LAFAYETTE BANCSHARES, INC.

July 21, 1997

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders of
Lafayette Bancshares, Inc. ("Lafayette"), the holding company for Lafayette
County Bank of Lexington/Wellington (the "Bank"), to be held at the main
office of the Bank at 20th Street and Highway 13, Lexington, Missouri on
August 16, 1997 at 1:00 p.m., local time.

The attached Notice of Special Meeting of Shareholders and Prospectus/
Proxy Statement describe the formal business to be transacted at the meeting.
At the meeting, you will be asked to consider and vote upon a proposal to
approve the Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 12, 1997 by and among Lexington B & L Financial Corp. ("Lexington"),
Lafayette and the Bank. The Merger Agreement provides that Lafayette will be
merged with a wholly-owned subsidiary of Lexington, which will then be merged
into Lexington. As a result, Lafayette will no longer exist and the Bank will
become a subsidiary of Lexington.

Upon consummation of the merger you will receive a combination of cash
plus shares of Lexington common stock for each share of Lafayette common stock
you own. Under the terms of the Agreement, as more fully described on the
following pages, you will receive $0.92 in cash plus 0.0977 shares of
Lexington common stock for each share of Lafayette common stock you own if
Lexington's common stock price is between $12.00 and $14.00 per share. If
Lexington's common stock price is $12.00 or less, you will receive $0.92 in
cash plus $1.17 in value of Lexington common stock for each share of Lafayette
common stock you own. If Lexington's common stock price is $14.00 or more,
you will receive $0.92 in cash plus $1.37 in value of Lexington common stock
for each share of Lafayette common stock you own. The calculation of
Lexington's common stock price will be based upon the average closing price of
Lexington common stock for the 20 trading days prior to the effective date of
the merger. Because the number of shares of Lexington common stock you will
receive will depend on the market price of Lexington common stock, the exact
number of shares and the value of those shares will not be determinable at the
time of the meeting. The last reported sale price of Lexington common stock
on the Nasdaq SmallCap Market (LXMO) on July 14, 1997 was $16.125 per share.

You are urged to review carefully the enclosed Prospectus/Proxy
Statement, which contains a more complete description of the terms of the
merger.

The Board of Directors of Lafayette has unanimously approved the Merger
Agreement and recommends that you vote FOR the approval of the Merger
Agreement. Approval of the Merger Agreement requires the affirmative vote of
two-thirds of the outstanding shares of Lafayette common stock.

It is very important that your shares be represented at the meeting,
regardless of whether you plan to attend in person. A failure to vote, either
by not returning the enclosed proxy or by checking the "Abstain" box thereon,
will have the same effect as a vote against approval of the Merger Agreement.
To assure that your shares are represented in voting on this very important
matter, please sign, date and return the enclosed proxy card in the enclosed
postage-prepaid envelope whether or not you plan to attend the meeting. If
you do attend, you may, if you wish, revoke your proxy and vote your shares in
person at the meeting.

On behalf of the Board of Directors, we recommend that you vote FOR
approval of the Merger Agreement.

Sincerely,

William J. Huhmann
Chairman

LAFAYETTE BANCSHARES, INC.
20th Street and Highway 13
Lexington, Missouri 64067

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Lafayette Bancshares, Inc. will be held at 20th Street and Highway 13,
Lexington, Missouri, on Saturday, August 16, 1997, at 1:00 p.m., for the
following purposes:

1. To consider and vote upon a proposal to approve the Agreement
and Plan of Merger dated as of March 12, 1997 (the "Merger
Agreement") by and among Lexington B & L Financial Corp.
("Lexington"), Lafayette Bancshares, Inc. ("Lafayette") and
Lafayette County Bank of Lexington/Wellington, pursuant to
which Lafayette would merge into a wholly-owned subsidiary of
Lexington and each outstanding share of Lafayette common stock
would be converted into the right to receive a combination of
Lexington common stock and cash, all on and subject to the
terms and conditions contained therein.

2. To consider and act upon such other matters as may properly come
before the meeting or any adjournments thereof.

Only those shareholders of record at the close of business on July 10,
1997 shall be entitled to notice of, and to vote at, the meeting or any
adjournments thereof. The affirmative vote of the holders of two-thirds of
the outstanding shares of Lafayette common stock is required for approval of
the Merger Agreement.

Lafayette shareholders have the right to dissent from the merger and
obtain payment of the fair value of their shares of Lafayette common stock
under the applicable provisions of Missouri law. In order to perfect
dissenters' rights, Lafayette shareholders must send a notice to Lafayette
before the Special Meeting on August 16 and must not vote in favor of the
Merger by proxy or otherwise. A copy of the applicable Missouri statutory
provisions is set forth in Appendix B to the accompanying Prospectus/Proxy
Statement and a summary of such provisions is set forth under "THE MERGER --
Dissenters' Rights." Further information regarding voting rights and the
business to be transacted at the meeting is given in the accompanying
Prospectus/Proxy Statement.

By Order of the Board of Directors

Lexington, Missouri Donald L. Coen
July 21, 1997 Secretary

Your vote is important regardless of the number of shares you own. Whether or
not you expect to attend the meeting, please sign, date and promptly return
the accompanying proxy card using the enclosed postage-prepaid envelope. If
for any reason you should desire to revoke your proxy, you may do so at any
time before it is voted at the meeting.

LAFAYETTE BANCSHARES, INC.
PROXY STATEMENT
-----------------
LEXINGTON B & L FINANCIAL CORP.
PROSPECTUS
Up to 150,000 shares of Common Stock

This Prospectus/Proxy Statement is being furnished by Lafayette
Bancshares, Inc. ("Lafayette") to the holders of Lafayette common stock, par
value $1.00 per share ("Lafayette Common Stock"), in connection with the
solicitation of proxies by the Board of Directors of Lafayette (the "Lafayette
Board") for use at a special meeting of Lafayette shareholders to be held on
August 16, 1997, and at any adjournments or postponements thereof (the
"Special Meeting"). This Prospectus/Proxy Statement is first being mailed to
shareholders on or about July 21, 1997.

At the Special Meeting, shareholders of Lafayette will consider and
vote upon a proposal to approve the Agreement and Plan of Merger dated as of
March 12, 1997 (the "Merger Agreement"), by and among Lexington B & L
Financial Corp. ("Lexington"), Lafayette and Lafayette County Bank of
Lexington/Wellington (the "Bank") pursuant to which, among other things,
Lafayette would be merged with and into a wholly-owned subsidiary of Lexington
(the "Merger").

Upon consummation of the Merger, each outstanding share of
Lafayette Common Stock (excluding any dissenting shares and certain shares
held by Lexington and Lafayette), will be converted into the right to receive
$0.92 in cash plus a number of shares of common stock, par value $0.01 per
share, of Lexington ("Lexington Common Stock") equal to the Exchange Ratio.
The "Exchange Ratio" will be (i) 0.0977 if the average last price per share of
Lexington Common Stock as reported in The Wall Street Journal for each of the
twenty trading days immediately preceding the effective date of the Merger
(the "Lexington Price") is greater than $12.00 and less than $14.00, (ii) the
result obtained by dividing $1.17 by the Lexington Price if the Lexington
Price is $12.00 or less, or (iii) the result obtained by dividing $1.37 by the
Lexington Price if the Lexington Price is $14.00 or greater. Because the
number of shares of Lexington Common Stock to be received by Lafayette
shareholders will depend on the market price of Lexington Common Stock, the
exact number of shares to be received by Lafayette shareholders and the value
of those shares will not be determinable at the time Lafayette shareholders
vote on the Merger at the Special Meeting. The last reported sale price of
Lexington Common Stock on the Nasdaq SmallCap Market (LXMO) on July 14, 1997
was $16.125 per share. For a more detailed description of the terms of the
Merger, see "THE MERGER."

Lexington has filed a registration statement on Form S-4 (the
"Registration Statement") pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), with respect to up to 150,000 shares of Lexington
Common Stock to be issued pursuant to the Merger Agreement. This
Prospectus/Proxy Statement also constitutes the prospectus of Lexington filed
as part of the Registration Statement.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS,
OR OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

This Prospectus/Proxy Statement does not cover any resale of the
securities to be received by shareholders of Lafayette upon consummation of
the proposed transaction, and no person is authorized to make any use of this
Prospectus/Proxy Statement in connection with any such resale.

The date of this Prospectus/Proxy Statement is July 17, 1997.

No person is authorized to give any information or to make any
representation not contained in this Prospectus/Proxy Statement, and, if given
or made, such information or representation should not be relied upon as
having been authorized. This Prospectus/Proxy Statement does not constitute
an offer to sell or a solicitation of an offer to purchase a security, or a
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it would be unlawful to make such offer or solicitation.

Neither the delivery of this Prospectus/Proxy Statement nor any
distribution of the securities made under this Prospectus/Proxy Statement
shall, under any circumstances, create any implication that there has been no
change in the affairs of Lexington or Lafayette or in the information set
forth herein since the date of this Prospectus/Proxy Statement.

AVAILABLE INFORMATION

Lexington is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC" or the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices of the Commission: 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material also can be obtained at
prescribed rates from the Commission's Public Reference Section at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, materials
filed by Lexington are available for inspection at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. Reports, proxy
statements and other information filed by Lexington are also available on the
Internet at the Commission's World Wide Web site at http://www.sec.gov.

This Prospectus/Proxy Statement constitutes part of a Registration
Statement on Form S-4 (File No. 333-28175) filed by Lexington with the
Commission under the Securities Act. This Prospectus/Proxy Statement omits
certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to Lexington and the Lexington Common Stock.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance where a copy of such document has
been filed as an exhibit to the Registration Statement or otherwise has been
filed with the Commission, reference is made to the copy so filed. Each such
statement is qualified in its entirety by such reference.

-----------------

All information contained in this Prospectus/Proxy Statement with
respect to Lexington has been supplied by Lexington, and Lafayette and all
information contained in this Prospectus/Proxy Statement with respect to
Lafayette has been supplied by Lafayette.

-ii-

TABLE OF CONTENTS

Page
----
Available Information. . . . . . . . . . . . . . . . . . . . . . ii
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Selected Historical and Pro Forma Financial Data . . . . . . . . x
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . xiv
Comparative Market Price Data. . . . . . . . . . . . . . . . . . xv
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . 1
Place, Time and Date . . . . . . . . . . . . . . . . . . . . 1
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Record Date; Shares Entitled to Vote . . . . . . . . . . . . 1
Vote Required. . . . . . . . . . . . . . . . . . . . . . . . 1
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . 2
Effective Date of the Merger . . . . . . . . . . . . . . . . 3
Exchange of Lafayette Stock Certificates . . . . . . . . . . 3
Background of the Merger . . . . . . . . . . . . . . . . . . 3
Reasons for the Merger and Recommendation of the
Lafayette Board . . . . . . . . . . . . . . . . . . . . . . 4
Interests of Certain Persons in the Merger . . . . . . . . . 5
Certain Federal Income Tax Consequences. . . . . . . . . . . 5
Conduct of Business Pending the Merger . . . . . . . . . . . 7
Conditions to Consummation of the Merger . . . . . . . . . . 7
Regulatory Requirements. . . . . . . . . . . . . . . . . . . 8
No Solicitation. . . . . . . . . . . . . . . . . . . . . . . 8
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . 8
Amendment; Waiver; Termination . . . . . . . . . . . . . . . 9
Termination Fee. . . . . . . . . . . . . . . . . . . . . . . 9
Resale of Lexington Common Stock . . . . . . . . . . . . . . 10
Accounting Treatment . . . . . . . . . . . . . . . . . . . . 10
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pro Forma Financial Information. . . . . . . . . . . . . . . . . 11
Management and Operations After the Merger . . . . . . . . . . . 15
Business of Lexington B & L Financial Corp.. . . . . . . . . . . 16
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Market Area. . . . . . . . . . . . . . . . . . . . . . . . . 16
Lending Activities . . . . . . . . . . . . . . . . . . . . . 16
Investment Activities. . . . . . . . . . . . . . . . . . . . 28
Deposit Activities and Other Sources of Funds. . . . . . . . 31
Competition. . . . . . . . . . . . . . . . . . . . . . . . . 35
Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Properties . . . . . . . . . . . . . . . . . . . . . . . . . 35
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 35
Regulation of Lexington B & L Financial Corp.. . . . . . . . . . 36
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Federal Regulation of Savings Associations . . . . . . . . . 36
Savings and Loan Holding Company Regulation. . . . . . . . . 42
Bank Holding Company Regulation. . . . . . . . . . . . . . . 42
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Federal Taxation . . . . . . . . . . . . . . . . . . . . . . 44
Missouri Taxation. . . . . . . . . . . . . . . . . . . . . . 45
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Lexington B & L Financial Corp.
for the Years Ended September 30, 1996, 1995 and 1994 . . . . . 46

-iii-

General
Operating Strategy . . . . . . . . . . . . . . . . . . . . . 46
Interest Rate Risk Management. . . . . . . . . . . . . . . . 46
Interest Rate Sensitivity of Net Portfolio Value . . . . . . 47
Results of Operations. . . . . . . . . . . . . . . . . . . . 47
Comparison of Operating Results for the Years Ended
September 30, 1996 and 1995. . . . . . . . . . . . . . . . 47
Comparison of Operating Results for the Years Ended
September 30, 1995 and 1994. . . . . . . . . . . . . . . . 48
Yields Earned and Rates Paid . . . . . . . . . . . . . . . . 49
Liquidity and Capital Resources. . . . . . . . . . . . . . . 52
Effect of Inflation and Changing Prices. . . . . . . . . . . 52
Impact of New Accounting Standards . . . . . . . . . . . . . 53
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Lexington B & L Financial Corp.
for the Six and Three Months Ended March 31, 1997 and 1996 . . 53
Comparison of Financial Condition at March 31, 1997
and September 30, 1996 . . . . . . . . . . . . . . . . . . 53
Comparison of the Three Months Ended March 31, 1997
to the Three Months Ended March 31, 1996 . . . . . . . . . 53
Comparison of the Six Months Ended March 31, 1997
to the Six Months Ended March 31, 1996 . . . . . . . . . . 54
Liquidity and Capital Resources. . . . . . . . . . . . . . . 55
Management of Lexington B & L Financial Corp.. . . . . . . . . . 56
Executive Compensation of Lexington B & L Financial Corp.. . . . 57
Voting Securities and Principal Stockholders of Lexington
B & L Financial Corp.. . . . . . . . . . . . . . . . . . . . . 59
Business of Lafayette Bancshares, Inc. . . . . . . . . . . . . . 61
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Lending Activities . . . . . . . . . . . . . . . . . . . . . 61
Allowance for Loan Losses. . . . . . . . . . . . . . . . . . 64
Securities . . . . . . . . . . . . . . . . . . . . . . . . . 65
Deposits and Other Sources of Funds. . . . . . . . . . . . . 66
Properties . . . . . . . . . . . . . . . . . . . . . . . . . 68
Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . 68
Competition. . . . . . . . . . . . . . . . . . . . . . . . . 68
Management's Discussion and Analysis of Financial Condition
and Results of Operations of Lafayette Bancshares, Inc.. . . . 68
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Results of Operations. . . . . . . . . . . . . . . . . . . . 69
Voting Securities and Principal Stockholders of Lafayette
Bancshares, Inc. . . . . . . . . . . . . . . . . . . . . . . . 74
Description of Lexington Capital Stock . . . . . . . . . . . . . 75
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 75
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 76
Comparison of Shareholders' Rights . . . . . . . . . . . . . . . 76
Payment of Dividends . . . . . . . . . . . . . . . . . . . . 76
Size of Board of Directors . . . . . . . . . . . . . . . . 76
Classified Board of Directors . . . . . . . . . . . . . . . 77
Cumulative Voting . . . . . . . . . . . . . . . . . . . . . 77
Removal of Directors . . . . . . . . . . . . . . . . . . . 77
Vacancies on the Board of Directors . . . . . . . . . . . . 77
Special Meetings of Shareholders and Action Without
a Meeting . . . . . . . . . . . . . . . . . . . . . . . . 78
Advance Notice Requirements for Nominations of Directors
and Presentation of New Business at Meetings of
Shareholders . . . . . . . . . . . . . . . . . . . . . . . 78

-iv-

Approval of Mergers, Consolidations, Sale of Substantially
All Assets and Dissolution . . . . . . . . . . . . . . . . 78
Limitation on Voting Rights. . . . . . . . . . . . . . . . . 79
Rights of Shareholders to Dissent. . . . . . . . . . . . . . 79
Indemnification of Officers and Directors and Limitation
of Liability . . . . . . . . . . . . . . . . . . . . . . . 79
Amendment of Articles of Incorporation and Bylaws. . . . . . 80
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . 80
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 80
Index to Financial Statements. . . . . . . . . . . . . . . . . . 81

Appendix A - Agreement and Plan of Merger
Appendix B - Chapter 13 of the General and Business Corporation Law of
Missouri

-v-

SUMMARY

The following summary of certain information relating to the Merger
is not intended to be complete and is qualified by reference to, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this Prospectus/Proxy Statement, including the Appendices hereto.

The Parties to the Merger

Lexington. Lexington is a savings and loan holding company
registered with the Office of Thrift Supervision ("OTS"). The business of
Lexington consists primarily of holding 100% of the capital stock of B & L
Bank. At March 31, 1997, Lexington had total assets of $59.7 million, total
deposits of $42.4 million and stockholders' equity of $16.5 million. The
principal executive offices of Lexington are located at 919 Franklin Avenue,
Lexington, Missouri 64067 and its telephone number is (816) 259-2247.

B & L Bank is a federally chartered savings bank and is regulated
by the OTS, its primary federal regulator, and by the Federal Deposit
Insurance Corporation ("FDIC"), the insurer of its deposits. B & L Bank's
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the FDIC. B & L Bank converted from the mutual to
the stock form of ownership on June 5, 1996. B & L Bank's principal business
consists of attracting savings deposits from the general public and
originating loans for the purchase of residential real estate. To a lesser
extent, B & L Bank originates multi-family residential, commercial real
estate, construction and consumer loans. B & L Bank conducts its business
through its main office located at 919 Franklin Avenue, Lexington, Missouri.

See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA," "BUSINESS
OF LEXINGTON B & L FINANCIAL CORP.," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF LEXINGTON B & L FINANCIAL
CORP.," and the Consolidated Financial Statements of Lexington B & L Financial
Corp. included in this Prospectus/Proxy Statement.

Lafayette and the Bank. Lafayette is a bank holding company
incorporated under the laws of the State of Missouri and under the supervision
of the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"). The business of Lafayette consists primarily of holding 94% of the
capital stock of the Bank. At March 31, 1997, Lafayette had consolidated
total assets of $33.9 million, total deposits of $30.6 million, and total
stockholders' equity of $2.0 million. Lafayette maintains its principal
office at 20th Street and Highway 13 in Lexington, Missouri 64067 and its
telephone number is (816) 259-4363.

The Bank is a Missouri state chartered bank regulated by the
Missouri Division of Finance ("Division") and the FDIC. The Bank's deposits
are insured up to applicable limits by the Bank Insurance Fund ("BIF") of the
FDIC. The Bank's principal business consists of attracting deposits from the
general public and originating commercial, agricultural, real estate and
installment loans. The Bank conducts its business from its main office in
Lexington, Missouri and its branch offices in Wellington and Callao, Missouri.

See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA," "BUSINESS
OF LAFAYETTE BANCSHARES, INC.," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF LAFAYETTE BANCSHARES, INC."
and the Consolidated Financial Statements of Lafayette Bancshares, Inc.
included in this Prospectus/Proxy Statement.

The financial statements for Lafayette are unaudited. Lafayette
has not had an independent accounting firm audit its financial statements and
Lexington has determined that it would not be practicable to have an audit
performed for the purpose of this Prospectus/Proxy Statement.

-vi-

Special Meeting

Place, Time and Date; Purpose. The Special Meeting will be held on
Saturday, August 16, 1997 at 1:00 p.m., local time, at the main office of the
Bank at 20th Street and Highway 13, Lexington, Missouri, for the purpose of
considering and voting upon a proposal to approve the Merger Agreement
attached hereto as Appendix A. See "THE SPECIAL MEETING -- Place, Time and
Date" and "-- Purpose."

Record Date; Shares Entitled to Vote. The Lafayette Board has
fixed the close of business on July 10, 1997 as the record date (the "Record
Date") for determining shareholders entitled to notice of and to vote at the
Special Meeting. Only those holders of shares of Lafayette Common Stock of
record on the Record Date will be entitled to notice of and to vote at the
Special Meeting. Each share of Lafayette Common Stock will be entitled to one
vote. Shareholders who execute proxies retain the right to revoke them at any
time prior to being voted at the Special Meeting. At the Record Date, there
were 1,129,500 shares of Lafayette Common Stock outstanding and entitled to be
voted at the Special Meeting. See "THE SPECIAL MEETING -- Record Date; Shares
Entitled to Vote."

Vote Required. Approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Lafayette Common Stock. At the Record Date, the directors and executive
officers of Lafayette and the Bank and their affiliates beneficially owned
495,800 shares of Lafayette Common Stock, which represents 43.9% of the shares
entitled to be voted at the Special Meeting. All of the directors of
Lafayette and the Bank, together with Robert F. Jackson, who owns 8.4% of the
outstanding shares of Lafayette, have agreed to vote their shares for the
approval of the Merger Agreement. See "THE SPECIAL MEETING -- Vote Required."

A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.

The Merger; Exchange Ratio

The Merger Agreement provides for the merger of Lafayette with and
into a wholly-owned subsidiary of Lexington, which will then be merged into
Lexington. As a result of the Merger, Lafayette will cease to exist and
Lexington will succeed to all of the assets and liabilities of Lafayette. See
"THE MERGER -- General." After consummation of the Merger, the Bank and B & L
Bank will operate as subsidiaries of Lexington.

Upon consummation of the Merger, each outstanding share of
Lafayette Common Stock (excluding any shares held by shareholders who perfect
their dissenters' rights of appraisal ("Dissenting Shares") and any shares of
stock held by Lexington or Lafayette, other than in a fiduciary capacity or in
satisfaction of a debt previously contracted (together with the Dissenting
Shares, "Excluded Shares")) will be converted into the right to receive $0.92
in cash plus a number of shares of Lexington Common Stock equal to the
Exchange Ratio. Each holder of Lafayette Common Stock who would otherwise be
entitled to a fractional share of Lexington Common Stock will receive cash in
lieu thereof determined by multiplying such fraction by a number equal to
$0.92 plus the Exchange Ratio multiplied by the Lexington Price. Upon
completion of the Merger, shareholders of Lafayette will no longer own any
stock in Lafayette.

Lafayette shareholders should note that the market price of the
Lexington Common Stock they receive will continue to be subject to changes in
market value and may, therefore, have a market value as of the date they
receive certificates for their shares (or such shares are otherwise made
available to them) that is less than, or greater than, the value of such stock
as of the consummation of the Merger. For a more detailed discussion of the
consideration to be received in exchange for Lafayette Common Stock, see "THE
MERGER -- Merger Consideration."
-vii-

Recommendation of the Lafayette Board

The Lafayette Board has unanimously approved the Merger Agreement
as advisable and in the best interests of Lafayette and the Lafayette
shareholders and recommends that the shareholders of Lafayette vote FOR
approval of the Merger Agreement.

For a discussion of the circumstances surrounding the Merger and
the factors considered by the Lafayette Board in making its recommendation,
see "THE MERGER -- Background of the Merger" and "-- Reasons for the Merger
and Recommendations of the Lafayette Board." Approval of the Merger Agreement
by Lafayette shareholders is required by law and is a condition to
consummation of the Merger. See "THE MERGER -- Conditions to Consummation of
the Merger." For a description of certain economic interests directors and
officers of Lafayette may be deemed to have in the Merger, see "THE MERGER --
Interests of Certain Persons in the Merger."

Interests of Certain Persons in the Merger

Certain members of Lafayette's management and the Lafayette Board
may be deemed to have interests in the Merger in addition to their interests
as shareholders of Lafayette generally. Following consummation of the Merger,
William J. Huhmann, Terry L. Thompson and Donald L. Coen, each of whom is an
executive officer of Lafayette and the Bank, will enter into employment
agreements with Lexington and the Bank. See "THE MERGER -- Interests of
Certain Persons in the Merger."

Effective Date of the Merger

Subject to the conditions to the obligations of the parties to
complete the Merger as set forth in the Merger Agreement, the "Effective Date"
of the Merger will occur on such date as Lexington notifies Lafayette in
writing not less than five days prior thereto, provided such date is not more
than 30 days after such conditions have been satisfied or waived. The
"Effective Time" of the Merger is the time on the Effective Date at which the
Merger becomes effective. Either Lexington or Lafayette may terminate the
Merger Agreement if the Effective Date does not occur on or before December
31, 1997.

Conditions to Consummation of the Merger

Consummation of the Merger is subject to, among other things: (i)
approval of the Merger Agreement by the holders of not less than two-thirds of
the outstanding shares of Lafayette Common Stock; (ii) receipt of all
applicable regulatory approvals without any condition that, in the opinion of
Lexington, would deprive Lexington of the material economic or business
benefits of the Merger; (iii) receipt by Lexington and Lafayette of the
opinion of Breyer & Aguggia, dated as of the Effective Date, as to certain
federal income tax consequences of the Merger; (iv) William J. Huhmann, Terry
L. Thompson and Donald L. Coen having entered into employment agreements with
Lexington and the Bank; (v) there being no more than 11.666 shares of common
stock of the Bank outstanding that are not owned by Lafayette; (vi) receipt by
Lexington of an agreement from each "affiliate" of Lafayette restricting the
sale of Lexington Common Stock received by such affiliate in the Merger; and
(vii) the number of Dissenting Shares not exceeding 5% of the outstanding
shares of Lafayette Common Stock. See "THE MERGER -- Conditions to
Consummation of the Merger."

Accounting Treatment

The Merger will be accounted for as a purchase by Lexington under
generally accepted accounting principles. See "THE MERGER -- Accounting
Treatment."

-viii-

Regulatory Requirements

The Merger is subject to the receipt of certain prior approvals
from the Federal Reserve Board and the Division. An application for approval
of the Merger was filed with the Federal Reserve Board and the Division on
June 30, 1997. There can be no assurance that such approval will be obtained,
and, if obtained, that it will not impose conditions that, in the opinion of
Lexington, would deprive Lexington of the economic and business benefits of
the Merger so as to render it inadvisable in the judgment of Lexington to
proceed with the Merger. See "THE MERGER -- Regulatory Requirements."

Certain Federal Income Tax Consequences

Consummation of the Merger is conditioned, among other things, on
receipt by Lexington and Lafayette of an opinion of Breyer & Aguggia, special
counsel for Lexington, to the effect that the Merger will be treated as a
reorganization described in Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). In accordance with this opinion, holders of
Lafayette Common Stock who receive Lexington Common Stock and cash in exchange
for their shares will recognize gain, but will not recognize any loss, on such
exchange. Holders of Lafayette Common Stock may also recognize gain or loss
by reason of cash received in lieu of fractional shares. See "THE MERGER --
Certain Federal Income Tax Consequences."

Because certain tax consequences of the Merger may vary depending
on the particular circumstances of each shareholder, each Lafayette
shareholder is urged to consult his or her own tax advisor as to the specific
tax consequences to such holder of the Merger, including the specific
application and effect of state, local, foreign and other tax laws to such
shareholder.

Dissenters' Rights

Lafayette shareholders have the right to dissent from the Merger
and obtain payment of the fair value of their shares of Lafayette Common Stock
under the provisions of Section 351.455 of the Missouri General and Business
Corporation Law ("Missouri GBCL"). A shareholder's failure to follow exactly
the procedures specified in Section 351.455 of the Missouri GBCL will result
in loss of such shareholder's dissenters' rights. Accordingly, Lafayette
shareholders wishing to dissent from the Merger are urged to read carefully
"THE MERGER -- Dissenters' Rights" and the copy of Section 351.455 of the
Missouri GBCL set forth in Appendix B to this Prospectus/Proxy Statement, and
to consult with their own legal advisors. If Lafayette shareholders perfect
dissenters' rights with respect to more than 5% of the outstanding shares of
Lafayette Common Stock, Lexington may elect not to consummate the Merger. See
"THE MERGER -- Conditions to Consummation of the Merger."

Comparison of Shareholders' Rights

Shareholders of Lafayette who receive shares of Lexington Common
Stock in exchange for their shares of Lafayette Common Stock will be governed,
with respect to their rights as such shareholders, by Lexington's Articles of
Incorporation and Bylaws. For a discussion of certain material differences in
the rights of shareholders of Lexington and Lafayette and an explanation of
possible antitakeover effects of certain provisions in Lexington's Articles of
Incorporation and Bylaws, see "COMPARISON OF SHAREHOLDERS' RIGHTS."

-ix-

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth selected historical consolidated
financial data for Lexington and Lafayette and selected unaudited pro forma
combined financial data, giving effect to the Merger using the purchase method
of accounting. This information should be read in conjunction with the
historical financial statements of Lexington and Lafayette, including the
respective notes thereto, and the unaudited pro forma financial information
appearing elsewhere in this Prospectus/Proxy Statement.

The Lexington historical consolidated financial statement data as
of and for the six months ended March 31, 1997 and 1996 have been prepared on
the same basis as the historical information derived from audited financial
statements, and in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for the fair
presentation of results of operations for such periods.

The pro forma condensed combined selected financial data have been
prepared based on a 0.0929 Exchange Ratio, which is the Exchange Ratio that
would be utilized if the Lexington Price is $14.75 (the closing price of
Lexington Common Stock on the day prior to public announcement of the Merger).
The actual Exchange Ratio will depend on the Lexington Price (which will not
be known until shortly before the Effective Date) and may be higher or lower
than 0.0929. The pro forma information would be different if the Lexington
Price results in an Exchange Ratio different from 0.0929. Lafayette
shareholders are urged to obtain current quotations of the market price of
Lexington Common Stock. The pro forma condensed combined selected financial
data is unaudited. Such data is intended for illustrative purposes only and
is not necessarily indicative of future results of operations or the future
financial position of the combined company or of the results of operations and
financial position of the combined company that would have actually occurred
had the Merger been in effect as of the date or for the periods presented.

-x-

Lexington B & L Financial Corp.
Consolidated Historical Selected Financial Data

At or For the At or For the
Six Months Ended Years Ended
March 31, September 30,
---------------- -----------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except for per share data)
Historical
Operating
Data:
Interest
income. . . $ 2,303 $ 1,930 $ 4,073 $ 3,611 $ 3,331 $ 3,631 $ 4,212
Interest
expense . . 1,148 1,153 2,333 2,003 1,617 1,891 2,590
Net ------- ------- ------- ------- ------- ------- ------
interest
income. . 1,155 777 1,740 1,608 1,714 1,740 1,622
Provision
for loan
losses. . . 21 10 10 33 5 21 1
Net interest ------- ------- ------- ------- ------- ------- ------
income after
provision
for loan
losses. . 1,134 767 1,730 1,575 1,709 1,719 1,621
Non-interest
income. . . 42 36 99 -- 47 10 11
Non-interest
expense . . 619 410 1,144 704 877 767 748
Income ------- ------- ------- ------- ------- ------- ------
before
income
taxes . . 557 393 685 871 879 962 884
Income taxes 201 135 224 300 292 312 214
------- ------- ------- ------- ------- ------- ------
Net income $ 356 $ 258 $ 461 $ 571 $ 587 $ 650 $ 670
======= ======= ======= ======= ======= ======= ======
Historical Per
Share Data:
Net income . $0.31 N/A $0.40 N/A N/A N/A N/A
Cash
dividends
declared. . -- N/A -- N/A N/A N/A N/A
Weighted
average
shares
outstanding. 1,144,402 N/A 1,164,464 N/A N/A N/A N/A

Historical
Consolidated
Statement of
Financial
Condition Data:
Total assets $59,748 $51,134 $61,670 $49,981 $47,727 $47,479 $48,186
Loans
receivable,
net. . . . . 44,628 40,744 45,348 41,111 39,379 37,605 36,387
Mortgage-
backed
securities . 1,959 2,301 2,063 2,535 3,135 3,710 3,974
Cash, interest-
bearing
deposits
and
investment
securities . 11,371 6,315 12,547 5,218 4,115 5,073 6,299
Deposits. . . 42,359 43,366 42,237 42,401 40,711 41,004 42,306
Stockholders'
equity . . . 16,505 7,461 18,762 7,195 6,598 6,030 5,381

Operating
Ratios:
Return on
average
assets(1). . 1.16% 1.02% 0.84% 1.17% 1.24% 1.67% 1.36%
Return on
average
equity(1). . 3.82 7.02 4.24 8.36 9.32 14.11 13.40
Average
equity to
average
assets . . . 30.26 14.52 19.73 14.00 13.26 11.80 10.18
- ---------------
(1) Ratios for the six month periods are annualized.

-xi-

Lafayette Bancshares, Inc.
Consolidated Selected Historical Financial Data

Historical
Consolidated
Statement
of Operations
Data:
Interest
income. . . $590 $572 $2,347 $2,138 $1,784 $1,775 $2,070
Interest
expense . . 323 305 1,263 1,150 940 921 1,189
Net ----- ----- ------ ------ ------ ------ ------
interest
income
before
provision
for losses
on loans. 267 267 1,084 988 844 854 881
Provision
for losses
on loans. . 12 3 33 45 11 16 12
Net interest ----- ----- ------ ------ ------ ------ ------
income after
provision
for losses
on loans. 255 264 1,051 943 833 838 869
Other
operating
income. . . 72 67 245 236 205 217 201
Other
operating
expenses. . 247 221 884 857 860 882 882
Income ----- ----- ------ ------ ------ ------ ------
before
income
taxes . . 80 110 412 322 178 173 188
Income tax
expense . . 31 43 150 119 57 45 68
Net ----- ----- ------ ------ ------ ------ ------
income. . $ 49 $ 67 $ 262 $ 203 $ 121 $ 128 $ 120
===== ===== ====== ====== ====== ====== ======
Historical Per
Share Data:
Net income . $0.04 $0.06 $ 0.23 $ 0.18 $ 0.11 $ 0.13 $ 0.12
Cash
dividends
declared. . $0.04 $0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.02 $ 0.03
Weighted
average
shares
outstanding 1,129,000 1,129,000 1,129,000 1,007,000
1,129,000 1,129,000 1,015,000
Historical
Consolidated
Statement of
Financial
Condition
Data:
Total assets $33,871 $31,732 $32,801 $31,574 $29,829 $28,433 $28,294
Loans, net . 15,735 14,549 15,366 14,477 12,791 10,887 10,703
Customer
deposits. . 30,554 28,531 29,511 28,434 27,063 25,770 25,723
Borrowings . 340 340 340 340 140 0 0
Notes payable 558 653 558 653 748 843 988
Stockholders'
equity. . . 1,990 1,785 1,979 1,751 1,568 1,478 1,222
Book value per
share . . . $1.76 $1.58 $1.75 $1.55 $1.39 $1.32 $1.21

Operating
Ratios:
Return on
average
assets(1) . 0.60% 0.85% 0.82% 0.67% 0.41% 0.45% 0.43%
Return on
average
equity(1) . 9.99 15.08 14.05 12.24 7.94 9.48 10.20
Average
equity to
average
assets. . . 6.00 5.65 5.84 5.50 5.17 4.73 4.17
Dividend
payout
ratio . . . 100.00 50.00 13.04 16.67 27.27 15.38 25.00
- ----------------
(1) Ratios for the three month periods are annualized.

-xii-

Lexington B & L Financial Corp.
Pro Forma Condensed Combined Selected Financial Data (unaudited)

Six Months Ended Year Ended
March 31, 1997 September 30, 1996
---------------- ------------------
(Dollars in thousands, except for per share data)

Pro Forma Operating Data:
Interest income. . . . . . $3,446 $6,334
Interest expense . . . . . 1,792 3,596
------ ------
Net interest income . . 1,654 2,738
Provision for loan losses. 41 43
Net interest income ------ ------
after provision for
loan losses . . . . . 1,613 2,695
Non-interest income. . . . 169 344
------ ------
Non-interest expense . . . 1,103 2,056
Income before income ------ ------
taxes . . . . . . . . . 679 983
Income taxes . . . . . . . 254 341
------ ------
Net income . . . . . . . . $ 425 $ 642
====== ======
Pro Forma Combined Per
Share Data:
Net income . . . . . . . . $0.34 $0.51
Cash dividends declared. . -- --
Weighted average shares
outstanding . . . . . . . 1,249,310 1,258,614

At
March 31, 1997
--------------

Pro Forma Condensed Combined
Financial Condition Data:
Total assets . . . . . . . $93,082
Loans receivable, net. . . 60,363
Mortgage-backed
securities. . . . . . . . 1,959
Cash, interest-bearing
deposits and investment
securities. . . . . . . . 26,019
Deposits . . . . . . . . . 72,913
Borrowings . . . . . . . . 340
Note Payable . . . . . . . 558
Stockholders' equity . . . 18,104

-xiii-

COMPARATIVE PER SHARE DATA

The following table sets forth selected comparative per share data
for Lexington on both a historical and pro forma combined basis and for
Lafayette on both a historical and pro forma equivalent basis giving effect to
the Merger using the purchase method of accounting. These tables should be
read in conjunction with the historical financial statements of Lexington and
Lafayette, including the respective notes thereto, and the unaudited pro forma
financial information appearing elsewhere in this Prospectus/Proxy Statement,
including the notes thereto. The pro forma information has been prepared
based on a 0.0929 Exchange Ratio, which is the Exchange Ratio that would be
utilized if the Lexington Price is $14.75 (the closing price of Lexington
Common Stock on the day prior to public announcement of the Merger). The
actual Exchange Ratio will depend on the average closing price of Lexington
Common Stock during the twenty trading days prior to the Effective Date and
may be different than 0.0929. The pro forma information would be different if
the Lexington Price results in an Exchange Ratio different from 0.0929.
Lafayette shareholders are urged to obtain current quotations of the market
price of Lexington Common Stock. The following information is not necessarily
indicative of the results of operations or combined financial position that
would have resulted had the Merger been consummated at the beginning of the
periods indicated, nor is it necessarily indicative of the results of
operations of future periods or future combined financial position.

At or For the At or For the
Six Months Ended Year Ended
March 31, 1997 September 30, 1996
-------------- ------------------
Book value per share(1):
Lexington historical . . . . $16.57 $16.07
Lafayette historical . . . . 1.76 1.75
Pro forma combined . . . . . 16.45 15.96
Lafayette pro forma
equivalent. . . . . . . . . 2.45 2.40

Cash dividends declared
per share(2):
Lexington historical . . . . -- --
Lafayette historical(3). . . 0.04 0.03
Pro forma combined . . . . . -- --
Lafayette pro forma
equivalent. . . . . . . . . -- --

Net income per share(4):
Lexington historical . . . . 0.31 0.40
Lafayette historical(3). . . 0.10 0.24
Pro forma combined . . . . . 0.34 0.51
Lafayette pro forma
equivalent. . . . . . . . . 0.03 0.05

- ----------------
(1) The pro forma combined book value per share of Lexington Common Stock is
based upon the historical total combined common stockholders' equity for
Lexington and Lafayette divided by total pro forma common shares of the
combined entities. The pro forma equivalent book value per share of
Lafayette Common Stock represents $0.92 plus the pro forma combined book
value of Lexington Common Stock multiplied by the 0.0929 Exchange Ratio.
(2) Assumes no changes in cash dividends per share.
(3) Information for Lafayette is for its fiscal year ended December 31,
1996.
(4) The pro forma combined net income per share of Lexington Common Stock
(based on fully diluted net income and weighted average shares
outstanding) is based upon the combined historical net income for
Lexington for its fiscal year ended September 30, 1996 and Lafayette for
its fiscal year ended December 31, 1996 divided by the average pro forma
common shares of the combined entities. The pro forma equivalent net
income per share of Lafayette Common Stock represents the pro forma
combined net income per share multiplied by the 0.0929 Exchange Ratio.

