FIRST BANCTRUST CORP
General  First BancTrust Corporation (the "Company") was incorporated in November 2000 under Delaware law. On April 18, 2001, the Company acquired all of the outstanding shares of common stock of First Bank & Trust, s.b. of Paris, Illinois, ("First Bank" or the "Bank") upon the Bank's conversion from an Illinois chartered mutual savings bank to an Illinois chartered stock savings bank (the "Conversion"). The Company purchased 100% of the outstanding capital stock of the Bank using 50% of the net proceeds from the Company's initial stock offering which was completed on April 18, 2001. The Company sold 3,041,750 shares of common stock in the initial offering at $5 per share. The Company began trading on the Nasdaq Small Cap Market on April 19, 2001 under the symbol "FBTC". At December 31, 2005, the Company had consolidated total assets, liabilities and stockholders' equity of $273.9 million, $247.8 million, and $26.1 million, respectively.  The Company's assets on an unconsolidated basis at December 31, 2005 consisted primarily of the investment in the Bank of $30.4 million, investment in First Charter Service Corporation of $74,000, investment in ECS Service Corporation doing business as Edgar County Title of $341,000, and investment in FBTC Statutory Trust I of $186,000, interest-bearing demand deposits of $267,000, an Employee Stock Ownership Plan ("ESOP") loan to the Bank of $572,000, available-for-sale securities of $66,000, and premises and equipment of $152,000. The Company originates loans and solicits deposits through the Bank, but otherwise conducts no significant business except through the Bank and the Company's other non-bank subsidiaries.  The Bank was founded in 1887, and continued as an Illinois mutual savings and loan, until January, 1990 when it was merged with First Federal Bank, a federal mutual savings                                         -1-    bank. In June, 1995, the charter was converted to an Illinois mutual savings bank, and the name modified to First Bank & Trust, s.b. As previously stated, First Bank converted to an Illinois stock savings bank in April, 2001. The Bank conducts business out of its main office and its operations office, both in Paris, Illinois, in Edgar County, and branch offices in Marshall, Illinois in Clark County and Savoy, and Rantoul, Illinois in Champaign County. The primary market areas of Clark and Edgar counties are located in east central Illinois, just west of Terre Haute, Indiana, and are both rural counties where agriculture is responsible for a large share of the local economy. In September, 2003, the Bank began operations in a temporary facility in Savoy, Illinois, until the move into a permanent facility in August, 2004. The Savoy market area is immediately adjacent to the large urban markets of Champaign and Urbana, and shows strong demographic characteristics. The community has experienced higher than average population growth, resulting in new housing construction. The Savoy market is characterized by a younger population, due to its proximity to the University of Illinois in Champaign-Urbana. The majority of the labor force in this area is employed in managerial or professional occupations. In October, 2005, the Company acquired all of the outstanding common shares of Rantoul First Bank, SB, located in northern Champaign County. The transaction was accounted for as a purchase, and the entity merged into the Bank's operations at the date of acquisition. Rantoul is also adjacent to the Champaign-Urbana urban area, located approximately 15 miles north of Champaign-Urbana.  As of December 31, 2005, the Bank had total assets of $273.4 million, total liabilities of $243.0 million, and total equity of $30.4 million. Total assets grew by $43.7 million, the majority from an increase in loans, which was primarily funded by an increase in deposits, a reduction in investments, and a contribution to paid-in capital from the Company to complete the purchase of Rantoul First Bank. Net income in 2005 increased by $96,000 or 7.3% which was primarily attributable to an increase in net interest income of $733,000, and a reduction in income tax expense of $157,000, partially offset by an increase in noninterest expense of $541,000 and a decrease in noninterest income of $232,000.  Business of the Company  The Company's principal business consists primarily of attracting deposits from the general public and using those funds to originate loans secured by one-to four-family residential properties, commercial real estate loans, agricultural real estate loans, commercial and industrial loans, agricultural production finance loans, consumer loans and other loans. A substantial number of single family residential mortgage loans and agricultural loans have been sold into the secondary market, and the Company retains servicing rights to those loans. At December 31, 2005, the Company's loan portfolio including loans held for sale, totaled $160.2 million. In addition, at December 31, 2005 the Company serviced $92.0 million in loans ($82.6 million of residential loans and $9.4 million of agricultural loans). The Company also invests in U.S. government securities, municipal securities, and mortgage-backed securities. At December 31, 2005, the Company's securities portfolio totaled $79.9 million, of which $76.5 million are designated as available for sale, and $3.4 million are designated as held to maturity. The                                         -2-    Company also had $5.1 million invested in interest-bearing demand deposits at December 31, 2005.  The Company's revenues are derived principally from interest on its mortgage, consumer, agriculture and commercial loans, interest on its securities, gains on loan sales, loan servicing fees, abstract and title fees, service charges on deposits, and other customer fees. The Company's primary sources of funds are deposits, loan repayments, sales of loans in the secondary market, purchases of federal funds, and advances (loans) from the Federal Home Loan Bank ("FHLB").  The Company's ability to earn a profit depends on net interest income, which is the difference between the interest income earned on interest-earning assets, such as mortgage, commercial and consumer loans, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Company's profitability depends on its ability to manage assets and liabilities during periods of changing interest rates. To a lesser extent, the Company's profitability depends on the ability to continue to generate noninterest income from services provided to its customers.  Lending Activities  GENERAL. At December 31, 2005, the net loan portfolio before allowance for loan losses, of the Company totaled $159.5 million, representing 58.3% of total assets at that date. One of the principal lending activities of the Company is the origination of one-to-four family (which are also known as single-family) residential loans. At December 31, 2005, single-family residential loans amounted to $51.8 million or 32.3% of the total loan portfolio. Of this amount, $7.9 million consisted of second mortgage or home equity loans. In addition, the Company originates commercial real estate loans, agricultural real estate loans, commercial and industrial loans, agricultural production finance loans, consumer loans and tax-exempt loans. On a limited basis, the Company offers multi-family loans and construction loans.  The types of loans the Company may originate are subject to federal and state laws and regulations. Interest rates charged on loans are affected principally by the demand for such loans and the supply of money available for lending purposes and the rates offered by competitors. These factors are, in turn, affected by general and economic conditions, the monetary policy of the federal government, including the Federal Reserve Board, legislative and tax policies, and governmental budgetary matters.  LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition of the Company's loan portfolio by type of loan at the dates indicated.                                         -3-                                        December 31, 2005    December 31, 2004    December 31, 2003                                   ------------------   ------------------   ------------------                                    Amount    Percent    Amount    Percent    Amount    Percent                                   --------   -------   --------   -------   --------   -------        Real estate loans:    One-to-four family             $ 51,823    32.29%   $ 37,568    31.15%   $ 36,513    33.38%    Multi-family                        695     0.43%        716     0.59%        266     0.24%    Commercial                       33,244    20.71%     16,902    14.02%     10,124     9.25%    Construction                      2,423     1.51%      1,516     1.26%      2,275     2.08%    Agricultural loans               20,913    13.03%     16,937    14.04%     13,908    12.71% Commercial and industrial            7,886     4.91%      6,411     5.32%      6,417     5.87% Agricultural production finance     15,442     9.62%     13,603    11.28%     12,357    11.29% Consumer loans:    Vehicle                          21,305    13.27%     20,801    17.25%     21,035    19.23%    Consumer finance                    872     0.54%        800     0.66%        823     0.75%    Share                               708     0.44%        472     0.39%        533     0.49%    Other                             3,531     2.20%      3,099     2.57%      3,169     2.90% Other loans                          1,677     1.05%      1,769     1.47%      1,983     1.81%                                   --------   ------    --------   ------    --------   ------     Total loans receivable         160,519   100.00%    120,594   100.00%    109,403   100.00%                                              ======               ======               ====== Less: Undisbursed portion of loans           164                   17                   23 Unearned discount and fees             808                  829                  845 Allowance for loan losses            2,662                2,300                2,124                                   --------             --------             --------    Loans receivable, net          $156,885             $117,448             $106,411                                   ========             ========             ========   Loans held for sale at December 31, 2005 amounted to $642,000, and are not included in the above table. These loans are single family dwellings committed for sale to the Federal Home Loan Mortgage Corporation and Illinois Housing Development Authority.  ORIGINATION OF LOANS. The lending activities of the Company are subject to the written underwriting standards and loan origination procedures established by the Board of Directors and management. Loan originations are obtained through a variety of procedures, including referrals from real estate brokers, builders and existing customers. The loan officers also supervise the procurement of credit reports, appraisals, and other documentation involved with loan originations. Property valuations on loans over $250,000 are performed by independent outside appraisers approved by the Board of Directors of the Company. A written evaluation is required for all real estate loans in the amount of less than $250,000 by a qualified individual.  Under the real estate lending policy of the Company, a title opinion or a title insurance policy must be obtained for each real estate loan, as well as fire and extended casualty insurance. Flood insurance is required when the property is in a flood hazard area designated by the Department of Housing and Urban Development. The Company does not require borrowers to advance funds to an escrow account for the payment of real estate taxes or hazard insurance premiums.                                         -4-    The Company's loan approval process is intended to assess the borrower's ability to repay the loan, the viability of the loan and the adequacy of the collateral that will secure the loan. The Company's loan policy assigns aggregate lending limits to officers of the Company depending on the type of loan and whether the loan is secured or unsecured. Two loan officers acting in concert may combine their lending limits to approve an individual loan, up to a limit of 2.5% of qualified capital. Management has established an executive officers' loan committee, which may generally approve credit requests up to 5% of qualified capital. The Board of Directors has established a loan committee of directors, which includes four independent directors. The loan committee of directors will review requests that have been submitted by the executive loan committee, and can approve loans up to 10% of qualified capital. Any credit in excess of 10% of qualified capital must be approved by the executive loan committee, the directors' loan committee, and submitted to the full Board of Directors for their approval.  Although federal laws and regulations permit savings institutions to originate and purchase loans secured by real estate located throughout the United States, the Company concentrates its lending activity on its primary market area of Edgar, Clark, Vermilion, and Champaign counties, Illinois. A savings institution generally may not make loans to one borrower and related entities in an amount which exceeds the greater of (i) 20% of its unimpaired capital and surplus, although loans in an amount equal to an additional 10% of unimpaired capital and surplus may be made to a borrower if the loans are fully secured by readily marketable securities, and (ii) $500,000. As an Illinois-chartered savings bank, the Bank is permitted to invest without limitation as a percentage of assets in residential mortgage loans and up to 400% of its capital in loans secured by non-residential or commercial real estate. The Bank may also invest in secured and unsecured consumer loans in an amount not exceeding 35% of total assets. This 35% limitation may be exceeded for certain types of consumer loans such as home equity and property improvement loans secured by residential real property. In addition, the Bank may invest up to 10% of its total assets in secured and unsecured loans for commercial, corporate, business or agricultural purposes. The Bank has received a waiver from the Illinois Department of Financial and Professional Regulation regarding its ability to exceed this 10% limit. The Bank is subject to its internal loans-to-one borrower limitation of 15% of unimpaired capital.  MATURITY OF LOAN PORTFOLIO. The following table presents certain information at December 31, 2005, regarding the dollar amount of loans maturing in the Company's portfolio based on their contractual terms to maturity or scheduled amortization, but does not include potential prepayments. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as becoming due within one year. Loan balances do not include undisbursed loan proceeds, net deferred origination costs and allowance for loan losses.                                         -5-                                                                At December 31, 2005                                    ----------------------------------------------------------------------                                                  Commercial   Agricultural                                                      and       Production                Other     Total                                    Real Estate   Industrial      Finance     Consumer    Loans     Loans                                    -----------   ----------   ------------   --------   ------   --------                                                                (In Thousands)        AMOUNTS DUE IN: One year or less                     $ 13,047      $4,559        $ 9,027      $ 2,592   $   29   $ 29,254 More than one year to five years       16,659       1,807          3,962       21,883       10     44,321 More than five years                   79,392       1,520          2,453        1,941    1,638     86,944                                      --------      ------        -------      -------   ------   --------    Total amount due                  $109,098      $7,886        $15,442      $26,416   $1,677   $160,519                                      ========      ======        =======      =======   ======   ========   The following table sets forth the dollar amount of all loans, before net items, due after December 31, 2006 which have fixed interest rates or which have floating or adjustable rates.                                      Fixed-Rates   Floating or Adjustable-Rates     Total                                   -----------   ----------------------------   --------                                                      (In Thousands)     Real estate loans:    One-to-four family               $11,404               $39,024              $ 50,428    Multi-family                         549                   146                   695    Commercial                        13,852                10,486                24,338    Construction                           6                   115                   121    Agricultural loans                11,492                 8,977                20,469 Commercial and industrial             1,834                 1,493                 3,327 Agricultural production finance       4,485                 1,930                 6,415 Consumer loans:    Vehicle                           20,402                    --                20,402    Consumer finance                     788                    --                   788    Share                                 94                     8                   102    Other                              2,521                    11                 2,532 Other loans                              10                 1,638                 1,648                                     -------               -------              --------    Total loans receivable           $67,437               $63,828              $131,265                                     =======               =======              ========   Scheduled contractual maturities of loans do not necessarily reflect the actual expected term of the loan portfolio. The average life of mortgage loans is substantially less than their average contractual terms because of prepayments. The average life of mortgage loans tends to increase when current mortgage rates are higher than rates on existing mortgage loans and, conversely, decrease when rates on current mortgage loans are lower than existing mortgage loan rates (due to refinancing of adjustable-rate and fixed-rate loans at lower rates). Under the latter circumstance, the weighted average yield on loans decreases as higher yielding loans are repaid or refinanced at lower rates.  ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LOANS. One of the primary lending activities of the Company is the origination of loans secured by single-family residences. At December 31, 2005, $51.8 million or 32.3% of the total loan portfolio consisted of                                         -6-    single-family residential loans. Of this amount, $7.9 million consisted of second mortgage or home equity loans.  The Company's present lending policy on one-to-four family regular conventional residential mortgage loans generally limits the maximum loan-to-value to 80% of the appraised value of the property. If the Company originates a residential mortgage loan with a loan-to-value in excess of 80%, the Company may require the borrower to obtain private mortgage insurance. An alternative mortgage product is available for owner occupied one to four family residential properties within the Bank's market area which generally allows financing to qualified applicants of up to 100% of the purchase price or the appraised value, whichever is less. Residential mortgage loans are typically amortized on a monthly basis with principal and interest due each month.  The Company's residential mortgage loans have either fixed rates of interest or interest rates which adjust periodically during the term of the loan. Fixed-rate loans generally have maturities from 5 to 30 years and are fully amortizing with monthly payments sufficient to repay the total amount of the loan with interest by the end of the loan term. The Company's fixed-rate conventional loans generally are originated under terms, conditions and documentation which permit them to be sold to U.S. government-sponsored agencies, such as the Federal Home Loan Mortgage Corporation, and other investors in the secondary market for mortgages. The Company sells substantially all qualifying fixed-rate conventional loans with terms greater than 10 years in the secondary market. At December 31, 2005, $12.1 million, or 23.4% of the Company's single-family residential mortgage loans were fixed-rate loans.  The adjustable-rate single-family residential mortgage loans currently offered by the Company have interest rates which adjust every one, three or five years in accordance with a designated index such as one-, three-, or five-year U.S. Treasury obligations adjusted to a constant maturity, plus a stipulated margin. In addition, the Company offers an adjustable mortgage loan with a fixed-rate for the first three or five years which adjusts on an annual basis thereafter. The Company's adjustable-rate single-family residential real estate loans generally have a cap of 2% on any increase or decrease in the interest rate at any adjustment date, and include a specified cap on the maximum interest rate over the life of the loan, which is generally 6% above the initial rate. Such loans generally are underwritten based on the initial rate. The Company's adjustable-rate loans require that any payment adjustment resulting from a change in the interest rate of an adjustable-rate loan be sufficient to result in full amortization of the loan by the end of the loan term, and thus, do not permit any of the increased payment to be added to the principal amount of the loan, or so-called negative amortization. At December 31, 2005, $39.7 million or 76.6% of the Company's single-family residential mortgage loans were adjustable-rate loans.  At December 31, 2005, the Company's second mortgage or home equity loans amounted to $7.9 million or 4.9% of the total loan portfolio. These loans are secured by the underlying equity in the borrower's residence, and accordingly, are reported with the one-to-four family real estate loans. As a result, the Company generally requires loan-to-value ratios of 90% or less after taking into consideration the first mortgage held by the Company. If the Company does not own or service the first mortgage, it will limit the                                         -7-    total loan-to-value ratio to 80%. These loans typically have ten-year terms with an interest rate adjustment after five years. Home equity lines-of-credit are also offered to qualified applicants to fund up to 100% of the equity in the borrower's home, based on the appraised value of the property, if the Company holds the first mortgage on the property. For all others, the maximum loan-to-value is eighty percent of the appraised value of the property. Home equity lines-of-credit are adjustable rate products priced off of the "prime" rate, and reprice monthly.  Adjustable-rate loans decrease the risks associated with changes in interest rates but involve other risks, primarily because as interest rates increase, the loan payment by the borrower increases to the extent permitted by the terms of the loan, thereby increasing the potential for default. Moreover, as with fixed-rate loans, as interest rates increase, the marketability of the underlying collateral property may be adversely affected by higher interest rates. The Company believes that these risks, which have not had a material adverse effect on the Company to date, generally are less than the risks associated with holding fixed-rate loans in an increasing interest rate environment.  COMMERCIAL REAL ESTATE LOANS. The Company's commercial real estate portfolio primarily consists of loans secured by office buildings, warehouses, production facilities, recreational facilities, retail stores and restaurants located within the Company's market area. Commercial real estate loans amounted to $33.2 million or 20.7% of the total loan portfolio as of December 31, 2005 with an average loan balance of approximately $118,000.  The Company's commercial real estate loans typically have a loan-to-value ratio of 80% or less and generally have higher interest rates than single-family residential loans. Loans secured by raw land cannot exceed 65% of the appraised value, and loans secured by real estate to be used for land development can not exceed 75% loan-to-value. The maximum term of the Company's commercial real estate loans cannot exceed 30 years. Generally, terms for commercial real estate loans are not longer than 10 years, and are based on an amortization schedule of up to thirty years. At December 31, 2005, fixed rate commercial real estate loans totaled $16.8 million, while adjustable rate commercial real estate loans totaled $16.4 million.  Commercial real estate lending is generally considered to involve a higher degree of risk than one-to-four family residential lending. Such lending typically involves large loan balances concentrated in a single borrower or groups of related borrowers for rental or business purposes. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the success of the operation of the related project and thus is typically affected by adverse conditions in the real estate market and in the economy. The Company generally attempts to mitigate the risks associated with its commercial real estate lending by, among other things, lending primarily in its market area and using low loan-to-value ratios in the underwriting process.  AGRICULTURAL REAL ESTATE LOANS. At December 31, 2005, the Company's agricultural loans amounted to $20.9 million or 13.0% of the total loan portfolio. The Company's agricultural loans are primarily secured by farmland located in its market area and other counties in east-central Illinois and western Indiana. The Company's adjustable rate                                         -8-    agricultural real estate loans have interest rates which generally adjust every one, three or five years in accordance with a designated index and are generally amortized over 20 or 30 years. A portion of these agricultural real estate loans also include a balloon payment after 10 years. Fixed rate agricultural real estate loans generally are for terms of up to 15 years, although many are amortized over longer periods, and include a balloon payment at maturity. The Company's lending policies on agricultural loans originated for its portfolio generally limit the maximum loan-to-value ratio to 80% of the lesser of the appraised value or purchase price of the property.  Many agricultural real estate loans to farmers have been underwritten by agency guidelines to qualify for a government guarantee of up to 90% of the original loan amount, which in turn qualifies them to be sold to a variety of investors in the secondary market. Once the government guarantee is secured from Farmers Home Loan Administration, the guarantee covers up to 90% of any loss on the loan. By way of example, assume that the Company originates a conforming $100,000 agricultural loan, secures a 90% guarantee from Farmers Home Loan Administration, and subsequently sells $90,000 of the loan in the secondary market with servicing retained. Assume that the borrower defaults on the loan, and the value of the property is $50,000. The Company would purchase the $90,000 portion from the investor, foreclose on the loan, and sell the property for $50,000. This would result in an initial loss to the Company of $50,000. However, as a result of the government guarantee, the Company would be reimbursed $45,000, representing 90% of its loss of $50,000. The Company's out of pocket loss in this example would be $5,000. Likewise, if the Company holds the example loan which carries the 90% guarantee in its own portfolio, the loss to the Company would also be limited to $5,000, after filing the claim with Farmers Home Loan Administration. If the Company originates an agricultural loan which qualifies for the agency guarantee, it may originate the loan with a loan-to-value of 90% of the lesser of the appraised value or purchase price of the property. At December 31, 2005, the guaranteed amount of $8.1 million on farmland loans of $9.0 million were owned by various investors. Additionally, farmland loans of $5.2 million are included in the Company's agricultural real estate portfolio, of which $4.6 million are guaranteed by the Farmers Home Loan Administration.  COMMERCIAL AND INDUSTRIAL LOANS. At December 31, 2005, the Company's commercial and industrial loans amounted to $7.9 million or 4.9% of the Company's loan portfolio. Types of commercial loans in the portfolio at December 31, 2005 include short-term working capital loans and term loans for capital purchases, secured by inventory, accounts receivable, fixtures, or equipment. The Company's commercial and industrial loans generally have a term of up to six years and may have either floating rates tied to the Company's internal prime rate or fixed rates of interest. The Company's commercial and industrial loans are made to small to medium-sized businesses within the Company's market area. A substantial portion of the Company's small business loans are secured by perfected security interests in accounts receivable and inventory or other corporate assets such as equipment. The Company also generally obtains personal guarantees from the principals of the borrower with respect to all commercial and industrial loans. In addition, the Company may extend loans for a commercial business purpose which are secured by a mortgage on the proprietor's home or business property. Commercial and                                         -9-    industrial loans generally are deemed to involve a greater degree of risk than single-family residential mortgage loans.  AGRICULTURAL PRODUCTION FINANCE LOANS. At December 31, 2005, the Company's agricultural production finance loans amounted to $15.4 million or 9.6% of the total loan portfolio. Generally these loans are extended to farmers in the Company's market area and other counties in Illinois and Indiana for the purchase of equipment, seed, fertilizer, insecticide and other purposes in connection with agricultural production. The Company's agricultural production finance loans generally have terms of one, three or five years, although loans secured by farm equipment may extend to seven years or longer. The maximum term for equipment secured loans will be tied directly to the useful life of the underlying collateral but cannot exceed 15 years. The interest rate is increased with respect to the longer terms loans due to the rate exposure of these loans. The amount of the commitment is based on management's review of the borrower's business plan, prior performance, marketability of crops, and current market prices. The Company requires a minimum current ratio of 1.1. These loans are secured by crops, equipment, accounts receivable, inventory, and second mortgages on the farmland.  The Company's agricultural production finance loans may be originated under terms, conditions and documentation which allow them to qualify for a guarantee by the Farmers Home Loan Administration, and/or to be sold to a variety of investors in the secondary market. These qualifying loans also carry a government guarantee of up to 90% of any loss.  CONSUMER LOANS. The Company is authorized to make loans for a wide variety of personal consumer purposes. At December 31, 2005, $26.4 million or 16.5% of the Company's total loan portfolio consisted of consumer loans.  The Company originates consumer loans in order to provide a full range of financial services to its customers and because such loans generally have shorter terms and higher interest rates than residential mortgage loans. The consumer loans offered by the Company include vehicle loans, consumer finance loans, loans secured by deposit accounts in the Company and other miscellaneous loans.  The Company offers vehicle loans on both new and used vehicles, with a significant portion of the loans secured by recent model used vehicles at the time of origination. The vehicle loans offered by the Company have fixed interest rates and terms of up to six years for new vehicles or used vehicles (model year 2003 and newer) and up to five years for older used vehicles. Vehicle loans amounted to $21.3 million or 13.3% of the total loan portfolio at December 31, 2005. All of the Company's vehicle loans are directly underwritten by the Company. The Company does not purchase any indirect vehicle loans.  At December 31, 2005, the Company's consumer finance loans amounted to $872,000 or 0.6% of the total loan portfolio. These loans are typically secured by household items such as furniture and electronic appliances and equipment. These loans are primarily underwritten based on the collateral and debt to income ratios. The Company generally limits the terms of these loans to three years with a fixed interest rate.                                         -10-    The Company offers loans secured by deposit accounts in the Company, which amounted to $708,000 or 0.4% of the Company's total loan portfolio at December 31, 2005. Such loans are originated for up to 90% of the account balance, with a hold placed on the account restricting the withdrawal of the account balance. These loans mature on or before the maturity date of the underlying certificate of deposit.  Other consumer loans consist primarily of unsecured personal loans and other loans. These loans amounted to $3.5 million or 2.2% of the total loan portfolio at December 31, 2005.  Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans because of the type and nature of the collateral and, in certain cases, the absence of collateral. In addition, consumer lending collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness, and personal bankruptcy. In some cases, repossessed collateral for a defaulted consumer loan will not provide full repayment of the outstanding loan balance because of improper repair and maintenance of the underlying security. The remaining deficiency may not warrant further substantial collection efforts against the borrower. The Company believes that the generally higher yields earned on consumer loans compensate for the increased credit risk associated with such loans and that consumer loans are important to its efforts to increase rate sensitivity, shorten the average maturity of its loan portfolio and provide a full range of services to its customers.  REAL ESTATE CONSTRUCTION LOANS. At December 31, 2005, the Company had approximately $2.4 million or 1.5% of total loans in single-family residential construction loans. The construction loans of the Company are comprised largely of loans made to borrowers to construct individual pre-sold homes. Frequently, the construction loan and the permanent mortgage loan are originated at one closing as a construction/permanent loan. Interest-only payments are required during the construction period, which is typically six months.  Construction lending is generally considered to involve a higher degree of risk of loss than long-term financing on improved, owner-occupied real estate because of the uncertainties of construction, including the possibility of costs exceeding the initial estimates and the need to obtain a tenant or purchaser if the property will not be owner-occupied. The Company generally attempts to mitigate the risks associated with construction lending by, among other things, lending in its market area, using conservative underwriting guidelines, and monitoring the construction process.  MULTI-FAMILY RESIDENTIAL LOANS. The Company also has a relatively small amount of multi-family (over four units) residential loans. The multi-family residential mortgage loans are underwritten on substantially the same basis as its commercial real estate loans, although loan-to-value ratios may be up to 80%. At December 31, 2005, the Company had $695,000 in multi-family residential mortgage loans which amounted to 0.4% of the total portfolio.                                         -11-    OTHER LOANS. The Company's other loans amounted to $1.7 million or 1.1% of the total loan portfolio at December 31, 2005. The majority of this balance represents a participation interest in an industrial revenue bond for a local hospital.  LOAN ORIGINATION AND OTHER FEES. In addition to interest earned on loans, the Company may receive loan origination fees or "points" for originating mortgage loans. Loan points are a percentage of the principal amount of the mortgage loan and are charged to the borrower in connection with the origination of the loan. A document preparation fee is generally assessed on consumer loan originations of $75 per loan for consumer non-mortgage originations, while second mortgages may be assessed a loan document preparation fee of $150 per origination and first mortgages may be assessed a loan document fee of $250 per loan.  LOAN SERVICING. The Company also services loans for others. Loan servicing includes collecting and remitting loan payments, accounting for the principal and interest, making inspections as required of mortgaged premises, contacting delinquent borrowers, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. At December 31, 2005, the Company was servicing $92.0 million of loans for others. Of this amount, $82.6 million were single family residential loans sold to the Federal Home Loan Mortgage Corporation and the Illinois Housing Development Authority. Agricultural land and equipment loans serviced for others were $9.4 million.  Asset Quality  GENERAL. The Company mails delinquent notices to borrowers when a borrower fails to make a required payment within 15 days of the due date. Additional notices are sent out when a loan becomes 30 days or 60 days past due. If a loan becomes 90 days past due, the Company mails a notice indicating that the Company will refer it to an attorney within 30 days to commence foreclosure. In most cases, deficiencies are cured promptly. While the Company generally prefers to work with borrowers to resolve such problems, the Company will institute foreclosure or other collection proceedings when necessary to minimize any potential loss.  Loans are placed on non-accrual status when management believes the probability of collection of interest is insufficient to warrant further accrual. After a loan is delinquent for 90 days or more, an interest reserve is established against which previously accrued but unpaid interest is deducted from interest income. If the borrower makes subsequent payments on the loan, they are applied to interest and principal, and the interest reserve is reduced by the amount of the interest payment. The Company periodically reviews all loans delinquent 90 days or more, and places those loans which are not likely to be collected on non-accrual status. When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income, and subsequent payments received are applied only against the principal balance.  Real estate and other assets acquired by the Company as a result of foreclosure or by deed-in-lieu of foreclosure are classified as real estate owned until sold. The Company                                         -12-    had $267,000 of real estate owned and other assets at December 31, 2005. This category consists primarily of commercial real estate, one-to-four residential properties, and vehicles.  DELINQUENT LOANS. The following table sets forth information concerning delinquent loans at December 31, 2005, in dollar amounts and as a percentage of the Company's total loan portfolio. The amounts presented represent the total outstanding principal balances of the related loans, rather than the actual payment amounts which are past due.                                                          December 31, 2005                                   ---------------------------------------------------------                                       30-59 Days          60-89 Days       90 or More Days                                        Overdue             Overdue             Overdue                                   -----------------   -----------------   -----------------                                             Percent             Percent             Percent                                            of Total            of Total            of Total                                   Amount     Loans    Amount     Loans    Amount     Loans                                   ------   --------   ------   --------   ------   --------                                                         (In Thousands)        Real estate loans:    One-to-four family             $  753     0.47%     $308      0.19%    $  306     0.19%    Commercial                        152     0.10%      343      0.21%       510     0.32%    Construction                       --       --        --        --         --       --    Agricultural loans                 70     0.04%       --        --         64     0.04% Commercial and industrial            702     0.44%       19      0.02%       421     0.26% Agricultural production finance      441     0.28%        1      0.00%        --       -- Consumer loans:                       --                                               --    Vehicle                           199     0.12%       27      0.02%        94     0.06%    Consumer finance                   30     0.02%        3      0.00%         1     0.00%    Other                              68     0.04%       16      0.01%        23     0.02%                                   ------     ----      ----      ----     ------     ----    Total loans                    $2,415     1.51%     $717      0.45%    $1,419     0.89%                                   ======     ====      ====      ====     ======     ====   NON-PERFORMING ASSETS. The following table presents information with respect to the Bank's nonperforming assets at the dates indicated.                                         -13-                                                              At December 31,                                                     ------------------------                                                      2005     2004     2003                                                     ------   ------   ------                                                      (Dollars in Thousands)     NON-PERFOMING LOANS: 90 Days Delinquent and Non-accrual loans:    Real estate loans:       One-to-four family                            $  306   $  202   $  567       Commercial                                       510       --      302       Construction                                      --      108      113       Agricultural loans                                64       --       --    Commercial and industrial                           421       --       --    Agricultural production finance                      --       19       32    Consumer loans:       Vehicle                                           94       97       89       Consumer finance                                   1       14       15       Other                                             23        3        8 Troubled debt restructurings                            94    1,128    1,403                                                     ------   ------   ------       Total non-performing loans                     1,513    1,571    2,529                                                     ------   ------   ------ Real estate owned (1)                                  267      190       96                                                     ------   ------   ------    Total nonperforming assets (2)                   $1,780   $1,761   $2,625                                                     ======   ======   ======  Total nonperforming loans as a percentage    of  total loans                                    0.95%    1.31%    2.35% Total nonperforming assets and troubled debt    restructurings as a percentage of total assets     0.65%    0.76%    1.16%   (1)  Real estate owned includes other repossessed assets and the balances are      shown net of related valuation allowances.  (2)  Nonperforming assets consist of nonperforming loans, other repossessed      assets and real estate owned.  CLASSIFIED ASSETS. Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a higher possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated "special mention" also must be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful, or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified loss, the insured                                         -14-    institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset-classified loss, or charge off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital. Federal examiners may disagree with an insured institution's classification and amounts reserved.  The Company's total classified loans, which include impaired loans, at December 31, 2005 amounted to $13.9 million, $5.8 million of which was classified as substandard, $372,000 of which was classified doubtful, $86,000 of which was classified loss, and $7.7 million which was classified as special mention or potential problem loans. Classified loans at December 31, 2004 were $13.0 million, $5.8 million of which was classified substandard, $141,000 of which was classified doubtful, $155,000 of which was classified loss, and $7.0 million which was classified special mention or potential problem loans. Of the $13.9 million classified assets at December 31, 2005, $1.4 million were nonperforming loans as of December 31, 2005. The remaining $12.5 million relate to potential problem loans due to various circumstances such as prior problem history with the customer or insufficient collateral value.  The Company had specific reserves totaling $1.5 million on classified loans as of December 31, 2005. Included in the classified loans of $13.9 million were agricultural production finance loans totaling $4.0 million, commercial loans of $1.6 million, farmland loans of $2.1 million, nonresidential real estate loans of $3.6 million, one-to-four family real estate loans of $2.1 million, and consumer loans of $421,000. Of the $4.0 million in classified agricultural production loans, $2.0 million in agricultural finance loans had guarantees by the Farmers Home Administration in the amount of $1.8 million. Also included in classified loans were farmland loans of $1.1 million which had guarantees by the Farmers Home Administration in the amount of $1.0 million.  RESERVE POLICY AND METHODOLOGY. The Company maintains an allowance for credit losses to absorb losses inherent in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the probable estimated losses inherent in the loan portfolio. The allowance is increased by the provision for credit losses, which is charged against current period operating results and decreased by the amount of chargeoffs, net of recoveries. In calculating the allowance for credit losses, the Company segments the loan portfolio into two groups, loans evaluated individually and loans evaluated collectively. The methodology for assessing the appropriateness of the allowance account consists of a formula allowance for loans evaluated collectively and specific allowances for loans evaluated individually.  The specific allowances are calculated by applying loss factor percentages to outstanding loans included in the classification of assets, based on the classification category of each loan. Changes in risk grades of these loans affect the amount of the specific allowance. Loss factors for the formula allowance are based on our historical loss experience and may be adjusted for significant factors that, in management's judgement, affect the collectibility of the portfolio as of the evaluation date. The adjustments to the historical loss experience are based on an evaluation of national and local economic trends, trends                                         -15-    in delinquencies and chargeoffs, trends in volume and terms of loans, changes in underwriting standards, and industry conditions.  Specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicate the probability that a loss has been incurred in excess of the amount determined by the application of the formula allowance.  While management believes the allowance for loan losses is sufficient to cover losses inherent in its loan portfolio at this time, no assurances can be given that the level of the allowance for loan losses will be sufficient to cover future loan losses incurred or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for loan losses. As of December 31, 2005 and 2004, the allowance for loan losses was 1.67% and 1.92%, respectively, of total loans. Management will continue to monitor and modify the allowance for loan losses as conditions dictate.  The following table sets forth information concerning the allocation of the Company's allowance for loan losses by loan categories at the dates indicated.                                                                 December 31,                                   ------------------------------------------------------------------                                           2005                   2004                   2003                                   --------------------   --------------------   --------------------                                             Percent of             Percent of             Percent of                                              Loans in               Loans in               Loans in                                                Each                   Each                   Each                                            Category to            Category to            Category to                                   Amount   Total Loans   Amount   Total Loans   Amount   Total Loans                                   ------   -----------   ------   -----------   ------   -----------        Allocated: Real estate loans:    One-to-four family             $  318      32.29%     $  224      31.15%     $  154      33.38%    Multi-family                        2       0.43%          2       0.59%          2       0.24%    Commercial                        866      20.71%        745      14.02%        349       9.25%    Construction                       60       1.51%         56       1.26%         60       2.08%    Agricultural loans                 84      13.03%         52      14.04%         91      12.71% Commercial and industrial            466       4.91%        376       5.32%        351       5.87% Agricultural production finance      330       9.62%        320      11.28%        503      11.29% Consumer loans:    Vehicle                           420      13.27%        414      17.25%        506      19.23%    Consumer finance                   42       0.54%         36       0.66%         41       0.75%    Share                              --       0.44%         --       0.39%         --       0.49%    Other                              55       2.20%         56       2.57%         68       2.90% Other loans                           19       1.05%         19       1.47%         --       1.81%                                   ------     ------      ------     ------      ------     ------                                   $2,662     100.00%     $2,300     100.00%     $2,125     100.00%                                   ======     ======      ======     ======      ======     ======                                          -16-   The following table sets forth an analysis of the Company's allowance for loan losses during the periods indicated.                                                   Year Ended December 31,                                            ------------------------------                                              2005       2004       2003                                            --------   --------   --------     Total loans outstanding                    $159,547   $119,748   $108,535 Average loans outstanding, net              131,405    111,445    105,773 Balance at beginning of period                2,300      2,125      1,963 CHARGE-OFFS: Real estate loans:    One-to-four family                            72         78        118    Multi-family                                  --         --         --    Commercial                                    91         67         --    Construction                                  --         --         --    Agricultural loans                            --         --         -- Commercial and industrial                        --         75         35 Agricultural production finance                  --         14        234 Consumer loans:    Vehicle                                      206        156        214    Consumer finance                              20         34         10    Share                                         --         --         --    Other                                         50         14         48                                            --------   --------   --------       Total charge-offs                         439        438        659                                            --------   --------   -------- RECOVERIES: Real estate loans:    One-to-four family                             1          8         --    Multi-family                                  --         --         --    Commercial                                    12          1         --    Construction                                  --         --         --    Agricultural loans                             7         --         -- Commercial and industrial                        --          3          5 Agricultural production finance                   2         --         11 Consumer loans:    Vehicle                                       48         52         47    Consumer finance                              11         23         23    Share                                         --         --         --    Other                                         10         11          7                                            --------   --------   --------       Total recoveries                           91         98         93                                            --------   --------   -------- Net charge-offs                                (348)      (340)      (566) Provision for loan losses                       510        515        728 Acquired through business combination           200         --         --                                            --------   --------   -------- Balance at end of period                   $  2,662   $  2,300   $  2,125                                            ========   ========   ======== Allowance for loan losses as a    percent of total loans outstanding          1.67%      1.92%      1.96%                                            ========   ========   ======== Allowance for loan losses as a    percent of total non-performing loans     175.94%    146.40%     84.03%                                            ========   ========   ======== Ratio of net charge-offs to    average loans outstanding                   0.26%      0.31%      0.54%                                            ========   ========   ========                                          -17-    Investment Securities  The Company has authority to invest in various types of securities, including mortgage-backed securities, U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, certificates of deposits at federally-insured banks and savings institutions, certain bankers' acceptances and federal funds. The Company's investment strategy is established by the Investment/ALCO Committee which currently consists of directors and senior officers of the Company. The Investment/ALCO Committee meets on a quarterly basis and the strategy established by the committee is implemented by the Company's President and Chief Financial Officer. The Company has obtained the services of an independent consultant to provide data regarding the Bank's investments as well as potential investments. Any material deviations from the investment strategy require approval by the Investment/ALCO Committee.  The following table sets forth information relating to the amortized cost and fair value of the Company's securities all of which are classified available for sale.                                                           December 31,                              ---------------------------------------------------------------                                      2005                  2004                  2003                              -------------------   -------------------   -------------------                              Amortized     Fair    Amortized     Fair    Amortized     Fair                                 Cost      Value       Cost      Value       Cost      Value                              ---------   -------   ---------   -------   ---------   -------                                                       (In Thousands)        AVAILABLE FOR SALE: U.S. Treasuries               $ 3,820    $ 3,527    $ 3,838    $ 3,920    $ 3,803    $ 3,792 Federal agencies                8,483      8,375      7,000      6,949      7,504      7,517 State and municipal            13,181     13,252     10,540     10,876      9,489      9,904 Mortgage-backed securities     51,138     50,369     60,625     60,800     70,759     70,814 Equity securities                 903        901      1,252      1,399      1,599      1,715                               -------    -------    -------    -------    -------    ------- Total                         $77,525    $76,424    $83,255    $83,944    $93,154    $93,742                               =======    =======    =======    =======    =======    ======= HELD TO MATURITY: Mortgage-backed securities    $ 3,437    $ 3,384    $ 4,778    $ 4,831    $    --    $    --                               -------    -------    -------    -------    -------    ------- Total                         $ 3,437    $ 3,384    $ 4,778    $ 4,831    $    --    $    --                               =======    =======    =======    =======    =======    =======   The following table sets forth the amount of the Company's available-for-sale debt securities which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2005. The table does not include equity securities as they have no stated maturity. The amounts reflect fair value of the Company's debt securities at December 31, 2005.                                         -18-                                                Weighted             Weighted             Weighted             Weighted                                  Under 1    Average     1-5      Average     5-10     Average   Over 10    Average                                    Year      Yield     Years      Yield     Years      Yield     Years      Yield     Total                                  -------   --------   -------   --------   -------   --------   -------   --------   -------                                                                         (In Thousands)           Available-for-sale securities U.S. Treasuries                  $     0              $ 3,527     3.92%    $     0               $    0              $ 3,527 Federal agencies                   1,489     2.35%      5,907     3.09%        979     4.00%          0                8,375 State and municipal                  130     4.06%      2,407     3.37%      8,276     3.64%      2,439     4.46%     13,252 Mortgage-backed securities (1)    13,096     4.31%     30,077     4.24%      7,121     4.24%         75     3.49%     50,369                                  -------              -------              -------               ------              ------- Total                            $14,715              $41,918              $16,376               $2,514              $75,523                                  =======              =======              =======               ======              =======   (1)  The maturities for mortgage-backed securities are based on prepayment speed      assumptions established by management based on the current interest rate      environment. The assumption rates vary by the individual security.  The mortgage-backed securities include $25.6 million in adjustable rate securities which typically have longer stated final maturities, but will have rate adjustments within the next four years. The fixed rate mortgage-backed securities have relatively short projected remaining lives, generally less than fifteen years.  The following table sets forth the amount of the Company's held-to-maturity debt securities which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2005. The amounts reflect the amortized cost of the Company's debt securities at December 31, 2005.                                               Weighted            Weighted             Weighted             Weighted                                  Under 1    Average     1-5     Average     5-10     Average   Over 10    Average                                    Year      Yield     Years     Yield     Years      Yield     Years      Yield     Total                                  -------   --------   ------   --------   -------   --------   -------   --------   ------                                                                        (In Thousands)           Held-to-maturity securities Mortgage-backed securities (1)     $378      4.50%    $1,695     4.50%     $1,311     4.50%      $--                $3,384                                    ----               ------               ------                ---                ------ Total                              $378               $1,695               $1,311                $--                $3,384                                    ====               ======               ======                ===                ======   (1)  The maturities for mortgage-backed securities are based on prepayment speed      assumptions established by management based on the current interest rate      environment. The assumption rates vary by the individual security.  Mortgage-backed securities represent a participation interest in a pool of one- to four-family or multi-family mortgages. The mortgage originators use intermediaries (generally U.S. Government agencies and government-sponsored enterprises) to pool and repackage the participation interests in the form of securities, with investors receiving the principal and interest payments on the mortgages. Such U.S. Government agencies and government-sponsored enterprises guarantee the payment of principal and interest to investors.  Mortgage-backed securities are typically issued with stated principal amounts, and the securities are backed by pools of mortgages that have loans with interest rates that are within a range and have varying maturities. The underlying pool of mortgages, i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are passed on to the certificate holder.                                         -19-   The life of a mortgage-backed pass-through security approximates the life of the underlying mortgages. However, prepayment of principal allows the Company to re-invest at current rates. This is beneficial in a rising interest rate environment. During 2005, proceeds generated from repayments and maturities of available-for-sale and held-to-maturity securities totaled $25.0 million compared to $34.7 million in 2004. Of the $25.0 million, repayments on mortgage-backed securities amounted to $20.7 million. Net amortization of premiums and discounts on securities decreased to $67,000 in 2005 compared to $190,000 in 2004, as prepayments slowed in response to the rising interest rates of 2005.  Mortgage-backed securities generally yield less than the loans which underlie such securities because of their payment guarantees or credit enhancements which offer nominal credit risk. However, these securities generally yield more than other debt instruments available from U.S. Government Agencies. In addition, mortgage-backed securities are more liquid than individual mortgage loans and may be used to collateralize borrowings or other obligations of the Company.  The Company's investment in mortgage-backed securities resulted in higher yields than were generally available from other securities of comparable credit risk. At the same time yields were only marginally less than those generally available on comparable real estate mortgages, without the inherent credit risk.  Sources of Funds  GENERAL. Deposits are the primary source of the Company's funds for lending and other investment purposes. In addition to deposits, principal and interest payments on loans and mortgage-backed securities are a source of funds. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. Borrowings may also be used on a short-term basis to compensate for reductions in the availability of funds and other sources and on a longer-term basis for general business purposes. For a discussion of commitments and credit risk, see note 25 to the consolidated financial statements.  DEPOSITS. Deposits are attracted by the Company principally from within its primary market area. Deposit account terms vary, with the principal differences being the minimum balance required, the time periods the funds must remain on deposit and the interest rate.  The Company obtains deposits primarily from residents in Illinois and Indiana. The Company seeks to attract deposit accounts by offering a variety of products with competitive rates and terms.  Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Management determines the rates and terms based on rates paid by competitors, the need for funds or liquidity, growth goals and federal and state regulations. The Company attempts to control the flow of deposits by pricing its accounts to remain generally competitive with other financial institutions in its market area.                                         -20-    The following table shows the distribution of and certain other information relating to the Company's average deposits for the years 2005 and 2004 by the type of deposits indicated.                                               December 31, 2005                December 31, 2004                                     ------------------------------   ------------------------------                                                 Percent                          Percent                                                of Total   Weighted              of Total   Weighted                                      Average    Average    Average    Average    Average    Average                                      Balance   Deposits     Rate      Balance   Deposits     Rate                                     --------   --------   --------   --------   --------   --------                                                          (dollars in thousands)        Money market deposits               $ 15,841      9.41%     1.99%    $  9,818      6.18%     1.32% Savings deposits                      12,225      7.26%     0.85%      11,989      7.55%     0.96% NOW and other demand deposits         36,990     21.97%     1.05%      47,268     29.76%     1.11% Non-interest bearing deposits         17,357     10.31%     0.00%      15,104      9.51%     0.00%                                     --------     -----      ----     --------     -----      ----       Total                           82,413     48.95%     0.98%      84,179     53.00%     0.91%  Certificate accounts    Three months or less                  356      0.21%     1.45%         387      0.24%     1.09%    Over three through six months       3,926      2.33%     2.73%       2,020      1.27%     1.17%    Over six through twelve months     29,696     17.64%     2.69%      26,699     16.81%     1.84%    Over one to three years            26,698     15.86%     2.59%      19,298     12.15%     2.41%    Over three to five years           12,828      7.62%     4.33%      14,082      8.87%     4.33%    Over five years                    12,435      7.39%     4.35%      12,170      7.66%     4.35%                                     --------    ------      ----     --------    ------      ----       Total certificates              85,939     51.05%     3.14%      74,656     47.00%     2.84%        Total average deposits        $168,352    100.00%     2.08%    $158,835    100.00%     1.82%                                     ========    ======      ====     ========    ======      ====   The following table shows the interest rate and maturity information for the Company's certificates of deposits at December 31, 2005.                                       Maturity Date                 ---------------------------------------------------                 One Year   Over 1-2   Over 2-3    Over 3                  or Less     Years      Years     Years      Total                 --------   --------   --------   -------   --------                                (dollars in thousands)       Interest Rate 0.00% - 1.99%    $ 8,112    $    14    $   --    $    --   $  8,126 2.00% - 3.99%     30,375      8,774     4,537      6,231     49,917 4.00% - 5.99%     27,062     10,741     4,221      5,946     47,970 6.00% - 7.99%         87          4        --         --         91                  -------    -------    ------    -------   --------                  $65,636    $19,533    $8,758    $12,177   $106,104                  =======    =======    ======    =======   ========   As of December 31, 2005, the aggregate amount of outstanding time certificates of deposit at the Company in amounts greater than or equal to $100,000, was approximately $27.0 million. The following table presents the maturity of these time certificates of deposits at December 31, 2005.                                         -21-                                       December 31, 2005                                   -----------------                                     (In thousands)   3 months or less                       $ 3,709 Over 3 months through 6 months           3,264 Over 6 months thruogh 12 months          8,855 Over 12 months                          11,147                                        -------   Total                                $26,975                                        =======   RETURN ON EQUITY AND ASSETS                                                  2005    2004    2003                                              -----   -----   -----     Return on assets (net income divided by    average total assets)                      0.52%   0.54%   0.90% Return on equity (net income divided by    average equity)                            4.66%   4.58%   7.38% Dividend payout ratio (dividends per share    divided by net income per share (1)       42.86%  42.59%  20.59% Equity to assets ratio (average equity    divided by average total assets)          11.08%  11.84%  12.19%   (1)  The ratio was calculated by dividing total dividends paid per share by      basic earnings per share.  BORROWINGS. The Company may obtain advances from the Federal Home Loan Bank ("FHLB") of Chicago upon the security of the common stock it owns in that bank and certain of its residential mortgage loans and mortgage-backed and other investment securities, provided certain standards related to creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. FHLB advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending.  At December 31, 2005, the Company had $43.2 million of FHLB advances secured by first mortgage loans, FHLB stock, and investment securities. Some of the advances are "rate-locked" for a determined time period, between one and five years, and then are convertible quarterly thereafter by the Federal Home Bank to a quarterly adjustable rate advance. Of the $36.2 million in fixed term advances, $20.5 million has passed the "rate-lock" period, but is still a fixed rate advance. The remaining $15.7 million advances are fixed term advances. An open-end, variable rate line of credit with the FHLB had a $7.0 million balance at December 31, 2005. The open-end line of credit is subject to daily interest rate adjustments, and generally is used for short-term funding needs.                                         -22-   The following schedule presents FHLB advances at December 31, 2005 by maturity date:                          Interest   Fixed or      Maturity       First Convertible       Amount   Date of Advance       Rate     Variable        Date               Date          (in thousands)   ---------------     --------   --------   ---------------   -----------------   --------------       Open line of credit     4.41%    Variable   January, 2006                               7,000 February, 2003          2.62%      Fixed    February, 2006                              8,000 October, 2003           2.78%      Fixed    October, 2006                                 400 February, 1998          5.05%      Fixed    February, 2008      February, 2001        $ 1,500 February, 1998          5.32%      Fixed    February, 2008      February, 2003          1,500 March, 2003             3.35%      Fixed    March, 2008                                 2,000 October, 2003           3.61%      Fixed    October, 2008                                 300 January, 2001           4.80%      Fixed    January, 2011       January, 2003           7,500 February, 2001          4.86%      Fixed    February, 2011      February, 2004         10,000 September, 2001         3.12%      Fixed    September, 2011                             5,000                                                                                       -------                                                                                       $43,200                                                                                       =======   The Company also occasionally purchases federal funds to fund short-term cash requirements. At December 31, 2005 federal funds purchased totaled $2.5 million.  Capital securities of $6.0 million were issued June 15, 2005, by a statutory business trust, FBTC Statutory Trust I. The Company owns 100% of the common equity of the trust, which is a wholly-owned subsidiary of the Company. The $6.0 million in proceeds from the trust preferred issuance and an additional $186,000 for the Company's investment in the common equity of the Trust, a total of $6,186,000, was invested in the junior subordinated debentures of the Company. As required by FIN 46R, the Company has not consolidated the investment in the Trust. The trust was formed with the purpose of issuing trust preferred securities and investing the proceeds from the sale of such trust preferred securities in the debentures. The debentures held by the trust are the sole assets of the trust. Distributions of the trust preferred securities are payable at a variable rate of interest, which is equal to the interest rate being earned by the trust on the debentures, and are recorded as interest expense by the Company. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures.  The debentures are included as Tier I capital for regulatory capital purposes. The debentures issued are first redeemable, in whole or part, by the Company on June 15, 2010, and mature on June 15, 2035. The funds were used for the acquisition of the common stock of Rantoul First Bank and for the repurchase of First BancTrust Corporation common stock. Interest is fixed at a rate of 5.80% for a period of five years, and then converts to a floating rate. Interest payments are made quarterly beginning in September, 2005.  Market Area  The Company is headquartered in Paris, Illinois, with regular branches in Marshall, and Savoy, Illinois, and the addition of a branch in Rantoul, Illinois as a result of the acquisition of Rantoul First Bank in October, 2005. The Company's primary retail                                         -23-    market area encompasses all of adjoining Clark and Edgar Counties, where the home office and the Marshall office are located, as well as Champaign County where the branches of Savoy and Rantoul are located, and Vermilion County which is adjacent to both Edgar and Champaign Counties. In August, 2004, the Company relocated the Savoy operation to a permanent facility in a retail area in Savoy. The Company's primary market area represents its source for deposit gathering and loan originating, however, the Company also originates loans to borrowers outside of the market area. Clark and Edgar Counties are located in east central Illinois, just west of Terre Haute, Indiana, and are both rural counties where agriculture is responsible for a much higher share of employment than in Illinois, as a whole. Champaign County is located in central Illinois and includes the urban markets of Champaign and Urbana, as well as the University of Illinois, which is the area's largest employer. The workforce in this area is primarily employed in professional, managerial, and sales positions. Vermilion County is located immediately north of Edgar County, and to the east of Champaign County.  Both Clark and Edgar Counties have similar economic characteristics with population levels of less than 20,000 in each county in 1990 and 2000. Overall, the demographic characteristics of Clark and Edgar Counties are weaker than Illinois or the U.S. with regard to income levels, housing values and growth trends. In contrast, the Savoy area in southern Champaign County has experienced an above-average population growth, with strong new-housing construction, and above-average home values. Rantoul is located 15 miles north of Champaign-Urbana in the northern portion of Champaign County, and while the immediate local economy has not experienced significant economic growth, Rantoul is affected by the economy of Champaign-Urbana. The median household income for Rantoul in the year 2000 is $36,904 compared to the median income of Savoy of $48,500 for the year 2000. The median house value for Rantoul for the year 2000 is $74,200 compared to the median house value for Savoy for the year 2000 of $147,100. Vermilion County has a median income of $34,071 and a median house value of $56,000 for the year 2000. The workforce in this county is primarily employed in manufacturing and education, health and social services positions. The largest employers in the area include a distributing company for Wal-Mart and Sam's Clubs, several manufacturing companies, and a railroad freight car repair company.  Competition  The Company faces significant competition in attracting deposits and making loans. Its most direct competition for deposits has come historically from commercial banks, credit unions, and other savings institutions located in its primary market area, including many large financial institutions which have greater financial and marketing resources available to them. In addition, the Company faces significant competition for investors' funds from short-term money market securities, mutual funds and other corporate and government securities. The Company does not rely upon any individual group or entity for a material portion of its deposits. The ability of the Company to attract and retain deposits depends on its ability to generally provide a rate of return, liquidity and risk comparable to that offered by competing investment opportunities.  The Company's competition for real estate loans comes principally from mortgage banking companies, commercial banks, other savings institutions and credit unions. The                                         -24-    Company's competition in the agricultural market also includes Farm Credit Services as well as agricultural equipment and product suppliers. The Company competes for loan originations primarily through the interest rates and loan fees it charges, and the efficiency and quality of services it provides borrowers. Factors which affect competition include general and local economic conditions, current interest rate levels and volatility in the mortgage markets. Competition may increase as a result of the continuing reduction of restrictions on the interstate operations of financial institutions and the anticipated slowing of refinancing activity.  Personnel  As of December 31, 2005, the Company, including the Bank and the Company's subsidiary, ECS Service Corporation, doing business as Edgar County Title, had 93 full-time and 16 part-time employees. None of the employees are represented by a collective bargaining agent, and the Company believes that it enjoys good relations with its personnel.  Subsidiaries  At December 31, 2005, the Company had three subsidiaries, the Bank, ECS Service Corporation, and First Charter Service Corporation. While the Bank's subsidiary, Community Finance Center, Incorporated was dissolved as a corporation in May, 2005, Community Finance continues to provide retail consumer loans as a division of the bank. In 2005, the Company also formed FBTC Statutory Trust I ("Trust"), which is an unconsolidated wholly owned subsidiary formed to issue cumulative preferred securities. The Company owns all of the securities of the Trust that possess general voting powers. The Company also acquired the subsidiary, Rantoul First Financial, as a part of the acquisition of Rantoul First Bank in October, 2005. Rantoul First Financial provided investment and brokerage services to Rantoul First Bank, and plans are to dissolve this entity in 2006.  ECS Service Corporation is an Illinois chartered corporation which provides real estate abstracting and title insurance services for Edgar and Clark Counties, Illinois primarily to the Company's customers. ECS Service Corporation generated net income of approximately $60,000 and $44,000 for the years ended December 31, 2005 and December 31, 2004, respectively.  First Charter Service Corporation is an Illinois chartered corporation which formerly provided retail sales of uninsured investment products to the Company's customers. Investment and brokerage services are now provided by First Advisors Financial Group, and First Charter is currently in an inactive status. First Charter generated a net loss of $488 and $7,000 for the years ended December 31, 2005 and 2004, respectively.  Rantoul First Financial, acquired with the purchase of Rantoul First Bank in October, 2005, generated net income of $8,000 for the year ended December 31, 2005. As previously stated, the corporation Rantoul First Financial will be dissolved in 2006.                                         -25-    Regulation  The following discussion of certain laws and regulations which are applicable to the Company and the Bank as well as descriptions of laws and regulations contained elsewhere herein, summarizes the aspects of such laws and regulations which are deemed to be material to the Company and the Bank. However, the summary does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.  FIRST BANCTRUST CORPORATION  GENERAL. The Company is a bank holding company and a financial holding company, and as such, is registered with the Federal Reserve Board. Under the Bank Holding Company Act, the Company will be subject to periodic examination by the Federal Reserve Board and will be required to file periodic reports of its operations and such additional information as the Federal Reserve Board may require. Because First Bank is chartered under Illinois law, the Company is also subject to regulation by the Illinois Office of Banks and Real Estate under the Illinois Savings Bank Act.  A bank holding company is a legal entity separate and distinct from its subsidiary bank or other banks. Normally, the major source of a holding company's revenue is dividends it receives from its subsidiary banks. The right of a bank holding company to participate as a stockholder in any distribution of assets of its subsidiary banks upon their liquidation or reorganization or otherwise is subject to the prior claims of creditors of such subsidiary banks. The subsidiary banks are subject to claims by creditors for long-term and short-term debt obligations, including obligations for Federal funds purchased and securities sold under repurchase agreements, as well as deposit liabilities. Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, in the event of a loss suffered by the FDIC in connection with a banking subsidiary of a bank holding company (whether due to a default or the provision of FDIC assistance), other banking subsidiaries of the holding company could be assessed for such loss.  SARBANES-OXLEY ACT OF 2002. In 2002, the President signed into law the Sarbanes-Oxley Act of 2002 implementing legislative reforms intended to address corporate and accounting fraud. In addition to the establishment of a new accounting oversight board which will enforce auditing, quality control and independence standards and will be funded by fees from all publicly traded companies, the Act restricts provision of both auditing and consulting services by accounting firms. To ensure auditor independence, any non-audit services being provided to an audit client will require preapproval by the company's audit committee members. In addition, the audit partners must be rotated. The Act requires chief executive officers and chief financial officers, or their equivalent, to certify to the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement. In addition, under the Act, counsel will be required to report evidence of a material violation of the securities laws or a breach of fiduciary duty by a company to its chief executive officer or its chief legal officer, and, if such officer does not appropriately respond, to report such evidence to the audit committee or other similar committee of the board of directors or the board itself.                                         -26-    Longer prison terms will also be applied to corporate executives who violate Federal securities laws, the period during which certain types of suits can be brought against a company or its officers has been extended, and bonuses issued to top executives prior to restatement of a company's financial statements are now subject to disgorgement if such restatement was due to corporate misconduct. Executives are also prohibited from trading during retirement plan "blackout" periods, and loans to company executives are restricted. In addition, a provision directs that civil penalties levied by the SEC as a result of any judicial or administrative action under the Act be deposited to a fund for the benefit of harmed investors. The Federal Accounts for Investor Restitution ("FAIR") provision also requires the SEC to develop methods of improving collection rates. The legislation accelerates the time frame for disclosures by public companies as they must immediately disclose any material changes in their financial condition or operations. Directors and executive officers must also provide information for most changes in ownership in a company's securities within two business days of the change.  The Act also increases the oversight of, and codifies certain requirements relating to audit committees of public companies and how they interact with the company's "registered public accounting firm" ("RPAF"). Audit committee members must be independent and are barred from accepting consulting, advisory or other compensatory fees from the issuer. In addition, companies must disclose whether at least one member of the committee is a "financial expert" (as such term will be defined by the SEC) and if not, why not. Under the Act, a RPAF is prohibited from performing statutorily mandated audit services for a company if such company's chief executive officer, chief financial officer, comptroller, chief accounting officer or any person serving in equivalent positions has been employed by such firm and participated in the audit of such company during the one-year period preceding the audit initiation date. The Act also prohibits any officer or director of a company or any other person acting under their direction from taking any action to fraudulently influence, coerce, manipulate or mislead any independent public or certified accountant engaged in the audit of the company's financial statements for the purpose of rendering the financial statement's materially misleading. The Act also requires the SEC to prescribe rules requiring inclusion of an internal control report and assessment by management in the annual report to shareholders. The Act requires the RPAF that issues the audit report to attest to and report on management's assessment of the company's internal controls. In addition, the Act requires that each financial report required to be prepared in accordance with (or reconciled to) generally accepted accounting principles and filed with the SEC reflect all material correcting adjustments that are identified by a RPAF in accordance with generally accepted accounting principles and the rules and regulations of the SEC.  ACQUISITIONS. The Bank Holding Company Act requires a bank holding company to obtain the prior approval of the Federal Reserve Board before acquiring ownership or control of more than 5% of the voting shares or all or substantially all of the assets of any bank or merging or consolidating with any other bank holding company. The Bank Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring more than 5% of the voting share of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks. A                                         -27-    bank holding company that becomes a financial holding company, such as the Company, is permitted to engage in activities that are financial in nature or incidental to such financial activities. Effective March 11, 2000, the Gramm-Leach-Bliley Act permitted bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the Federal Deposit Insurance Corporation Improvement Act of 1991 prompt corrective action provisions, is well managed and has at least a satisfactory rating under the Community Reinvestment Act by filing a declaration with the Federal Reserve Board that the bank holding company seeks to become a financial holding company. No regulatory approval is required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.  The Gramm-Leach-Bliley Act, enacted in 1999, defines "financial in nature" to include securities underwriting, dealing and market making; providing financial or investment advice; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking. Subsidiary banks of a financial holding company must continue to be well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or subsidiaries. In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a Community Reinvestment Act rating of satisfactory or better.  The Company became a financial holding company under the Bank Holding Company Act effective March 16, 2002, and the Company owns subsidiaries engaged in real estate title and securities brokerage activities.  "SOURCE OF STRENGTH" POLICY. According to Federal Reserve Board policy, bank holding companies are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. This support may be required at times when a bank holding company may not be able to provide such support.  CAPITAL REQUIREMENTS. The Federal Reserve Board has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis) substantially similar to those of the FDIC for the Bank. See "Regulation - First Bank & Trust - - Capital Requirements." The Company's Tier I and total capital significantly exceed the Federal Reserve Board's capital adequacy requirements. Refer to Company capital amounts and ratios in Footnote 14 of the consolidated financial statements for the Company's capital ratios. However, the Federal Reserve Board recently amended its Small Bank Holding Company Policy Statement to provide that bank holding companies with consolidated assets of $500 million or less are subject to such policy. Under the Small Bank Holding Company Policy Statement, among other things, capital adequacy requirements apply only to insured depository subsidiaries of small bank holding companies with                                         -28-    consolidated assets of less than $500 million and capital adequacy is not measured on a consolidated basis or bank holding company only basis.  RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between a savings bank and its "affiliates" are subject to quantitative and qualitative restrictions under Sections 23A and 23B of the Federal Reserve Act and FDIC regulations. Affiliates of a savings bank include, among other entities, the savings bank's holding company and companies that are controlled by or under common control with the savings bank.  In general, the extent to which a savings bank or its subsidiaries may engage in certain "covered transactions" with affiliates is limited to an amount equal to 10% of the institution's capital and surplus, in the case of covered transactions with any one affiliate, and to an amount equal to 20% of such capital and surplus, in the case of covered transactions with all affiliates. In addition, a savings bank and its subsidiaries may engage in covered transactions and certain other transactions with affiliates only on terms and under circumstances that are substantially the same, or at least as favorable to the savings bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A "covered transaction" is defined to include a loan or extension of credit to an affiliate; a purchase of investment securities issued by an affiliate; a purchase of assets from an affiliate, with certain exceptions; the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; or the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.  In addition, Sections 22(h) and (g) of the Federal Reserve Act place restrictions on loans to executive officers, directors and principal stockholders. Under Section 22(h), loans to a director, an executive officer and to a greater than 10% stockholder of a bank, and certain related interests of such person generally may not exceed 15% of the bank's unimpaired capital and surplus for loans that are not fully secured and an additional 10% of the bank's unimpaired capital and surplus for loans fully secured by readily marketable collateral. Section 22(h) also requires that loans to directors, executive officers and principal stockholders be made on terms substantially the same as offered in comparable transactions to other persons and requires prior board approval for certain loans. In addition, the aggregate amount of extensions of credit by a bank to all insiders cannot exceed the institution's unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers.  TAXATION. The Company is subject to those rules of federal income taxation generally applicable to corporations under the Internal Revenue Code. The Company and its subsidiaries, as members of an affiliated group of corporations within the meaning of Section 1504 of the Internal Revenue Code, file a consolidated federal income tax return, which has the effect of eliminating or deferring the tax consequences of inter-company distributions, including dividends, in the computation of consolidated taxable income.  The Company also is subject to various forms of state taxation under the laws of Illinois as a result of the business which it conducts in Illinois.                                         -29-    FIRST BANK & TRUST  GENERAL. First Bank is an Illinois-chartered savings bank, the deposit accounts of which are insured by the Savings Association Insurance Fund of the FDIC. As a Savings Association Insurance Fund insured, Illinois-chartered savings bank, the Bank is subject to examination, supervision, reporting and enforcement requirements of the Division of Banking of the Illinois Department of Financial and Professional Regulation, as the chartering authority for Illinois savings banks, and the FDIC, as administrator of the Savings Association Insurance Fund, and to the statutes and regulations administered by the Illinois Division of Banking and the FDIC governing such matters as capital standards, mergers, establishment of branch offices, subsidiary investments and activities and general investment authority. The Bank is required to file reports with the Illinois Division of Banking and the FDIC concerning its activities and financial condition and will be required to obtain regulatory approvals prior to entering into certain transactions, including mergers with, or acquisitions of, other financial institutions.  The Illinois Division of Banking and the FDIC have extensive enforcement authority over Illinois-chartered savings banks, such as First Bank. This enforcement authority includes, among other things, the ability to issue cease-and-desist or removal orders, to assess civil money penalties and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe and unsound practices.  The Illinois Division of Banking has established a schedule for the assessment of "supervisory fees" upon all Illinois savings banks to fund the operations of the Illinois Division of Banking. These supervisory fees are computed on the basis of each savings bank's total assets (including consolidated subsidiaries) and are payable at the end of each calendar quarter. A schedule of fees has also been established for certain filings made by Illinois savings banks with the Illinois Division of Banking. The Illinois Division of Banking also assesses fees for examinations conducted by the Illinois Division of Banking's staff, based upon the number of hours spent by the staff performing the examination. During the year ended December 31, 2005, First Bank paid approximately $34,500 in supervisory fees and $21,500 in examination fees.  INSURANCE OF ACCOUNTS. The deposits of the Bank are insured to the maximum extent permitted by the Savings Association Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. However, under the recently adopted Federal Deposit Insurance Reform Act of 2005 (the "FDIRA"), the Savings Association Insurance Fund will be merged with the Bank Insurance Fund during 2006. As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the FDIC. The FDIC also has the authority to initiate enforcement actions against savings banks.  Currently Savings Association Insurance Fund insured institutions pay premiums based on a matrix of nine assessment risk classifications, with rates currently ranging from .00% for well capitalized healthy institutions, to .27% for undercapitalized institutions                                         -30-    with substantial supervisory concerns. Pursuant to the FDIRA, a new system for assessing insurance premiums based on risk will be adopted.  Assessments for subsequent periods will depend on the timetable for implementation of the FDIRA and the regulations adopted by the FDIC to implement the FDIRA. In addition to a new system for assessing insurance premiums based on risk, a number of other provisions of the FDIRA and the implementing regulations will impact future assessments. The FDIC will have flexibility to determine the level of reserves it will hold. Currently, the FDIC must hold reserves equal to 1.25 percent of insured deposits, but under the FDIRA, the FDIC will be able to set the reserve ratio annually between 1.15 percent and 1.50 percent. In addition, the FDIC will be required to pay dividends awarded on an historical basis to insured depository institutions whenever the reserve ratio exceeds 1.35 percent, although dividends may be suspended or limited if the FDIC determines there is a significant risk to the deposit insurance fund. Insured depository institutions also will receive a one-time credit which can be applied against the payment of future premiums.  Until FDIRA is fully implemented, it is not possible for the Bank to determine how these changes will impact the amount of deposit premiums it will pay in the future.  In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980's by the Financing Corporation ("FICO") to recapitalize the predecessor to the Savings Association Insurance Fund. During 2005, FICO payments for Savings Association Insurance Fund members approximated 1.43 basis points and the premium paid by the Bank for this period was $21,700.  The FDIC may terminate the deposit insurance of any insured depositary institution, including First Bank, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, continue to be insured for a period of six months to two years, as determined by the FDIC. Management is aware of no existing circumstances which would result in termination of First Bank's deposit insurance.  CAPITAL REQUIREMENTS. The Bank is subject to various regulatory capital requirements administered by the FDIC. FDIC regulations establish a minimum 3.0% Tier I leverage capital requirement for the most highly-rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively increases the minimum Tier I leverage ratio for such other banks to 4.0% to 5.0% or more. Under FDIC regulations, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest risk exposure, excellent asset quality, high liquidity, good earnings and, in general, which are considered a strong banking organization, rated composite 1 under the Uniform Financial Institutions Rating                                         -31-   \ System. Tier I or core capital is defined as the sum of common stockholders' equity (including retained earnings), noncumulative perpetual preferred stock, and related surplus, and minority interests in consolidated subsidiaries, minus all intangible assets other than certain qualifying supervisory goodwill, and certain purchased mortgage servicing rights and purchased credit and relationships.  FDIC regulations also require that savings banks meet a risk-based capital standard. The risk-based capital standard for savings banks requires the maintenance of total capital, which is defined as Tier I capital and supplementary (Tier 2 capital), to risk weighted assets of 8% of which at least 4% must be Tier I capital. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the federal regulators believe are inherent in the type of asset.  Refer to Bank capital amounts and ratios in Footnote 14 of the consolidated financial statements for the Bank's capital ratios.  DIVIDENDS. The Bank is subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. The FDIC or the Illinois Division of Banking is authorized to determine under certain circumstances relating to the financial condition of the Bank or the Company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. Restrictions on the payment of dividends by the Bank are more fully described below.  Under the Illinois Savings Bank Act, no dividends may be declared when total capital of a savings bank is less than that required by Illinois law. Dividends may be paid by a savings bank out of its net profits. Written approval of the Illinois Division of Banking is required if a savings bank has total capital of less than 6% of total assets and the dividend to be declared in any year exceeds 50% of the savings bank's net profits for the year. The approval of the Commissioner of the Illinois Division of Banking also is required before dividends may be declared that exceed a savings bank's net profits in any year. In 2005, First Bank declared and paid dividends to the Company of $150,000.  SAFETY AND SOUNDNESS GUIDELINES. The FDIC and the other federal banking agencies have established guidelines for safety and soundness, addressing operational and managerial standards, as well as compensation matters for insured financial institutions. Institutions failing to meet these standards are required to submit compliance plans to their appropriate federal regulators. The FDIC and the other agencies have also established guidelines regarding asset quality and earnings standards for insured institutions. The Bank believes that it is in compliance with these guidelines and standards.  FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the Federal Home Loan Bank of Chicago, which is one of 12 regional Federal Home Loan Banks that administers the home financing credit function of savings institutions. Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the                                         -32-   Federal Home Loan Bank System. It makes loans to members (i.e. advances) in accordance with policies and procedures established by the Board of Directors of the Federal Home Loan Bank. At December 31, 2005, the Bank had $43.2 million of Federal Home Loan Bank advances. See Note 10 to Financial Statements.  As a member, the Bank is required to purchase and maintain stock in the Federal Home Loan Bank of Chicago in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans or similar obligations at the beginning of each year. In addition, all borrowings from the Chicago Federal Home Loan Bank must be supported by capital stock holdings not less than 5% of borrowings. At December 31, 2005, the Bank had $6.6 million in Federal Home Loan Bank stock, which was in compliance with these requirements.  The Federal Home Loan Banks are required to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have adversely affected the level of Federal Home Loan Bank dividends in the past and could do so in the future. These contributions also could have an adverse effect on the value of Federal Home Loan Bank stock in the future. The average dividend yield on the Bank's stock was 4.32% in 2005 and 6.03% in 2004.  COMMUNITY INVESTMENT AND CONSUMER PROTECTION LAWS. In connection with its lending activities, First Bank is subject to a variety of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population. Included among these are the federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act and Community Reinvestment Act.  The Community Reinvestment Act requires insured institutions to define the communities that they serve, identify the credit needs of those communities and adopt and implement a "Community Reinvestment Act Statement" pursuant to which they offer credit products and take other actions that respond to the credit needs of the community. The responsible federal banking regulator must conduct regular Community Reinvestment Act examinations of insured financial institutions and assign to them a Community Reinvestment Act rating of "outstanding," "satisfactory," "needs improvement" or "unsatisfactory." In 2004, the Community Reinvestment Act rating of the Bank was satisfactory.  FEDERAL RESERVE SYSTEM. The Federal Reserve Board requires all depository institutions to maintain reserves against their transaction accounts (primarily NOW and Super NOW checking accounts) and non-personal time deposits. As of December 31, 2005, no reserves were required to be maintained on the first $7.8 million of net transaction accounts, reserves of 3% were required to be maintained against the next $40.5 million and reserves of 10% were required to be maintained on net transaction accounts in excess of $48.3 million. The Company applied for and received permission from the Federal Reserve to employ a deposit reclassification process whereby a portion of our transaction accounts can be classified as savings deposits, which are not subject to Reserve                                         -33-    Requirements. As a result of this reclassification, at December 31, 2005 total reserves required to be maintained by the Federal Reserve Board were only $72,000. The above dollar amounts and percentages are subject to periodic adjustment by the Federal Reserve Board. Because required reserves must be maintained in the form of vault cash or a noninterest-bearing account at a Federal Reserve Bank, the effect of this reserve requirement is to reduce an institution's earning assets and constrain its ability to lend.  RECENT ACCOUNTING PRONOUNCEMENTS.  FASB Staff Position on FAS No. 115-1 and FAS No. 124-1 ("the FSP"), "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," was issued in November 2005 and addresses the determination of when an investment is considered impaired; whether the impairment is other-than-temporary; and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of an other-than-temporary impairment on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance on Emerging Issues Task Force (EITF) Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary, must be recognized in earnings at an amount equal to the entire difference between the securities cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also required that an investor recognize an other-than-temporary impairment loss when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The initial adoption of this statement is not expected to have a material impact on the Company's consolidated financial statements.  In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-based Compensation, that sets accounting requirements for "share-based" compensation to employees. This statement will require the Company to recognize in the income statement the grant-date fair value of the stock options and other equity-based compensation issued to employees, but expresses no preference for a type of valuation model. This Statement is effective on January 1, 2006. The unvested stock options that are outstanding on the effective date of SFAS No. 123R that were previously included as part of the net income in Note 1 of the Company's financial statements will be charged to expense over the remaining vesting period, without any changes in measurement. The Company will adopt this Standard under the modified prospective method of application. Under that method, the Company will recognize compensation costs for new grants of share-based awards, awards modified after the effective date, and the remaining portion of the unvested awards at the adoption date. The adoption of SFAS No. 123R will not have an impact on the Company's results of operations, financial position or cash flows as all stock options were vested as of December 31, 2005.  The FASB issued an FSP on December 15, 2005, "SOP 94-6-1 -- Terms of Loan Products That May Give Rise to a Concentration of Credit Risk" which addresses the                                         -34-    disclosure requirements for certain nontraditional mortgage and other loan products the aggregation of which may constitute a concentration of credit risk under existing accounting literature. Pursuant to this FSP, the FASB's intentions were to reemphasize the adequacy of such disclosures and noted that the recent popularity of certain loan products such as negative amortization loans, high loan-to-value loans, interest only loans, teaser rate loans, option adjusted rate mortgage loans and other loan product types may aggregate to the point of being a concentration of credit risk to an issuer and thus may require enhanced disclosures under existing guidance. This FSP was effective immediately. We have evaluated the impact of this FSP and have concluded that our disclosures are consistent with the objectives of the FSP.
Information relating to Risk Factors is included in the Registrant's 2005 Annual Report to Stockholders attached hereto as Exhibit 13 ("2005 Annual Report to Stockholders") on pages 38 through 43 under the caption "Risk Factors", and is incorporated herein by reference.
None
The following table sets forth information relating to the Bank's offices at December 31, 2005.                                                        Net Book Value of                                                        Property and                                           Lease         Leasehold                             Owned or   Expiration    Improvements at      Deposits as of          Location            Leased       Date      December 31, 2005   December 31, 2005          --------           --------   ----------   -----------------   -----------------      101 South Central Avenue    Owned          --              $388              $    -- Paris Illinois 61944  206 South Central Avenue    Leased      8/31/2006            --               85,156 Paris, Illinois 61944  610 North Michigan Avenue   Owned          --               668               61,581 Marshall, Illinois 62441  1251 Woodfield Drive        Leased      8/31/2009           317               20,217 Savoy, Illinois 61874  1500 East Grove Avenue      Owned                         1,290               27,021 Rantoul Illinois 61866
The Company and Bank are also subject to claims and lawsuits which arise primarily in the ordinary course of business, such as claims to enforce liens and claims involving the making and servicing of real property loans and other issues. It is the opinion of                                         -35-    management that the disposition or ultimate determination of such possible claims or lawsuits will not have a material adverse effect on the consolidated financial position and results of operations of the Company and Bank.
During the quarter ended December 31, 2005, no matters were submitted to a vote of security holders through a solicitation of proxies or otherwise.                                       PART II
(a) Information relating to the market for Registrant's common stock and related stockholder matters is under "Shareholder Information" in the 2005 Annual Report to Stockholders attached hereto as Exhibit 13 ("2005 Annual Report to Stockholders") on page 89 and is incorporated herein by reference.  The Company's Board of Directors has the authority to declare dividends on the Common Stock, subject to statutory and regulatory requirements. The Company currently intends to pay quarterly cash dividends on the common stock at an annual rate of $0.24 per share. However, the rate of such dividends and the continued payment thereof will depend upon a number of factors, including investment opportunities available to us, capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods. Special cash dividends or stock dividends may be paid in addition to, or in lieu of, regular cash dividends.  Dividends from us depend upon the receipt of dividends from the Bank, because the Company has no material source of income other than dividends from the Bank, and interest payments with respect to our loan to our ESOP. See "Item 1. Description of Business. Regulation-First Bank & Trust-Dividends."  Any payment of dividends by the Bank to the Company which would be deemed to be drawn out of the Bank's bad debt reserves would require a payment of taxes at the then-current tax rate by the Bank on the amount of earnings deemed to be removed from the reserves for such distribution. The Bank does not intend to make any distribution to the Company that would create such a Federal tax liability.  Unlike the Bank, the Company is not subject to the above regulatory restrictions on the payment of dividends to our stockholders, although the source of such dividends may eventually depend, in part, upon dividends from the Bank in addition to the net proceeds retained by us and earnings thereon. The Company is, however, subject to the requirements of Delaware law, which generally permits the payment of dividends out of                                         -36-    surplus, except when (1) the corporation is insolvent or would thereby be made insolvent, or (2) the declaration or payment thereof would be contrary to any restrictions contained in the certificate of incorporation. If there is no surplus available for dividends, a Delaware corporation may pay dividends out of its net profits for the then current or the preceding fiscal year or both, except that no dividend may be paid if the corporation's assets are exceeded by its liabilities or if its net assets are less than the amount which would be needed, under certain circumstances, to satisfy any preferential rights of stockholders.  (b) Not Applicable.  (c) The following table provides information about purchases of the Company's common stock by the Company during the quarter ended December 31, 2005.                        ISSUER PURCHASES OF EQUITY SECURITIES                                                                        (d) Maximum                                               (c) Total Number       Number of                                                   of Shares       Shares that May                                                 Purchased as          Yet Be              (a) Total Number   (b) Average   Part of Publicly   Purchased Under                  of Shares       Price Paid   Announced Plans        the Plans   Period         Purchased        per Share      or Programs        or Programs   ------     ----------------   -----------   ----------------   ----------------      10/1/2005     to 10/31/2005            --              --               --             21,250  11/1/2005     to 11/30/2005            --              --               --             21,250  12/1/2005     to 12/31/2005         8,000           $12.20           8,000             13,250                    -----           ------           -----   Total            8,000           $12.20           8,000                    =====           ======           =====   (1)  The Company's board of directors approved the repurchase by us of 124,850      shares over the one year period ending April 18, 2006.
The above captioned information appears under the caption "Selected Financial Data" in the 2005 Annual Report to Stockholders on page 3 and is incorporated herein by reference.
The above captioned information appears under the caption "Management's Discussion and Analysis" in the 2005 Annual Report to Stockholders on pages 4 to 38 and is incorporated herein by reference.                                         -37-
Sources of market risk include interest rate risk, foreign currency exchange risk, commodity price risk and equity price risk. The Company is only subject to interest rate risk. The Company purchased no financial instruments for trading purposes during the year ended December 31, 2005.  The principal objectives of the Company's interest rate risk management function are: (i) to evaluate the interest rate risk included in certain balance sheet accounts; (ii) to determine the level of risk appropriate given the Company's business focus, operating environment, capital and liquidity requirements, and performance objectives; (iii) to establish asset concentration guidelines; and (iv) to manage the risk consistent with Board-approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes interest rates and to manage the ratio of interest rate sensitive assets to interest rate sensitive liabilities within specified maturity terms or repricing dates. The Company's Board of Directors has established an Asset/Liability Committee consisting of directors and senior management officers, which is responsible for reviewing the Company's asset/liability policies and monitoring interest rate risk as such risk relates to its operating strategies. The committee usually meets on a quarterly basis, and at other times as dictated by market conditions, and reports to the Board of Directors. The committee is responsible for reviewing Company activities and strategies, and the effect of those strategies on the Company's net interest margin, the market value of the portfolio and the effect that changes in the interest will have on the Company's portfolio and exposure limits.  The Company's key interest rate risk management tactics consist primarily of: (i) emphasizing the attraction and retention of core deposits, which tend to be a more stable source of funding; (ii) emphasizing the origination of adjustable rate mortgage loan products and short-term commercial and consumer loans for the in-house portfolio, although this is dependent largely on the market for such loans; (iii) selling longer-term fixed-rate one-to-four family mortgage loans in the secondary market; and (iv) investing primarily in U.S. government agency instruments and mortgage-backed securities. The above captioned information appears under the caption "Management's Discussion and Analysis--Management of Interest Rate Risk" in the 2005 Annual Report to Stockholders on pages 34 to 38 and is incorporated herein by reference.
The consolidated balance sheets of First BancTrust Corporation as of December 31, 2005, and 2004, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2005, together with the report of BKD, LLP appears in the 2005 Annual Report to Stockholders on pages 44 to 88 and is incorporated herein by reference. The Supplementary Data required by Item 8 is incorporated by reference from Note 28 to the financial statements contained in the Annual Report to Stockholders.                                         -38-
None
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of December 31, 2005. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls during the quarter ended December 31, 2005.  Disclosure controls and procedures are the controls and other procedures of the Company that are designed to ensure that the information required to be disclosed by the Company in its reports filed or submitted under the Securities Exchange Act of 1934, as amended ("Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports filed under the Exchange Act is accumulated and communicated to the Company's management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Not Applicable.                                      PART III
The information required by this item is incorporated herein by reference from the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on April 17, 2006 ("Proxy Statement"), filed on March 17, 2006 with the Securities and Exchange Commission, under the captions "The Audit Committee" and "Audit Committee Financial Expert" on page 8, "Code of Ethics" on page 10, "Election of Directors" on page 11, and "Compliance With Section 16" on page 26. Information on our Executive Officers appears under the caption "Backgrounds of Our Other Executive Officers" on page 16 of the Proxy Statement and is incorporated herein by reference.                                         -39-
The information relating to executive compensation is incorporated herein by reference from the Registrant's Proxy Statement under the captions "Executive Compensation", "Directors' Compensation", "Other Compensation Arrangements," and "Compensation Committee Interlocks and Insider Participation." The information appearing under the captions "Performance Graph" and "Executive Compensation Committee Report" are furnished but shall not be deemed "filed" or incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except as specifically set forth therein.
The information relating to security ownership of certain beneficial owners and management and related stockholder matters is incorporated herein by reference from the Registrant's Proxy Statement under the captions "Security Ownership of Directors, Nominees For Directors, Most Highly Compensated Executive Officers and All Directors and Executive Officers as a Group" and "Security Ownership of Stockholder Holding 5% or More."  EQUITY COMPENSATION PLAN INFORMATION. The following table sets forth certain information for all equity compensation plans and individual compensation arrangements (whether with employees or non-employees, such as directors), in effect as of December 31, 2005.                        EQUITY COMPENSATION PLAN INFORMATION                                    Number of securities to be                           Number of securities remaining                                   issued upon exercise of      Weighted-average       available for future issuance                                    outstanding options,        exercise price of     under equity compensation plans                                          warrants            outstanding options,   (excluding securities reflected                                         and rights            warrants and rights         in the first column)                                 --------------------------   --------------------   --------------------------------     Equity compensation plans approved by security holders              304,174                    $9.87                      2,094(1)  Equity compensation plans not approved by security holders                   --                       --                         --                                           -------                    -----                      ----- Total                                     304,174                    $9.87                      2,094(1)                                           =======                    =====                      =====   (1)  As of December 31, 2005, 119,576 shares of restricted stock had been      granted, which are excluded from the total.
The information relating to certain relationships and related transactions is incorporated herein by reference from the Registrant's Proxy Statement under the caption "Transactions With Certain Related Persons."                                         -40-
The information relating to principal accountant fees and services is incorporated herein by reference from the Registrant's Proxy Statement under the caption "Item 2. Ratification of Auditors."