-xiv-

COMPARATIVE MARKET PRICE DATA

Lexington Common Stock is quoted on the Nasdaq SmallCap Market
under the symbol LXMO. There is no established trading market for Lafayette
Common Stock. The table below sets forth, for the calendar quarters
indicated, the high and low sales prices of Lexington Common Stock as reported
on the Nasdaq SmallCap Market and the dividends per share declared on
Lexington and Lafayette Common Stock in each such quarter. The market for
shares of Lafayette Common Stock is highly illiquid and the shares are neither
traded on an established exchange nor listed on the Nasdaq Stock Market.

Lexington Lafayette
Common Stock Common Stock
------------ ------------
High Low Dividends Dividends
---- --- --------- ---------

Year Ended September
30, 1996:
First Quarter. . . . N/A N/A N/A $ --
Second Quarter . . . N/A N/A N/A 0.03
Third Quarter. . . . $11.00 $9.375 $ -- --
Fourth Quarter . . . 11.00 9.50 -- --

Year Ended September
30, 1997:
First Quarter. . . . 13.50 10.875 -- --
Second Quarter . . . 15.75 12.875 -- 0.04

Third Quarter. . . . 16.75 14.125 0.15 --
Fourth Quarter
(through July 14,
1997) . . . . . . . 16.375 16.125 -- --

As of July 14, 1997, the 1,138,500 outstanding shares of Lexington
Common Stock were held by approximately 315 holders of record and 1,129,500
shares of Lafayette Common Stock were held by 38 holders of record.

The following table sets forth the closing price per share for
Lexington Common Stock, as reported on the Nasdaq SmallCap Market and the
equivalent pro forma per share price for Lafayette Common Stock on March 11,
1997, the last full trading day prior to the public announcement of the
execution of the Merger Agreement, and on July 14, 1997, which is the most
recent date for which it was practicable to obtain market price data prior to
the printing of this Prospectus/Proxy Statement. Holders of Lafayette Common
Stock are urged to obtain current market quotations for shares of Lexington
Common Stock.

March 11, 1997 July 14, 1997
-------------- -------------
Closing price per share:
Lexington. . . . . . . . $14.75 $16.125
Equivalent pro forma
per share of Lafayette
Common Stock . . . . . 2.29(1) 2.29(2)

- ------------------
(1) Computed by multiplying the closing price per share of Lexington Common
Stock by a 0.0929 Exchange Ratio (which is the Exchange Ratio that would
be utilized if the Lexington Price is $14.75) and adding $0.92.
(2) Computed by multiplying the closing price per share of Lexington Common
Stock by a 0.0850 Exchange Ratio (which is the Exchange Ratio that would
be utilized if the Lexington Price is $16.125) and adding $0.92.

-xv-

THE SPECIAL MEETING

Place, Time and Date

The Special Meeting will be held on Saturday, August 16, 1997 at
1:00 p.m., local time, at the main office of the Bank at 20th Street and
Highway 13, Lexington, Missouri. This Prospectus/Proxy Statement is being
sent to holders of Lafayette Common Stock and is accompanied by a form of
proxy that is being solicited by the Lafayette Board for use at the Special
Meeting and any adjournments or postponements thereof.

Purpose

The purpose of the Special Meeting is (i) to consider and vote upon
a proposal to approve the Merger Agreement described herein and (ii) to act
upon such other matters, if any, as may properly come before the Special
Meeting.

Record Date; Shares Entitled to Vote

The Lafayette Board has fixed the close of business on July 10,
1997 as the Record Date for determining shareholders entitled to notice of and
to vote at the Special Meeting. Only those holders of Lafayette Common Stock
of record on the Record Date will be entitled to notice of and to vote at the
Special Meeting. Each share of Lafayette Common Stock will be entitled to one
vote. At the Record Date, there were 1,129,500 shares of Lafayette Common
Stock outstanding and entitled to be voted at the Special Meeting.

Vote Required

A majority of the shares entitled to vote, represented in person or
by proxy, will constitute a quorum of Lafayette shareholders at the Special
Meeting. Abstentions will be considered present for purposes of determining
whether a quorum exists. Approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Lafayette Common Stock. Abstentions will have the same effect as votes cast
against approval of the Merger Agreement.

As of the Record Date, the directors and executive officers of
Lafayette and the Bank and their affiliates beneficially owned an aggregate of
495,800 shares of Lafayette Common Stock, which represents 43.9% of the shares
entitled to be voted at the Special Meeting. Simultaneous with the execution
of the Merger Agreement, all of the directors and executive officers of
Lafayette and the Bank, together with Robert F. Jackson, who owns 8.4% of the
outstanding shares of Lafayette, entered into agreements with Lexington
pursuant to which each director agreed to vote his shares for approval of the
Merger Agreement.

Proxies

Holders of Lafayette Common Stock may vote either in person or by
properly executed proxy. Shares of Lafayette Common Stock represented by a
properly executed proxy received prior to or at the Special Meeting will,
unless such proxy is revoked, be voted in accordance with the instructions
indicated on such proxy. If no instructions are indicated on a properly
executed proxy, the shares covered thereby will be voted FOR the proposal to
approve the Merger Agreement. Failure to return the proxy card or to vote in
person at the Lafayette Special Meeting will have the effect of a vote cast
against the Merger Agreement. If any other matters are properly presented at
the Special Meeting for consideration, including, among other things, a motion
to adjourn the Special Meeting to another time and/or place (including,
without limitation, for the purpose of soliciting additional proxies), the
persons named in the proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment; provided, however,
that no proxy which is voted against the proposal to approve the Merger
Agreement will be voted in favor of any such adjournment or postponement. As
of the date hereof, the Lafayette Board knows of no such other matters.

-1-

Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted by delivering
to the Secretary of Lafayette, on or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy or a later dated proxy relating to the same shares of Lafayette Common
Stock, or by attending the Special Meeting and voting in person. Attendance
at the Special Meeting will not in itself constitute revocation of a proxy.

The proxy for the Special Meeting is being solicited on behalf of
the Lafayette Board. The expense of soliciting proxies for the Special
Meeting will be borne by Lafayette. All other costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
are to be paid by the party incurring such expenses. Proxies will be
solicited principally by mail, but may also be solicited by the directors,
officers and other employees of Lafayette in person or by telephone, facsimile
or other means of communication. Such directors, officers and employees will
receive no compensation therefor in addition to their regular compensation,
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Brokers and others who hold Lafayette Common Stock on behalf of
another will be asked to forward proxy material and related documents to the
beneficial owners of such stock, and Lafayette will reimburse them for their
expenses in doing so.

THE MERGER

The descriptions in this Prospectus/Proxy Statement of the terms
and conditions of the Merger and related transactions are qualified in their
entirety by reference to the Merger Agreement, a copy of which is attached as
Appendix A to this Prospectus/Proxy Statement and is incorporated herein by
reference.

General

The Merger Agreement provides for the merger of Lafayette with and
into a wholly-owned subsidiary Lexington, which will then be merged into
Lexington. The separate existence of Lafayette will cease upon completion of
the Merger. It is currently intended that after consummation of the Merger
the Bank will operate as a subsidiary of Lexington. While Lexington and
Lafayette believe that they will receive the requisite regulatory approvals
for the Merger, there can be no assurance that such approvals will be received
or, if received, as to the timing of such approvals or as to the ability to
obtain such approvals on satisfactory terms. See "-- Conditions to
Consummation of the Merger" and "-- Regulatory Requirements."

Merger Consideration

Upon consummation of the Merger, each outstanding share of
Lafayette Common Stock (excluding any Excluded Shares) will be converted into
the right to receive $0.92 in cash plus a number of shares of Lexington Common
Stock equal to the Exchange Ratio. Each holder of Lafayette Common Stock who
would otherwise be entitled to a fractional share of Lexington Common Stock
will receive cash in lieu thereof determined by multiplying such fraction by a
number equal to $0.92 plus the Exchange Ratio multiplied by the Lexington
Price. The Exchange Ratio will be (a) 0.0977 if the average last price per
share of Lexington Common Stock as reported in The Wall Street Journal for
each of the twenty trading days immediately preceding the Effective Date (the
Lexington Price) is greater than $12.00 and less than $14.00, (b) the result
obtained by dividing $1.17 by the Lexington Price if the Lexington Price is
$12.00 or less, or (c) the result obtained by dividing $1.37 by the Lexington
Price if the Lexington Price is $14.00 or greater. Accordingly, the combined
value of the cash and Lexington Common Stock to be received by Lafayette
shareholders will range from $2.09 to $2.29 (valuing the Lexington Common
Stock at the Lexington Price). The total amount of cash to be paid by
Lexington will be approximately $1,039,140.

Because the number of shares of Lexington Common Stock to be
received by Lafayette shareholders will depend on the market price of
Lexington Common Stock, the exact number of shares to be received by Lafayette
shareholders and the value of these shares will not be known until the
Effective Date. On July 14, 1997, the most

-2-

recent date for which it was practicable to obtain information prior to the
printing of this Prospectus/Proxy Statement, the closing price per share of
Lexington Common Stock, as reported on the Nasdaq SmallCap Market, was
$16.125. If the Lexington Price is $16.125, Lafayette shareholders would
receive $0.92 in cash plus 0.0850 shares of Lexington Common Stock, which
would have a combined value of $2.29 (valuing the shares of Lexington Common
Stock at the Lexington Price). Lafayette shareholders should note, however,
that the market price of the Lexington Common Stock they may receive will
continue to be subject to market fluctuations, as well as the future results
of operations and financial condition of Lexington, among other factors, and
therefore may be worth less than, or more than, such amount as of the date
they receive their Lexington Common Stock certificates.

Effective Date of the Merger

Subject to the conditions to the obligations of the parties to
complete the Merger as set forth in the Merger Agreement, the Effective Date
of the Merger will occur on such date as Lexington notifies Lafayette in
writing not less than five days prior thereto, provided such date is not more
than 30 days after such conditions have been satisfied or waived. Subject to
the foregoing, it is currently anticipated that the Merger will be consummated
in the third calendar quarter of 1997. Either Lexington or Lafayette may
terminate the Merger Agreement if the Effective Date does not occur on or
before December 31, 1997.

Exchange of Lafayette Stock Certificates

As promptly as practicable after the Effective Date, Lexington, or
an exchange agent designated by Lexington, will send to each holder of record
of Lafayette Common Stock transmittal materials for use in exchanging all of
such holder's certificates representing Lafayette Common Stock for a
certificate or certificates representing the Lexington Common Stock and cash
into which such holder's shares of Lafayette Common Stock were converted in
the Merger and cash for such holder's fractional share interests, as
appropriate. The transmittal materials will contain information and
instructions with respect to the surrender and exchange of such certificates.

LAFAYETTE SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.

Upon surrender of all of the certificates for Lafayette Common
Stock registered in the name of a holder of such certificates (or indemnity
satisfactory to Lexington and the exchange agent selected by Lexington, if any
of such certificates are lost, stolen or destroyed), together with a properly
completed letter of transmittal, such exchange agent will mail to such holder
a certificate or certificates representing the number of shares of Lexington
Common Stock to which such holder is entitled, a check for the cash portion of
the Merger consideration and, where applicable, a check for any fractional
share interest (without interest).

All shares of Lexington Common Stock issued to the holders of
Lafayette Common Stock pursuant to the Merger will be deemed issued as of the
Effective Date. After the Effective Date, the stock transfer books of
Lafayette will be closed, and there will be no transfers on the transfer books
of Lafayette of the shares of Lafayette Common Stock that were outstanding
immediately prior to the Effective Date.

Background of the Merger

From time to time, management of Lafayette has studied the
possibility of a strategic business combination that would enhance the ability
of Lafayette to compete in the increasingly consolidated financial
institutions industry and to maximize the long-term value of shareholders'
interest. Under such a business combination, management considered various
possible options of (i) expanding the base of operations and market area
through additional facilities, (ii) acquiring another financial institution,
and (iii) strategically combining with another financial institution.

In July 1996, Erwin Oetting, Jr., President and Chairman of the
Board of Lexington, and William J. Huhmann, Chairman of the Board of
Lafayette, and Donald L. Coen, Secretary of Lafayette, met at Mr. Huhmann's
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suggestion to discuss a possible combination of Lafayette and Lexington. The
focus of such meeting was strategic philosophy, and did not involve a
discussion of price or other significant terms of a merger or similar
transaction.

Additional discussions relating to structure, terms of a proposed
merger and organizational issues occurred during the period from the date of
the original meeting in July 1996 through October 1996. The parties discussed
whether Lafayette would become a subsidiary of Lexington, what positions
Lafayette management would hold in the Bank and Lexington after the Merger,
and in what form the merger consideration would be paid. Lafayette and
Lexington determined that the merger consideration should consist of a
combination of cash and Lexington Common Stock as a compromise of both
parties' interests. Lafayette desired that a portion of the consideration be
in the form of Lexington Common Stock so that its receipt would not trigger
income tax liability on the part of Lafayette shareholders. Lexington, on the
other hand, desired to pay the merger consideration in cash since it had
excess capital as a result of the completion of its initial public offering in
June 1996. On October 30, 1996, a draft merger agreement was presented to the
management of Lafayette. A special meeting of the Board of Directors was held
on November 7, 1996 to review and discuss the proposed merger with Lexington.
The Lafayette Board approved the engagement of Humphrey, Farrington & McClain
as legal counsel to review and represent Lafayette in the negotiations with
Lexington and authorized Mr. Farrington to engage such other special counsel
as needed for securities law matters. In addition, the Lafayette Board
authorized management to proceed with negotiations with Lexington. The
Lafayette Board did not solicit any other offers to engage in a business
combination. The Lafayette Board believed that Lexington's proposal was very
strong and in the best interests of Lafayette, its shareholders and its
customers. Accordingly, the Lafayette Board determined to pursue negotiations
with Lexington on an exclusive basis. Additional special meetings of the
Lafayette Board were also held on December 4 and 7, 1996 to update the Board
on the status of merger discussions and to review the status of the merger
agreement with Lexington.

Following these meetings, management of Lafayette and Lexington met
to negotiate further the terms of the merger, which resulted in the final
Merger Agreement. A special meeting of the Boards of Directors of Lafayette
and the Bank were held on March 12, 1997 to consider the merger between
Lafayette and Lexington. A discussion regarding the fairness of the offer and
the need to obtain an independent fairness opinion or solicit other offers was
held. Management stated that considering the length of the negotiation
process and the successful negotiation of issues that the Lafayette Board and
management had raised, it considered the offer to be fair and that the
interest of the Lafayette stockholders would be best served with a merger with
Lexington. Accordingly, the Lafayette Board concluded that the benefits of a
fairness opinion did not justify the costs to Lafayette and its shareholders.
Following the discussions on the merger, both Boards unanimously approved the
Merger Agreement. The Merger Agreement was signed on March 12, 1997 by
Lafayette and Lexington.

Reasons for the Merger and Recommendation of the Lafayette Board

The Lafayette Board, at its meeting held on March 12, 1997,
considered the Merger Agreement and determined it to be fair and in the best
interests of Lafayette and its shareholders. In reaching its determination to
approve the Merger Agreement, the Lafayette Board considered a number factors,
including, without limitation, the following:

(i) The rapid consolidation and increasing nationwide competition
in the financial services industry and the need to anticipate and best
position Lafayette in light of industry trends;

(ii) The positive impact that a combination of Lafayette and
Lexington would have on the communities served by Lafayette and especially in
the city of Lexington, Missouri, where Lafayette and Lexington have their home
offices;

(iii) The financial terms of the merger and the effect of such
terms on Lafayette's shareholders, and the determination that such terms were
consistent with Lafayette's long-term strategy of enhancing shareholder value;
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(iv) The opportunities created by the Merger to leverage
Lafayette's technology, products, and lines of business through Lexington and
the possibility of achieving a cost savings and operating efficiencies
through, among other things, the elimination of duplication of efforts;

(v) The Lafayette Board's belief that the Merger would enhance
shareholder value by, among other things, expanding and diversifying the
combined company's customer base, revenue stream, loan portfolio and funding
sources, and reducing the combined company's exposure to business sector and
operational risks; and

(vi) The likelihood that the Merger would receive requisite
regulatory approvals.

The foregoing discussion of the information and factors considered
by the Lafayette Board is not intended to be exhaustive, but includes all
material factors considered by the Lafayette Board. The Lafayette Board did
not identify any material disadvantages of the Merger. In reaching its
determination to approve the Merger Agreement, the Lafayette Board did not
assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to differing factors.
After deliberating with respect to the Merger, and considering the matters
discussed above, the Lafayette Board unanimously approved the Merger Agreement
as being in the best interest of Lafayette and its shareholders.

For the reasons set forth above, the Lafayette Board has approved
the Merger Agreement as advisable and in the best interests of Lafayette and
Lafayette shareholders and recommends that the shareholders of Lafayette vote
FOR the approval of the Merger Agreement.
- ---
Interests of Certain Persons in the Merger

The directors and executive officers of Lafayette and the Bank,
together with their affiliates, beneficially owned a total of 495,800 shares
of Lafayette Common Stock (representing 43.9% of all outstanding shares of
Lafayette Common Stock) as of the Record Date. The directors and executive
officers will receive the same consideration in the Merger for their shares as
the other shareholders of Lafayette. Certain members of Lafayette's
management and the Lafayette Board have certain interests in the Merger as
described below that are in addition to their interests as shareholders of
Lafayette generally. The Lafayette Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and
the transactions contemplated thereby.

Following the Merger, Mr. Huhmann, Mr. Thompson and Mr. Coen will
enter into three-year employment agreements with Lexington and the Bank.
Pursuant to Mr. Huhmann's agreement, he will serve as Chairman of the Board of
Directors of the Bank and Chief Financial Officer/Chief Operating Officer of
the Bank. Mr. Huhmann will also serve as Senior Vice President/Chief
Financial Officer of Lexington. Pursuant to Mr. Thompson's agreement, he will
serve as President and Chief Executive Officer of the Bank and as a Vice
President of Lexington. Pursuant to Mr. Coen's agreement, he will serve as an
Executive Vice President of the Bank. The salaries for all of these persons
have not yet been determined, but are expected to be comparable to their
current salaries.

Certain Federal Income Tax Consequences

The following is a discussion of the material federal income tax
consequences of the Merger that are generally applicable to Lafayette
shareholders. This discussion is based on currently existing provisions of
the Code, existing regulations thereunder (including final, temporary or
proposed), and current administrative rulings and court decisions, all of
which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences described herein. The following
discussion is intended only as a summary of the material federal income tax
consequences of the Merger and does not purport to be a complete analysis or
listing of all of the potential tax effects relevant to a decision on whether
to vote in favor of approval of the Merger Agreement.

-5-

The Merger is expected to qualify as a reorganization under Section
368(a) of the Code. As parties to a reorganization, neither Lexington nor
Lafayette will recognize gain or loss as a result of the Merger.

A holder of Lafayette Common Stock who receives a combination of
Lexington Common Stock and cash in exchange for Lafayette Common Stock will
recognize any capital gain realized in the transaction but will not recognize
any loss realized in the transaction. The amount of capital gain that is
recognized will be calculated separately for each block of Lafayette Common
Stock surrendered, in an amount equal to the lesser of (i) the amount of gain
realized in respect of such block (i.e., the excess of (a) the sum of the
amount of cash and the fair market value of Lexington Common Stock received
that is allocable to such block of Lafayette Common Stock over (b) the tax
basis of such block) and (ii) the amount of cash received that is allocable to
such block. Such capital gain will constitute long-term capital gain if such
block of Lafayette Common Stock has been held for more than one year at the
Effective Time. For this purpose, all of the cash and Lexington Common Stock
received by a holder will be allocated proportionately among the blocks of
Lafayette Common Stock surrendered by such holder. The tax basis of the
Lexington Common Stock received in exchange for a block of Lafayette Common
Stock will be equal to the tax basis of such surrendered block of Lafayette
common Stock, decreased by the amount of cash received in respect of such
block and increased by the amount of gain recognized in respect of such block.
The holding period of the Lexington Common Stock will include the holding
period of such block of Lafayette Common Stock surrendered.

A holder of Lafayette Common Stock who receives cash in lieu of
fractional shares of Lexington Common Stock will be treated as having received
such fractional shares pursuant to the Merger and then as having exchanged
such fractional shares for cash in a redemption by Lexington. Any gain or
loss attributable to fractional shares generally will be capital gain or loss.
The amount of such gain or loss will be equal to the difference between the
ratable portion of the tax basis of the Lafayette Common Stock surrendered in
the Merger that is allocated to such fractional shares and the cash received
in lieu thereof. Any such capital gain or loss will constitute long-term
capital gain or loss if the Lafayette Common Stock has been held by the holder
for more than one year at the Effective Time.

Each holder of Lafayette Common Stock that receives Lexington
Common Stock in the Merger will be required to retain records and file with
such holder's Federal income tax return a statement setting forth certain
facts relating to the Merger. It is also expected that holders of Lafayette
Common Stock will be asked to indicate in the letter of transmittal their tax
basis in the shares of Lafayette Common Stock surrendered.

Consummation of the Merger is conditioned upon the receipt by
Lexington of an opinion of Breyer & Aguggia, special counsel to Lexington, to
the effect that if the Merger is consummated in accordance with the terms set
forth in the Merger Agreement (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and (ii) no gain or loss
will be recognized by Lafayette shareholders to the extent they receive
Lexington Common Stock in exchange for shares of Lafayette Common Stock.
Lexington and Lafayette may waive receipt of such tax opinion. However, if
the material federal income tax consequences of the Merger are different than
those described herein, Lafayette will resolicit the approval of its
shareholders.

The opinion of counsel, which will be delivered on the Effective
Date, is filed as an exhibit to the Registration Statement, and the foregoing
is only a summary of such tax consequences as described in the opinion. An
opinion of counsel only represents counsel's best legal judgment, and has no
binding effect or official status of any kind, and no assurance can be given
that contrary positions may not be taken by the Internal Revenue Service (the
"IRS") or a court considering the issues. Neither Lafayette nor Lexington has
requested or will request a ruling from the IRS with regard to the federal
income tax consequences of the Merger.

The foregoing is a general summary of all of the material federal
income tax consequences of the Merger to Lafayette shareholders, without
regard to the particular facts and circumstances of each shareholder's tax
situation and status. Because certain tax consequences of the Merger may vary
depending upon the particular circumstances of each shareholder, each
Lafayette shareholder should consult his or her own tax advisor regarding such
shareholder's specific tax situation and status, including the specific
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application and effect of state, local and foreign laws to such shareholder
and the possible effect of changes in federal and other tax laws.

Conduct of Business Pending the Merger

Lafayette and the Bank have agreed in the Merger Agreement not to
take certain actions without the prior approval of Lexington relating to their
operations pending consummation of the Merger. These actions include, among
other things, (i) issuing or selling any Lafayette Common Stock or common
stock of the Bank; (ii) paying any dividends; (iii) incurring any indebtedness
for borrowed money or becoming liable for the obligations of any other entity
other than in the ordinary course of business; (iv) changing its lending,
investment, liability management or other material banking policies in any
respect; (v) imposing any lien on any share of stock held by Lafayette or on
any assets of Lafayette or the Bank; (vi) entering into or amending any
employment agreements or any employee benefit plans or granting any salary
increases (other than in the ordinary course of business); (vii) disposing of
any material portion of its assets or acquiring any material portion of the
business or property of any other entity; (viii) amending its articles of
incorporation or bylaws; (ix) settling any claims involving any liability for
money damages in excess of $25,000; (x) entering into, terminating or changing
any material agreements, except for those agreements that may be terminated by
Lafayette without penalty upon not more than 60 days' prior written notice;
and (xi) extending credit other than in accordance with existing lending
policies or making or renewing any loan to any borrower if the amount of such
loan, when aggregated with other extensions of credit to such borrower, would
exceed $150,000. Moreover, Lafayette and the Banks are required, among other
things, to operate their businesses in the usual, regular and ordinary course
and to use their best efforts to preserve their business relationships and to
retain key employees.

Conditions to Consummation of the Merger

The obligations of Lafayette and Lexington to consummate the Merger
are subject to, among other things, the satisfaction of the following
conditions: (i) approval of the Merger Agreement by the holders of not less
than two-thirds of the outstanding shares of Lafayette Common Stock; (ii)
receipt of all applicable regulatory approvals without any condition that, in
the opinion of Lexington, would deprive Lexington of the material economic or
business benefits of the Merger; (iii) no court or government or regulatory
authority having taken any action which enjoins or prohibits the Merger; and
(iv) receipt by Lexington and Lafayette of the opinion of Breyer & Aguggia,
dated as of the Effective Date, as to certain federal income tax consequences
of the Merger.

The obligations of Lexington are subject to the satisfaction or
waiver of certain additional conditions, including: (i) the delivery by
Lafayette of opinions of its legal counsel and certificates executed by
certain of its executive officers as to compliance with the Merger Agreement;
(ii) the accuracy of the representations and warranties, and compliance in all
material respects with the agreements and covenants of Lafayette; (iii)
William J. Huhmann, Terry L. Thompson and Donald L. Coen having entered into
employment agreements with the Bank and Lexington; (iv) receipt by Lexington
of an agreement from each "affiliate" of Lafayette restricting the sale of
Lexington Common Stock received by such affiliate in the Merger; (v) the
absence of any material adverse change in the financial position or results of
operations of Lafayette; (vi) the number of Dissenting Shares not exceeding 5%
of the outstanding shares of Lafayette Common Stock; and (vii) there being no
more than 11.666 shares of common stock of the Bank outstanding that are not
owned by Lafayette.

The obligations of Lafayette are also subject to the satisfaction
or waiver of certain additional conditions, including: (i) the delivery by
Lexington of opinions of its legal counsel and certificates executed by
certain of its executive officers as to compliance with the Merger Agreement;
and (ii) the accuracy of the representations and warranties, and compliance in
all material respects with the agreements and covenants of Lexington.

-7-

Regulatory Requirements

The Merger is subject to prior approval by the Federal Reserve
Board under the BHC Act. The Merger is also subject to the approval of the
Division. An application for approval of the Merger was filed with the
Federal Reserve Board and the Division on June 30, 1997.

The approval of any application merely implies satisfaction of
regulatory criteria for approval, which do not include review of the Merger
from the standpoint of the adequacy of the consideration to be received by, or
fairness to, shareholders. Regulatory approvals do not constitute an
endorsement or recommendation of the proposed Merger.

Lexington and Lafayette are not aware of any governmental approvals
or compliance with banking laws and regulations that are required for
consummation of the Merger other than those described above. Should any other
approval or action be required, it is presently contemplated that such
approval or action would be sought. There can be no assurance that any such
approval or action, if needed, could be obtained and, if such approvals or
actions are obtained, there can be no assurance as to the timing thereof. The
Merger cannot proceed in the absence of all requisite regulatory approvals.
See "-- Effective Date of the Merger," "-- Conditions to Consummation of the
Merger," and "-- Amendment; Waiver; Termination."

The Merger Agreement provides that if the Merger has not been
consummated by December 31, 1997, the Merger Agreement may be terminated by
Lexington or Lafayette. Since there is the possibility that regulatory
approval may not be obtained for a substantial period of time after approval
of the Merger Agreement by Lafayette's shareholders, there can be no assurance
that the Merger will be consummated by December 31, 1997. In addition, should
regulatory approval require any material change, a resolicitation of
shareholders may be required if regulatory approval is obtained after
shareholder approval of the Merger Agreement.

No Solicitation

Lafayette has agreed in the Merger Agreement that neither it nor
any of its subsidiaries will solicit, initiate or encourage inquiries or
proposals with respect to, or furnish any nonpublic information relating to,
or participate in any negotiations concerning, any acquisition or purchase of
all or a substantial portion of the assets of, or a substantial equity
interest in, Lafayette or any of its subsidiaries or any merger or other
business combination with Lafayette or any of its subsidiaries.

Dissenters' Rights

Under the Missouri GBCL, stockholders of Lafayette will have
dissenters' rights with respect to the Merger. Such rights will entitle
stockholders to receive the fair value of their shares of Lafayette Common
Stock rather than having such shares converted into the right to receive the
cash and shares of Lexington Common Stock as described above, if the
stockholders follow the procedures set forth in Section 351.455 of the
Missouri GBCL. Accompanying this Proxy Statement as Appendix B is a copy of
the text of Section 351.455 of the Missouri GBCL, which prescribes the
procedures for the exercise of dissenters' rights and for determining the fair
value of the Lafayette Common Stock.

A stockholder who wishes to exercise his or her dissenters' rights
must deliver to Lafayette prior to or at the Special Meeting a written
objection to the Merger Agreement, must not vote in favor of approval of the
Merger Agreement and must make a written demand on Lexington, as the surviving
corporation, within 20 days after the Merger is consummated for the fair value
of his or her shares. All stockholders who deliver a written objection to
Lafayette and who do not vote in favor of approval of the Merger Agreement
will be notified when the Merger is consummated. The fair value of
dissenters' shares shall be determined as of the day prior to the Special
Meeting.

-8-

If within 30 days after the Effective Time the value of the
dissenting stockholder's shares is agreed upon between the dissenting
stockholder and Lexington, payment therefor will be made within 90 days after
the Effective Time upon surrender of the certificate(s) representing such
shares.

If within 30 days after the Effective Time the dissenting
stockholder and Lexington do not agree as to the fair value of such
stockholder's shares, then, within 60 days after expiration of such 30 day
period, the dissenting stockholder may file a petition asking for a finding
and determination of the fair value of such shares, and shall be entitled to
judgment against Lexington for the amount of such fair value as of the day
prior to the Special Meeting, together with interest thereon. The "fair
value" determined by the court may be more or less than the amount offered to
Lafayette stockholders under the Merger Agreement. The judgment will be
payable only upon the surrender of the certificates representing such
stockholder's shares of Lafayette Common Stock. A dissenting stockholder who
does not file a petition within the specified time frame will be conclusively
presumed to have approved the Merger Agreement and will receive cash and
Lexington Common Stock in exchange for his or her shares in accordance with
the terms of the Merger Agreement.

The failure of a holder of Lafayette Common Stock to vote against
the Merger will not itself constitute a waiver of the right to receive payment
for his or her shares in accordance with the Merger Agreement, nor will a vote
against the Merger satisfy the notice requirements referred to above.

Amendment; Waiver; Termination

Lexington may elect to modify the structure of the Merger;
provided, however, that Lexington shall not have the right to make any
revision to the structure of the Merger which (i) changes the amount or kind
of the consideration which the Lafayette shareholders are entitled to receive
or (ii) adversely affects the tax treatment to Lafayette shareholders of
receiving such consideration. Prior to the Effective Date of the Merger, any
condition of the Merger Agreement may (to the extent allowed by law) be waived
in writing by the party benefitted by the provision or may be amended or
modified by an agreement in writing approved by the Boards of Directors of
Lexington and Lafayette. After approval of the Merger Agreement by the
shareholders of Lafayette, the Merger Agreement may not, without further
approval of such shareholders, be amended in any manner that would alter the
consideration to be received by Lafayette shareholders in exchange for their
Lafayette Common Stock.

The Merger Agreement may be terminated at any time prior to the
Effective Date of the Merger, either before or after approval by the Lexington
and Lafayette shareholders, as follows: (i) by the mutual consent of the
parties; (ii) by either party if the other party has committed a material
breach that cannot be or has not been cured within 30 days after the giving of
written notice of such breach; (iii) by either party if the Merger is not
consummated by December 31, 1997; or (iv) by either party if the shareholders
of Lafayette fail to approve the Merger Agreement or written notice is
received which states that any required regulatory approval has not been
approved or has been denied.

In the event of the valid termination of the Merger Agreement by
either Lexington or Lafayette, the obligations of the parties to the Merger
Agreement shall terminate, and there will be no liability on the part of
either party or their officers or directors except for liability for breach of
the Merger Agreement or for any misstatement or misrepresentation made prior
to such termination.

Termination Fee

As a condition and inducement to Lexington's entering into the
Merger Agreement and in consideration thereof, Lafayette has agreed to pay to
Lexington a termination fee of $100,000 under certain circumstances. Such fee
may be demanded by Lexington in the event that (i) the Merger Agreement is
terminated because Lafayette and the Bank and their respective directors do
not use all reasonable efforts to consummate the Merger in accordance with the
terms of the Merger Agreement; (ii) Lafayette terminates the Merger Agreement
for any reason other than (A) with the mutual consent of Lexington, (B)
because of a material breach by Lexington that cannot be or has not
-9-

been cured within 30 days after written notice of such breach (but only if
such breach is willful and at such time as Lafayette exercises its right to
terminate the Merger Agreement Lexington is not entitled to terminate the
Merger Agreement because of a material breach by Lafayette, because the Merger
has not been consummated by December 31, 1997 or because the shareholders of
Lafayette failed to approve the Merger Agreement or a required regulatory
approval has been denied) or (C) because the Merger has not been consummated
by December 31, 1997; (iii) Lexington terminates the Merger Agreement as a
result of Lafayette or the Bank having committed a material breach that cannot
be or has not been cured within 30 days after written notice of such breach;
or (iv) the Merger is not completed by March 12, 1998 and any of the following
occurs: (A) a third party acquires beneficial ownership of 25% or more of the
then outstanding Lafayette Common Stock; (B) Lafayette, without the written
consent of Lexington, enters into or recommends to Lafayette stockholders an
agreement with a third party providing for certain actions (each an
"Acquisition Transaction"), including a merger or similar transaction
involving Lafayette, the purchase, acquisition or lease of substantially all
of the assets of Lafayette or the purchase or other acquisition of securities
representing 10% or more of the voting power of Lafayette; or (C) a bona fide
proposal to engage in an Acquisition Transaction is made to Lafayette by a
third party, and after such proposal is made either Lafayette willfully
breaches the Merger Agreement entitling Lexington to terminate the Merger
Agreement, Lafayette stockholders fail to approve the Merger Agreement at the
Special Meeting, the Special Meeting is canceled without the fault of
Lexington, or Lafayette's Board of Directors withdraws or modifies in a manner
adverse to Lexington its recommendation to stockholders to approve the Merger
Agreement.

Lafayette will not be required to pay the termination fee if, prior
to the occurrence of any of the events described in clause (iv) above,
Lafayette validly terminates the Merger Agreement with the mutual consent of
Lexington or because any regulatory authority has denied approval of the
Merger. The termination fee is intended to increase the likelihood that the
Merger will be consummated according to the terms set forth in the Merger
Agreement and may be expected to discourage competing offers to acquire
Lafayette from potential third party acquirors because the termination fee
could increase the cost of such acquisition. To the best of Lafayette's
knowledge, no event that would permit Lexington to demand payment of the
termination fee has occurred as of the date of this Prospectus/Proxy
Statement.

Resale of Lexington Common Stock

The shares of Lexington Common Stock to be issued to shareholders
of Lafayette upon consummation of the Merger have been registered under the
Securities Act. Such shares may be traded freely and without restriction by
those shareholders not deemed to be "affiliates" of Lafayette or Lexington as
that term is defined in the rules under the Securities Act. Lexington Common
Stock received by those shareholders of Lafayette who are deemed to be
"affiliates" of Lafayette may be resold without registration only to the
extent provided for by Rule 145, or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Lafayette
generally include individuals or entities that control, are controlled by or
are under common control with, Lafayette, and may include the executive
officers and directors of Lafayette as well as certain principal shareholders
of Lafayette. In the Merger Agreement, Lafayette has agreed to use its best
efforts to cause each person who may be deemed to be an affiliate of Lafayette
to enter into an agreement with Lexington providing that such affiliate will
not sell, transfer, or otherwise dispose of the shares of Lexington Common
Stock to be received by such person in the Merger except in compliance with
the applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder. This Prospectus/Proxy Statement does not cover any
resales of Lexington Common Stock received by affiliates of Lafayette.

Accounting Treatment

The Merger, if completed as proposed, will be treated as a purchase
in accordance with generally accepted accounting principles. Accordingly, the
assets and liabilities of Lafayette will be recorded on the books of Lexington
at their respective fair values at the time of consummation of the Merger.
-10-

The unaudited pro forma data contained in this Prospectus/Proxy
Statement has been prepared using the purchase method of accounting to account
for the Merger. See "PRO FORMA FINANCIAL INFORMATION."

Expenses

The Merger Agreement provides that Lexington and Lafayette each
will pay their own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.

PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial
statements give effect to the Merger under the purchase method of accounting.
These pro forma financial statements are presented for illustration purposes
only, and, therefore, are not necessarily indicative of the operating results
and financial position that might have been achieved had the Merger occurred
as of an earlier date, nor are they necessarily indicative of the operating
results and financial position which may occur in the future. Amounts
allocated to the Lafayette tangible and intangible assets acquired by
Lexington will be based upon the estimated fair values at the Effective Date
of the Merger. The allocation of the purchase price in the accompanying
unaudited pro forma condensed combined financial statements is based on
management's preliminary estimates and is subject to revision based on further
studies and valuations. For a description of certain matters with respect to
the accounting of the Merger under the purchase method of accounting, see "THE
MERGER -- Accounting Treatment."

A pro forma condensed combined statement of financial condition is
provided as of March 31, 1997, giving effect to the Merger as though it had
been consummated on that date. Pro forma condensed combined statements of
operations are provided for the six months ended March 31, 1997 and the year
ended September 30, 1996, giving effect to the Merger as though it had
occurred at the beginning of the earliest period presented.

The pro forma condensed combined financial statements have been
prepared based on a 0.0929 Exchange Ratio. The actual Exchange Ratio will
depend on the Lexington Price (which will not be known until shortly before
the Effective Date) and may be higher or lower than 0.0929.

The pro forma condensed combined financial statements include all
adjustments (consisting only of normal recurring entries) which the respective
managements of Lexington and Lafayette believe are necessary for the fair
presentation of the information presented. The unaudited pro forma condensed
combined financial statements are derived from the historical consolidated
financial statements of Lexington and Lafayette, and should be read in
conjunction with the separate historical consolidated financial statements of
Lexington and Lafayette, including the notes thereto, presented elsewhere in
this Prospectus/Proxy Statement.