(a) The following documents are filed as a part of this report:            (1) Financial Statements            Consolidated Financial Statements of the Registrant are incorporated           by reference from the following indicated pages of the 2005 Annual           Report to Stockholders.               Independent Accountants' Report                       44            Consolidated Balance Sheets as of           December 31, 2005 and 2004                            45-46            Consolidated Statements of Income for the years           ended December 31, 2005 2004, and 2003                47-48            Consolidated Statements of Stockholders' Equity for           the years ended December 31, 2005, 2004, and 2003     49-50            Consolidated Statements of Cash Flows for the years           ended December 31, 2005, 2004, and 2003               51-52            Notes to Consolidated Financial Statements            53-88             The remaining information appearing in the 2005 Annual Report to           Stockholders is not deemed to be filed as part of this report, except           as expressly provided herein.            (2) Schedules            All schedules are omitted because they are not required or applicable,           or the required information is shown in the consolidated financial           statements or the notes thereto.            (3)(a) Exhibits            The following exhibits are filed as part of this report, and this list           includes the Exhibit Index.                                         -41-     No.                                   Description - ---                                   -----------   3.1    Certificate of Incorporation of First BancTrust Corporation* 3.2    Amended and Restated Bylaws of First BancTrust Corporation ** 4.0    Form of Stock Certificate of First BancTrust Corporation* 4.1    Trust Preferred Securities Indenture (filed herewith) 10.1   Employment Agreement between First BancTrust Corporation, First Bank &        Trust, s.b. and Terry J. Howard**(1) 10.2   2002 Stock Option Plan***(1) 10.3   Form of Stock Option Agreement ***** 10.3   2002 Recognition and Retention Plan and Trust Agreement***(1) 10.4   First BancTrust Corporation Deferred Compensation Plan **** (1) 10.5   Amendment Number One to First BancTrust Corporation Deferred Compensation        Plan **** (1) 10.6   Trust Preferred Securities Subscription Agreement (filed herewith) 10.7   Trust Preferred Securities Declaration of Trust (filed herewith) 10.8   Trust Preferred Securities Guarantee Agreement (filed herewith) 13.0   2005 Annual Report to Stockholders (filed herewith) 14.0   Code of Ethics (filed herewith) 21.0   Subsidiary information is incorporated herein by reference to "Part I -        Subsidiaries" 23.0   Consent of BKD, LLP (filed herewith) 31.1   Certification of Terry J. Howard, required by Rule 13a-14(a). 31.2   Certification of Ellen M. Litteral, required by Rule 13a-14(a). 32.1   Certification of Terry J. Howard, Chief Executive Officer pursuant to        Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18        U.S.C. 1350). 32.2   Certification of Ellen M. Litteral, Chief Financial Officer pursuant to        Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002 (18        U.S.C. 1350).   - ---------- *    Incorporated herein by reference from the Registration Statement on Form      SB-2, as amended, filed on December 15, 2000, Registration No. 333-51934.  **   Incorporated herein by reference from the Registrant's Form 10-KSB filed on      April 1, 2002.  ***  Incorporated herein by reference from the Registrant's definitive proxy      statement filed on March 22, 2002.  **** Incorporated herein by reference from the Registrant's Form 10-KSB filed on      March 28, 2003.                                         -42-    ***** Incorporated herein by reference from the Registrant's Form 10-KSB filed      on March 29, 2005.  (1)  Management contract or compensatory plan or arrangement.                                     SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.                                          First BancTrust Corporation   Date: March 27, 2006                    /s/ Terry J. Howard                                         ----------------------------------------                                         Terry J. Howard                                         President, Chief Executive Officer                                         and Director  Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   Date: March 27, 2006                    /s/ Terry J. Howard                                         ----------------------------------------                                         Terry J. Howard                                         President, Chief Executive Officer                                         and Director (Principal Executive                                         Officer)   Date: March 27, 2006                    /s/ John W. Welborn                                         ----------------------------------------                                         John W. Welborn, Director                                         Chairman of the Board of Directors   Date: March 27, 2006                    /s/ Vick N. Bowyer                                         ----------------------------------------                                         Vick N. Bowyer, Director   Date: March 27, 2006                    /s/ David W. Dick                                         ----------------------------------------                                         David W. Dick, Director                                         -43-     Date: March 27, 2006                    /s/ James D. Motley                                         ----------------------------------------                                         James D. Motley, Director   Date: March 27, 2006                    /s/ Joseph R. Schroeder                                         ----------------------------------------                                         Joseph R. Schroeder, Director   Date: March 27, 2006                    /s/ Terry T. Hutchison                                         ----------------------------------------                                         Terry T. Hutchison, Director   Date: March 27, 2006                    /s/ Ellen M. Litteral                                         ----------------------------------------                                         Ellen M. Litteral, Chief Financial                                         Officer and Treasurer (Principal                                         Accounting and Financial Officer                                         -44-    EX-4.1 2 c03489exv4w1.txt TRUST PREFERRED SECURITIES INDENTURE                                                                         Exhibit 4.1  ================================================================================                            FIRST BANCTRUST CORPORATION,                                     AS ISSUER                                      INDENTURE                              DATED AS OF JUNE 15, 2005                              WILMINGTON TRUST COMPANY,                                    AS TRUSTEE             FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST                                    DEBENTURES                                      DUE 2035  ================================================================================                                   TABLE OF CONTENTS                                                                                Page                                                                             ----   ARTICLE I. DEFINITIONS ..................................................     1    Section 1.1.   Definitions ...........................................     1  ARTICLE II. DEBENTURES ..................................................     8    Section 2.1.   Authentication and Dating .............................     8    Section 2.2.   Form of Trustee's Certificate of Authentication.. .....     9    Section 2.3.   Form and Denomination of Debentures ...................     9    Section 2.4.   Execution of Debentures ...............................     9    Section 2.5.   Exchange and Registration of Transfer of Debentures ...    10    Section 2.6.   Mutilated, Destroyed, Lost or Stolen Debentures .......    12    Section 2.7.   Temporary Debentures ..................................    12    Section 2.8.   Payment of Interest and Additional Interest ...........    13    Section 2.9.   Cancellation of Debentures Paid, etc ..................    14    Section 2.10.  Computation of Interest ...............................    14    Section 2.11.  Extension of Interest Payment Period ..................    15    Section 2.12.  CUSIP Numbers .........................................    16  ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY ........................    17    Section 3.1.   Payment of Principal, Premium and Interest; Agreed                   Treatment of the Debentures ...........................    17    Section 3.2.   Offices for Notices and Payments, etc .................    17    Section 3.3.   Appointments to Fill Vacancies in Trustee's Office ....    18    Section 3.4.   Provision as to Paying Agent ..........................    18    Section 3.5.   Certificate to Trustee ................................    19    Section 3.6.   Additional Sums .......................................    19    Section 3.7.   Compliance with Consolidation Provisions ..............    19    Section 3.8.   Limitation on Dividends ...............................    19    Section 3.9.   Covenants as to the Trust .............................    20    Section 3.10.  Additional Junior Indebtedness ........................    20  ARTICLE IV. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND                   THE TRUSTEE ...........................................    20    Section 4.1.   Securityholders' Lists ................................    20    Section 4.2.   Preservation and Disclosure of Lists ..................    21  ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN                   EVENT OF DEFAULT ......................................    22    Section 5.1.   Events of Default .....................................    22    Section 5.2.   Payment of Debentures on Default; Suit Therefor .......    23    Section 5.3.   Application of Moneys Collected by Trustee ............    25    Section 5.4.   Proceedings by Securityholders ........................    25    Section 5.5.   Proceedings by Trustee.. ..............................    25    Section 5.6.   Remedies Cumulative and Continuing; Delay or Omission                   Not a Waiver ..........................................    26                                            i         Section 5.7.   Direction of Proceedings and Waiver of Defaults by                   Majority of Securityholders ...........................    26    Section 5.8.   Notice of Defaults ....................................    26    Section 5.9.   Undertaking to Pay Costs ..............................    27  ARTICLE VI. CONCERNING THE TRUSTEE ......................................    27    Section 6.1.   Duties and Responsibilities of Trustee ................    27    Section 6.2.   Reliance on Documents, Opinions, etc ..................    28    Section 6.3.   No Responsibility for Recitals, etc ...................    29    Section 6.4.   Trustee, Authenticating Agent, Paying Agents, Transfer                   Agents or Registrar May Own Debentures ................    29    Section 6.5.   Moneys to be Held in Trust ............................    29    Section 6.6.   Compensation and Expenses of Trustee ..................    29    Section 6.7.   Officers' Certificate as Evidence .....................    30    Section 6.8.   Eligibility of Trustee ................................    30    Section 6.9.   Resignation or Removal of Trustee .....................    31    Section 6.10.  Acceptance by Successor Trustee .......................    32    Section 6.11.  Succession by Merger, etc .............................    32    Section 6.12.  Authenticating Agents .................................    33  ARTICLE VII. CONCERNING THE SECURITYHOLDERS .............................    33    Section 7.1.   Action by Securityholders .............................    33    Section 7.2.   Proof of Execution by Securityholders .................    34    Section 7.3.   Who Are Deemed Absolute Owners ........................    34    Section 7.4.   Debentures Owned by Company Deemed Not Outstanding ....    34    Section 7.5.   Revocation of Consents; Future Holders Bound ..........    35  ARTICLE VIII. SECURITYHOLDERS' MEETINGS .................................    35    Section 8.1.   Purposes of Meetings ..................................    35    Section 8.2.   Call of Meetings by Trustee ...........................    35    Section 8.3.   Call of Meetings by Company or Securityholders ........    36    Section 8.4.   Qualifications for Voting .............................    36    Section 8.5.   Regulations ...........................................    36    Section 8.6.   Voting ................................................    36    Section 8.7.   Quorum; Actions .......................................    37  ARTICLE IX. SUPPLEMENTAL INDENTURES .....................................    37    Section 9.1.   Supplemental Indentures without Consent of                   Securityholders .......................................    37    Section 9.2.   Supplemental Indentures with Consent of                   Securityholders .......................................    39    Section 9.3.   Effect of Supplemental Indentures .....................    39    Section 9.4.   Notation on Debentures ................................    39    Section 9.5.   Evidence of Compliance of Supplemental Indenture to be                   Furnished to Trustee ..................................    40  ARTICLE X. REDEMPTION OF SECURITIES .....................................    40    Section 10.1.  Optional Redemption ...................................    40    Section 10.2.  Special Event Redemption ..............................    40    Section 10.3.  Notice of Redemption; Selection of Debentures .........    40    Section 10.4.  Payment of Debentures Called for Redemption ...........    41                                           ii      ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE ...........    41    Section 11.1.  Company May Consolidate, etc., on Certain Terms .......    41    Section 11.2.  Successor Entity to be Substituted ....................    42    Section 11.3.  Opinion of Counsel to be Given to Trustee .............    42  ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE ....................    42    Section 12.1.  Discharge of Indenture ................................    42    Section 12.2.  Deposited Moneys to be Held in Trust by Trustee .......    43    Section 12.3.  Paying Agent to Repay Moneys Held .....................    43    Section 12.4.  Return of Unclaimed Moneys ............................    43  ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND                   DIRECTORS .............................................    43    Section 13.1.  Indenture and Debentures Solely Corporate Obligations..    43  ARTICLE XIV. MISCELLANEOUS PROVISIONS ...................................    44    Section 14.1.  Successors ............................................    44    Section 14.2.  Official Acts by Successor Entity .....................    44    Section 14.3.  Surrender of Company Powers ...........................    44    Section 14.4.  Addresses for Notices, etc ............................    44    Section 14.5.  Governing Law .........................................    44    Section 14.6.  Evidence of Compliance with Conditions Precedent ......    44    Section 14.7.  Table of Contents, Headings, etc ......................    45    Section 14.8.  Execution in Counterparts .............................    45    Section 14.9.  Separability ..........................................    45    Section 14.10. Assignment ............................................    45    Section 14.11. Acknowledgment of Rights ..............................    45  ARTICLE XV. SUBORDINATION OF DEBENTURES .................................    45    Section 15.1.  Agreement to Subordinate ..............................    45    Section 15.2.  Default on Senior Indebtedness ........................    46    Section 15.3.  Liquidation, Dissolution, Bankruptcy ..................    46    Section 15.4.  Subrogation ...........................................    47    Section 15.5.  Trustee to Effectuate Subordination ...................    48    Section 15.6.  Notice by the Company .................................    48    Section 15.7.  Rights of the Trustee; Holders of Senior                   Indebtedness ..........................................    48    Section 15.8.  Subordination May Not Be Impaired .....................    49   Exhibit A   Form of Fixed/Floating Rate Junior Subordinated Deferrable Interest             Debenture Exhibit B   Form of Certificate to Trustee                                         iii        THIS INDENTURE, dated as of June 15, 2005, between First BancTrust Corporation, a Delaware corporation (the "Company"), and Wilmington Trust Company, a Delaware banking corporation, as debenture trustee (the "Trustee").                                     WITNESSETH:       WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2035 (the "Debentures") under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and       WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;       NOW, THEREFORE, This Indenture Witnesseth:       In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:                                     ARTICLE I.                                   DEFINITIONS       SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.       "Acceleration Event of Default" means an Event of Default under Section 5.1(a), (d), (e) or (f), whatever the reason for such Acceleration Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.       "Additional Interest" has the meaning set forth in Section 2.11.       "Additional Junior Indebtedness" means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated                                           1    subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.       "Additional Sums" has the meaning set forth in Section 3.6.       "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.       "Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.       "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.       "Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company.       "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.       "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.       "Capital Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.       "Capital Securities Guarantee" means the guarantee agreement that the Company enters into with Wilmington Trust Company, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.       "Capital Treatment Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as "Tier 1 Capital" (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of                                           2    the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.       "Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.       "Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.       "Company" means First BancTrust Corporation, a Delaware corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.       "Comparable Treasury Issue" means with respect to any Special Redemption Date the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the Fixed Rate Period Remaining Life that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Fixed Rate Period Remaining Life. If no United States Treasury security has a maturity which is within a period from three months before to three months after the Interest Payment Date in June 2010, the two most closely corresponding fixed, non-callable United States Treasury securities, as selected by the Quotation Agent, shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or extrapolated on a straight-line basis, rounding to the nearest month using such securities.       "Comparable Treasury Price" means (a) the average of five Reference Treasury Dealer Quotations for such Special Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (b) if the Quotation Agent obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such Quotations.       "Coupon Rate" has the meaning set forth in Section 2.8.       "Debenture" or "Debentures" has the meaning stated in the first recital of this Indenture.       "Debenture Register" has the meaning specified in Section 2.5.       "Declaration" means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.       "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.       "Defaulted Interest" has the meaning set forth in Section 2.8.       "Distribution Period" means (i) with respect to interest paid on the first Interest Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in September 2005 and (ii) thereafter, with respect to interest paid on each successive Interest Payment Date, the period beginning on (and including) the preceding Interest Payment Date and ending on (but excluding) such current Interest Payment Date.                                           3        "Determination Date" has the meaning set forth in Section 2.10.       "Event of Default" means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.       "Extension Period" has the meaning set forth in Section 2.11.       "Federal Reserve" means the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.       "Fixed Rate Period Remaining Life" means, with respect to any Debenture, the period from the Special Redemption Date for such Debenture to the Interest Payment Date in June 2010.       "Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.       "Institutional Trustee" has the meaning set forth in the Declaration.       "Interest Payment Date" means March 15, June 15, September 15 and December 15 of each year during the term of this Indenture, or if such day is not a Business Day, then the next succeeding Business Day, commencing in September 2005.       "Interest Rate" means for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in June 2010 the rate per annum of 5.80%, and for each Distribution Period beginning on or after the Interest Payment Date in June 2010, the Coupon Rate for such Distribution Period.       "Investment Company Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.       "Liquidation Amount" means the stated amount of $1,000.00 per Trust Security.       "Maturity Date" means June 15, 2035.       "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.       "Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.                                           4         "OTS" means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.       The term "outstanding," when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:       (a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;       (b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and       (c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course.       "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.       "Predecessor Security" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.       "Primary Treasury Dealer" means either a nationally recognized primary United States Government securities dealer or an entity of recognized standing in matters pertaining to the quotation of treasury securities that is reasonably acceptable to the Company and the Trustee.       "Principal Office of the Trustee," or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600. Attention: Corporate Trust Administration.       "Quotation Agent" means a designee of the Institutional Trustee who shall be a Primary Treasury Dealer.       "Redemption Date" has the meaning set forth in Section 10.1.       "Redemption Price" means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Redemption Date.       "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any other Primary Treasury Dealer selected by the Trustee after consultation with the Company.                                           5         "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.       "Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.       "Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation.       "Securityholder," "holder of Debentures," or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.       "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for all borrowed and purchased money and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the Company associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts, and similar arrangements; (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise including, without limitation, similar obligations arising from off-balance sheet guarantees and direct credit substitutes; and (vii) all obligations of the type referred to in clauses (i) through (vi) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.                                           6        "Special Event" means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.       "Special Redemption Date" has the meaning set forth in Section 10.2.       "Special Redemption Price" means (a) if the Special Redemption Date occurs before the Interest Payment Date in June 2010, the greater of (i) 107.5% of the principal amount of the Debentures, plus accrued and unpaid interest (including Additional Interest) on the Debentures to the Special Redemption Date, or (ii) as determined by the Quotation Agent, (A) the sum of the present values of the scheduled payments of principal and interest on the Debentures during the Fixed Rate Period Remaining Life of the Debentures (assuming the Debentures matured on the Interest Payment Date in June 2010) discounted to the Special Redemption Date on a quarterly basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate, plus (B) accrued and unpaid interest (including Additional Interest) on the Debentures to such Special Redemption Date, or (b) if the Special Redemption Date occurs on or after the Interest Payment Date in June 2010, 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Special Redemption Date.       "Subsidiary" means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.       "Tax Event" means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations) (an "Administrative Action") or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.       "3-Month LIBOR" has the meaning set forth in Section 2.10.       "Telerate Page 3750" has the meaning set forth in Section 2.10.                                           7         "Treasury Rate" means (i) the yield, under the heading which represents the average for the week immediately prior to the date of calculation, appearing in the most recently published statistical release designated H.15 (519) or any successor publication which is published weekly by the Federal Reserve and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Fixed Rate Period Remaining Life (if no maturity is within three months before or after the Fixed Rate Period Remaining Life, yields for the two published maturities most closely corresponding to the Fixed Rate Period Remaining Life shall be determined and the Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Special Redemption Date. The Treasury Rate shall be calculated by the Quotation Agent on the third Business Day preceding the Special Redemption Date.       "Trust" shall mean FBTC Statutory Trust I, a Delaware statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.       "Trust Securities" means Common Securities and Capital Securities of the Trust.       "Trustee" means Wilmington Trust Company, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.                                     ARTICLE II.                                    DEBENTURES       SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $6,186,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee, upon receipt of a written authentication order from the Company, shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. Notwithstanding anything to the contrary contained herein, the Trustee shall be fully protected in relying upon the aforementioned authentication order and written order in authenticating and delivering said Debentures. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:       (a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and       (b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:            (1) that such Debentures, when authenticated and delivered by the      Trustee and issued by the Company in each case in the manner and subject to      any conditions specified in such Opinion of Counsel, will constitute valid      and legally binding obligations of the Company, subject to or limited by      applicable bankruptcy, insolvency, reorganization, conservatorship,      receivership, moratorium and other statutory or                                           8         decisional laws relating to or affecting creditors' rights or the      reorganization of financial institutions (including, without limitation,      preference and fraudulent conveyance or transfer laws), heretofore or      hereafter enacted or in effect, affecting the rights of creditors      generally; and            (2) that all laws and requirements in respect of the execution and      delivery by the Company of the Debentures have been complied with and that      authentication and delivery of the Debentures by the Trustee will not      violate the terms of this Indenture.       The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.       The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.       SECTION 2.2. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication on all Debentures shall be in substantially the following form:       This is one of the Debentures referred to in the within-mentioned Indenture.  WILMINGTON TRUST COMPANY, as Trustee   By    ----------------------------------    Authorized Signer       SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.       SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.       In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or                                           9   the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.       Every Debenture shall be dated the date of its authentication.       SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the "Debenture Register") for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.       Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.       All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.       No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.       The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.       Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:       THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.                                          10         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.       THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.                                          11         THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.       THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.       SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.       The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.       Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.       SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent                                          12   definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.       SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.       Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in June 2010 at a rate per annum of 5.80%, and shall bear interest for each successive Distribution Period beginning on or after the Interest Payment Date in June 2010 at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 1.70% (the "Coupon Rate"), applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on the Interest Payment Date in September 2005.       Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in                                          13    whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.       The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical.       Any interest (including Additional Interest) scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.       The term "regular record date" as used in this Section shall mean the close of business on the 15th Business Day preceding the applicable Interest Payment Date.       Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.       SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.       SECTION 2.10. COMPUTATION OF INTEREST. The amount of interest payable (i) for any Distribution Period commencing on or after the date of original issuance but before the Interest Payment Date in June 2010 will be computed on the basis of a 360-day year of twelve 30-day months, and (ii) for the Distribution Period commencing on the Interest Payment Date in June 2010 and each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).       (a) "3-Month LIBOR" means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:            (1) the rate (expressed as a percentage per annum) for U.S. dollar      deposits having a three-month maturity that appears on Telerate Page 3750      as of 11:00 a.m. (London time) on the related Determination Date (as      defined below). "Telerate Page 3750" means the display designated as "Page      3750" on the Moneyline Telerate Service or such other page as may replace      Page 3750 on that service or such other service or services as may be      nominated by the British Bankers' Association as the information vendor for      the purpose of displaying London interbank offered rates for U.S. dollar      deposits;                                          14              (2) if such rate cannot be identified on the related Determination      Date, the Trustee will request the principal London offices of four leading      banks in the London interbank market to provide such banks' offered      quotations (expressed as percentages per annum) to prime banks in the      London interbank market for U.S. dollar deposits having a three-month      maturity as of 11:00 a.m. (London time) on such Determination Date. If at      least two quotations are provided, 3-Month LIBOR will be the arithmetic      mean of such quotations;            (3) if fewer than two such quotations are provided as requested in      clause (2) above, the Trustee will request four major New York City banks      to provide such banks' offered quotations (expressed as percentages per      annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m.      (London time) on such Determination Date. If at least two such quotations      are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;      and            (4) if fewer than two such quotations are provided as requested in      clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with      respect to the Distribution Period immediately preceding such current      Distribution Period.       If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.       (b) The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.       (c) "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.       (d) The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.       (e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.       SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without                                          15   causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as "Additional Interest"). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's or such Affiliate's capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The Trustee shall give notice of the Company's election to begin a new Extension Period to the Securityholders.       SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of                                          16    redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.                                    ARTICLE III.                        PARTICULAR COVENANTS OF THE COMPANY       SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES.       (a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest and other payments on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee.       (b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.       (c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.       (d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.       SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Wilmington, Delaware, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the                                          17    above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Wilmington, Delaware, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.       In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Wilmington, Delaware, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Wilmington, Delaware, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.       SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.       SECTION 3.4. PROVISION AS TO PAYING AGENT.       (a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,            (1) that it will hold all sums held by it as such agent for the           payment of the principal of and premium, if any, or interest, if any,           on the Debentures (whether such sums have been paid to it by the           Company or by any other obligor on the Debentures) in trust for the           benefit of the holders of the Debentures;            (2) that it will give the Trustee prompt written notice of any failure           by the Company (or by any other obligor on the Debentures) to make any           payment of the principal of and premium, if any, or interest, if any,           on the Debentures when the same shall be due and payable; and            (3) that it will, at any time during the continuance of any Event of           Default, upon the written request of the Trustee, forthwith pay to the           Trustee all sums so held in trust by such paying agent.       (b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium, interest or other payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest or other payments, if any, on the Debentures when the same shall become due and payable.       Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or other payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.                                          18        (c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.       (d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.       SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof. A form of this Certificate is attached hereto as Exhibit B.       SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts ("Additional Sums") on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes (including withholding taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.       SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.       SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of                                          19    the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).       SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.       SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.                                     ARTICLE IV.                        SECURITYHOLDERS' LISTS AND REPORTS                          BY THE COMPANY AND THE TRUSTEE       SECTION 4.1. SECURITYHOLDERS' LISTS. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:       (a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and       (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;                                          20    except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.       SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS.       (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.       (b) In case three or more holders of Debentures (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:            (1) afford such applicants access to the information preserved at the           time by the Trustee in accordance with the provisions of subsection           (a) of this Section 4.2, or            (2) inform such applicants as to the approximate number of holders of           Debentures whose names and addresses appear in the information           preserved at the time by the Trustee in accordance with the provisions           of subsection (a) of this Section 4.2, and as to the approximate cost           of mailing to such Securityholders the form of proxy or other           communication, if any, specified in such application.       If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.       (c) Each and every holder of Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless                                          21   of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).                                     ARTICLE V.                    REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS                             UPON AN EVENT OF DEFAULT       SECTION 5.1. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):       (a) the Company defaults in the payment of any interest upon any Debenture, including any Additional Interest in respect thereof, following the nonpayment of any such interest for twenty or more consecutive Distribution Periods; or       (b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or       (c) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or       (d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or       (e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or       (f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.       If an Acceleration Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the                                          22    Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default under Section 5.1(b) or (c) occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may proceed to remedy the default or breach thereunder by such appropriate judicial proceedings as the Trustee or such holders shall deem most effectual to remedy the defaulted covenant or enforce the provisions of this Indenture so breached, either by suit in equity or by action at law, for damages or otherwise.       The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.       In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.       SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the                                          23    Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.       In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,       (i)  to file and prove a claim or claims for the whole amount of principal           and interest owing and unpaid in respect of the Debentures,       (ii) in case of any judicial proceedings, to file such proofs of claim and           other papers or documents as may be necessary or advisable in order to           have the claims of the Trustee (including any claim for reasonable           compensation to the Trustee and each predecessor Trustee, and their           respective agents, attorneys and counsel, and for reimbursement of all           other amounts due to the Trustee under Section 6.6), and of the           Securityholders allowed in such judicial proceedings relative to the           Company or any other obligor on the Debentures, or to the creditors or           property of the Company or such other obligor, unless prohibited by           applicable law and regulations, to vote on behalf of the holders of           the Debentures in any election of a trustee or a standby trustee in           arrangement, reorganization, liquidation or other bankruptcy or           insolvency proceedings or Person performing similar functions in           comparable proceedings,       (iii) to collect and receive any moneys or other property payable or           deliverable on any such claims, and       (iv) to distribute the same after the deduction of its charges and           expenses.  Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.       Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.       All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.       In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to                                          24   represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.       SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:       First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;       Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;       Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures (including Additional Interest); and       Fourth: The balance, if any, to the Company.       SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.       Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.       SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.                                          25         SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1) or by the Securityholders.       SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.       The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.       SECTION 5.8. NOTICE OF DEFAULTS. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the                                          26    Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.       SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.                                     ARTICLE VI.                              CONCERNING THE TRUSTEE       SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.       No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:       (a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred            (1) the duties and obligations of the Trustee with respect to           Debentures shall be determined solely by the express provisions of           this Indenture, and the Trustee shall not be liable except for the           performance of such duties and obligations with respect to the           Debentures as are specifically set forth in this Indenture, and no           implied covenants or obligations shall be read into this Indenture           against the Trustee, and            (2) in the absence of bad faith on the part of the Trustee, the           Trustee may conclusively rely, as to the truth of the statements and           the correctness of the opinions expressed therein, upon any           certificates or opinions furnished to the Trustee and conforming to           the requirements of this Indenture; but, in the case of any such           certificates or opinions which by any provision hereof are           specifically required to be furnished to the Trustee, the Trustee           shall be under a duty to examine the same to determine whether or not           they conform to the requirements of this Indenture;                                          27        (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and       (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.       None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.       SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1:       (a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;       (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;       (c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;       (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;       (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;       (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the                                          28    Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;       (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and       (h) with the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.       SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.       SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN DEBENTURES. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.       SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.       SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. For purposes of clarification, this Section 6.6 does not contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and expenses of the Trustee's counsel in connection with the closing of the transactions contemplated by this Indenture. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of                                          29    liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.       Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), (e) or (f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.       The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.       Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.       SECTION 6.7. OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.       SECTION 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.       The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.       In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.       If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.                                          30        SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE       (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.       (b) In case at any time any of the following shall occur --            (1) the Trustee shall fail to comply with the provisions of Section           6.8 after written request therefor by the Company or by any           Securityholder who has been a bona fide holder of a Debenture or           Debentures for at least 6 months, or            (2) the Trustee shall cease to be eligible in accordance with the           provisions of Section 6.8 and shall fail to resign after written           request therefor by the Company or by any such Securityholder, or            (3) the Trustee shall become incapable of acting, or shall be adjudged           as bankrupt or insolvent, or a receiver of the Trustee or of its           property shall be appointed, or any public officer shall take charge           or control of the Trustee or of its property or affairs for the           purpose of rehabilitation, conservation or liquidation,  then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.       (c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.       (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10.                                          31         SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.       If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.       No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.       In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.       Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.       SECTION 6.11. SUCCESSION BY MERGER, ETC. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.       In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate                                          32    of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.       SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.       Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.       Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.       The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.                                    ARTICLE VII.                          CONCERNING THE SECURITYHOLDERS       SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking                                          33   of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.       If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date.       SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.       The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.6.       SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.       SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided,                                          34    however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.       SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.                                    ARTICLE VIII.                             SECURITYHOLDERS' MEETINGS       SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:       (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;       (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;       (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or       (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.       SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures                                          35    Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.       SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.       SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.       SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.       The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.       Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.       SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more                                          36   Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.       Any record so signed and verified shall be conclusive evidence of the matters therein stated.       SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.       Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.       Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.                                     ARTICLE IX.                              SUPPLEMENTAL INDENTURES       SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:                                          37         (a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;       (b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;       (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;       (d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);       (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;       (f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or       (g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.       The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.       Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.                                          38         SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.       Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.       Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.       It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.       SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.       SECTION 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the                                          39   Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.       SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.                                     ARTICLE X.                             REDEMPTION OF SECURITIES       SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in June 2010 (the "Redemption Date"), at the Redemption Price.       SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the "Special Redemption Date") at the Special Redemption Price. If the Special Event redemption occurs prior to the Interest Payment Date in June 2010, the Company shall appoint a Quotation Agent, which shall be a designee of the Institutional Trustee, for the purpose of performing the services contemplated in, or by reference in, the definition of Special Redemption Price. Any error in the calculation of the Special Redemption Price by the Quotation Agent or the Trustee may be corrected at any time by notice delivered to the Company and the holders of the Debentures. Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of the Special Redemption Price on the Debentures by the Trustee or the Quotation Agent, as the case may be, shall (in the absence of willful default, bad faith or manifest error) be final, conclusive and binding on the holders of the Debentures and the Company, and no liability shall attach (except as provided above) to the Trustee or the Quotation Agent in connection with the exercise or non-exercise by any of them of their respective powers, duties and discretion.       SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been                                          40    duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.       Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.       Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.       If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.       SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price.       Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.                                     ARTICLE XI.                 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE       SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as                                          41    an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property.       SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.       SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.                                    ARTICLE XII.                      SATISFACTION AND DISCHARGE OF INDENTURE       SECTION 12.1. DISCHARGE OF INDENTURE. When       (a)  the Company shall deliver to the Trustee for cancellation all           Debentures theretofore authenticated (other than any Debentures which           shall have been destroyed, lost or stolen and which shall have been           replaced or paid as provided in Section 2.6) and not theretofore           canceled, or       (b)  all the Debentures not theretofore canceled or delivered to the           Trustee for cancellation shall have become due and payable, or are by           their terms to become due and payable within 1 year or are to be           called for redemption within 1 year under arrangements satisfactory to           the Trustee for the giving of notice of redemption, and the Company           shall deposit with the Trustee, in trust, funds, which shall be           immediately due and payable,                                          42             sufficient to pay at maturity or upon redemption all of the Debentures           (other than any Debentures which shall have been destroyed, lost or           stolen and which shall have been replaced or paid as provided in           Section 2.6) not theretofore canceled or delivered to the Trustee for           cancellation, including principal and premium, if any, and interest           due or to become due to such date of maturity or redemption date, as           the case may be, but excluding, however, the amount of any moneys for           the payment of principal of, and premium, if any, or interest on the           Debentures (1) theretofore repaid to the Company in accordance with           the provisions of Section 12.4, or (2) paid to any state or to the           District of Columbia pursuant to its unclaimed property or similar           laws,  and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.       SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.       SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.       SECTION 12.4. RETURN OF UNCLAIMED MONEYS. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.                                    ARTICLE XIII.                     IMMUNITY OF INCORPORATORS, STOCKHOLDERS,                              OFFICERS AND DIRECTORS       SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any                                          43    successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.                                    ARTICLE XIV.                             MISCELLANEOUS PROVISIONS       SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.       SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.       SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.       SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 101 South Central, Paris, Illinois 61944, Attention: Terry J. Howard. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.       SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.       SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.       Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or                                          44    opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.       SECTION 14.7. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.       SECTION 14.8. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.       SECTION 14.9. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.       SECTION 14.10. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.       SECTION 14.11. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.                                     ARTICLE XV.                            SUBORDINATION OF DEBENTURES       SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.                                          45        The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred.       No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.       SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.       In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.       SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.       In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust                                          46    for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.       For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.       SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.       Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.                                          47         Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.       SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes.       SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.       The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.       SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.                                          48        With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.       Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.       SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.       Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.                       Signatures appear on the following page                                          49         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.                                          FIRST BANCTRUST CORPORATION                                           By /s/ Terry J. Howard                                            -------------------------------------                                         Name: Terry J. Howard                                         Title: President & CEO                                           WILMINGTON TRUST COMPANY, as Trustee                                           By /s/ Christopher J. Monigle                                            -------------------------------------                                         Name: Christopher J. Monigle                                         Title: Assistant Vice President                                          50                                        EXHIBIT A         FORM OF FIXED/FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST                                     DEBENTURE                             [FORM OF FACE OF SECURITY]       THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.       THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.       THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY                                          A-1   SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.       THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.       THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.       IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.        Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture                                         of                             First BancTrust Corporation                                    June 15, 2005       First BancTrust Corporation, a Delaware corporation (the "Company" which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for FBTC Statutory Trust I (the "Holder") or registered assigns, the principal sum of six million one hundred eighty-six thousand dollars ($6,186,000.00) on June 15, 2035, and to pay interest on said principal sum from June 15, 2005, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an "Interest Payment Date") (it being understood that interest accrues for any such non-Business Day during the applicable Distribution Period, beginning on or after June 15, 2010), commencing on the Interest Payment Date in September 2005, at an annual rate equal to 5.80% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in June 2010 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in June 2010, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as described below, plus 1.70% (the "Coupon Rate"), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the                                          A-2    extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable (i) for any Distribution Period commencing on or after the date of original issuance but before the Interest Payment Date in June 2010 will be computed on the basis of a 360-day year of twelve 30-day months, and (ii) for the Distribution Period commencing on the Interest Payment Date in June 2010 and each succeeding Distribution Period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen Business Days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.       "3-Month LIBOR" as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date ("Telerate Page 3750" means the display designated as "Page 3750" on the Moneyline Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks' offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks' offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, "Determination Date" means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.       The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.       All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all                                          A-3    dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).       The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.       So long as no Acceleration Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as "Additional Interest"). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 15 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.       The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.                                          A-4        This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.       The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.                                          A-5         IN WITNESS WHEREOF, the Company has duly executed this certificate.                                          FIRST BANCTRUST CORPORATION                                           By                                            -------------------------------------                                         Name:                                               ----------------------------------                                         Title:                                                ---------------------------------                            CERTIFICATE OF AUTHENTICATION       This is one of the Debentures referred to in the within-mentioned Indenture.                                          WILMINGTON TRUST COMPANY, as Trustee                                           By:                                             ------------------------------------                                             Authorized Officer                                          A-6                             [FORM OF REVERSE OF DEBENTURE]       This Debenture is one of the fixed/floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of June 15, 2005 (the "Indenture"), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.       Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in June 2010, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.       In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in June 2010, at the Redemption Price.       Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.       If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.       Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.       In case an Acceleration Event of Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.       The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.                                          A-7        The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.       No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.       The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or its Affiliates' capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (3) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the                                          A-8    dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).       The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.       Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.       No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.       Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.       THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.                                          A-9                                        EXHIBIT B                           FORM OF CERTIFICATE TO TRUSTEE       Pursuant to Section 3.5 of the Indenture between First BancTrust Corporation, as the Company (the "Company"), and Wilmington Trust Company, as Trustee, dated as of June 15, 2005 (the "Indenture"), the undersigned hereby certifies as follows:       1.   In my capacity as an officer of the Company, I would normally have           knowledge of any default by the Company during the last fiscal year in           the performance of any covenants of the Company contained in the           Indenture.       2.   [To my knowledge, the Company is not in default in the performance of           any covenants contained in the Indenture.            OR, ALTERNATIVELY:            I am aware of the default(s) in the performance of covenants in the           Indentures, as specified below.]       Capitalized terms used herein, and not otherwise defined herein, have the respective meanings ascribed thereto in the Indenture.       IN WITNESS WHEREOF, the undersigned has executed this Certificate.  Date:                                           ----------------------------------------                                         Name:                                               ----------------------------------                                         Title:                                                ---------------------------------                                          B-1    EX-10.6 3 c03489exv10w6.txt TRUST PREFERRED SECURITIES SUBSCRIPTION AGREEMENT                                                                        Exhibit 10.6                               FBTC STATUTORY TRUST I                           FIRST BANCTRUST CORPORATION                               SUBSCRIPTION AGREEMENT                                    JUNE 15, 2005       THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among FBTC Statutory Trust I (the "Trust"), a statutory trust created under the Delaware Statutory Trust Act (Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sections 3801, et seq.), First BancTrust Corporation, a Delaware corporation, with its principal offices located at 101 South Central, Paris, Illinois 61944 (the "Company" and, collectively with the Trust, the "Offerors"), and Preferred Term Securities XVIII, Ltd. (the "Purchaser").                                      RECITALS:       A. The Trust desires to issue 6,000 of its Fixed/Floating Rate Capital Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital Security, representing an undivided beneficial interest in the assets of the Trust (the "Offering"), to be issued pursuant to an Amended and Restated Declaration of Trust (the "Declaration") by and among the Company, Wilmington Trust Company ("WTC"), the administrators named therein, and the holders (as defined therein), which Capital Securities are to be guaranteed by the Company with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the terms of a Guarantee Agreement between the Company and WTC, as trustee (the "Guarantee"); and       B. The proceeds from the sale of the Capital Securities will be combined with the proceeds from the sale by the Trust to the Company of its common securities, and will be used by the Trust to purchase an equivalent amount of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company (the "Debentures") to be issued by the Company pursuant to an indenture to be executed by the Company and WTC, as trustee (the "Indenture"); and       C. In consideration of the premises and the mutual representations and covenants hereinafter set forth, the parties hereto agree as follows:                                      ARTICLE I                       PURCHASE AND SALE OF CAPITAL SECURITIES       1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to purchase from the Trust 6,000 Capital Securities at a price equal to $1,000.00 per Capital Security (the "Purchase Price") and the Trust agrees to sell such Capital Securities to the Purchaser for said Purchase Price. The rights and preferences of the Capital Securities are set forth in the Declaration. The Purchase Price is payable in immediately available funds on June 15, 2005, or such other business day as may be designated by the Purchaser, but in no event later than June 30, 2005 (the "Closing Date"). The Offerors shall provide the Purchaser wire transfer instructions no later than 1 day following the date hereof.       1.2. The certificate for the Capital Securities shall be delivered by the Trust on the Closing Date to the Purchaser or its designee.       1.3. The Placement Agreement, dated June 7, 2005 (the "Placement Agreement"), among the Offerors and the Placement Agents identified therein includes certain representations and warranties, covenants and conditions to closing and certain other matters governing the Offering. The Placement    Agreement is hereby incorporated by reference into this Agreement and the Purchaser shall be entitled to each of the benefits of the Placement Agents and the Purchaser under the Placement Agreement and shall be entitled to enforce the obligations of the Offerors under such Placement Agreement as fully as if the Purchaser were a party to such Placement Agreement.                                     ARTICLE II                     REPRESENTATIONS AND WARRANTIES OF PURCHASER       2.1. The Purchaser understands and acknowledges that neither the Capital Securities, the Debentures nor the Guarantee have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities law, are being offered for sale by the Trust in transactions not requiring registration under the Securities Act, and may not be offered, sold, pledged or otherwise transferred by the Purchaser except in compliance with the registration requirements of the Securities Act or any other applicable securities laws, pursuant to an exemption therefrom or in a transaction not subject thereto.       2.2. The Purchaser represents, warrants and certifies that (i) it is not a "U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii) it is not acquiring the Capital Securities for the account or benefit of any such U.S. person, (iii) the offer and sale of Capital Securities to the Purchaser constitutes an "offshore transaction" under Regulation S of the Securities Act, and (iv) it will not engage in hedging transactions with regard to the Capital Securities unless such transactions are conducted in compliance with the Securities Act and the Purchaser agrees to the legends and transfer restrictions set forth on the Capital Securities certificate.       2.3. The Purchaser represents and warrants that it is purchasing the Capital Securities for its own account, for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, subject to any requirement of law that the disposition of its property be at all times within its control and subject to its ability to resell such Capital Securities pursuant to an effective registration statement under the Securities Act or under Rule 144A or any other exemption from registration available under the Securities Act or any other applicable Securities law.       2.4. The Purchaser represents and warrants that it has full power and authority to execute and deliver this Agreement, to make the representations and warranties specified herein, and to consummate the transactions contemplated herein and it has full right and power to subscribe for Capital Securities and perform its obligations pursuant to this Agreement.       2.5. The Purchaser, a Cayman Islands Company whose business includes issuance of certain notes and acquiring the Capital Securities and other similar securities, represents and warrants that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of purchasing the Capital Securities, has had the opportunity to ask questions of, and receive answers and request additional information from, the Offerors and is aware that it may be required to bear the economic risk of an investment in the Capital Securities.       2.6. The Purchaser represents and warrants that no filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court having jurisdiction over the Purchaser, other than those that have been made or obtained, is necessary or required for the performance by the Purchaser of its obligations under this Agreement or to consummate the transactions contemplated herein.                                           2         2.7. The Purchaser represents and warrants that this Agreement has been duly authorized, executed and delivered by the Purchaser.       2.8. The Purchaser represents and warrants that (i) the Purchaser is not in violation or default of any term of its Memorandum of Association or Articles of Association, of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is a party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to the Purchaser which would prevent the Purchaser from performing any material obligation set forth in this Agreement; and (ii) the execution, delivery and performance of and compliance with this Agreement, and the consummation of the transactions contemplated herein, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or the suspension, revocation, impairment, forfeiture or non-renewal of any permit, license, authorization or approval applicable to the Purchaser, its business or operations or any of its assets or properties which would prevent the Purchaser from performing any material obligations set forth in this Agreement.       2.9. The Purchaser represents and warrants that the Purchaser is an exempted company with limited liability duly incorporated, validly existing and in good standing under the laws of the jurisdiction where it is organized, with full power and authority to perform its obligations under this Agreement.       2.10. The Purchaser understands and acknowledges that the Company will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and agrees that, if any of the acknowledgments, representations, warranties or agreements deemed to have been made by it by its purchase of the Capital Securities are no longer accurate, it shall promptly notify the Company.       2.11. The Purchaser understands that no public market exists for any of the Capital Securities, and that it is unlikely that a public market will ever exist for the Capital Securities.                                     ARTICLE III                                    MISCELLANEOUS       3.1. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, international courier or delivered by hand against written receipt therefor, or by facsimile transmission and confirmed by telephone, to the following addresses, or such other address as may be furnished to the other parties as herein provided:            To the Offerors:  First BancTrust Corporation                             101 South Central                             Paris, Illinois 61944                             Attention: Terry J. Howard                             Fax: 217-465-0235            To the Purchaser: Preferred Term Securities XVIII, Ltd.                             c/o Maples Finance Limited                             P.O. Box 1093 GT                             Queensgate House                             South Church Street                             George Town, Grand Cayman                             Cayman Islands                             Attention: The Directors                             Fax: 345-945-7100                                          3             Unless otherwise expressly provided herein, notices shall be deemed to have been given on the date of mailing, except notice of change of address, which shall be deemed to have been given when received.       3.2. This Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.       3.3. Upon the execution and delivery of this Agreement by the Purchaser, this Agreement shall become a binding obligation of the Purchaser with respect to the purchase of Capital Securities as herein provided.       3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.       3.5. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.       3.6. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.       3.7. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that all of the Offerors' and the Purchaser's rights and privileges shall be enforceable to the fullest extent permitted by law.                       Signatures appear on the following page                                           4         IN WITNESS WHEREOF, I have set my hand the day and year first written above.  PREFERRED TERM SECURITIES XVIII, LTD.   By: /s/ Carrie Bunton     --------------------------------- Print Name: Carrie Bunton Title: Director       IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day and year first written above.                                          FIRST BANCTRUST CORPORATION                                           By: /s/ Terry J. Howard                                             ------------------------------------                                         Name: Terry J. Howard                                         Title: President & CEO                                           FBTC STATUTORY TRUST I                                           By: /s/ Terry J. Howard                                             ------------------------------------                                         Name: Terry J. Howard                                         Title: Administrator                                           5    EX-10.7 4 c03489exv10w7.txt TRUST PREFERRED SECURITIES DECLARATION OF TRUST                                                                        Exhibit 10.7                                DECLARATION OF TRUST       This DECLARATION OF TRUST is made this 27th day of May, 2005 (this "Declaration of Trust"), by and among (i) First BancTrust Corporation, a Delaware corporation (the "Depositor"), (ii) Wilmington Trust Company, a Delaware banking corporation, as trustee ("the Trustee"), and (iii) Terry J. Howard, John W. Welborn and David W. Dick, each an individual, as administrators (each an "Administrator" and collectively, the "Administrators"). The Depositor, the Trustee and the Administrators hereby agree as follows:       1. The trust created hereby (the "Trust") shall be known as "FBTC Statutory Trust I," in which name the Trustee, the Administrators or the Depositor, to the extent provided herein, may engage in the transactions contemplated hereby, make and execute contracts, and sue and be sued.       2. The Depositor hereby assigns, transfers, conveys and sets over to the Trustee the sum of $10.00. The Trustee hereby acknowledges receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustee hereby declares that it will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitutes a statutory trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Sections 3801, et seq. (the "Statutory Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustee is hereby authorized and directed to execute and file a certificate of trust (the "Certificate of Trust") with the Delaware Secretary of the State in accordance with the provisions of the Statutory Trust Act.       3. The Depositor, the Trustee and the Administrators will enter into an amended and restated Declaration of Trust, satisfactory to each such party, to provide for the contemplated operation of the Trust created hereby and the issuance of the Fixed/Floating Rate Capital Securities and Fixed/Floating Rate Common Securities referred to therein (the "Securities"). Prior to the execution and delivery of such amended and restated Declaration of Trust, other than (i) the filing of the Certificate of Trust in accordance with Section 2 herein and as further contemplated in Section 4 herein and (ii) entering into a Placement Agreement among the placement agents, the Depositor and the Trust, neither the Trustee nor the Administrators shall have any duty or liability with respect to the administration of the trust estate, the investment of the Trust's property or the payment of dividends or other distributions of income or principal to the Trust's beneficiaries, and no implied obligations shall be inferred from this Declaration of Trust on the part of the Trustee or the Administrators.            (i) The Trustee and the Administrators accept the trusts hereby created and agree to perform their duties hereunder with respect to the same but only upon the terms of this Declaration of Trust. Neither the Trustee nor the Administrators shall be personally liable under any circumstances, except for their own willful misconduct or gross negligence. In particular, but not by way of limitation:                 (A) No provision of this Declaration of Trust shall require the Trustee or the Administrators to expend or risk their personal funds or otherwise incur any financial liability in the performance of their rights or duties hereunder, if the Trustee or any Administrator shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;                 (B) Under no circumstance shall the Trustee or the Administrators be personally liable for any representation, warranty, covenant or indebtedness of the Trust;                 (C) Neither the Trustee nor the Administrators shall have liability for their action or inaction taken in good faith;                   (D) All funds deposited with the Trustee hereunder may be held in a non- interest bearing trust account and the Trustee shall not be liable for any interest thereon; and                 (E) To the extent that, at law or in equity, the Trustee or the Administrators have duties and liabilities relating thereto to the Trust, such duties and liabilities are replaced by the terms of this Declaration of Trust.            (ii) Notwithstanding anything contained herein to the contrary, the Trustee shall not be required to take any action in any jurisdiction other than the State of Delaware if the taking of such action will (i) require the consent or approval or authorization or order of or the giving of notice to, or the registration with or the taking of any other action in respect of, any state or other governmental authority or agency of any jurisdiction other than, in the case of the Trustee, the State of Delaware, (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivision thereof in existence becoming payable by Wilmington Trust Company, or (iii) subject Wilmington Trust Company to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by the Trustee contemplated hereby.            (iii) Except as expressly provided in this Section 3, in accepting and performing the trusts hereby created, the Trustee acts solely as Trustee hereunder and not in its individual capacity, and all persons having any claim against the Trustee by reason of the transactions contemplated by this Declaration of Trust shall look only to the Trust's property for payment or satisfaction thereof.            (iv) The Trustee may resign without cause at any time so long as Trustee provides the Depositor and the Administrators at least thirty days' prior written notice of such resignation. If no successor has been appointed within such thirty day period, the Trustee may, at the expense of the Trust, petition a court of competent jurisdiction to appoint a successor trustee.       4. The Depositor, the Administrators and the Trustee hereby authorize and direct the Depositor, as the sponsor of the Trust, to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Securities under the securities or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable. In the event that any filing referred to above is required by the rules and regulations of the state securities or blue sky laws to be executed on behalf of the Trust by one or more of the Administrators, each of the Administrators, in its or his capacity as an Administrator of the Trust, is hereby authorized and, to the extent so required, directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that Wilmington Trust Company in its capacity as a Trustee of the Trust shall not be required to join in any such filing or execute on behalf of the Trust any such documents unless required by the rules and regulations of the state securities or blue sky laws. In connection with the filings referred to above, the Depositor and Terry J. Howard, John W. Welborn and David W. Dick, each as Administrator and not in their individual capacities, hereby constitutes and appoints Terry J. Howard, John W. Welborn and David W. Dick and each of them, as its true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the Depositor or such Administrator or in the Depositor's or such Administrator's name, place and stead, in any and all capacities, to sign any and all documents with the administrators of the state securities or blue sky laws, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Administrator might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their respective substitute or substitutes, shall do or cause to be done by virtue hereof.                                           2         5. The Administrators hereby authorize and direct the Depositor to negotiate the placement agreement, to be entered into among the Trust, the Depositor and the placement agents therein relating to the sale and issuance of the Securities, on behalf of the Trust.       6. This Declaration of Trust may be executed in one or more counterparts.       7. The number of Administrators initially shall be three and thereafter the number of Administrators shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Administrators. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Administrator or the Trustee at any time. The Trustee or any Administrator may resign upon 30 days' prior written notice to the Depositor.       8. This Declaration of Trust shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles).                       Signatures appear on the following page                                           3        IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written.                                          WILMINGTON TRUST COMPANY,                                         as Trustee                                           By: /s/ Christopher J. Slaybaugh                                             ------------------------------------                                         Print Name: Christopher J. Slaybaugh                                         Title: Senior Financial Services Officer                                           FIRST BANCTRUST CORPORATION,                                         as Depositor                                           By: /s/ Terry J. Howard                                             ------------------------------------                                         Print Name: Terry J. Howard                                         Title: President & CEO                                           ADMINISTRATORS OF FBTC STATUTORY TRUST I                                           By: /s/ TERRY J. HOWARD                                             ------------------------------------                                             TERRY J. HOWARD, as Administrator                                           By: /s/ JOHN W. WELBORN                                             ------------------------------------                                             JOHN W. WELBORN, as Administrator                                           By: /s/ DAVID W. DICK                                             ------------------------------------                                             DAVID W. DICK, as Administrator                                           4    EX-10.8 5 c03489exv10w8.txt TRUST PREFERRED SECURITIES GUARANTEE AGREEMENT                                                                        Exhibit 10.8  ================================================================================                                 GUARANTEE AGREEMENT                                   BY AND BETWEEN                             FIRST BANCTRUST CORPORATION                                         AND                              WILMINGTON TRUST COMPANY                              DATED AS OF JUNE 15, 2005  ================================================================================                                   GUARANTEE AGREEMENT       This GUARANTEE AGREEMENT (this "Guarantee"), dated as of June 15, 2005, is executed and delivered by First BancTrust Corporation, a Delaware corporation (the "Guarantor"), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of FBTC Statutory Trust I, a Delaware statutory trust (the "Issuer").       WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of the date hereof among Wilmington Trust Company, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $6,000,000.00 (the "Capital Securities"); and       WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;       NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.                                      ARTICLE I                           DEFINITIONS AND INTERPRETATION       SECTION 1.1. DEFINITIONS AND INTERPRETATION. In this Guarantee, unless the context otherwise requires:       (a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;       (b) a term defined anywhere in this Guarantee has the same meaning throughout;       (c) all references to "the Guarantee" or "this Guarantee" are to this Guarantee as modified, supplemented or amended from time to time;       (d) all references in this Guarantee to "Articles" or "Sections" are to Articles or Sections of this Guarantee, unless otherwise specified;       (e) terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and       (f) a reference to the singular includes the plural and vice versa.       "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.       "Beneficiaries" means any Person to whom the Issuer is or hereafter becomes indebted or liable.         "Capital Securities" has the meaning set forth in the recitals to this Guarantee.       "Common Securities" means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.       "Corporate Trust Office" means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.       "Covered Person" means any Holder of Capital Securities.       "Debentures" means the debt securities of the Guarantor designated the Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due 2035 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.       "Declaration Event of Default" means an "Event of Default" as defined in the Declaration.       "Event of Default" has the meaning set forth in Section 2.4(a).       "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution").       "Guarantee Trustee" means Wilmington Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.       "Guarantor" means First BancTrust Corporation and each of its successors and assigns.       "Holder" means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor.       "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.       "Indenture" means the Indenture dated as of the date hereof between the Guarantor and Wilmington Trust Company, not in its individual capacity but solely as trustee, and any indenture                                           2   supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.       "Issuer" has the meaning set forth in the opening paragraph to this Guarantee.       "Liquidation Distribution" has the meaning set forth in the definition of "Guarantee Payments" herein.       "Majority in liquidation amount of the Capital Securities" means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.       "Obligations" means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.       "Officer's Certificate" means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:            (a) a statement that the officer signing the Officer's Certificate has      read the covenant or condition and the definitions relating thereto;            (b) a brief statement of the nature and scope of the examination or      investigation undertaken by the officer in rendering the Officer's      Certificate;            (c) a statement that the officer has made such examination or      investigation as, in such officer's opinion, is necessary to enable such      officer to express an informed opinion as to whether or not such covenant      or condition has been complied with; and            (d) a statement as to whether, in the opinion of the officer, such      condition or covenant has been complied with.       "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.       "Redemption Price" has the meaning set forth in the Indenture.       "Responsible Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.       "Special Event" has the meaning set forth in the Indenture.       "Special Redemption Price" has the meaning set forth in the Indenture.                                           3         "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.       "Trust Securities" means the Common Securities and the Capital Securities.                                     ARTICLE II                            POWERS, DUTIES AND RIGHTS OF                                GUARANTEE TRUSTEE       SECTION 2.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.       (a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.       (b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.       (c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.       (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:            (i) prior to the occurrence of any Event of Default and after the      curing or waiving of all such Events of Default that may have occurred:                 (A) the duties and obligations of the Guarantee Trustee shall be           determined solely by the express provisions of this Guarantee, and the           Guarantee Trustee shall not be liable except for the performance of           such duties and obligations as are specifically set forth in this           Guarantee, and no implied covenants or obligations shall be read into           this Guarantee against the Guarantee Trustee; and                 (B) in the absence of bad faith on the part of the Guarantee           Trustee, the Guarantee Trustee may conclusively rely, as to the truth           of the statements and the correctness of the opinions expressed           therein, upon any certificates or opinions furnished to the Guarantee           Trustee and conforming to the requirements of this Guarantee; but in           the                                           4              case of any such certificates or opinions that by any provision hereof           are specifically required to be furnished to the Guarantee Trustee,           the Guarantee Trustee shall be under a duty to examine the same to           determine whether or not they conform to the requirements of this           Guarantee;            (ii) the Guarantee Trustee shall not be liable for any error of      judgment made in good faith by a Responsible Officer of the Guarantee      Trustee, unless it shall be proved that such Responsible Officer of the      Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining      the pertinent facts upon which such judgment was made;            (iii) the Guarantee Trustee shall not be liable with respect to any      action taken or omitted to be taken by it in good faith in accordance with      the written direction of the Holders of not less than a Majority in      liquidation amount of the Capital Securities relating to the time, method      and place of conducting any proceeding for any remedy available to the      Guarantee Trustee, or relating to the exercise of any trust or power      conferred upon the Guarantee Trustee under this Guarantee; and            (iv) no provision of this Guarantee shall require the Guarantee      Trustee to expend or risk its own funds or otherwise incur personal      financial liability in the performance of any of its duties or in the      exercise of any of its rights or powers, if the Guarantee Trustee shall      have reasonable grounds for believing that the repayment of such funds is      not reasonably assured to it under the terms of this Guarantee or security      and indemnity, reasonably satisfactory to the Guarantee Trustee, against      such risk or liability is not reasonably assured to it.       SECTION 2.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.       (a) Subject to the provisions of Section 2.1:            (i) The Guarantee Trustee may conclusively rely, and shall be fully      protected in acting or refraining from acting upon, any resolution,      certificate, statement, instrument, opinion, report, notice, request,      direction, consent, order, bond, debenture, note, other evidence of      indebtedness or other paper or document believed by it to be genuine and to      have been signed, sent or presented by the proper party or parties.            (ii) Any direction or act of the Guarantor contemplated by this      Guarantee shall be sufficiently evidenced by an Officer's Certificate.            (iii) Whenever, in the administration of this Guarantee, the Guarantee      Trustee shall deem it desirable that a matter be proved or established      before taking, suffering or omitting any action hereunder, the Guarantee      Trustee (unless other evidence is herein specifically prescribed) may, in      the absence of bad faith on its part, request and conclusively rely upon an      Officer's Certificate of the Guarantor which, upon receipt of such request,      shall be promptly delivered by the Guarantor.            (iv) The Guarantee Trustee shall have no duty to see to any recording,      filing or registration of any instrument (or any re-recording, refiling or      re-registration thereof).            (v) The Guarantee Trustee may consult with counsel of its selection,      and the advice or opinion of such counsel with respect to legal matters      shall be full and complete authorization and protection in respect of any      action taken, suffered or omitted by it hereunder in good faith and in      accordance with such advice or opinion. Such counsel may be counsel to the      Guarantor or any                                           5        of its Affiliates and may include any of its employees. The Guarantee      Trustee shall have the right at any time to seek instructions concerning      the administration of this Guarantee from any court of competent      jurisdiction.            (vi) The Guarantee Trustee shall be under no obligation to exercise      any of the rights or powers vested in it by this Guarantee at the request      or direction of any Holder, unless such Holder shall have provided to the      Guarantee Trustee such security and indemnity, reasonably satisfactory to      the Guarantee Trustee, against the costs, expenses (including attorneys'      fees and expenses and the expenses of the Guarantee Trustee's agents,      nominees or custodians) and liabilities that might be incurred by it in      complying with such request or direction, including such reasonable      advances as may be requested by the Guarantee Trustee; provided, however,      that nothing contained in this Section 2.2(a)(vi) shall relieve the      Guarantee Trustee, upon the occurrence of an Event of Default, of its      obligation to exercise the rights and powers vested in it by this      Guarantee.            (vii) The Guarantee Trustee shall not be bound to make any      investigation into the facts or matters stated in any resolution,      certificate, statement, instrument, opinion, report, notice, request,      direction, consent, order, bond, debenture, note, other evidence of      indebtedness or other paper or document, but the Guarantee Trustee, in its      discretion, may make such further inquiry or investigation into such facts      or matters as it may see fit.            (viii) The Guarantee Trustee may execute any of the trusts or powers      hereunder or perform any duties hereunder either directly or by or through      agents, nominees, custodians or attorneys, and the Guarantee Trustee shall      not be responsible for any misconduct or negligence on the part of any      agent or attorney appointed with due care by it hereunder.            (ix) Any action taken by the Guarantee Trustee or its agents hereunder      shall bind the Holders of the Capital Securities, and the signature of the      Guarantee Trustee or its agents alone shall be sufficient and effective to      perform any such action. No third party shall be required to inquire as to      the authority of the Guarantee Trustee to so act or as to its compliance      with any of the terms and provisions of this Guarantee, both of which shall      be conclusively evidenced by the Guarantee Trustee's or its agent's taking      such action.            (x) Whenever in the administration of this Guarantee the Guarantee      Trustee shall deem it desirable to receive instructions with respect to      enforcing any remedy or right or taking any other action hereunder, the      Guarantee Trustee (i) may request instructions from the Holders of a      Majority in liquidation amount of the Capital Securities, (ii) may refrain      from enforcing such remedy or right or taking such other action until such      instructions are received, and (iii) shall be protected in conclusively      relying on or acting in accordance with such instructions.            (xi) The Guarantee Trustee shall not be liable for any action taken,      suffered, or omitted to be taken by it in good faith, without negligence,      and reasonably believed by it to be authorized or within the discretion or      rights or powers conferred upon it by this Guarantee.       (b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.                                          6         SECTION 2.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.       SECTION 2.4. EVENTS OF DEFAULT; WAIVER.       (a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.       (b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.       SECTION 2.5. EVENTS OF DEFAULT; NOTICE.       (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.       (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.                                     ARTICLE III                                 GUARANTEE TRUSTEE       SECTION 3.1. GUARANTEE TRUSTEE; ELIGIBILITY.       (a) There shall at all times be a Guarantee Trustee which shall:            (i) not be an Affiliate of the Guarantor, and            (ii) be a corporation organized and doing business under the laws of      the United States of America or any State or Territory thereof or of the      District of Columbia, or Person authorized under such laws to exercise      corporate trust powers, having a combined capital and surplus of at least      50 million U.S. dollars ($50,000,000), and subject to supervision or      examination by Federal, State, Territorial or District of Columbia      authority. If such corporation publishes reports of condition at least      annually, pursuant to law or to the requirements of the supervising or      examining authority referred to above, then, for the purposes of this      Section 3.1(a)(ii), the combined capital and surplus of such corporation      shall be deemed to be its combined capital and surplus as set forth in its      most recent report of condition so published.                                          7         (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).       (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.       SECTION 3.2. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.       (a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.       (b) The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.       (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.       (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.       (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.       (f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.                                          8                                      ARTICLE IV                                      GUARANTEE       SECTION 4.1. GUARANTEE.       (a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.       (b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.       SECTION 4.2. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.       SECTION 4.3. OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:       (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;       (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);       (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;       (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;                                          9         (e) any invalidity of, or defect or deficiency in, the Capital Securities;       (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or       (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.       There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.       SECTION 4.4. RIGHTS OF HOLDERS.       (a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.       (b) Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.       SECTION 4.5. GUARANTEE OF PAYMENT. This Guarantee creates a guarantee of payment and not of collection.       SECTION 4.6. SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.       SECTION 4.7. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.       SECTION 4.8. ENFORCEMENT BY A BENEFICIARY. A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity                                          10    before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.                                      ARTICLE V                      LIMITATION OF TRANSACTIONS; SUBORDINATION       SECTION 5.1. LIMITATION OF TRANSACTIONS. So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor's or such Affiliate's capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantor's capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor's capital stock or of any class or series of the Guarantor's indebtedness for any class or series of the Guarantor's capital stock, (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders' rights plan, or the issuance of rights, stock or other property under any stockholders' rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee).       SECTION 5.2. RANKING. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.       The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor's obligations under this Guarantee will be effectively                                          11   subordinated to all existing and future liabilities of the Guarantor's subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.                                     ARTICLE VI                                    TERMINATION       SECTION 6.1. TERMINATION. This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.                                     ARTICLE VII                                   INDEMNIFICATION       SECTION 7.1. EXCULPATION.       (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions.       (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.       SECTION 7.2. INDEMNIFICATION.       (a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person's powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.                                          12         (b) Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the Guarantor's expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.       SECTION 7.3. COMPENSATION; REIMBURSEMENT OF EXPENSES. The Guarantor agrees:       (a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and       (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.       For purposes of clarification, this Section 7.3 does not contemplate the payment by the Guarantor of acceptance or annual administration fees owing to the Guarantee Trustee for services to be provided by the Guarantee Trustee under this Guarantee or the fees and expenses of the Guarantee Trustee's counsel in connection with the closing of the transactions contemplated by this Guarantee. The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.                                          13                                      ARTICLE VIII                                   MISCELLANEOUS       SECTION 8.1. SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor's assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.       SECTION 8.2. AMENDMENTS. Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.       SECTION 8.3. NOTICES. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:       (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):       Wilmington Trust Company      Rodney Square North      1100 North Market Street      Wilmington, Delaware 19890-1600      Attention: Corporate Trust Administration      Telecopy: 302-636-4140       (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):       First BancTrust Corporation      101 South Central      Paris, Illinois 61944      Attention: Terry J. Howard      Telecopy: 217-465-0235       (c) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.       All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.                                          14        SECTION 8.4. BENEFIT. This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.       SECTION 8.5. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).       SECTION 8.6. COUNTERPARTS. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.       SECTION 8.7 SEPARABILITY. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.                       Signatures appear on the following page                                          15         THIS GUARANTEE is executed as of the day and year first above written.                                          FIRST BANCTRUST CORPORATION, as                                         Guarantor                                           By: /s/ Terry J. Howard                                             ------------------------------------                                         Name: Terry J. Howard                                         Title: President & CEO                                           WILMINGTON TRUST COMPANY, as Guarantee                                         Trustee                                           By: /s/ Christopher J. Monigle                                             ------------------------------------                                         Name: Christopher J. Monigle                                         Title: Assistant Vice President                                          16    EX-13.0 6 c03489exv13w0.txt 2005 ANNUAL REPORT TO STOCKHOLDERS                                                                          Exhibit 13                            COMMITTED TO OUR COMMUNITIES  Dear Fellow Shareholder:  We made significant strides in expanding our operations in 2005 and in positioning ourselves for still further growth in 2006. The acquisition of Rantoul First Bank, S.B., located just 15 miles north of the Champaign - Urbana metropolitan area was completed on October 1, 2005. This addition, now known as First Bank of Rantoul, provides a second location for marketing our products and services in Champaign County in a new emerging market that includes a diverse community with a vibrant economy.  First Bank of Rantoul and First Bank of Savoy in southern Champaign County, allow us to compete more effectively in one of the fastest growing counties in Illinois. The presence of the University of Illinois and the multitude of businesses it spawns assure that Champaign County will continue to grow for the foreseeable future, providing us with further opportunities in consumer, residential, and commercial lending.  In order to make certain we are prepared for continued growth, we undertook an expansion of our headquarters in Paris, Illinois, during 2005. When completed in 2006, the 30,000 square foot, $5.6 million expansion will bring together at one location, several operations currently located in separate buildings. All of our banking operations in Paris will be conducted from one location on the southeast corner of the Courthouse Square. This consolidation allows us to enhance our operations while making it much more convenient for our customers to conduct business at First Bank of Paris. The expanded drive-up facility, enlarged customer lobby area, and expansion of office space will improve efficiencies and allow us to serve our customers in an inviting atmosphere.  We have also developed and will soon complete construction of our model bank created to serve smaller communities. First Bank of Martinsville will be opened in May 2006, to serve the financial needs of that community. Located just ten miles west of First Bank of Marshall, this facility will be staffed by experienced financial personnel who will be supported by the entire First Bank family of employees.  The outlook for 2006 and beyond is positive. We will continue to develop new markets for our lending products and seek new sources of deposits. Our goal is to enhance our profitability through improving our interest rate margins, as well as increasing the number of fee-generating, value-added services we provide to all of our customers.  Housing in the markets we serve is strong, and we expect our core mortgage lending business to continue to grow as well. Further, projections suggest the overall economy in our area will continue to strengthen over the next 12 to 18 months. Demand for commercial development, commercial real estate, and agricultural lending products should continue to increase throughout the year. With our broad array of consumer and business financial products, we should experience sustained growth in our core deposit base which will result in increased fee income.    Growth should also come from further geographic expansion. We remain active in seeking growth through acquisitions both within our traditional market area of east-central Illinois, as well as west-central Indiana. Our goal is to identify opportunities in which we can make an acquisition at a reasonable price and generate positive contributions to our financial performance within a realistic time period.  In sum, we anticipate our financial performance will improve in 2006 as the actions undertaken in the recent past contribute to our performance. We will also benefit from the economies of scale associated with the Rantoul acquisition and from the increased efficiency from our home office expansion.  I would like to thank all our customers, employees, management team, and our directors for the confidence and support they continue to provide. In particular, I would like to thank our shareholders for their interest and continued support. We remain dedicated to growing the value of your investment.  Sincerely,   Terry J. Howard President and Chief Executive Officer  March 10, 2006                                          2    FIRST BANCTRUST CORPORATION SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE DATA)                                               2005       2004       2003       2002     2001 (1)                                          --------   --------   --------   --------   --------       SUMMARY OF OPERATIONS Interest income                          $ 12,999   $ 11,774   $ 11,899   $ 13,032   $ 13,574 Interest expense                            5,333      4,397      4,621      5,526      6,990                                          --------   --------   --------   --------   --------  Net  interest income                        7,666      7,377      7,278      7,506      6,584  Provision for loan losses                     510        515        728        718        607 Noninterest income                          3,338      3,469      3,819      3,492      3,330 Noninterest expense                         8,933      8,564      7,488      8,355      6,478                                          --------   --------   --------   --------   --------  Income before income tax                    1,561      1,767      2,881      1,925      2,829 Income tax expense                            313        539        932        613        968  Net Income                                  1,248      1,228      1,949      1,312      1,861  PER SHARE (2) Basic earnings per share                 $   0.56   $   0.54   $   0.85   $   0.51        N/A Diluted earnings per share               $   0.52   $   0.51   $   0.81   $   0.50        N/A Cash dividends paid                      $   0.24   $   0.23   $  0.175   $   0.10   $  0.025 Book value at December 31                $  11.00   $  11.04   $  10.55   $  10.00   $   9.50 Market value at December 31              $  12.19   $  11.58   $  11.62   $   7.86   $   6.98  RATIOS BASED ON NET INCOME Return on average stockholders' equity       4.66%      4.58%      7.38%      4.77%      7.66% Return on average assets                     0.52%      0.54%      0.90%      0.64%      0.99% Net interest margin on average    earning assets                            3.46%      3.56%      3.68%      4.02%      3.92% Dividend payout ratio                       46.64%     46.82%     23.05%     21.57%       N/A  YEAR-END BALANCE SHEET DATA Total assets                              273,865    230,924    226,194    202,725    196,037 Net loans (3)                             157,527    117,586    106,864    105,778    101,253 Securities                                 79,862     88,723     93,742     72,748     65,207 Deposits                                  193,975    159,471    163,028    147,335    141,316 Other borrowings                           51,886     42,500     35,500     26,501     25,516 Total stockholders' equity                 26,046     27,547     26,392     27,306     27,718 Average equity to average assets            11.08%     11.84%     12.19%     13.52%     12.92%   (1)  The Bank converted to a stock savings bank in April, 2001. Earnings per      share for 2001 are not meaningful and are therefore not presented.  (2)  Per share data reflects two for one stock split on May 21, 2004  (3)  Includes loans held for sale                                          3                               FIRST BANCTRUST CORPORATION                       MANAGEMENT'S DISCUSSION AND ANALYSIS              (TABLE DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)  First BancTrust Corporation (Company) is a financial holding company whose principal activity is the ownership and management of its wholly-owned subsidiaries, First Bank & Trust, s.b. (Bank), ECS Service Corporation, and First Charter Service Corporation. FBTC Statutory Trust I is an unconsolidated wholly-owned subsidiary of the Company.  The Company conducts traditional banking activities through the Bank, including originating and servicing residential, commercial, and consumer loans and providing a broad range of depository services; but, otherwise, conducts no significant business, except through the Company's other subsidiaries First Charter Service Corporation and ECS Service Corporation. The Community Finance Center, Incorporated, which originally operated as a subsidiary of the Bank, provided retail consumer lending to the Bank's market area. In May, 2005, Community Finance Center, Incorporated was dissolved, and those activities were merged into the Bank. Beginning in October, 2004, activities formerly provided through First Charter Service Corporation were conducted under a third-party agreement between First Advisors Financial Group and the Bank. First Advisors provides securities brokerage, asset management services, and other investment services and also engages in the sale of tax deferred annuities, and other insurance products. First Charter is currently in inactive status. ECS Service Corporation, doing business as Edgar County Title, provides abstracting services and title insurance for the Bank's market area.  On October 1, 2005, the Company acquired all of the outstanding common stock of Rantoul First Bank, SB located in Rantoul, Illinois. The transaction was accounted for as a purchase, and the results of operations for Rantoul since the acquisition have been included in the consolidated financial statements. The Company also acquired a subsidiary, Rantoul First Financial, as part of the acquisition of Rantoul First Bank in October, 2005. Rantoul First Financial was a subsidiary of Rantoul First Bank, which provided brokerage and investment services. Plans are to dissolve Rantoul First Financial early in 2006. All references to the Company include the Bank and subsidiaries, unless otherwise indicated.  "SAFE HARBOR" STATEMENT  In addition to historical information, forward-looking statements are contained herein that are subject to risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. The forward-looking statements are identifiable by the use of the terms "believes," "expects," "anticipates," "estimates," or similar expressions. Factors that could cause future results to vary from current expectations, include, but are not limited to, the impact of economic conditions (both generally and more specifically in the markets in which the Company operates); the impact of competition for the Company's customers from other providers of financial services; the impact of government legislation and regulation (which changes from time to time and over which the Company has no control); and other risks detailed in this Annual Report and in the Company's other Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of                                          4    the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission.  FINANCIAL OVERVIEW  First BancTrust Corporation is a publicly held, Illinois-chartered stock savings bank holding company. Our business activities are focused on community banking in east-central Illinois through a subsidiary, First Bank & Trust, s.b., which currently operates offices in Paris, Marshall, Savoy, and beginning in October, 2005, through the acquisition of Rantoul First Bank, in Rantoul, Illinois. The Bank's activities are supplemented by the activities of our other subsidiary, Edgar County Title Company. Currently, the Company's subsidiary, First Charter Financial Services, is inactive. In October 2004, a strategic alliance was established with First Advisor Financial Group to provide brokerage and investment services, insurance products and asset management to our customers.  During 2005, the Company continued building on the foundation created to support growth over the past several years. The Savoy, Illinois branch developed to a full-service community bank enhancing our presence in southern Champaign County, Illinois. The acquisition of Rantoul First Bank solidified our presence in the northern half of the County. These investments in our future coupled with enhancements to existing product lines and the development of more efficient processing and delivery systems will continue to strengthen our revenues. However, expenses associated with these efforts and economic conditions resulting from the flattened yield curve adversely impacted the Company's financial performance in 2005. Net income in 2005 was $1.2 million or 52 cents per diluted share. Net income in 2004 declined to $1.2 million or 51 cents per diluted share from $1.9 million or 81 cents per diluted share in 2003. These results reflect the 2-for-1 stock split that took effect May 21, 2004. Total assets increased to $273.9 million at December 31, 2005 from $230.9 million at December 31, 2004. Loans, net of allowance for loan losses, rose to $156.9 million at December 31, 2005 compared to $117.4 million at December 31, 2004. Total deposits increased to $194.0 million at December 31, 2005, an increase of $34.5 million compared to total deposits at December 31, 2004 of $159.5 million.  The foundation created for the future afforded the opportunity for expansion of our market area this year. Past investments in product expansion and delivery enhancements fortified our ability to compete across the entire spectrum of products from mortgage lending and retail banking to commercial lending and non-deposit retail investment products and services. The investment in the Savoy, Illinois location has provided growth, with deposits at Savoy at the end of 2005 increasing to $20.1 million, an increase of $6.8 million over 2004 year-end balances. The addition of First Bank of Rantoul solidifies our presence in the Champaign County allowing us to enter a vibrant market emerging north of Champaign-Urbana and the University of Illinois Campus.  The increased number of households achieved through growth in Savoy and the acquisition of Rantoul First Bank created the opportunity for expansion of fee generating deposit services. This source of noninterest income has grown steadily, and when combined with the                                          5    increase in both brokerage fees and abstract and title fees, has offset reductions in net gains on loan sales and other service fees and charges experienced during 2005. Non deposit fee income increases are directly attributable to our alliance with First Advisor Financial Group, which provides investment advisory and brokerage services, and the increasing types of services performed by our subsidiary Edgar County Title Company.  We continue to focus our efforts on the needs of the communities we serve. We emphasize that commitment to those individual communities by including the name of each in our local banking facility. First Bank of Paris, Marshall, Savoy, and Rantoul are all committed to improving the economic environment of those communities and providing the broadest range of competitively priced financial services possible. Each Bank expanded its portfolio of home equity lines of credit during 2005 as well as commercial and mortgage loans. Our competition has emulated our success, but we remain committed to providing premier deposit and lending products. As a result, we should experience increasing revenues from larger portfolios of local loans as well as growing deposits and fee income associated with this expanding base.  We experienced significant growth in our loan portfolio, as a result of loans acquired in the purchase of Rantoul First Bank and also from commercial loans originated for the development of real estate in the Champaign-Urbana area. However, the Bank's traditional commercial product lines have also expanded with existing and new customers. As a result, we remain a leading lender in agricultural and agri-business lending in our market area. Our enhanced ability to respond to the financial needs of commercial customers continues to develop, and these new relationships will help us continue to expand our commercial deposit base.  We are now structured to withstand the challenging interest rate environment created by a series of short-term interest rate increases over the past eighteen months. Our reliance on historical fee income sources has decreased significantly. Our efforts are now focused on delivering our proven products and services to an expanding customer base in the most efficient and personal manner. Our broad spectrum of financial services will continue to yield additional opportunities for revenue enhancement. We are confident in our ability to continue to grow in the markets we now serve. However, the Company will continue to review opportunities for acquisitions in new market areas, analyzing those opportunities carefully to assure that our economic value will be enhanced by the acquisition. We are positioned to weather the challenging interest rate environment, but we should also be able to improve our performance during the next several years.  COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2005, DECEMBER 31, 2004, AND DECEMBER 31, 2003  General  Net income for the year ended December 31, 2005 increased by $20,000, to $1.25 million or 1.63% from $1.23 million for the year ended December 31, 2004. The primary reasons for the slight increase were an increase in net interest income and a decrease in income tax expense, which were mostly offset by an increase in noninterest expense combined with a                                          6    reduction of noninterest income. Net income for the year ended December 31, 2004 decreased by $722,000, or 37.02% from $1.95 million for the year ended December 31, 2003. The decrease in net income is primarily due to a decrease in noninterest income and an increase in noninterest expense, partially offset by an increase in net interest income and decreases in the provision for loan losses and income tax expense. Return on average assets decreased slightly to 0.52% for the year ended December 31, 2005, from 0.54% for the year ended December 31, 2004, which had declined from 0.90% for the year ended December 31, 2003. Return on average equity increased slightly to 4.66% for the year ended December 31, 2005, from 4.58% for the year ended December 31, 2004, which had decreased from 7.38% for the year ended December 31, 2003.  Net Interest Income  Net interest income increased by $289,000 or 3.92% from $7.4 million for the year ended December 31, 2004 to $7.7 million for the year ended December 31, 2005. The primary reason for the increase in net interest income is an increase in interest income of $1.2 million, partially offset by an increase in interest expense of $935,000. The Company's net interest margin was 3.46% for the year ended December 31, 2005, compared to 3.56% for the year ended December 31, 2004. Net interest income had also increased by $99,000 or 1.36%, from $7.3 million for the year ended December 31, 2003, to $7.4 million for the year ended December 31, 2004. The primary reason for this increase in net interest income is a decrease in interest expense of $224,000, partially offset by a decrease in interest income of $125,000. The Company's net interest margin was 3.56% for the year ended December 31, 2004, compared to 3.68% for the year ended December 31, 2003.  For the year ended December 31, 2005, the net interest margin decreased as a result of a decrease in the ratio of average interest-earning assets to average interest-bearing liabilities from 114.22% for the year ended December 31, 2004, to 113.06% for the year ended December 31, 2005. The average interest rate earned on interest-earning assets increased from 5.68% in 2004 to 5.86% in 2005, while the average balances increased from $207.4 million in 2004 to $221.9 million in 2005. The increase in earning assets was primarily due to the additional investment in loans, which was funded by deposits and borrowings which increased earning liabilities. The average rate of interest-bearing liabilities increased from 2.42% in 2004 to 2.72% in 2005, due to the increasing rate environment. The average balance of interest-bearing liabilities increased from $181.5 million in 2004 to $196.2 million in 2005. Interest rate spread for 2005 declined to 3.14% from 3.26% in 2004.  For the year ended December 31, 2004, the net interest margin decreased as a result of a slight decrease in the ratio of average interest-earning assets to average interest-bearing liabilities from 114.80% for the year ended December 31, 2003, to 114.22% for the year ended December 31, 2004. The average interest rate earned on interest-earning assets declined from 6.02% in 2003 to 5.68% in 2004, while the average balances increased from $197.5 million in 2003 to $207.4 million in 2004. The increase in earning assets was primarily due to the additional investment in loans and securities, which was funded by deposits and borrowings which increased earning liabilities. The average rate of interest-bearing liabilities decreased from 2.69% in 2003 to 2.42% in 2004, due to the declining rate environment. The average balance of interest-bearing liabilities increased from $172.0                                          7    million in 2003 to $181.5 million in 2004. Interest rate spread for 2004 declined slightly to 3.26% from 3.33% in 2003.  Projections for 2006 indicate that interest margins should increase as a result of an increase in the average rate earned on interest-earning assets. Management's expectations include significant loan volume to be generated in the Savoy market in both commercial real estate development and residential real estate. Loan growth is projected for the Rantoul market as well, for these types of loans as well as agricultural loans. Growth in home equity loans is also expected to continue in all markets. Interest margin should also increase as a result of the conversion of investments and securities to higher-yielding loans. Funds generated from maturities and principal repayments on investment securities, as well as deposit growth, will fund loan growth. Deposit growth is expected to occur in both the Savoy and Rantoul areas by attracting new customers and their deposits. In addition, we will be promoting marketing strategies to increase both the deposits and the number of deposit relationships of existing customers.  