-11-

Pro Forma Condensed Combined Statement of Financial Condition
March 31, 1997
(unaudited)

Acquisition
Entries Pro Forma
Lexington Lafayette(1) Debit Credit Combined
--------- ------------ ----- ------ --------
(In Thousands)

Assets
Cash . . . $ 680 $ 256 $ -- $ -- $ 936
Interest-
bearing
deposits. 4,800 1,416 -- 1,129(3) 5,087
Certificates
of deposit 1,525 -- -- -- 1,525
Investment
securities
available-
for-sale. 3,495 112 -- -- 3,607
Investment
securities
held-to-
maturity. 871 13,993 -- -- 14,864
Mortgage-backed
securities
available-for-
sale. . . 1,959 -- -- -- 1,959
Federal funds
sold. . . -- 850 -- -- 850
Stock in
Federal Home
Loan Bank. 464 114 -- -- 578
Loans
receivable 44,628 15,735 -- -- 60,363
Accrued
interest
receivable 369 376 -- -- 745
Premises and
equipment. 368 388 -- -- 756
Foreclosed
real estate 11 -- -- -- 11
Goodwill. . -- 327 738(3) -- 1,065
Other assets 578 158 1,990(3) 1,990(4) 736
Total ------- ------- ------ ------ -------
assets . $59,748 $33,725 $2,728 $3,119 $93,082
======= ======= ====== ====== =======
Liabilities and
Stockholders'
Equity
Liabilities
Deposits. . $42,359 $30,554 $ -- $ -- $72,913
Advances from
Federal Home
Loan Bank . -- 340 -- -- 340
Notes payable -- 558 -- -- 558
Advances from
borrowers for
taxes and
insurance . 88 -- -- -- 88
Other
liabilities 796 283 -- -- 1,079
Total ------- ------- ------ ------ -------
liabilities 43,243 31,735 -- -- 74,978

Stockholders'
Equity
Preferred
stock. . -- -- -- -- --
Common stock 13 1,130 1,130(4) -- 13
Paid-in
capital. 12,088 35 35(4) -- 12,088
Retained
earnings 8,005 830 830(4) -- 8,005

Unrealized gain
(loss) on
securities 18 (5) -- 5(4) 18
Treasury stock (2,699) -- -- 1,599(3) (1,100)
Unearned ESOP
shares . (920) -- -- -- (920)
Total ------- ------- ------ ------ -------
stockholders'
equity 16,505 1,990 1,995 1,604 18,104
Total ------- ------- ------ ------ -------
liabilities
and stock-
holders'
equity $59,748 $33,725 $1,995 $1,604 $93,082
======= ======= ====== ====== =======

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

-12-

Pro Forma Condensed Combined Statement of Operations
Six Months Ended March 31, 1997
(unaudited)

Pro Forma
Adjustments Pro Forma
Lexington Lafayette(1) Debit Credit Combined
--------- ------------ ----- ------ --------
(In Thousands, Except Per Share Data)

Interest Income
Interest
and fees
on loans. . . $1,888 $ 751 $ -- $ -- $2,639
Investment
securities. . 415 429 37(5) -- 807
Total ------ ------ ----- ---- ------
interest
income . . 2,303 1,180 37 -- 3,446

Interest Expense
Deposits . . . 1,148 602 -- -- 1,750
Advances from
Federal Home
Loan Bank . . -- 11 -- -- 11
Notes payable. -- 31 -- -- 31
Total interest ------ ------ ----- ---- ------
expense . . 1,148 644 -- -- 1,792
Net interest ------ ------ ----- ---- ------
income . . . 1,155 536 37 -- 1,654

Provision for
Loan Losses. . 21 20 -- -- 41
Net interest ------ ------ ----- ---- ------
income after
provision for
loan losses. 1,134 516 37 -- 1,613

Non-interest
Income
Service charges
and other fees 13 96 -- -- 109
Commissions, net 10 12 -- -- 22
Income from
foreclosed
assets. . . . -- -- -- -- --
Gain on sale of
investments . -- -- -- -- --
Other. . . . . 19 19 -- -- 38
Total non- ------ ------ ----- ---- ------
interest
income. . . 42 127 -- -- 169

Non-interest Expense
Employee salaries
and benefits . 313 269 -- -- 582
Occupancy costs 33 48 -- -- 81
Advertising . . 7 -- -- -- 7
Data processing 34 -- -- -- 34
Federal insurance
premiums . . . 28 21 -- -- 49
Other . . . . . 204 121 25(5) -- 350
Total non- ------ ------ ----- ---- ------
interest
expense. . . 619 459 25 -- 1,103
Income before ------ ------ ----- ---- ------
income taxes 557 184 62 -- 679

Income taxes . . 201 68 -- 15(5) 254
------ ------ ----- ---- ------
Net income . $ 356 $ 116 $ 62 $ 15 $ 425
====== ====== ====== ==== ======
Net income per
share . . . . . $ 0.31 $ 0.10 $ 0.34
====== ====== ======
Average shares
outstanding 1,144,402 1,129,500 1,249,310
========= ========= =========

See accompanying Notes to Pro Forma Condensed Combined Financial Statements

-13-

Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 1996(1)
(unaudited)

Pro Forma
Adjustments Pro Forma
Lexington Lafayette(1) Debit Credit Combined(2)
--------- ------------ ----- ------ -----------
(In Thousands, Except Per Share Data)

Interest Income
Interest and
fees on loans $3,350 $1,481 $ -- $ -- $4,831
Investment
securities. . 723 853 73(5) -- 1,503
Total ------ ------ ----- ---- ------
interest
income. . . 4,073 2,334 73 -- 6,334

Interest Expense
Deposits. . . . 2,333 1,172 -- -- 3,505
Advances from
Federal Home
Loan Bank. . . -- 21 -- -- 21
Notes payable . -- 70 -- -- 70
Total interest ------ ------ ----- ---- ------
expense. . . 2,333 1,263 -- -- 3,596
Net interest ------ ------ ----- ---- ------
income . . . 1,740 1,071 73 -- 2,738

Provision for
Loan Losses . . 10 33 -- -- 43
Net interest ------ ------ ----- ---- ------
income after
provision for
loan losses. 1,730 1,038 73 -- 2,695

Non-interest Income
Service charges
and other fees 24 184 -- -- 208
Commissions, net 26 23 -- -- 49
Income from
foreclosed
assets . . . . 9 -- -- -- 9
Gain on sale of
investments. . -- 9 -- -- 9
Other . . . . . 40 29 -- -- 69
Total non- ------ ------ ----- ---- ------
interest
income . . . 99 245 -- -- 344

Non-interest Expense
Employee salaries
and benefits. . 470 502 -- -- 972
Occupancy costs. 58 107 -- -- 165
Advertising. . . 11 -- -- -- 11
Data processing. 58 -- -- -- 58
Federal insurance
premiums. . . . 378 25 -- -- 403
Other. . . . . . 169 228 50(5) -- 447
Total non- ------ ------ ----- ---- ------
interest
expense . . . 1,144 862 50 -- 2,056
Income before ------ ------ ----- ---- ------
income taxes. 685 421 123 -- 983

Income taxes. . . 224 154 -- 37(5) 341
------ ------ ----- ---- ------
Net income . . $ 461 $ 267 $ 123 $ 37 $ 642
====== ====== ====== ==== ======
Net income per
share. . . . . . $ 0.40 $ 0.24 $ 0.51
====== ====== ======
Average shares
outstanding 1,164,464 1,129,500 1,258,614
========= ========= =========

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

-14-

Notes to Pro Forma Condensed Combined Financial Statements

(1) Lafayette financial data is as of March 31, 1997, adjusted for the
repurchase of minority bank shares at the maximum repurchase price of
150% of book value per share of the Bank at September 30, 1996.
(2) The historical financial information for Lafayette is for the year ended
December 31, 1996. The pro forma combined statement of operations for
the year ended September 30, 1996 is based upon the combined historical
statement of operations for Lexington for its fiscal year ended September
30, 1996 and Lafayette for its fiscal year ended December 31, 1996.
(3) The entries to record the acquisition of Lafayette reflect the purchase
method of accounting on the assumption that cash and 104,908 shares of
Lexington Common Stock, now held in treasury, will be exchanged for
1,129,500 shares (100%) of Lafayette Common Stock. The entries reflect a
stock price of $14.75 for Lexington Common Stock which was the closing
price at March 11, 1997, the last full trading day preceding the public
announcement of the Merger. The exchange reflects $0.92 in cash and
0.0929 shares of Lexington Common Stock for each share of Lafayette
Common Stock. Lexington has determined that the difference between the
carrying amounts and estimated fair market values of Lafayette's
financial instruments and fixed assets are not material.
(4) Elimination adjustment to pro forma condensed combined statement of
financial condition.
(5) The pro forma adjustments represent the estimated lost investment income
computed at 6.50% per annum and annual amortization of the excess cost
over equity in the net assets of Lafayette. Amortization is on a
straight-line basis over fifteen years and is assumed not to be tax
deductible. The computation assumes a 40% effective income tax rate.
The excess cost is based on the assumption that cash and 104,908 shares
of Lexington Common Stock, now held in treasury, will be exchanged for
1,129,500 shares (100%) of Lafayette Common Stock. The entries reflect a
stock price of $14.75 for Lexington Common Stock which was the closing
price at March 11, 1997, the last full trading day preceding the public
announcement of the Merger. The exchange reflects $0.92 in cash and
0.0929 shares of Lexington Common Stock for each share of Lafayette
Common Stock. Lexington has determined that the difference between the
carrying amounts and estimated fair market values of Lafayette's
financial instruments and fixed assets are not material.

MANAGEMENT AND OPERATIONS AFTER THE MERGER

As a result of the Merger, the separate existence of Lafayette
will cease and Lexington will succeed to all of the assets and liabilities of
Lafayette. Lexington will have two direct subsidiaries, the Bank and B & L
Bank. The Bank will continue to operate as a Missouri-chartered bank while B
& L Bank will continue to operate as a federally chartered savings bank.

The directors and officers of Lexington immediately prior to the
Effective Time of the Merger will continue as the directors and officers of
Lexington after the Effective Time of the Merger. After the Effective Time of
the Merger, Erwin Oetting Jr., the President of Lexington, together with two
or more other persons chosen by Lexington, will join the Board of Directors of
the Bank.

William J. Huhmann will serve as Chairman of the Board of Directors
of the Bank and Chief Financial Officer/Chief Operating Officer of the Bank.
Mr. Huhmann will also serve as Senior Vice President/Chief Financial Officer
of Lexington. Terry L. Thompson will serve as President and Chief Executive
Officer of the Bank and as a Vice President of Lexington. Donald L. Coen will
serve as an Executive Vice President of the Bank. All three individuals will
have three-year employment agreements with Lexington and the Bank. See "THE
MERGER -- Interests of Certain Persons in the Merger."

Following the Effective Time, Lexington will establish a committee
comprised of the three senior management officials of the Bank and the four
senior management officials of B & L Bank for the purpose of advising the
Lexington Board of Directors with respect to the management and operating
strategies of Lexington's depository institution subsidiaries.

-15-

BUSINESS OF LEXINGTON B & L FINANCIAL CORP.
General

Lexington, a Missouri corporation, was organized on November 29,
1995 for the purpose of becoming the holding company for B & L Bank upon its
conversion from a federal mutual savings and loan association to a federal
stock savings bank ("Conversion"). The Conversion was completed on June 5,
1996 through the issuance of 1,265,000 shares of common stock by Lexington at
a price of $10.00 per share to certain former mutual members of B & L Bank and
the general public. At September 30, 1996, Lexington had total assets of
$61.7 million, total deposits of $42.2 million and total equity of $18.8
million, or 30.4% of adjusted total assets, on a consolidated basis.

B & L Bank was originally chartered in 1887 as a Missouri-chartered
mutual savings and loan association under the name "The Lexington Building and
Loan Association," and converted to a federal charter and adopted the name
"The Lexington Building and Loan Association, F.A." in June 1995. B & L Bank
is regulated by the OTS, its primary federal regulator, and the FDIC, the
insurer of its deposits. B & L Bank's deposits are federally insured by the
FDIC under the Savings Association Insurance Fund ("SAIF"). B & L Bank is a
member of the Federal Home Loan Bank ("FHLB") System.

B & L Bank is a community oriented financial institution that
engages primarily in the business of attracting deposits from the general
public and using these funds to originate one- to four-family residential
mortgage loans within B & L Bank's market area. B & L Bank is a portfolio
lender and generally does not sell the mortgage loans that it originates. At
September 30, 1996, one- to four-family residential mortgage loans totalled
$40.5 million, which represented 89.0% of B & L Bank's total gross loans at
that date. To a lesser extent, lending activities also have included the
origination of multi-family, commercial real estate, construction, and
consumer loans.

Market Area

Lexington, Missouri is located on the southern bank of the Missouri
River approximately 45 miles east of Kansas City, Missouri. Lexington,
estimated population of 4,900, is the county seat and the largest town in
Lafayette County. Lafayette County is predominately rural and contains
several small towns, although the western portions are becoming bedroom
communities for commuters to jobs in the Kansas City metropolitan area. B & L
Bank considers its market area for loans and savings deposits to encompass
Lafayette County and the bordering areas of three surrounding counties
(southern Ray County, northern Johnson County and western Jackson County).

The Lafayette County economy has its roots in agriculture, although
agriculture has declined as a source of revenue over the decades. Most of the
employment today is primarily based in services, light manufacturing, state
and local government and retail trade. The largest employer in Lafayette
County is S&K Industries, a wood products manufacturer that employees
approximately 300 people, according to the Lexington Chamber of Commerce.
Tourism is also part of the local economy as Lexington has historic ties to
the Civil War.

Lending Activities

General. The principal lending activity of B & L Bank is the
origination of conventional mortgage loans for the purpose of purchasing,
constructing or refinancing owner-occupied, one- to four-family residential
property. To a significantly lesser extent, B & L Bank also originates
multi-family, commercial real estate, land and consumer loans. B & L Bank's
net loans receivable totalled $45.3 million at September 30, 1996,
representing 73.5% of consolidated total assets.

-16-

Loan Portfolio Analysis. The following table sets forth the
composition of B & L Bank's loan portfolio by type of loan and type of
security as of the dates indicated. B & L Bank had no concentration of loans
exceeding 10% of total gross loans other than as set forth below.

At September 30,
---------------------------------------------------------
1996 1995 1994
----------------- ---------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Type of Loan:

One- to four-
family. . . . . $40,537 88.51% $37,486 90.07% $35,435 88.38%
Commercial real
estate and
multi-family . 1,120 2.45 978 2.35 1,223 3.05
Land . . . . . . 489 1.07 483 1.16 549 1.37
Construction . . 613 1.34 427 1.02 1,340 3.34
Total mortgage ------- ------ ------- ------ ------- ------
loans. . . . . 42,759 93.37 39,374 94.60 38,547 96.14
Other Loans:
Home equity. . . 486 1.06 301 0.72 184 0.46
Loans on savings
accounts. . . . 1,210 2.64 844 2.03 643 1.61
Automobile loans 1,090 2.38 839 2.02 534 1.33
Other. . . . . . 253 0.55 262 0.63 185 0.46
------- ------ ------- ------ ------- ------
Total other
loans . . . . 3,039 6.63 2,246 5.40 1,546 3.86
------- ------ ------- ------ ------- ------
Total loans. . 45,798 100.00% 41,620 100.00% 40,093 100.00%
====== ====== ======
Less:
Loans in process 249 308 536
Allowance for
possible loan
losses. . . . . 201 201 178
Loans receivable, ------- ------- -------
net. . . . . . $45,348 $41,111 $39,379
======= ======= =======
Type of Security:

One- to four-
family. . . . . $41,636 90.91% $38,214 91.81% $36,959 92.18%
Commercial real
estate and
multi-family. . 1,120 2.45 978 2.35 1,223 3.05
Land . . . . . . 489 1.07 483 1.16 549 1.37
Savings accounts 1,210 2.64 844 2.03 643 1.61
Automobile . . . 1,090 2.38 839 2.02 534 1.33
Other. . . . . . 253 0.55 262 0.63 185 0.46
------- ------ ------- ------ ------- ------
Total . . . . . 45,798 100.00% 41,620 100.00% 40,093 100.00%
====== ====== ======
Less:
Loans in process 249 308 536
Allowance for
possible loan
losses. . . . . 201 201 178
Loans receivable, ------- ------- -------
net. . . . . . $45,348 $41,111 $39,379
======= ======= =======

Residential Real Estate Lending. The primary lending activity of B
& L Bank is the origination of mortgage loans to enable borrowers to purchase
existing one- to four-family homes. Management believes that this policy of
focusing on one- to four-family residential mortgage loans located in its
market area has been successful in contributing to interest income while
keeping credit losses to a minimum. At September 30, 1996, $40.5 million, or
88.5% of B & L Bank's gross loan portfolio, consisted of loans secured by one-
to four-family residential real estate. The average principal balance of the
loans in B & L Bank's one- to four-family portfolio was approximately $34,000
at September 30, 1996. B & L Bank presently originates for retention in its
portfolio both adjustable rate
-17-

mortgage ("ARM") loans with terms of up to 25 years and fixed-rate mortgage
loans with terms of up to 10 years. Borrower demand for ARM loans versus
fixed-rate mortgage loans is a function of the level of interest rates, the
expectations of changes in the level of interest rates and the difference
between the initial interest rates and fees charged for each type of loan.
The relative amount of fixed-rate mortgage loans and ARM loans that can be
originated at any time is largely determined by the demand for each in a
competitive environment. At September 30, 1996, $39.5 million, or 86.2% of B
& L Bank's gross loans, were subject to periodic interest rate adjustments.

The loan fees charged, interest rates and other provisions of B & L
Bank's ARM loans are determined by B & L Bank on the basis of its own pricing
criteria and competitive market conditions. B & L Bank originates one-year
ARM loans secured by owner-occupied residences whose interest rates and
payments generally are adjusted annually to a rate typically equal to 2.875%
above the one-year constant maturity U.S. Treasury ("CMT") index. B & L Bank
occasionally offers ARM loans with initial rates below those that would
prevail under the foregoing computations, determined by B & L Bank based on
market factors and competitive rates for loans having similar features offered
by other lenders for such initial periods. At September 30, 1996, the initial
interest rate on ARM loans offered by B & L Bank ranged from 7.5% to 8.5% per
annum. The periodic interest rate cap (the maximum amount by which the
interest rate may be increased or decreased in a given period) on B & L Bank's
ARM loans is generally 1% to 2% per adjustment period and the lifetime
interest rate cap is generally 5% to 6% over the initial interest rate of the
loan. Substantially all of B & L Bank's ARM loans have caps over the initial
interest rate of 1% per adjustment period and 5% over the life of the loan.

B & L Bank does not originate negative amortization loans. The terms
and conditions of the ARM loans offered by B & L Bank, including the index for
interest rates, may vary from time to time. B & L Bank believes that the
adjustment features of its ARM loans provide flexibility to meet competitive
conditions as to initial rate concessions while preserving B & L Bank's
objectives by limiting the duration of the initial rate concession.

A significant portion of B & L Bank's residential mortgage loans are
not readily saleable in the secondary market because they are not originated
in accordance with the purchase requirements of the Federal Home Loan Mortgage
Corporation ("FHLMC") or the Federal National Mortgage Association ("FNMA").
Although such loans satisfy B & L Bank's underwriting requirements, they are
non-agency-conforming because they do not satisfy collateral requirements,
income and debt ratios, acreage limits, or various other requirements imposed
by the FHLMC and FNMA. In addition, substantially all of B & L Bank's ARM
loans have periodic interest rate caps of 1% per adjustment period and 5%
lifetime over the initial loan interest rate, while FHLMC and FNMA secondary
market guidelines require higher adjustment periods and lifetime caps of 2%
and 6%, respectively. Accordingly, B & L Bank's non- agency-conforming loans
could be sold only after incurring certain costs and/or discounting the
purchase price. B & L Bank, however, currently does not intend to sell its
loans. B & L Bank has historically found that its origination of
non-agency-conforming loans has not resulted in high amounts of non-performing
loans. In addition, B & L Bank believes that these loans satisfy a need in B
& L Bank's local community. As a result, B & L Bank intends to continue to
originate such non-agency-conforming loans.

The retention of ARM loans in B & L Bank's loan portfolio helps
reduce B & L Bank's exposure to changes in interest rates. There are,
however, unquantifiable credit risks resulting from the potential of increased
costs due to changed rates to be paid by the customer. It is possible that
during periods of rising interest rates the risk of default on ARM loans may
increase as a result of repricing and the increased costs to the borrower.
Furthermore, because the ARM loans originated by B & L Bank generally provide,
as a marketing incentive, for initial rates of interest below the rates that
would apply were the adjustment index used for pricing initially
(discounting), these loans are subject to increased risks of default or
delinquency. Another consideration is that although ARM loans allow B & L
Bank to increase the sensitivity of its asset base to changes in interest
rates, the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate adjustment limits. Because of these considerations, B
& L Bank has no assurance that yields on ARM loans will be sufficient to
offset increases in B & L Bank's cost of funds.
-18-

While fixed-rate single-family residential real estate loans are
normally originated with 10 year terms, such loans typically remain
outstanding for substantially shorter periods. This is because borrowers
often prepay their loans in full upon sale of the property pledged as security
or upon refinancing the original loan. In addition, substantially all
mortgage loans in B & L Bank's loan portfolio contain due-on-sale clauses
providing that B & L Bank may declare the unpaid amount due and payable upon
the sale of the property securing the loan. Typically, B & L Bank enforces
these due-on-sale clauses to the extent permitted by law and as business
judgment dictates. Thus, average loan maturity is a function of, among other
factors, the level of purchase and sale activity in the real estate market,
prevailing interest rates and the interest rates payable on outstanding loans.

B & L Bank generally requires title insurance insuring the status of
its lien on all of the real estate secured loans. B & L Bank also requires
that fire and extended coverage casualty insurance (and, if appropriate, flood
insurance) be maintained in an amount at least equal to the outstanding loan
balance.

Appraisals are obtained on all properties and are conducted by
independent fee appraisers approved by the Board of Directors. B & L Bank's
lending policies generally limit the maximum loan-to-value ratio on mortgage
loans secured by owner-occupied properties to 80% of the lesser of the
appraised value or the purchase price, with the condition that the
loan-to-value ratio may be increased to 90% provided that private mortgage
insurance coverage is obtained for the amount in excess of 80%.

Income Property Lending. Historically, B & L Bank has engaged in
limited amounts of commercial real estate and multi-family lending
(collectively, "income property lending"). B & L Bank does not actively
solicit income property loans but generally extends them as an accommodation
to existing customers and intends to continue to do so in the future. At
September 30, 1996, income property loans aggregated $1.1 million, or 2.5% of
the gross loan portfolio.

The average principal balance of the loans in B & L Bank's income
property loan portfolio was approximately $43,000 at September 30, 1996.
Substantially all of the income property loans are secured by properties
located in B & L Bank's market area. Such properties include residential
properties of five or more units, strip shopping malls generally containing
between two and six store fronts, churches, and professional offices. Income
property loans are generally made for terms of 20 years with five- to 10-year
balloon payments and at variable interest rates that adjust annually to a rate
typically equal to 3.0% to 3.5% above the one-year CMT index.

Income property loans generally involve greater risks than one- to
four-family residential mortgage loans. Payments on loans secured by such
properties often depend on successful operation and management of the
properties. Repayment of such loans may be subject to a greater extent to
adverse conditions in the real estate market or the economy. B & L Bank seeks
to minimize these risks in a variety of ways, including limiting the size of
such loans, limiting the maximum loan-to-value ratio to 70% and strictly
scrutinizing the financial condition of the borrower, the quality of the
collateral and the management of the property securing the loan. All of the
properties securing B & L Bank's income property loans are inspected by B & L
Bank's lending personnel before the loan is made. B & L Bank also obtains
appraisals on each property in accordance with applicable regulations.

Construction Lending. B & L Bank occasionally originates
residential construction loans to individuals or local builders to construct
one- to four-family homes. At September 30, 1996, construction loans totalled
$613,000, or 1.3% of the gross loan portfolio.

Substantially all construction loans made to individuals provide for
B & L Bank to originate a permanent loan upon the completion of construction,
which is generally an ARM loan as described under "-- Lending Activities --
Residential Real Estate Lending." The origination fee for construction loans
is generally 1.5% of the principal amount. Construction loans are generally
made for terms of up to six months. Loans to builders are made less
frequently and may be for the construction of a pre-sold home or may be a loan
to construct a speculative home (i.e.,
-19-

a home for which no purchaser has been identified). Loans to builders are
generally limited to local builders well known to B & L Bank.

Construction lending is generally considered to involve a higher
level of risk as compared to one- to four-family residential permanent lending
because of the inherent difficulty in estimating both a property's value at
completion of the project and the estimated cost of the project. The nature
of these loans is such that they are generally more difficult to evaluate and
monitor. If the estimate of value proves to be inaccurate, B & L Bank may be
confronted at, or prior to, the maturity of the loan, with a project whose
value is insufficient to assure full repayment. Loans for the construction of
speculative homes carry more risk because the payoff for the loan is dependent
on the builder's ability to sell the property prior to the time that the
construction loan is due.

Land Lending. B & L Bank originates loans secured by farm
residences and combinations of farm residences and farm real estate. B & L
Bank also originates loans for the acquisition of land upon which the
purchaser can then build or upon which the purchaser makes improvements
necessary to build upon or to sell as improved lots. At September 30, 1996,
the land loan portfolio totalled $489,000, or 1.1% of total gross loans,
substantially all of which were secured by properties located in B & L Bank's
market area. Land loans are generally made for the same terms and at the same
interest rates as those offered on income property loans, except that the
loan-to-value ratio is generally limited to 60%.

Loans secured by farm real estate generally involve greater risks
than one- to four-family residential mortgage loans. Payments on loans
secured by such properties may, in some instances, be dependent on farm income
from the properties. To address this risk, B & L Bank does not consider farm
income when qualifying borrowers. In addition, such loans are more difficult
to evaluate. If the estimate of value proves to be inaccurate, B & L Bank may
be confronted with a property the value of which is insufficient to assure
full repayment in the event of default and foreclosure.

Consumer Lending. Consumer lending has traditionally been a small
part of B & L Bank's business. Consumer loans generally have shorter terms to
maturity and higher interest rates than mortgage loans. B & L Bank's consumer
loans consist primarily of home equity loans, deposit account loans,
automobile loans and, to a substantially lesser extent, unsecured loans. At
September 30, 1996, B & L Bank's consumer loans totalled approximately $3.0
million, or 6.6% of B & L Bank's gross loans. B & L Bank intends to emphasize
consumer lending to a greater degree by primarily cross-selling to its
existing customer base.

Consumer loans are made at fixed interest rates and for varying
terms. Automobile and other loans are generally made for terms up to 60
months, while home equity loans are made for terms up to 10 years. With
respect to substantially all home equity loans, B & L Bank holds the first
mortgage on the borrower's residence.

Consumer loans entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or
secured by rapidly depreciating assets such as automobiles. In such cases,
any repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts
against the borrower beyond obtaining a deficiency judgment. In addition,
consumer loan collections are dependent on the borrower's continuing financial
stability, and thus are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount that can be recovered on such loans.

-20-

Maturity of Loan Portfolio. The following table sets forth at September 30, 1996 certain
information regarding the dollar amount of loans maturing in B & L Bank's portfolio based on contractual
terms to maturity, but does not include scheduled payments or potential prepayments. Demand loans (loans
having no stated repayment schedule and no stated maturity) and overdrafts are reported as due in one year
or less. Mortgage loans which have adjustable interest rates are reported as maturing at their next
repricing date. Loan balances do not include undisbursed loan proceeds, unearned discounts, and allowance
for loan losses.

After After After
3 Years 5 Years 10 Years
Through Through Through Beyond
Due at September 30, 5 Years 10 Years 15 Years 15 Years Total
---------------------- ------- -------- -------- -------- -----
1997 1998 1999
---- ---- ----
(In Thousands)

Mortgage loans:
One- to four-
family. . . . $2,419 $2,398 $2,329 $4,832 $12,124 $8,777 $7,658 $40,537
Commercial real
estate and
multi-family . 110 88 97 158 422 202 43 1,120
Land. . . . . . 37 38 37 78 156 104 39 489
Construction. . 364 -- -- -- -- -- -- 364
Total mortgage ------ ------ ------ ------ ------- ------ ------
loans . . . . 2,930 2,524 2,463 5,068 12,702 9,083 7,740 42,510
Consumer and
other loans. . 1,778 502 325 310 115 9 -- 3,039
------ ------ ------ ------ ------- ------ ------
Total loans. $4,708 $3,026 $2,788 $5,378 $12,817 $9,092 $7,740 $45,549
====== ====== ====== ====== ======= ====== ======

The following table sets forth the dollar amount of all loans due after September 30, 1997, which
have fixed interest rates and have floating or adjustable interest rates.

Fixed- Floating- or
Rates Adjustable-Rates Total
----- ---------------- -----
(In Thousands)

Mortgage loans:
One- to four-family . . . . . . . . . $2,493 $35,624 $38,117
Commercial real estate
and multi-family. . . . . . . . . . . 188 822 1,010
Land . . . . . . . . . . . . . . . . . -- 452 452
Construction . . . . . . . . . . . . . -- -- --
Total mortgage loans . . . . . . . 2,681 36,898 39,579
Consumer and other loans. . . . . . . . 1,262 -- 1,262
------ ------- -------
Total. . . . . . . . . . . . . . . $3,943 $36,898 $40,841
====== ======= =======
-21-

Scheduled contractual principal repayments of loans do not reflect
the actual life of such assets. The average life of loans ordinarily is
substantially less than their contractual terms because of prepayments. In
addition, due-on-sale clauses on loans generally give B & L Bank the right to
declare loans immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase, however,
when current mortgage loan market rates are higher than rates on existing
mortgage loans and, conversely, decrease when rates on existing mortgage loans
are higher than current mortgage loan market rates.

Loan Solicitation and Processing. Loan applicants come primarily
from walk-in customers and referrals by realtors and previous and present
customers of B & L Bank. Upon receipt of a loan application from a
prospective borrower, a credit report and other data are obtained to verify
specific information relating to the loan applicant's employment, income and
credit standing. An appraisal of the real estate offered as collateral
generally is undertaken by a Board-approved independent fee appraiser who is
certified by the State of Missouri.

All mortgage loans must be approved by B & L Bank's Board of
Directors. Interest rates are subject to change if the approved loan is not
closed within the time of the commitment. Consumer loans up to any amounts
may be approved by President Erwin Oetting, Jr., Executive Vice President E.
Steva Vialle or Chief Loan Officer Mark D. Summerlin. Management of B & L
Bank believes its local decision-making capabilities and the accessibility of
its senior officers is an attractive quality to customers within its market
area. B & L Bank's loan approval process allows consumer loans to be approved
in one to two days and mortgage loans to be approved and closed in
approximately two weeks.

Loan Originations, Sales and Purchases. During the year ended
September 30, 1996, B & L Bank's total gross mortgage loan originations were
$8.0 million. While B & L Bank originates both adjustable-rate and fixed-rate
loans, its ability to generate each type of loan depends upon relative
customer demand for loans in its market.

Consistent with its asset/liability management strategy, B & L
Bank's policy has been to retain in its portfolio nearly all of the loans that
it originates.

B & L Bank has occasionally purchased whole loans and loan
participation interests, primarily during periods of reduced loan demand in
its market area. At September 30, 1996, $4.7 million of B & L Bank's gross
loan portfolio consisted of purchased whole loans and purchased participation
interests. Any such purchases are made in conformance with B & L Bank's
underwriting standards. B & L Bank may decide to purchase additional loans in
the future depending upon the demand for mortgage credit in its market area.

During the fiscal year ended September 30, 1996, B & L Bank
purchased $3.8 million of one- to four-family mortgage loans secured by
properties located in Jefferson City, Missouri. These loans were purchased to
supplement local loan demand. Subject to market conditions, B & L Bank
intends to purchase additional such loans.
-22-

The following table shows total mortgage loans originated,
purchased, sold and repaid during the periods indicated. Predominately all
mortgage loan originations during the periods indicated were ARM loans.

Years Ended September 30,
---------------------------
1996 1995 1994
---- ---- ----
(In Thousands)

Total mortgage loans at beginning
of period . . . . . . . . . . . . . . $39,374 $38,547 $36,655

Loans originated:
One- to four-family . . . . . . . . . . 6,589 6,372 6,750
Commercial real estate and
multi-family. . . . . . . . . . . . . 376 110 180
Land . . . . . . . . . . . . . . . . . 124 170 20
Construction . . . . . . . . . . . . . 900 1,205 1,780
Total mortgage loans originated. . . 7,989 7,857 8,730

Loans purchased:
One- to four-family. . . . . . . . . . 3,815 -- 619

Loans sold:
One - to four-family
participations. . . . . . . . . . . . -- -- 125

Mortgage loan principal
repayments . . . . . . . . . . . . . . 8,419 7,030 7,332
------- ------- -------
Net mortgage loan activity. . . . . . . 3,385 827 1,892
------- ------- -------
Total gross mortgage loans at
end of period . . . . . . . . . . . . $42,759 $39,374 $38,547
======= ======= =======

Loan Commitments. B & L Bank issues, without fee, commitments for
one- to four-family residential mortgage loans conditioned upon the occurrence
of certain events. Such commitments are made in writing on specified terms
and conditions and at a specified interest rate and are honored for up to
three months from the date of loan approval. B & L Bank had outstanding net
loan commitments of approximately $880,000 at September 30, 1996, $862,000 of
which were for variable rate loans. See Note L of Notes to the Consolidated
Financial Statements.

Loan Origination and Other Fees. B & L Bank, in some instances,
receives loan origination fees. Loan fees are a percentage of the principal
amount of the mortgage loan which are charged to the borrower for funding the
loan. The amount of fees charged by B & L Bank is generally up to 1% for
mortgage loans and 1.5% for construction loans. Current accounting standards
require that origination fees received (net of certain loan origination costs)
for originating loans to be deferred and amortized into interest income over
the contractual life of the loan. Net deferred fees or costs associated with
loans that are prepaid are recognized as income at the time of prepayment. B &
L Bank had immaterial net deferred loan fees at September 30, 1996.

Non-Performing Assets and Delinquencies. When a mortgage loan
borrower fails to make a required loan payment when due, B & L Bank institutes
collection procedures. All loan payments are contractually due on the

-23-

first day of each month but a loan is not considered delinquent and collection
procedures are not instituted until after the 30th day of the month ("actual
due date"). Borrowers are charged a late penalty on all payments made after
the actual due date. The first written notice is mailed to a delinquent
borrower on the first day after the actual due date, followed by a second
written notice mailed approximately 20 days thereafter. On or about 30 days
after the actual due date, a computer-generated Notice of Delinquency is
mailed and will continue to be mailed on the first and 20th day of every month
until the account is brought current. On or about 60 days after the actual
due date, a telephone call is placed to the delinquent borrower. A
pre-foreclosure letter setting forth a date certain (generally 35 days after
the date of the letter) for instituting foreclosure procedures is mailed on or
about 90 days after the actual due date. Foreclosure procedures are
instituted on the date specified in the pre-foreclosure letter if the
delinquency continues to that date.

When a consumer loan borrower fails to make a required payment on a
consumer loan by the payment due date, B & L Bank institutes collection
procedures. The first notice is mailed to the borrower approximately 30 days
following the actual due date. If payment is not promptly received, a second
notice is mailed to the borrower approximately 60 days following the actual
due date and the customer is contacted by telephone to ascertain the cause of
the delinquency. If the delinquency remains uncured, B & L Bank mails an
additional notice to the borrower approximately 90 days following the actual
due date. In most cases, delinquencies are cured promptly; however, if by the
120th day of delinquency the delinquency has not been cured, B & L Bank begins
legal action to repossess the collateral. At the 120th day of delinquency, B
& L Bank establishes a specific reserve for the full principal amount of the
loan.

B & L Bank's Board of Directors is informed monthly as to the status
of all mortgage and consumer loans that are delinquent more than 30 days, the
status on all loans currently in foreclosure, and the status of all foreclosed
and repossessed property owned by B & L Bank.

B & L Bank has experienced fluctuating and, periodically, relatively
high levels of loan delinquencies. Management attributes this experience
primarily to its practice, consistent with its mission as a community-oriented
financial institution, of offering non-agency-conforming loan products that
enable borrowers with lesser financial resources to otherwise qualify for a
loan. B & L Bank's loss experience, however, as measured by charge offs, has
not been significant. See "-- Lending Activities -- Allowance for Loan
Losses." No assurances can be given as to future delinquency and loss levels.

The following table sets forth information regarding B & L Bank's
delinquent loans, excluding loans 90 days or more delinquent and accounted for
on a non-accrual basis.

At September 30,
------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- ---------------------
Percentage Percentage Percentage
Principal of Gross Principal of Gross Principal of Gross
Balance Loans Balance Loans Balance Loans
------- ----- ------- ----- ------- ----
(Dollars in Thousands)
Loans
delinquent
for:
30-59
days. . $1,088 2.38% $ 653 1.58% $835 2.11%
60-89
days. . 331 0.72 728 1.76 48 0.12
------ ---- ------ ---- ---- ----
$1,419 3.10% $1,381 3.34% $883 2.23%
====== ==== ====== ==== ==== ====

-24-

The following table sets forth information with respect to B & L
Bank's non-performing assets at the dates indicated. B & L Bank had no
restructured loans within the meaning of Statement of Financial Accounting
Standards ("SFAS") No. 15, and no accruing loans contractually past due 90
days or more as to principal or interest payments, at any of the dates
indicated.

At September 30,
--------------------------
1996 1995 1994
---- ---- ----
(Dollars in Thousands)
Loans 90 days or more delinquent
and accounted for on
a non-accrual basis:
Residential real estate . . . . . . $495 $489 $287
Commercial . . . . . . . . . . . . 106 -- --
Consumer . . . . . . . . . . . . . 177 57 21
---- ---- ----
Total non-accrual loans. . . . . 778 546 308

Real estate owned . . . . . . . . . -- 28 54
---- ---- ----
Total non-performing assets . . . . $778 $574 $362
==== ==== ====
Total loans delinquent 90 days or
more to net loans . . . . . . . . 1.33% 1.33% 0.78%
==== ==== ====
Total loans delinquent 90 days or
more to total assets . . . . . . 0.97% 1.09% 0.64%
==== ==== ====
Total non-performing assets to
total assets. . . . . . . . . . . 0.97% 1.15% 0.76%
==== ==== ====

At September 30, 1996, management of B & L Bank was unaware of any
material loans not disclosed in the above table but where known information
about possible credit problems of the borrowers caused management to have
serious doubts as to the ability of such borrowers to comply with their loan
repayment terms at that date and which may result in future inclusion in the
non-performing assets category.

The amount of interest collected in cash and included in the results
of operations on non-accruing loans for the year ended September 30, 1996
amounted to approximately $2,300, before such loans were placed on non-
accrual status. Had such non-accruing loans been current in accordance with
their original terms, additional interest income of approximately $5,600 would
have been recorded for the year ended September 30, 1996.

Foreclosed Real Estate. See Note A of Notes to the Consolidated
Financial Statements for a discussion of B & L Bank's procedures for
accounting for foreclosed real estate. B & L Bank had no foreclosed real
estate at September 30, 1996.

Asset Classification. The OTS has adopted various regulations
regarding problem assets of savings institutions. The regulations require
that each insured institution review and classify its assets on a regular
basis. In addition, in connection with examinations of insured institutions,
OTS examiners have authority to identify problem assets and, if appropriate,
require them to be classified. 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 some 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

-25-

is a high possibility of loss. An asset classified as loss is considered
uncollectible and of such little value that continuance as an asset of the
institution is not warranted. If an asset or portion thereof is classified as
loss, the insured institution establishes specific allowances for loan losses
for the full amount of the portion of the asset classified as loss. All or a
portion of general loan 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 generally do not qualify as regulatory capital.
Assets that do not currently expose the insured institution to sufficient risk
to warrant classification in one of the aforementioned categories but possess
weaknesses are designated "special mention" and are monitored by B & L Bank.

The aggregate amounts of B & L Bank's classified assets and general
and specific loss allowances at the dates indicated, were as follows:

At September 30,
------------------------
1996 1995 1994
---- ---- ----
(In Thousands)

Loss. . . . . . . . . . . . . . $ 59 $ 50 $ 20
Doubtful. . . . . . . . . . . . -- -- --
Substandard assets. . . . . . . 602 489 287
Special mention . . . . . . . . 67 126 177
---- ---- ----
Total classified assets . . . $728 $665 $484
==== ==== ====

General loss allowances . . . . $142 $151 $158
Specific loss allowances. . . . 59 50 20
---- ---- ----
Total allowances. . . . . . . $201 $201 $178
==== ==== ====

Allowance for Loan Losses. B & L Bank has established a systematic
methodology for determining provisions for loan losses. The methodology is
set forth in a formal policy and considers the need for an overall general
valuation allowance as well as specific allowances for individual loans.

In originating loans, B & L Bank recognizes that losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. B & L Bank increases its allowance for
loan losses by charging provisions for loan losses against B & L Bank's
income.

The general valuation allowance is maintained to cover losses
inherent in the portfolio of performing loans. Management reviews the
adequacy of the allowance at least quarterly based on management's assessment
of current economic conditions, past loss and collection experience, and risk
characteristics of the loan portfolio. The amount of the allowance is based
on management's evaluation of the collectibility of the loan portfolio, credit
concentrations, trends in historical loss experience, specific impaired loans
and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flow. Specific valuation allowances are established to absorb losses on loans
for which full collectibility may not be reasonably assured. The amount of
the allowance is based on the estimated value of the collateral securing the
loan and other analyses pertinent to each situation.

At September 30, 1996, B & L Bank had an allowance for loan losses
of $201,000, which management believed to be adequate to absorb losses
inherent in the portfolio at that date. Although management believes that it
uses the best information available to make such determinations, future
adjustments to the allowance for loan losses

-26-

may be necessary and results of operations could be significantly and
adversely affected if circumstances differ substantially from the assumptions
used in making the determinations.