Economic forecasts indicate that the demand for loans will continue well into the year. These forecasts also show a slight easing of short-term interest rates by year end. If the yield curve continues to flatten as interest rates rise, our efforts to increase loans as a percentage of interest-earning assets will likely be reflected as a slowing in the rate of decline in the interest margin rather than as an increase in the interest margin. In this instance, deposit rates which tend to be based on the short end of the yield curve are likely to increase much more quickly than loan rates which tend to be based on the longer end of the yield curve.  Interest Income - Total interest income was $13.0 million for the year 2005, an increase of $1.2 million, or 10.4% from $11.8 million reported in 2004. Interest income from loans increased by $1.4 million from $8.0 million in 2004 to $9.4 million in 2005, and interest income from deposits with financial institutions increased by $59,000 from $53,000 in 2004 to $113,000 in 2005, while investment income declined by $185,000 from $3.4 million in 2004 to $3.2 million in 2005, and dividend income from Federal Home Loan Bank stock decreased by $37,000 from $249,000 in 2004 to $212,000 in 2005.  For the year 2004 total interest income was $11.8 million, a decrease of $125,000, or 1.05% from $11.9 million reported in 2003. Interest income from loans decreased by $439,000 from $8.5 million in 2003 to $8.0 million in 2004, and interest income from deposits with financial institutions decreased by $9,000 from $62,000 in 2003 to $53,000 in 2004, while investment income increased by $312,000 from $3.1 million in 2003 to $3.4 million in 2004, and dividend income from Federal Home Loan Bank stock increased from $238,000 in 2003 to $249,000 in 2004.  The following schedule compares average total loan balances by major categories for the years 2005 and 2004:                                          8                                        Average Balance                                   -------------------                %                                     2005       2004      Change   Change                                   --------   --------   -------   ------                                       (Dollars in thousands)      Real Estate Loans    One-to-four family             $ 39,651   $ 35,673   $ 3,978   11.15%    Multi-family                        671        444       227   51.13%    Commercial                       22,528     11,716    10,812   92.28%    Construction                      1,715      1,814       (99)  -5.46%    Agricultural                     17,383     15,263     2,120   13.89%                                   --------   --------   -------   ----- Total real estate loans             81,948     64,910    17,038   26.25% Agricultural production finance     14,750     13,915       835    6.00% Commercial and industrial loans      8,172      8,377      (205)  -2.45% Consumer loans                      28,868     26,481     2,387    9.01%                                   --------   --------   -------   ----- Total loans                        133,738    113,683    20,055   17.64% Allowance for loan losses           (2,333)    (2,238)      (95)  -4.24%                                   --------   --------   -------   ----- Net loans                         $131,405   $111,445   $19,960   17.91%                                   ========   ========   =======   =====   The average net loan portfolio increased by $20.0 million or 17.9% from $111.4 million in 2004 to $131.4 million in 2005. This was primarily a result of increases in average real estate loans of $17.0 million, average agricultural production finance loans of $835,000, and $2.4 million in average consumer loans, partially offset by a decrease in the average commercial and industrial loans of $205,000, and an increase in the average allowance for loan losses of $95,000. The $17.0 million increase in average real estate loans was primarily a result of an increase in the average commercial real estate loans of $10.8 million or 92.3%, an increase of $4.0 million or 11.2% in average one-to-four family real estate loans, and an increase of $2.1 million in average agricultural real estate loans. Average multifamily real estate loans also increased by $227,000 in comparing 2005 to 2004, while average construction real estate loans decreased by $99,000 from 2004 to 2005.  The increase of $4.0 million in the average one-to-four family residential loans was primarily a result of $10.5 million in one-to-four family residential loans acquired as part of the acquisition of Rantoul First Bank in October, 2005. New loan originations on one-to-four family residential properties totaled $30.4 million for 2005, of which $15.5 million in loans were originated for sale into the secondary market. Of the $14.9 million in portfolio originations on one-to-four family residential properties during 2005, $4.8 million was revolving home equity loans. Average commercial real estate loans increased by $10.8 million or 92.2% from an average of $11.7 million in 2004 to $22.5 million in 2005. This was primarily attributable to $28.2 million in new originations during 2005, of which $23.9 million was generated in the Savoy market. The average balance of agricultural real estate loans increased by $2.1 million or 13.9% from an average balance of $15.3 million in 2004 compared to an average balance of $17.4 million in 2005. New originations of farmland loans during 2005 totaled $4.8 million. Agricultural production finance loans increased by $835,000 or 6.0% from an average balance of $13.9 million in 2004 to an average balance of $14.8 million in 2005, resulting primarily from new originations in 2005 of $12.1 million.                                           9    The average balance of consumer loans increased by $2.4 million or 9.0% from 2004 to 2005, primarily as a result of $18.6 million in new originations in consumer loans during 2005. Commercial and industrial loans decreased by $205,000 or 2.5% from an average balance of $8.4 million for 2004 compared to an average balance of $8.2 million for 2005.  The increase in loan interest income of $1.4 million from 2004 to 2005 was primarily due to the increase in average balance from $111.4 million in 2004 to $131.4 million in 2005, partially offset by a slight decrease in average rate earned on outstanding loans. The average yield on loans for 2005 was 7.18% compared to 7.22% average yield on loans for 2004, a decrease of 4 basis points. Interest income for 2006 is expected to increase primarily as a result of an increase in the average balance of outstanding loans as well as an increase in the balance of outstanding loans as a percentage of total earning assets; however, the rates generally available for new loans are expected to be somewhat less than the yield of the current portfolio. The reduction in the average interest rate earned on the portfolio as a result of this factor is expected to be at least partially offset by an increase in the rates of interest earned on variable rate loans held in the portfolio that are subject to re-pricing during 2006.  The decrease in loan interest income of $439,000 from 2003 to 2004 was primarily due to a decrease in the average rate earned on outstanding loans, partially offset by an increase in the average balance. The average yield on loans receivable decreased by 80 basis points from 8.02% in 2003 to 7.22% in 2004. The decrease in average loan yields in 2004 was caused by adjustable loans repricing to a lower rate, and new originations being priced lower than loans which were repaid.  Investment income decreased by $185,000 from $3.4 million in 2004 to $3.2 million for 2005. This was primarily a result of a decrease in the average balance of investments, partially offset by a slight increase in average yield. The average balance of investments declined by $5.8 million from $87.9 million during 2004 to an average balance of $82.1 million in investments during 2005. The reduction in investments in 2005 was a source of funding for loan growth. The average rate earned on investments in securities during 2005 was 3.95%, a slight increase from the average rate earned on securities in 2004 of 3.90%.  Income from investments increased by $312,000 from $3.1 million in 2003 to $3.4 million in 2004. The increase was primarily due to a higher average balance in securities and, to a lesser extent, to a higher average rate. Average total investment securities were $87.9 million during 2004, a $10.0 million increase over the 2003 average of $81.9 million. The average rate of investments increased by 10 basis points, from 3.80% in 2003 to 3.90% in 2004, due to a slight interest rate increase. The increase in average investments was funded by deposit growth and advances from the Federal Home Loan Bank.  Interest Expense - Interest expense increased by $935,000, or 21.3%, from $4.4 million for the year ended December 31, 2004, to $5.3 million for the year ended December, 31, 2005. Interest on deposits increased by $616,000 from $2.9 million for 2004 to $3.5 million for 2005. Interest on Federal Home Loan Bank and other debt increased by $320,000 from $1.5 million for 2004 to $1.8 million for 2005.                                          10    Interest expense decreased from $4.6 million in 2003 to $4.4 million in 2004, a decrease of $224,000 or 4.8%. Interest expense on deposits declined from $3.2 million in 2003 to $2.9 million in 2004, a reduction of $317,000 or 9.9%. Interest expense on borrowings increased by $93,000 or 6.6% from $1.4 million in 2003 compared to $1.5 million in 2004.  The $616,000 increase in interest paid on deposits from 2004 to 2005 was due to an increase in the average balance of deposits as well as an increase in average rates paid on those deposits. Demand deposits decreased by $4.3 million from an average balance of $57.1 million in 2004 to an average balance of $52.8 million in 2005. The average interest rate paid on demand deposits for 2004 was 1.15% compared to 1.33% for 2005. Average balances in savings accounts for 2005 increased slightly from $12.0 million for 2004 compared to $12.2 million for 2005. The average rate paid on savings accounts decreased by 11 basis points from 0.96% paid in 2004 to 0.85% paid in 2005. Certificates of deposits increased by $11.2 million from an average balance of $74.7 million during 2004 to an average balance of $85.9 million during 2005. The largest component of this increase was the acquisition of $19.2 million in certificates of deposits as part of the acquisition of Rantoul First Bank in October, 2005. The average rate paid on certificates of deposit increased by 30 basis points from 2.84% in 2004 to an average rate paid in 2005 of 3.14%.  During 2004, demand deposits, of which the largest component is Investor Checking Accounts, increased by $716,000 from an average balance of $56.4 million in 2003 to an average balance of $57.1 million in 2004. The average rate on demand deposits decreased from 1.43% in 2003 to 1.15% in 2004. Investor Checking Accounts, which have comparable rates to a money market product without the transaction limitations, averaged $38.9 million in 2004 compared to $41.0 million in 2003. In 2005, the interest rates paid on the Investor Checking Account product were adjusted to a level more than basic NOW account rates, but less than the money market rates. As a result, the 2005 average balance of investor checking accounts declined by $10.1 million to $28.8 million. Average money market accounts increased from an average of $9.0 million during 2003 to $9.9 million average balance for 2004. For 2005, average money market accounts increased by $7.7 million to $17.6 million from $9.9 million average balance of 2004, as many investor checking account holders sensitive to interest rates, converted their investor checking accounts to the higher yielding money market product in 2005.  Interest expense on savings accounts declined $15,000 from $130,000 in 2003 to $115,000 in 2004. The average rate paid on savings accounts decreased 35 basis points from an average rate of 1.31% paid in 2003 to an average rate of 0.96% paid in 2004. The average balance in savings accounts increased from $9.9 million in 2003 to an average balance of $12.0 million in 2004.  Interest expense on certificates of deposit decreased by $157,000, or 6.9%, from $2.3 million in the year 2003 to $2.1 million in the year 2004 due to a decline in the average rate, which was offset by an increase in the average balance. The average rate paid on certificates for 2004 declined by 34 basis points from 3.18% in 2003 to 2.84% in 2004. The average balance of certificate of deposits increased by $3.2 million from $71.5 million in 2003 to $74.7 million in 2004.                                          11    Interest expense on Federal Home Loan Bank (FHLB) advances and other debt for 2005 was $1.8 million compared to $1.5 million for 2004, an increase of $320,000 or 21.2%. The increase from 2004 to 2005 was primarily due to an increase of $7.4 million in the average balance of borrowings for 2005 of $45.2 million compared to an average balance of borrowings for 2004 of $37.8 million, and a slight increase in the average rate paid on borrowings. The average rate paid on borrowings during 2004 was 3.98% compared to an average of 4.04% paid in 2005. In June, 2005, the Company issued $6.0 million of trust preferred securities through FBTC Statutory Trust I, to finance the purchase of all outstanding shares of Rantoul First Bank, SB, for $4.2 million, and for other corporate use. The debentures carry a fixed interest rate of 5.8% for a period of five years, and then convert to a floating rate. The average balance of FHLB advances for 2005 increased by $3.6 million from $37.1 million average balance for 2004, compared to $40.7 million average balance for 2005. The increase in borrowings was used to fund loan growth during the year. Borrowings at the FHLB typically consist of fixed-term notes, and an open-end line of credit. At December 31, 2005, borrowings at FHLB totaled $43.2 million, which consisted of $36.2 million in fixed term advances, and $7.0 million in an open line of credit. Of the $36.2 in fixed term advances, $20.5 million have convertible options, which are subject quarterly to possible conversion to an adjustable rate advance after a specific lock-out period. All of the convertible advances have passed the "lock-out" periods, and thus are subject to possible conversion on a quarterly basis. If an advance is converted to an adjustable rate, the Company has the option to prepay principal on each quarterly adjustment date. The Company also occasionally purchases federal funds to fund short-term cash requirements, and at December 31, 2005, had $2.5 million purchased in federal funds.  Interest expense on Federal Home Loan Bank advances and other debt for 2004 was $1.5 million compared to $1.4 million for 2003. The increase was due to an increase in the average balance offset by a decrease in the average rate. The average balance of borrowings for 2004 was $37.8 million compared to $34.2 million for 2003. The additional borrowings were used to fund loans and purchase investment securities. At December 31, 2004, all $40.5 million in borrowings from the Federal Home Loan Bank were fixed-rate, fixed-term advances; however, $25.5 million had convertible options. Federal funds purchased at December 31, 2004 totaled $2.0 million. The average rate on average FHLB advances and other debt decreased from 4.13% in 2003 to 3.98% in 2004.  Average Balance Sheet  The following table presents the average balance sheet for the Company for the years ended December 31, 2005, 2004, and 2003, the interest on interest-earning assets and interest-bearing liabilities and the related average yield or cost. The yields or costs are calculated by dividing income or expense by the average balance of assets or liabilities, respectively, for the years shown. The yields and costs include fees, which are considered adjustments to yields.                                          12                                                                  As of                      Year Ended                                                        December 31, 2005             December 31, 2005                                                      ---------------------   --------------------------------                                                        Ending     Average     Average                Average                                                       Balance   Yield/Rate    Balance   Interest   Yield/Rate                                                      --------   ----------   --------   --------   ----------                                                                 (Dollars in thousands)       INTEREST-EARNING ASSETS    Deposits with financial institutions(1)           $  5,110      3.96%     $  3,421    $   113      3.30%    Securities                                          79,862      4.10%       82,130      3,242      3.95%    Loans receivable, net (2)                          157,527      6.96%      131,405      9,432      7.18%    Federal Home Loan Bank stock                         6,608      3.75%        4,904        212      4.32%                                                      --------      ----      --------    -------      ----       Total interest-earning assets                   249,107      5.90%      221,860     12,999      5.86%                                                                    ----                  -------      ----    Non-interest-earning assets                         24,758                  19,757                                                      --------                --------       Total assets                                   $273,865                $241,617                                                      ========                ========  INTEREST-BEARING LIABILITIES    Deposits:       Demand                                         $ 54,190      1.54%     $ 52,831    $   702      1.33%       Savings                                          12,152      0.86%       12,225        104      0.85%       Certificates of deposits of $100,000 or more     26,975      3.84%       22,090        794      3.59%       Other certificates                               79,129      3.55%       63,849      1,906      2.99%    Borrowings                                          51,886      4.31%       45,234      1,826      4.04%                                                      --------      ----      --------    -------      ----    Total interest-bearing liabilities                 224,332      3.13%      196,229      5,332      2.72%                                                                    ----                  -------      ----    Non-interest-bearing demand accounts                21,529                  17,357    Non-interest-bearing liabilities                     1,958                   1,271                                                      --------                --------       Total liabilities                               247,819                 214,857    Total equity capital(3)                             26,046                  26,760                                                      --------                --------       Total liabilities and equity capital           $273,865                $241,617                                                      ========                ========    Net average interest-earning assets               $ 24,775                $ 25,631                                                      ========                ========    Net interest income; interest rate spread(4)                                          $ 7,667      3.14%                                                                                          =======      ====    Net interest margin(5)                                                                             3.46%                                                                                                       ====    Average interest-earning assets to average       interest-bearing liabilities                                             113.06%                                                                              ========   - ---------- (1)  Includes interest-bearing demand deposits and other interest bearing      deposits.  (2)  Includes loans held for sale and nonaccruing loans.  (3)  Includes retained earnings and accumulated other comprehensive income      (loss).  (4)  Interest rate spread represents the difference between the weighted average      yield on interest-earning assets and the weighted average rate on      interest-bearing liabilities.  (5)  Net interest margin is net interest income divided by net average      interest-earning assets.                                          13                                                                               Year ended December 31,                                                      -------------------------------------------------------------------                                                                    2004                               2003                                                      --------------------------------   --------------------------------                                                       Average                Average     Average                Average                                                       Balance   Interest   Yield/Rate    Balance   Interest   Yield/Rate                                                      --------   --------   ----------   --------   --------   ----------                                                                             (Dollars in thousands)        INTEREST-EARNING ASSETS    Deposits with financial institutions(1)           $  3,880    $    53      1.37%     $  5,970    $    62      1.04%    Securities                                          87,896      3,427      3.90%       81,902      3,115      3.80%    Loans receivable, net (2)                          111,445      8,045      7.22%      105,773      8,484      8.02%    Federal Home Loan Bank stock                         4,129        249      6.03%        3,864        238      6.16%                                                      --------    -------      ----      --------    -------      ----       Total interest-earning assets                   207,350     11,774      5.68%      197,509     11,899      6.02%                                                                  -------      ----                  -------      ----    Non-interest-earning assets                         19,033                             19,218                                                      --------                           --------       Total assets                                   $226,383                           $216,727                                                      ========                           ======== INTEREST-BEARING LIABILITIES    Deposits:       Demand                                         $ 57,086    $   659      1.15%     $ 56,370    $   804      1.43%       Savings                                          11,989        115      0.96%        9,944        130      1.31%       Certificates of deposits of $100,000 or more     20,280        630      3.11%       16,643        582      3.50%       Other certificates                               54,376      1,487      2.73%       54,840      1,692      3.09%    Borrowings                                          37,801      1,506      3.98%       34,245      1,413      4.13%                                                      --------    -------      ----      --------    -------      ----    Total interest-bearing liabilities                 181,532      4,397      2.42%      172,042      4,621      2.69%                                                                  -------      ----                  -------      ----    Non-interest-bearing demand accounts                15,104                             14,599    Non-interest-bearing liabilities                     2,933                              3,671                                                      --------                           --------       Total liabilities                               199,569                            190,312    Total equity capital(3)                             26,814                             26,415                                                      --------                           --------       Total liabilities and equity capital           $226,383                           $216,727                                                      ========                           ========    Net average interest-earning assets               $ 25,818                           $ 25,467                                                      ========                           ========    Net interest income; interest rate spread(4)                  $ 7,377      3.26%                 $ 7,278      3.33%                                                                  =======      ====                  =======      ====    Net interest margin(5)                                                     3.56%                              3.68%                                                                               ====                               ====    Average interest-earning assets to average       interest-bearing liabilities                     114.22%                            114.80%                                                      ========                           ========   - ---------- (1)  Includes interest-bearing demand deposits and other interest bearing      deposits.  (2)  Includes loans held for sale and nonaccruing loans.  (3)  Includes retained earnings and accumulated other comprehensive income      (loss).  (4)  Interest rate spread represents the difference between the weighted average      yield on interest-earning assets and the weighted average rate on      interest-bearing liabilities.  (5)  Net interest margin is net interest income divided by net average      interest-earning assets.                                          14    Rate/Volume Analysis  The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company's interest income and expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rate (change in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.                                            Year Ended 12/31/2005     Year Ended 12/31/2004                                              Compared to               Compared to                                         Year Ended 12/31/2004     Year Ended 12/31/2003                                       ------------------------   ----------------------                                           Increase                  Increase                                          (Decrease)                (Decrease)                                            Due to                    Due to                                       ---------------            --------------                                       Volume    Rate      Net    Volume    Rate    Net                                       ------   ------   ------   ------   -----   -----                                                         (in thousands)        Interest-earning assets:    Interest-bearing demand deposits      ($7)   $  67   $   60     ($25)  $  16     ($9)    Securities                           (227)      42     (185)     232      80     312    Loans receivable, net               1,433      (46)   1,387      439    (878)   (439)    Federal Home Loan Bank stock           41      (78)     (37)      16      (5)     11                                       ------    -----   ------    -----   -----   -----       Total interest-earning assets    1,240      (15)   1,225      662    (787)   (125)  Interest-bearing liabilities:    Demand accounts                       (52)      95       43       10    (155)   (145)    Savings accounts                        2      (13)     (11)      24     (39)    (15)    Certificates of deposit               334      249      583      104    (261)   (157)    Borrowings                            294       26      320      129     (36)     93                                       ------    -----   ------    -----   -----   -----       Total interest-bearing          liabilities                     578      357      935      267    (491)   (224)                                       ------    -----   ------    -----   -----   -----       Net change in net interest          income                       $  662    ($372)  $  290    $ 395   ($296)  $  99                                       ======    =====   ======    =====   =====   =====   Provision for Loan Losses  The provision for loan losses for the year ended December 31, 2005 was $510,000 compared to $515,000 for the year ended December 31, 2004, a slight decrease of $5,000. For 2003, the provision for loan losses was $728,000. Chargeoffs for 2005 were $439,000, which was nearly equal to the 2004 chargeoffs of $437,000. The chargeoffs of $439,000 for 2005 were partially offset by recoveries of $90,000, while the chargeoffs of $437,000 for 2004 were partially offset by recoveries of $98,000. In 2003, chargeoffs totaled $659,000, which were                                          15   partially offset by recoveries of $93,000. Chargeoffs in 2005 primarily included $205,000 in vehicle loan chargeoffs which were partially offset by recoveries of $48,000, $91,000 in a 2005 chargeoff pertaining to a single borrower with multiple rental properties, and $58,000 in five chargeoffs on loans secured by 1-to-4 family residential properties. In 2004, chargeoffs included from two borrowers on commercial real estate loans, and $75,000 from five borrowers on commercial and industrial loans. Chargeoffs on vehicle loans in 2004 decreased from $222,000 in 2003 to $155,000 in 2004, while chargeoffs on one-to-four family real estate loans decreased from $118,000 in 2003 to $63,000 in 2004. Chargeoffs in 2003 included a $233,000 from a single credit on an agricultural production loan.  The provision for all periods reflects management's analysis of the Company's loan portfolio based on the information which was available to it at such time. In particular, management meets on a quarterly basis to review the adequacy of the allowance for loan losses by classifying loans in compliance with regulatory classifications. Classified loans are individually reviewed to arrive at specific reserve levels for those loans. Once the specific portion for each loan is determined, management calculates a historical portion for each category of loans not classified based on a combination of loss history adjusted for current national and local economic conditions, trends in delinquencies and chargeoffs, trends in volume and term of loans, changes in underwriting standards, and industry conditions.  While Company management believes that the allowance for loan losses is sufficient based on information currently available, no assurances can be made that future events, conditions, or regulatory directives will not result in increased provisions for loan losses or additional chargeoffs which may adversely affect net income.  Noninterest Income  Noninterest income for 2005 was $3.3 million compared to $3.5 million for 2004, a decrease of $132,000, or 3.8%. The decrease was primarily due to reductions in loan servicing fees, other service charges and fees, and net gains on loan sales, partially offset by increased customer service fees. Noninterest income totaled $3.5 million in 2004, compared to $3.8 million in 2003, a decrease of $350,000 or 9.1%, primarily due to decreases in net gains on loan sales, abstract and title fees, and other service charges and fees, partially offset by increases in customer service fees and loan servicing fees.  Customer service fees for 2005 totaled $966,000, which was an $82,000 increase over the 2004 total customer service fees of $884,000. The 9.3% increase was largely due to a $74,000 increase in non-sufficient ("NSF") and overdraft fees from 2004 of $831,000 to $905,000 for 2005. The "Safety-Net Checking" product provides overdraft protection in the form of a pre-approved amount of overdrafts, most often up to $500. The number of active "Safety-Net Checking" accounts at December 31, 2005 totaled 2,145 compared to 1,455 accounts at December 31, 2004. Of the $74,000 increase in NSF and overdraft fees, $24,500 was generated by Rantoul accounts acquired as part of the acquisition of Rantoul First Bank in October, 2005. At the end of 2005, Rantoul had 466 active Safety-Net Checking accounts. NSF fees generated from the Savoy branch for 2005 totaled $63,425, an increase of $45,400                                          16    over 2004 NSF fees of $18,025. The majority of new consumer checking accounts opened are "Safety-Net Checking" as it also has no minimum balance requirements. Expectations are that as the number of accounts will continue to rise, related non-sufficient funds and overdraft fees will also increase due to the increased volume of accounts.  Customer service fees increased by $117,000 or 15.3% from $766,000 for the year ended December 31, 2003, to $884,000 for the year ended December 31, 2004. The $117,000 increase was primarily a result of increases in non-sufficient funds and overdraft fees generated from "Safety-Net Checking" accounts. At December 31, 2004, there were 1,455 "Safety-Net Checking" accounts compared to 1,189 at December 31, 2003.  Other service charges and fees decreased by $33,000 from $789,000 for the year ended December 31, 2004, to $756,000 for the year ended December 31, 2005. The primary reasons for the 4.2% decrease were reduced loan fees associated with loans sold into the secondary market and fewer commissions earned on consumer loan credit accident and life insurance, partially offset by an increase in debit card fees. Residential loans sold into the secondary market for 2005 were $15.1 million compared to $17.8 million in residential loans sold into the secondary market in 2004, and the related fees associated with these loans decreased by $31,000. Commissions earned on credit life, disability, and accident insurance policies sold with consumer loans decreased by $17,000 from $196,000 for the year ended December 31, 2004, to $179,000 for the year ended December 31, 2005. Interchange fees earned on debit card usage increased by $49,000 from $84,000 for the year ended December 31, 2004, to $133,000 for the year ended December 31, 2005. Debit card usage continues to rise, as 328,112 transactions were processed in 2005 compared to 211,166 transactions processed in 2004, a 55.4% increase. Dollar volume of debit card usage has also increased from $7.4 million in purchases made using debit cards in 2004, compared to $11.3 million in debit card purchases during 2005. This trend is expected to continue in 2006 as consumers increase the frequency of debit card purchases.  Other service charges and fees decreased $97,000 from $885,000 for the year ended December 31, 2003, to $789,000 for the year ended December 31, 2004. The 10.93% decrease was primarily due to a $123,000 decrease in loan fees generated from loans sold into the secondary market, partially offset by an $18,000 increase in debit card fees. Loan fees generated from residential loans sold into the secondary market were $190,000 for the year ended December 31, 2003, compared to $67,000 for the year ended December 31, 2004. This occurred as a result of a decrease in secondary market loan sales from $45.6 million in 2003 to $17.8 million in 2004. Interchange fees earned from debit card use increased from $66,000 for the year ended December 31, 2003, to $84,000 for the year ended December 31, 2004. The number of debit card transactions processed in 2004 increased 62,827 or 42.4% from 148,339 transactions processed in 2003 to 211,166 transactions processed in 2004. The total dollar volume of transactions also increased by $2.1 million from $5.3 million in 2003 to $7.4 million in 2004.  Net gains on loan sales decreased by $43,000 from $334,000 for the year ended December 31, 2004, to $291,000 for the year ended December 31, 2005. Net gains on loan sales are comprised of actual cash gains at the time of sale, and the gain recognized from the capitalization of the related loan servicing assets. When a loan is sold into the secondary                                          17    market and the servicing rights to that loan are retained, an asset is created representing the future payment stream of the servicing which is recognized as income from the loan sale. Cash gains on the sale of loans for 2005 totaled $123,000, which was a reduction of $31,000 from cash gains on the sale of loans of $154,000 in 2004. Loans sold into the secondary market during 2005 were $15.1 million, compared to $17.8 million in loans sold during 2004. The Company sells both one-to-four family residential loans and agricultural loans in the secondary market, although in 2004 and 2005, all loans sold into the secondary market were one-to-four residential loans. Of the $15.1 million in loans sold in 2005, approximately $2.0 million were sold servicing released. In 2004, servicing rights were retained on all loans sold into the secondary market. The gain recognized from the capitalization of servicing assets decreased by $12,000 from $180,000 for the year ended December 31, 2004, to $168,000 for the year ended December 31, 2005.  Net gains on loan sales decreased $401,000 from $735,000 for the year ended December 31, 2003, to $334,000 for the year ended December 31, 2004. Cash gains on the sales of loans decreased by $134,000 from $288,000 for the year ended December 31, 2003, to $154,000 for the year ended December 31, 2004. The gain recognized from the capitalization of servicing assets decreased by $267,000 from $447,000 during 2003 to $180,000 for 2004. Loans sold into the secondary market during 2004 were $17.8 million, compared to $45.6 million in loans sold into the secondary market during 2003.  Net realized gains on sales of available-for-sale securities for 2005 were $117,959, which was a result of selling equity securities of $985,000. In 2004, net realized gains on sales of available-for-sale securities totaled $97,000 from the sale of equity securities of $514,000. In 2003, net realized gains on available-for-sale securities totaled $134,000 from the sale of equity securities of $417,000.  Loan servicing fees for the year ended December 31, 2005 were $489,000, which was $169,000 or 25.7% less than loan servicing fees of $658,000 for the year ended December 31, 2004. The average servicing portfolio for agricultural loans has decreased by $2.3 million from an average portfolio of 12.4 million in 2004 compared to an average portfolio of agricultural loans serviced in 2005 of $10.1 million.  Loan servicing fees for the year ended December 31, 2004 were $658,000 compared to $526,000 for the year ended December 31, 2003, an increase of $132,000 or 25.13% due to an increase in loans serviced for others. Average one-to-four residential loans serviced for others totaled $78.0 million for 2004, compared to $70.3 million for 2003, while the average agricultural portfolio of loans serviced for others for 2004 was $12.4 million compared to $14.6 million for 2003.  Brokerage fees for the year ended December 31, 2005 increased by $14,000 to $85,000 from $72,000 for the year ended December 31, 2004. Brokerage fees remained stable from 2003 to 2004, only increasing by $9,000 from $63,000 in 2003 to $72,000 in 2004. In September, 2003 a new alliance was formed with First Advisor Financial Group to provide brokerage and investment services, insurance products, and asset management to the Bank's customer base. Through September, 2004, the Company paid all of the associated expenses through First Charter Service Corporation, and then shared a percentage of the commission income                                          18    with First Advisors. In October, 2004, the arrangement shifted, and First Advisors assumed the control of the accounts and the associated expenses, and paid the Company a similar percentage of the gross commissions for the last quarter in 2004. Beginning in 2005, this arrangement continued with the Bank, and First Charter Service Corporation has remained dormant as a subsidiary.  Abstract and title fees increased by $15,000 or 4.5% from $335,000 for the year ended December 31, 2004, to $350,000 for the year ended December 31, 2005. This increase was a result of an increase in commissions earned on title insurance policies issued. Abstract and title fees decreased by $105,000 or 23.8% from $439,000 for the year ended December 31, 2003, to $335,000 for the year ended December 31, 2004. The $105,000 decrease was a result of a decreased volume of business due to the decrease of loan originations by lenders from 2003 to 2004.  Noninterest Expense  Total noninterest expense increased from $8.6 million for the year ended December 31, 2004, to $8.9 million for the year ended December 31, 2005. The $368,000 increase was primarily due to increases in net occupancy, equipment, data processing, and other expenses, and a reduction in the amount of impairment recovery of loan servicing rights partially offset by a reduction in the amount of amortization of loan servicing rights.  Total noninterest expense increased from $7.5 million in 2003 to $8.6 million in 2004, an increase of $1.1 million or 14.4% due primarily to increases in salaries and benefits expense, net occupancy expense, equipment expenses, professional fees, marketing expense, and other expenses, and a decrease in the recovery of previously identified impairment of servicing rights, partially offset by a decrease in amortization of loan servicing rights.  Salaries and employee benefits expense remained relatively stable in 2005 at $4.6 million. Director fees increased by $18,000 from $197,000 in 2004 compared to $214,000 in 2005, due to the addition of a new director as a result of the Rantoul acquisition, and a change in the composition of director committees. Salaries and wages for 2005 were $3.1 million which was only a $21,000 increase over the 2004 total salaries and wages of $3.1 million. As of December 31, 2005, the Company payroll included 93 full-time positions and 16 part-time positions. This included 9 full-time employees and 1 part-time employee acquired as part of the purchase of Rantoul First Bank. FICA tax expense and Employee Stock Ownership Plan ("ESOP") expense each had a slight increase for the year, while the Company contributions to the Voluntary Benefit Welfare Association ("VEBA") trust, which provides health insurance and other insurance benefits, experienced a slight deduction for 2005 when compared to 2004.  Salaries and employee benefits expense increased by $516,000 or 12.5% from $4.1 million for the year ended December 31, 2003, compared to $4.6 million for the year ended December 31, 2004. Salaries increased by $352,000 from $2.8 million for the year ended December 31, 2003, to $3.1 million for the year ended December 31, 2004, due to the addition of five full-time employees and five part-time employees. The majority of the employee additions are a result of the branch expansion into Savoy. The increase in                                          19    employee benefits of $164,000 was primarily due to increased contributions to the VEBA to provide group health insurance and increased ESOP expense. Contributions to the VEBA for the year ended December 31, 2003 were $346,000 compared to $385,000 for the year ended December 31, 2004. The $39,000 increase was a result of both increases in health insurance premiums and number of participants. ESOP expense increased $60,000 from $320,000 for the year ended December 31, 2003, to $380,000 for the year ended December 31, 2004, due to a higher average share price. The monthly expense for the ESOP is determined by the average share price in the open market for the month, and, as the monthly average share price increases, the ESOP expense increases accordingly.  Net occupancy expenses for 2005 increased by $93,000 to $438,000 from $345,000 net occupancy expenses in 2004. The 27.1% increase was primarily a result of a full year of occupancy expense for the new bank facility in Savoy, versus five months of expense in 2004, as the Savoy branch moved into their new facility in August, 2004. Building lease expense increased from $81,000 for 2004, compared to $117,000 for 2005, an increase of $36,000. The depreciation expense on leasehold improvements increased by $51,000 from $37,000 for the year ended December 31, 2004, versus $88,000 for the year ended December 31, 2005. Real estate taxes increased by $15,000 from $40,000 in 2004 to $55,000 in 2005. As part of the Savoy building lease, the Company is required to pay real estate taxes, maintenance, and insurance.  Net occupancy expenses increased by $110,000 or 46.6% from $235,000 for the year ended December 31, 2003, compared to $345,000 for the year ended December 31, 2004. Equipment expenses increased by $132,000 or 20.3% from $654,000 for the year ended December 31, 2003, compared to $786,000 for the year ended December 31, 2004. In August, 2004, the Savoy branch moved into their new facility, and the increase in occupancy expense resulted from the building lease on the new facility and the depreciation of leasehold improvements. The $133,000 increase in equipment expense is a result of an increase in lease expense. Occupancy and equipment expenses should both increase in 2006, as the construction on the Paris facility is completed on the main bank facility. The move to the new facility is anticipated to occur in late spring or early summer 2006.  Professional fees for the year ended December 31, 2005 were $460,000 compared to $481,000 of professional fees for the year ended December 31, 2004, a slight decrease of $21,000. The primary cause for the decrease was a reduction in consulting expenses incurred with the investor relations firm retained by the Company. Fees incurred for the investor relations firm in 2005 totaled $73,000 compared to $92,000 for the year 2004. Professional fees for 2006 are expected to rise, as the implementation of SOX 404 requirements continue.  Professional fees totaled $481,000 for the year ended December 31, 2004, compared to $282,000 for the year ended December 31, 2003. The increase of $199,000 was primarily due to $168,000 in increased consulting fees, of which $92,000 was for the retention of an investors relations firm at the corporate level. Other consulting fees incurred in 2004 included fees incurred for compliance issues and a comprehensive information technology audit.                                          20    Foreclosed assets expense, net, decreased by $7,000 from $71,000 for the year ended December 31, 2004, to $64,000 for the year ended December 31, 2005. Foreclosed assets expense, net, decreased by $46,000 from $118,000 for the year ended December 31, 2003, to $71,000 for the year ended December 31, 2004, a 39.1% decrease. The decease was due to a decrease in expenses associated with holding and disposing of real estate properties acquired through foreclosure. In addition, in 2004, several properties and repossessed assets were disposed of resulting in a recognized gain. In 2003, 2004, and 2005, foreclosed assets were primarily associated with one-to-four family residential properties.  Marketing expense decreased by $9,000 from $343,000 for the year ended December 31, 2004, to $334,000 for the year ended December 31, 2005, a 2.6% decrease. Marketing expense increased by $65,000, from $278,000 for the year ended December 31, 2003, to $343,000 for the year ended December 31, 2004, a 23.4% increase. The increase was primarily a result of specific promotions announcing the move to the new facility in the Savoy, Illinois area. Similar promotions were used to introduce the Bank name to the Rantoul community after the acquisition of Rantoul First Bank.  Printing and office supplies expense decreased by $21,000 from $175,000 for the year ended December 31, 2004, to $154,000 for the year ended December 31, 2005 as expenses returned to normal levels. Printing and office supplies increased by $53,000 from $121,000 for the year ended December 31, 2003, to $175,000 for the year ended December 31, 2004. This increase was primarily due to additional expenses associated with expenditures for office supplies and printing expense for the new Savoy branch.  Amortization of loan servicing rights was $487,000 for the year ended December 31, 2005, compared to $630,000 for the year ended December 31, 2004, a reduction of $143,000. The reduction in amortization was primarily due to amortization of loan servicing rights on agricultural loans serviced for others. Amortization on agricultural loan servicing rights declined from $319,000 for 2004 to $215,000 for 2005. This is primarily a result of the reduction of the agricultural servicing portfolio, as no agricultural loans have been sold in the secondary market since 2003. The remainder of the decrease relates to the loan servicing rights on the 1-to-4 family residential loan servicing portfolio. Amortization on the residential loan servicing rights declined to $271,000 for 2005 from $311,000 for 2004. As the rate of loan repayment has slowed, the amount of accelerated amortization has also been reduced, and the expected life of the servicing rights lengthens.  Amortization of loan servicing rights was $849,000 for the year ended December 31, 2003, compared to $630,000 for the year ended December 31, 2004, a decrease of $219,000. In 2003, amortization on loan servicing rights was accelerated due to the high level of prepayments on the related loans.  In 2002, when existing loan servicing assets were valued with estimated shorter lives due to the lower interest rate environment and accelerated prepayment speeds, the calculated value was substantially less than the book value of the servicing assets, identifying an impairment. The impairment of $683,000 was charged against earnings in 2002, and a valuation allowance was established for this amount. During subsequent valuations in 2003, the Company recognized a $416,000 recovery of the previously identified impairment, and in                                          21    2004, current valuations indicated an additional recovery of $242,000. In 2005, the last of the impairment from 2002, or $24,000 was recovered as the current valuations indicated a complete recovery of the original impairment.  Other expenses increased by $154,000 from $905,000 for the year ended December 31, 2004, to $1.1 million for the year ended December 31, 2005, an increase of 17.0%. The increase was primarily attributable to a loss on premises and equipment, increased amortization of core deposit intangibles, increased bank fees from Federal Reserve Bank, and an increase in supervisory fees from the State of Illinois. A loss was recognized in 2005 of $62,000 relating to the main bank facility which was part of a property exchange at year end. Amortization of core intangible assets increased by $30,000 for 2005 over 2004, as amortization began on the core intangible assets from the Rantoul acquisition. Fees assessed by the Federal Reserve Bank for 2005 increased by $34,000 over 2004 as more services were utilized in 2005 including image delivery of both incoming and outgoing cash letters. The increase in fees assessed from supervision from the Bank's primary regulator, the State of Illinois, of $15,000 was primarily due to the expenses associated with examination by this agency, which occurs approximately every three years.  Other expenses increased $88,000 from $817,000 in 2003 to $905,000 in 2004, an increase of 10.7%. The increase was due primarily to increases in insurance expense, regulator supervisory fees, corporate NASDAQ fees, and charitable contributions. Insurance expense for 2004 increased $21,000 over 2003 primarily due to higher premiums in workers compensation and directors and officers insurance premiums. Regulatory supervisory fees assessed by the Bank's primary regulator, the Department of Financial and Professional Regulation for the State of Illinois, increased by $10,000 from 2003 to 2004 due to a slight change in the fee structure, an increased asset base, and the additional branch site at Savoy. NASDAQ expenses for 2004 increased by $13,000 over 2003 primarily due to the stock split in 2004, which generated some additional NASDAQ fees for the additional registered shares. Charitable contributions increased by $33,000 primarily due to a contribution to the local community hospital foundation for their capital campaign to fund an expansion project and to additional contributions to a foundation to fund additional scholarships to area college students.  Income Tax Expense  Total income tax expense for 2005 was $313,000, compared to $539,000 for 2004, a decrease of $226,000. The decrease of $226,000 is attributable to lower taxable income of $1.6 million in 2005 compared to $1.8 million in 2004 and an increase in permanent tax differences related to tax exempt interest.  Total income tax expense was $539,000 in 2004, compared to $932,000 in 2003, a decrease of $392,000 or 42.1%. The decrease of $392,000 is attributable to lower taxable income in 2004 of $1.8 million compared to $2.9 million in 2003.                                          22    FINANCIAL CONDITION  Total assets of the Company increased by $42.9 million or 18.6% to $273.9 million at December 31, 2005, from $230.9 million at December 31, 2004. The growth in total assets was due primarily due to a $39.4 million increase in loans, net of allowance for loan losses, a $3.3 million increase in premises and equipment, a $3.3 million increase in cash and cash equivalents, and a $2.4 million increase in Federal Home Loan Bank stock, partially offset by a decrease of $7.5 million in available-for-sale securities. The overall increase in total assets was funded primarily by an increase in deposits, the issuance of junior subordinated debentures, and an increase in Federal Home Loan Bank advances.  The Company's cash and cash equivalents increased by $3.3 million, from $9.1 million at December 31, 2004, to $12.4 million at December 31, 2005. Interest-bearing demand deposits with banks increased by $2.4 million from $2.7 million at December 31, 2004, to $5.1 million at December 31, 2005. Cash and due from banks increased by $966,000 from $6.4 million at December 31, 2004, to $7.3 million at December 31, 2005.  Investment securities available for sale totaled $76.4 million at December 31, 2005, compared to $83.9 million at December 31, 2004, a decrease of $7.5 million. The decrease resulted from $23.6 million generated by calls, maturities, and pre-payments, $985,000 generated by sales proceeds, and amortization of premiums of $67,000, offset by $9.3 million in available-for-sale investment purchases, primarily in mortgage-backed securities, municipal bonds, and Federal Home Loan Bank ("FHLB") bonds. The decrease in securities available-for-sale was used primarily to fund loan growth.  Investment securities held-to-maturity totaled $3.4 million at December 31, 2005, compared to $4.8 million at December 31, 2004. The $1.3 million decrease was due to repayments received on these securities in 2005. The Company has the positive intent and ability to hold these securities until maturity.  Loans held for sale, net of unrealized loss, increased by $504,000 from $138,000 at December 31, 2004, to $642,000 at December 31, 2005. Loans for sale at December 31, 2005, consisted entirely of one-to-four family residential loans, which were in the process of being sold into the secondary market to the Federal Home Loan Mortgage Corporation and Illinois Housing Development Authority. The allowance for unrealized loss of $5,000 at December 31, 2005, pertained to the market value differential on two loans to be sold to Federal Home Loan Mortgage Corporation.  The Company's net loan portfolio increased by $39.4 million or 33.6%, from $117.4 million at December 31, 2004, to $156.9 million at December 31, 2005. Gross loans increased by $39.8 million, offset by an increase in the allowance for loan loss of $362,000. The growth was primarily from one-to-four family residential loans, which increased by $14.2 million, and commercial real estate loans, which grew by $16.3 million in 2005. One-to-four family residential loans grew by $14.2 million from $37.6 million at December 31, 2004, to $51.8 million at December 31, 2005. One-to-four family residential loans acquired in the purchase of Rantoul First Bank in October, 2005 totaled $10.5 million. Home equity lines of credit                                          23    increased by $2.2 million from $3.5 million at December 31, 2004, to $5.7 million at December 31, 2005.  Commercial real estate loans increased by $16.3 million from $16.9 million at December 31, 2004, to $33.2 million at December 31, 2005. The $16.3 million in growth was primarily a result of new loans originated by the Savoy branch. Commercial real estate loan originations for 2005 totaled $28.2 million, of which $23.9 million in commercial real estate loans were originated by the Savoy branch. Expectations are that, in 2006, the Savoy branch will continue to originate a significant number of commercial real estate loans. Agricultural real estate or farmland loans at December 31, 2005 totaled $20.9 million compared to $16.9 million in farmland loans at December 31, 2004. The $4.0 million increase was primarily due to new farmland loan originations in 2005 of $4.8 million, generated by the Paris and Marshall branches.  Commercial and industrial loans at December 31, 2005 totaled $7.9 million, compared to $6.4 million at December 31, 2004, a $1.5 million increase. New originations during 2005 totaled $4.4 million, which were evenly distributed between all branches. Agricultural production finance increased by $1.8 million from the December 31, 2004 total of $13.6 million, to the December 31, 2005 total of $15.4 million. The number of outstanding loans at December 31, 2005 was 291 compared to 259 outstanding loans at December 31, 2004, although the average balance remained constant at $53,000.  Consumer loans increased in all categories by $1.2 million from a balance of $25.2 million at December 31, 2004 to $26.4 million at December 31, 2005. Vehicle loans increased by $504,000, consumer finance loans increased by $72,000, share loans, or loans secured by deposits, increased by $236,000, and other consumer loans increased by $432,000. Consumer loans acquired as part of the Rantoul First Bank purchase totaled $975,000.  At December 31, 2005, the allowance for loan losses was $2.7 million or 1.67% of the total loan portfolio compared to $2.3 million or 1.92% at December 31, 2004. The Company's net chargeoffs were $348,000 for 2005 compared to $339,000 for 2004. Delinquent loans overdue by 90 days or more totaled $1.4 million or 0.88% of total loans at December 31, 2005, compared to $443,000 or 0.37% of total loans at December 31, 2004. The Company's non-performing loans, which include loans delinquent 90 days or more and troubled debt restructurings, were $1.5 million or 0.95% of total loans at December 31, 2005, compared to $1.6 million or 1.31% of total loans at December 31, 2004. Non-performing loans at December 31, 2005 included $306,000 of one-to-four family residential loans, $510,000 of commercial real estate loans pertaining to two borrowers, $421,000 of commercial and industrial loans pertaining to three borrowers, and $94,000 in multiple vehicle loans. Non-performing assets, which include non-performing loans and foreclosed assets totaled $1.8 million at December 31, 2005, compared to $1.8 million at December 31, 2004. Troubled debt restructurings are loans which are modified due to the borrower's financial difficulties, to terms which the Bank might not have otherwise considered. Once these loans are restructured, they continue to be monitored until they have performed according to the terms of the modification for at least one year with no late payments. At December 31, 2005, troubled debt restructurings totaled $94,000, compared to $1.1 million at December 31, 2004. Three loans totaling $821,000, which were included in the troubled debt restructurings at                                          24    December 31, 2004, performed according to terms for one year without any late payments, and, as a result, were eliminated from the troubled debt restructurings for 2005. Nonperforming assets and troubled debt restructurings as a percentage of total loans decreased from 2.35% at December 31, 2003, to 1.31% at December 31, 2004. The Company's troubled debt restructurings at December 31, 2005 consisted of a restructured farmland loan and a restructured commercial loan secured by business assets and a personal residence. The Company will continue to monitor changes in the composition of the loan portfolio due to loan growth in Savoy to ensure that the allowance is adequate. Management reviews the adequacy of the allowance for loan losses quarterly, and believes that its allowance is adequate; however, the Company cannot assure that future chargeoffs and/or provisions will not be necessary.  Premises and equipment for December 31, 2005 was $6.4 million, a $3.3 million or 106.8% increase from the December 31, 2004 total of $3.1 million. Purchases of premises and equipment for 2005 totaled $2.7 million, of which $1.9 million was related to the building expansion and renovation of the Operations Center located in Paris. When completed, this facility will house all bank employees located in Paris. Total expenditures related to this project are expected to total $6.0 million, and final occupancy should occur in mid-summer 2006. As part of the purchase of Rantoul First Bank in October, 2005, the Company acquired the bank facility in Rantoul and related equipment for a cost of $1.4 million. Depreciation of premises and equipment for 2005 increased by $88,000 from $325,000 for the year ended December 31, 2004, to $413,000 for the year ended December 31, 2005.  Federal Home Loan Bank stock increased $2.3 million from $4.3 million at December 31, 2004, to $6.6 million at December 31, 2005. Federal Home Loan Bank stock acquired as part of the purchase of Rantoul First Bank totaled $2.1 million. The remainder of the increase, or $212,000, was the result of dividends received in the form of additional stock.  Interest receivable at December 31, 2005 totaled $2.4 million, compared to the December 31, 2004 total of $2.2 million. The $237,000 increase is attributable to the $39.4 million increase in loans, net of allowance for loan losses, from December 31, 2004 to December 31, 2005.  A deferred tax asset of $1.4 million existed at December 31, 2005, compared to a deferred tax liability of $110,000 at December 31, 2004. Of the $1.5 million net change, $701,000 was due to the tax effect of the net decrease in market valuations on investment securities from December 31, 2004 to December 31, 2005. The deferred tax asset at December 31, 2005, relating to the tax effect of the market valuation of investment securities, totaled $427,000. The purchase of Rantoul First Bank in October, 2005 included a net operating loss of $2.4 million. The net operating loss carryforward will expire in the year 2020; however, it is expected that the Company will be able to utilize the full amount of the carryforward. Deferred taxes at December 31, 2005, related to the net operating loss carryforward, totaled $946,000.  Loan servicing rights decreased $294,000 from $757,000 at December 31, 2004, to $462,000 at December 31, 2005. The decrease was due to amortization of loan servicing rights, offset by newly capitalized assets and a partial recovery of a previously identified impairment. Capitalized servicing assets for 2005 were $168,000 compared to $180,000 for 2004, while                                          25    total loans sold in the secondary market in 2005 were $15.1 million compared to $17.8 million during 2004. An independent valuation of servicing assets is obtained quarterly to establish the market value of the assets using current prepayment assumptions. In 2002, the independent valuation of the servicing assets was substantially less than the recorded book value of the servicing assets, identifying an impairment. As a result, a provision for the valuation allowance of $683,000 was recorded and charged against earnings in 2002. In 2003, subsequent valuations of the servicing assets indicated a partial recovery of the impairment of $416,000. Additional recoveries of $242,000 were indicated in 2004 by current year valuations, and a final recovery of $24,000 occurred in 2005. As prepayment speeds slow due to rising interest rates, the remaining life of the servicing asset increases, which in turn will increase the market value of the servicing assets. The previous impairment has now all been recovered, while the valuation allowance for loan servicing rights at December 31, 2004 was $24,000. Amortization of servicing rights amounted to $487,000 in 2005 compared to $630,000 in 2004. The original amount capitalized is recognized as a gain and is included as gain on sale of loans in the income statement. Capitalized servicing rights are amortized in proportion to and over the period of estimated servicing revenues.  Cash surrender value of life insurance increased from $4.5 million at December 31, 2004, to $4.8 million at December 31, 2005. The increase of $302,000 was due to the purchase of a bank owned director life insurance policy for $125,000 and the net increase in the cash surrender value of $177,000.  Goodwill of $541,000 at December 31, 2005 is related to the purchase of Rantoul First Bank. The excess of the purchase price paid over the fair market value of the individual assets and liabilities acquired as part of the purchase is considered goodwill. Goodwill is not subject to amortization, and will be tested annually for impairment. Core deposit intangible assets at December 31, 2005 totaled $484,000 compared to $104,000 at December 31, 2004, an increase of $380,000. The increase in core deposit intangibles resulted from the acquisition of Rantoul First Bank in October. Amortization on the core deposits intangible assets for 2005 was $42,000 compared to $12,000 for 2004.  Other assets increased from $406,000 at December 31, 2004, to $658,000 at December 31, 2005, an increase of $252,000. The increase was partially due to an investment of $186,000 in the FBTC Statutory Trust I. FBTC Statutory Trust I was established as a statutory trust for the purpose of issuing trust preferred securities. As required by FIN 46R, the Company has not consolidated the investment in the trust. For further discussion, see Note 11 to the financial statements.  The Company's total deposits increased from $159.5 million at December 31, 2004, to $194.0 million at December 31, 2005, an increase of $34.5 million or 21.6%. The increase in total deposits was due to a $3.6 million increase in demand deposits, a $2.7 million increase in savings, NOW and money market accounts, and a $28.1 million increase in certificates of deposit. Deposits acquired as part of the purchase of Rantoul First Bank totaled $26.7 million, which included $491,000 in demand deposits, $7.0 million in savings, NOW and money market accounts, and $19.2 million in certificates of deposits. Deposits generated from the Savoy branch totaled $6.8 million, from $13.3 million at December 31, 2004, to $20.1 million at December 31, 2005.                                          