While B & L Bank believes it has established its existing allowance
for loan losses in accordance with generally accepted accounting principles,
there can be no assurance that regulators, in reviewing B & L Bank's loan
portfolio, will not request B & L Bank to increase significantly its allowance
for loan losses. In addition, because future events affecting borrowers and
collateral cannot be predicted with certainty, there can be no assurance that
the existing allowance for loan losses is adequate or that substantial
increases will not be necessary should the quality of any loans deteriorate as
a result of the factors discussed above. Any material increase in the
allowance for loan losses may adversely affect B & L Bank's financial
condition and results of operations.

The following table sets forth an analysis of B & L Bank's allowance
for loan losses for the periods indicated. Where specific loan loss reserves
have been established, any differences between the loss allowances and the
amount of loss realized has been charged or credited to current income. As
indicated by the table, there has not been any material fluctuations in the
allowance for loan losses. Periodically, however, the allowance for loan
losses has been replenished in response to low level charge offs. No
assurances can be given as to the level of future charge offs.

Year Ended September 30,
-------------------------
1996 1995 1994
---- ---- ----
(Dollars in Thousands)

Allowance at beginning of period. . . . . $201 $178 $173
---- ---- ----
Provision for loan losses . . . . . . . . 10 33 5
Recoveries. . . . . . . . . . . . . . . . -- -- --

Charge-offs:
Residential real estate. . . . . . . . . -- -- --
Commercial real estate and multi-family. -- -- --
Construction . . . . . . . . . . . . . . -- -- --
Consumer . . . . . . . . . . . . . . . . 10 10 --
---- ---- ----
Total charge-offs . . . . . . . . . . 10 10 --
---- ---- ----
Net charge-offs . . . . . . . . . . . 10 10 --
---- ---- ----
Balance at end of period. . . . . . . . . $201 $201 $178
==== ==== ====
Ratio of allowance to total
loans outstanding at the
end of the period. . . . . . . . . . . . 0.44% 0.49% 0.45%
==== ==== ====
Ratio of net charge-offs to
average loans outstanding
during the period. . . . . . . . . . . . 0.02% 0.02% --%
==== ==== ====
Ratio of allowance to
non-accrual loans. . . . . . . . . . . . 25.83% 36.79% 57.87%
===== ===== =====

-27-

The following table sets forth the breakdown of the allowance for
loan losses by loan category for the periods indicated. The portion of the
allowance to each loan category does not necessarily represent the total
available for losses within that category since the total allowance applies to
the entire loan portfolio. The allocation of the allowance to each category
is not necessarily indicative of future losses and does not restrict the use
of the allowance to absorb losses in any other category.

At September 30,
-----------------------------------------------------
1996 1995 1994
------------------ ----------------- --------------
% of % of % of
Loans Loans Loans
in Each in Each in Each
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
(Dollars in Thousands)

Real estate mortgage:
One- to four-
family . . . . . $ 65 88.51% $ 67 90.07% $ 47 88.38%
Commercial and
multi-family . . 59 2.45 44 2.35 53 3.05
Land. . . . . . . . -- 1.07 -- 1.16 -- 1.37
Construction. . . . -- 1.34 -- 1.02 -- 3.34
Consumer. . . . . . 77 6.63 64 5.40 29 3.86
Unallocated . . . . -- -- 26 -- 49 --
Total allowance ---- ------ ---- ------ ---- ------
for loan losses. $201 100.00% $201 100.00% $178 100.00%
==== ====== ==== ====== ==== ======

Investment Activities

B & L Bank is permitted under federal law to invest in various types
of liquid assets, including U.S. Treasury obligations, securities of various
federal agencies and of state and municipal governments, deposits at the
FHLB-Des Moines, certificates of deposit of federally insured institutions,
certain bankers' acceptances and federal funds. Subject to various
restrictions, B & L Bank may also invest a portion of its assets in commercial
paper and corporate debt securities. Savings institutions like B & L Bank are
also required to maintain an investment in FHLB stock.

B & L Bank is required under federal regulations to maintain a
minimum amount of liquid assets. At September 30, 1996, B & L Bank's
regulatory liquidity of 22.55% was significantly in excess of the 5% required
by OTS regulations. Management intends to hold all securities in B & L Bank's
investment portfolio in order to enable B & L Bank to provide liquidity for
loan funding upon maturity of such investment securities and to match more
closely the interest-rate sensitivities of its assets and liabilities.

A committee consisting of the President and the Executive Vice
President determines appropriate investments in accordance with the Board of
Directors' approved investment policies and procedures. B & L Bank's
investment policies generally limit investments to U.S. Government and agency
securities, municipal bonds, certificates of deposits, marketable investment
grade corporate debt obligations and mortgage-backed securities. Investments
are made based on certain considerations, which include the interest rate,
yield, settlement date and maturity of the investment, B & L Bank's liquidity
position, and anticipated cash needs and sources (which in turn include
outstanding commitments, upcoming maturities, estimated deposits and
anticipated loan amortization and repayments). The effect that the proposed
investment would have on B & L Bank's credit and interest rate risk, and
risk-based capital is also given consideration during the evaluation.

B & L Bank adopted SFAS No. 115 on October 1, 1993. At September
30, 1996, B & L Bank's portfolio of state and local debt securities and
mortgage-backed securities are classified as "held to maturity" and the
portfolio
-28-

of federal agency obligations are classified as "available for sale."
Consistent with B & L Bank's asset/liability management strategy, at September
30, 1996, the majority of the investment portfolio matures within five years
of that date.

The following table sets forth the composition of Lexington's
mortgage-backed securities portfolio at the dates indicated.

At September 30,
----------------------------------------
1996 1995 1994
-------- -------- --------
Carrying Carrying Carrying
Value Value Value
----- ----- -----
(In Thousands)

Government National
Mortgage Association
("GNMA") . . . . . . $ 319 $ 415 $ 566
FNMA. . . . . . . . . 524 658 747
FHLMC . . . . . . . . 1,220 1,462 1,822
------ ------ ------
Total . . . . . . $2,063 $2,535 $3,135
====== ====== ======

-29-

The following table sets forth the composition of Lexington's
investment securities, FHLB stock, certificates of deposit and mortgage-backed
securities portfolios at the dates indicated.

At September 30,
---------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
Percent Percent Percent
Book of Book of Book of
Value Portfolio Value Portfolio Value Portfolio
----- --------- ----- --------- ----- ----------
(Dollars in Thousands)
Investment
securities:
U.S.
Government
and federal
agency
obligations(1) $ 2,906 20.14% $ 893 11.85% $1,371 19.00%
State and
local
obliga-
tions(1) 848 5.88 718 9.53 655 9.08
Interest-
bearing
deposits 5,620 38.96 2,933 38.93 1,602 22.19

Mortgage-backed
securities(1) 2,063 14.30 2,535 33.65 3,135 43.43

Certificates of
deposit 2,525 17.50 -- -- -- --

Capital stock -
FHLB-Des
Moines(2) 464 3.22 455 6.04 455 6.30
------- ------ ------ ------ ------ ------
Total investment
securities,
FHLB stock
and mortgage-
backed
securities $14,426 100.00% $7,534 100.00% $7,218 100.00%
======= ====== ====== ====== ====== ======

- ----------------------
(1) Lexington adopted SFAS No. 115 on October 1, 1993. U.S. Government and
federal agency obligations are classified as "available-for-sale" and are
valued at fair value at September 30, 1996, 1995 and 1994. State and
local obligations are classified as "held-to-maturity" and are reflected
at amortized cost.
(2) The dividend yield on the capital stock of the FHLB-Des Moines was 7.25%
for the fiscal year ended September 30, 1996.

-30-

The following table sets forth the composition and maturities of the investment securities
portfolio, interest-bearing deposits, certificates of deposit and mortgage-backed securities (excluding
FHLB stock) at September 30, 1996.

One Year After One To Over Five to After
or Less Five Years Ten Years Ten Years Total Investment Securities
---------- ---------- ---------- ---------- ---------------------------
Book Value Book Value Book Value Book Value Book Value Market Value
---------- ---------- ---------- ---------- ---------- ------------
(Dollars in Thousands)

U.S Government
and federal
agency
obligations. . . $399 $2,507 $ -- $ -- $2,906 $2,906

State and local
obligations. . . -- -- 348 500 848 1,005

Interest-bearing
deposits . . . . 5,620 -- -- -- 5,620 5,620

Certificates of
deposit. . . . . 2,525 -- -- -- 2,525 2,525
------ ------ ---- ---- ------- -------
Total investment
securities and
interest-bearing
deposits . . . . $8,544 $2,507 $348 $500 $11,899 $12,056
====== ====== ==== ===== ======= =======
Weighted average
yield. . . . . . 5.27% 6.12% 8.13% 10.59% 5.76%
====== ====== ==== ===== =======
Mortgage-backed
securities. . . $ -- $840 $ -- $1,223 $2,063 $2,063
====== ====== ==== ===== ======= =======
Weighted average
yield . . . . . --% 6.11% --% 7.65% 7.02%
====== ====== ==== ===== =======

Deposit Activities and Other Sources of Funds

General. Deposits and loan repayments are the major sources of B &
L Bank's funds for lending and other investment purposes. Scheduled loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are influenced significantly by general interest
rates and money market conditions. Borrowings through the FHLB-Des Moines may
be used on a short-term basis to compensate for reductions in the availability
of funds from other sources. At September 30, 1996, B & L Bank had no other
borrowing arrangements.

Deposit Accounts. Substantially all of B & L Bank's depositors are
residents of the State of Missouri. Deposits are attracted from within B & L
Bank's market area through the offering of a broad selection of deposit
instruments, including negotiable order of withdrawal ("NOW") accounts, money
market deposit accounts, regular savings accounts, certificates of deposit and
retirement savings plans. Deposit account terms vary, according to the
minimum balance required, the time periods the funds must remain on deposit
and the interest rate, among other factors. In determining the terms of its
deposit accounts, B & L Bank considers current market interest rates,
profitability to B & L Bank, matching deposit and loan products and its
customer preferences and concerns. B & L Bank reviews its deposit mix and
pricing weekly.

In the unlikely event B & L Bank is liquidated, depositors will be
entitled to full payment of their deposit accounts prior to any payment being
made to Lexington, as the sole stockholder of B & L Bank.

-31-

The following table sets forth certain information concerning B & L
Bank's time deposits and other interest-bearing deposits at September 30,
1996.

Weighted
Average Percentage
Interest Original Checking and Minimum of Total
Rate Term Savings Deposits Amount Balance Deposits
- ---- ---- ---------------- ------ ------- --------
(In Thousands)

2.52% None Demand and NOW accounts $ 250 $1,477(1) 3.50%
3.28 None Money market accounts 2,500 2,082 4.93
3.05 None Passbook savings accounts 10 3,852 9.12

Certificates of Deposit
-----------------------

3.75 91-day Fixed-term, fixed-rate 500 8 .02
5.11 6 months Fixed-term, fixed-rate 500 3,816 9.03
5.11 9 months Fixed-term, fixed-rate 500 50 .12
5.50 12 months Fixed-term, fixed-rate 500 7,530 17.83
5.84 18 months Fixed-term, fixed-rate 500 4,819 11.41
6.08 24 months Fixed-term, fixed-rate 500 3,154 7.47
6.07 30 months Fixed-term, fixed-rate 500 2,588 6.13
6.08 36 months Fixed-term, fixed-rate 500 3,389 8.02
5.66 48 months Fixed-term, fixed-rate 500 2,515 5.95
6.35 60 months Fixed-term, fixed-rate 500 841 1.99
7.52 72 months Fixed-term, fixed-rate 500 6,116 14.48
------- ------
$42,237 100.00%
======= ======
- ------------------
(1) Includes non-interest-bearing accounts with an aggregate balance of
$505,000.

The following table indicates the amount of B & L Bank's
certificates of deposit of $100,000 or more by time remaining until maturity
as of September 30, 1996.

Maturity Period Amount
--------------- ------
(In Thousands)

Three months or less. . . . . . . . . . . . . . $ 228
Over three through six months . . . . . . . . . 711
Over six through 12 months. . . . . . . . . . . 709
Over 12 months. . . . . . . . . . . . . . . . . 1,593
------
Total. . . . . . . . . . . . . . . . . . . $3,241
======

-32-

Deposit Flow. The following table sets forth the balances and changes in dollar amounts of
deposits in the various types of accounts offered by B & L Bank at the dates indicated.

At September 30,
-----------------------------------------------------------------------------
1996 1995 1994
---------------------------- --------------------------- ----------------
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total (Decrease) Amount Total
------ ----- ---------- ------ ----- ---------- ------ -----
(Dollars in Thousands)

Non-interest-bearing . . $ 505 1.20% $ 200 $ 305 0.72% $ 123 $ 182 0.45%
NOW checking . . . . . . 972 2.30 (180) 1,152 2.72 211 941 2.31
Regular savings
accounts (1). . . . . . 3,852 9.12 262 3,590 8.47 (2,258) 5,848 14.36
Money market deposits. . 2,082 4.92 112 1,970 4.64 (1,160) 3,130 7.69
------- ------ ------ ------- ------ ------- ------- ------
7,411 17.55 394 7,017 16.55 (3,084) 10,101 24.81
Fixed-rate certificates
which mature (1)(2):
Within 1 year. . . . . 18,866 44.67 (417) 19,283 45.48 (1,365) 20,648 50.72
After 1 year, but
within 2 years. . . . 6,316 14.95 28 6,288 14.83 (63) 6,351 15.60
After 2 years, but
within 5 years. . . . 9,098 21.54 4,597 4,501 10.61 1,079 3,422 8.41
Certificates maturing
thereafter. . . . . . . 546 1.29 (4,766) 5,312 12.53 5,123 189 .46
------- ------ ------ ------- ------ ------- ------- ------
34,826 82.45 (558) 35,384 83.45 4,774 30,610 75.19
------- ------ ------ ------- ------ ------- ------- ------
Total . . . . . . . . $42,237 100.00% $ (164) $42,401 100.00% $ 1,690 $40,711 100.00%
======= ====== ====== ======= ====== ======= ======= ======
- -------------------
(1) Included in savings accounts and certificate balances were individual retirement account ("IRA")
balances of (in thousands) $3,567, $3,672 and $2,640 at September 30, 1996, 1995 and 1994,
respectively.
(2) At September 30, 1996, 1995 and 1994, certificates amounting to $100,000 or more were (in thousands)
$3,241, $2,885 and $1,419, respectively.

-33-

Time Deposits by Rates. The following table sets forth the time
deposits in B & L Bank classified by rates at the dates indicated.

At September 30,
------------------------------
1996 1995 1994
---- ---- ----
(In Thousands)

3.00 - 3.99%. . . . . . . . . . . . $ 8 $ 998 $14,524
4.00 - 4.99%. . . . . . . . . . . . 913 2,709 7,008
5.00 - 5.99%. . . . . . . . . . . . 20,863 18,120 6,288
6.00 - 6.99%. . . . . . . . . . . . 7,222 7,383 1,355
7.00 - 7.99%. . . . . . . . . . . . 2,230 2,219 441
8.00 - 8.99%. . . . . . . . . . . . 3,590 3,955 477
9.00% and over. . . . . . . . . . . -- -- 517
------- ------- -------
Total . . . . . . . . . . . . . . $34,826 $35,384 $30,610
======= ======= =======

The following table sets forth the amount and maturities of time
deposits at September 30, 1996.

Amount Due Percent
------------------------------------------------- of Total
Less Than 1-2 2-3 3-4 After Certificate
One Year Years Years Years 4 Years Total Accounts
-------- ----- ----- ----- ------- ----- --------
(In Thousands)

3.00 - 3.99% $ 8 $ -- $ -- $ -- $ -- $ 8 0.02%
4.00 - 4.99% 689 224 -- -- -- 913 2.62
5.00 - 5.99% 15,018 4,114 1,581 150 -- 20,863 59.91
6.00 - 6.99% 3,134 1,218 666 838 1,366 7,222 20.74
7.00 - 7.99% 17 760 231 170 1,052 2,230 6.40
8.00 - 8.99% -- -- -- -- 3,590 3,590 10.31
------- ------ ------ ------ ------ ------- ------
Total $18,866 $6,316 $2,478 $1,158 $6,008 $34,826 100.00%
======= ====== ====== ====== ====== ======= ======

Savings Activities. The following table sets forth the deposit activities
of B & L Bank for the periods indicated.

Year Ended September 30,
------------------------------
1996 1995 1994
---- ---- ----
(In Thousands)

Beginning balance . . . . . . . . . $42,401 $40,711 $41,004
Net deposits (withdrawals)
before interest credited . . . . . (1,765) 347 (1,371)
Interest credited . . . . . . . . . 1,601 1,343 1,078
Net increase (decrease) in
deposits . . . . . . . . . . . . . (164) 1,690 (293)
------- ------- -------
Ending balance. . . . . . . . . . . $42,237 $42,401 $40,711
======= ======= =======

-34-

Borrowings. B & L Bank has the ability to use advances from the
FHLB-Des Moines to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB-Des Moines functions as a central reserve
bank providing credit for savings and loan associations and certain other
member financial institutions. As a member of the FHLB-Des Moines, B & L Bank
is required to own capital stock in the FHLB-Des Moines and is authorized to
apply for advances on the security of such stock and certain of its mortgage
loans and other assets (principally securities that are obligations of, or
guaranteed by, the U.S. Government) provided certain creditworthiness
standards have been met. Advances are made pursuant to several different
credit programs. Each credit program has its own interest rate and range of
maturities. Depending on the program, limitations on the amount of advances
are based on the financial condition of the member institution and the
adequacy of collateral pledged to secure the credit. During the years ended
September 30, 1996, 1995 and 1994, B & L Bank had no borrowings from the
FHLB-Des Moines.

Competition

Due to the proximity of Lexington to the Kansas City metropolitan
area, B & L Bank operates in an extremely competitive market for the
attraction of savings deposits (its primary source of lendable funds) and in
the origination of loans. Historically, its most direct competition for
savings deposits has come from commercial banks and thrift institutions
operating in its market area. Some of these commercial banks are subsidiaries
of large regional holding companies having vastly greater resources at their
disposal. At September 30, 1996, there were 13 commercial banks and, in
addition to B & L Bank, one thrift institution in Lafayette County.
Particularly in times of high market interest rates, B & L Bank has faced
competition for investors' funds from short-term money market securities and
corporate and U.S. Government securities. B & L Bank competes for loan
originations with mortgage bankers, thrift institutions, credit unions and
commercial banks. Such competition for deposits and loans may limit B & L
Bank's future growth and earnings prospects.

Personnel

As of September 30, 1996, B & L Bank had 10 full-time and no
part-time employees. The employees are not represented by a collective
bargaining unit. B & L Bank believes its relationship with its employees is
good.

Properties

B & L Bank has no branch offices. B & L Bank owns its main office
located at 919 Franklin Avenue, Lexington, Missouri. The office was opened in
1960 and its size is approximately 3,500 square feet. At September 30, 1996,
the net book value of B & L Bank's premises and equipment (land, building and
improvements, furniture and equipment) was $381,000.

Legal Proceedings

Periodically, there have been various claims and lawsuits involving
B & L Bank, such as claims to enforce liens, condemnation proceedings on
properties on which B & L Bank holds security interests, claims involving the
making and servicing of real property loans and other issues incident to B & L
Bank's business. B & L Bank is not a party to any pending legal proceedings
that it believes would have a material adverse effect on the financial
condition or operations of B & L Bank.

-35-

REGULATION OF LEXINGTON B&L FINANCIAL CORP.
General

B & L Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer
of its deposits. The activities of federal savings institutions are governed
by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act ("FDIA") and the regulations
issued by the OTS and the FDIC to implement these statutes. These laws and
regulations delineate the nature and extent of the activities in which federal
savings associations may engage. Lending activities and other investments
must comply with various statutory and regulatory capital requirements. In
addition, B & L Bank's relationship with its depositors and borrowers is also
regulated to a great extent, especially in such matters as the ownership of
deposit accounts and the form and content of B & L Bank's mortgage documents.
B & L Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with, or
acquisitions of, other financial institutions. There are periodic
examinations by the OTS and the FDIC to review B & L Bank's compliance with
various regulatory requirements. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or Congress, could have a material
adverse impact on B & L Bank and its operations.

Federal Regulation of Savings Associations

Office of Thrift Supervision. The OTS is an office in the
Department of the Treasury subject to the general oversight of the Secretary
of the Treasury. The OTS generally possesses the supervisory and regulatory
duties and responsibilities formerly vested in the Federal Home Loan Bank
Board. Among other functions, the OTS issues and enforces regulations
affecting federally insured savings associations and regularly examines these
institutions.

Federal Home Loan Bank System. The FHLB System, consisting of 12
FHLBs, is under the jurisdiction of the Federal Housing Finance Board
("FHFB"). The designated duties of the FHFB are to supervise the FHLBs, to
ensure that the FHLBs carry out their housing finance mission, to ensure that
the FHLBs remain adequately capitalized and able to raise funds in the capital
markets, and to ensure that the FHLBs operate in a safe and sound manner. B &
L Bank, as a member of the FHLB, is required to acquire and hold shares of
capital stock in the FHLB in an amount equal to the greater of (i) 1.0% of the
aggregate outstanding principal amount of residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, or
(ii) 1/20 of its advances (i.e., borrowings) from the FHLB. B & L Bank is in
compliance with this requirement. Among other benefits, the FHLB provides a
central credit facility primarily for member institutions. It is funded
primarily from proceeds derived from the sale of consolidated obligations of
the FHLB System. It makes advances to members in accordance with policies and
procedures established by the FHFB and the Board of Directors of the FHLB.

Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency that insures the deposits, up to prescribed statutory limits,
of depository institutions. The FDIC currently maintains two separate
insurance funds: the BIF and the SAIF. As insurer of B & L Bank's deposits,
the FDIC has examination, supervisory and enforcement authority over B & L
Bank.

B & L Bank's accounts are insured by the SAIF to the maximum extent
permitted by law. B & L Bank pays deposit insurance premiums based on a
risk-based assessment system established by the FDIC. Under applicable
regulations, institutions are assigned to one of three capital groups that are
based solely on the level of an institution's capital -- "well capitalized,"
"adequately capitalized," and "undercapitalized" -- which are defined in the
same manner as the regulations establishing the prompt corrective action
system, as discussed below. These three groups are then divided into three
subgroups which reflect varying levels of supervisory concern, from those
which
-36-

are considered to be healthy to those which are considered to be of
substantial supervisory concern. The matrix so created results in nine
assessment risk classifications, with rates that until September 30, 1996
ranged from 0.23% for well capitalized, financially sound institutions with
only a few minor weaknesses to 0.31% for undercapitalized institutions that
pose a substantial risk of loss to the SAIF unless effective corrective action
is taken.

Pursuant to the DIF Act, which was enacted on September 30, 1996,
the FDIC imposed a special assessment on each depository institution with
SAIF-assessable deposits which resulted in the SAIF achieving its designated
reserve ratio. In connection therewith, the FDIC reduced the assessment
schedule for SAIF members, effective January 1, 1997, to a range of 0% to
0.27%, with most institutions, including B & L Bank, paying 0%. This
assessment schedule is the same as that for the BIF, which reached its
designated reserve ratio in 1995. In addition, since January 1, 1997, SAIF
members are charged an assessment of .065% of SAIF-assessable deposits for the
purpose of paying interest on the obligations issued by the Financing
Corporation ("FICO") in the 1980s to help fund the thrift industry cleanup.
BIF-assessable deposits will be charged an assessment to help pay interest on
the FICO bonds at a rate of approximately .013% until the earlier of December
31, 1999 or the date upon which the last savings association ceases to exist,
after which time the assessment will be the same for all insured deposits.

The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates
the development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter
may take and what effect, if any, the adoption of a new charter would have on
the operation of B & L Bank.

The FDIC may terminate the deposit insurance of any insured
depository institution 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 termination, less subsequent withdrawals, shall
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 that could
result in termination of the deposit insurance of B & L Bank.

Liquidity Requirements. Under OTS regulations, each savings
institution is required to maintain an average daily balance of liquid assets
(cash, certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations and certain
other investments) equal to a monthly average of not less than a specified
percentage (currently 5.0%) of its net withdrawable accounts plus short-term
borrowings. OTS regulations also require each savings institution to maintain
an average daily balance of short-term liquid assets at a specified percentage
(currently 1.0%) of the total of its net withdrawable accounts plus short-term
borrowings. Monetary penalties may be imposed for failure to meet liquidity
requirements.

Prompt Corrective Action. Under the FDIA, each federal banking
agency is required to implement a system of prompt corrective action for
institutions that it regulates. The federal banking agencies have promulgated
substantially similar regulations to implement this system of prompt
corrective action. Under the regulations, an institution shall be deemed to
be (i) "well capitalized" if it has a total risk-based capital ratio of 10.0%
or more, has a Tier I risk-based capital ratio of 6.0% or more, has a leverage
ratio of 5.0% or more and is not subject to specified requirements to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, has a
Tier I risk-based capital ratio of 4.0% or more, has a leverage ratio of 4.0%
or more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized;" (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, has a Tier I risk-based capital ratio
that is less than 4.0% or has a leverage ratio that is less than 4.0% (3.0%
under certain circumstances); (iv) "significantly undercapitalized" if it has
a total risk-based capital ratio that is less than 6.0%,

-37-

has a Tier I risk-based capital ratio that is less than 3.0% or has a leverage
ratio that is less than 3.0%; and (v) "critically undercapitalized" if it has
a ratio of tangible equity to total assets that is equal to or less than 2.0%.

A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized
and may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has
received in its most recent examination, and has not corrected, a less than
satisfactory rating for asset quality, management, earnings or liquidity.
(The OTS may not, however, reclassify a significantly undercapitalized
institution as critically undercapitalized.)

An institution generally must file a written capital restoration
plan that meets specified requirements, as well as a performance guaranty by
each company that controls the institution, with the appropriate federal
banking agency within 45 days of the date that the institution receives notice
or is deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to various mandatory and
discretionary restrictions on its operations.

At December 31, 1996, B & L Bank was categorized as "well
capitalized" under the prompt corrective action regulations of the OTS.

Standards for Safety and Soundness. The federal banking regulatory
agencies have prescribed, by regulation, standards for all insured depository
institutions relating to: (i) internal controls, information systems and
internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; (vi) asset quality; (vii)
earnings and (viii) compensation, fees and benefits ("Guidelines"). The
Guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the OTS determines that B &
L Bank fails to meet any standard prescribed by the Guidelines, the agency may
require B & L Bank to submit to the agency an acceptable plan to achieve
compliance with the standard. OTS regulations establish deadlines for the
submission and review of such safety and soundness compliance plans.

Qualified Thrift Lender Test. All savings associations are required
to meet a qualified thrift lender ("QTL") test to avoid certain restrictions
on their operations. A savings institution that fails to become or remain a
QTL shall either convert to a national bank charter or be subject to the
following restrictions on its operations: (i) the association may not make
any new investment or engage in activities that would not be permissible for
national banks; (ii) the association may not establish any new branch office
where a national bank located in the savings institution's home state would
not be able to establish a branch office; (iii) the association shall be
ineligible to obtain new advances from any FHLB; and (iv) the payment of
dividends by the association shall be subject to the rules regarding the
statutory and regulatory dividend restrictions applicable to national banks.
Also, beginning three years after the date on which the savings institution
ceases to be a QTL, the savings institution would be prohibited from retaining
any investment or engaging in any activity not permissible for a national bank
and would be required to repay any outstanding advances to any FHLB. In
addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a
bank holding company and become subject to the rules applicable to such
companies. A savings institution may requalify as a QTL if it thereafter
complies with the QTL test.

Currently, the QTL test requires that either an institution qualify
as a domestic building and loan association under the Internal Revenue Code or
that 65% of an institution's "portfolio assets" (as defined) consist of
certain housing and consumer-related assets on a monthly average basis in nine
out of every 12 months. Assets that qualify without limit for inclusion as
part of the 65% requirement are loans made to purchase, refinance, construct,
improve or repair domestic residential housing and manufactured housing; home
equity loans; mortgage-backed securities (where the mortgages are secured by
domestic residential housing or manufactured housing); FHLB stock; direct or
indirect obligations of the FDIC; and loans for educational purposes, loans to
small businesses and loans made
-38-

through credit cards. In addition, the following assets, among others, may be
included in meeting the test subject to an overall limit of 20% of the savings
institution's portfolio assets: 50% of residential mortgage loans originated
and sold within 90 days of origination; 100% of consumer loans; and stock
issued by Freddie Mac or Fannie Mae. Portfolio assets consist of total
assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets.

Capital Requirements. Under OTS regulations a savings association
must satisfy three minimum capital requirements: core capital, tangible
capital and risk-based capital. Savings associations must meet all of the
standards in order to comply with the capital requirements.

OTS capital regulations establish a 3% core capital or leverage
ratio (defined as the ratio of core capital to adjusted total assets). Core
capital is defined to include common stockholders' equity, noncumulative
perpetual preferred stock and any related surplus, and minority interests in
equity accounts of consolidated subsidiaries, less (i) any intangible assets,
except for certain qualifying intangible assets; (ii) certain mortgage
servicing rights; and (iii) equity and debt investments in subsidiaries that
are not "includable subsidiaries," which is defined as subsidiaries engaged
solely in activities not impermissible for a national bank, engaged in
activities impermissible for a national bank but only as an agent for its
customers, or engaged solely in mortgage-banking activities. In calculating
adjusted total assets, adjustments are made to total assets to give effect to
the exclusion of certain assets from capital and to account appropriately for
the investments in and assets of both includable and nonincludable
subsidiaries. Institutions that fail to meet the core capital requirement
would be required to file with the OTS a capital plan that details the steps
they will take to reach compliance. In addition, the OTS's prompt corrective
action regulation provides that a savings institution that has a leverage
ratio of less than 4% (3% for institutions receiving the highest CAMEL
examination rating) will be deemed to be "undercapitalized" and may be subject
to certain restrictions. See "-- Federal Regulation of Savings Associations
- -- Prompt Corrective Action."

Savings associations also must maintain "tangible capital" not less
than 1.5% of B & L Bank's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.

Each savings institution must maintain total risk-based capital
equal to at least 8% of risk-weighted assets. Total risk-based capital
consists of the sum of core and supplementary capital, provided that
supplementary capital cannot exceed core capital, as previously defined.
Supplementary capital includes (i) permanent capital instruments such as
cumulative perpetual preferred stock, perpetual subordinated debt and
mandatory convertible subordinated debt, (ii) maturing capital instruments
such as subordinated debt, intermediate-term preferred stock and mandatory
convertible subordinated debt, subject to an amortization schedule, and (iii)
general valuation loan and lease loss allowances up to 1.25% of risk-weighted
assets.

The risk-based capital regulation assigns each balance sheet asset
held by a savings institution to one of four risk categories based on the
amount of credit risk associated with that particular class of assets. Assets
not included for purposes of calculating capital are not included in
calculating risk-weighted assets. The categories range from 0% for cash and
securities that are backed by the full faith and credit of the U.S. Government
to 100% for repossessed assets or assets more than 90 days past due.
Qualifying residential mortgage loans (including multi-family mortgage loans)
are assigned a 50% risk weight. Consumer, commercial, home equity and
residential construction loans are assigned a 100% risk weight, as are
nonqualifying residential mortgage loans and that portion of land loans and
nonresidential construction loans that do not exceed an 80% loan-to-value
ratio. The book value of assets in each category is multiplied by the
weighing factor (from 0% to 100%) assigned to that category. These products
are then totalled to arrive at total risk-weighted assets. Off-balance sheet
items are included in risk-weighted assets by converting them to an
approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk
categories in the same manner as balance sheet assets and included
risk-weighted assets.

-39-

The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of
the association's assets, as calculated in accordance with guidelines set
forth by the OTS. A savings association whose measured interest rate risk
exposure exceeds 2% must deduct an interest rate risk component in calculating
its total capital under the risk-based capital rule. The interest rate risk
component is an amount equal to one-half of the difference between the
institution's measured interest rate risk and 2%, multiplied by the estimated
economic value of the association's assets. That dollar amount is deducted
from an association's total capital in calculating compliance with its
risk-based capital requirement. Under the rule, there is a two quarter lag
between the reporting date of an institution's financial data and the
effective date for the new capital requirement based on that data. A savings
association with assets of less than $300 million and risk-based capital
ratios in excess of 12% is not subject to the interest rate risk component,
unless the OTS determines otherwise. The rule also provides that the Director
of the OTS may waive or defer an association's interest rate risk component on
a case-by-case basis. Under certain circumstances, a savings association may
request an adjustment to its interest rate risk component if it believes that
the OTS-calculated interest rate risk component overstates its interest rate
risk exposure. In addition, certain "well-capitalized" institutions may
obtain authorization to use their own interest rate risk model to calculate
their interest rate risk component in lieu of the OTS-calculated amount. The
OTS has postponed the date that the component will first be deducted from an
institution's total capital.

Limitations on Capital Distributions. OTS regulations impose
uniform limitations on the ability of all savings associations to engage in
various distributions of capital such as dividends, stock repurchases and
cash-out mergers. In addition, OTS regulations require B & L Bank to give the
OTS 30 days' advance notice of any proposed declaration of dividends, and the
OTS has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.

A Tier 1 savings association has capital in excess of its fully
phased-in capital requirement (both before and after the proposed capital
distribution). Tier 1 savings association may make (without application but
upon prior notice to, and no objection made by, the OTS) capital distributions
during a calendar year up to 100% of its net income to date during the
calendar year plus one-half its surplus capital ratio (i.e., the amount of
capital in excess of its fully phased-in requirement) at the beginning of the
calendar year or the amount authorized for a Tier 2 association. Capital
distributions in excess of such amount require advance notice to the OTS. A
Tier 2 savings association has capital equal to or in excess of its minimum
capital requirement but below its fully phased-in capital requirement (both
before and after the proposed capital distribution). Such an association may
make (without application) capital distributions up to an amount equal to 75%
of its net income during the previous four quarters depending on how close the
association is to meeting its fully phased-in capital requirement. Capital
distributions exceeding this amount require prior OTS approval. Tier 3
associations are savings associations with capital below the minimum capital
requirement (either before or after the proposed capital distribution). Tier
3 associations may not make any capital distributions without prior approval
from the OTS.

B & L Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of
the calendar year less any distributions previously paid during the year.

Loans to One Borrower. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of B & L Bank's unimpaired capital and surplus,
plus an additional 10% of unimpaired capital and surplus, if such loan is
secured by readily-marketable collateral, which

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is defined to include certain financial instruments and bullion. The OTS by
regulation has amended the loans to one borrower rule to permit savings
associations meeting certain requirements, including capital requirements, to
extend loans to one borrower in additional amounts under circumstances limited
essentially to loans to develop or complete residential housing units.

Activities of Associations and Their Subsidiaries. A savings
association may establish operating subsidiaries to engage in any activity
that the savings association may conduct directly and service corporation
subsidiaries to engage in certain preapproved activities or, with approval of
the OTS, other activities reasonably related to the activities of financial
institutions. When a savings association establishes or acquires a subsidiary
or elects to conduct any new activity through a subsidiary that the
association controls, the savings association must notify the FDIC and the OTS
30 days in advance and provide the information each agency may, by regulation,
require. Savings associations also must conduct the activities of
subsidiaries in accordance with existing regulations and orders.

The OTS may determine that the continuation by a savings association
of its ownership control of, or its relationship to, the subsidiary
constitutes a serious risk to the safety, soundness or stability of the
association or is inconsistent with sound banking practices or with the
purposes of the FDIA. Based upon that determination, the FDIC or the OTS has
the authority to order the savings association to divest itself of control of
the subsidiary. The FDIC also may determine by regulation or order that any
specific activity poses a serious threat to the SAIF. If so, it may require
that no SAIF member engage in that activity directly.

Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to
which the insured association or its subsidiaries may engage in certain
covered transactions with an affiliate to an amount equal to 10% of such
institution's capital and surplus and place an aggregate limit on all such
transactions with affiliates to an amount equal to 20% of such capital and
surplus, and (ii) require that all such transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate. The term "covered transaction" includes the
making of loans, the purchase of assets, the issuance of a guarantee and
similar types of transactions. Any loan or extension of credit by B & L Bank
to an affiliate must be secured by collateral in accordance with Section 23A.

Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank
holding companies; (ii) a savings association may not purchase or invest in
securities issued by an affiliate (other than securities of a subsidiary); and
(iii) the OTS may, for reasons of safety and soundness, impose more stringent
restrictions on savings associations but may not exempt transactions from or
otherwise abridge Section 23A or 23B. Exemptions from Section 23A or 23B may
be granted only by the Federal Reserve, as is currently the case with respect
to all FDIC-insured banks.

B & L Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such
persons, is currently governed by Sections 22(g) and 22(h) of the Federal
Reserve Act, and Regulation O thereunder. Among other things, these
regulations require that such loans be made on terms and conditions
substantially the same as those offered to unaffiliated individuals and not
involve more than the normal risk of repayment. Regulation O also places
individual and aggregate limits on the amount of loans B & L Bank may make to
such persons based, in part, on B & L Bank's capital position, and requires
certain board approval procedures to be followed. The OTS regulations, with
certain minor variances, apply Regulation O to savings institutions.

-41-

Community Reinvestment Act. Banks are also subject to the
provisions of the Community Reinvestment Act of 1977, which requires the
appropriate federal bank regulatory agency, in connection with its regular
examination of a bank, to assess the bank's record in meeting the credit needs
of the community serviced by the bank, including low and moderate income
neighborhoods. The regulatory agency's assessment of the bank's record is
made available to the public. Further, such assessment is required of any
bank which has applied, among other things, to establish a new branch office
that will accept deposits, relocate an existing office or merge or consolidate
with, or acquire the assets or assume the liabilities of, a federally
regulated financial institution.

Savings and Loan Holding Company Regulation

Holding Company Acquisitions. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without
prior OTS approval, from acquiring more than 5% of the voting stock of any
other savings association or savings and loan holding company or controlling
the assets thereof. They also prohibit, among other things, any director or
officer of a savings and loan holding company, or any individual who owns or
controls more than 25% of the voting shares of such holding company, from
acquiring control of any savings association not a subsidiary of such savings
and loan holding company, unless the acquisition is approved by the OTS.

Holding Company Activities. As a unitary savings and loan holding
company, Lexington generally is not subject to activity restrictions under the
HOLA. If Lexington acquires control of another savings association as a
separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company. The HOLA provides that, among
other things, no multiple savings and loan holding company or subsidiary
thereof which is not an insured association shall commence or continue for
more than two years after becoming a multiple savings and loan association
holding company or subsidiary thereof, any business activity other than: (i)
furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a
subsidiary insured institution, (iv) holding or managing properties used or
occupied by a subsidiary insured institution, (v) acting as trustee under
deeds of trust, (vi) those activities previously directly authorized by
regulation as of March 5, 1987 to be engaged in by multiple holding companies
or (vii) those activities authorized by the Federal Reserve Board as
permissible for bank holding companies, unless the OTS by regulation,
prohibits or limits such activities for savings and loan holding companies.
Those activities described in (vii) above also must be approved by the OTS
prior to being engaged in by a multiple savings and loan holding company.

Qualified Thrift Lender Test. The HOLA requires any savings and
loan holding company that controls a savings association that fails the QTL
test, as explained under "-- Federal Regulation of Savings Associations --
Qualified Thrift Lender Test," must, within one year after the date on which
the association ceases to be a QTL, register as and be deemed a bank holding
company subject to all applicable laws and regulations.

Bank Holding Company Regulation

General. Upon consummation of the Merger, Lexington will become a
bank holding company and will register as such with the Federal Reserve. Bank
holding companies are subject to comprehensive regulation by the Federal
Reserve under the BHCA and the regulations of the Federal Reserve. As a bank
holding company, Lexington will be required to file with the Federal Reserve
annual reports and such additional information as the Federal Reserve may
require and will be subject to regular examinations by the Federal Reserve.
The Federal Reserve also has extensive enforcement authority over bank holding
companies, including, among other things, the ability to assess civil money
penalties, to issue cease and desist or removal orders and to require that a
holding company divest subsidiaries (including its bank subsidiaries). In
general, enforcement actions may be initiated for violations of law and
regulations and unsafe or unsound practices.