26    Demand or non-interest bearing accounts have increased by $3.6 million from $17.9 million at December 31, 2004, to $21.5 at December 31, 2005, a 20.4% increase. Consumer demand checking accounts increased by $2.2 million from $12.7 million at December 31, 2004, to $14.9 million at December 31, 2005. Consumer demand deposits from Rantoul totaled $1.7 million and numbered 657 at December 31, 2005. One of the other sources of the consumer demand deposit growth was in the "Safety-Net Checking" product which offers a fixed amount of overdraft protection, usually up to $500. Safety-net checking accounts numbered 2,145 for a total balance of $3.1 million at December 31, 2005, compared to 1,455 accounts totaling $2.0 million at December 31, 2004, an increase of $1.1 million. A new product introduced in 2004 was "Student Checking" which targets college students. This new product, for students aged 18-23, offers a checking product with no service charges or minimum balance requirements. The account offers an option of adding a $100 "Safety-Net" for overdraft protection, free debit card, and online banking. At December 31, 2005, 208 Student Checking accounts were in existence with a total balance of $71,000, compared to 98 Student Checking accounts with a total balance of $38,000 at December 31, 2004. Business demand accounts increased by $1.9 million from $4.1 million at December 31, 2004, to $6.0 million at December 31, 2005. The business product line was expanded in 2004 to offer a variety of products to meet the needs of different types of businesses. Different products have been tailored for the small business owner, non-corporate and non-profit organizations, and for commercial businesses. All of the new business products can have an additional feature called "e-business" added to the accounts, which allows for funds management between accounts. At December 31, 2005, business accounts numbered 330 compared to 275 accounts at December 31, 2004.  Savings, NOW, and money market accounts increased by $2.3 million from $63.6 million at December 31, 2004, to $66.3 million at December 31, 2005. Investor Checking, still the largest component of NOW account deposits, was $21.6 million at December 31, 2005, compared to $34.5 million at December 31, 2004, a decrease of $12.9 million. Investor Checking was introduced several years ago as a consumer product with comparable rates to money market accounts without withdrawal restrictions. As interest margins continued to tighten during 2004, the tier structure of this product was modified, and rates were realigned to more resemble a NOW account rather than a money market. During 2005, the gap between interest rates paid on investor checking versus money market accounts has continued to widen. The weighted average interest rate for investor checking at December 31, 2005, was 1.05% compared to the weighted average interest rate of 2.90% for consumer money market accounts at December 31, 2005. At December 31, 2004, the weighted average rate of interest for investor checking was 1.14% compared to a weighted average rate of interest for money market accounts of 1.37% at December 31, 2004. As a result of the larger interest rate spread in the two products, many interest sensitive customers have converted their investor checking accounts to the money market product. Consumer money market accounts have grown by $11.6 million, from $1.7 million at December 31, 2004, to $13.3 million at December 31, 2005. Business money market accounts have grown by $2.3 million, from $8.1 million at December 31, 2004, to $10.4 million at December 31, 2005. The number of business money market accounts has also increased, from 34 accounts at December 31, 2004, to 41 accounts at December 31, 2005. The average rate of interest for business money market accounts has remained constant at 1.30% from December 31, 2004, to December 31, 2005.                                          27    Other NOW accounts increased by $1.3 million from $7.7 million at December 31, 2004, to $9.0 million at December 31, 2005. This increase was primarily a result of accounts acquired in the Rantoul First Bank purchase, which at December 31, 2005, totaled $735,000, and from an increase in Savoy NOW accounts of $190,000. Savings accounts have grown from $11.7 million at December 31, 2004, to $12.2 million at December 31, 2005, an increase of $419,000. Signature savings accounts, a traditional savings product, increased by $285,000 from $9.3 million at December 31, 2004, to $9.6 million at December 31, 2005. This increase was primarily due to accounts acquired in the purchase of Rantoul First Bank and offset by decreases from other branches. Rantoul signature savings accounts at December 31, 2005 totaled $1.6 million. "Pay Yourself First" savings accounts are structured to pay interest on a tiered basis and require an automatic transfer from a bank checking account at least monthly. While the Pay Yourself First savings dollar totals have stabilized at $1.9 million in deposits at both December 31, 2005 and 2004, the number of accounts has increased. At December 31, 2004, Pay Yourself First savings accounts numbered 635 compared to 744 accounts at December 31, 2005. Introduced at the end of 2004, was the Health Savings Account, to be used with high deductible health insurance plans. These accounts allow account holders with high deductible health insurance plans to set aside in an account an amount up to the amount of the deductible each year. The funds are available to the account holder to fund qualified medical expenses. If the funds are not used for medical purposes, they can accumulate in the account and earn interest. There were two accounts opened by December 31, 2004, and at December 31, 2005, there were 62 accounts on record with balances totaling $70,000. The health savings accounts are expected to increase as more employers offer high deductible insurance plans to their employees.  Certificates of deposit have increased by $28.1 million from $78.0 million at December 31, 2004, to $106.1 million at December 31, 2005. This growth was primarily due to the certificates of deposit acquired as part of the Rantoul acquisition. Certificates of deposit at Rantoul at December 31, 2005 totaled $27.1 million.  Federal funds purchased at December 31, 2005 were $2.5 million compared to $2.0 million at December 31, 2004, and were used to provide short-term funds. Federal Home Loan Bank advances at December 31, 2005 were $43.2 million, an increase of $2.7 million over the December 31, 2004 balance of $40.5 million. In November, 2005, a $5.0 million convertible advance was called, and at the Company's option, converted over to the open line of credit with a daily adjustable rate. An additional $2.0 million was borrowed against the open line of credit at December 31, 2005, for short-term funding purposes. Another $700,000 in fixed term advances was assumed as part of the acquisition of Rantoul First Bank in October, 2005. At December 31, 2005, borrowings consisted of $36.2 million in long-term, fixed-rate advances, of which $20.5 million are fixed-rate convertible advances. Convertible advances have specific lock-out periods, usually one to three years, after which the Federal Home Loan Bank has the option to convert the advance to a quarterly adjustable rate loan, with the option of prepayment at the conversion date, or on any future date of rate adjustment. At December 31, 2005, all of the convertible advances were past the lock-out period, and are subject to possible call on a quarterly basis. At December 31, 2005, the average rate on all Federal Home Loan Bank advances was 4.09% compared to 3.54% at December 31, 2004.                                          28    Capital securities of $6.0 million were issued June 15, 2005, by a statutory business trust, FBTC Statutory Trust I. The Company owns 100% of the common equity of the trust, which is a wholly-owned subsidiary of the Company. The $6.0 million in proceeds from the trust preferred issuance and an additional $186,000 for the Company's investment in the common equity of the Trust, a total of $6,186,000, was invested in the junior subordinated debentures of the Company. As required by FIN 46R, the Company has not consolidated the investment in the Trust. The trust was formed with the purpose of issuing trust preferred securities and investing the proceeds from the sale of such trust preferred securities in the debentures. The debentures held by the trust are the sole assets of the trust. Distributions of the trust preferred securities are payable at a variable rate of interest, which is equal to the interest rate being earned by the trust on the debentures, and are recorded as interest expense by the Company. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures.  The debentures are included as Tier I capital for regulatory capital purposes. The debentures issued are first redeemable, in whole or part, by the Company on June 15, 2010, and mature on June 15, 2035. The funds were used for the acquisition of the common stock of Rantoul First Bank and for the repurchase of First BancTrust Corporation common stock. Interest is fixed at a rate of 5.80% for a period of five years, and then converts to a floating rate. Interest payments are made quarterly beginning in September, 2005.  Interest payable increased by $109,000 from the December 31, 2004 balance of $136,000 to $245,000 at December 31, 2005. The increase in interest payable was primarily due to an increase in accrued interest on deposits and an increase in accrued interest on borrowings. Accrued interest on deposits increased by $81,000 due to interest accruals on the 155-day certificates of deposits which only pay interest at maturity. Accrued interest on borrowings increased by $28,000 due to an increase in borrowed funds, as well as an increase in the average interest rates paid on borrowed money.  Other liabilities increased by $487,000 from $962,000 at December 31, 2004, to $1.4 million at December 31, 2005, resulting primarily from increases in accounts payable, accrued expenses, and deferred compensation. Accounts payable and accrued expenses for income tax expense and real estate tax expense increased by $230,000 from December 31, 2004, to December 31, 2005. Deferred compensation for directors increased by $237,000, of which $75,000 relates to a deferred compensation plan of the Company covering certain directors, whereby those directors may elect to defer their annual fees. The Company also assumed a deferred compensation liability with directors of the former Rantoul First Bank, SB, as part of the acquisition of Rantoul First Bank. As of December 31, 2005, the deferred compensation liability relating to this agreement was $162,000.  Stockholders' equity at December 31, 2005 was $26.0 million compared to $27.5 million at December 31, 2004, a decrease of $1.5 million. The decrease was primarily a result of additional purchases of treasury stock and a decrease in accumulated other comprehensive income due to a reduction of market value in available-for-sale investments, partially offset by increases in retained earnings, additional paid-in capital, unallocated employee stock ownership plan shares, and unearned incentive plan shares. Retained earnings increased by $666,000 primarily due to net income of $1.2 million offset by dividends declared and paid                                          29    of $582,000. The change of $176,000 in unallocated employee stock ownership plan shares was due to the allocation of 30,408 shares to plan participants. The change of $113,000 in unearned incentive plan shares was due to the allocation of 13,704 shares to recipients. The change of $228,000 in additional paid-in capital was primarily due to the allocations of employee stock ownership shares and incentive plan shares. Treasury stock increased by $1.6 million from the purchase of 131,600 treasury shares during 2005, partially offset by the issuance of shares from treasury stock for the exercise of options for 4,200 shares of stock. All repurchased shares are held as treasury shares to be used for general corporate purposes.  CRITICAL ACCOUNTING POLICIES  The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The Company's significant accounting policies are described in detail in the notes to the Company's consolidated financial statements for the year ended December 31, 2005 and 2004. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. The financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company's financial condition and results, and they require management to make estimates that are difficult, subjective, or complex.  Allowance for Loan Losses - The allowance for loan losses provides coverage for probable losses inherent in the Company's loan portfolio. Management evaluates the adequacy of the allowance for credit losses each quarter based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors. This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect management's estimates of specific and expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.  The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, fraud loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogenous category or group of loans. The allowance for credit losses relating to impaired loans is based on the loan's observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan's effective interest rate.  Regardless of the extent of the Company's analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors including inherent delays in obtaining                                          30    information regarding a customer's financial condition or changes in their unique business conditions, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogeneous groups of loans are among other factors. The Company estimates a range of inherent losses related to the existence of these exposures. The estimates are based upon the Company's evaluation of imprecision risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment.  Loan Servicing Rights - Loan servicing rights ("LSR") associated with loans originated and sold, where servicing is retained, are capitalized and included in the consolidated balance sheet. The value of the capitalized servicing rights represents the present value of the future servicing fees arising from the right to service loans in the portfolio. Critical accounting policies for LSR's relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of LSR's requires the development and use of a number of estimates, including anticipated principal amortization and prepayments of that principal balance. Events that may significantly affect the estimates used are changes in interest rates, mortgage loan prepayment speeds, and the payment performance of the underlying loans. The carrying value of the LSR's is periodically reviewed for impairment based on a determination of fair value. For purposes of measuring impairment, the servicing rights are compared to a valuation prepared based on a discounted cash flow methodology utilizing current prepayment speeds and discount rates. Impairment, if any, is recognized through a valuation allowance and a corresponding charge to the income statement.  LIQUIDITY AND CAPITAL RESOURCES  As of December 31, 2005, the total amount of certificates scheduled to mature in the following 12 months was $65.6 million.  The following table presents additional information about our contractual obligations as of December 31, 2005, which by their terms, has contractual maturity and termination dates subsequent to December 31, 2005 (dollars in thousands):                                              Next 12    13-36     37-60    More than                                            Months    Months    Months   60 Months    Totals                                           -------   -------   -------   ---------   --------       CONTRACTUAL OBLIGATIONS:    Certificates of deposit                $65,636   $28,291   $10,770    $ 1,407    $106,104    Federal Home Loan Bank advances         15,400     5,300        --     22,500      43,200    Junior subordinated debt                    --        --        --      6,186       6,186    Paris IL construction project            3,700        --        --         --       3,700    Martinsville IL construction project       213        --        --         --         213    Minimum operating lease commitments        328       319       105         --         752                                           -------   -------   -------    -------    --------       Totals                              $85,277   $33,910   $10,875    $30,093    $160,155                                           =======   =======   =======    =======    ========                                           31   The Company's purchase obligations have no material impact on its cash flow or liquidity, and accordingly, have not been included in the above table.  At December 31, 2005, the Company had outstanding commitments to originate loans of $7.2 million. The commitments extended over varying periods of time with the majority being disbursed within a one-year period. Loan commitments at fixed rates of interest amounted to $5.3 million, with the remainder at floating market rates. In addition, the Company had outstanding unused lines of credit to borrowers aggregating $8.5 million for commercial lines, and $4.7 million for consumer lines of credit. Outstanding commitments for letters of credit at December 31, 2005 totaled $168,000.  The following table presents additional information about our unfunded commitments as of December 31, 2005, which by their terms have contractual maturity dates subsequent to December 31, 2005 (dollars in thousands):                            Next 12    13-36    37-60   More than                          Months   Months   Months   60 Months    Totals                         -------   ------   ------   ---------   -------       UNFUNDED COMMITMENTS:    Lines of credit       $9,687      $9     $522      $3,020    $13,238                          ======     ===     ====      ======    =======   The Company believes that it has adequate resources to fund all of its commitments. The Company's most liquid assets are cash and cash equivalents. The level of cash and cash equivalents is dependent on the Company's operating, financing, lending and investing activities during any given period. The level of cash and cash equivalents at December 31, 2005 was $12.4 million. The Company's future short-term requirements for cash are not expected to significantly change. However, in the event that the Company should require funds beyond its ability to generate them internally, additional sources of funds are available, such as Federal Home Loan Bank advances. With sound capital levels, the Company has several options for longer-term cash needs, such as for future expansion and acquisitions.  A review of the Consolidated Statement of Cash Flows included in the accompanying financial statements shows that the Company's cash and cash equivalents ("cash") increased by $3.3 million in 2005 and decreased by $1.2 million in 2004 and $159,000 in the year ended December 31, 2003. Cash increased in 2005 due to net cash provided by financing activities of $14.3 million and net cash provided by operating activities of $2.2 million, partially offset by $13.1 million in net cash used in investing activities. Cash provided by operating activities included net income of $1.2 million, plus non cash adjustments to net income including the proceeds from sales of loans originated for sale of $15.1 million, offset by $15.5 million in loans originated for sale and net gain on loan sales of $291,000, the provision for loan losses of $510,000, depreciation and amortization of $413,000, amortization of loan servicing rights of $487,000, and compensation related to employee stock ownership and incentive plans of $488,000, partially offset by Federal Home Loan Bank stock dividends of $212,000 and the net change in deferred income taxes of $189,000.                                          32    Net cash used in investing activities included net originations in loans of $25.7 million, purchases of available-for-sale securities of $9.3 million, $2.3 million in net cash paid for the purchase of Rantoul First Bank (net of cash received), and $2.7 million for purchases of premises and equipment. Net cash provided in investing activities included $23.6 million in proceeds from maturities of available-for-sale securities and $1.4 million in proceeds from maturities of held-to-maturity securities. Net cash provided by financing activities included $9.0 million net increase in certificates of deposit, $6.2 million in proceeds from the issuance of junior subordinated debentures, and $2.0 million proceeds from Federal Home Loan Bank advances, partially offset by a net decrease in demand deposits, money market, NOW and savings accounts, purchases of $1.6 million of treasury stock, and dividends paid of $582,000.  Cash decreased in 2004 due to net cash used by investing activities of $7.3 million, partially offset by net cash provided by operating activities of $3.5 million and net cash provided by financing activities of $2.6 million. Cash provided by operating activities included net income of $1.2 million, plus non cash adjustments to net income including the proceeds from sales of loans originated for sale of $17.8 million, offset by $17.4 million of loans originated for sale and net gain on loan sales of $334,000, the provision for loan losses of $515,000, net amortization of premiums and discounts on securities of $190,000, depreciation and amortization of $325,000, compensation related to employee stock ownership and incentive plans of $487,000, and amortization of loan servicing rights of $630,000, partially offset by the recovery of $242,000 of a previously identified impairment of loan servicing rights.  Net cash used in investing activities included $30.2 million in purchases of available-for-sale and held-to-maturity securities, net originations of loans of $12.0 million, and the purchase of premises and equipment of $670,000, offset by proceeds from maturities of available-for-sale and held-to-maturity securities of $34.7 million, proceeds from sales of foreclosed assets of $357,000, and proceeds from sales of available-for-sale securities of $514,000. Cash provided by financing activities included an increase in certificates of deposits of $2.2 million, an increase in federal funds purchased of $2.0 million, and $5.0 million in proceeds for the issuance of Federal Home Loan Bank advances, offset by dividends paid of $575,000, a net decrease in demand deposits, money market, NOW and savings accounts of $5.8 million, and a net decrease of $202,000 in pass through payments received on loans sold.  Cash decreased in 2003 due to net cash used by investing activities of $25.5 million, partially offset by net cash provided by operating activities of $3.3 million and net cash provided by financing activities of $22.0 million. Cash provided by operating activities included net income of $1.9 million, plus non cash adjustments to net income including the proceeds from sales of loans originated for sale of $45.6 million, offset by $45.2 million of loans originated for sale and net gain on loan sales of $735,000, the provision for loan losses of $728,000, net amortization of premiums and discounts on securities of $887,000, depreciation and amortization of $218,000, compensation related to employee stock ownership and incentive plans of $424,000, and amortization of loan servicing rights of $849,000, partially offset by the recovery of $416,000 of a previously identified impairment of loan servicing rights.  Net cash used by investing activities included $91.7 million in purchases of available-for-sale securities, net originations of loans of $2.4 million, the purchase of director life                                          33    insurance of $512,000, and the purchase of premises and equipment of $227,000, offset by proceeds from maturities of available-for-sale securities of $68.5 million, proceeds from sales of foreclosed assets of $442,000, and proceeds from sales of available-for-sale securities of $417,000. Cash provided by financing activities included a net increase in demand deposits, money market, NOW and savings accounts of $10.5 million, $10.0 million in proceeds for the issuance of Federal Home Loan Bank advances, and an increase in certificates of deposits of $5.2 million, offset by the repayment of $1.0 million of Federal Home Loan Bank advances, the purchase of treasury stock of $2.2 million, and dividends paid of $449,000.  The Bank is required to maintain regulatory capital sufficient to meet tier I leverage, tier I risk-based and total risk-based capital ratios of at least 4.0%, 4.0% and 8.0%, respectively. At December 31, 2005, the Bank exceeded each of its capital requirements with ratios of 11.4%, 18.3% and 19.6%, respectively.  MANAGEMENT OF INTEREST RATE RISK  The principal objectives of the Company's interest rate risk management function are: (i) to evaluate the interest rate risk included in certain balance sheet accounts; (ii) to determine the level of risk appropriate given the Company's business focus, operating environment, capital and liquidity requirements, and performance objectives; (iii) to establish asset concentration guidelines; and (iv) to manage the risk consistent with Board-approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates and to manage the ratio of interest rate sensitive assets to interest rate sensitive liabilities within specified maturity terms or repricing dates. The Company's Board of Directors has established an Asset/Liability Committee consisting of directors and senior management officers, which is responsible for reviewing the Company's asset/liability policies and interest rate risk position. Such committee generally meets on a quarterly basis, and at other times as dictated by market conditions, and reports to the Board of Directors.  The Company's key interest rate risk management tactics consists primarily of: (i) emphasizing the attraction and retention of core deposits, which tend to be a more stable source of funding; (ii) emphasizing the origination of adjustable rate mortgage loan products and relatively short-term and medium-term commercial and consumer loans for the in-house portfolio, although this is dependent largely on the market for such loans; (iii) selling longer-term fixed-rate one-to-four family mortgage loans into the secondary market; and (iv) investing primarily in U.S. government agency investments and mortgage-backed securities.  Our ability to maintain net interest income depends upon earning a higher yield on assets than the rates we pay on deposits and borrowings and sustaining this positive interest rate spread during the fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities that either re-price or mature within a given period of time. The difference, or the interest rate re-pricing "gap", provides an indication of how an institution's interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities, and is considered negative when the amount of interest-rate sensitive liabilities                                          34    exceeds the amount of interest-rate sensitive assets. Generally, during a period of rising interest rates, a negative gap within shorter maturities would adversely affect net interest income, while a positive gap within shorter maturities would result in an increase in net interest income. During a period of falling interest rates, a negative gap within shorter maturities would result in an increase in net interest income while a positive gap within shorter maturities would have the opposite effect.  The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2005, which mature or re-price in the periods shown. Except as stated in the table, the amount of assets and liabilities shown which re-price or mature during a particular period were determined in accordance with the earlier of term to re-pricing or contractual maturity. Cumulatively, as of December 31, 2005, the amount of the Company's interest-bearing liabilities estimated to mature or re-price within one year exceeded the Company's earning assets with the same time characteristics by $57.0 million or 20.8% of the Company's total book assets.                                          Daily      1 to 3     3 to 12      1 to 3     3 to 5    Over 5                                      Reprice     Months      Months      Years      Years     Years      Total                                      -------   ---------   ---------   ---------   -------   -------   --------                                                                (dollars in thousands)         Interest-earning Assets:    Loans receivable, net (1,5,6)     $    0    $  33,106   $  27,273   $  46,725   $29,879   $20,544   $157,527    Investment Securities (2,3,5,6)        0       10,370      17,069      25,998    12,749   $13,676     79,862    Interest-bearing Due From Banks    5,110            0           0           0         0         0      5,110                                      ------    ---------   ---------   ---------   -------   -------   --------       TOTAL                           5,110       43,476      44,342      72,723    42,628    34,220    242,499                                      ------    ---------   ---------   ---------   -------   -------   -------- Interest-bearing Liabilities    Deposits (4)                           0       84,852      47,127      28,290    12,177         0    172,446    Borrowings                         2,500        3,850      11,550       5,300    13,611    15,075     51,886                                      ------    ---------   ---------   ---------   -------   -------   --------       TOTAL                           2,500       88,702      58,677      33,590    25,788    15,075    224,332                                      ------    ---------   ---------   ---------   -------   -------   -------- Gap                                   2,610      (45,226)    (14,335)     39,133    16,840    19,145     18,167                                      ------    ---------   ---------   ---------   -------   -------   -------- Cumulative Gap                       $2,610     ($42,616)   ($56,951)   ($17,818)    ($978)  $18,167   $ 18,167                                      ======    =========   =========   =========   =======   =======   ======== Cumulative Gap as a %    of Total Assets                      1.0%       -15.6%      -20.8%       -6.5%     -0.4%      6.6%       6.6%   (1)  Fixed rate loans are slotted according to their final maturity date.      Adjustable rate loans are slotted according to their next reprice date. The      cash flows Resdiential R/E, Commercial R/E and Consumer Installment Loans      al receive an amortizing treatment. The cash flows for Residential R/E are      accelerated to reflect assumptions for prepayments.  (2)  Reflects re-pricing, contractual maturity, or anticipated call date.  (3)  Securities are classified as available for sale and held to maturity.  (4)  Adjusted to reflect next likely reset period.  (5)  The cash flows for mortgage-backed securities receive an amortizing      treatment.  (6)  The cash flows for mortgage-backed securities are accelerated to reflect      assumptions for prepayments.  The degree to which future Interest Margin is potentially negatively exposed to changes in market interest rates is known as EARNINGS-AT-RISK. To effectively evaluate Earnings-at-Risk, the Company employs an EARNINGS SIMULATION. The Earnings Simulation is a series of scenarios where 12 month future earnings are forecast holding market interest rates                                          35   constant, forecast simulating rates rising progressively, and forecast simulating rates falling progressively. The interest rate environment where earnings are estimated to be lower than the "rates constant" scenario is the rate environment where earnings are "at risk".  The Earnings Simulation is the most robust and reliable technique for measuring Interest Rate Risk, and goes well beyond mere gap analysis. The Earnings Simulation ultimately flows from an option adjusted balance sheet cash flow forecast. The Simulation not only takes into account that cash flows are dynamic and their streams often change with shifts in market interest rates, but also the relative degrees with which the rates associated with various balance sheet items react and adjust to changes in market interest rates.  The following table sets forth the summarized results of the Earnings Simulation prepared as of December 31, 2005.  EARNINGS AT RISK  2006 Earnings Forecast With Rate Change Impact                                      $ CHANGE              $ CHANGE                                     RATES     4Q-2006     RATES                                    FALLING   EARNINGS    RISING                                    100 BP    FORECAST    100 BP                                   --------   --------   --------                                           (in thousands)     INTEREST INCOME    FF Sold & Due From Banks          -51         135        51    Securities                       -149       3,328       137    Total Loans                      -288      10,062       213    Other Interest Income               0         212         0                                     ----      ------      ----       TOTAL INTEREST INCOME         -488      13,737       474  INTEREST EXPENSE    NOW, MMDA & Savings              -139         847        56    Small CD's                       -205       2,004       205    Large CD's                        -59         848        59    Structured Debt                   -94       2,077        94                                     ----      ------      ----       TOTAL INTEREST EXPENSE        -497       5,777       414                                     ----      ------      ---- NET INTEREST INCOME                    9       7,894        60                                     ----      ------      ----    Provision Expense                   0         515         0    Non-Interest Income                 0       2,078         0    Non-Interest Expense                0       7,422         0    Realized Security G/L               0           0         0    Income Before Taxes                 0       2,035         0    Taxes                               2         626        12                                     ----      ------      ---- NET INCOME                             7       1,227        48                                     ----      ------      ---- % CHANGE IN NET INTEREST INCOME     0.11%                 0.72%                                     ----      ------      ----   The Company tends to be liability sensitive due to the levels of non-maturity deposits (NOW, Savings, and MMDA), the offering rates of which are available to be reset at least monthly, and certificates of deposit that will mature within twelve months. The effect of interest rate                                          36    increases on loans, since they are subject to competitive pressure, tends to lag behind change in market rates. This lag generally lessens the positive impact on net interest income during a period of rising interest rates. Based on information provided in the table, assuming no significant impact from competitive pressure, the effect of an increase in interest rates of 100 basis points would be an increase in annualized net interest income of approximately $60,000.  IMPACT OF INFLATION AND CHANGING PRICES  The consolidated financial statements of the Company and related notes presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Bank's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Bank's performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.  IMPACT OF ACCOUNTING CHANGES  FASB Staff Position on FAS No. 115-1 and FAS No. 124-1 ("the FSP"), "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," was issued in November 2005 and addresses the determination of when an investment is considered impaired; whether the impairment is other-than-temporary; and how to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of an other-than-temporary impairment on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance on Emerging Issues Task Force (EITF) Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary, must be recognized in earnings at an amount equal to the entire difference between the securities cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also required that an investor recognize an other-than-temporary impairment loss when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The initial adoption of this statement is not expected to have a material impact on the Company's consolidated financial statements.  In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-based Compensation, that sets accounting requirements for "share-based" compensation to employees. This statement will require the Company to recognize in the income statement the grant-date fair value of the stock options and other equity-based compensation issued to employees, but expresses no preference for a                                          37    type of valuation model. This Statement is effective on January 1, 2006. The unvested stock options that are outstanding on the effective date of SFAS No. 123R that were previously included as part of the net income in Note 1 of the Company's financial statements will be charged to expense over the remaining vesting period, without any changes in measurement. The Company will adopt this Standard under the modified prospective method of application. Under that method, the Company will recognize compensation costs for new grants of share-based awards, awards modified after the effective date, and the remaining portion of the unvested awards at the adoption date. The adoption of SFAS No. 123R will not have an impact on the Company's results of operations, financial position or cash flows as all stock options were vested as of December 31, 2005.  The FASB issued an FSP on December 15, 2005, "SOP 94-6-1 -- Terms of Loan Products That May Give Rise to a Concentration of Credit Risk" which addresses the disclosure requirements for certain nontraditional mortgage and other loan products the aggregation of which may constitute a concentration of credit risk under existing accounting literature. Pursuant to this FSP, the FASB's intentions were to reemphasize the adequacy of such disclosures and noted that the recent popularity of certain loan products such as negative amortization loans, high loan-to-value loans, interest only loans, teaser rate loans, option adjusted rate mortgage loans and other loan product types may aggregate to the point of being a concentration of credit risk to an issuer and thus may require enhanced disclosures under existing guidance. This FSP was effective immediately. We have evaluated the impact of this FSP and have concluded that our disclosures are consistent with the objectives of the FSP.  RISK FACTORS (FBTC)  Investing in our common stock involves various risks which are particular to our company, our industry and our market area. Several risk factors regarding investing in our common stock are discussed below. This listing should not be considered as all-inclusive. If any of the following risks were to occur, we may not be able to conduct our business as currently planned and our financial condition or operating results could be negatively impacted. These matters could cause the trading price of our common stock to decline in future periods.  WE ARE GEOGRAPHICALLY CONCENTRATED IN EAST CENTRAL ILLINOIS, AND CHANGES IN LOCAL ECONOMIC CONDITIONS COULD IMPACT OUR PROFITABILITY.  We operate primarily in Champaign, Clark and Edgar Counties in Illinois, and most of our loan customers and substantially all of our deposit and other customers live or have operations in, or contiguous to Champaign, Clark, and Edgar Counties, (our "primary market area"). Accordingly, our success significantly depends upon the growth in population, income levels, deposits and housing starts in our primary market area, along with the continued attraction of business ventures to the area. Our profitability is impacted by the changes in general economic conditions in this market. Additionally, unfavorable local or national economic conditions could reduce our growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations.                                          38    We are less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies. Moreover, we cannot give any assurance that we will benefit from any market growth or favorable economic conditions in our primary market areas if they do occur.  Our continued growth may require the need for additional capital and further regulatory approvals which, if not obtained, could adversely impact our profitability and implementation of our current business plan.  To continue to grow, we will need to provide sufficient capital to our subsidiary, First Bank &Trust, s.b., through earnings generation, additional equity-offerings or borrowed funds or any combination of these sources of funds. Should we incur indebtedness, we are required to obtain certain regulatory approvals beforehand. Should our growth exceed our expectations, we may need to raise additional capital over our projected capital needs. However, our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, as well as our financial performance. Accordingly, we cannot assure our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand and grow our operations could be materially impaired. Additionally, our current plan involves both increasing our branch network and acquiring existing financial institutions, which will require capital expenditures. Our expansion efforts may also require certain regulatory approvals. Should we not be able to obtain such approvals or otherwise not be able to grow our asset base, our ability to attain our long-term profitability goals will be more difficult.  WE HAVE A CONCENTRATION OF CREDIT EXPOSURE TO BORROWERS IN CERTAIN INDUSTRIES AND WE ALSO TARGET SMALL TO MEDIUM-SIZED BUSINESSES.  At December 31, 2005, we had significant credit exposures to borrowers in agricultural and related businesses as well as commercial real estate development. If either of these industries experience an economic slowdown and, as a result, the borrowers in these industries are unable to perform their obligations under their existing loan agreements, our earnings could be negatively impacted, causing the value of our common stock to decline.  Additionally, a substantial focus of our marketing and business strategy is to serve both household and small to medium-sized businesses which are related to agriculture and real estate development in our primary market area. As a result, a relatively high percentage of our loan portfolio consists of agricultural and related business loans and commercial real estate development loans. As December 31, 2005, our agricultural loans accounted for 22.6% of our total loans while commercial real estate loans totaled 20.7% of our total loans. Producers of agricultural products may be negatively impacted by weather-related events that may effect their ability to repay their loans. Even though our commercial loans are primarily secured by real estate, during periods of economic weakness, small to medium-sized businesses may be impacted more severely than larger businesses. Consequently, the ability of such businesses to repay their loans may deteriorate, which would adversely impact our results of operations and financial condition.                                          39    IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT SUFFICIENT TO COVER ACTUAL LOAN LOSSES, OUR EARNINGS WILL DECREASE.  If loan customers with significant loan balances fail to repay their loans according to the terms of these loans, our earnings would suffer. We make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of any collateral securing the repayment of our loans. We maintain an allowance for loan losses in an attempt to cover the inherent risks associated with lending. In determining the size of this allowance, we rely on an analysis of our loan portfolio based on volume and types of loans, internal loan classifications, trends in classifications, volume and trends in delinquencies, nonaccruals and chargeoffs, national and local economic conditions, other factors and other pertinent information. If our assumptions are inaccurate, our current allowance may not be sufficient to cover potential loan losses, and additional provisions may be necessary which would decrease our earnings.  In addition, federal and state regulators periodically review our loan portfolio and may require us to increase our allowance for loan losses or recognize loan chargeoffs. Their conclusions about the quality of our loan portfolio may be different than ours. Any increase in our allowance for loan losses or loan chargeoffs as required by these regulatory agencies could have a negative effect on our operating results.  FLUCTUATIONS IN INTEREST RATES COULD REDUCE OUR PROFITABILITY.  Changes in interest rates may affect our level of interest income, the primary component of our gross revenue, as well as the level of our interest expense. Interest rate fluctuations are caused by many factors which, for the most part, are not under our direct control. For example, national monetary policy plays a significant role in the determination of interest rates. Additionally, competitor pricing and the resulting negotiations that occur with our customers also impact the rates we collect on loans and the rates we pay on deposits.  As interest rates change, we expect that we will periodically experience "gaps" in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this 'gap" may work against us, and our earnings may be negatively affected.  Changes in the level of interest rates also may negatively affect our ability to originate real estate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings. A decline in the market value of our assets may limit our ability to borrow additional funds. As a result, we could be required to sell some of our loans and investments under adverse market conditions, with terms that are not favorable to us, in order to maintain our liquidity. If those sales are made at prices lower than the amortized costs of the investments, we will incur losses.                                          40    LOSS OF OUR SENIOR EXECUTIVE OFFICERS OR OTHER KEY EMPLOYEES COULD IMPAIR OUR RELATIONSHIP WITH OUR CUSTOMERS AND ADVERSELY AFFECT OUR BUSINESS.  We have assembled a senior management team which has a substantial background and experience in banking and financial services in the market. Loss of these key personnel could negatively impact our earnings because of their skills, customer relationships and/or the potential difficulty of promptly replacing them.  COMPETITION WITH OTHER BANKING INSTITUTIONS COULD ADVERSELY AFFECT OUR PROFITABILITY.  A number of banking institutions in the market have higher lending limits, more banking offices, and a larger market share. In some respects, this may place these competitors in a competitive advantage, although many of our customers have selected us because of service quality concerns at the larger enterprises. This competition may limit or reduce our profitability, reduce our growth and adversely affect our results of operations and financial condition.  WE MAY ISSUE ADDITIONAL COMMON STOCK OR OTHER EQUITY SECURITIES IN THE FUTURE WHICH COULD DILUTE THE OWNERSHIP INTEREST OF EXISTING SHAREHOLDERS.  In order to maintain our capital at desired or regulatory-required levels, we may be required to issue additional shares of common stock, or securities convertible into, exchangeable for or representing rights to acquire shares of common stock. We may sell these shares at prices below the current market price of shares, and the sale of these shares may significantly dilute shareholder ownership. We could also issue additional shares in connection with acquisitions of other financial institutions.  EVEN THOUGH OUR COMMON STOCK IS CURRENTLY TRADED ON THE NASDAQ STOCK MARKET, IT HAS LESS LIQUIDITY THAN THE AVERAGE STOCK QUOTED ON THAT OR SIMILAR SECURITIES EXCHANGES.  The trading volume in our common stock on the Nasdaq market has been relatively low when compared with larger companies listed on the Nasdaq Stock Market or similar exchanges.  We cannot predict the effect, if any, that future sales of our common stock in the market, or the availability of shares of common stock for sale in the market, will have on the market price of our common stock. We can give no assurance that sales of substantial amounts of common stock in the market, or the potential for large amounts of sales in the market, would not cause the price of our common stock to decline or impair our future ability to raise capital through sales of our common stock.  The market price of our common stock may fluctuate in the future, and these fluctuations may be unrelated to our performance. General market price declines or overall market volatility in the future could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices.                                          41    IF A CHANGE IN CONTROL OR CHANGE IN MANAGEMENT IS DELAYED OR PREVENTED, THE MARKET PRICE OF OUR COMMON STOCK COULD BE NEGATIVELY AFFECTED.  Provisions in our corporate documents, as well as certain federal and state regulations, may make it difficult and expensive to purse a tender offer, change in control or takeover attempt that our board of directors opposes. As a result, our shareholders may not have an opportunity to participate in such a transaction, and the trading price of our stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers. Anti-takeover provisions contained in our charter also will make it more difficult for an outside shareholder to remove our current board of directors.  THE AMOUNT OF COMMON STOCK OWNED BY, AND OTHER COMPENSATION ARRANGEMENTS WITH, OUR OFFICERS AND DIRECTORS MAY MAKE IT MORE DIFFICULT TO OBTAIN SHAREHOLDER APPROVAL OF POTENTIAL TAKEOVERS THAT THEY OPPOSE.  As of December 31, 2005, directors and executive officers beneficially owned approximately 16% of our common stock. Employment agreements with our senior management also provide for significant payments under certain circumstances following a change in control. These compensation arrangements, together with the common stock, option ownership and grants of stock not yet vested in of our board and management could make it difficult or expensive to obtain majority support for shareholder proposals or potential acquisition proposals of us that our directors and officers oppose.  OUR BUSINESS IS DEPENDENT ON TECHNOLOGY, AND AN INABILITY TO INVEST IN TECHNOLOGICAL IMPROVEMENTS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.  The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. We have made significant investments in data processing, management information systems and internet banking accessibility. Our future success will depend in part upon our ability to create additional efficiencies in our operations through the use of technology, particularly in light of our past and projected growth strategy. Many of our competitors have substantially greater resources to invest in technological improvements. We cannot make assurances that our technological improvements will increase our operational efficiency or that we will be able to effectively implement new technology-driven products and services be successful in marketing these products and services to our customers.  OUR INTERNAL CONTROL OVER FINANCIAL REPORTING MAY HAVE WEAKNESSES OR INADEQUACIES THAT MAY BE MATERIAL.  Section 404 of the Sarbanes-Oxley Act of 2002 will require us to perform an evaluation of our internal control over financial reporting and our auditor to attest to such evaluation on an annual basis, unless these requirements are modified for smaller public companies. Ongoing compliance with these requirements is expected to be expensive and time-consuming and may negatively impact our results of operations. While our management has not identified                                          42    any material weaknesses relating to our internal controls at December 31, 2005, we cannot make any assurance that material weaknesses in our internal control over financial reporting will not be identified in the future. If we are unable to complete an evaluation of our internal control over financial reporting and our auditor is not able to timely attest to such evaluation, we may be subject to regulatory scrutiny, and a loss of public confidence in our internal control over financial reporting which may cause the value of our common stock to decrease.  WE ARE SUBJECT TO VARIOUS STATUTES AND REGULATIONS THAT MAY LIMIT OUR ABILITY TO TAKE CERTAIN ACTIONS.  We operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by various regulatory agencies. Our compliance with these regulations is costly and restricts certain of our activities, including payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits and locations of offices. We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our growth.  The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our business and profitability. Because government regulations greatly affects the business and financial results of all commercial banks and bank holding companies, our cost of compliance could adversely affect our ability to operate profitably.                                          43                                 REPORT OF INDEPENDENT                        REGISTERED PUBLIC ACCOUNTING FIRM  Audit Committee, Board of Directors    and Stockholders First BancTrust Corporation Paris, Illinois  We have audited the accompanying consolidated balance sheets of First BancTrust Corporation (Company) as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2005. 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 auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First BancTrust Corporation as of December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.   /s/ BKD, LLP  Decatur, Illinois February 21, 2006                                          44                              FIRST BANCTRUST CORPORATION                            CONSOLIDATED BALANCE SHEETS                            DECEMBER 31, 2005 AND 2004                                                                             2005           2004                                                                      ------------   ------------    ASSETS     Cash and due from banks                                           $  7,337,584   $  6,371,394    Interest-bearing demand deposits                                     5,109,549      2,742,036                                                                      ------------   ------------       Cash and cash equivalents                                        12,447,133      9,113,430                                                                      ------------   ------------    Available-for-sale securities                                       76,424,175     83,944,308    Held-to-maturity securities (fair value of $3,383,547 and       $4,830,557)                                                       3,437,417      4,778,380    Loans held for sale, net of unrealized loss of $4,784 and $0 at       December 31, 2005 and 2004                                          642,198        137,925    Loans, net of allowance for loan losses of $2,662,450 and       $2,300,452 at December 31, 2005 and 2004                        156,884,910    117,447,638    Premises and equipment                                               6,386,074      3,088,241    Federal Home Loan Bank stock                                         6,608,412      4,255,500    Foreclosed assets held for sale, net                                   267,200        189,903    Interest receivable                                                  2,415,689      2,178,945    Deferred income taxes                                                1,381,511             --    Loan servicing rights, net of valuation allowance of $0 and       $24,191 at December 31, 2005 and 2004                               462,341        756,637    Cash surrender value of life insurance                               4,824,886      4,523,326    Goodwill                                                               541,474             --    Core deposit intangibles                                               483,752        103,744    Other assets                                                           657,973        405,816                                                                      ------------   ------------       Total assets                                                   $273,865,145   $230,923,793                                                                      ============   ============   See Notes to Consolidated Financial Statements                                          45                                                                              2005           2004                                                                      ------------   ------------    LIABILITIES AND STOCKHOLDERS' EQUITY     LIABILITIES       Deposits          Demand                                                      $ 21,528,960   $ 17,885,444          Savings, NOW, and money market                                66,341,936     63,628,086          Time                                                         106,104,371     77,957,535                                                                      ------------   ------------             Total deposits                                            193,975,267    159,471,065                                                                      ------------   ------------       Federal funds purchased                                           2,500,000      2,000,000       Federal Home Loan Bank advances                                  43,200,000     40,500,000       Junior subordinated debentures                                    6,186,000             --       Pass through payments received on loans sold                         74,695         60,194       Advances from borrowers for taxes and insurance                     189,366        137,889       Deferred income taxes                                                    --        109,615       Interest payable                                                    245,118        136,369       Other                                                             1,448,521        961,798                                                                      ------------   ------------             Total liabilities                                         247,818,967    203,376,930                                                                      ------------   ------------     COMMITMENTS AND CONTINGENT LIABILITIES     STOCKHOLDERS' EQUITY       Preferred stock, $.01 par value; authorized and unissued -          1,000,000 shares       Common stock, $.01 par value; authorized 5,000,000 shares;          Issued 3,041,750 shares          Outstanding - 2005 - 2,367,450 shares, 2004 - 2,494,850             shares                                                         30,418         30,418       Additional paid-in capital                                       15,015,139     14,787,446       Retained earnings                                                19,061,990     18,396,265       Unearned incentive plan shares; 2005 - 71,422 shares, 2004 -          85,126 shares                                                   (589,364)      (702,422)       Unearned ESOP compensation; 2005 - 98,902 shares, 2004 -          129,310 shares                                                  (571,570)      (747,302)       Accumulated other comprehensive income (loss)                      (665,423)       415,227       Treasury stock, at cost          Common: 2005 - 674,300 shares, 2004 - 546,900 shares          (6,235,012)    (4,632,769)                                                                      ------------   ------------             Total stockholders' equity                                 26,046,178     27,546,863                                                                      ------------   ------------             Total liabilities and stockholders' equity               $273,865,145   $230,923,793                                                                      ============   ============                                           46                                   FIRST BANCTRUST CORPORATION                              CONSOLIDATED STATEMENTS OF INCOME                           YEARS ENDED DECEMBER 31, 2005 AND 2004                                                                2005          2004          2003                                                         -----------   -----------   -----------     INTEREST AND DIVIDEND INCOME    Loans       Taxable                                           $ 9,370,277   $ 7,980,443   $ 8,445,980       Tax-exempt                                             61,896        64,193        38,003    Securities       Taxable                                             2,775,099     3,043,768     2,771,604       Tax-exempt                                            466,712       382,813       343,367    Dividends on Federal Home Loan Bank stock                212,394       249,387       237,954    Deposits with financial institutions and other           112,507        53,490        62,066                                                         -----------   -----------   -----------          Total interest and dividend income              12,998,885    11,774,094    11,898,974                                                         -----------   -----------   ----------- INTEREST EXPENSE    Deposits                                               3,506,395     2,890,651     3,207,433    Federal Home Loan Bank advances and other debt         1,826,035     1,506,303     1,413,147                                                         -----------   -----------   -----------          Total interest expense                           5,332,430     4,396,954     4,620,580                                                         -----------   -----------   ----------- NET INTEREST INCOME                                       7,666,455     7,377,140     7,278,394 PROVISION FOR LOAN LOSSES                                   510,145       515,001       728,000                                                         -----------   -----------   ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES       7,156,310     6,862,139     6,550,394                                                         -----------   -----------   ----------- NONINTEREST INCOME    Customer service fees                                    965,684       883,920       766,457    Other service charges and fees                           755,606       788,503       885,260    Net gains on loan sales                                  291,259       333,862       735,309    Net realized gains on sales of available-for-sale       securities                                            117,959        97,036       133,965    Loan servicing fees                                      489,196       658,487       526,237    Brokerage fees                                            85,425        71,676        62,704    Abstract and title fees                                  349,733       334,846       439,491    Increase in cash surrender value of life insurance       176,560       177,350       167,050    Other                                                    106,172       123,482       102,056                                                         -----------   -----------   -----------          Total noninterest income                         3,337,594     3,469,162     3,818,529                                                         -----------   -----------   -----------   See Notes to Consolidated Financial Statements                                               47                                                             2005         2004         2003                                                      ----------   ----------   ----------     NONINTEREST EXPENSE    Salaries and employee benefits                    $4,642,557   $4,629,509   $4,113,413    Net occupancy expense                                437,944      344,529      234,991    Equipment expense                                    831,912      786,487      653,779    Data processing fees                                 485,944      441,052      437,429    Professional fees                                    460,101      481,039      281,772    Foreclosed assets expense, net                        63,510       71,210      117,685    Marketing expense                                    334,164      343,132      278,086    Printing and office supplies                         154,171      174,757      121,370    Amortization of loan servicing rights                486,792      630,182      848,746    Recovery of impairment of loan servicing rights      (24,191)    (242,448)    (416,448)    Other                                              1,059,033      904,996      817,200                                                      ----------   ----------   ----------          Total noninterest expense                    8,932,937    8,564,445    7,488,023                                                      ----------   ----------   ---------- INCOME BEFORE INCOME TAXES                            1,560,967    1,766,856    2,880,900 PROVISION FOR INCOME TAXES                              313,272      539,123      931,501                                                      ----------   ----------   ---------- NET INCOME                                           $1,247,695   $1,227,733   $1,949,399                                                      ==========   ==========   ========== BASIC EARNINGS PER SHARE                             $     0.56   $     0.54   $     0.85                                                      ==========   ==========   ========== DILUTED EARNINGS PER SHARE                           $     0.52   $     0.51   $     0.81                                                      ==========   ==========   ==========                                                48                              FIRST BANCTRUST CORPORATION                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                      YEARS ENDED DECEMBER 31, 2005 AND 2004                                                               COMMON STOCK       ADDITIONAL                                                        -------------------       PAID                                                          SHARES     AMOUNT   -IN CAPITAL                                                        ---------   -------   -----------     BALANCE, JANUARY 1, 2003                               2,731,420   $30,418   $14,428,801    Comprehensive income       Net income                                              --        --            --       Change in unrealized appreciation on          available-for-sale securities, net of taxes          --        --            --           Total comprehensive income    Dividends on common stock, $.175 per share                 --        --            --    Purchase of treasury stock (230,970 shares)          (230,970)       --            --    Incentive plan shares allocated (13,704 shares)            --        --        (3,426)    ESOP shares earned (30,408 shares)                         --        --       139,101                                                        ---------   -------   ----------- BALANCE, DECEMBER 31, 2003                             2,500,450    30,418    14,564,476    Comprehensive income       Net income                                              --        --            --       Change in unrealized appreciation on          available-for-sale securities, net of taxes          --        --            --           Total comprehensive income    Dividends on common stock, $.23 per share                  --        --            --    Purchase of treasury stock (5,600 shares)              (5,600)       --            --    Incentive plan shares allocated (13,704 shares)            --        --        (3,426)    Tax benefit related to incentive plan                      --        --        25,129    ESOP shares earned (30,408 shares)                         --        --       201,267                                                        ---------   -------   ----------- BALANCE, DECEMBER 31, 2004                             2,494,850    30,418    14,787,446    Comprehensive income       Net income                                              --        --            --       Change in unrealized appreciation on          available-for-sale securities, net of taxes          --        --            --           Total comprehensive income    Dividends on common stock, $.24 per share                  --        --            --    Purchase of treasury stock (131,600 shares)          (131,600)       --            --    Stock options exercised (4,200 shares)                  4,200        --         4,400    Incentive plan shares allocated (13,704 shares)            --        --        (3,426)    Tax benefit related to stock options       exercised and incentive plan                            --        --        24,401    ESOP shares earned (30,408 shares)                         --        --       202,318                                                        ---------   -------   ----------- BALANCE, DECEMBER 31, 2005                             2,367,450   $30,418   $15,015,139                                                        =========   =======   ===========   See Notes to Consolidated Financial Statements                                          49                                                 ACCUMULATED                 UNEARNED      UNEARNED         OTHER   RETAINED     INCENTIVE        ESOP       COMPREHENSIVE     TREASURY   EARNINGS    PLAN SHARES   COMPENSATION   INCOME (LOSS)      STOCK         TOTAL - -----------   -----------   ------------   -------------   -----------   -----------       $16,243,149    $(928,538)   $(1,098,766)    $   993,257    $(2,362,597)  $27,305,724    1,949,399           --             --              --             --     1,949,399           --           --             --        (637,664)            --      (637,664)                                                                          -----------                                                                            1,311,735    (449,248)          --             --              --             --      (449,248)          --           --             --              --     (2,201,068)   (2,201,068)          --      113,058             --              --             --       109,632          --           --        175,732              --             --       314,833 - -----------    ---------    -----------     -----------    -----------   -----------  17,743,300     (815,480)      (923,034)        355,593     (4,563,665)   26,391,608    1,227,733           --             --              --             --     1,227,733           --           --             --          59,634             --        59,634                                                                          -----------                                                                            1,287,367    (574,768)          --             --              --             --      (574,768)          --           --             --              --        (69,104)      (69,104)          --      113,058             --              --             --       109,632          --           --             --              --             --        25,129          --           --        175,732              --             --       376,999 - -----------    ---------    -----------     -----------    -----------   -----------  18,396,265     (702,422)      (747,302)        415,227     (4,632,769)   27,546,863    1,247,695           --             --              --             --     1,247,695           --           --             --      (1,080,650)            --    (1,080,650)                                                                          -----------                                                                              167,045    (581,970)          --             --              --             --      (581,970)          --           --             --              --     (1,639,297)   (1,639,297)          --           --             --              --         37,054        41,454          --      113,058             --              --             --       109,632           --           --             --              --             --        24,401          --           --        175,732              --             --       378,050 - -----------    ---------    -----------     -----------    -----------   ----------- $19,061,990    $(589,364)   $  (571,570)    $  (665,423)   $(6,235,012)  $26,046,178 ===========    =========    ===========     ===========    ===========   ===========                                           50                              FIRST BANCTRUST CORPORATION                       CONSOLIDATED STATEMENTS OF CASH FLOWS                      YEARS ENDED DECEMBER 31, 2005 AND 2004                                                                    2005           2004           2003                                                             ------------   ------------   ------------     OPERATING ACTIVITIES    Net income                                               $  1,247,695   $  1,227,733   $  1,949,399    Items not requiring (providing) cash       Depreciation and amortization                              413,487        325,332        217,838       Provision for loan losses                                  510,145        515,001        728,000       Loss on foreclosed assets, net                              20,868         10,580         42,443       Donation of fixed assets                                        --         21,031             --       Loss on premises and equipment                              89,188          6,315             --       Amortization of premiums and discounts on          securities, net                                          67,397        189,845        887,042       Amortization of loan servicing rights                      486,792        630,182        848,746       Recovery for impairment of loan servicing rights           (24,191)      (242,448)      (416,448)       Deferred income taxes                                     (189,433)       105,313        157,744       Amortization of intangible assets                           42,120         11,856          2,964       Net realized gains on available-for-sale securities       (117,959)       (97,036)      (133,965)       Net gain on loan sales                                    (291,259)      (333,862)      (735,309)       Federal Home Loan Bank stock dividends                    (212,186)      (249,200)      (237,954)       Compensation expense related to ESOP and incentive          plan                                                    487,682        486,631        424,465       Loans originated for sale                              (15,494,804)   (17,375,955)   (45,201,025)       Proceeds from sales of loans originated for sale        15,113,485     17,844,887     45,632,815    Changes in       Interest receivable                                        (73,789)        58,649         62,431       Cash surrender value of life insurance                    (176,560)      (177,350)      (167,050)       Other assets                                               (53,981)       305,359       (725,196)       Interest payable                                           104,617          9,411         21,307       Other liabilities                                          244,436        210,001        (39,095)                                                             ------------   ------------   ------------          Net cash provided by operating activities             2,193,750      3,482,275      3,319,152                                                             ------------   ------------   ------------  INVESTING ACTIVITIES    Purchases of available-for-sale securities                 (9,325,372)   (25,243,873)   (91,737,490)    Proceeds from maturities of available-for-sale       securities                                              23,616,275     34,532,091     68,473,021    Proceeds from sales of available-for-sale securities          985,299        514,236        416,855    Purchases of held-to-maturity securities                           --     (4,946,591)            --    Proceeds from maturities of held-to-maturity       securities                                               1,356,578        171,490             --    Net change in loans                                       (25,700,454)   (12,013,569)    (2,352,060)    Proceeds from sales of foreclosed assets                      799,345        357,094        441,857    Purchase of premises and equipment                         (2,699,845)      (670,228)      (226,913)    Capitalized interest                                          (20,216)            --             --    Proceeds from sales of premises and equipment                      --         10,000             --    Proceeds received from exchange of premises and       equipment                                                  269,096             --             --    Purchase of life insurance                                   (125,000)            --       (512,000)    Net cash paid for the purchase of Rantoul First Bank       (net of cash received)                                  (2,333,440)            --             --                                                             ------------   ------------   ------------          Net cash used in investing activities               (13,177,734)    (7,289,350)   (25,496,730)                                                             ------------   ------------   ------------   See Notes to Consolidated Financial Statements                                          51                                                                    2005          2004          2003                                                            -----------   -----------   -----------     FINANCING ACTIVITIES    Net increase (decrease) in demand deposits, money       market, NOW and savings accounts                     $(1,184,822)  $(5,777,660)  $10,471,512    Net increase in certificates of deposit                   8,952,043     2,220,835     5,220,997    Net increase in short-term borrowings                       500,000     2,000,000            --    Proceeds from Federal Home Bank advances                  2,000,000     5,000,000    10,000,000    Repayment of Federal Home Loan Bank advances                     --            --    (1,001,230)    Proceeds from the issuance of junior subordinated       debentures                                             6,186,000            --            --    Net change in pass through payments received on loans       sold                                                      14,501      (201,507)          948    Net change in advances from borrowers for taxes and       insurance                                                 29,778        28,604       (23,600)    Proceeds from stock options exercised                        41,454            --            --    Purchase of treasury stock                               (1,639,297)      (69,104)   (2,201,068)    Dividends paid                                             (581,970)     (574,768)     (449,248)                                                            -----------   -----------   -----------       Net cash provided by financing activities             14,317,687     2,626,400    22,018,311                                                            -----------   -----------   -----------  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             3,333,703    (1,180,675)     (159,267)  CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                 9,113,430    10,294,105    10,453,372                                                            -----------   -----------   ----------- CASH AND CASH EQUIVALENTS, END OF YEAR                     $12,447,133   $ 9,113,430   $10,294,105                                                            ===========   ===========   ===========  SUPPLEMENTAL CASH FLOWS INFORMATION     Interest paid (net of capitalized interest)             $ 5,227,813   $ 4,387,543   $ 4,599,273     Income taxes paid (net of refunds)                      $   340,000   $    43,149   $ 1,300,000     Real estate and other property acquired in settlement       of loans                                             $   257,374   $   462,016   $   394,778     Tax benefit related to incentive plan and exercise of       options                                              $    24,401   $    25,129   $        --                                           52                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES       NATURE OF OPERATIONS       First BancTrust Corporation (Company) is a financial holding company whose      principal activity is the ownership and management of its wholly-owned      subsidiaries, First Bank & Trust, S.B. (Bank), ECS Service Corporation, and      First Charter Service Corporation. FBTC Statutory Trust I (Trust) is an      unconsolidated wholly owned subsidiary of the Company. The Trust was formed      during 2005 to issue cumulative preferred securities. The Company owns all      of the securities of the Trust that possess general voting powers. The Bank      is primarily engaged in providing a full range of banking and financial      services to individual and corporate customers in East Central Illinois.      The Company also provides other services, such as brokerage and abstract      and title services through its subsidiaries, ECS Service Corporation and      First Charter Service Corporation. During May 2005, the Bank dissolved its      subsidiary, Community Finance Center. Community Finance Center provided      retail consumer loans to the Company's customers. Subsequent to May 2005,      the Consumer Finance Center operates as a division of the Bank. The Company      and Bank are subject to competition from other financial institutions. The      Company and Bank are subject to the regulation of certain federal and state      agencies and undergo periodic examinations by those regulatory authorities.       PRINCIPLES OF CONSOLIDATION       The consolidated financial statements include the accounts of the Company,      Bank, ECS Service Corporation, and First Charter Service Corporation. All      significant intercompany accounts and transactions have been eliminated in      consolidation.       USE OF ESTIMATES       The preparation of financial statements in conformity with accounting      principles generally accepted in the United States of America requires      management to make estimates and assumptions that affect the reported      amounts of assets and liabilities and disclosure of contingent assets and      liabilities at the date of the financial statements and the reported      amounts of revenues and expenses during the reporting period. Actual      results could differ from those estimates.       Material estimates that are particularly susceptible to significant change      relate to the determination of the allowance for loan losses, the valuation      of real estate acquired in connection with foreclosures or in satisfaction      of loans, loan servicing rights, and premiums on mortgage backed securities      and collateralized mortgage obligations. In connection with the      determination of the allowance for loan losses and the valuation of      foreclosed assets held for sale, management obtains independent appraisals      for significant properties. Management estimates loan servicing rights      taking into consideration changes in interest rates, current prepayment      rates and expected future cash flows and obtains an independent valuation      for the asset. Management estimates the prepayment assumptions used in      calculating the amortization on premiums on mortgage backed securities and      collateralized mortgage obligations.                                          53                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       CASH EQUIVALENTS       The Company considers all liquid investments with original maturities of      three months or less to be cash equivalents.       SECURITIES       Available-for-sale securities, which include any security for which the      Company has no immediate plan to sell but which may be sold in the future,      are carried at fair value. Unrealized gains and losses are recorded, net of      related income tax effects, in other comprehensive income.       Held-to-maturity securities, which include any security for which the      Company has the positive intent and ability to hold until maturity, are      carried at historical cost adjusted for amortization of premiums and      accretion of discounts.       A decline in the market value of any available-for-sale or held-to-maturity      security below cost is deemed to be other-than-temporary results in a      reduction in carrying amount to fair value. The impairment is charged to      earnings and a new cost basis for the security is established. To determine      whether impairment is other-than-temporary, management considers whether it      has the ability and intent to hold the investment until a market price      recovery and considers whether evidence indicating the cost of the      investment is recoverable outweighs evidence to the contrary. Evidence      considered in this assessment includes the reasons for the impairment, the      security and duration of the impairment changes in value subsequent to      year-end and forecasted performance of the investee.       Amortization of premiums and accretion of discounts are recorded as      interest income from securities. Realized gains and losses are recorded as      net security gains (losses). Gains and losses on sales of securities are      determined on the specific identification method.       LOANS HELD FOR SALE       The Company sells one-to-four family residential loans, real estate loans      and agricultural loans, including farmland and agricultural production      finance, to various investors. The agricultural loans are underwritten to      carry a government guarantee that covers 90% of any loss on the loan. The      guaranteed portion is sold to the various investors with servicing      retained.       Loans originated and intended for sale in the secondary market are carried      at the lower of cost or fair value in the aggregate. Net unrealized losses,      if any, are recognized through a valuation allowance by charges to income.                                          54                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       LOANS       Loans that management has the intent and ability to hold for the      foreseeable future or until maturity or payoffs are reported at their      outstanding principal balances adjusted for any charge-offs, the allowance      for loan losses, any deferred fees or costs on originated loans and      unamortized premiums or discounts on purchased loans. Interest income is      reported on the interest method and includes amortization of the net      deferred loan fees and costs over the loan term. Generally, loans are      placed on non-accrual status at ninety days past due and interest is      considered a loss, unless the loan is well-secured and in the process of      collection.       Discounts and premiums on purchased residential real estate loans are      amortized to income using the interest method over the remaining period to      contractual maturity, adjusted for anticipated prepayments. Discounted and      premiums on purchased consumer loans are recognized over the expected lives      of the loans using methods that approximate the interest method.       ALLOWANCE FOR LOAN LOSSES       The allowance for loan losses is established as losses are estimated to      have occurred through a provision for loan losses charged to income. Loan      losses are charged against the allowance when management believes the      uncollectibility of a loan balance is confirmed. Subsequent recoveries, if      any, are credited to the allowance.       The allowance for loan losses is evaluated on a regular basis by management      and is based upon management's periodic review of the collectibility of the      loans in light of historical experience, the nature and volume of the loan      portfolio, adverse situations that may affect the borrower's ability to      repay, estimated value of any underlying collateral and prevailing economic      conditions. This evaluation is inherently subjective as it requires      estimates that are susceptible to significant revision as more information      becomes available.       A loan is considered impaired when, based on current information and      events, it is probable that the Company will be unable to collect the      scheduled payments of principal or interest when due according to the      contractual terms of the loan agreement. Factors considered by management      in determining impairment include payment status, collateral value and the      probability of collecting scheduled principal and interest payments when      due. Loans that experience insignificant payment delays and payment      shortfalls generally are not classified as impaired. Management determines      the significance of payment delays and payment shortfalls on a case-by-case      basis, taking into consideration all of the circumstances surrounding the      loan and the borrower, including the length of the delay, the reasons for      the delay, the borrower's prior payment record and the amount of the      shortfall in relation to the principal and interest owed. Impairment is      measured on a loan-by-loan basis for commercial and construction loans by      either the present value of expected future cash flows discounted at the      loan's effective interest rate, the loan's obtainable market price or the      fair value of the collateral if the loan is collateral dependent.                                          55                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       Large groups of smaller balance homogenous loans are collectively evaluated      for impairment. Accordingly, the Company does not separately identify      individual consumer and residential loans for impairment disclosures.       PREMISES AND EQUIPMENT       Depreciable assets are stated at cost less accumulated depreciation.      Depreciation is charged to expense using the straight-line method over the      estimated useful lives of the assets. Leasehold improvements are      capitalized and depreciated using the straight-line method over the terms      of the respective leases or the estimated useful lives of the improvements,      whichever is shorter.       The Company is capitalizing interest during the construction period of its      new bank facility. Interest capitalization will cease when the facility is      complete and available for occupancy.       During the year ended December 31, 2005, gross interest expense on      borrowings totaled $1,826,035, of which $20,216 was capitalized.       FEDERAL HOME LOAN BANK STOCK       Federal Home Loan Bank stock is a required investment for institutions that      are members of the Federal Home Loan Bank system. The required investment      in the common stock is based on a predetermined formula.       During 2005, the Federal Home Loan Bank announced they have ceased      repurchasing, for an undisclosed period of time, any stock in excess of the      required investment in Federal Home Loan Bank stock held by member banks.      The Company had approximately $4,448,000 of voluntary Federal Home Loan      Bank stock as of December 31, 2005.       FORECLOSED ASSETS HELD FOR SALE       Assets acquired through, or in lieu of, loan foreclosure are held for sale      and are initially recorded at fair value at the date of foreclosure,      establishing a new cost basis. Subsequent to foreclosure, valuations are      periodically performed by management and the assets are carried at the      lower of carrying amount or fair value less cost to sell. Revenue and      expenses from operations and changes in the valuation allowance are      included in net expenses from foreclosed assets.       GOODWILL       Goodwill is tested annually for impairment. If the implied fair value of      goodwill is lower than its carrying amount, a goodwill impairment is      indicated, and goodwill is written down to its implied fair value.      Subsequent increases in goodwill are not recognized in the financial      statements.                                          56                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       CORE DEPOSIT INTANGIBLES       Core deposit intangibles are being amortized on the straight-line and      accelerated basis over periods ranging from five to ten years. Such assets      are periodically evaluated to the recoverability of their carrying value.       LOAN SERVICING RIGHTS       Loan servicing rights on originated loans that have been sold are      capitalized by allocating the total cost of the loans between the loan      servicing rights and the loans based on their relative fair values.      Capitalized servicing rights are amortized in proportion to and over the      period of estimated servicing revenues. Impairment of loan servicing rights      is assessed based on the fair value of those rights. Fair values are      estimated using either an independent valuation or by discounted cash flows      based on a current market interest rate. For purposes of measuring      impairment, the rights are stratified based on the predominant risk      characteristics of the underlying loans. The predominant characteristic      currently used for stratification is type of loan. The amount of impairment      recognized is the amount by which the capitalized loan servicing rights for      a stratum exceed their fair value.       INCENTIVE PLAN       The Company accounts for its stock award program or incentive plan in      accordance with Accounting Principals Board Opinion (APB) No. 25,      Accounting for Stock Issued to Employees. The aggregate purchase price of      all shares owned by the incentive plan is reflected as a reduction of      stockholders' equity. Compensation expense is based on the market price of      the Company's stock on the date the shares are granted and is recorded over      the vesting period. The difference between the aggregate purchase price and      the fair value on the date granted of the shares earned is recorded as an      adjustment to additional paid-in capital.       EMPLOYEE STOCK OWNERSHIP PLAN       The Company accounts for its employee stock ownership plan (ESOP) in      accordance with American Institute of Certified Public Accountants (AICPA)      Statement of Position 93-6. The cost of shares issued to the ESOP but not      yet allocated to participants are presented in the consolidated balance      sheet as a reduction of stockholders' equity. Compensation expense is      recorded based on the market price of the shares as they are committed to      be released for allocation to participant accounts. The difference between      the market price and the cost of shares committed to be released is      recorded as an adjustment to additional paid-in capital. Dividends on      allocated ESOP shares are recorded as a reduction of retained earnings;      dividends on unallocated ESOP shares are reflected as a reduction of debt.       Shares are considered outstanding for earnings per share calculations when      they are committed to be released; unallocated shares are not considered      outstanding.                                          57                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       TREASURY STOCK       Treasury stock is stated at cost. Cost is determined by the average cost      method.       STOCK OPTIONS       The Company has a stock-based employee compensation plan, which is      described more fully in Note 19. The Company accounts for this plan under      the recognition and measurement principles of APB Opinion No. 25,      Accounting for Stock Issued to Employees, and related Interpretations. No      stock-based employee compensation cost is reflected in net income, as all      options granted under this plan had an exercise price equal to the market      value of the underlying common stock on the grant date. The following table      illustrates the effect of net income and earnings per share if the Company      had applied the fair value provisions of FASB Statement No. 123R,      Share-Based Payment, which is a revision to Statement No. 123, Accounting      for Stock Based Compensation to stock based employee compensation. See Note      26 in regard to a future change in accounting principle.                                                                 YEARS ENDED                                                 ------------------------------------                                                    2005         2004         2003                                                 ----------   ----------   ----------     Net income, as reported                         $1,247,695   $1,227,733   $1,943,399 Less: Total stock-based employee compensation    cost determined under the fair value based    method, net of income taxes                     282,723      139,241       87,023                                                 ----------   ----------   ---------- Pro forma net income                            $  964,972   $1,088,492   $1,856,376                                                 ==========   ==========   ========== Earnings per share:    Basic - as reported                          $      .56   $      .54   $      .85                                                 ==========   ==========   ==========    Basic - pro forma                            $      .43   $      .48   $      .81                                                 ==========   ==========   ==========    Diluted - as reported                        $      .52   $      .51   $      .81                                                 ==========   ==========   ==========    Diluted - pro forma                          $      .41   $      .45   $      .77                                                 ==========   ==========   ==========        During December 2005, the Company accelerated the vesting of 182,504      options on shares of the Company's stock. The exercise price and remaining      terms of each of the accelerated options remained the same. As of December      31, 2005, all of the Company's stock options are vested. In accordance with      Statement No. 123 and related interpretations, no compensation expense was      recognized.                                          58                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       INCOME TAXES       Deferred tax assets and liabilities are recognized for the tax effects of      differences between the financial statement and tax bases of assets and      liabilities. A valuation allowance is established to reduce deferred tax      assets if it is more likely than not that a deferred tax asset will not be      realized. The Company files consolidated income tax returns with its      consolidated subsidiaries.       EARNINGS PER SHARE       Earnings per share have been computed based upon the weighted average      common shares outstanding during each year. Unearned ESOP shares and      unearned incentive plan shares which have not vested have been excluded      from the computation of average shares outstanding.       Diluted earnings per share reflect the potential dilation that could occur      if securities or other contracts to issue common stock were exercised or      converted into common stock or resulted in the issuance of common stock      that then shared in the earnings of the Company.       RECLASSIFICATIONS       Certain reclassifications have been made to the 2003 and 2004 financial      statements to conform to the 2005 financial statement presentation. These      classifications had no effect on net income.  NOTE 2: RESTRICTION ON CASH AND DUE FROM BANKS       The Company is required to maintain reserve funds in cash and/or on deposit      with the Federal Reserve Bank. The reserve required at December 31, 2005      was $72,000.                                          59                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 3: SECURITIES       The amortized cost and approximate fair values of securities are as      follows:                                      AMORTIZED    GROSS UNREALIZED   GROSS UNREALIZED   APPROXIMATE FAIR                                      COST            GAINS             LOSSES              VALUE                                  -----------   ----------------   ----------------   ----------------      AVAILABLE-FOR-SALE SECURITIES:    December 31, 2005:       U.S. Treasuries            $ 3,820,540       $     --         $  (293,333)        $ 3,527,207       U.S. government          agencies                  8,483,179             --            (108,200)          8,374,979       Mortgage-backed          securities               51,137,631        129,274            (898,319)         50,368,586       State and political          subdivisions             13,181,161        209,093            (137,728)         13,252,526       Equity securities              902,912          3,690              (5,725)            900,877                                  -----------       --------         -----------         -----------                                  $77,525,423       $342,057         $(1,443,305)        $76,424,175                                  ===========       ========         ===========         ===========                                      AMORTIZED    GROSS UNREALIZED   GROSS UNREALIZED   APPROXIMATE FAIR                                      COST            GAINS             LOSSES              VALUE                                  -----------   ----------------   ----------------   ----------------      AVAILABLE-FOR-SALE SECURITIES:    December 31, 2004:       U.S. Treasuries            $ 3,837,663      $   82,691         $      --          $ 3,920,354       U.S. government          agencies                  7,000,000           3,346           (54,697)           6,948,649       Mortgage-backed          securities               60,625,266         414,807          (239,795)          60,800,278       State and political          subdivisions             10,540,317         382,791           (47,594)          10,875,514       Equity securities            1,251,763         155,850            (8,100)           1,399,513                                  -----------      ----------         ---------          -----------                                  $83,255,009      $1,039,485         $(350,186)         $83,944,308                                  ===========      ==========         =========          ===========                                           60                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004                                                       GROSS        GROSS     APPROXIMATE                                     AMORTIZED   UNREALIZED   UNREALIZED       FAIR                                       COST         GAINS       LOSSES        VALUE                                    ----------   ----------   ----------   -----------      HELD-TO-MATURITY SECURITIES:    December 31, 2005:       Mortgage-backed securities   $3,437,417     $    --     $(53,870)    $3,383,547                                    ==========     =======     ========     ==========    December 31, 2004:       Mortgage-backed securities   $4,778,380     $52,207     $     --     $4,830,587                                    ==========     =======     ========     ==========        The amortized cost and fair value of available-for-sale and      held-to-maturity securities at December 31, 2005, by contractual maturity,      are shown below. Expected maturities will differ from contractual      maturities because issuers may have the right to call or prepay obligations      with or without call or prepayment penalties.                                     AVAILABLE-FOR-SALE          HELD-TO-MATURITY                              -------------------------   ------------------------                               AMORTIZED    APPROXIMATE    AMORTIZED   APPROXIMATE                                  COST       FAIR VALUE      COST       FAIR VALUE                              -----------   -----------   ----------   -----------      Within one year              $ 1,624,054   $ 1,619,111   $             $       -- One to five years             12,217,098    11,842,248           --            -- Five to ten years              9,235,972     9,254,697           --            -- After ten years                2,407,756     2,438,656                              -----------   -----------   ----------    ----------                               25,484,880    25,154,712           --            -- Mortgage-backed securities    51,137,631    50,368,586    3,437,417     3,883,547 Equity securities                902,912       900,877           --            --                              -----------   -----------   ----------    ----------    Totals                    $77,525,423   $76,424,175   $3,437,417    $3,883,547                              ===========   ===========   ==========    ==========        The carrying value of securities pledged as collateral, to secure public      deposits, Federal Home Loan Bank advances and for other purposes, was      $57,254,229 at December 31, 2005 and $45,094,707 at December 31, 2004.       Gross gains of $117,959, $97,036 and $133,965 resulting from sales of      available-for-sale securities were realized for 2005, 2004 and 2003. Income      tax expense of $45,768, $40,077 and $55,307 was recognized on the sales of      available-for-sale securities during 2005, 2004 and 2003.                                          61                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       With the exception of securities of U.S. government agencies and      corporations, the Company did not hold any securities of a single issuer,      payable from and secured by the same source of revenue or taxing authority,      the book value of which exceeded 10% of stockholder's equity at December      31, 2005.       Certain investments in debt and marketable equity securities are reported      in the financial statements at an amount less than their historical cost.      Total fair value of these investments at December 31, 2005, and was      $60,837,601 and $38,927,137, which is approximately 76% and 44% of the      Company's investment portfolio. These declines primarily resulted from      recent increases in market interest rates.       Based on evaluation of available evidence, including recent changes in      market interest rates, management believes the declines in fair value for      these securities are temporary.       Should the impairment of any of these securities become other than      temporary, the cost basis of the investment will be reduced and the      resulting loss recognized in net income in the period the      other-than-temporary impairment is identified.       The following table shows our investments' gross unrealized losses and fair      value, aggregated by investment category and length of time that individual      securities have been in a continuous unrealized loss position at December      31, 2005 and 2004:                                             LESS THAN 12 MONTHS         12 MONTHS OR MORE                TOTAL                                       ------------------------   ------------------------   -------------------------                                                     UNREALIZED                 UNREALIZED                  UNREALIZED      DESCRIPTION OF SECURITIES         FAIR VALUE     LOSSES      FAIR VALUE     LOSSES      FAIR VALUE      LOSSES - -----------------------------------   -----------   ----------   -----------   ----------   -----------   -----------        December 31, 2005:    U.S. treasury                      $ 3,527,207   $(293,333)   $        --   $      --    $ 3,527,207   $  (293,333)    U.S. government agencies             1,975,943      (7,235)     6,399,036    (100,965)     8,374,979      (108,200)    Mortgage-backed securities          21,600,636    (255,892)    21,567,707    (696,297)    43,168,343      (952,189)    State and political subdivisions     2,908,691     (47,882)     2,847,406     (89,846)     5,756,097      (137,728)    Equity securities                           --          --         10,975      (5,725)        10,975        (5,725)                                       -----------   ---------    -----------   ---------    -----------   -----------       Total temporarily          impaired securities          $30,012,477   $(604,342)   $30,825,124   $(892,833)   $60,837,601   $(1,497,175)                                       ===========   =========    ===========   =========    ===========   ===========                                           62                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004                                 LESS THAN 12 MONTHS        12 MONTHS OR MORE                TOTAL                           ------------------------   -----------------------   ------------------------      DESCRIPTION OF                     UNREALIZED                UNREALIZED                 UNREALIZED        SECURITIES          FAIR VALUE     LOSSES     FAIR VALUE     LOSSES      FAIR VALUE     LOSSES - -----------------------   -----------   ----------   ----------   ----------   -----------   ----------        December 31, 2004:    U.S. government       agencies            $ 5,459,538   $ (40,462)   $  985,765   $ (14,235)   $ 6,445,303   $ (54,697)    Mortgage-backed       securities           25,926,582    (155,480)    3,072,008     (84,315)    28,998,590    (239,795)    State and political       subdivisions          1,055,063      (4,730)    2,419,581     (42,864)     3,474,644     (47,594)    Equity securities               --          --         8,600      (8,100)         8,600      (8,100)                           -----------   ---------    ----------   ---------    -----------   ---------       Total temporarily          impaired          securities       $32,441,183   $(200,672)   $6,485,954   $(149,514)   $38,927,137   $(350,186)                           ===========   =========    ==========   =========    ===========   =========   NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES       Categories of loans at December 31, include:                                                  2005           2004                                           ------------   ------------    Commercial and industrial                 $  7,885,998   $  6,411,049 Agricultural production financing           15,441,718     13,603,206 Real estate construction                     2,422,736      1,515,873 Commercial and agricultural real estate     54,157,375     33,838,966 Residential real estate                     52,517,947     38,283,762 Consumer                                    26,416,129     25,171,918 Other                                        1,676,935      1,769,268                                           ------------   ------------       Total loans                          160,518,838    120,594,042 Less    Unearned discount and fees                 (807,119)      (828,554)    Undisbursed loans in process               (164,359)       (17,398)    Allowance for loan losses                (2,662,450)    (2,300,452)                                           ------------   ------------       Net loans                           $156,884,910   $117,447,638                                           ============   ============                                           63                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       Activity in the allowance for loan losses was as follows:                                                   2005         2004         2003                                             ----------   ----------   ----------     Balance, beginning of year                  $2,300,452   $2,124,297   $1,962,551 Provision charged to expense                   510,145      515,001      728,000 Losses charged off, net of recoveries of    $90,198 for 2005, $97,905 for 2004 and    $92,928 for 2003                           (348,348)    (338,846)    (566,254) Allowance acquired through business    combination                                 200,201           --           --                                             ----------   ----------   ---------- Balance, end of year                        $2,662,450   $2,300,452   $2,124,297                                             ==========   ==========   ==========        Impaired loans totaled $7,893,352 and $8,648,209 at December 31, 2005 and      2004, respectively. An allowance for loan losses of $1,234,450 and      $1,145,381 relates to impaired loans of $6,169,330 and $6,073,066, at      December 31, 2005 and 2004, respectively. At December 31, 2005 and 2004,      impaired loans of $1,724,023 and $2,575,143 had no related allowance for      loan losses.       Interest of $504,291, $575,483 and $590,645 was recognized on average      impaired loans of $7,442,377, $8,159,341 and $8,770,270 for 2005, 2004 and      2003. Interest of $457,973, $563,544 and $575,749 was recognized on      impaired loans on a cash basis during 2005, 2004 and 2003.       At December 31, 2005 and 2004, accruing loans delinquent 90 days or more      totaled $1,406,488 and $326,000, respectively. Non-accruing loans at      December 31, 2005 and 2004 were $12,848 and $117,000, respectively.  NOTE 5: PREMISES AND EQUIPMENT       Major classifications of premises and equipment, stated at cost, are as follows:                                        2005          2004                                 -----------   -----------    Land                            $   932,205   $   533,370 Buildings and improvements        3,030,686     2,756,769 Leasehold improvements              445,016       445,063 Equipment                         4,628,431     4,083,388 Construction in progress          1,937,167            --                                 -----------   -----------                                  1,0973,505     7,818,590 Less accumulated depreciation    (4,587,431)   (4,730,349)                                 -----------   -----------    Net premises and equipment   $ 6,386,074   $ 3,088,241                                 ===========   ===========                                           64                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The Company is expanding and renovating its Operations Center in Paris,      Illinois to house its entire banking operations in Paris, Illinois. As a      result of the renovation and expansion, the Company signed an agreement for      approximately $5.6 million. The Company's remaining commitment to complete      the project is approximately $3.7 million. The project is expected to be      completed in 2006.       The Company has also entered into an agreement with a building contractor      to design and build a branch bank building to be located in Martinsville,      Illinois. The cost of the building is not to exceed $213,000. The building      is scheduled to be completed and occupied in May, 2006.  NOTE 6: GOODWILL       Goodwill of $541,474 was acquired in the year ended December 31, 2005. See      Note 22.       All goodwill is allocated to the banking segment of the business. The fair      value of the banking segment of the business was estimated using the      expected value of future cash flows.  NOTE 7: CORE DEPOSIT INTANGIBLES       The carrying basis and accumulated amortization of core deposit intangibles      of December 31, 2005 and 2004 were:                                            2005                            2004                            -----------------------------   -----------------------------                            GROSS CARRYING    ACCUMULATED   GROSS CARRYING    ACCUMULATED                                AMOUNT       AMORTIZATION       AMOUNT       AMORTIZATION                            --------------   ------------   --------------   ------------      Core deposit intangibles      $540,692         $56,940        $118,564         $14,820                               ========         =======        ========         =======        Amortization expense for the years ended December 31, 2005, 2004 and 2003      was $42,120, $11,856 and $2,964, respectively. Estimated amortization      expense for each of the following five years is:     2006   $65,816 2007    62,096 2008    58,455 2009    54,891 2010    51,848                                           65                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 8: LOAN SERVICING       Loans serviced for others are not included in the accompanying consolidated      balance sheets. The unpaid principal balances of serviced loans consist of      the following:                                               2005          2004                                        -----------   -----------    One-to-four family residential loans    FHLMC                               $72,383,496   $73,340,858    IHDA                                 10,226,052     8,340,792                                        -----------   -----------                                         82,609,548    81,681,650 Agricultural loans    Farmer Mac                              280,350       292,831    Other investors                       9,157,874    11,142,039                                        -----------   -----------                                        $92,047,772   $93,116,520                                        ===========   ===========        Custodial escrow balances maintained in connection with the foregoing loan      servicing, and included in demand deposits, were $243,566, $207,507 and      $185,373 at December 31, 2005, 2004 and 2003, respectively.       The aggregate fair value of capitalized loan servicing rights at December      31, 2005, 2004 and 2003 totaled $1,342,246, $1,107,401 and $1,108,449,      respectively. Comparable market values and a valuation model that      calculates the present value of future cash flows were used to estimate      fair value. For purposes of measuring impairment, risk characteristics      including product type, and interest rate, were used to stratify the      originated loan servicing rights. The carrying value of capitalized loan      servicing rights are as follows:                                             2005        2004         2003                                       ---------   ----------   ----------     Loan Servicing Rights    Balance, beginning of year         $ 780,828   $1,230,663   $1,632,667    Servicing rights capitalized         168,305      180,347      446,742    Amortization of servicing rights    (486,792)    (630,182)    (848,746)                                       ---------   ----------   ----------                                         462,341      780,828    1,230,663    Valuation allowance                       --      (24,191)    (266,639)                                       ---------   ----------   ----------    Balance, end of year               $ 462,341   $  756,637   $  964,024                                       =========   ==========   ==========                                           66                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       Activity in the valuation allowance for loan servicing rights was as      follows:                                   2005        2004        2003                              --------   ---------   ---------     Balance, beginning of year   $ 24,191   $ 266,639   $ 683,087    Additions                    1,739          --          --    Reductions                 (25,930)   (242,448)   (416,448)    Direct write-downs              --          --          --                              --------   ---------   --------- Balance, end of year         $      0   $  24,191   $ 266,639                              ========   =========   =========   NOTE 9: INTEREST-BEARING DEPOSITS       Interest-bearing deposits in denominations of $100,000 or more were      $51,370,576 on December 31, 2005 and $43,690,393 on December 31, 2004.       At December 31, 2005, the scheduled maturities of time deposits are as      follows:     2006         $ 65,636,386 2007           19,533,133 2008            8,757,793 2009            7,001,103 2010            3,769,387 Thereafter      1,406,569              ------------              $106,104,371              ============   NOTE 10: FEDERAL HOME LOAN BANK ADVANCES AND OTHER DEBT                                                                       2005          2004                                                                -----------   -----------    Federal Home Loan Bank open line of credit, variable rate,    4.41% at December 31, 2005                                  $ 7,000,000   $        -- Federal Home Loan Bank advances, fixed rates ranging from    2.62% to 5.32% at December 31, 2005, due at various dates    through September 2011                                       36,200,000    40,500,000                                                                -----------   -----------                                                                $43,200,000   $40,500,000                                                                ===========   ===========                                           67                             FIRST BANC TRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The Federal Home Loan Bank advances are secured by first-mortgage loans,      certain mortgage and other investment securities, and all Federal Home Loan      Bank stock owned by the Company. Advances are subject to restrictions or      penalties in the event of prepayment. Convertible advances of $20,500,000      have specific lock-out periods, usually two or three years, after which the      Federal Loan Bank has the option to convert the advance to a quarterly      adjustable rate loan, with the option of prepayment at the conversion date,      or on any future date of rate adjustment. All convertible advances are past      the initial lock-out period, and are subject to possible conversion to an      adjustable rate advance on a quarterly basis.       Aggregate annual maturities of Federal Home Loan Bank advances at December      31, 2005, are:     2006         $ 8,400,000 2008           5,300,000 After 2010    22,500,000              -----------              $36,200,000              ===========   NOTE 11: JUNIOR SUBORDINATED DEBENTURES       On June 15, 2005, the Company completed the issuance and sale of $6.0      million of trust preferred securities through FBTC Statutory Trust I (the      "Trust"), a statutory business trust and wholly-owned subsidiary of the      Company, as part of a pooled offering. The Company established the Trust      for the purpose of issuing the trust preferred securities and investing the      proceeds from the sale of such trust preferred securities in the      debentures. The $6.0 million in proceeds from the trust preferred issuance      and an additional $186,000 for the Company's investment in the common      equity of the Trust, a total of $6,186,000 was invested in the junior      subordinated debentures of the Company. The debentures issued by the      Company to the Trust are first redeemable, in whole or part, by the      Company, on June 15, 2010, and mature on June 15, 2035. Interest is fixed      at 5.80% for a period of five years, then converts to a floating rate.      Interest payments are made quarterly beginning in September, 2005.       As required by FIN 46R, the Company has not consolidated the investment in      the Trust. The debentures held by the Trust are the sole assets of the      Trust. Distributions of the trust preferred securities are payable at a      rate of interest which is equal to the interest rate being earned by the      Trust on the debentures, and are recorded as interest expense by the      Company. The trust preferred securities are subject to mandatory      redemption, in whole or in part, upon repayment of the debentures. The      trust preferred securities issued by the trust are included as Tier I      capital of the Company for regulatory capital purposes.                                          68                              FIRST BANC TRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 12: INCOME TAXES       The provision for income taxes includes these components:                                   2005       2004       2003                             ---------   --------   --------     Taxes currently payable    Federal                  $ 502,705   $366,860   $647,785    State                           --     66,950    125,972 Deferred income taxes    Federal                   (291,959)    88,432    131,243    State                      102,526     16,881     26,501                             ---------   --------   --------       Income tax expense    $ 313,272   $539,123   $931,501                             =========   ========   ========        A reconciliation of income tax expense at the statutory rate to the      Company's actual income tax expense is shown below:                                                     2005        2004        2003                                               ---------   ---------   ---------     Computed at the statutory rate (34%)          $ 530,729   $ 600,731   $ 979,506 Increase (decrease) resulting from    Tax exempt interest                         (198,900)   (135,071)   (100,617)    State income taxes                            67,667      55,329     100,632    Increase in cash surrender value of life       insurance                                 (58,513)    (59,313)    (55,811)    Other                                        (27,711)     77,447       7,791                                               ---------   ---------   ---------       Actual tax expense                      $ 313,272   $ 539,123   $ 931,501                                               =========   =========   =========                                           69                              FIRST BANC TRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The tax effects of temporary differences related to deferred taxes shown on      the balance sheets were:                                                                2005          2004                                                         -----------   -----------    Deferred tax assets    Allowance for loan losses                            $ 1,033,361   $   922,721    Reserve for uncollected interest                          12,984        17,168    Deferred compensation                                    135,178        95,848    Unrealized losses on available-for-sale securities       427,283            --    Net operating losses                                     946,366            --    Other                                                     48,734        58,099                                                         -----------   -----------                                                           2,603,907     1,093,836                                                         -----------   -----------  Deferred tax liabilities    Depreciation                                             (58,706)     (227,728)    Unrealized gains on available-for-sale securities             --      (274,072)    Federal Home Loan Bank stock dividends                  (616,098)     (362,357)    Capitalized loan servicing rights                       (174,326)     (276,661)    Purchase accounting difference                          (337,314)           --    Other                                                    (35,952)      (62,633)                                                         -----------   -----------                                                          (1,222,396)   (1,203,451)                                                         -----------   -----------       Net deferred tax asset (liability)                $ 1,381,511   $  (109,615)                                                         ===========   ===========        The Company received net operating losses from the acquisition of Rantoul      First Bank, SB. The net operating losses totaling $2,439,088 can be      utilized by the Company and expire in 2020.       Retained earnings at December 31, 2005 and 2004, include approximately      $2,573,000 and $2,000,000 for which no deferred federal income tax      liability has been recognized. This amount represents an allocation of      income to bad debt deductions for tax purposes only. Reduction of amounts      so allocated for purposes other than tax bad debt losses or adjustments      arising from carryback of net operating losses would create income for tax      purposes only, which would be subject to the then-current corporate income      tax rate. The deferred income tax liabilities on the preceding amounts that      would have been recorded if they were expected to reverse into taxable      income in the foreseeable future were approximately $998,324 and $776,000      at December 31, 2005 and 2004.                                          70                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 13: OTHER COMPREHENSIVE INCOME (LOSS)       Other comprehensive income (loss) components and related taxes were as follows:                                                        2005        2004         2003                                                 -----------   --------   -----------     Unrealized gains (loss) on available-for-sale    securities                                   $(1,664,047)  $198,109   $  (966,345) Less reclassification adjustment for realized    gains included in income                         117,959     97,036       133,965                                                 -----------   --------   -----------    Other comprehensive income (loss),       before tax effect                          (1,782,006)   101,073    (1,100,310) Tax expense (benefit)                              (701,356)    41,439      (462,646)                                                 -----------   --------   -----------    Other comprehensive income (loss)            $(1,080,650)  $ 59,634   $  (637,664)                                                 ===========   ========   ===========   NOTE 14: STOCKHOLDERS' EQUITY       On April 19, 2004, the Board of Directors of the Company approved a two for      one stock split of the Company's common stock payable as a 100% stock      dividend on May 21, 2004 to shareholders of record on April 30, 2004. Prior      period financial information has been adjusted to reflect the stock split.       The Company and Bank are subject to various regulatory capital requirements      administered by the federal banking agencies. Failure to meet minimum      capital requirements can initiate certain mandatory and possibly additional      discretionary actions by regulators that, if undertaken, could have a      direct material effect on the Company and Bank's financial statements.      Under capital adequacy guidelines and the regulatory framework for prompt      corrective action, the Company and Bank must meet specific capital      guidelines that involve quantitative measures of assets, liabilities, and      certain off-balance-sheet items as calculated under regulatory accounting      practices. The capital amounts and classification are also subject to      qualitative judgments by the regulators about components, risk weightings      and other factors.       Quantitative measures established by regulation to ensure capital adequacy      require the Company to maintain minimum amounts and ratios (set forth in      the following table). Management believes, as of December 31, 2005 and      2004, that the Company and Bank meet all capital adequacy requirements to      which they are subject.       As of December 31, 2005, the most recent notification from the regulatory      agencies categorized the Company and Bank as well capitalized under the      regulatory framework for prompt corrective action. To be categorized as      well capitalized, the Company and Bank must maintain capital ratios as set      forth in the table. There are no conditions or events since that      notification that management believes have changed the Company and Bank's      category.                                          71                                FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The Company and Bank's actual capital amounts and ratios are also presented in the following table.                                                                             TO BE WELL                                                                         CAPITALIZED                                                                         UNDER PROMPT                                                       FOR CAPITAL        CORRECTIVE                                                         ADEQUACY           ACTION                                        ACTUAL           PURPOSES         PROVISIONS                                   ---------------   ---------------   ---------------                                    AMOUNT   RATIO    AMOUNT   RATIO    AMOUNT   RATIO                                   -------   -----   -------   -----   -------   -----                                                  (DOLLARS IN THOUSANDS)        As of December 31, 2005    Total capital       (to risk-weighted assets)       Consolidated                $33,419   20.5%   $13,028    8.0%              N/A       Bank                         31,754   19.6     12,961    8.0    $16,202   10.0  Tier I capital       (to risk-weighted assets)       Consolidated                 31,376   19.3      6,514    4.0               N/A       Bank                         29,721   18.3      6,481    4.0      9,721    6.0  Tier I capital       (to average assets)       Consolidated                 31,376   12.0     10,454    4.0               N/A       Bank                         29,721   11.4     10,432    4.0     13,040    5.0  As of December 31, 2004    Total capital       (to risk-weighted assets)       Consolidated                $28,581   23.1%   $ 9,822    8.0%              N/A       Bank                         26,409   21.6      9,788    8.0    $12,235   10.0  Tier I capital       (to risk-weighted assets)       Consolidated                 27,028   21.9      4,941    4.0               N/A       Bank                         24,871   20.3      4,894    4.0      7,341    6.0  Tier I capital       (to average assets)       Consolidated                 27,028   12.1      8,962    4.0               N/A       Bank                         24,871   11.2      8,904    4.0     11,137    5.0        The Bank is permitted to pay dividends to the Company in an amount equal to      its net profits in any fiscal year; however, in the event that capital is      less than 6% to total assets, the Bank can pay up to 50% of its net profits      for that year without prior approval of the State of Illinois Office of      Banks and Real Estate. In addition, the Bank is unable to pay dividends in      an amount which would reduce its capital below the greater of (i) the      amount required by the FDIC or (ii) the amount required by the Bank's      liquidation account. The FDIC and the Commissioner also have the authority      to prohibit the payment of any dividends by the Bank if they determine that      the distribution would constitute an unsafe or unsound practice. At      December 31, 2005, the Bank could declare up to approximately $1,235,000      without receiving regulatory approval.                                          72                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 15: RELATED PARTY TRANSACTIONS       At December 31, 2005 and 2004, the Company had loans outstanding to      executive officers, directors, significant stockholders and their      affiliates (related parties).       The aggregate amount of loans, as defined, to such related parties were as follows:     Balance, January 1, 2005                      $ 487,298    Change in composition of related parties     137,655    New loans, including renewals                157,881    Payments, etc., including renewals          (201,308)                                               --------- Balance, December 31, 2005                    $ 581,526                                               =========        In management's opinion, such loans and other extensions of credit were      made in the ordinary course of business and were made on substantially the      same terms (including interest rates and collateral) as those prevailing at      the time for comparable transactions with other persons. Further, in      management's opinion, these loans did not involve more than normal risk of      collectibility or present other unfavorable features.  NOTE 16: EMPLOYEE BENEFIT PLANS       The Company has a retirement savings 401(k) covering substantially all      employees. The Company may contribute to the plan at the discretion of the      Board of Directors. Employer contributions charged to expense for 2005,      2004 and 2003 were $5,289, $4,109 and $4,240, respectively.       The Company also maintains a voluntary employee's benefit association      (VEBA) for the benefit of substantially all of its full-time employees.      