-42-

Under the BHCA, a bank holding company must obtain Federal Reserve
approval before: (1) acquiring, directly or indirectly, ownership or control
of any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding company; or
(3) merging or consolidating with another bank holding company.

The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any company which is not a bank or bank
holding company, or from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or providing services
for its subsidiaries. The principal exceptions to these prohibitions involve
certain non-bank activities which, by statute or by Federal Reserve regulation
or order, have been identified as activities closely related to the business
of banking or managing or controlling banks. The list of activities permitted
by the Federal Reserve includes, among other things, operating a savings
institution, mortgage company, finance company, credit card company or
factoring company; performing certain data processing operations; providing
certain investment and financial advice; underwriting and acting as an
insurance agent for certain types of credit-related insurance; leasing
property on a full-payout, non-operating basis; selling money orders,
travelers' checks and United States Savings Bonds; real estate and personal
property appraising; providing tax planning and preparation services; and,
subject to certain limitations, providing securities brokerage services for
customers. Lexington has no present plans to engage in any of these
activities.

Interstate Banking and Branching. On September 29, 1994, the
Riegle-Neal Interstate Banking and Branching Act of 1994 (the "Riegle-Neal
Act") was enacted to ease restrictions on interstate banking. The Riegle-
Neal Act allows the Federal Reserve to approve an application of an adequately
capitalized and adequately managed bank holding company to acquire control of,
or acquire all or substantially all of the assets of, a bank located in a
state other than such holding company's home state, without regard to whether
the transaction is prohibited by the laws of any state. The Federal Reserve
may not approve the acquisition of a bank that has not been in existence for
the minimum time period (not exceeding five years) specified by the statutory
law of the host state. The Riegle-Neal Act also prohibits the Federal Reserve
from approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home
state or in any state in which the target bank maintains a branch. The
Riegle-Neal Act does not affect the authority of states to limit the
percentage of total insured deposits in the state which may be held or
controlled by a bank holding company to the extent such limitation does not
discriminate against out-of-state banks or bank holding companies. Individual
states may also waive the 30% state-wide concentration limit contained in the
Riegle-Neal Act.

Additionally, beginning on June 1, 1997, the federal banking
agencies will be authorized to approve interstate merger transactions without
regard to whether such transaction is prohibited by the law of any state,
unless the home state of one of the banks opts out of the Riegle-Neal Act by
adopting a law after the date of enactment of the Riegle-Neal Act and prior to
June 1, 1997 which applies equally to all out-of-state banks and expressly
prohibits merger transactions involving out-of-state banks. Interstate
acquisitions of branches will be permitted only if the law of the state in
which the branch is located permits such acquisitions. Interstate mergers and
branch acquisitions will also be subject to the nationwide and statewide
insured deposit concentration amounts described above.

The Riegle-Neal Act authorizes the applicable federal banking agency
to approve interstate branching de novo by national and state banks, but only
in states which specifically allow for such branching. The Riegle-Neal Act
also requires the appropriate federal banking agencies to prescribe
regulations by June 1, 1997 which prohibit any out-of-state bank from using
the interstate branching authority primarily for the purpose of deposit
production. These regulations must include guidelines to ensure that
interstate branches operated by an out-of-state bank in a host state are
reasonably helping to meet the credit needs of the communities which they
serve.
-43-

Dividends. The Federal Reserve has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the
Federal Reserve's view that a bank holding company should pay cash dividends
only to the extent that the company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earnings retention
that is consistent with the company's capital needs, asset quality and overall
financial condition. The Federal Reserve also indicated that it would be
inappropriate for a company experiencing serious financial problems to borrow
funds to pay dividends.

Bank holding companies are required to give the Federal Reserve
prior written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve may disapprove such a purchase or redemption
of it determines that the proposal would constitute an unsafe or unsound
practice or would violate any law, regulation, Federal Reserve order, or any
condition imposed by, or written agreement with, the Federal Reserve. This
notification requirement does not apply to any company that meets the
well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.

Capital Requirements. The Federal Reserve has established capital
requirements for bank holding companies that generally parallel the capital
requirements for national banks. The Federal Reserve regulations provide that
capital standards will generally be applied on a bank only (rather than a
consolidated) basis on the case of a bank holding company with less than $150
million in total consolidated assets. Lexington's total consolidated assets
will not exceed $150 million upon consummation of the Merger. See "PRO FORMA
FINANCIAL INFORMATION."

TAXATION

Federal Taxation

General. Lexington and B & L Bank report their income on a calendar
year basis using the accrual method of accounting and will be subject to
federal income taxation in the same manner as other corporations with some
exceptions. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax
rules applicable to B & L Bank or Lexington.

Bad Debt Reserve. Historically, savings institutions such as B & L
Bank which met certain definitional tests primarily related to their assets
and the nature of their business ("qualifying thrift") were permitted to
establish a reserve for bad debts and to make annual additions thereto, which
may have been deducted in arriving at their taxable income. B & L Bank's
deductions with respect to "qualifying real property loans," which are
generally loans secured by certain interest in real property, were computed
using an amount based on B & L Bank's actual loss experience, or a percentage
equal to 8% of B & L Bank's taxable income, computed with certain
modifications and reduced by the amount of any permitted additions to the
non-qualifying reserve. Due to B & L Bank's loss experience, B & L Bank
generally recognized a bad debt deduction equal to 8% of taxable income.

In August 1996, provisions repealing the current thrift bad debt
rules were enacted by Congress as part of "The Small Business Job Protection
Act of 1996." The new rules eliminate the 8% of taxable income method for
deducting additions to the tax bad debt reserves for all thrifts for tax years
beginning after December 31, 1995. These rules also require that all
institutions recapture all or a portion of their bad debt reserves added since
the base year (last taxable year beginning before January 1, 1988). B & L
Bank has previously recorded a deferred tax liability equal to the bad debt
recapture and as such, the new rules will have no effect on the net income or
federal income tax expense. For taxable years beginning after December 31,
1995, B & L Bank's bad debt deduction will be determined under the experience
method using a formula based on actual bad debt experience over a period of
years or, if B & L Bank is a "large" bank (i.e., assets in excess of $500
million) on the basis of net charge-offs
-44-

during the taxable year. The new rules allow an institution to suspend bad
debt reserve recapture for the 1996 and 1997 tax years if the institution's
lending activity for those years is equal to or greater than the institution's
average residential lending activity for the six taxable years preceding 1996.
For this purpose, only home purchase or home improvement loans are included
and the institution can elect to have the tax years with the highest and
lowest lending activity removed from the average calculation. If an
institution is permitted to postpone the reserve recapture, it must begin its
six year recapture no later than the 1998 tax year. The unrecaptured base
year reserves will not be subject to recapture as long as the institution
qualifies as a bank as defined by the statue. In addition, the balance of the
pre-1988 bad debt reserves continue to be subject to provision of present law
referred to below that require recapture in the case of certain excess
distributions to shareholders.

Distributions. To the extent that B & L Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of
December 31, 1987 (or a lesser amount if B & L Bank's loan portfolio decreased
since December 31, 1987) and then from the supplemental reserve for losses on
loans ("Excess Distributions"), and an amount based on the Excess
Distributions will be included in B & L Bank's taxable income. Nondividend
distributions include distributions in excess of B & L Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. However, dividends paid out
of B & L Bank's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not be considered to result in a
distribution from B & L Bank's bad debt reserves.

The amount of additional taxable income created from and Excess
Distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one
and one-half times the Excess Distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate. See "REGULATION" and "DIVIDEND POLICY" for limits on the payment of
dividends by B & L Bank. B & L Bank does not intend to pay dividends that
would result in a recapture of any portion of its tax bad debt reserve.

Corporate Alternative Minimum Tax. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. AMTI is
increased by an amount equal to 75% of the amount by which B & L Bank's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses). For taxable
years beginning after December 31, 1986, and before January 1, 1996, an
environmental tax of .12% of the excess of AMTI (with certain modification)
over $2.0 million is imposed on corporations, including B & L Bank, whether or
not an Alternative Minimum Tax ("AMT") is paid. Under President Clinton's
1998 budget proposal, the corporate environmental income tax would be
reinstated for taxable years beginning after December 31, 1996 and before
January 1, 2008.

Dividends-Received Deduction and Other Matters. Lexington may
exclude from its income 100% of dividends received from B & L Bank as a member
of the same affiliated group of corporations. The corporate
dividends-received deduction is generally 70% in the case of dividends
received from unaffiliated corporations with which Lexington and B & L Bank
will not file a consolidated tax return, except that if Lexington or B & L
Bank owns more than 20% of the stock of a corporation distributing a dividend,
then 80% of any dividends received may be deducted.

Other Matters. There have not been any Internal Revenue Service
audits of B & L Bank's federal income tax returns during the past five years.

Missouri Taxation

Missouri-based thrift institutions, such as B & L Bank, are subject
to a special financial institutions tax, based on net income without regard to
net operating loss carryforwards, at the rate of 7% of net income. This tax
is in lieu of certain other state taxes on thrift institutions, on their
property, capital or income, except taxes on

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tangible personal property owned by B & L Bank and held for lease or rental to
others and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales taxes and use
taxes. In addition, B & L Bank is entitled to credit against this tax all
taxes paid to the State of Missouri or any political subdivision, except taxes
on tangible personal property owned by B & L Bank and held for lease or rental
to others and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales and use taxes, and
taxes imposed by the Missouri Financial Institutions Tax Law. Missouri-based
thrift institutions are not subject to the regular corporate income tax.

There have not been any audits of B & L Bank's Missouri tax returns
by Missouri tax authorities during the past five years.

As a Missouri-chartered corporation, Lexington is subject to annual
franchise and income taxes imposed by the State of Missouri. Franchise taxes
are assessed at a rate of 1/20 of 1% of the par value of outstanding shares
and surplus. Income taxes are assessed at a rate of 6.25% of federal taxable
income derived from Missouri sources.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF LEXINGTON B & L FINANCIAL CORP.
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

General

Management's discussion and analysis of the financial condition and
results of operations is intended to assist in understanding the consolidated
financial condition and results of operations of Lexington. The information
contained in this section should be read in conjunction with the Consolidated
Financial Statements and accompanying notes thereto.

Operating Strategy

The business of B & L Bank consists principally of attracting
deposits from the general public and using such deposits to originate mortgage
loans secured primarily by one- to four-family residences. B & L Bank also
invests in certificates of deposit, investment grade federal agency and state
and local obligations and, occasionally, mortgage-backed securities. B & L
Bank plans to continue to fund its assets primarily with deposits, although
FHLB advances may be used as a supplemental source of funds.

Operating results are dependent primarily on net interest income,
which is the difference between the income earned on its interest-earning
assets, such as loans and investments, and the cost of its interest-bearing
liabilities, consisting of deposits. Operating results are also significantly
affected by general economic and competitive conditions, primarily changes in
market interest rates, governmental legislation and policies concerning
monetary and fiscal affairs and housing, as well as financial institutions and
the attendant actions of the regulatory authorities.

B & L Bank's strategy is to operate as a conservative,
well-capitalized, profitable community-oriented financial institution
dedicated to financing home ownership and other consumer needs and to provide
quality service to all customers. B & L Bank believes that it has
successfully implemented its strategy by (i) maintaining capital levels in
excess of regulatory requirements, (ii) maintaining effective control over
operating expenses to attempt to achieve profitability under differing
interest rate scenarios, (iii) limiting interest rate risk, (iv) emphasizing
local loan originations, and (v) emphasizing high-quality customer service
with a competitive fee structure.

Interest Rate Risk Management

In order to reduce the impact on B & L Bank's net interest income
due to changes in interest rates, B & L Bank's management has adopted a
strategy that has been designed to maintain the interest rate sensitivity of
its assets
-46-

and liabilities. The primary elements of this strategy involve emphasizing
the origination of adjustable-rate mortgage loans and maintaining a short- and
medium-term investment portfolio. At September 30, 1996, 88.82% of B & L
Bank's mortgage loan and mortgage-backed securities portfolio was composed of
adjustable-rate loans and securities, respectively, and the average maturity
of the mortgage-backed securities portfolio was less than thirteen years.

Interest Rate Sensitivity of Net Portfolio Value

The following table is provided to B & L Bank by the OTS and
illustrates the percent change in NPV, and the applicable limits approved by B
& L Bank's Board of Directors, as of September 30, 1996, based on OTS
assumptions. No effect has been given to any steps that management of B & L
Bank may take to counter the effect of the interest rate movements presented
in the table.

Basis
Point ("bp")
Change
in Rates Board Limit Change in NPV
-------- ----------- -------------

+400 bp (45)% (13)%
+300 bp (25) (8)
+200 bp (20) (4)
+100 bp (10) (1)
0 bp --- ---
-100 bp 8 (1)
-200 bp 10 (3)
-300 bp 11 (3)
-400 bp 20 (4)

As with any method of measuring interest rate risk, certain
shortcomings are inherent in the method of analysis presented in the foregoing
table. For example, although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. Additionally, certain assets, such as substantially all of B &
L Bank's ARM loans, have features that restrict changes in interest rates on a
short-term basis (1% per adjustment period) and over the life of the asset (5%
over the life). Furthermore, in the event of a change in interest rates,
expected rates of prepayments on loans and early withdrawals from certificates
could likely deviate significantly from those assumed in calculating the
table. Therefore, the data presented in the table should not be relied upon
as indicative of actual results.

Results of Operations

The earnings of B & L Bank depend primarily on its level of net
interest income, which is the difference between interest earned on
interest-earning assets and the interest paid on interest-bearing liabilities.
Net interest income is a function of B & L Bank's interest rate spread, which
is the difference between the yield earned on interest-earning assets and the
rate paid on interest-bearing liabilities, as well as a function of the
average balance of interest-earning assets as compared to the average balance
of interest-bearing liabilities.

Comparison of Operating Results for the Years Ended September 30, 1996 and
1995

Net Income. Net income decreased by $110,000 to $461,000 for the
year ended September 30, 1996 from $571,000 for the year ended September 30,
1995. This decrease was primarily due to a one-time SAIF assessment

-47-

of approximately $281,000 imposed on B & L Bank's deposits as a result of the
enactment of the Deposit Insurance Fund Act.

Net Interest Income. Net interest income increased to $1.7 million
for the year ended September 30, 1996 from $1.6 million for the year ended
September 30, 1995. Total interest income increased $462,000 to $4.1 million
in 1996 from $3.6 million in 1995, primarily as a result of the availability
of conversion funds for investment for approximately three and one-half months
and, to a lesser extent, an increase in the average yield of the loan
portfolio to 8.13% from 7.73%, offset by a decrease in the average yield of
the investment securities and interest-bearing deposits to 5.83% from 7.06%.
Partially offsetting the increase in total interest income, interest expense
on deposits increased $330,000 to $2.3 million for 1996 from $2.0 million for
1995, primarily as a result of higher interest rates paid on new and
renewing certificates of deposit and, to a lesser extent, an increase in
deposit average balances to $43.3 million from $41.4 million. Because the
average yield on interest-earning assets rose less than the average rate paid
on interest-bearing liabilities, B & L Bank's net interest spread declined to
2.22% for the fiscal year ended September 30, 1996 from 2.75% for the fiscal
year ended September 30, 1995, continuing the trend from the previous fiscal
year.

Provision for Loan Losses. The provision for loan losses was
$10,000 for the year ended September 30, 1996, as compared to $33,000 for the
year ended September 30, 1995. The reduction in the provision for loan losses
was primarily attributable to a reduction in the increase of non-accruing
loans as compared to the prior year.

Non-interest Income. Non-interest income increased $99,000 to
$99,000 for the year ended September 30, 1996 primarily due to an $8,000 gain
in the year ended September 30, 1996, as compared to a $6,000 loss in the year
ended September 30, 1995, on income from foreclosed assets, and a $17,000 gain
on sale of equity interest in Financial Information Trust (B & L Bank's
cooperative data processor) during the year ended September 30, 1996, as
compared to a $47,000 loss during the year ended September 30, 1995, on the
sale of investments.

Non-interest Expense. Non-interest expense increased $441,000 to
$1,145,000 for the year ended September 30, 1996 from $704,000 for the year
ended September 30, 1995, primarily due to an increase in Federal deposit
insurance premiums of approximately $281,000 for the one-time SAIF assessment.
The change also included an increase of $133,000 resulting from a $30,000
increase in deferred compensation expense associated with the funding of
executive officer salary continuation agreements, $10,000 increase in life
insurance cost, $70,000 associated with ESOP debt retirement, and the addition
of one employee during the year.

Income Taxes. The provision for income taxes decreased to $224,000
for the year ended September 30, 1996 from $300,000 for the year ended
September 30, 1995, primarily as a result of the approximately $281,000 one
time SAIF assessment.

Comparison of Operating Results for the Years Ended September 30, 1995 and
1994.

Net Income. Net income decreased $16,000 to $571,000 for the year
ended September 30, 1995 from $587,000 for the year ended September 30, 1994.
This decrease was primarily due to a decrease in net interest income of
$106,000, an increase in the provision for loan losses of $27,000 and a
decrease in non-interest income of $47,000, offset by a decrease in
non-interest expense of $173,000.

Net Interest Income. Net interest income decreased to $1.6 million
for the year ended September 30, 1995 from $1.7 million for the year ended
September 30, 1994. Total interest income increased $280,000 to $3.6 million
for 1995 from $3.3 million for 1994, primarily as a result of increased loan
volume attributable to mortgage loan refinancings during the relatively low
interest rate environment and, to a lesser extent, an increase in the average
yield of the loan portfolio to 7.73% from 7.55%. Total interest income also
increased due to an increase in the average yield of the investment securities
and interest-bearing deposits to 7.06% from 4.70%. Partially offsetting the
increase in total interest income, interest expense on deposits increased
$386,000 to $2.0 million for 1995 from
-48-

$1.6 million for 1994, primarily as a result of higher interest rates paid on
new and renewing certificates of deposit and, to a lesser extent, an increase
in deposit average balances from $40.7 million to $41.4 million. Because the
average yield on interest-earning assets rose less than the average rate paid
on interest-bearing liabilities, B & L Bank's net interest spread declined to
2.75% for the fiscal year ended September 30, 1995 from 3.20% for the fiscal
year ended September 30, 1994, continuing the trend from the previous fiscal
year.

Provision for Loan Losses. The provision for loan losses was
$32,000 for the year ended September 30, 1995, as compared to $5,000 for the
year ended September 30, 1994. Management deemed that an increase in the
allowance for loan losses was prudent in light of an increase in
non-accruing loans.

Non-interest Income. Non-interest income decreased $47,000 to $-0-
for the year ended September 30, 1995 from $47,000 for the year ended
September 30, 1994, primarily due to a $47,000 loss on the sale of
investments, offset by increases in insurance commissions earned by B & L
Bank's service corporation subsidiary. The loss on the sale of investments
was attributable to the sale of a FHLB bond in order to fund loan demand.

Non-interest Expense. Non-interest expense decreased $173,000 to
$704,000 for the year ended September 30, 1995 from $877,000 for the year
ended September 30, 1994, primarily due to a decrease in employee salaries and
benefits to $359,000 from $539,000, as a result of the death of an employee
and the retirement of another employee during 1995 and the absence of the
one-time cost of $74,000 incurred in 1994 to fund B & L Bank's defined benefit
retirement plan. Other operating expense was $135,000 and $131,000 for the
years ended September 30, 1995 and 1994, respectively. Such expense consisted
of various miscellaneous expenses, the largest three of which were office
supplies and postage, auditing and tax accounting expense, and the state
assessment fees, which amounted to $27,000, $26,000 and $17,000, respectively,
for the year ended September 30, 1995 and $25,000, $30,000 and $16,000,
respectively, for the year ended September 30, 1994.

Income Taxes. The provision for income taxes increased to $300,000
for the year ended September 30, 1995 from $291,000 for 1994 primarily as a
result of accruals for expected future income tax liability.

Yields Earned and Rates Paid

The earnings of Lexington depend largely on the spread between the
yield on interest-earning assets and the cost of interest-bearing liabilities,
as well as the relative size of Lexington's interest-earning assets and
interest-bearing liability portfolios.

The following table sets forth, for the periods indicated,
information regarding average balances of assets and liabilities as well as
the total dollar amounts of interest income from average interest-earning
assets and interest expense on average interest-bearing liabilities, resultant
yields, interest rate spreads, net interest margin, and ratio of average
interest-earning assets to average interest-bearing liabilities.

-49-

Year Ended September 30,
----------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- ---------------------------- ----------------------------
Interest Interest Interest
Average and Yield/ Average and Yield/ Average and Yield/
Balance(1) Dividends Cost Balance(1) Dividends Cost Balance(1) Dividends Cost
---------- --------- ----- ---------- --------- ---- ---------- --------- ----

Interest-earning
assets(2):
Loans receivable $41,201 $ 3,350 8.13% $40,249 $ 3,112 7.73% $38,098 $ 2,876 7.55%
Mortgage-backed
securities . . 2,283 147 6.44 2,820 183 6.49 3,481 225 6.45
Investment
securities and
other interest-
bearing deposits 9,252 539 5.83 4,476 316 7.06 4,903 230 4.70
Certificates of
deposit. . . . 794 37 4.66 --- --- --- --- --- ---
------- ------- ------ ------ ------- -------
Total interest-
bearing
assets. . . 53,530 4,073 7.61 47,545 3,611 7.59 46,482 3,331 7.17

Non-interest-
earning assets:
Office properties
and equipment,
net. . . . . . 396 418 415
Real estate, net 2 24 12
Other non-interest-
earning assets 1,134 791 600
------- ------- -------
Total assets. $55,062 $48,778 $47,509
======= ======= =======
Interest-earning
liabilities:
Passbook, NOW
and money
market
accounts. . . . $ 7,893 223 2.83 $ 8,101 242 2.99 $ 9,681 279 2.88
Certificates of
deposit . . . . 35,427 2,110 5.96 33,272 1,761 5.29 31,023 1,338 4.31
------- ------- ------ ------ ------- -------
Total deposits. 43,320 2,333 5.39 41,373 2,003 4.84 40,704 1,617 3.97

Non-interest-
bearing liabilities:
Non-interest-
bearing deposits 393 181 138
Other liabilities 485 397 367
Total
liabilities . 44,198 41,951 41,209
Stockholders'
equity. . . . . 10,864 6,827 6,300
------- ------- -------
Total liabilities
and stockholders'
equity. . . . $55,062 $48,778 $47,509
======= ------- ======= ------- ======= -------
Net interest
income. . . . . . $ 1,740 $ 1,608 $ 1,714
======= ======= =======
Interest rate
spread. . . . . . 2.22% 2.75% 3.20%
Net interest ==== ==== ====
margin. . . . . . 3.25% 3.38% 3.69%
Ratio of average ==== ==== ====
interest-earning
assets to average
interest-bearing
liabilities . . . 124% 115% 114%
=== === ===
_______________
(1) Average balances for a period are calculated using the average month-end balance during each period.
(2) Interest-earning assets include non-accrual loans and loans 90 days or more past due.

-50-

The following table sets forth (on a consolidated basis) the
weighted average yields earned on Lexington's assets and the weighted average
interest rates paid on Lexington's liabilities, together with the net yield on
interest-earning assets.

At September 30,
-------------------------------
1996 1995 1994
---- ---- ----

Weighted average yield on:
Loan portfolio . . . . . . . . 8.06% 8.00% 7.28%
Mortgage-backed securities . . 7.02 7.02 7.15
Investment securities and
interest-bearing deposits . . 5.85 6.38 6.18
Certificates of deposit. . . . 5.67 -- --
All interest-earning assets. . 7.56 7.80 7.18

Weighted average rate paid on:
Deposits . . . . . . . . . . . 5.47 5.42 4.06
All interest-bearing
liabilities . . . . . . . . . 5.47 5.42 4.06

Interest rate spread (spread
between weighted average
yield on interest-earning
assets and weighted average
rate paid on all interest-
bearing liabilities) . . . . . 2.09 2.38 3.12

The following table sets forth the effects of changing rates and
volumes on net interest income of Lexington. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) to the net change. The changes attributed to the combined impact of
rate and volume have been allocated proportionately to the changes due to
volume and the changes due to rate.

Years Ended September 30,
--------------------------------------------------------
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Due to Increase (Decrease) Due to
-------------------------- --------------------------
Rate Volume Net Rate Volume Net
---- ------ --- ---- ------ ---
(Dollars in Thousands)

Interest-earning
assets:
Loans receivable(1) $ 163 $ 75 $ 238 $ 70 $ 166 $ 236
Mortgage-backed
securities. . . . (1) (35) (36) 1 (43) (42)
Investment securities
and other interest-
bearing deposits. (63) 286 223 104 (18) 86
Certificates of
deposit . . . . . 19 18 37 -- -- --
Total net change
in income on
interest-earning
assets . . . . 118 344 462 175 105 280

Interest-bearing
liabilities:
Passbook, NOW and
money market
accounts. . . . . (13) (6) (19) 11 (48) (37)
Certificates of
deposit . . . . . 231 118 349 320 103 423
Total interest-
bearing
liabilities. . 218 112 330 331 55 386
Net change in
net interest
income . . . . $ (100) $ 232 $ 132 $ (156) $ 50 $ (106)

- -----------------
(1) For purposes of calculating volume, rate and rate/volume variances,
non-accrual loans are included in the weighted-average balance
outstanding.

-51-

Liquidity and Capital Resources

Lexington's principal sources of funds are cash receipts from
deposits, loan repayments by borrowers, proceeds from maturing securities, and
net earnings. B & L Bank has an agreement with the FHLB of Des Moines to
provide cash advances should Lexington need additional funds. For regulatory
purposes, liquidity is measured as a ratio of cash and certain investments to
withdrawable deposits. The minimum level of liquidity required by regulation
is presently 5%. Lexington's liquidity ratio at September 30, 1996 was
approximately 22.5%. Lexington maintains a higher level of liquidity than
required by regulation in order to more closely match interest-sensitive
assets with interest-sensitive liabilities.

Liquidity management is both an ongoing and long-term component of
Lexington's asset/liability management strategy. Excess funds generally are
invested in overnight deposits and short-term certificates of deposit at the
FHLB of Des Moines. Should Lexington require funds beyond its ability to
generate them internally, additional sources of funds are available through
advances from the FHLB. Lexington would pledge its FHLB stock or certain
other assets as collateral for such advances.

The primary investing activity of Lexington is the origination of
one- to four-family mortgage loans. During the year ended September 30, 1996,
Lexington originated mortgage loans in the amount of $8.0 million. During the
year ended September 30, 1996, Lexington also purchased $3.8 million of one-
to four-family mortgage loans secured by properties located in Jefferson City,
Missouri. Lexington purchased these loans with excess conversion funds to
supplement local loan demand and, subject to market condition, intends to
purchase additional such loans. Other investing activities include the
purchase of certificates of deposit, investment grade federal agency and state
and local obligations, and mortgage-backed securities.

Lexington must maintain an adequate level of liquidity to ensure
the availability of sufficient funds to support loan growth and deposit
withdrawals, to satisfy financial commitments and to take advantage of
investment opportunities. During fiscal years 1996, 1995 and 1994, Lexington
(or B & L Bank) used its sources of funds primarily to fund loan commitments
and to pay deposit withdrawals. At September 30, 1996, Lexington had loan
commitments for ARM only, which amounted to $879,900.

Like most thrift institutions, deposits, particularly certificates
of deposit, have been the primary source of external funds for Lexington. By
offering interest rates that are competitive with or at a slight premium to
the average rate paid by local competitors, Lexington has had some success in
lengthening the maturity of its certificate of deposit portfolio, a component
of its asset/liability management strategy. At September 30, 1996,
certificates of deposit amounted to $34.8 million, or 82.5% of total deposits,
including $15.9 million which were scheduled to mature in more than one year
at September 30, 1996. At September 30, 1996, $18.9 million of certificates
of deposit were schedule to mature within one year. Historically, Lexington
has been able to retain a significant amount of its deposits as they mature.
Management of Lexington believes it has adequate resources to fund all loan
commitments by deposits and, if necessary, FHLB-Des Moines advances and that
it can adjust the offering rates of savings certificates to retain deposits in
changing interest rate environments.

Lexington is not subject to any regulatory capital requirements. B
& L Bank is subject to certain capital requirements imposed by the OTS. B & L
Bank satisfied each of these requirements at September 30, 1996. See Note I
of the Consolidated Financial Statements.

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles which require the measurement of financial position and
operating results in terms of historical dollars, without considering the
change in the relative purchasing power of money over time due to inflation.
The primary impact of inflation on operations of Lexington is reflected in
increased operating costs. Unlike most industrial companies, virtually all
the assets and liabilities of a financial
-52-

institution are monetary in nature. As a result, interest rates generally
have a more significant impact on a financial institution's performance than
do general levels of inflation. Interest rates do not necessarily move in the
same direction or to the same extent as the prices of goods and services.

Impact of New Accounting Standards

See Note A of the Notes to the Consolidated Financial Statements of
Lexington.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF LEXINGTON B & L FINANCIAL CORP. FOR THE SIX
AND THREE MONTHS ENDED MARCH 31, 1997 AND 1996

Comparison of Financial Condition at March 31, 1997 and September 30, 1996

Assets of Lexington decreased from $61.7 million at September 30,
1996 to $59.8 million at March 31, 1997, primarily as a result of the purchase
of treasury stock of Lexington. Cash and interest-bearing deposits decreased
$0.8 million and certificates of deposit decreased $1.0 million. Investments
securities and mortgage-backed securities increased $0.5 million and loans
decreased $0.7 million. Total liabilities increased $0.3 million and
stockholders' equity decreased $2.3 million.

Nonperforming assets were $368,000 or 0.62% of total assets at
March 31, 1997, compared to $778,000 or 1.3% of total assets at September 30,
1996.

Comparison of the Three Months Ended March 31, 1997 to the Three Months Ended
March 31, 1996

Net Income. Net income was $151,000 for the quarter ended March
31, 1997, compared to $107,000 for the quarter ended March 31, 1996. Net
interest income after provision for loan losses increased $183,000,
non-interest income increased $14,000 and non-interest expense increased
$134,000. Income tax expense increased $19,000 due to the increase in income
before income tax.

Net Interest Income. Net interest income of $575,000 for the
quarter ended March 31, 1997, increased by $193,000, or 51%, from $382,000 for
the quarter ended March 31, 1996. Interest income increased $183,000 while
interest expense decreased $10,000.

Interest Income. Interest income increased by $183,000, or 19%,
from $960,000 for the quarter ended March 31, 1996, to $1,143,000 for the
quarter ended March 31, 1997. Interest income from mortgage loans increased
$87,000 from $782,000 for the quarter ended March 31, 1996, to $869,000 for
the quarter ended March 31, 1997. The increase was due to an increase in the
average balance of loans outstanding and upward interest rate adjustments on
adjustable rate mortgages. Interest income on other loans increased by
$20,000 from $49,000 for the quarter ended March 31, 1996 to $69,000 for the
quarter ended March 31, 1997. The increase was due to an increase in both the
average balance of loans outstanding and rates earned on loans. Interest and
dividend income on investment securities and interest bearing deposits
increased $83,000 from $91,000 for the quarter ended March 31, 1996 to
$174,000 for the quarter ended March 31, 1997. This increase was primarily
due to proceeds from the stock conversion being invested in investment
securities and interest-bearing deposits. Interest income from mortgage-
backed securities decreased $7,000 from $38,000 for the quarter ended March
31, 1996 to $31,000 for the quarter ended March 31, 1997. The decrease
resulted from the monthly proceeds from principal payments on mortgage-backed
securities creating a decrease in the average balances in the investment.

Interest Expense. Interest expense on deposits decreased $10,000
from $578,000 for the three months ended March 31, 1996 to $568,000 for the
three months ended March 31, 1997. The decrease results from a change in

-53-

mix of deposit accounts. The certificates amount decreased in total dollars
while savings deposits increased. The certificate deposits result in higher
interest expense for Lexington.

Provision for Loan Losses. Provision for loan losses increased
$10,000 from $10,000 for the three months ended March 31, 1996, to $20,000 for
the three months ended March 31, 1997. Lexington recorded a $20,000 provision
to increase its allowance for loan losses from $201,000 to $221,000 during the
quarter. The increase resulted from management's continuing review of the
loan portfolio.

Non-interest Income. Non-interest income increased $14,000 for the
quarter ended March 31, 1997, as compared to the quarter ended March 31, 1996.
The increase was primarily the result of earnings on life insurance polices
purchased to fund deferred compensation agreements with present employees.

Non-interest expense. Non-interest expense increased $134,000, or
65%, from $207,000 for the quarter ended March 31, 1996, to $341,000 for the
quarter ended March 31, 1997. This increase was primarily due to a $56,000
increase in employee salaries and benefits which was due to the hiring of
additional employees, implementation of a salary continuation plan and
implementation of the ESOP plan and a $104,000 increase in other non-interest
expenses related to operating as a public company.

Comparison of the Six Months Ended March 31, 1997, to the Six Months Ended
March 31, 1996

Net Income. Net income for the six months ended March 31, 1997
increased $98,000 from $258,000 for the six months ended March 31, 1996 to
$356,000 for the six months ended March 31, 1997. The increase was primarily
the result of investing the proceeds from the public offering.

Net Interest Income. Net interest income was $1,155,000 for the
six months ended March 31, 1997, an increase of $378,000 from the net interest
income of $777,000 for the six months ended March 31, 1996. Total interest
income increased $373,000 and interest expense decreased $5,000 for the six
months ended March 31, 1997.

Interest Income. Total interest income increased $373,000 from
$1,930,000 for the six months ended March 31, 1996, to $2,303,000 for the six
months ended March 31, 1997. The increase was primarily due to increases in
interest income on mortgage loans and other loans and investment of a portion
of the conversion proceeds in interest-bering deposits and other investments.
The interest income from mortgage loans increased by $182,000 from $1,572,000
for the six months ended March 31, 1996, to $1,754,000 for the six months
ended March 31, 1997. This increase was primarily due to an increases in
average loan balances, loan rates and adjustments on adjustable-rate
mortgages. The interest income on other loans increased $37,000 from $97,000
for the six months ended March 31, 1996 to $134,000 for the six months ended
March 31,1997. This increase was due to an increase in loans and rates on
loans.

Interest income on investment securities and interest-earning
deposits increased $167,000 from $184,000 for the six months ended March 31,
1996, to $351,000 for the six months ended March 31, 1997, primarily due to
the investment of proceeds from the public offering.

Interest Expense. Interest expense on deposits decreased $5,000
from $1,153,000 for the six months ended March 31, 1996, to $1,148,000 for the
six months ended March 31, 1997. The decrease was due primarily to lower
average customer deposits for the six months ended March 31, 1997, as compared
to the six months ended March 31, 1996, during which time the public interest
in the conversion and stock offering resulted in higher deposits.

Provision for Loan Losses. Provision for loan losses increased
$11,000 from $10,000 for the six months ended March 31, 1996 to $21,000 for
the six months ended March 31, 1997. Lexington recorded a $20,000 provision
to increase its allowance for loan losses from $201,000 to $221,000 during the
six months ended March 31, 1997. The increase resulted from management's
continuing review of the loan portfolio.

-54-

Non-interest Expense. Non-interest expense increased by $209,000
from $410,000 for the six months ended March 31, 1996, to $619,000 for the six
months ended March 31, 1997. The increase was primarily due to a $101,000
increase in employee salaries and benefits, which was due to the hiring of
additional employees, implementation of a salary continuation plan and
implementation of the ESOP plan and a $121,000 increase in other non-interest
expenses primarily related to operating as a public company.

Liquidity and Capital Resources

B & L Bank's primary sources of funds are deposits, proceeds from
principal and interest payments on loans, mortgage-backed securities,
investment securities and net operating income. While maturities and
scheduled amortization of loans and mortgage-backed securities are a somewhat
predictable source of funds, deposit flows and mortgage prepayments are
greatly influenced by general interest rates, economic conditions and
competition.

B & L Bank must maintain an adequate level of liquidity to ensure
availability of sufficient funds to support loan growth and deposit
withdrawals, satisfy financial commitments and to take advantage of investment
opportunities. At March 31, 1997, B & L Bank had approved loan commitments
totaling $1,011,000 and had undisbursed loans in process of $393,000.

Liquid funds necessary for normal daily operations are maintained
in a working checking account and a daily time account with the Federal Home
Loan Bank of Des Moines. It is B & L Bank's current policy to maintain
adequate collected balances in those deposit accounts to meet daily operating
expenses, customer withdrawals and fund loan demand. Funds received from
daily operating activities are deposited on a daily basis in the checking
account and transferred, when appropriate, to the daily time account to
enhance income.

Normal daily operating expenses are not expected to change
significantly in the foreseeable future. Non-interest expense is expected to
remain basically constant. Interest expense is expected to increase gradually
as the rates on existing interest bearing transaction accounts are increased
and maturing certificates of deposit are reinvested at currently higher
interest rates. The interest expense increase is expected to be offset
partially as interest rates are increased on current adjustable-rate loans and
securities and as maturing investments are reinvested at higher interest
rates. Customer deposits are expected to remain stable.

At March 31, 1997, certificates of deposit amounted to $35 million,
or 82.6%, of B & L Bank's total deposits, including $19.0 million of fixed
rate certificates scheduled to mature within twelve months. Historically, B &
L Bank has been able to retain a significant amount of its deposits as they
mature. Management believes it has adequate resources to fund all loan
commitments from savings deposits, loan payments and maturities of investment
securities.

The OTS currently requires a thrift institution to maintain an
average daily balance of liquid assets (cash and eligible investments) equal
to at least 5% of the average daily balance of its net withdrawable deposits
and short-term borrowings. In addition, short-term liquid assets currently
must constitute 1% of the sum of net withdrawable deposit accounts plus
short-term borrowings. B & L Bank's liquidity ratio was 21.00% at March 31,
1997, and its short-term liquidity ratio at March 31, 1997 was 15.91%. B & L
Bank consistently maintains liquidity levels in excess of regulatory
requirements, and believes this is an appropriate strategy for proper asset
and liability management.

During the quarter ended March 31, 1997, Lexington repurchased
177,100 of its common shares at an average price of $15.24 per share.
Approximately 50,600 shares will be used to fund Lexington's 1997 Management
Recognition and Development Plan. Lexington completed the repurchase program
authorized by the Board of Directors in March 1997.

-55-

The OTS requires institutions such as B & L Bank to meet certain
tangible, core, and risk-based capital requirements. Tangible capital
generally consists of stockholders' equity minus certain intangible assets.
Core capital generally consists of stockholders' equity. The risk-based
capital requirements presently address risk related to both recorded assets
and off-balance sheet commitments and obligations. The following table
summarizes B & L Bank's capital ratios and the ratios required by regulation
at March 31, 1997.

Percent of Adjusted
Amount Total Assets
------ --------------------
(Dollars in thousands)

Tangible capital. . . . $13,027 22.6%
Tangible capital
requirement. . . . . . 864 1.5
------- ----
Excess. . . . . . $12,163 21.1%

Core capital. . . . . . $13,027 22.6%
Core capital
requirement. . . . . . 1,729 3.0
------- ----
Excess. . . . . . $11,298 19.6%

Risk-based capital. . . $13,189 45.0%
Risk-based capital
requirement. . . . . . 2,343 8.0
------- ----
Excess. . . . . . $10,846 37.0%

MANAGEMENT OF LEXINGTON B & L FINANCIAL CORP.

The following table sets forth certain information with respect to
the directors of Lexington.

Year First
Principal Occupations Elected Term to
Name Age(1) During Last Five Years Director(2) Expire
---- ------ ---------------------- ----------- ------

Norman Vialle(3) 70 Retired owner and operator of 1964 2000
Maid-Rite Drive-In, Lexington,
Missouri.