Those benefits available under the VEBA include major medical, life,      accidental death and dismemberment, and disability insurance. These      benefits are available to all employees who have attained a minimum age and      length of service. The VEBA is funded through voluntary contributions from      employees and contributions of the Company. Employer contributions totaled      $325,000, $400,000 and $338,000 for the years ended December 31, 2005, 2004      and 2003. The VEBA has been determined to be a tax-exempt organization with      its fiscal year ending December 31.       The Company has a deferred director fee plan covering certain directors      whereby each director may elect to defer their annual fees. For the years      ended December 31, 2005, 2004 and 2003, fees deferred and interest expense      related to the plan totaled $74,908, $69,745 and $58,761, respectively. The      liability related to these plans was $347,641 and $272,733 as of December      31, 2005 and 2004.                                          73                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The Company also has deferred compensation agreements with certain      directors and officers of the former Rantoul First Bank, SB. The      agreements, which include specific service requirements, provide benefits      to certain retired directors and officers upon attainment of specified      ages, disability or death. The deferred compensation changed to earnings      were $3,900 for the year ended December 31, 2005. The deferred compensation      liability related to these agreements was $161,921 as of December 31, 2005.  NOTE 17: EMPLOYEE STOCK OWNERSHIP PLAN       The Company has an employee stock ownership plan (ESOP) covering      substantially all employees who work 20 or more hours per week. The ESOP      borrowed $1,406,297 from the Company and used those funds to acquire      243,340 shares of the Company's common stock at an average price of $5.78.       Shares issued to the ESOP are allocated to ESOP participants based on      principal repayments made by the ESOP on the loan from the Company. The      loan is secured by shares purchased with the loan proceeds and will be      repaid by the ESOP with funds from the Bank's discretionary contributions      to the ESOP and earnings on ESOP assets. Dividends on unallocated ESOP      shares will be applied to reduce the loan. Principal payments are scheduled      to occur in even annual amounts over an eight year period. However, in the      event contributions exceed the minimum debt service requirements,      additional principal payments will be made.       Stock totaling 30,408 shares for 2005, 2004 and 2003 with an average fair      value of $12.43, $12.40 and $10.35 were committed to be released, resulting      in ESOP compensation expense of $378,050, $376,999 and $314,833 for 2005,      2004 and 2003, respectively. The ESOP shares as of December 31 were as      follows:                                            2005         2004         2003                                      ----------   ----------   ----------     Allocated shares                        144,438      114,030       83,622 Shares released for allocation               --           --           -- Unreleased shares                        98,902      129,310      159,718                                      ----------   ----------   ----------    Total ESOP shares                    243,340      243,340      243,340                                      ==========   ==========   ========== Fair value of unreleased shares at    December 31                       $1,211,550   $1,533,617   $1,936,581                                      ==========   ==========   ==========        The Company is obligated at the option of each beneficiary to repurchase      shares of the ESOP upon the beneficiary's termination or after retirement.      At December 31, 2005, the fair value of the 144,438 allocated shares held      by the ESOP is $1,769,366.                                          74                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 18: INCENTIVE PLAN       The Company has a stock award program or incentive plan which provides for      the award and issuance of up to 121,670 shares of the Company stock to      members of the Board of Directors and management. The incentive plan      purchased 121,670 shares of the Company stock in the open market in 2002.       At December 31, 2005, 119,576 shares had been awarded. In 2002, the Company      awarded 65,576 shares under the incentive plan which vests ratably over a      five-year period, commencing with the date of the award. An additional      54,000 shares were awarded in December 2005 to members of the Board of      Directors and management which will vest according to a defined schedule      based on meeting defined financial performance goals over the next five      year period. Expense recognized under the incentive plan totaled $109,632      for 2005, 2004 and 2003.  NOTE 19: STOCK OPTION PLAN       The Company has a fixed option plan under which the Company may grant      options that vest over five years to selected employees for up to 304,174      shares of common stock. The exercise price of each option is intended to      equal the fair value of the Company's stock on the date of grant. An      option's maximum term is ten years. In December 2005, the Company      accelerated the vesting of 182,504 options on shares of the Company's      stock. The exercise price and remaining terms of the options remained the      same. As of December 31, 2005, all of the stock options are fully vested.       A summary of the status of the plan at December 31, 2005, 2004 and 2003,      and changes during the years then ended is presented below:                                              2005                 2004                 2003                                    ------------------   ------------------   ------------------                                              WEIGHTED             WEIGHTED             WEIGHTED                                              -AVERAGE             -AVERAGE             -AVERAGE                                              EXERCISE             EXERCISE             EXERCISE                                     SHARES     PRICE     SHARES     PRICE     SHARES     PRICE                                    -------   --------   -------   --------   -------   --------        Outstanding, beginning of year     304,174     $9.87    304,174     $9.87         --     $9.87    Granted                              --                   --              304,174    Exercised                         4,200                   --                   --    Forfeited                            --                   --                   --    Expired                              --                   --                   --                                    -------              -------              ------- Outstanding, end of year           299,974     $9.87    304,174     $9.87    304,174     $9.87                                    =======              =======              ======= Options exercisable, end of year   299,974               60,835                   --                                    =======              =======              =======                                           75                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The fair value of options granted is estimated on the date of the grant      using an option-pricing model with the following weighted-average      assumptions:                                                                        2003                                                                  ---------   Dividend yields                                                       1.89% Volatility factors of expected market price of common stock          17.00% Risk-free interest rates                                              4.70% Expected life of options                                          10 years Weighted-average fair value of options granted during the year   $    2.25        The following table summarizes information about stock options under the      plan outstanding at December 31, 2005:                                              OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE                                ----------------------------------------   ------------------------------                                   WEIGHTED-AVERAGE                     NUMBER     REMAINING CONTRACTUAL   WEIGHTED-AVERAGE      NUMBER     WEIGHTED-AVERAGE EXERCISE PRICE   OUTSTANDING            LIFE            EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE - --------------   -----------   ---------------------   ----------------   -----------   ----------------            $9.87         299,974           7.3 years               $9.87          299,974           $9.87   NOTE 20: LEASES       The Company has several noncancellable operating leases, including a      building lease for the Savoy facility, and leases for other various types      of equipment, including imaging equipment and other computer and network      components. The building lease was originated in 2004 for a term of five      years, with a renewal option for an additional five year term, and requires      the lessee to pay all executory costs such as real estate taxes,      maintenance and insurance. The equipment operating leases expire over the      next five years, and generally contain renewal options for one year to five      years. Total rental expense for all operating leases was $460,792, $389,000      and $250,000 for the years ended December 31, 2005, 2004 and 2003,      respectively.       Future minimum lease payments under operating leases are:     2006                              $327,723 2007                               180,205 2008                               138,969 2009                                93,969 2010                                11,489                                   --------    Total minimum lease payments   $752,355                                   ========                                           76                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 21: EARNINGS PER SHARE       Earnings per share (EPS) were computed as follows:                                                    YEAR ENDED DECEMBER 31, 2005                                              ----------------------------------                                                           WEIGHTED-                                                            AVERAGE    PER SHARE                                                INCOME       SHARES      AMOUNT                                              ----------   ---------   ---------     Net income                                   $1,247,695   2,237,853 Basic earnings per share    Income available to common stockholders                              $0.56                                                                         ===== Effect of dilutive securities    Stock options                                             52,146    Unearned incentive plan shares                            87,132                                              ----------   --------- Diluted earnings per share    Income available to common       stockholders and assumed conversions   $1,247,695   2,377,131     $0.52                                              ==========   =========     =====                                                    YEAR ENDED DECEMBER 31, 2004                                              ----------------------------------                                                           WEIGHTED-                                                            AVERAGE    PER SHARE                                                INCOME       SHARES      AMOUNT                                              ----------   ---------   ---------     Net income                                   $1,227,733   2,264,866 Basic earnings per share    Income available to common stockholders                              $0.54                                                                         ===== Effect of dilutive securities    Stock options                                             51,664    Unearned incentive plan shares                           102,414                                              ----------   --------- Diluted earnings per share    Income available to common       stockholders and assumed conversions   $1,227,733   2,418,944     $0.51                                              ==========   =========     =====                                           77                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004                                                    YEAR ENDED DECEMBER 31, 2003                                              ----------------------------------                                                           WEIGHTED-                                                            AVERAGE    PER SHARE                                                INCOME       SHARES      AMOUNT                                              ----------   ---------   ---------     Net income                                   $1,949,399   2,288,610 Basic earnings per share    Income available to common stockholders                              $0.85                                                                         ===== Effect of dilutive securities    Stock options                                             23,182    Unearned incentive plan shares                           100,428                                              ----------   --------- Diluted earnings per share    Income available to common       stockholders and assumed conversions   $1,949,399   2,412,220     $0.81                                              ==========   =========     =====                                           78                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 22: ACQUISITION       On October 1, 2005, the Company acquired all of the outstanding common      stock of Rantoul First Bank, SB located in Rantoul, Illinois. This      acquisition expands the Company's banking presence in east Central Illinois      into Rantoul and surrounding communities. Under the terms of the agreement,      the Company acquired all of the outstanding shares of common stock for      $22.10 per share for a total purchase price of $4.2 million. The      transaction has been accounted for as a purchase, and the results of      operations of both entities since the acquisition date have been included      in the consolidated financial statements. The following table summarizes      the estimated fair values of the assets acquired and liabilities assumed at      the date of this transaction.     Cash and cash equivalents                             $ 1,972,552 Securities                                              9,503,128 Loans, net of allowance for loan losses of $200,201    14,504,337 Premises and equipment                                  1,387,844 Federal Home Loan Bank stock                            2,120,800 Foreclosed assets held for sale, net                      640,136 Interest receivable                                       162,955 Deferred income taxes                                     600,337 Goodwill                                                  541,474 Core deposit intangibles                                  422,128 Other assets                                              179,802                                                       -----------     Total assets acquired                               32,035,492  Deposits                                               26,736,981 Federal Home Loan Bank advances                           700,000 Other liabilities                                         292,519                                                       -----------     Total liabilities assumed                           27,729,500                                                       -----------     Net assets acquired                                $ 4,305,992                                                       ===========        Transaction costs related to the completion of the transaction totaled      $85,754. The fair value of deposits acquired in the transaction exceeded      the book value, resulting in a core deposit intangible asset of $422,000,      which will be amortized over 10 years. The total fair value of the assets      and liabilities acquired exceeded the book value, resulting in goodwill of      $541,474, which is not subject to amortization. The core deposit intangible      and goodwill are not deductible for tax purposes.                                          79                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The results of operations relating to Rantoul First Bank, SB, have been      reflected in the Company's consolidated statements of income beginning as      of the acquisition date. The following proforma disclosures, including the      effect of the purchase accounting adjustments, depict the results of      operations as though the merger had taken place at the beginning of each      period.                                        YEAR ENDED DECEMBER 31,                              ------------------------------------                                 2005         2004         2003                              ----------   ----------   ----------     Net interest income          $8,088,751   $8,010,483   $7,791,962 Net income                    1,024,773      937,813    1,341,291 Basic earnings per share           0.46         0.41         0.58 Diluted earnings per share         0.43         0.39         0.56                                           80                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 23: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS       The following table presents estimated fair values of the Company's      financial instruments. The fair values of certain of these instruments were      calculated by discounting expected cash flows, which method involves      significant judgments by management and uncertainties. Fair value is the      estimated amount at which financial assets or liabilities could be      exchanged in a current transaction between willing parties, other than in a      forced or liquidation sale. Because no market exists for certain of these      financial instruments and because management does not intend to sell these      financial instruments, the Company does not know whether the fair values      shown below represent values at which the respective financial instruments      could be sold individually or in the aggregate.                                         DECEMBER 31, 2005             DECEMBER 31, 2004                                 ---------------------------   ---------------------------                                   CARRYING         FAIR         CARRYING         FAIR                                    AMOUNT          VALUE         AMOUNT          VALUE                                 ------------   ------------   ------------   ------------      Financial assets    Cash and cash equivalents    $ 12,447,133   $ 12,447,133   $  9,113,430   $  9,113,430    Available-for-sale       securities                  76,424,175     76,424,175     83,944,308     83,944,308    Held-to-maturity       securities                   3,437,417      3,383,547      4,778,380      4,830,587    Loans held for sale               642,198        642,198        137,925        138,761    Loans, net allowance of       loan losses                156,884,910    155,150,383    117,447,638    115,768,239    Federal Home Loan Bank       stock                        6,608,412      6,608,412      4,255,500      4,255,500    Interest receivable             2,415,689      2,415,689      2,178,945      2,178,945  Financial liabilities    Deposits                      193,975,267    193,904,000    159,471,065    158,999,530    Federal funds purchased         2,500,000      2,500,000      2,000,000      2,000,000    Federal Home Loan Bank       advances                    43,200,000     43,022,000     40,500,000     40,001,000    Junior subordinated       debentures                   6,186,000      6,402,000             --             --    Pass through payments       received on loans sold          74,695         74,695         60,194         60,194    Advances by borrowers       for taxes and insurance        189,366        189,366        137,889        137,889    Interest payable                  245,118        245,118        136,369        136,369 Unrealized financial    instruments (net of    contract amount)    Commitments to originate       loans                                0              0              0              0    Lines of credit                         0              0              0              0                                           81                             FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       The following methods and assumptions were used to estimate the fair value      of each class of financial instruments.  CASH AND CASH EQUIVALENTS AND FEDERAL HOME LOAN BANK STOCK       The carrying amount approximates fair value.  SECURITIES       Fair values equal quoted market prices, if available. If quoted market      prices are not available, fair value is estimated based on quoted market      prices of similar securities.  LOANS HELD FOR SALE       For homogeneous categories of loans, such as loans held for sale, fair      value is estimated using the quoted market prices for securities backed by      similar loans, adjusted for differences in loans characteristics.  LOANS       The fair value of loans is estimated by discounting the future cash flows      using the current rates at which similar loans would be made to borrowers      with similar credit ratings and for the same remaining maturities. Loans      with similar characteristics were aggregated for purposes of the      calculations. The carrying amount of accrued interest approximates its fair      value.  DEPOSITS       The fair value of demand deposits, savings accounts, NOW accounts, and      certain money market deposits is the amount payable on demand at the      reporting date, i.e., their carrying amount. The fair value of      fixed-maturity time deposits is estimated using a discounted cash flow      calculation that applies the rates currently offered for deposits of      similar remaining maturities. The carrying amount of accrued interest      payable approximates its fair value.  FEDERAL HOME LOAN BANK ADVANCES AND JUNIOR SUBORDINATED DEBENTURES       Rates currently available to the Company for debt with similar terms and      remaining maturities are used to estimate fair value of existing debt.  FEDERAL FUNDS PURCHASED, PASS THROUGH PAYMENTS RECEIVED ON LOAN SOLD AND ADVANCE PAYMENTS BY BORROWERS FOR TAXES AND INSURANCE       The fair value approximates the carrying value.                                          82                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  COMMITMENTS TO ORIGINATE LOANS AND LINES OF CREDIT       The fair value of commitments is estimated using the fees currently charged      to enter into similar agreements, taking into account the remaining terms      of the agreements and the present creditworthiness of the counterparties.      The fair value of lines of credit is based on fees currently charged for      similar agreements or on the estimated cost to terminate or otherwise      settle the obligations with the counterparties at the reporting date.  NOTE 24: SIGNIFICANT ESTIMATES AND CONCENTRATIONS       Accounting principles generally accepted in the United States of America      require disclosure of certain significant estimates and current      vulnerabilities due to certain concentrations. Estimates related to the      allowance for loan losses, loan servicing rights, foreclosed assets held      for sale, and amortization of premiums on mortgage backed securities and      collateralized mortgage obligations are reflected in the footnotes      regarding loans, loan servicing rights, foreclosed assets held for sale,      and securities. Current vulnerabilities due to certain concentrations of      credit risk are discussed in the footnote on commitments and credit risk.  NOTE 25: COMMITMENTS, CREDIT RISK, AND CONTINGENT LIABILITIES       The Company generates commercial, mortgage and consumer loans and receives      deposits from customers located primarily in Edger, Clark, Vermilion and      Champaign counties as well as the surrounding communities. The Company's      loans are generally secured by specific items of collateral including real      property, consumer assets and business assets. Although the Company has a      diversified loan portfolio, a substantial portion of its debtors' ability      to honor their contracts is dependent upon economic conditions in the      agricultural industry.  COMMITMENTS TO ORIGINATE LOANS       Commitments to originate loans 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 a portion of the      commitments may expire without being drawn upon, the total commitment      amounts do not necessarily represent future cash requirements. Each      customer's creditworthiness is evaluated on a case-by-case basis. The      amount of collateral obtained, if deemed necessary, is based on      management's credit evaluation of the counterparty. Collateral held varies,      but may include accounts receivable, inventory, property, plant and      equipment, commercial real estate and residential real estate.                                          83                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       At December 31, 2005 and 2004, the Company had outstanding commitments to      originate loans aggregating approximately $7,214,425 and $4,804,275,      respectively. The commitments extended over varying periods of time with      the majority being disbursed within a one-year period. Loan commitments at      fixed rates of interest amounted to $5,327,800 and $3,188,325 at December      31, 2005 and 2004, respectively, with the remainder at floating market      rates.  LINES OF CREDIT       Lines of credit are agreements to lend to a customer as long as there is no      violation of any condition established in the contract. Lines of credit      generally have fixed expiration dates. Since a portion of the line may      expire without being drawn upon, the total unused lines do not necessarily      represent future cash requirements. Each customer's creditworthiness is      evaluated on a case-by-case basis. The amount of collateral obtained, if      deemed necessary, is based on management's credit evaluation of the      counterparty. Collateral held varies but may include accounts receivable,      inventory, property, plant and equipment, commercial real estate and      residential real estate. Management uses the same credit policies in      granting lines of credit as it does for on-balance-sheet instruments.       At December 31, 2005, the Company had granted unused lines of credit to      borrowers aggregating approximately $8,491,906 and $4,746,217 for      commercial lines and open-end consumers lines, respectively. At December      31, 2004, unused lines of credit to borrowers aggregated approximately      $7,214,627 for commercial lines and $3,796,167 for open-end consumer lines.  OTHER CREDIT RISKS AND CONTINGENT LIABILITIES       The Company had a concentration of funds on deposit with the Federal Home      Loan Bank totaling $5,526,245 and $3,447,500 at December 31, 2005 and 2004.      The Company had deposits from two customers totaling approximately      $12,259,000 as of December 31, 2005.  NOTE 26: FUTURE CHANGE IN ACCOUNTING PRINCIPLE       In December 2004, the Financial Accounting Standards Board (FASB) issued      Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based      Payment, which is a revision of SFAS No. 123, Accounting for Stock-based      Compensation, that sets accounting requirements for "share-based"      compensation to employees. This statement will require the Company to      recognize in the income statement the grant-date fair value of the stock      options and other equity-based compensation issued to employees, but      expresses no preference for a type of valuation model. This Statement is      effective on January 1, 2006. The unvested stock options that are      outstanding on the effective date of SFAS No. 123R that were previously      included as part of the net income in Note 1 will be charged to expense      over the remaining vesting period, without any changes in measurement. The      Company will adopt this Standard under the modified prospective method of      application. Under that method, the Company will recognize compensation      costs for new grants of share-based awards, awards modified after the      effective date, and the remaining portion of the unvested awards at the      adoption date. The adoption of SFAS No. 123R will not have an impact on                                          84                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004       the Company's results of operations, financial position or cash flows as      all stock options were vested as of December 31, 2005.  NOTE 27: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)       Presented below is condensed financial information as to financial      position, results of operations and cash flows of the Company:                              CONDENSED BALANCE SHEETS                                                              DECEMBER 31,                                                    -------------------------                                                        2005          2004                                                    -----------   -----------    ASSETS    Cash and due from banks                         $       175   $        --    Interest bearing demand deposits                    267,015       174,569                                                    -----------   -----------       Total cash and cash equivalents                  267,190       174,569    Available-for-sale securities                        65,859       897,041    ESOP loan to subsidiaries                           571,570       747,302    Premises and equipment                              152,240            --    Investment in consolidated subsidiaries:       First Bank & Trust, S.B                       30,373,683    25,287,540       ECS Service Corporation                          341,417       281,509       First Charter Service Corporation                 73,758        74,246    Investment in FBTC Statutory Trust                  186,000            --    Cash surrender value of life insurance               65,078        62,065    Other assets                                        158,970        93,810                                                    -----------   -----------       Total assets                                 $32,255,765   $27,618,082                                                    ===========   ===========  LIABILITIES    Junior subordinated debentures                  $ 6,186,000   $        --    Other liabilities                                    23,587        71,219                                                    -----------   -----------       Total liabilities                              6,209,587        71,219                                                    -----------   ----------- STOCKHOLDERS' EQUITY                                26,046,178    27,546,863                                                    -----------   -----------       Total liabilities and stockholders' equity   $32,255,765   $27,618,082                                                    ===========   ===========                                           85                              FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004                           CONDENSED STATEMENTS OF INCOME                                                           YEAR ENDING DECEMBER 31,                                                  ------------------------------------                                                     2005         2004         2003                                                  ----------   ----------   ----------     INCOME    Dividends from First Bank & Trust, S.B        $  150,000   $  500,000   $  500,000    Dividends from ECS Service Corporation                --      150,000           --    Interest and dividend income                      71,830       54,823       77,333    Net realized gains on sales of       available-for-sale securities                 117,959       97,036      132,965    Other income                                         113           55           --                                                  ----------   ----------   ----------       Total income                                  339,902      801,914      710,298                                                  ----------   ----------   ---------- EXPENSES-OTHER                                      564,200      364,437      266,494                                                  ----------   ----------   ---------- INCOME (LOSS) BEFORE INCOME TAX AND EQUITY IN    UNDISTRIBUTED INCOME OF SUBSIDIARIES            (224,298)     437,477      443,804 INCOME TAX BENEFIT                                 (147,331)     (84,876)     (16,157)                                                  ----------   ----------   ---------- INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED    INCOME OF SUBSIDIARIES                           (76,967)     522,353      459,961 EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES    1,324,662      705,380    1,489,438                                                  ----------   ----------   ---------- NET INCOME                                       $1,247,695   $1,227,733   $1,949,399                                                  ==========   ==========   ==========                                           86                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004                         CONDENSED STATEMENTS OF CASH FLOWS                                                               YEAR ENDING DECEMBER 31,                                                     --------------------------------------                                                         2005         2004          2003                                                     -----------   ----------   -----------     OPERATING ACTIVITIES    Net income                                       $ 1,247,695   $1,227,733   $ 1,949,399    Items not requiring (providing) cash       Net realized gains on available-for-sale          securities                                    (117,959)     (97,036)     (132,965)       Equity in undistributed income of          subsidiaries                                (1,324,662)    (705,380)   (1,389,438)    Changes in       Other assets                                      (68,171)     (93,810)        4,045       Other liabilities                                  13,735      (34,553)      (13,247)                                                     -----------   ----------   -----------       Net cash provided by operating activities        (249,362)     296,954       417,794                                                     -----------   ----------   -----------  INVESTING ACTIVITIES    Net change in ESOP loan                              175,733      175,732       175,732    Purchases of available-for-sale securities          (185,945)    (299,051)     (438,916)    Proceeds from the sales of available-for-sale       securities                                        985,299      514,235       416,855    Purchase of premises and equipment                  (152,240)          --            --    Purchase of life insurance policy                         --      (62,065)           --    Investment in FBTC Statutory Trust                  (186,000)          --            --    Purchase of Rantoul First Bank, SB                (4,305,992)          --            --                                                     -----------   ----------   -----------       Net cash provided by (used in) investing          activities                                  (3,669,145)     328,851       153,671                                                     -----------   ----------   -----------  FINANCING ACTIVITIES    Purchase of treasury stock                        (1,639,297)     (69,104)   (2,201,068)    Dividends paid                                      (581,970)    (574,768)     (449,249)    Issuance of long-term debt                         6,186,000           --            --    Exercise of stock options                             41,454           --            --    Tax benefit related to stock options exercised         4,941           --            --                                                     -----------   ----------   -----------       Net cash provided by (used in) financing          activities                                   4,011,128     (643,872)   (2,650,317)                                                     -----------   ----------   -----------  NET CHANGE IN CASH AND CASH EQUIVALENTS                  92,621      (18,067)   (2,078,852)  CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR          174,569      192,636     2,271,488                                                     -----------   ----------   -----------  CASH AND CASH EQUIVALENTS AT END OF YEAR            $   267,190   $  174,569   $   192,636                                                     ===========   ==========   ===========                                           87                               FIRST BANCTRUST CORPORATION                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            DECEMBER 31, 2005 AND 2004  NOTE 28: QUARTERLY FINANCIAL INFORMATION       The following is a summary of selected quarterly results of operations for      the years ended December 31, 2005 and 2004:                                                     QUARTER ENDED                                 -----------------------------------------------                                 DECEMBER 31   SEPTEMBER 30   JUNE 30   MARCH 31                                 -----------   ------------   -------   --------                                        (In thousands, except share data)      2005    Net interest income             $2,056        $1,863       $1,908    $1,839    Provision for loan losses          223            99           94        94    Noninterest income                 838           848          842       810    Noninterest expense              2,344         2,305        2,127     2,157    Income before income tax           327           307          529       398    Net income                         283           262          400       303     Basic earnings per share          0.13          0.12         0.18      0.13    Diluted earnings per share        0.12          0.11         0.17      0.12  2004    Net interest income              1,998         1,740        1,843     1,796    Provision for loan losses          127           126          112       150    Noninterest income                 847         1,022          853       747    Noninterest expense              2,250         2,171        2,097     2,046    Income before income tax           468           465          487       346    Net income                         378           299          324       226     Basic earnings per share          0.16          0.13         0.14      0.11    Diluted earnings per share        0.16          0.12         0.13      0.10                                           88                              FIRST BANCTRUST CORPORATION                              SHAREHOLDER INFORMATION  STOCK LISTING AND PRICE INFORMATION  The Company's common stock trades on the Nasdaq SmallCap Market under the symbol "FBTC". As of March 10, 2006, the number of outstanding shares of common stock of the Company totaled 2,367,450. These shares were held by 448 persons or entities, which does not individually count each person or entity holding stock in nominee of street name through various brokers or banks.  The following schedule shows the high and low bid prices for each of the quarters in 2003, 2004, and 2005:      Quarter Ended:      High    Low   --------------     -----   -----    March 31, 2003        9.08    8.30 June, 30 2003        11.04    8.93 September 30, 2003   11.85   10.25 December 31, 2003    12.48   11.63 March 31, 2004       13.07   11.75 June, 30 2004        13.32   12.25 September 30, 2004   12.53   11.50 December 31, 2004    12.74   11.80 March 31, 2005       12.89   11.71 June, 30 2005        12.65   10.85 September 30, 2005   12.90   12.59 December 31, 2005    12.90   11.95   At March 10, 2006 the closing price of a common share was $12.48. Such prices do not necessarily reflect retail markups, markdowns, or commissions. During the years ended December 31, 2003, 2004, and 2005, the Company declared dividends as follows:      Date Declared         Record Date         Payment Date         Amount   -------------      -----------------   -----------------   -------------     February 6, 2003     February 18, 2003   February 28, 2003      $0.025 May 15, 2003         May 27, 2003        June 10, 2003          $ 0.05 August 14, 2003      August 25, 2003     September 5, 2003      $ 0.05 November 13, 2003    November 24, 2003   December 8, 2003       $ 0.05 February 12, 2004    February 24, 2004   March 5, 2004          $ 0.05 March 25, 2004       April 30, 2004      May 21, 2004        2 for 1 split May 13, 2004         June 4, 2004        June 11, 2004          $ 0.06 August 12, 2004      August 30, 2004     September 8, 2004      $ 0.06 November 12, 2004    November 29, 2004   December 17, 2004      $ 0.06 February 10, 2005    February 25, 2005   March 8, 2005          $ 0.06 May 12, 2005         June 3, 2005        June 14, 2005          $ 0.06 August 11, 2005      August 26, 2005     September 9, 2005      $ 0.06 November 10, 2005    December 2, 2005    December 16, 2005      $ 0.06   All dividends per share have been adjusted to reflect the stock split.                                          89    Stockholders, investors and analysts interested in additional information may contact:  Sarah Aguirre Administrative Assistant First BancTrust Corporation 101 S. Central Avenue Paris, IL 61944-0880  ANNUAL REPORT ON FORM 10-K  A copy of the annual report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission is available to stockholders (excluding exhibits) at no charge, upon written request to Sarah Aguirre, Administrative Assistant, at the above address.  SPECIAL REGULATORY COUNSEL  Howard & Howard Attorneys, P.C. The Pinehurst Office Center, Suite 101 39400 Woodward Avenue Bloomfield Hills, MI 48304-5151  INDEPENDENT ACCOUNTANTS  BKD, LLP 225 North Water Street Suite 400 Decatur, IL 62525-1580  ANNUAL MEETING OF STOCKHOLDERS  The Annual Meeting of Stockholders of First BancTrust Corporation will be held at 10:00 a.m. April 17, 2006 at:  Human Resources Center 118 E. Court Street Paris, Illinois 61944  TRANSFER AGENT  Inquiries regarding stock transfer, registration, lost certificates or changes in name and address should be directed to the transfer agent:  Illinois Stock Transfer Company 209 W. Jackson Boulevard Suite 903 Chicago, Illinois 60606 (312) 427-2953                                          90                                        DIRECTORS  JOHN W. WELBORN Chairman of the Board;  Retired Facilities Manager, TRW, Inc., Marshall, Illinois  JOSEPH R. SCHROEDER Attorney in private practice with law firm of Bennett, Schroeder & Wieck, Marshall, Illinois  VICK N. BOWYER Co-owner and registered principal of  a Linsco/Private Ledger, a registered broker-dealer, Marshall, Illinois  JAMES D. MOTLEY Self employed owner of accounting firm James D. Motley, C.P.A. Paris, Illinois  TERRY T. HUTCHISON Self-employed Business Consultant in Paris, Illinois  DAVID W. DICK Senior Partner Gladding & Dick Insurance; agents for Country Insurance and Financial Services, Bloomington, Illinois;  Illinois licensed embalmer and funeral director  TERRY J. HOWARD President and Chief Executive Officer of the Company and First Bank                                 EXECUTIVE OFFICERS  TERRY J. HOWARD Director, President and Chief Executive Officer of the Company and First Bank  ELLEN M. LITTERAL Chief Financial Officer and Treasurer of the Company and Senior Vice President of First Bank  JACK R. FRANKLIN Sr. Vice President of the Company and President of the First Bank of Savoy, a branch of First Bank & Trust, s.b.  DAVID F. SULLIVAN Vice President of the Company and President of First Bank & Trust, Paris branch  LARRY W. STROHM Vice President of the Company and President of First Bank & Trust, Marshall branch                                  BANKING LOCATIONS                                     MAIN OFFICE                             206 South Central Avenue                               Paris, Illinois 61944                                  (217) 465-6381                                  OPERATIONS CENTER                             101 South Central Avenue                               Paris, Illinois 61944                                   BRANCH OFFICES                             610 North Michigan Avenue                             Marshall, Illinois 62441                                  (217) 826-6308                                1251 Woodfield Drive                               Savoy, Illinois 61874                                  (217) 351-3526                               1500 East Grove Avenue                              Rantoul, Illinois 61866                                  (217) 893-8100                                          91    EX-14.0 7 c03489exv14w0.txt CODE OF ETHICS                                                                          EXHIBIT 14                                 FIRST BANK & TRUST                        BUSINESS ETHICS AND CODE OF CONDUCT  The successful business operation and reputation of First Bank & Trust is built upon the principles of fair dealing and ethical conduct of our employees. Our reputation for integrity and excellence requires careful observance of the spirit and letter of all applicable laws and regulations, as well as a scrupulous regard for the highest standards of conduct and personal integrity.  The continued success of First Bank & Trust is dependent upon our customers' trust, and we are dedicated to preserving that trust. Employees owe a duty to First Bank & Trust and to its customers to act in a way that will merit the continued trust and confidence of the public. First Bank & Trust recognizes the need for highly confidential information from customers in order to conduct banking transactions. First Bank & Trust will do everything within our control to use this information only for the business purpose intended.  First Bank & Trust will comply with all applicable laws and regulations and expects its directors, officers, and employees to conduct business in accordance with the letter, spirit, and intent of all relevant laws and to refrain from any illegal, dishonest, or unethical conduct.  EMPLOYEE DISHONESTY  Financial institutions have a unique relationship of trust to uphold, and employees are subject to rigid standards of honesty and integrity in the conduct of their professional and personal banking business. Employees who violate this relationship of trust through dishonesty or policy violation will be subject to immediate dismissal. For purposes of the employment policies, the definition of dishonesty includes, but is not limited to, theft, fraud, expense account abuse or floating of funds. We are required by law to report any known or suspected employee dishonesty or floating of funds to the appropriate Federal Regulator for appropriate action and, where indicated, we will immediately report the suspected crime to the FBI, the U.S. Attorney, local law enforcement officials and our bonding insurance company.  INTERNAL CONTROLS  All employees must adhere to internal control procedures. Violation of internal control procedures may result in disciplinary action, including termination.  EMPLOYEE ACCOUNTS  Employees must handle their personal bank accounts with First Bank & Trust (including checking, savings, loans, credit cards and debit cards), corporate credit cards, and expense accounts with strict adherence to the rules and policies of the Bank.  Employee accounts will be monitored for overdrafts, overextensions and and/or unusual activity. Employees may not process their own transactions.  All Bank policies and procedures apply to employee bank accounts. If an employee incurs an overdraft,   FB&T Business Ethics &                 1 Code of Conduct    the employee will be notified like all other customers, charged an overdraft fee, and asked to make the necessary deposit to bring the account to a positive balance. Employees may apply for overdraft protection, and will be approved or denied, based on the same credit criteria as other customers.  SOFTWARE LICENSE AGREEMENTS  It is the duty of each employee to adhere to all software license agreements when using personal computer software.  EMPLOYEE COMMUNICATION SYSTEMS  The Electronic Mail, Voice Mail, Internet Access, Personal Computers and Phone Systems are the property of the Bank. The Bank provides these systems at its expense and therefore intends the systems to be used primarily for Bank business. If Bank systems are used to send personal messages, the employee waives any claim of privacy.  CONFIDENTIAL INFORMATION  Bank employees have access to confidential information, including customer data. Employees are to use this information only for the business purpose intended. Confidential information cannot be used for personal reasons. Confidential information must not be shared with anyone outside of the Bank, including family or friends, or with other Bank personnel who do not need the information to carry out their duties. If employment with the Bank is terminated, employees remain under an obligation to keep all such information confidential.  It is a criminal offense to solicit or accept anything of value in return for the business, service, or confidential information of the Bank.  INFORMATION SECURITY  Information and information systems are critical and important to the Bank. Information security is everyone's responsibility. All customer and confidential Bank information must be properly discarded for shredding by the Bank.  CONFIDENTIALITY AND DISCLOSURE OF INFORMATION  Confidences must never be used by any employee for personal gain or benefit, or revealed to friends, or other person or outsiders. No employee shall attempt to access information unauthorized to him or her by circumventing any electronic or non-electronic access controls.  CREDIT FILE INFORMATION  Credit file information including employee payroll data will not be accessible to anyone other than new accounts officer for accounts they open, credit clerks, the lending officer with direct responsibility in a   FB&T Business Ethics &                 2 Code of Conduct    specific situation, executive officers, Director Loan Committee Members and appropriate auditing and examining personnel. Credit files and confidential credit-related information will not be available to the Trust Department for purposes of investment-related decision making.  MANAGEMENT SUPPORT  Questions concerning disclosure, modification or destruction of confidential, restricted or critical information should be discussed with the appropriate Bank Officer.  STATEMENT OF PRINCIPLES ON MONEY LAUNDERING  In order to avoid implications in criminal activities involving the transfer or deposit of illegally obtained monies, commonly referred to as money laundering, Bank employees will adhere to the following principles:       -    Reasonable efforts will be made to determine the true identity of all           customers requesting Bank services. No significant business           transactions (as defined by current regulation) will be conducted with           customers who fail to provide evidence of their identity.       -    We will adhere to high ethical standards and compliance with laws and           regulations. In no event will services be provided where there is           reason to assume that these transactions are associated with money           laundering activities.       -    We will cooperate fully with law enforcement authorities to the extent           permitted by specific regulations relating to customer           confidentiality. Under no circumstances will the Bank provide support           or assistance to customers seeking to deceive law enforcement           agencies. Whenever we become aware of facts which lead to the           reasonable presumption that money held on deposit is derived from           criminal activities, or that transactions entered into are criminal in           purpose, appropriate supervisory personnel should be advised so the           proper action can be taken to report the activity to regulatory           authorities and to sever the relationship with the customer.  VIOLATIONS  Upon encountering or otherwise learning of a violation or suspected violation of federal, state or local law or regulation relating to the operation or conduct of business of the Bank or a violation or suspected violation of this Code of Conduct or Bank policies, it becomes an employee's responsibility to promptly report any such matter to the Bank President/CEO.  All employees are expected to review the Code of Conduct annually. On an ongoing basis, all employees are required to report to their supervisor any conflict they may have with the provision of the Code of Conduct.  OUTSIDE DIRECTORSHIPS  Serving as a Director, Officer or Partner in a non-affiliated bank, a customer's business, or any other business firm is generally prohibited for Bank employees. It is the Bank's policy that employees may not serve as Board members, Officers, or Partners of profit-making firms. However, there are situations where such service may be appropriate. The Bank President/CEO must approve acceptance of a   FB&T Business Ethics &                 3 Code of Conduct    directorship, officership, or partnership in a profit-making business, regardless of the reason.  This policy statement is not in any way intended to discourage employees from considering directorships, officerships or other forms of participation in charitable, educational, community or religious activities in which business people have historically considered it their civic obligation to participate. All employees are encouraged to take part in such worthy endeavors in the community.  ACCEPTANCE OF GIFTS  Employees are not to solicit or accept anything of value from any customer, prospective customer or supplier of products and services in connection with any transaction of business. It is permissible for employees to accept an occasional meal or unsolicited gift of minimal value ($50 or less) only when gifts are clearly unrelated to Bank transactions and cannot be construed as being given to influence the employee. The acceptance or giving of gifts having more than a minimal value ($50) may be misinterpreted as an attempt at bribery, and subject the giver and recipient to a felony charge.  Meals, which are extravagant in relation to the business to be discussed, or the position of the employee should be avoided. Frequent invitations from customers for meals should be declined or handled by firm insistence that the employee pay for alternate meals.  Employees are not to receive preferential prices or special discounts on personal purchases from a customer, unless such discounts are offered to the general public, are clearly unrelated to banking transactions, and cannot be construed as being given to influence the employee.  Any questions regarding the appropriateness of a gift or gratuity should be directed to the Bank President/CEO. Employees are encouraged to communicate the limitations of this policy tactfully, but openly, to the donors of gifts.  POLITICAL ACTIVITIES  The Bank encourages all employees to participate in the political process. The Bank President/CEO shall be notified before an employee accepts a political campaign position such as Chairperson or Treasurer. The Bank President/CEO must be consulted by employees who are considering running for elective office to determine the possible impact on the Bank or on the employee's career. The use of Bank funds, supplies, equipment, or labor must be avoided in any situation involving participation in a political campaign. Such use is illegal. No employee will be reimbursed for political contributions or the cost of attendance at any political function.  BORROWING  Borrowing from individual, commercial or trust customers of the Bank must be avoided unless such customers regularly extend credit in the normal course of business. This is not only because of the potential influence over an Officer's or employee's judgment and decision, but because the grant or denial of such a request imposes a wrongful burden on the customer. For the employee's own protection, any exception must always be reviewed with Bank President/CEO in advance.  Borrowing from other financial institutions, and lending to Officers and staff of such organizations, must be free of any reciprocity regarding terms or interest rates received or given.   FB&T Business Ethics &                 4 Code of Conduct    OUTSIDE EMPLOYMENT  In order to avoid any potential or perceived conflict of interest, the Bank discourages outside employment, including the ownership of an outside business. If an employee is considering outside work, they must first obtain written approval through their Supervisor and the Bank President/CEO. Outside employment will not be approved where it is determined to be at variance with the Bank's best interest or contrary to any legal restrictions. Permission for Officers to pursue outside employment will be granted only under the most unusual circumstances.  TRUST DEPARTMENT RELATIONSHIPS  It is intended that Officers and employees of the Trust Department shall not use information gained through their employment, nor act in the management of their outside personal account, in any way which would result in a loss or disadvantage to a trust account.  No Officer or employee shall purchase assets from or sell assets to a Trust account.  In no case shall a Trust employee simultaneously purchase or sell stock for an employee's outside account or the outside account of any member of the employee's family, or any relative or friend at the time it is being purchased or sold for a trust account.  A member of the Trust Investment Committee should not buy or sell the security of any Bank at a time when he or she has knowledge that the Trust is actively buying or selling that Bank's securities. The same restriction applies to any Bank employee who has knowledge that the Trust department is actively buying or selling an unlisted Bank's securities.  All Bank Officers must be aware of their professional relationships with accounts with which they are involved or are administering or working with in developing wills and trusts. The integrity of the Officers would be seriously questioned should they be named as a beneficiary in any account, with which they have or may have had responsibility. No Officer or employee will accept a bequest from a Trust customer unless that person was a spouse, child, sibling, parent, grandparent, aunt or uncle, whether by blood or marriage, of the employee.  SENIOR MANAGEMENT ASSISTANCE  The President/CEO and the Presidents of each branch are available to assist employees in the application of this Code of Conduct. It is intended that this assistance be used to avoid situations that could cause embarrassment and have legal implications for the individual employee or the Bank.   FB&T Business Ethics &                 5 Code of Conduct     EX-23.0 8 c03489exv23w0.txt CONSENT OF BKD, LLP                                                                       EXHIBIT 23.0                INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT     The Board of Directors First BancTrust Corporation   We consent to the incorporation by reference in the registration statement of First BancTrust Corporation on Form S-8 (Registration Statement Nos. 333-91466 and 333-114943) of our report dated February 21, 2006 on our audit of the consolidated financial statements of First BancTrust Corporation as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004, and 2003, which report is included in this Annual Report on Form 10-K.   /s/ BKD, LLP Decatur, IL March 27, 2006     EX-31.1 9 c03489exv31w1.txt CERTIFICATION OF TERRY J. HOWARD                                                                        EXHIBIT 31.1              SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER  I, Terry J. Howard, certify that:  1.   I have reviewed this annual report on Form 10-K of FIRST BANCTRUST      CORPORATION (the "Registrant");  2.   Based on my knowledge, this annual report does not contain any untrue      statement of a material fact or omit to state a material fact necessary to      make the statements made, in light of the circumstances under which such      statements were made, not misleading with respect to the period covered by      this annual report;  3.   Based on my knowledge, the financial statements, and other financial      information included in this annual report, fairly present in all material      respects the financial condition, results of operations and cash flows of      the Registrant as of, and for, the periods presented in this annual report;  4.   The Registrant's other certifying officers and I are responsible for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we      have:       a)   designed such disclosure controls and procedures, or caused such           disclosure controls and procedures to be designed under our           supervision, to ensure that material information relating to the           Registrant, including its consolidated subsidiaries, is made known to           us by others within those entities, particularly during the period in           which this annual report is being prepared;       b)   evaluated the effectiveness of the Registrant's disclosure controls           and procedures and presented in this report our conclusions about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       c)   disclosed in this report any change in the Registrant's internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's fourth fiscal quarter in           the case of an annual report) that has materially affected, or is           reasonably likely to materially affect, the Registrant's internal           control over financial reporting; and  5.   The Registrant's other certifying officers and I have disclosed, based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's auditors and the audit committee of the Registrant's board      of directors (or persons performing the equivalent functions):         a)   all significant deficiencies and material weaknesses in the design or           operation of internal control over financial reporting which are           reasonably likely to adversely affect the Registrant's ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material, that involves management or other           employees who have a significant role in the Registrant's internal           control over financial reporting.   Date: March 27, 2006                    /s/ Terry J. Howard                                         ---------------------------------                                         TERRY J. HOWARD                                         Chief Executive Officer and                                         President    EX-31.2 10 c03489exv31w2.txt CERTIFICATION OF ELLEN M. LITTERAL                                                                        EXHIBIT 31.2                SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER  I, Ellen M. Litteral, certify that:  1.   I have reviewed this annual report on Form 10-K of FIRST BANCTRUST      CORPORATION (the "Registrant");  2.   Based on my knowledge, this annual report does not contain any untrue      statement of a material fact or omit to state a material fact necessary to      make the statements made, in light of the circumstances under which such      statements were made, not misleading with respect to the period covered by      this annual report;  3.   Based on my knowledge, the financial statements, and other financial      information included in this annual report, fairly present in all material      respects the financial condition, results of operations and cash flows of      the Registrant as of, and for, the periods presented in this annual report;  4.   The Registrant's other certifying officers and I are responsible for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we      have:       a)   designed such disclosure controls and procedures, or caused such           disclosure controls and procedures to be designed under our           supervision, to ensure that material information relating to the           Registrant, including its consolidated subsidiaries, is made known to           us by others within those entities, particularly during the period in           which this annual report is being prepared;       b)   evaluated the effectiveness of the Registrant's disclosure controls           and procedures and presented in this report our conclusions about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       c)   disclosed in this report any change in the Registrant's internal           control over financial reporting that occurred during the Registrant's           most recent fiscal quarter (the Registrant's fourth fiscal quarter in           the case of an annual report) that has materially affected, or is           reasonably likely to materially affect, the Registrant's internal           control over financial reporting; and  5.   The Registrant's other certifying officers and I have disclosed, based on      our most recent evaluation of internal control over financial reporting, to      the Registrant's auditors and the audit committee of the Registrant's board      of directors (or persons performing the equivalent functions):         a)   all significant deficiencies and material weaknesses in the design or           operation of internal control over financial reporting which are           reasonably likely to adversely affect the Registrant's ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material, that involves management or other           employees who have a significant role in the Registrant's internal           control over financial reporting.   Date: March 27, 2006                    /s/ Ellen M. Litteral                                         ----------------------------------------                                         ELLEN M. LITTERAL                                         Chief Financial Officer and Treasurer    EX-32.1 11 c03489exv32w1.txt SECTION 906 CERTIFICATION                                                                        EXHIBIT 32.1                      CERTIFICATION OF CHIEF EXECUTIVE OFFICER     PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)  The undersigned executive officer of First BancTrust Corporation (the "Registrant") hereby certifies that the Registrant's Form 10-K for the year ended December 31, 2005 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant.                                           /s/ Terry J. Howard                                         ----------------------------------------                                         Name: Terry J. Howard                                         Title: Chief Executive Officer and                                                President  Date: March 27, 2006    EX-32.2 12 c03489exv32w2.txt SECTION 906 CERTIFICATION                                                                        EXHIBIT 32.2                      CERTIFICATION OF CHIEF FINANCIAL OFFICER     PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)  The undersigned executive officer of First BancTrust Corporation (the "Registrant") hereby certifies that the Registrant's Form 10-K for the year ended December 31, 2005 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant.                                           /s/ Ellen M. Litteral                                         ----------------------------------------                                         Name: Ellen M. Litteral                                         Title: Chief Financial Officer and                                                Treasurer  Date: March 27, 2006    -----END PRIVACY-ENHANCED MESSAGE-----