Charles R.
Wilcoxon 84 Retired businessman. 1962 2000

Erwin Oetting,
Jr. 56 President and Chief Executive 1966 1999
Officer of Lexington and
President, Chairman of the Board
and Chief Executive Officer of
B&L Bank.

Steve Oliaro 51 Owner of Baker Memorials, Inc. 1989 1999
and sole proprietor of Custom
Grafix Design, both in Lexington,
Missouri.

(table continued on following page)

-56-

Year First
Principal Occupations Elected Term to
Name Age(1) During Last Five Years Director(2) Expire
---- ------ ---------------------- ----------- ------

E. Steva Vialle(3) 45 Treasurer, Chief Financial 1992 1998
Officer and Secretary of B&L
and Executive Vice President,
Chief Operating Officer and
Secretary of the Bank.

Glenn H. Twente 69 Retired chiropractor. 1981 1998

- -------------------
(1) At September 30, 1996.
(2) Includes prior service on the Board of Directors of B&L Bank.
(3) Norman Vialle is the uncle of E. Steva Vialle.

The following table sets forth certain information regarding the
executive officers of Lexington and B&L Bank who are not also directors of
Lexington.

Name Age Position
- ---- --- --------

Kathryn M. Swafford 34 Vice President,
Treasurer of B & L Bank
Mark D. Summerlin 32 Vice President of B & L
Bank

Kathryn M. Swafford joined B & L Bank as Controller in 1984 and has
been employed as Treasurer since 1988.

Mark D. Summerlin has been employed by B & L Bank since 1985.

EXECUTIVE COMPENSATION OF LEXINGTON B & L FINANCIAL CORP.

Summary Compensation Table. The following information is furnished
for Lexington's chief executive officer.

Annual Compensation(1)
-------------------------------------
Name and Other Annual
Position Year Salary($) Bonus Compensation
- -------- ---- --------- ----- ------------

Erwin Oetting, Jr. 1996 $71,899 $7,055 $10,073(2)
President and Chief 1995 $70,849 $6,875 $7,565
Executive Officer

- ----------------
(1) Compensation information for prior fiscal years has been omitted because
Lexington was neither a public company nor a subsidiary thereof at such
times. Excludes certain additional benefits, the aggregate amounts of
which do not exceed 10% of total salary and bonus.
(2) Consists of directors' fees of $6,600 and a $3,473 salary received from B
& L Bank's service corporation.

-57-

Employment Agreements. Lexington and B & L Bank (collectively, the
"Employers") have entered into a three-year employment agreement with Mr.
Oetting. Under the agreement, the salary level for Mr. Oetting is $71,899,
which amount will be paid by B & L Bank and may be increased at the discretion
of the Board of Directors or an authorized committee of the Board. In
determining the salary level for Mr. Oetting, the Board will consider
compensation levels for similarly situated executives at comparable
institutions, the financial performance of B & L Bank, as well as his
individual performance. On each anniversary of the commencement date of the
agreement, the term of the agreement may be extended for an additional year.
The agreement is terminable by the Employers at any time or upon the
occurrence of certain events specified by federal regulations.

The employment agreement provides for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, Mr. Oetting is assigned
duties inconsistent with his positions, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than Lexington purchases shares of Lexington Common Stock
pursuant to a tender or exchange offer for such shares, (b) any person (as
such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of
Lexington representing 25% or more of the combined voting power of Lexington's
then outstanding securities, (c) the membership of the Board of Directors
changes as the result of a contested election, or (d) shareholders of
Lexington approve a merger, consolidation, sale or disposition of all or
substantially all of Lexington's assets, or a plan of partial or complete
liquidation.

The severance payment from the Employers will equal 2.99 times the
executive's average annual compensation during the five-year period preceding
the change in control. Such amount will be paid in a lump sum within 10
business days following the termination of employment. Assuming that a change
in control had occurred at September 30, 1996, Mr. Oetting would have been
entitled to severance payments of approximately $215,000. Section 280G of the
Internal Revenue Code of 1986, as amended ("Code") states that severance
payments that equal or exceed three times the base compensation of the
individual are deemed to be "excess parachute payments" if they are contingent
upon a change in control. Individuals receiving excess parachute payments are
subject to a 20% excise tax on the amount of such excess payments, and the
Employers would not be entitled to deduct the amount of such excess payments.

The agreement restricts the executive's right to compete against
the Employers for a period of one year from the date of termination of the
agreement if Mr. Oetting voluntarily terminates employment, except in the
event of a change in control.

Salary Continuation Agreements. B & L Bank has entered into a
salary continuation agreement with Mr. Oetting to ensure his continued service
with B & L Bank through retirement and to provide him with additional
financial security at retirement. The agreement provides that if Mr. Oetting
remains employed by B & L Bank through the retirement age specified in the
Agreement, B & L Bank will provide him with monthly benefits of $2,917 for a
period of 180 months following retirement. The agreement provides for
retirement at age 60 for Mr. Oetting. Under the agreement, Mr. Oetting will
vest ratably in his salary continuation benefit over the number of years
remaining to the specified retirement age. However, in the event of a change
in control of Lexington or B & L Bank (as defined in the agreements), Mr.
Oetting would be fully vested as of the effective date of the change in
control. In the event that Mr. Oetting terminates his employment with
Lexington or B & L Bank prior to the specified retirement age, the retirement
benefit will be reduced to the amount of the vested benefit on the date of
termination. In the event of the Mr. Oetting's death while employed by
Lexington or B & L Bank, his designated beneficiary will receive the same
benefit as Mr. Oetting had retired at the specified retirement age. B & L
Bank accrued compensation expense of approximately $29,000 during fiscal 1996
with respect to its liability to Mr. Oetting under the terms of the salary
continuation agreement.
-58-

Defined Benefit Plan. B & L Bank is a participant in the Financial
Institution Retirement Fund ("FIRF"), a multi-employer, non-contributory
defined benefit retirement plan. The FIRF plan covers all employees who have
completed one year of service and have attained the age of 21 years and
provides for monthly retirement benefits determined based on the employee's
base salary and years of service after June 1, 1988. The normal retirement
age is 65 and the early retirement age is before age 65, but generally after
age 55. Normal retirement benefits are equal to 2.0% multiplied by the years
of service to B & L Bank and the employee's average salary for the five
highest consecutive years preceding retirement. Benefits under the plan are
not subject to offset for social security benefits. If an employee elects
early retirement, but defers the receipt of benefits until age 65, the formula
for computation of early retirement benefits is the same as if the employee
had retired at the normal retirement age. However, if the employee elects
early retirement and receives benefits prior to age 65, benefits are reduced
by applying an early retirement factor based on the number of years the early
retirement date precedes age 65. If a participant terminates employment prior
to the normal retirement date or early retirement date as a result of
disability, the participant would receive the vested percentage of benefits at
the participant's normal retirement date. Separate actuarial valuations are
not made for individual members of the plan. Pension costs and funding
include normal costs. According to FIRF, plan assets exceeded vested benefits
as of June 30, 1995, the date of the most current actuarial valuation.
Pension expense for the fiscal year ended September 30, 1996 was $27,224. As
of September 30, 1996, Mr. Oetting had 8.5 years of credited service under the
plan.

The following table illustrates annual pension benefits payable at
normal retirement age, based on various levels of compensation and years of
service.

Years of Service
Highest Five Year ----------------------------------------------
Annual Compensation 5 10 15 25 35
- ------------------- ----------------------------------------------

$ 10,000. . . . . . . . 1,000 2,000 3,000 5,000 7,000
20,000. . . . . . . . 2,000 4,000 6,000 10,000 14,000
30,000. . . . . . . . 3,000 6,000 9,000 15,000 21,000
40,000. . . . . . . . 4,000 8,000 12,000 20,000 28,000
60,000. . . . . . . . 6,000 12,000 18,000 30,000 42,000
80,000. . . . . . . . 8,000 16,000 24,000 40,000 56,000
100,000. . . . . . . . 10,000 20,000 30,000 50,000 70,000
120,000. . . . . . . . 12,000 24,000 36,000 60,000 84,000

VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
OF LEXINGTON B & L FINANCIAL CORP.

Persons and groups who beneficially own in excess of 5% of
Lexington Common Stock are required to file certain reports with the SEC
regarding such ownership pursuant to the Exchange Act. Based upon such
reports, the following table sets forth, as of March 31, 1997, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of Lexington Common Stock. Management knows of no
persons other than those set forth below who owned more than 5% of the
outstanding shares of Lexington Common Stock at March 31, 1997. The table
also sets forth, as of March 31, 1997, information as to the shares of Common
Stock beneficially owned by each director, the chief executive officer of
Lexington, and all executive officers and directors of Lexington as a group.
The table also provides pro forma information concerning the beneficial
ownership of Lexington Common Stock by such persons and greater than 5%
shareholders after giving effect to the issuance of 110,352 shares of
Lexington Common Stock in the Merger.

-59-

Amount and Percent of
Nature of Percent of Shares
of Beneficial Shares Outstanding
Beneficial Owner Ownership(1) Outstanding Post-Merger
- ---------------- ------------ ----------- -----------

Beneficial Owners of
More Than 5%

B & L Bank Employee Stock 101,200 8.9% 8.1%
Ownership Plan Trust

Jerome H. Davis 98,200(2) 8.6 7.9
Susan B. Davis
c/o David M. Perlmutter, Esq.
200 Park Ave., Suite 4515
New York, NY 10166

Directors and Chief
Executive Officer

Erwin Oetting, Jr.(3) 15,946 1.4 1.3
Steve Oliaro 10,700 * *
Norman Vialle 7,500 * *
Charles R. Wilcoxon 7,000 * *
E. Steva Vialle 17,664 1.6 1.4
Glenn H. Twente 5,000 * *

All Executive Officers and
Directors as a
Group (8 persons) 69,919 6.1 5.6
____________________
(*) Less than 1%.
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to be
the beneficial owner, for purposes of this table, of any shares of the
Corporation's Common Stock if he or she has voting and/or investment
power with respect to such security or has a right to acquire, through
the exercise of outstanding options or otherwise, beneficial ownership at
any time within 60 days from March 31, 1997. The table includes shares
owned by spouses, other immediate family members in trust, shares held in
retirement accounts or funds for the benefit of the named individuals,
and other forms of ownership, over which shares the named persons possess
voting and/or investment power.
(2) Information concerning the shares owned by Jerome H. and Susan B. Davis
is as of May 20, 1997 and was obtained from Amendment No. 2 to a Schedule
13D dated May 20, 1997. According to this filing, Mr. and Mrs. Davis
have shared voting and dispositive power with respect to 98,200 shares.
(3) Mr. Oetting is the Chief Executive Officer and a director of Lexington.

-60-

BUSINESS OF LAFAYETTE BANCSHARES, INC.
General

Lafayette operates as a one bank holding company headquartered in
Lexington, Missouri. Lafayette, with $33.9 million in assets, offers banking
services to individuals, business and agricultural customers. Lafayette's
subsidiary, Lafayette County Bank of Lexington/Wellington, was founded in 1888
in the town of Wellington, Missouri. In 1982 the Bank branched and moved its
home office to Lexington, located approximately 10 miles from Wellington.

Lafayette considers its market area for loans and deposits to
include the Missouri communities of Lexington and Wellington in northern
Lafayette County and southern Ray County, and Callao in Macon County. The
market area of Lafayette encompasses a basic agriculture and small business
economy.

Lending Activities

Generally Lafayette's lending activities are balanced between
commercial, agriculture, consumer, and real estate loans. Lafayette's net
loans receivable totalled $15.7 million at March 31, 1997, representing 46.5%
of consolidated total assets.

The following table sets forth the composition of Lafayette's loan
portfolio as of the dates indicated.

At December 31,
--------------------------------------
1996 1995
----------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)

Commercial. . . . . $3,278 21.0% $3,314 22.6%
Agricultural. . . . 1,342 8.6 1,692 11.5
Consumer. . . . . . 4,165 26.7 3,880 26.4
Real estate:
Commercial. . . . 2,414 15.5 1,796 12.3
Agricultural. . . 1,018 6.6 825 5.6
Residential . . . 3,364 21.6 3,178 21.6
------ ----- ------ -----
Total. . . . . . 15,581 100.0% 14,685 100.0%
===== =====
Less:
Allowance for loan
losses. . . . . . 216 208
------- -------
Total loans. . . $15,365 $14,477
======= =======

-61-

The following table shows the maturity of loans outstanding as of
December 31, 1996.

Maturing
----------------------------------------------
After One
Within and Within After
One Year Five Years Five Years Total
-------- ---------- ---------- -----

Commercial. . . . . . . $2,564 $ 714 $ -- $3,278
Agricultural. . . . . . 1,303 39 -- 1,342
Consumer. . . . . . . . 1,148 3,017 -- 4,165
Real estate:
Commercial . . . . . . 1,674 704 36 2,414
Agricultural . . . . . 653 291 74 1,018
Residential. . . . . . 1,122 2,067 175 3,364
------ ------ ---- -------
Total. . . . . . . $8,464 $6,832 $285 $15,581
====== ====== ==== =======

The following table shows the amounts of loans due after December
31, 1997 that have fixed interest rates and that have adjustable interest
rates.

Fixed-rate Adjustable-rate
---------- ---------------

Total loans due after
December 31, 1997. . . . . . $6,932 $184

Management has taken steps to ensure loan quality by maintaining a
balance in the mix of its loans and by reducing its exposure to any one
borrower. By keeping its loan portfolio balanced, Lafayette has attempted to
avoid problems associated with undue concentration of loans of a particular
type. In addition, Lafayette also has kept its loans to one borrower below
its legal lending limit to reduce its maximum exposure on a single line or it
has obtained government guarantees to minimize its credit risk on larger
credits. Lafayette has no concentration of loans to any one borrower
exceeding 3% of total gross loans.

A loan is generally placed on nonaccrual status when payments are
past due 90 days or more and when management has considerable doubt about the
borrower's ability to repay on the terms originally contracted. In certain
instances, Lafayette continues to accrue interest on loans past due 90 days or
more, when collection of interest and principal is expected to resume and
sufficient collateral is believed to exist to protect Lafayette form
significant loss.

The following table sets forth information with respect to
Lafayette's nonaccrual, past due and restructured loans within the meaning of
SFAS No. 15 at the dates indicated.

-62-

At December 31,
------------------
1996 1995
---- ----
(In Thousands)

Loans accounted for on a
nonaccrual basis:
Commercial. . . . . . . . . . . . . . $ 14 $ 3
Agricultural. . . . . . . . . . . . . ---- --
Consumer. . . . . . . . . . . . . . . 41 7
Real Estate:
Commercial . . . . . . . . . . . . . ---- 1
Agricultural . . . . . . . . . . . . 8 --
Residential. . . . . . . . . . . . . 5 21
---- ---
Total . . . . . . . . . . . . . . $ 68 $32
==== ===

Accruing loans which are contractually
past due 90 days or more:
Commercial. . . . . . . . . . . . . . $ 51 $ 6
Agricultural. . . . . . . . . . . . . -- --
Consumer. . . . . . . . . . . . . . . 56 9
Real Estate:
Commercial . . . . . . . . . . . . . 10 --
Agricultural . . . . . . . . . . . . -- --
Residential. . . . . . . . . . . . . 15 5
---- ---
Total . . . . . . . . . . . . . . $132 $20
==== ===

Restructured loans. . . . . . . . . . . $ 22 $23

The gross interest income on nonaccrual and restructured loans that
would have been recorded in 1996 if the loans had been current in accordance
with their terms was $7,000.

Certain loans are restructured to provide a reduction or deferral
of interest or principal because of deterioration in the financial condition
of the borrower. For the period ended March 31, 1997, restructured loans
increased to $236,000 from $22,000 at December 31, 1996. This increase can
be attributed to one line of credit of approximately $208,000 which had been
delinquent at year end 1996 and was subsequently rewritten extending the loan
repayment terms without reducing the interest rate. Additional collateral was
obtained to support the line. This transaction reduced delinquent loans at
March 31, 1997 from the December 31, 1996 level and increased the
"watch/special mention" loan classification amounts at March 31, 1997.

At March 31, 1997, classified loans totalled $905,000 and included
$13,000 classified as "doubtful", $229,000 classified as "substandard" and
$663,000 classified as "watch/special mention."

-63-

The aggregate amounts of Lafayette's classified assets at March 31,
1997 were as follows:

Doubtful Substandard Special Mention Total
-------------- -------------- --------------- --------------
Amount Number Amount Number Amount Number Amount Number
------ ------ ------ ------ ------ ------ ------ ------
(Dollars in Thousands)

Commercial $-- -- $ 64 2 $ 96 4 $160 6
Agricultural -- -- 7 1 -- -- 7 1
Consumer 13 6 90 21 186 40 289 67
Real Estate:
Commercial -- -- 24 1 129 3 153 4
Agricultural -- -- -- -- -- -- -- --

Residential -- -- 44 7 252 9 296 16
--- -- ---- -- ---- -- ---- --
$13 6 $229 32 $663 56 $905 94
=== == ==== == ==== == ==== ==

At March 31, 1997, management of Lafayette was unaware of any
material loans not reported as delinquent or classified, where known
information about possible credit problems of the borrowers would cause
management to have serious doubts as to the ability of such borrowers to
comply with their loan repayment terms at that date and which may result in
future inclusion in the non-performing asset category.

Allowance for Loan Losses

The following table sets forth an analysis of Lafayette's allowance
for loan losses for the periods indicated.

Year Ended December 31,
-----------------------
1996 1995
---- ----
(Dollars in Thousands)

Balance at beginning of period. . . . $208 $166

Provision for loan losses . . . . . . 33 45

Recoveries. . . . . . . . . . . . . . 17 8

Charge-offs:
Commercial and Agricultural. . . . . (15) --
Consumer . . . . . . . . . . . . . . (27) (11)
Real estate. . . . . . . . . . . . . -- --
---- ----
Total charge-offs. . . . . . . . . (42) (11)

Net charge-offs. . . . . . . . . . (25) (3)
---- ----
Balance at end of period. . . . . . . $216 $208
==== ====
Ratio of net charge-offs to
average loans outstanding
during the period. . . . . . . . . . .16% .02%
=== ===
The allowance for loan losses is established by charges to
operations based on management's evaluation of the assets, economic
conditions, and other factors considered necessary to maintain the allowance
at an adequate level. Uncollectible loans are charged to the allowance at an
adequate

-64-

level. Uncollectible loans are charged to the allowance account in the period
such determination is made. For a discussion of the factors responsible for
changes in Lafayette's provision for loan losses from 1995 to 1996, see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF LAFAYETTE BANCSHARES, INC. -- RESULTS OF OPERATIONS --
Provisions for Loan Losses."

The following table sets forth the breakdown of the allowance for
loan losses by loan category for the periods indicated. Management believes
that the allowance can be allocated by category only on an approximate basis.
The allocation of the allowance to each category is not necessarily indicative
of future losses and does not restrict the use of the allowance to absorb
losses in any other category.

At December 31,
-------------------------------------------
1996 1995
------------------- -----------------
% of % of
Loans in Loans in
Category Category
to Total to Total
Amount Loans Amount Loans
------ ----- ------ -----
(Dollars in Thousands)

Commercial. . . $ 50 21.0 $ 89 22.6
Agricultural. . 11 8.6 10 11.5
Consumer. . . . 77 26.7 30 26.4
Real estate:
Commercial . . 4 15.5 6 12.3
Agricultural. -- 6.6 -- 5.6
Residential . 38 21.6 28 21.6
Unallocated . . 36 N/A 45 N/A
Total allowance ---- ----- ---- -----
for loan
losses. . . $216 100.0% $208 100.0%
==== ===== ==== =====
Securities

Lafayette's investment strategy is to purchase U.S. Treasury and
Federal agency securities with maturities up to two years and municipal
securities with maturities up to five years. Most of the Federal Agency
securities are callable by the issuing agency. Variation from these
investment guidelines is dependent on management's estimate of the current
position of interest rates on the interest curve.

-65-

The following table sets forth the composition of Lafayette's
investment securities portfolio at the dates indicated.

At December 31,
-----------------------------------------------
1996 1995
--------------------- ---------------------
Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio
----- --------- ----- ---------
(Dollars in Thousands)
Available for sale:
Mutual funds. . . . . $ 113 0.8% $ 113 1.0%

Held to maturity:
U.S. Government
obligations . . . . . 4,893 36.6 6,494 47.5
Federal agency
obligations. . . . . 7,634 57.0 6,229 45.6
State and municipal
obligations. . . . . 754 5.6 716 5.2
Certificates of
deposit. . . . . . . -- -- 105 0.7
Total held to ------- ----- ------- -----
maturity. . . . . 13,281 99.2 13,544 99.0
------- ----- ------- -----
Total . . . . . . $13,394 100.0% $13,657 100.0%
======= ===== ======= =====

The table below sets forth certain information regarding the
carrying value, weighted average yields and maturities of Lafayette's
investment securities at December 31, 1996. Yields on tax exempt obligations
have not been computed on a tax equivalent basis.

Over Over
Less Than One to Five to
One Year Five Years Ten Years
-------------- -------------- -------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
(Dollars in Thousands)

Available for sale:
Mutual funds. . $113 5.24% $ -- --% $-- --%

Held to maturity:
U.S. Government
obligations. . 2,600 6.08 2,293 5.75
Federal agency
obligations. . 1,100 5.94 6,534 6.67
State and
municipal
obligations. . 146 6.43 515 9.12 93 10.32
------ ---- ------ ---- --- -----
Total held to
maturity. . 3,846 6.06 9,342 6.57 93 10.32
------ ---- ------ ---- --- -----
Total . . . $3,959 6.06% $9,342 6.57% $93 10.32%
====== ==== ====== ==== === =====

Deposits and Other Sources of Funds

Substantially all of Lafayette's depositors are residents of the
State of Missouri. Deposits are attracted from within Lafayette's market area
through the offering of a broad selection of deposit instruments, including
non-interest bearing checking accounts, NOW accounts, money market deposit
accounts, certificates of deposit and retirement savings plans. Deposit
account terms vary, according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors.
-66-

The following table sets forth the balances in dollar amounts of
deposits in the various types of accounts offered by Lafayette at the dates
indicated.

At December 31,
-----------------
1996 1995
---- ----
(In Thousands)

Non-interest-bearing. . . . . . . . $ 3,574 $ 4,210
NOW checking. . . . . . . . . . . . 3,630 3,827
Regular savings . . . . . . . . . . 2,419 2,523
Money market deposit. . . . . . . . 3,609 3,021
Certificates of deposit:
Three months or less. . . . . . . 6,882 4,875
Four to 12 months . . . . . . . . 6,416 4,845
Over 12 months. . . . . . . . . . 2,981 5,133
------- -------
Total deposits. . . . . . . . . $29,511 $28,434
======= =======

The following table sets forth the amount of certificates of
deposit of $100,000 or more by time remaining until maturity as of December
31, 1996.

Maturity Period Amount
- --------------- ------
(In Thousands)

Three months or less. . . . . . . . . . . . . . . $1,321
Over three through six months . . . . . . . . . . 100
Over six through 12 months. . . . . . . . . . . . 460
Over 12 months. . . . . . . . . . . . . . . . . . 800
------
Total. . . . . . . . . . . . . . . . . . . . $2,681
======

Lafayette has the ability to use advances from the FHLB of Des
Moines to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. As a member of the FHLB of Des Moines, Lafayette is
required to own capital stock in the bank to obtain advances, which must be
collateralized by either mortgage loans or securities. Lafayette had the
following advances outstanding with the FHLB as indicated in the following
table at the dates indicated.

Outstanding
Date of Maturity Interest At December 31,
Advance Date Rate 1996 1995 1994
------- ---- ---- ---- ---- ----
(In Thousands)

3/15/94 3/15/99 6.30% $ 35 $ 35 $ 35
3/13/94 3/15/00 6.50 35 35 35
3/15/04 3/15/01 6.70 35 35 35
3/15/94 3/15/02 6.80 35 35 35
6/08/95 6/08/98 5.86 100 100 0
9/15/95 9/15/98 5.93 100 100 0
---- ---- ----
$340 $340 $140
==== ==== ====

-67-

At March 31, 1997, Federal Agency securities with a market value of
$395,000 have been pledged as collateral to secure the above advances from the
FHLB of Des Moines.

Properties

In addition to Lafayette's home office located in Lexington,
Missouri, the Bank has two other branch offices located in Wellington and
Callao, Missouri. The Lexington office is a modern banking office constructed
in 1982 and contains approximately 8,000 square feet. The branch office in
Wellington was constructed around 1920, has been remodeled several times and
contains approximately 5,000 square feet. The Callao office was acquired in
1986 through the purchase of the Callao Community Bank from the FDIC.
Although the date of construction of the Callao office is not known, it is
estimated to have been built around 1930 and has approximately 4,000 square
feet. All three offices have vaults containing rental safe deposit boxes.
At March 31, 1997, the net book value of Lafayette's premises and equipment
was $387,000.

Personnel

At March 31, 1997, Lafayette had 13 full-time and two part-time
employees at its Lexington office, two full-time and two part-time employees
at its Wellington office, and three full-time and two part-time employees at
it Callao office. Employee relations are considered good and none of the
employees are represented by a collective bargaining unit.

Competition

Lafayette's subsidiary operates in an extremely competitive market
for loans and deposits because of its close proximity to the Kansas City
metropolitan area. Two of the commercial banks in Lexington are operated as
branches of larger banks in the Kansas City area with much larger asset bases
and more resources then Lafayette. The result of this highly competitive
market is a higher cost of funds and a lower net interest spread and interest
margin than comparable banks in its peer group within the State of Missouri
and nationally.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF LAFAYETTE BANCSHARES, INC.

General

The following financial review presents management's discussion and
analysis of Lafayette's consolidated financial condition and results of
operations. This review highlights the major factors affecting results of
operation and any significant changes in financial condition for the
three-year period ending December 31, 1996 and for the three-month periods
ending March 31, 1997 and 1996. This discussion should be read in conjunction
with accompanying consolidated financial statements, and the notes to
financial statements appearing elsewhere in this Proxy Statement.

Overview

Lafayette recorded consolidated net income of $261,506 for the year
ended December 31, 1996, compared to net income of $202,859 and $121,646 for
1995 and 1994, respectively. For the three months ended March 31, 1997,
Lafayette reported consolidated net income of $49,325 compared to $66,642 for
the same period in 1996. These operating results represent a 28.9% increase
in net income for 1996 compared to 1995 and a 66.6% increase in net income for
1995 compared to 1994. For the three month period ended March 31, 1997,
consolidated net income decreased 26.0% compared to the same period in 1996.
Per share earnings for 1996 were $0.23, a 27.7% increase over 1995 per share
earnings of $0.18. Per share results for 1995 represented a 63.6% increase
over 1994

-68-

results of $0.11. Earnings per share of $0.04 for the three months ended
March 31, 1997 declined 33.3% from the $0.06 reported for the three months
ended March 31, 1996.

Lafayette's improved earnings during 1996 over 1995 were primarily
driven by an increase in net interest income, along with higher noninterest
income and a lower provision for loan losses. These increases were partially
offset by higher noninterest expenses. Consolidated earnings improvement for
1995 over 1994 was the result of an increase in net interest earnings, along
with higher noninterest income and marginally lower noninterest expenses.
These increases for 1995 over 1994 were partially offset by a higher provision
for loan losses. The decline in net income for the first three months of 1997
compared to the same period in 1996 was the result of higher noninterest
expenses and a larger provision for loan losses, offset somewhat by an
increase in noninterest income. Net interest income for the three months
ended March 31, 1997 only marginally increased over net interest income for
the same period in 1996.

Results of Operations

Net interest income, Lafayette's principal source of earnings, is
the amount of interest income generated by interest-earning assets less
interest expense paid on interest-bearing liabilities.

The following table sets forth certain information for the periods
indicated regarding average balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets
and interest expense on average interest-bearing liabilities and average
yields and costs. Such yields and costs for the periods indicated are derived
by dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods presented. Average balances are derived from
daily balances.

Three Months Ended March 31,
-----------------------------------------------------------
1997 1996
---------------------------- -----------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
Interest-earning
assets:
Loans
receivable. $15,658,084 $371,218 9.61% $14,697,783 $359,030 9.91%
Investment
securities. 13,741,902 202,629 5.98 13,443,109 200,800 6.06
Interest-
bearing
due from
banks . . . 184,338 1,548 3.41 309,848 4,027 5.27
Federal
funds
sold. . . . 1,148,560 14,663 5.18 618,942 8,209 5.38
Total ----------- ------- ----- ----------- -------- -----
interest-
earning
assets. . 30,732,884 590,058 7.79 29,069,682 572,066 7.98
----------- ------- ----- ----------- -------- -----
Non-interest-
earning assets:
Premises and
equipment . 390,424 388,757
Other assets 1,783,777 1,842,122
Total ----------- -----------
assets. . $32,907,085 $31,300,561
=========== ===========
Interest-bearing
liabilities:
Deposits . . $26,512,600 302,217 4.62 $24,911,873 281,848 4.59
FHLB
advances. . 340,000 5,181 6.18 340,000 5,307 6.33
Notes payable 558,219 15,426 11.21 653,219 18,198 11.30
Total ----------- ------- ----- ----------- -------- -----
interest-
bearing
liabilities 27,410,819 322,824 4.78 25,905,092 305,353 4.78
----------- ------- ----- ----------- -------- -----
Non-interest-
bearing
liabilities 3,240,475 3,347,850

Other
liabilities 281,076 279,790
Total ----------- -----------
liabili-
ties 30,932,370 $29,532,732

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Net interest
margin . . . 3.53 3.72

Ratio of average
interest-earning
assets to average
interest-bearing
liabilities. 112% 112%

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Year Ended December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------- ----------------------------- -----------------------------
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ---- ------- --------- ----

Interest-
earning
assets:
Loans
receivable $15,211,142 $1,481,550 9.47% $13,815,703 $1,345,793 9.74% $11,870,402 $1,071,669 9.03%
Investment
securities 13,489,733 812,226 6.02 13,241,269 747,514 5.65 14,340,700 676,169 4.72
Interest-
bearing
due from
banks 245,618 11,132 4.53 180,419 8,503 4.71 51,691 2,878 5.57
Federal
funds
sold 832,307 42,285 5.08 635,862 36,436 5.73 822,772 32,921 4.00
Total ----------- --------- ----- ----------- --------- ----- ----------- --------- -----
interest-
earning
assets 29,778,800 2,347,193 7.88 27,873,253 2,138,246 7.67 27,085,565 1,783,637 6.59
----------- ---------- ----------- ---------- ----------- ----------
Non-interest-
earning assets:
Premises and
equipment 402,964 401,948 439,375
Other assets 1,741,943 1,879,160 1,954,571
Total ----------- ----------- -----------
assets $31,923,707 $30,154,361 $29,479,511
=========== =========== ===========
Interest-
bearing
liabilities:
Deposits $25,553,494 1,171,789 4.59 $24,019,434 1,054,829 4.39 $23,968,694 840,211 3.51
FHLB
advances 340,000 21,460 6.31 239,346 15,310 6.40 117,289 7,990 6.81
Notes
payable 605,719 69,763 11.52 700,719 80,542 11.49 795,719 91,469 11.50
Total
interest-
bearing
liabili-
ties 26,499,213 1,263,012 4.77 24,959,499 1,150,681 4.61 24,881,702 939,670 3.78
----------- ---------- ----------- ---------- ----------- ----------
Non-interest-
bearing
liabilities 3,301,535 3,289,738 2,887,048

Other
liabilities 258,168 245,684 187,882
Total ----------- ----------- -----------
liabili-
ties 30,058,916 28,494,921 27,956,632

Stockholders'
equity 1,864,791 1,659,440 1,522,879
Total ----------- ----------- -----------
liabilities
and stock-
holders'
equity $31,923,707 $30,154,361 $29,479,511
=========== =========== ===========
Net interest
earnings $ 1,084,181 $ 987,565 $ 843,967
=========== =========== ===========
Interest rate
spread 3.11 3.06 2.81

Net interest
margin 3.64 3.54 3.12

Ratio of
average
interest-
earning
assets to
average
interest-
bearing
liabilities 112% 112% 109%

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The following table sets forth the effects of changing rates and volumes on interest income and
expense of Lafayette. Information is provided with respect to (i) effects attributable to changes in volume
(changes in volume multiplied by prior rate); and (ii) effects attributable to changes in rate (changes in
rate multiplied by prior volume). Changes attributable to the combined impact of changes in rate and volume
have been allocated proportionately to the changes due to volume and the changes due to rate.

Three Months Ended Three Months Ended Three Months Ended
March 31, 1997 Compared March 31, 1996 Compared March 31, 1995 Compared
to Three Months Ended to Three Months Ended to Three Months Ended
March 31, 1996 Increase March 31, 1995 Increase March 31, 1994 Increase
(Decrease) Due to (Decrease) Due to (Decrease) Due to
----------------------- ----------------------- -------------------------
Rate Volume Net Rate Volume Net Rate Volume Net
---- ------ --- ---- ------ --- ---- ------ ---

Interest-
earning
assets:
Loans
receivable $(11,181) $23,369 $12,188 $ 9,075 $126,682 $135,757 $ 133,987 $140,137 $274,124
Investment
securities (2,929) 4,758 1,829 58,887 5,825 64,712 157,195 (85,850) 71,345
Interest-
bearing due
from banks (1,159) (1,320) (2,479) (294) 2,923 2,629 (1,079) 6,704 5,625
Federal funds
sold (341) 6,795 6,454 (4,902) 10,751 5,849 12,635 (9,120) 3,515
-------- ------- ------- ------- -------- -------- -------- -------- --------
Total net
change in
income on
interest-
bearing
assets (15,610) 33,602 17,992 62,766 146,181 208,947 302,738 51,871 354,609
-------- ------- ------- ------- -------- -------- -------- -------- --------
Interest-
bearing
liabilities:
Deposits 1,281 19,088 20,369 41,800 75,160 116,960 209,216 5,402 214,618
FHLB advances (126) -- (126) (366) 6,516 6,150 (1,031) 8,351 7,320
Notes payable (33) (2,739) (2,772) (87) (10,692) (10,779) (112) (10,815) (10,927)
-------- ------- ------- ------- -------- -------- -------- -------- --------
Total net
change in
expense on
interest-
bearing
liabilities 1,122 16,349 17,471 41,347 70,984 112,331 208,073 2,938 211,011
-------- ------- ------- ------- -------- -------- -------- -------- --------
Net change in
net interest
income $(16,732) $17,253 $ 521 $21,419 $ 75,197 $ 96,616 $ 94,665 $ 48,933 $143,598
======== ======= ======= ======= ======== ======== ======== ======== ========
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Net Interest Earnings. For the year ended December 31, 1996,
interest income increased $208,947 to $2,347,194, compared to $2,138,245 in
1995 and $1,783,638 in 1994. During the three-month period ended March 31,
1997, interest income increased $17,992 to $590,058 compared to $572,066 for
the same period in 1996. For 1996, interest expense increased $112,331 to
$1,263,013, compared to $1,150,681 in 1995 and $939,670 in 1994. During the
three-month period ended March 31, 1997, interest expense increased $17,471 to
$322,824 compared to $305,353 for the same period in 1996. These changes
resulted in an increase in Lafayette's net interest earnings of $96,617 to
$1,084,181 in 1996 compared to $987,564 in 1995 and $843,968 in 1994. For the
three-month period ended March 31, 1997, net interest earnings increased
slightly to $267,234, compared to $266,713 for the same period in 1996.

Net interest margin measures Lafayette's ability to generate net
interest earnings. The behavior of the margin depends on the interaction of
three factors: 1) net interest spread (defined as the difference between the
yield on interest-earning assets and the rate paid on interest-bearing
liabilities); 2) yield earned on assets funded by interest-free funding
sources (primarily noninterest-bearing demand deposits and equity capital);
and 3) percentage of earning assets funded by interest-free funding sources
and the mix of earning assets.

Interest-earning assets averaged $29,778,800 during 1996 compared
to $27,873,253 in 1995 and $27,085,565 in 1994. Interest-earning assets
averaged $30,732,884 for the three-month period ended March 31, 1997 compared
to $29,069,682 in 1996. Increases in average earning assets were the result
of a corresponding increase in interest-bearing deposits.

The net interest margin earned by Lafayette during 1996 was 3.64%,
compared to 3.54% in 1995 and 3.12% in 1994. For the three months ended March
31, 1997 and 1996, the net interest margin was 3.53% and 3.72%, respectively.
The primary factors contributing to the improvement in Lafayette's net
interest margin in 1996 as compared to 1995 and 1994 was an overall increase
in the net interest spread and to the change in the balance sheet mix of
interest-earning assets from investment securities to loans. Average loans
increased $1,395,439 to $15,211,142 in 1996 compared to $13,815,703 in 1995
and $11,870,402 in 1994. At March 31, 1997, loans averaged $15,658,084, an
increase of $960,301 over March 31, 1996. Average investment securities
declined from $14,340,700 for 1994 to $13,489,733 for 1996. Although, average
investment securities during the first three months of 1997 increased $298,793
over the same period of 1996, securities represented a lesser portion of total
average earning assets in 1997.

Lafayette's cost of funds for 1996 increased 16 basis points to
4.77%, compared to 4.61% for 1995 and 3.78% for 1994. During the first three
months of 1997, cost of funds was 4.78%, representing no change from the same
period of 1996. The general increase in interest rates in 1995 compared to
1994 contributed to an 83 basis point increase in the cost of funds for 1995
and was a contributing factor for the increase in 1996 resulting from the
renewal of certificates of deposits in a higher interest rate environment. The
16 basis point increase in the 1996 cost of funds compares to a 21 basis point
increase in the yield on earning assets, which widened the net interest spread
to 3.11% from 3.06% in 1995. For the three months ended March 31, 1997, the
net interest spread narrowed 19 basis points despite an unchanged average cost
of funds rate from 1996. The yield on earnings asset declined from 7.98% in
1996 to 7.79% in 1997 and contributed to the narrower interest spread.

Provision for Loan Losses. The allowance for loan losses
represents management's judgement of the losses inherent in Lafayette's loan
portfolio. The provision for loan losses is the amount necessary to adjust
the allowance to the level considered appropriate by management after
considering such items as historical loss trends, a review of individual
loans, current and projected economic conditions, loan growth and
characteristics and other factors. The provision for loan losses declined
$12,000 to $33,000 for 1996, compared to $45,000 for 1995 and $11,000 for
1994. For the first three months of 1997 the provision for loan losses
increased $9,000 to $12,000, compared to $3,000 for the same period in 1996.
The increase in 1997 was the result of higher loan losses and an increase in
outstanding loans. The allowance for loan losses as a percentage of
outstanding loans at December 31, 1996 was

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1.38%, compared to 1.41% at year end 1995 and 1.28% at year end 1994. At
March 31, 1997, the allowance for loan losses as a percentage of outstanding
loans was 1.35%, compared to 1.40% at March 31, 1996.

Noninterest Income. Noninterest income for 1996 increased $8,415
to $244,690, compared to $236,275 for 1995 and $205,298 for 1994. For the
three months ended March 31, 1997, noninterest income increased $5,277 to
$72,181 compared to $66,904 for the same period a year ago. Increased service
charges on deposit accounts accounted for a majority of the increase.
Included in noninterest income were gains on the sale of investment securities
classified as held-to-maturity amounting to $8,577 in 1996, compared to $6,849
in 1995 and $5,171 in 1994, resulting primarily from call options exercised by
Federal agencies. There were no gains or losses on securities during the
first three months of 1997, compared to $8,273 of gains recorded in the same
period last year.

Noninterest Expense. Noninterest expenses for 1996 increased
$27,385 to $884,365, compared to $856,980 in 1995 and $859,620 in 1994. For
the three months ended March 31, 1997 and 1996, noninterest expenses amounted
to $247,090 and $220,975, respectively. The level of other expenses for 1996
and 1995 was effected by the decrease in premiums paid for deposit insurance
from levels paid in 1994 as a result of reduction in the assessment rate by
the FDIC. Deposit insurance for 1996 totalled $25,202, compared to $40,763 for
1995 and $67,396 for 1994. The increase in noninterest expenses during the
first three months of 1997 of $26,115 over the same period a year ago is the
result of an increase in personnel expense of $21,077 and a special charge to
expense of $14,748 for the surrender charge on life insurance purchased to
fund salary continuation agreements Lafayette entered into with two of its
principal officers. Lafayette had 17 full time and seven part-time employees
at March 31, 1997 and at December 31, 1996.

Income Taxes. Income tax expense totaled $150,000 in 1996,
compared to $119,000 in 1995 and $57,000 in 1994. For the three months ended
March 31, 1997, income tax expense totaled $31,000 compared to $43,000 for the
same period a year ago. The effective tax rates were 36.5% for 1996, compared
to 36.9% in 1995 and 31.9% in 1994. For the first three months of 1997, the
effective tax rate was 38.6% compared to 39.2% for the same period last year.
Non taxable interest income and Bank taxes paid to the State of Missouri at
the rate of 7% are the primary reasons for the difference between the Federal
statutory rate of 34% and the effective tax rates.

VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
OF LAFAYETTE BANCSHARES, INC.

The following table sets forth, as of the Record Date, certain
information as to those persons who were beneficial owners of more than 5% of
the outstanding shares of Lafayette Common Stock. The following table also
sets forth, as of the Record Date, information as to the shares of Lafayette
Common Stock beneficially owned by each director, by the Chief Executive
Officer of Lafayette, and by all executive officers and directors of Lafayette
as a group.

Number of Shares Percent of Shares
Name Beneficially Owned Outstanding
- ---- ------------------ -----------
Beneficial Owners of
More Than 5%

Richard E. Jones and 70,000 6.2%
Velma M. Jones

Steven Haller and 75,000 6.6
Laura Haller

Robert F. Jackson 95,000 8.4

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Number of Shares Percent of Shares
Name Beneficially Owned Outstanding
- ---- ------------------ -----------
Directors

Donald L. Coen 21,000 1.9
William J. Huhmann(1) 305,000 27.0
Terry L. Thompson 65,000 5.8
Ranie Thompson 29,800 2.6

All Executive Officers and 420,800 37.3
Directors as a Group
(four persons)

- -----------------
(1) Mr. Huhmann is also the Chief Executive Officer.

DESCRIPTION OF LEXINGTON CAPITAL STOCK

Lexington is authorized to issue 8,000,000 shares of Common Stock,
$0.01 par value per share and 500,000 shares of preferred stock, par value
$0.01 per share. Lexington Common Stock is listed for trading on the Nasdaq
SmallCap Market under the symbol "LXMO." Each share of Lexington Common Stock
has the same relative rights and is identical in all respects with every other
share of Lexington Common Stock. The following summary does not purport to be
a complete description of the applicable provisions of the Lexington Articles
of Incorporation and Bylaws or of applicable statutory or other law, and is
qualified in its entirety by reference thereto. See "AVAILABLE INFORMATION."

Common Stock

Voting Rights. The holders of Lexington Common Stock possess
exclusive voting rights in Lexington. Each holder of Lexington Common Stock
is entitled to one vote for each share held of record on all matters submitted
to a vote of holders of Lexington Common Stock. Holders of shares of
Lexington Common Stock are not entitled to cumulate votes for the election of
directors.

Dividends. The holders of Lexington Common Stock are entitled to
such dividends as the Lexington Board may declare from time to time out of
funds legally available therefor. Dividends from Lexington depend upon the
receipt by Lexington of dividends from B & L Bank because Lexington has no
material source of income other than dividends from B & L Bank.

Liquidation. In the event of liquidation, dissolution or winding
up of Lexington, the holders of shares of Lexington Common Stock are entitled
to share ratably in all assets remaining after payment of all debts and other
liabilities of Lexington.

Other Characteristics. Holders of Lexington Common Stock do not
have any preemptive, conversion or other subscription rights with respect to
any additional shares of Lexington Common Stock which may be issued.
Therefore, the Lexington Board may authorize the issuance and sale of shares
of capital stock of Lexington without first offering them to existing
shareholders of Lexington. Lexington Common Stock is not subject to any
redemption or sinking fund provisions. The outstanding shares of Lexington
Common Stock are, and the shares to be issued in the Merger will be, fully
paid and non-assessable.

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Preferred Stock

Lexington's Articles of Incorporation authorize the Lexington Board
to issue from time to time one or more series of preferred stock with such
designations and preferences, relative, participating, optional and other
special rights and qualifications, limitations and restrictions thereon, as
permitted by law and as fixed from time to time by resolution of the Lexington
Board. Because of its broad discretion with respect to the creation and
issuance of any series of preferred stock without stockholder approval, the
Lexington Board could adversely affect the voting power of the holders of
common stock, and by issuing shares of preferred stock with certain voting,
conversion and/or redemption rights, could discourage any attempt to obtain
control of Lexington in any transaction not approved by the Lexington Board.

COMPARISON OF SHAREHOLDERS' RIGHTS

Lexington is incorporated under the laws of the State of Missouri
and, accordingly, the rights of Lexington's shareholders are governed by
Lexington's Articles of Incorporation, Bylaws and the Missouri GBCL.
Lafayette is also incorporated under the laws of the State of Missouri and,
accordingly, the rights of Lafayette's shareholders are governed by
Lafayette's Articles of Incorporation, Bylaws and the Missouri GBCL.

Upon consummation of the Merger, those shareholders of Lafayette
who receive shares of Lexington Common Stock in exchange for their shares of
Lafayette Common Stock will be governed, with respect to their rights as
Lexington shareholders, by Lexington's Articles of Incorporation, Bylaws and
the Missouri GBCL. The following is a summary of material differences between
the Articles of Incorporation and Bylaws of Lexington and the Articles of
Incorporation and Bylaws of Lafayette. This discussion is not intended to be
a complete statement of the differences affecting the rights of shareholders
and is qualified in its entirety by reference to the governing law and the
articles of incorporation and bylaws of each corporation.

Payment of Dividends

Lexington. Under Missouri law, Lexington may pay cash dividends in
an amount equal to its paid-in surplus and retained earnings (less unallocated
stock held by its ESOP and its stock benefit plans), so long as no dividend is
declared or paid at a time when the net assets of Lexington are less than its
stated capital or when the payment thereof would reduce the net assets of
Lexington below its stated capital.

Lafayette. Under Missouri law, Lafayette may pay cash dividends in
an amount equal to its paid-in surplus and retained earnings, so long as no
dividend is declared or paid at a time when the net assets of Lafayette are
less than its stated capital or when the payment thereof would reduce the net
assets of Lafayette below its stated capital.

Size of Board of Directors

Lexington. Lexington's Articles of Incorporation provide that its
Board of Directors shall consist of not less than five nor more than 15
members, with the current number set at six by the Bylaws of Lexington. The
Bylaws of Lexington provide that the Board of Directors may change the
authorized number of directors within the stated range by resolution adopted
by at least two-thirds of the Board. Changes in the size of the range may be
made by an amendment to Lexington's Articles of Incorporation, which must be
approved by a majority of the outstanding shares entitled to vote. The effect
of such provisions may be to make it difficult for a person or entity
immediately to acquire control of Lexington through an increase in the number
of Lexington's directors and election of such person's or entity's nominees to
fill the newly created vacancies.

Lafayette. Lafayette's Articles of Incorporation provide that its
Board of Directors shall consist of no more than five members. The current
number of directors is four. Increases in the number of directors beyond five
may

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be made by an amendment to Lafayette's Articles of Incorporation, which must
be approved by a majority of the outstanding shares entitled to vote.

Classified Board of Directors

Lexington. A classified board is one in which a certain number,
but not all, of the directors are elected on a rotating basis each year.
Lexington's Articles of Incorporation provide for a Board of Directors divided
into three classes, with members of each class of directors being elected for
a term of three years. This method of electing directors makes a change in
the composition of the Board of Directors, and a potential change in control
of a corporation, a lengthier and more difficult process. Since the terms of
only one-third of the incumbent directors expire each year, it requires at
least two annual elections for the shareholders to change a majority of the
directors. In the absence of the provisions of the Articles of Incorporation
classifying the Board, all of the directors would be elected each year.

Lafayette. Lafayette's Bylaws permit a classified Board of
Directors. However, because Lafayette has not implemented a classified board,
all of the directors are elected each year.

Cumulative Voting

Lexington. Cumulative voting entitles each shareholder to cast a
number of votes in the election of directors equal to the number of such
shareholders' shares of common stock multiplied by the number of directors to
be elected, and to distribute such votes among one or more of the nominees to
be elected. Lexington's Articles of Incorporation eliminate cumulative
voting. The absence of cumulative voting rights limits the ability of
minority shareholders to obtain representation on Lexington's Board of
Directors.

Lafayette. Lafayette shareholders are entitled to cumulative
voting in the election of directors.

Removal of Directors

Lexington. Lexington's Articles of Incorporation provide that at a
meeting of shareholders called expressly for that purpose, any director or the
entire Board of Directors may be removed for cause by a vote of the holders of
at least 80% of the shares then entitled to vote at such meeting. The
requirement that directors may be removed only upon a super-majority vote and
only for cause makes it difficult for a person or entity immediately to
acquire control of Lexington's Board through the removal of existing directors
and the election of such person's or entity's nominees to fill the newly
created vacancies.

Lafayette. Pursuant to the Missouri GBCL, at a meeting called
expressly for that purpose, one or more directors or the entire board of
directors may be removed, with or without cause, by a vote of the holders of a
majority of the shares then entitled to vote at an election of directors. If
less than the entire board is to be removed, no one of the directors may be
removed if the votes cast against his or her removal would be sufficient to
elect him or her if then cumulatively voted at an election of the entire board
of directors.

Vacancies on the Board of Directors

Lexington. Lexington's Articles of Incorporation provide that any
vacancy on the Board of Directors may be filled by the affirmative vote of a
majority of the remaining directors, and any director so appointed is to serve
until the next election of directors.

Lafayette. Lafayette's Articles of Incorporation provide that the
Board of Directors may appoint persons to fill vacancies created by the death
or resignation or disqualification of one or more of the directors. Pursuant
to

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the Missouri GBCL, newly created directorships resulting from an increase in
the number of directors may be filled by the directors then in office.

Special Meetings of Shareholders and Action Without a Meeting

Lexington. The Bylaws of Lexington provide that special meetings
of shareholders may be called by the president or the Board of Directors.
This restriction on the calling of special shareholders' meetings may deter
hostile takeovers of Lexington by making it more difficult for a person or
entity to obtain immediate control of Lexington between one annual meeting and
the next. Pursuant to Lexington's Bylaws, any action required or permitted to
be taken at a meeting of shareholders may be taken without a meeting if a
consent in writing is signed by all of the shareholders entitled to vote on
the matter.

Lafayette. The Bylaws of Lafayette provide that special meetings
of shareholders may be called by the president, by the Board of Directors, or
by the holders of not less than one-fifth of all the outstanding shares
entitled to vote at such meeting. Pursuant to Lafayette's Bylaws, any action
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if a consent in writing is signed by all of the shareholders
entitled to vote on the matter.

Advance Notice Requirements for Nominations of Directors and Presentation of
New Business at Meetings of Shareholders

Lexington. The Bylaws of Lexington generally provide that any
shareholder desiring to make a nomination for the election of directors or a
proposal for new business at a meeting of shareholders must submit written
notice to Lexington at least 30 days and not more than 60 days in advance of
the meeting, together with certain information relating to the nomination or
new business. Failure to comply with these advance notice requirements will
preclude such nominations or new business from being considered at the
meeting. Management believes that it is in the best interests of Lexington
and its shareholders to provide sufficient time to enable management to
disclose to shareholders information about a dissident slate of nominations
for directors. This advance notice requirement may also give management time
to solicit its own proxies in an attempt to defeat any dissident slate of
nominations, should management determine that doing so is in the best interest
of shareholders generally. Similarly, adequate advance notice of shareholder
proposals will give management time to study such proposals and to determine
whether to recommend to the shareholders that such proposals be adopted. In
certain instances, such provisions could make it more difficult to oppose
management's nominees or proposals, even if shareholders believe such nominees
or proposals are in their best interests.

Lafayette. Lafayette's Articles of Incorporation and Bylaws do not
impose any requirements for nominations of directors and presentation of new
business at meetings of shareholders.

Approval of Mergers, Consolidations, Sale of Substantially All Assets and
Dissolution

Lexington. Article X of Lexington's Articles of Incorporation
requires the approval of the holders of (i) at least 80% of Lexington's
outstanding shares of voting stock, and (ii) at least a majority of
Lexington's outstanding shares of voting stock, not including shares held by
an "Interested Shareholder," to approve certain "Business Combinations,"
except in cases where the proposed transaction has been approved in advance by
a majority of those members of Lexington's Board of Directors who were
directors prior to the time when the Interested Shareholder became an
Interested Shareholder. In the event the requisite approval of the Board were
given, the normal vote requirement of applicable Missouri law would apply, or,
for certain transactions, no shareholder vote would be necessary. The term
"Interested Shareholder" is defined to include any individual, corporation,
partnership or other entity which owns beneficially or controls, directly or
indirectly, 5% or more of the outstanding shares of voting stock of Lexington.
The provisions of Article X apply to any "Business Combination" which is
defined to include among other things: (i) any merger or consolidation of
Lexington or any of its affiliates with or into any Interested

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Shareholder; (ii) any sale, lease, exchange, mortgage, transfer, or other
disposition of 25% or more of the assets of Lexington or any of its affiliates
to any Interested Shareholder; (iii) the issuance or transfer by Lexington or
any of its subsidiaries of any securities of Lexington or any of its
subsidiaries to any Interested Shareholder in exchange for consideration which
equals or exceeds 25% of the fair market value of Lexington Common Stock;
(iv) the adoption of any plan for the liquidation or dissolution of Lexington
proposed by or on behalf of any Interested Shareholder; and (v) any
reclassification of Lexington Common Stock or recapitalization of Lexington
which increases the proportionate share of Lexington Common Stock owned by any
Interested Shareholder. The increased shareholder vote required to approve a
Business Combination may have the effect of foreclosing mergers and other
business combinations which a majority of shareholders deem desirable and
place the power to prevent such a merger or combination in the hands of a
minority of shareholders.

Lafayette. Lafayette's Articles of Incorporation do not contain a
similar provision. Pursuant to the Missouri GBCL, a plan of merger or plan of
consolidation must be submitted to a vote at a meeting of shareholders. The
plan of merger or plan of consolidation will be approved upon receiving the
affirmative vote of the holders of at least two-thirds of the outstanding
shares entitled to vote.

Limitation on Voting Rights

Lexington. Lexington's Articles of Incorporation provide that in
no event shall any record owner of any outstanding Lexington Common Stock
which is beneficially owned, directly or indirectly, by a person who
beneficially owns in excess of 10% of the then outstanding shares of Lexington
Common Stock (the "Limit") be entitled or permitted to any vote in respect of
the shares held in excess of the Limit, unless permitted by a resolution
adopted by a majority of the Board of Directors. Beneficial ownership is
determined pursuant to Rule 13d-3 of the General Rules and Regulations of the
Exchange Act and includes shares beneficially owned by such person or any of
such person's affiliates (as defined in the Articles of Incorporation), shares
which such person or such person's affiliates have the right to acquire upon
the exercise of conversion rights or options and shares as to which such
person and such person's affiliates have or share investment or voting power,
but shall not include shares beneficially owned by the ESOP or directors,
officers and employees of the Lexington or B & L Bank or shares that are
subject to a revocable proxy and that are not otherwise beneficially, or
deemed by Lexington to be beneficially, owned by such person and his or her
affiliates.

Lafayette. Lafayette's Articles of Incorporation do not contain a
similar provision.

Rights of Shareholders to Dissent

Lexington. Under the Missouri GBCL shareholders of Lexington will
generally have dissenters' appraisal rights in connection with a plan of
merger or consolidation to which Lexington is a party. However, shareholders
generally will not have such dissenters' rights if shareholder approval is not
required by the Missouri GBCL for the corporate action. Shareholders of
Lexington do not have dissenters' rights in connection with the Merger.

Lafayette. Under the Missouri GBCL, shareholders of Lafayette
generally have dissenters' appraisal rights in connection with a plan of
merger or consolidation to which Lafayette is a party. However, shareholders
generally will not have such dissenters' rights if shareholder approval is not
required for the corporate action. Shareholders of Lafayette have dissenters'
rights in connection with the Merger. See "THE MERGER -- Dissenters' Rights."

Indemnification of Officers and Directors and Limitation of Liability

Lexington. Pursuant to Lexington's Articles of Incorporation,
Lexington will indemnify the directors and executive officers of Lexington
with respect to expenses, settlements, judgments and fines in suits in which
such person has been made a party by reason of the fact that he or she is or
was serving as a director or executive officer

-79-

of Lexington. No such indemnification may be given if the acts or omissions
of the person are finally adjudged to have been knowingly fraudulent or
deliberately dishonest or to have constituted willful misconduct.

Lafayette. Pursuant to the Missouri GBCL, Lafayette may indemnify
the directors and executive officers of Lafayette with respect to expenses,
settlements, judgments and fines in suits in which such person has been made a
party by reason of the fact that he or she is or was serving as a director or
executive officer of Lafayette if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of Lafayette, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.

Amendment of Articles of Incorporation and Bylaws.

Lexington. Lexington's Articles of Incorporation may be amended by
the vote of the holders of a majority of the outstanding shares of Lexington
Common Stock, except that the provisions of the Articles of Incorporation
governing approval of business combinations with "Interested Shareholders" may
not be altered, amended or repealed except by the vote of the holders of at
least 80% of the outstanding shares of Lexington, and the provisions of the
Articles of Incorporation regarding directors may not be amended except by the
vote of the holders of at least 80% of the outstanding shares of Lexington
unless any such amendment has been approved by two-thirds of the members of
the Board of Directors. The Bylaws of Lexington may be amended by a majority
vote of the Board of Directors, except that the provision regarding the
number, term and qualification of directors may be amended only upon the vote
of two-thirds of the directors.

Lafayette. Lafayette's Articles of Incorporation and Bylaws may be
amended by the vote of the holders of a majority of the outstanding shares of
Lafayette Common Stock.

LEGAL OPINIONS

The validity of the Lexington Common Stock to be issued in the
Merger is being passed upon for Lexington by Breyer & Aguggia, Washington,
D.C. Breyer & Aguggia will deliver an opinion concerning certain federal
income tax consequences of the Merger.

EXPERTS

The consolidated statements of financial condition of Lexington as
of September 30, 1996 and 1995 and the related consolidated statements of
income, stockholders' equity and cash flows for the three years ended
September 30, 1996, have been audited by Moore, Horton & Carlson, P.C.,
independent auditors, as set forth in their report thereon included herein.
Such consolidated financial statements are included herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.

OTHER MATTERS

The Lafayette Board is not aware of any business to come before the
Lafayette Special Meeting other than those matters described above in this
Prospectus/Proxy Statement. However, if any other matters should properly
come before the Special Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.

-80-

INDEX TO FINANCIAL STATEMENTS

Lexington B & L Financial Corporation

Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . F-1

Consolidated Statements of Financial Condition at
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Statements of Stockholders' Equity
for the Years Ended September 30, 1996, 1995 and 1994 . . . . . . . F-3

Consolidated Statements of Income for the Years Ended
September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . F-5

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-7

Consolidated Statements of Financial Condition at March 31,
1997 (unaudited) and September 30, 1996 . . . . . . . . . . . . . . F-24

Consolidated Statements of Income for the Three and Six
Months Ended March 31, 1997 and 1996 (unaudited). . . . . . . . . . F-25

Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1997 and 1996 (unaudited) . . . . . . . . . . . . . F-26

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-27

Lafayette Bancshares, Inc. (unaudited)

Report of Management. . . . . . . . . . . . . . . . . . . . . . . . . F-30

Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996 and the Years Ended
December 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . F-31

Consolidated Statements of Financial Condition at
March 31, 1997 and December 31, 1996 and 1995 . . . . . . . . . . . F-33

Consolidated Statements of Changes in Stockholders'
Equity for the Three Months Ended March 31, 1997 and
the Years Ended December 31, 1996 and 1995. . . . . . . . . . . . . F-34

Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 and the Years
Ended December 31, 1996, 1995 and 1994. . . . . . . . . . . . . . . F-35

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-36

-81-

INDEPENDENT AUDITORS' REPORT
----------------------------

Board of Directors
Lexington B & L Financial Corp. and Subsidiary
Lexington, Missouri

We have audited the accompanying consolidated statements of financial
condition of Lexington B & L Financial Corp. ("Company") and Subsidiary as of
September 30, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in
the period ended September 30, 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Lexington
B & L Financial Corp. and Subsidiary at September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996, in conformity with generally accepted
accounting principles.

As described in note A to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", effective October
1, 1993.

/s/ Moore, Horton & Carlson, P.C.

Mexico, Missouri
November 19, 1996

F-1

Lexington B & L Financial Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30
1996 1995
--------------------------
ASSETS
Cash (includes interest-bearing deposits of
$5,619,441 and $2,907,589, respectively) $ 6,268,048 $ 3,582,607
Certificates of deposit 2,524,854 24,854
Investment securities--Note B
Available-for-sale, at fair value 2,906,125 893,062
Held-to-maturity (fair value of $1,004,791
and $841,375, respectively) 847,702 717,778
Mortgage-backed securities available-for-sale,
at fair value--Note C 2,063,402 2,535,419
Stock in Federal Home Loan Bank of Des Moines 464,300 455,200
Loans receivable--Note D 45,347,771 41,110,703
Accrued interest receivable--Note E 301,697 152,530
Premises and equipment--Note F 381,186 408,219
Foreclosed real estate --- 27,882
Other assets 564,938 73,129
----------- -----------
TOTAL ASSETS $61,670,023 $49,981,383
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits--Note G $42,236,793 $42,401,283
Advances from borrowers for property taxes
and insurance 162,659 174,193
Other liabilities 508,602 211,264
---------- ----------
TOTAL LIABILITIES 42,908,054 42,786,740

Commitments and contingencies--Note L

Stockholders' Equity--Notes I, J and M
Preferred stock, $.01 par value; 500,000 shares
authorized, none issued --- ---
Common stock, $.01 par value; 8,000,000 shares
authorized, 1,265,000 shares issued & outstanding 12,650 ---
Additional paid-in capital 12,071,392 ---
Retained earnings-substantially restricted-
-Notes I and M 7,649,330 7,188,457
Unearned ESOP shares--Note J (971,240) ---
Unrealized gain (loss) on securities available-
for-sale, net of tax (163) 6,186
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 18,761,969 7,194,643
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $61,670,023 $49,981,383
=========== ===========

See accompanying notes to consolidated financial statements.

F-2

Lexington B & L Financial Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended September 30, 1996, 1995 and 1994

Unrealized
Gain (Loss)
on
Securities
Available- Total
Common Stock Additional Unearned For-Sale, Stock-
---------------- Paid-In Retained ESOP Net of holders'
Shares Amount Capital Earnings Shares Tax Equity
---------------------------------------------------------------------

Balance at September 30, 1993 --- $ --- $ --- $6,030,389 $ --- $ --- $6,030,389
Adoption of accounting change
to record net unrealized gain
on securities available-for-sale
at October 1, 1993 --- --- --- --- --- 51,758 51,758
Net income --- --- --- 587,376 --- --- 587,376
Change in unrealized gain (loss)
on securities available-for-sale,
net of tax --- --- --- --- --- (71,183) (71,183)
--------- ------ --------- --------- --------- ------- ---------
BALANCE AT SEPTEMBER 30, 1994 --- --- --- 6,617,765 --- (19,475) 6,598,340

Net income --- --- --- 570,692 --- --- 570,692
Change in unrealized gain (loss)
on securities available-for-sale,
net of tax --- --- --- --- --- 25,611 25,611
--------- ------ ---------- ---------- --------- ------- ----------
BALANCE AT SEPTEMBER 30, 1995 --- --- --- 7,188,457 --- 6,186 7,194,643

Net income --- --- --- 460,873 --- --- 460,873
Net proceeds from issuance of
common stock--Note M 1,265,000 12,650 12,071,304 --- --- --- 12,083,954
Common stock issued to
Employee Stock Ownership
Plan (ESOP)--Note J --- --- --- --- (1,012,000) --- (1,012,000)
Release of ESOP shares --- --- 88 --- 40,760 --- 40,848
Change in unrealized gain (loss)
on securities available-for-sale,
net of tax --- --- --- --- --- (6,349) (6,349)
--------- ------- ----------- ---------- ---------- ------- ------------
BALANCE AT SEPTEMBER 30, 1996 1,265,000 $12,650 $12,071,392 $7,649,330 $(971,240) $ (163) $18,761,969
========= ======= =========== ========== ========== ======== ===========

See accompanying notes to consolidated financial statements.

F-3

Lexington B & L Financial Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME

Year Ended September 30
1996 1995 1994
--------------------------------
Interest Income
Mortgage loans $3,140,193 $2,962,378 $2,760,348
Other loans 210,256 149,183 115,195
Investment securities and interest-
bearing deposits 575,708 316,121 230,376
Mortgage-backed securities 147,119 183,102 224,606
--------- --------- ---------
Total Interest Income 4,073,276 3,610,784 3,330,525

Interest Expense on Deposits--Note G 2,332,708 2,002,990 1,616,909
--------- --------- ---------
Net Interest Income 1,740,568 1,607,794 1,713,616

Provision for Loan Losses--Note D 10,013 32,460 5,000
Net Interest Income After Provision --------- --------- ---------
for Loan Losses 1,730,555 1,575,334 1,708,616

Non-interest Income (Loss)
Service charges and other fees 24,342 26,320 30,812
Commissions, net 25,960 20,856 12,929
Income (loss) from foreclosed real estate 8,490 (5,600) 5,545
Loss on sale of investments--Note B (175) (46,606) (3,866)
Loss on equipment disposals --- --- (2,111)
Other 40,203 4,864 3,569
--------- --------- ---------
Total Non-Interest Income (Loss) 98,820 (166) 46,878

Non-interest Expense
Employee salaries and benefits 470,209 327,870 490,221
Occupancy costs 58,453 58,868 52,437
Advertising 10,545 7,665 11,103
Data processing 58,142 49,298 49,991
Federal insurance premium 378,003 94,006 93,508
Other 169,150 166,769 179,558
--------- --------- ---------
Total Non-interest Expense 1,144,502 704,476 876,818
--------- --------- ---------
INCOME BEFORE INCOME TAXES 684,873 870,692 878,676

Income Taxes--Note H 224,000 300,000 291,300
--------- --------- ---------
NET INCOME $ 460,873 $ 570,692 $ 587,376
========= ========= =========
Net income per share $ .40 N/A N/A
========= ========= =========

See accompanying notes to consolidated financial statements.

F-4

Lexington B & L Financial Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended September 30
1996 1995 1994
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $460,873 $ 570,692 $ 587,376
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization 27,589 28,135 25,202
Amortization of premiums and discounts (57,278) (53,092) (53,694)
Gain on sales of foreclosed real estate (8,490) (811) ---
Loss on sales of securities available-
for-sale --- 46,606 ---
Loss on securities held-to-maturity
called 175 --- 3,866
Carrying value of equipment disposal --- --- 2,111
Provisions for loan losses 10,013 32,460 5,000
Stock and patronage dividends (9,100) (18,636) ---
Proceeds for past patronage dividends 25,368 --- ---
ESOP shares released 40,848 --- ---
Changes to assets and liabilities
increasing (decreasing) cash flows
Accrued interest receivable (149,167) (30,063) 1,788
Other assets (57,177) 537 (755)
Other liabilities 300,511 (42,506) (35,867)
-------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 584,165 533,322 535,027

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from principal payments of
mortgage-backed securities available-
for-sale 438,777 629,255 1,039,659
Proceeds from sales of securities
available-for-sale --- 429,375 ---
Proceeds from maturity of securities
held-to-maturity 43,459 --- 107,165
Proceeds from maturity of certificates
of deposit --- 769,000 600,000
Loans originated, net of repayments (436,345) (1,806,852) (1,833,221)
Proceeds from sales of foreclosed real
estate 40,570 69,600 47,222
Purchase of certificates of deposits (2,500,000) --- (1,170,000)
Purchase of mortgage-backed securities
available-for-sale --- --- (501,484)
Purchase of securities available-for-
sale (2,000,625) --- (870,500)
Purchase of securities held-to-maturity (105,000) --- ---
Purchase of loans (3,814,934) --- ---
Purchase of life insurance policies to
fund salary continuation plan (460,000) --- ---
Purchase of premises and equipment (556) (24,333) (29,433)
NET CASH PROVIDED BY (USED IN) ---------- ---------- ----------
INVESTING ACTIVITIES (8,794,654) 66,045 (2,610,592)

F-5

Lexington B & L Financial Corp. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS - Cont'd

Year ended September 30
1996 1995 1994
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ (164,490) $1,689,796 $(292,945)
Net increase (decrease) in advances
from borrowers for property taxes
and insurance (11,534) (1,911) 18,415
Proceeds from sale of common stock 12,083,954 --- ---
Loan to ESOP (1,012,000) --- ---
----------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 10,895,930 1,687,885 (274,530)
----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 2,685,441 2,287,252 (2,350,095)
Cash, beginning of year 3,582,607 1,295,355 3,645,450
----------- ---------- ----------
CASH, END OF YEAR $ 6,268,048 $3,582,607 $1,295,355
=========== ========== ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for:
Interest on deposits $ 2,368,816 $1,993,279 $1,619,498
=========== ========== ==========
Income tax $ 275,302 $ 307,393 $ 341,682
=========== ========== ==========

Noncash investing and financing
activities are as follows:
Loans to facilitate sales of real
estate $ 26,587 $ 14,900 $ ---
=========== ========== ==========
Foreclosed real estate acquired by
foreclosure or deed in lieu of
foreclosure $ 30,785 $ 42,803 $ 53,868
=========== ========== ==========
Stock and patronage dividends $ 9,100 $ 18,636 $ ---
=========== ========== ==========

See accompanying notes to consolidated financial statements.

F-6

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1996, 1995 and 1994

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

On June 5, 1996, B & L Bank (formerly known as The Lexington Building and Loan
Association, F.A.) (the "Bank") converted from a federally-chartered mutual
savings and loan association to a federally-chartered stock savings bank and
became a wholly-owned subsidiary of a newly formed Missouri holding company,
Lexington B & L Financial Corp. (the "Company"). See Note M for additional
information.

The following summarizes the significant accounting policies of the Company
and the Bank.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Lexington B & L Financial Corp. and its wholly-owned
subsidiary, the Bank, and B & L Financial Services, Inc., a wholly-owned
subsidiary of the Bank. B & L Financial Services, Inc., principally provides
insurance products for the Bank's customers. Significant intercompany
balances and transactions have been eliminated in consolidation.

Investment Securities: Effective October 1, 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 115, "Accounting for
Certain Investments in Debt and Equity Securities", which established three
classifications of investment securities: trading, held-to-maturity and
available-for-sale. Trading securities are acquired principally for the
purpose of near term sales. Such securities are reported at fair value and
unrealized gains and losses are included in income. Securities which are
designated as held-to-maturity are designated as such because the investor has
the ability and the intent to hold these securities to maturity. Such
securities are reported at amortized cost.

All other securities are designated as available-for-sale, a designation which
provides the investor with certain flexibility in managing its investment
portfolio. Such securities are reported at fair value; net unrealized gains
and losses are excluded from income and reported net of applicable income tax
as a separate component of equity.

Gains or losses on sales of securities are recognized in operations at the
time of sale and are determined by the difference between the net sales
proceeds and the cost of the securities using the specific identification
method, adjusted for any unamortized premiums or discounts. Premiums or
discounts are amortized or accreted to income using the interest method over
the period to maturity.

In adopting SFAS No. 115, the Company modified its accounting policies and
designated its securities in accordance with the three classifications. The
Company's adoption of SFAS No. 115 resulted in the classification of all
securities as either held-to-maturity or available-for-sale. At September 30,
1996 and 1995, the Company had no securities designated as trading.

Mortgage-backed Securities: Mortgage-backed securities represent
participating interests in pools of long-term first mortgage loans originated
and serviced by issuers of the securities. Mortgage-backed securities are
reported at fair value; net unrealized gains and losses are excluded from
income and reported net of applicable income taxes as a separate component of
equity. Gains or losses on sales of mortgage-backed securities are recognized
in operations at the time of sale and are determined by the difference between
the net sales proceeds and the cost of the securities using the specific
identification method, adjusted for any unamortized premiums or discounts.
Premiums or discounts are amortized or accreted to income using the interest
method over the period to maturity.

F-7

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cont'd

Stock in Federal Home Loan Bank of Des Moines: Stock in the Federal Home Loan
Bank of Des Moines is stated at cost and the amount of stock held is
determined by regulation. No ready market exists for such stock and it has no
quoted market value.

Loans Receivable: Loans receivable are carried at unpaid principal balances,
less allowance for loan losses. Loan origination and commitment fees and
certain direct loan origination costs are deferred and amortized to interest
income over the contractual life of the loan using the interest method.

The company's real estate loan portfolio consists primarily of long-term loans
secured by first trust deeds on single-family residences, other residential
property, commercial property and land. The adjustable-rate mortgage is the
Company's primary loan investment.

Loans are placed on nonaccrual status when principal or interest is delinquent
for 90 days or more. Uncollectible interest on loans is charged off or an
allowance established by a charge to income equal to all interest previously
accrued and interest is subsequently recognized only to the extent cash
payments are received until delinquent interest is paid in full and in
management's judgement, the borrower's ability to make periodic interest and
principal payments is back to normal in which case the loan is returned to
accrual status.

Allowance for Loan Losses: The allowance for loan losses is maintained at a
level which, in management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a
provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries.

Impaired Loans: The Association adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures, an amendment of
SFAS No. 114", effective October 1, 1995. These statements address the
accounting by creditors for impairment of certain loans. They apply to all
creditors and to all loans, uncollateralized as well as collateralized, except
for large groups of small-balance homogeneous loans that are collectively
evaluated for impairment, loans measured at fair value or at lower of cost or
fair value, leases, and debt securities. The Company considers all one- to
four-family residential mortgage loans, construction loans, and all consumer
and other loans to be smaller homogeneous loans.

The Company assesses loans individually and identifies impairment when the
accrual of interest has been discontinued, loans have been restructured or
management has serious doubts about the future collectibility of principal and
interest, even though the loans are currently performing. Factors considered
in determining impairment include, but are not limited to, expected future
cash flow, the financial condition of the borrower and current economic
conditions. The Company measures each impaired loan based on the fair value
of its collateral and charges off those loans or portions of loans deemed
uncollectible.

F-8

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cont'd

Premises and Equipment: Premises and equipment have been stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the
respective assets, which range from five to forty years.

Foreclosed Real Estate: Real estate acquired in settlement of loans is
carried at the lower of the balance of the related loan at the time of
foreclosure or fair value less the estimated costs to sell the asset. Costs
of holding foreclosed property are charged to expense in the current period,
except for significant property improvements which are capitalized to the
extent that carrying value does not exceed estimated fair market value.

Income Taxes: The Company files a consolidated federal income tax return with
its wholly-owned subsidiary. The income tax effect of timing differences in
reporting transactions for financial reporting and income tax purposes is
reflected in the financial statements as deferred income taxes.

The Company adopted SFAS No. 109, "Accounting for Income Taxes", effective
October 1, 1993. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences, attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
income tax bases. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period that
includes the enactment date. The effect of this accounting change at the date
of adoption was not material.

Statements of Cash Flows: For purposes of the cash flows, cash and amounts
due from depository institutions and interest-bearing deposits in other banks
with a maturity of three months or less at date of purchase are considered
cash equivalents.

Risks and Uncertainties: The Company is a community-oriented financial
institution which provides traditional financial services within the areas it
serves. The Company is engaged primarily in the business of attracting
deposits from the general public and using these funds to originate one- to
four-family residential mortgage loans located primarily in Lafayette County,
Missouri. Accordingly, the ultimate collectibility of the Company's loan
portfolio is dependent upon market conditions in that area. This geographic
concentration is considered in management's establishment of the allowance for
loan losses.

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
which affect the reported amounts of assets and liabilities as of the balance
sheet dates and income and expenses for the periods covered. Actual results
could differ significantly from these estimates and assumptions.

In the normal course of its business, the Company encounters two significant
types of risk: economic and regulatory. There are three main components of
economic risk: interest rate risk, credit risk and market risk. The Company
is subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice more or less rapidly, or on a different basis,
than its interest-earning assets. Credit risk is the risk of default on the
Company's loan portfolio that results from the borrower's inability or
unwillingness to make contractually required payments. Market risk results
from changes in the value of assets and liabilities which may impact,
favorably or unfavorably, the realizability of those assets and liabilities
held by the Company.

F-9

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cont'd

The Company is subject to the regulations of various government agencies.
These regulations can and do change significantly from period to period. The
Company also undergoes periodic examinations by the regulatory agencies, which
may subject it to further changes with respect to asset valuations, amounts of
required loss allowances and operating restrictions resulting from the
regulators' judgements based on information available to them at the time of
their examination.

Net Income Per Share: Net income per share of common stock has been computed
on the basis of the weighted-average number of shares of common stock and
common stock equivalents assumed to be outstanding. The calculation assumes
the common stock issued in 1996 has been outstanding for all periods and
considers ESOP shares which have been committed to be released as outstanding.

New Accounting Standards:
- ------------------------

Accounting for Impairment of Long-Lived Assets

In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of" and is effective for years beginning after December
15, 1995. The statement generally addresses required disclosures for long-
lived impaired assets and long-lived impaired asset to be disposed of. The
impact of the adoption of the new accounting standard on the consolidated
financial statements is not expected to be material.

Accounting for Loan Servicing Rights

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights" and is effective for years beginning after December 15, 1995. The
statement generally requires entities that sell or securitize loans and retain
the mortgage servicing rights to allocate the total cost of the mortgage loans
to the mortgage servicing right and the loan based on their relative fair
value. Costs allocated to mortgage servicing rights should be recognized as a
separate asset and amortized over the period of estimated net servicing income
and evaluated for impairment based on fair value. The impact of the adoption
of the new accounting standard on the consolidated financial statements is not
expected to be material.

Accounting for Stock-Based Compensation

In October, 1995, the FASB issued SFAS No. 123," Accounting for Stock-Based
Compensation". SFAS No. 123 requires that compensation cost for stock-based
employee compensation plans be measured at the grant date based on the fair
value of the award and recognized over the service period, which is usually
the vesting period. Stock-based employee compensation plans include stock
purchase plans, stock options, restricted stock and stock appreciation rights.
Employee stock ownership plans are not covered by this Statement. SFAS No.
123 is effective for transactions entered into in fiscal years that begin
after December 15, 1995, with earlier application permitted. The Company is
awaiting stockholder approval of its management recognition plan and stock
option plan. Management of the Company cannot determine the effect of the
compensation plans on the financial position or results of operations.

F-10

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cont'd

Reclassification: Certain amounts in the 1995 and 1994 consolidated financial
statements have been reclassified to conform with the 1996 presentation.

NOTE B--INVESTMENT SECURITIES
Gross Unrealized
Amortized ------------------ Fair
Cost Gains Losses Value
------------------------------------------
U.S. government and Federal agency
obligations available-for-sale:
September 30, 1996 $2,900,600 $ 5,997 $ (472) $2,906,125
========== ======= ======= ==========
September 30, 1995 $ 899,575 $ 300 $(6,813) $ 893,062
========== ======= ======= ==========
State and local obligations held-
to-maturity:
September 30, 1996 $ 847,702 $157,548 $ (459) $1,004,791
========== ======== ======= ==========
September 30, 1995 $ 717,778 $127,314 $(3,717) $ 841,375
========== ======== ======= ==========

The scheduled contractual maturities of debt securities at September 30, 1996,
are shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations without
call or prepayment penalties.

Held-to-Maturity Available-for-Sale
-------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-------------------- ----------------------
Amounts maturing:
One year or less $ --- $ --- $ 399,722 $ 399,250
After one year through
five years --- --- 2,500,878 2,506,875
After five years through
ten years 347,473 405,791 --- ---
After ten years 500,229 599,000 --- ---
---------- ---------- ---------- ----------
$ 847,702 $1,004,791 $2,900,600 $2,906,125
========== ========== ========== ==========

During 1996 and 1994, state and local obligations held-to-maturity with an
amortized cost of $43,634 and $118,067 were called for redemption resulting in
gross realized losses of $175 and $3,866, respectively.

During 1995, securities available-for-sale sold for total proceeds of $429,375
resulting in a gross realized loss of $46,606.

F-11

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE C--MORTGAGE-BACKED SECURITIES

Mortgage-backed securities available-for-sale consist of the following:

Gross Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
--------------------------------------------
September 30, 1996
GNMA $ 295,666 $ 23,019 $ --- $ 318,685
FNMA 528,822 578 (5,061) 524,339
FHLMC 1,244,683 1,740 (26,045) 1,220,378
---------- -------- -------- ----------
$2,069,171 $ 25,337 $(31,106) $2,063,402
========== ======== ======== ==========
September 30, 1995
GNMA $ 386,405 $ 28,422 $ --- $ 414,827
FNMA 657,259 1,307 --- 658,566
FHLMC 1,475,963 2,822 (16,759) 1,462,026
---------- -------- -------- ----------
$2,519,627 $ 32,551 $(16,759) $2,535,419
========== ======== ======== ==========

The amortized cost and fair value of mortgage-backed securities at September
30, 1996, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations without call or prepayment penalties.

Amortized Fair
Cost Value
-------------------------
Amounts maturing:
After one year through five years $ 863,661 $ 840,169
After ten years 1,205,510 1,223,233
--------- -------
$2,069,171 $2,063,402
========== ==========

Mortgage-backed securities were pledged to secure deposits as required or
permitted by law, with an amortized cost of $836,894 and fair value of
$820,995 at September 30, 1996.

NOTE D--LOANS RECEIVABLE

Loans receivable consist of the following at September 30:

1996 1995
--------------------------
Mortgage loans
One- to four-family residences $40,537,065 $37,485,866
Multi-family residential 103,352 132,668
Commercial 1,016,901 845,540
Construction 613,000 426,819
Land 488,610 483,041
---------- ----------
42,758,928 39,373,934
Less undisbursed portion of mortgage loans 249,502 307,768
---------- ----------
42,509,426 39,066,166

F-12

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE D--LOANS RECEIVABLE - Cont'd

1996 1995
Consumer and other loans --------------------------

Home equity $ 486,389 $ 300,601
Loans on savings 1,210,549 844,212
Automobile loans 1,089,563 838,554
Other 252,844 262,170
3,039,345 2,245,537
----------- -----------
45,548,771 41,311,703
Less allowance for loan losses 201,000 201,000
----------- -----------
$45,347,771 $41,110,703
=========== ===========

At September 30, 1996 and 1995, the Company serviced loans amounting to
$21,106 and $40,462, respectively, for the benefit of others. Also, the
Company had loans serviced by others amounting to $4,670,821 and $1,211,799 at
September 30, 1996 and 1995, respectively.

In the ordinary course of business, the Company makes loans to its directors
and officers at substantially the same terms prevailing at the time of
origination for comparable transactions with borrowers. The following is
a summary of related party loan activity:

Year end September 30
1996 1995
----------------------

Balance, beginning of period $198,292 $240,705
Originations 19,658 ---
Payments (9,775) (42,413)
-------- --------
BALANCE, END OF PERIOD $208,175 $198,292
======== ========

Allowance for loan losses is as follows:

Year Ended September 30
1996 1995 1994
----------------------------

Balance, beginning of period $201,000 $178,000 $173,000
Provision for loan losses 10,013 32,460 5,000
Charge-offs, net of recoveries (10,013) (9,460) ---
-------- -------- --------
BALANCE, END OF PERIOD $201,000 $201,000 $178,000
======== ======== ========

At September 30, 1996 the recorded investment in impaired loans, for which
there is no need for a valuation allowance based upon the measure of the
loan's fair value of the underlying collateral, was $105,781. The average
recorded investment in impaired loans during the year ended September 30,
1996, was $38,798 and the related

F-13

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE D--LOANS RECEIVABLE - Cont'd

interest income that would have been recorded had the loans been current in
accordance with their original terms amounted to approximately $5,600. The
amount of interest included in interest income on such loans for the year
ended September 30, 1996, amounts to approximately $2,300.

The allowance for losses on foreclosed real estate is $-0- at September 30,
1996 and 1995, and October 1, 1994.

NOTE E--ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following at September 30:

1996 1995
------------------

Loans receivable $208,028 $128,583
Mortgage-backed securities 12,074 14,597
Investments and other 81,595 9,350
-------- --------
$301,697 $152,530
======== ========

NOTE F--PREMISES AND EQUIPMENT

Premises and equipment consists of the following at September 30:

1996 1995
------------------

Land $ 48,676 $ 48,676
Building and improvements 515,595 515,595
Furniture and equipment 155,722 155,166
-------- --------
719,993 719,437
Less accumulated depreciation and amortization 338,807 311,218
-------- --------
$381,186 $408,219
======== ========

NOTE G--DEPOSITS

Deposit account balances are summarized as follow at September 30:

Weighted
Average
Rate at 1996 1995
September ---------------- ----------------
30,
1996 Amount % Amount %
-------- -----------------------------------

Non-interest-bearing ---% $ 505,264 1.2% $ 305,152 .7%
NOW 2.52 971,504 2.3 1,152,353 2.7
Money Market 3.28 2,082,300 4.9 1,969,883 4.7
Passbook savings 3.05 3,851,499 9.1 3,589,906 8.5
---------- ---- ---------- ----
7,410,567 17.5 7,017,294 16.6

F-14

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE G--DEPOSITS - Cont'd

Weighted
Average
Rate at
September 1996 1995
30, --------------- -----------------
1996 Amount % Amount %
-------- ------------------------------------
Certificates of deposit:
3.00 to 3.99% 3.75% $ 8,107 ---% $ 998,231 2.4%
4.00 to 4.99% 4.54 912,701 2.2 2,708,827 6.4
5.00 to 5.99% 5.52 20,862,976 49.4 18,119,665 42.7
6.00 to 6.99% 6.34 7,222,095 17.1 7,383,464 17.4
7.00 to 7.99% 7.32 2,230,029 5.3 2,218,704 5.2
8.00 to 8.99% 8.00 3,590,318 8.5 3,955,098 9.3
----------- ----- ----------- -----
34,826,226 82.5 35,383,989 83.4
----------- ----- ----------- -----
$42,236,793 100.0% $42,401,283 100.0%
=========== ===== =========== =====

The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was approximately $3,241,000 and $2,885,000 at September 30, 1996 and
1995, respectively. Deposits over $100,000 are not federally insured.

The Company had deposits of approximately $871,096 and $1,022,882 for its
directors and officers at September 30, 1996 and 1995, respectively.

At September 30, 1996, contractual maturities of certificate accounts are as
follows:

Stated Year Ended September 30
Interest Rate 1997 1998 1999 2000 2001 After
- ------------- ----------------------------------------------------------------

3.00 to 3.99% $ 8,107 $ --- $ --- $ --- $ --- $ ---
4.00 to 4.99% 688,667 224,034 --- --- --- ---
5.00 to 5.99% 15,018,395 4,113,755 1,581,015 149,811 --- ---
6.00 to 6.99% 3,133,694 1,217,731 666,632 838,211 820,227 545,600
7.00 to 7.99% 17,076 760,594 230,442 169,890 1,052,027 ---
8.00 to 8.99% --- --- --- --- 3,590,318 ---
----------- ---------- ---------- ---------- --------- --------
$18,865,939 $6,316,114 $2,478,089 $1,157,912 $5,462,572 $545,600
=========== ========== ========== ========== ========== ========

Interest expense on deposits are as follows:
Year Ended September 30
1996 1995 1994
--------------------------------
Passbook, Now and Money Market savings
accounts $ 223,471 $ 242,172 $ 278,938
Certificate accounts 2,109,237 1,760,818 1,337,971
---------- ---------- ----------
$2,332,708 $2,002,990 $1,616,909
========== ========== ==========

F-15

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE H--INCOME TAXES

Components of income tax expense (benefit) are as follows:

Year Ended September 30
1996 1995 1994
----------------------------

Current $319,900 $317,200 $304,000
Deferred (95,900) (17,200) (12,700)
-------- -------- --------
$224,000 $300,000 $291,300
======== ======== ========

In addition, the Company recorded deferred income tax (benefit) to equity
relating to unrealized gains and losses on investment securities available-
for-sale of ($3,175), $12,809 and ($9,715) for the years ended September 30,
1996, 1995 and 1994, respectively.

The provision for income taxes as shown on the consolidated statements of
income differs from amounts computed by applying the statutory federal income
tax rate of 34% to income before taxes as follows:

Year Ended September 30
1996 1995 1994
-------------------------------------------
Amount % Amount % Amount %
-------------------------------------------
Income tax expense at statutory
rates $232,857 34.0% $296,035 34.0% $298,750 34.0%
Increase (decrease) in taxes
resulting from:
Tax bad debt deduction --- --- --- --- (22,072)(2.5)
Tax exempt income, net of
related expenses (21,573)(3.2) (19,508)(2.2) (19,813)(2.2)
State income tax, net of
federal benefit 14,208 2.1 23,232 2.7 29,700 3.4
Other, net (1,492) (.2) 241 --- 4,735 .5
-------- ---- -------- ---- -------- ----
$224,000 32.7% $300,000 34.5% $291,300 33.2%
======== ==== ======== ==== ======== ====

Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws. Temporary differences which give rise to a
significant portion of deferred tax assets and liabilities are as follows:

September 30
1996 1995
------------------
Deferred tax assets
Allowance for loan losses $ 29,200 $ 29,213
Excess pension contribution --- 7,374
Unrealized loss on available-for-sale
securities 81 ---
Savings Association Insurance Fund assessment 103,800 ---
Deferred compensation 11,200 ---
Deferred tax liabilities
Depreciation (33,800) (36,637)
Federal Home Loan Bank of Des Moines stock
dividend (57,000) (53,650)
Unrealized gain on available-for-sale
securities --- (3,094)
-------- --------
NET DEFERRED TAX ASSET (LIABILITY) $ 53,481 $(56,794)
======== ========
F-16

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE I--REGULATORY CAPITAL REQUIREMENTS

Pursuant to the Financial Institutions Reform Recovery and Enforcement Act
("FIRREA") of 1989, as implemented by a rule promulgated by OTS, saving
institutions are required to have a minimum regulatory tangible capital equal
to 1.5% of adjusted total assets, a minimum of 3.0% core/leverage capital
ratio, and a minimum 8% total risk-based capital. FIRREA also restricts
investment activities with respect to noninvestment grade corporate debt and
certain other investments and increases the required ratio of housing-related
assets in order to qualify as a savings institution.

The following table presents the Bank's capital position relative to its
regulatory capital requirements under FIRREA at September 30, 1996:

Regulatory Capital
Tangible Core Risk-based
----------------------------
(Dollars in Thousands)

GAAP capital $12,644 $12,644 $12,644
Adjustments to capital:
Unrealized losses 4 4 4
General valuation allowances as
defined --- --- 142
-------- ------- -------
REGULATORY CAPITAL 12,648 12,648 12,790
Regulatory capital requirement 894 1,788 2,376
-------- ------- -------
EXCESS REGULATORY CAPITAL $11,754 $10,860 $10,414
======= ======= =======

Regulatory capital ratio 19.7% 18.2% 35.1%
Regulatory capital requirement 1.5 3.0 8.0
-------- ------- -------
EXCESS REGULATORY CAPITAL RATIO 18.2% 15.2% 27.1%
==== ==== ====

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
established additional capital requirements which require regulatory action
against depository institutions in one of the undercapitalized categories
defined in implementing regulations. Institutions such as the Bank, which are
defined as "well capitalized", must generally have a leverage capital (core)
ratio of at least 5%, a tier risk-based capital ratio of at least 6% and a
total risk-based capital ratio of at least 10%. In November 1994, the OTS
revised its regulations whereby unrealized gains or losses on available-
for-sale securities accounted for under SFAS No. 115 are not considered in the
determination of regulatory capital. FDICIA also provided for increased
supervision by federal regulatory agencies, increased reporting requirements
for insured depository institutions and other changes in the legal and
regulatory environment for institutions.

The Bank has qualified under provisions of the Internal Revenue Code which
permit it to deduct from taxable income a provision for bad debts, which
differs from the provisions for such losses charged to income. Accordingly,
retained earnings at September 30, 1996, includes income of approximately
$2,000,000 for which no provision for federal income taxes has been made. If,
in the future, this portion of retained earnings is used for any purpose other
than to absorb loan losses, federal income taxes may be imposed at the then
applicable rates. The Bank's retained earnings at September 30, 1996, were
substantially restricted because of the effect of these bad debt reserves.

F-17

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE J--BENEFIT PLANS

The Company is a participating employer in a multi-employer plan trusteed
pension plan that covers and provides defined benefits to substantially all
full-time employees of the Company after one year of service. The plan assets
exceeded vested benefits as of June 30, 1995, the date of the most current
actuarial valuation. The Company portion of the plan assets and accumulated
plan benefits has not been determined. Pension expense of $27,224, $9,250 and
$93,166 was recognized for the years ended September 30, 1996, 1995 and 1994,
respectively.

The Company also has a 401(k) salary reduction plan for all full-time
employees. The plan is entirely funded by participant contributions.
Participants may make deferrals up to 15% of compensation.

The Company has also entered into a salary continuation agreement with two of
its officers. These agreements provide for monthly deferred compensation
payments for a period of 180 months following retirement. The Company has
purchased life insurance policies to fund these agreements. Deferred
compensation charged to operations for the years ended September 30, 1996,
1995 and 1994 was $30,289, $-0- and $-0-, respectively.

In connection with the conversion from mutual to stock form, the Company
established an employee stock ownership plan ("ESOP") for the benefit of
participating employees. Employees are eligible to participate upon attaining
age twenty-one and completing one year of service.

The ESOP borrowed $1,012,000 from the Company to fund the purchase of 101,200
shares of the Company's common stock. The purchase of shares of the ESOP was
recorded in the consolidated financial statements through a credit to common
stock and additional paid-in capital with a corresponding charge to a contra
equity account for the unreleased shares. The loan is secured solely by the
common stock and is to be repaid in equal quarterly installments of principal
and interest payable through March, 2006 at the prime rate published in the
Wall Street Journal (8.25% at September 30, 1996). The intercompany ESOP note
and related interest were eliminated in consolidation.

The Company makes quarterly contributions to the ESOP which are equal to the
debt service less dividends on unallocated ESOP shares used to repay the loan.
Dividends on allocated shares will be paid to participants of the ESOP. The
ESOP shares are pledged as collateral on the ESOP loan. Shares are released
from collateral and allocated to participating employees, based on the
proportion of loan principal and interest repaid and compensation of the
participants. Forfeitures will be reallocated to participants on the same
basis as other contributions in the plan year. Benefits are payable upon a
participant's retirement, death, disability or separation from service.

Effective with the date of the stock conversion the Company adopted Statement
of Position ("SOP") 93-6. As shares are committed to be released from
collateral, the Company reports compensation expense equal to the average fair
value of the shares committed to be released. Dividends on allocated shares
will be charged to stockholders' equity. Dividends on unallocated shares are
recorded as a reduction to the ESOP loan. ESOP expense for the year ended
September 30, 1996 was $40,848. The fair value of unreleased shares based on
market price of the Company's stock was $1,056,224 at September 30, 1996.

The number of ESOP shares at September 30, 1996 are summarized as follows:

Shares released for allocation 4,076
Unreleased shares 97,124
-------
101,200
=======

F-18

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE K--INCENTIVE PLANS

Management Recognition Plan and Trust ("MRP"): The Company intends to seek
approval of the MRP at a meeting of stockholders as a method of providing
officers, employees and nonemployee directors of the Company with a
proprietary interest in the Company in a manner designed to encourage such
persons to remain with the Company. The Company plans to contribute funds to
the MRP to enable the trust to acquire, in the aggregate, 4% of the shares of
common stock in the conversion. Such shares would be acquired either through
open market purchases or from authorized but unissued shares of common stock.
Under the MRP, awards would be granted in the form of shares of common stock
held by the MRP. These shares represent deferred compensation and would be
accounted for as a reduction of stockholders' equity.

Stock Option Plan: The Company also intends to seek stockholder approval of
the 1996 Stock Option Plan ("Stock Option Plan") which will reserve a number
of shares equal to 10% of the number of shares issued in the conversion. The
Stock Option Plan provides for the grant of options at an exercise price equal
to the fair market value on the date of grant. The Stock Option Plan is
intended to promote stock ownership by directors and selected officers and
employees of the Company to increase their proprietary interest in the Company
as an incentive to contribute to the success of the Company and to reward
officers and key employees for outstanding performance.

NOTE L--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS
OF CREDIT RISK

The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet customer financing needs. These
financial instruments consist principally of commitments to extend credit.
The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. The
Company's exposure to credit loss in the event of nonperformance by the other
party is represented by the contractual amount of those instruments. The
Company does not generally require collateral or other security on unfunded
loan commitments until such time that loans are funded.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation
of the counterparty. Such collateral consists primarily of residential
properties.

At September 30, 1996 and 1995, the Bank was committed to originate loans
aggregating approximately $879,900 and $784,900, respectively. Fixed loan
commitments approximated $18,000 and $15,000 at September 30, 1996 and 1995,
respectively, with interest rates ranging from 8.50% to 10.00%.

At September 30, 1996, the Company had amounts on deposit at banks and federal
agencies in excess of federally insured limits of approximately $8,458,000.

F-19

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE M--PLAN OF CONVERSION

On November 15, 1995, the Lexington Building and Loan Association, F.A.
(currently B & L Bank) Board of Directors adopted, and on February 14, 1996,
subsequently amended, a plan ("Plan") to convert from a federally-chartered
mutual savings and loan association to a federally-chartered stock savings
bank. The Plan included the formation of a holding company which acquired all
of the capital stock of the Bank issued upon its conversion from a mutual to
stock form of ownership. In connection with the conversion, which was
consummated on June 5, 1996, the Company issued and sold to the public
1,265,000 shares of its common stock (par value $.01 per share) at a price of
$10.00 per share. The proceeds, net of $566,046 in conversion costs, received
by the Company for the issuance amounted to $12,083,954. Prior to the
completion of the conversion, the Company had no assets or liabilities and did
not conduct any business other than of an organizational nature.

At the time of conversion, the Bank established a liquidation account in the
amount equal to the equity of the Bank as of the date of the latest balance
sheet contained in the final prospectus. The liquidation account is
maintained for the benefit of certain eligible account holders who continue to
maintain their accounts at the Bank after the conversion. The liquidation
account will be reduced annually to the extent that eligible account holders
have reduced their qualifying deposits. Subsequent increases will not restore
an eligible account holder's interest in the liquidation account. In the
event of a complete liquidation, each eligible account holder will be entitled
to receive a distribution from the liquidation account proportionate to the
current adjusted qualifying balances for accounts then held.

The Bank may not declare or pay cash dividends on or repurchase any of its
shares of common stock, if the effect would cause stockholder's equity to be
reduced below applicable regulatory capital maintenance requirements or if
such declaration and payment would otherwise violate regulatory requirements.

NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS

On October 1, 1995, the Company adopted SFAS No. 107, Disclosures about Fair
Values of Financial Instruments, which requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statement of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instruments. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.

The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein.

Cash and due from banks: The carrying amounts of cash and due from
depository institutions approximate their fair value.

Certificates of deposit: The carrying amount of certificates of deposit
approximate their fair value.

Investment and mortgage-backed securities: Fair value is determined by
reference to quoted market prices.

F-20

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS - Cont'd

Stock in FHLB: This stock is a restricted asset and its carrying value is a
reasonable estimate of fair value.

Loans receivable: The fair value of first mortgage loans is estimated by
using discounted cash flow analyses, using interest rates currently offered
by the Bank for loans with similar terms to borrowers of similar credit
quality. The majority of real estate loans are residential. First mortgage
loans are segregated by fixed and adjustable interest terms. The fair value
of consumer loans is calculated by using the discounted cash flow based upon
the current market for like instruments. Fair values for impaired loans are
estimated using discounted cash flow analyses.

Accrued interest receivable: The carrying value approximates fair value.

Transaction deposits: Transaction deposits, payable on demand or with
maturities of 90 days or less, have a fair value equal to book value.

Certificates of deposit: The fair value of fixed maturity certificates of
deposit is estimated by discounting the future cash flows using the rates
currently offered for deposits of similar maturities.

Advances from borrowers for taxes and insurance: The book value
approximates fair value.

All other liabilities: The book value approximates fair value.

Off-balance sheet instruments: The fair value of a loan commitment and a
letter of credit is determined based on the fees currently charged to enter
into similar agreements, taking into account the remaining terms of the
agreement and the present creditworthiness of the counterparties. Neither
the fees earned during the year on these instruments nor their value at
year-end are significant to the Bank's consolidated financial position.

Limitations: Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. The valuation techniques employed above involve uncertainties
and are affected by assumptions used and judgements regarding prepayments,
credit risk, discount rates, cash flows and other factors. Changes in
assumptions could significantly affect the reported fair value.

In addition, the fair value estimates are based on existing on and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. The fair value estimates do not include
the benefit that results from the low-cost funding provided by the deposit
liabilities compared to the cost of borrowing funds in the market. The amounts
at September 30, 1996 (dollars in thousands) are as follows:

Carrying Fair
Amount Value
-----------------
ASSETS
Cash $ 6,268 $ 6,268
Certificates of deposit 2,525 2,525
Investment securities available-for-sale 2,906 2,906
Investment securities held-to-maturity 848 1,005

F-21

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS - Cont'd

Carrying Fair
Amount Value
-----------------
ASSETS - Cont'd
Mortgage-backed securities $ 2,063 $ 2,063
Stock in FHLB 464 464
Loans receivable 45,348 44,613
Accrued interest receivable 302 302
LIABILITIES
Transaction accounts 7,411 7,411
Certificates of deposit 34,826 35,185
Advances from borrowers for taxes and insurance 163 163

NOTE O--CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following condensed balance sheet and condensed statements of income and
cash flows for Lexington B & L Financial Corp. should be read in conjunction
with the consolidated financial statements and the notes thereto.

September 30
1996
------------

CONDENSED BALANCE SHEET

ASSETS
Cash and cash equivalents $ 108,198
Certificates of deposit 3,022,615
Securities available-for-sale 2,005,937
ESOP note receivable 978,602
Accrued interest receivable 45,177
Investment in subsidiary 12,644,333
-----------
TOTAL ASSETS $18,804,862
===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued income taxes $ 42,893
Stockholders' equity 18,761,969
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,804,862
===========
F-22

Lexington B & L Financial Corp. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Cont'd

NOTE O--CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS - Cont'd

Period From
June 5, 1996
to
September 30,
1996
------------
CONDENSED STATEMENT OF INCOME
Equity in income of the subsidiary $ 103,543
Interest income 113,174
Income taxes (41,100)
-----------
NET INCOME $ 175,617
===========

Period From
June 5, 1996
to
September 30,
1996
------------
CONDENSED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Net income $ 175,617
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in income of the subsidiary (103,543)
Amortization of premiums and discounts on
securities 65
Interest credited to certificates of deposit (22,615)
Increase in accrued interest receivable (45,177)
Increase in accrued income taxes 41,100
-----------

NET CASH PROVIDED BY OPERATING ACTIVITIES 45,447
Cash flows from investing activities
Purchase of common stock of the subsidiary (6,041,977)
Purchase of certificates of deposit (3,000,000)
Purchase of securities available-for-sale (2,000,624)
-----------

NET CASH USED IN INVESTING ACTIVITIES (11,042,601)

Cash flows from financing activities
Proceeds from sale of common stock 12,083,954
Loan to ESOP (1,012,000)
Principal collected from ESOP 33,398
-----------

NET CASH PROVIDED BY FINANCING ACTIVITIES 11,105,352
-----------

NET INCREASE IN CASH AND CASH EQUIVALENTS 108,198

Cash and cash equivalents at beginning of period ---
-----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 108,198
===========
F-23

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)

March 31, September 30,
1997 1996
------------------------------
(Unaudited)
ASSETS

Cash $ 680 $ 649
Interest-bearing deposits 4,800 5,619
Certificates of deposit 1,525 2,525
Investment securities available-for-sale,
at fair value 3,495 2,906
Investment securities held-to-maturity
(estimated market value of $1,036 at
March 31, 1997 and $1,005 at September
30, 1996) 871 848
Mortgage-backed securities
available-for-sale, at fair value 1,959 2,063
Stock in Federal Home Loan Bank
of Des Moines 464 464
Loans receivable (allowance for loan
losses of $221 at March 31, 1997
and $201 at September 30, 1996) 44,628 45,348
Accrued interest receivable 369 302
Premises and equipment 368 381
Foreclosed real estate 11 ---
Other assets 578 565
-------- ----------

TOTAL ASSETS $59,748 $61,670
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Deposits $42,359 $42,237
Advances from borrowers for taxes
and insurance 88 163
Other liabilities 796 508
-------- --------
TOTAL LIABILITIES 43,243 42,908

Commitments and contingencies

Stockholders' Equity
Preferred stock, $.01 par value per
share; 500,000 shares authorized,
none outstanding --- ---
Common stock, $.01 par value per share;
8,000,000 shares authorized, 1,265,000
issued and outstanding at March 31, 1997
and September 30, 1996 13 13
Paid-in capital 12,088 12,071
Retained earnings-substantially restricted 8,005 7,649
Unrealized gain on securities
available-for-sale, net of taxes 18 ---
Treasury stock, 177,100 shares at cost (2,699) ---
Unearned ESOP shares (920) (971)
------- -------
TOTAL STOCKHOLDERS' EQUITY 16,505 18,762
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $59,748 $61,670
======= =======

See accompanying notes to Consolidated Financial Statements

F-24

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)

Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
-----------------------------------------------
(Unaudited)

INTEREST INCOME
Mortgage loans $ 869 $ 782 $1,754 $1,572
Other loans 69 49 134 97
Investment securities and
interest-bearing deposits 174 91 351 184
Mortgage-backed securities 31 38 64 77
------ ------ ------ ------
TOTAL INTEREST INCOME 1,143 960 2,303 1,930

Interest Expense on Deposits 568 578 1,148 1,153
------ ------ ------ ------
NET INTEREST INCOME 575 382 1,155 777

Provision for Loan Losses 20 10 21 10
------ ------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 555 372 1,134 767

NON-INTEREST INCOME
Service charges and other fees 6 2 13 11
Commissions, net 5 1 10 12
Income from foreclosed assets --- --- --- 8
Other 11 5 19 5
------ ------ ------ ------
TOTAL NON-INTEREST INCOME 22 8 42 36

NON-INTEREST EXPENSE
Employee salaries and
benefits 164 108 313 212
Occupancy costs 18 15 33 29
Advertising 1 1 7 7
Data processing 20 18 34 31
Federal insurance premiums 2 33 28 48
Other 136 32 204 83
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE 341 207 619 410
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 236 173 557 393

Income Taxes 85 66 201 135
------ ------ ------ ------

NET INCOME $ 151 $ 107 $ 356 $ 258
====== ====== ====== ======

Net Income Per Share $ 0.13 * $ 0.31 *
====== ====== ====== ======

* Operating as The Lexington Building & Loan Association, F.A., a mutual
institution.

See accompanying notes to Consolidated Financial Statements

F-25

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Six Months Ended
March 31,
1997 1996
-----------------
(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 356 $ 258
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 13 14
Amortization of premiums and discounts (17) (29)
Gain on sales of foreclosed real estate --- (8)
Provisions for loan losses 21 ---
Stock and patronage dividends --- (9)
ESOP shares released 68 ---
Changes to assets and liabilities increasing
(decreasing) cash flows
Accrued interest receivable (68) (12)
Other assets (66) (225)
Other liabilities (191) 20
-------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 116 9

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from principal payments of
mortgage-backed securities available-for-sale 136 238
Proceeds from maturities of certificates of deposit 1,000 ---
Proceeds from maturities of investment
securities available-for-sale 400 ---
Purchase of investment securities available-for-sale (999) ---
Loans originated, net of repayments 688 363
Purchase of life insurance policies to fund
salary continuation plan --- (453)
Proceeds from sales of foreclosed real estate --- 40
-------- ------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 1,225 188

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 122 965
Net decrease in advances from borrowers for
property taxes and insurance (74) (103)
Purchase of treasury stock (2,177) ---
------- -------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES (2,129) 862
NET INCREASE (DECREASE) IN CASH (788) 1,059

Cash and cash equivalents, beginning of period 6,268 3,582
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,480 $4,641
======= ======

See accompanying notes to Consolidated Financial Statements

F-26

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--Basis of Presentation

The consolidated interim financial statements as of March 31, 1997 and for the
period then ended included in this report have been prepared by the Lexington
B & L Financial Corp. ("Registrant" or "Company") without audit. In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation are reflected in the March 31,
1997, interim financial statements. The results of operations for the period
ended March 31, 1997, are not necessarily indicative of the operating results
for the full year. The consolidated interim financial statements as of March
31, 1997, should be read in conjunction with the Registrant's audited
consolidated financial statements as of September 30, 1996 and for the year
then ended included in the Registrant's 1996 Annual Report to Shareholders.

NOTE B--Formation of Holding Company and Conversion to Stock Form

On June 5, 1996, the Company became the holding company for The Lexington
Building & Loan Association, F.A. & Subsidiary upon the Association's
conversion from a federally chartered mutual savings and loan association to a
federally chartered capital stock savings bank. In connection with the
conversion, The Lexington Building & Loan Association, F.A. changed its name
to B & L Bank. The conversion was accomplished through the sale and issuance
by the Registrant of 1,265,000 shares of common stock at $10 per share.
Proceeds from the sale of common stock, net of expenses incurred of $566,046
were $12,083,954, inclusive of $1,012,000 related to shares held by B & L
Bank's Employee Stock Ownership Plan ("ESOP"). The financial statements
included herein have not been restated as a result of the consummation of the
conversion.

NOTE C--Earnings Per Share

Earnings per share data is not relevant for any period prior to June 30, 1996
since the Registrant had no stockholders prior to the initial stock offering
completed June 5, 1996. Earnings per share is presented for March 31, 1997
based on the average shares issued and outstanding during the period. During
March, 1997 the Company repurchased 177,100 shares of stock (14% of
outstanding shares). The total number of shares outstanding after the buy back
is 1,087,900.

NOTE D--Employee Stock Ownership Plan

In connection with the conversion to stock form as described in Note B, B & L
Bank established an ESOP for the exclusive benefit of participating employees
(all salaried employees who have completed at least 1000 hours of service in a
twelve-month period and have attained the age of 21). The ESOP borrowed funds
from the Company in an amount sufficient to purchase 101,200 shares (8% of the
Common Stock issued in the stock offering). The loan is secured by the shares
purchased and will be repaid by the ESOP with funds from contributions made by
B & L Bank, dividends received by the ESOP and any other earnings on ESOP
assets. B & L Bank presently expects to contribute approximately $149,600,
including interest, annually to the ESOP. Contributions will be applied to
repay interest on the loan first, then the remainder will be applied to
principal. The loan is expected to be repaid in approximately 10 years. Shares
purchased with the loan proceeds are held in a suspense account for allocation
among participants as the loan is repaid. Contributions to the ESOP and shares
released from the suspense account are allocated among participants in
proportion to their compensation relative to total compensation of all active
participants. Benefits generally become 25% vested after each year of credited
service beyond one year. Vesting is accelerated upon retirement, death or
disability of the participant. Forfeitures are returned to B & L Bank or
reallocated to other participants to reduce future funding costs. Benefits may
be payable upon retirement, death, disability or separation from service.
Since B & L Bank's annual contributions are discretionary, benefits payable
under the ESOP cannot be estimated.
F-27

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE D--Employee Stock Ownership Plan (Continued)

The Company accounts for its ESOP in accordance with Statement of Position
("SOP") 93-6, Employers Accounting for Employee Stock Ownership Plans.
Accordingly, the debt of the ESOP is eliminated in consolidation and the
shares pledged as collateral are reported as unearned ESOP shares in the
consolidated statements of financial condition. Contributions to the ESOP
shall be sufficient to pay principal and interest currently due under the loan
agreement. As shares are committed to be released from collateral, the Company
reports compensation expense equal to the average market price of the shares
for the respective period, and the shares become outstanding for earnings per
share computations. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt and accrued interest. ESOP compensation
expense was $36,270 and $67,687 for the three and six months ended March 31,
1997, respectively.

A summary of ESOP shares at March 31, 1997 is as follows:

Shares Allocated 4,076

Shares released for allocation 5,112

Unreleased shares 92,012
------

TOTAL 101,200
=======

Fair value of unreleased shares $1,403,183
==========

NOTE E--Accounting Changes

Effective June 5, 1996, the Company adopted SOP 93-6, "Employers' Accounting
for Employee Stock Ownership Plans". SOP 93-6 applies to shares acquired by
employee stock ownership plans after December 31, 1992, but not yet committed
to be released as of the beginning of the year SOP 93-6 is adopted. SOP 93-6
changes the measure of compensation expenses recorded by employers for
leveraged employee stock ownership plans from the cost of the ESOP shares to
the fair value of the ESOP shares during the periods in which they become
committed to be released. To the extent that fair value of the Company's
shares held by the ESOP differ from the cost of such shares, the differential
will be charged or credited to equity. Employers with internally leveraged
employee stock ownership plans such as the Company will not report the loans
receivable from the ESOP as an asset and will not report the ESOP debt from
the employer as a liability.

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT
OF LIABILITIES. In June, 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities", as amended by SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125". SFAS No. 125, as amended,
provides accounting and reporting standards for transfers and servicing of
financial assets and the extinguishment of liabilities based on consistent
application of a financial components approach that focuses on control. It
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. Under the financial components approach, after a
transfer of financial assets, an entity recognizes all financial and servicing
assets it controls and liabilities it has incurred and derecognizes financial
assets it no longer controls and liabilities that have been extinguished. The
financial components approach focuses on the assets and liabilities that exist
after the transfer. Many of these assets and liabilities are components of
financial assets that existed prior to the transfer. If a transfer does not
meet the criteria for a sale, the transfer is accounted for as a secured
borrowing with pledge of collateral.
F-28

LEXINGTON B & L FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE E--Accounting Changes (Continued)

SFAS No. 125 extends the "available for sale" or "trading" approach in SFAS
No. 115 to nonsecurity financial assets that can contractually be repaid or
otherwise settled in such a way that the holder of the assets would not
recover substantially all of its recorded investment. SFAS No. 125 also amends
SFAS No. 115 to prevent a security from being classified as held to maturity
if the security can be prepaid or otherwise settled in such a way that the
holder of the security would not recover substantially all of its recorded
investment.

SFAS No. 125 provides implementation guidance for accounting for (i)
securitizations, (ii) transfers of partial interests, (iii) servicing of
financial assets, (iv) securities lending transactions, (v) repurchase
agreements including "dollar rolls", (vi) loan syndications and
participations, (vii) risk participations in banker's acceptances, (viii)
factoring arrangements, (ix) transfers of receivables with recourse, (x)
transfers of sales type and direct financing lease receivables, and (xi)
extinguishment of liabilities.

SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996, and its to be
applied prospectively. Earlier or retroactive application is not permitted. In
addition, the extension of the SFAS No. 125 approach to certain nonsecurity
financial assets and the amendment of SFAS No. 115 is effective for financial
assets held on or acquired after January 1, 1997. Reclassifications that are
necessary because of the amendment do not call into question an entity's
ability to hold other debt securities to maturity in the future. Management of
the Association does not expect the adoption of SFAS No. 125 will have a
material effect on B & L Bank's financial position or results of operations.

NOTE F--Merger Agreement

The Company on March 12, 1997, announced the execution of a definitive
agreement between Lafayette Bancshares, Inc., the holding company for
Lafayette County Bank that will result in Lafayette County Bank becoming a
subsidiary of Lexington B & L Financial Corp. Lafayette County Bank,
headquartered in Lexington, Missouri, had total assets of $32.5 million at
December 31, 1996. It has three full service offices, one in Lexington, one in
Wellington and one in Callao, Missouri.

In the transaction, Lafayette shareholders will receive a combination of cash
plus shares of Lexington common stock for each share of Lafayette common
stock. Under the terms of the agreement, Lafayette's shareholders would
receive $0.92 in cash plus 0.0977 shares of Lexington common stock for each
share of Lafayette common stock if Lexington's common stock price is between
$12.00 and $14.00 per share. If Lexington's common stock price is $12.00 or
less, Lafayette shareholders would receive $0.92 in cash plus $1.17 in value
of Lexington common stock for each share of Lafayette common stock. If
Lexington's common stock price is $14.00 or more, Lafayette shareholders would
receive $0.92 in cash plus $1.37 in value of Lexington common stock for each
share of Lafayette common stock. The calculation of Lexington's common stock
price will be based upon the average closing price of Lexington common stock
for the 20 trading days prior to the effective date of the acquisition.

Based on Lexington's stock price of $14.75 on March 11, 1997, the transaction
would be valued at approximately $2,587,000, representing an exchange value of
$2.29 for each Lafayette share. In connection with the acquisition, Lexington
expects to use approximately 105,000 of its treasury stock purchased in March,
1997 at an average price of $15.24.

The Merger, which is expected to be completed in late third or early fourth
calendar quarter of 1997, is subject to the approval of federal banking
regulators and the shareholders of Lafayette, among other conditions.

F-29

REPORT OF MANAGEMENT

The management of Lafayette Bancshares, Inc. is responsible for the
preparation, integrity and objectivity of the consolidated financial
statements of the Corporation. The consolidated financial statements and
notes have been prepared by the Corporation in accordance with generally
acceptable accounting principles and in the judgement of management, present
fairly the Corporation's financial position and results of operation. The
financial information contained elsewhere in this report is consistent with
that in the financial statements. The financial statements and other
financial information in this report include amounts that are based on
management's best estimates and judgements and give due consideration too
materially.

The Corporation maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that transactions are
executed according to management's authorization and recorded properly to
permit the preparation of financial statements in accordance with generally
accepted accounting principles. Management recognizes that even a highly
effective internal control system has inherent risks, including the
possibility of human error, and the circumvention or overriding of controls,
and that the effectiveness of an internal control system can change with
circumstances. However, management believes that the internal control system
provides reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented or would be detected on a
timely basis and corrected through the normal course of business. As of March
31, 1997, management believes that the internal controls are in place and
operating effectively.

The Board of Directors discharges its responsibility for the Corporation's
financial statements through the employment of independent accountants to
perform selected audit procedures on certain categories off the Corporation's
assets and liabilities, including evaluation of accounting policies and
procedures and the effectiveness of the internal controls related thereto.
The independent accountants have met with the Board to discuss the scope and
results of their work and the adequacy of internal accounting controls.

William J. Huhmann Terry L. Thompson
Chairman of the Board President
Chief Executive Officer

F-30

Lafayette Bancshares, Inc.

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

Three Months Ended
March 31, Year Ended December 31,
------------------ ------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Interest income:
Interest on
Commercial loans . . $75,245 $72,419 $300,841 $280,479 $225,164
Agricultural loans . 36,267 43,287 171,409 172,936 141,881
Consumer loans . . . 98,367 97,134 393,605 348,518 265,559
Real estate loans. . 157,366 143,420 602,237 528,762 436,634
Loan fees collected . 3,973 2,770 13,459 15,098 2,432
-------- ------- --------- --------- ---------
Total loans. . . . 371,218 359,030 1,481,551 1,345,793 1,071,670
Investment securities
US treasury. . . . . . 77,958 91,119 360,430 367,721 273,033
Federal agencies . . . 113,913 96,647 404,744 300,705 254,154
State and municipal. . 8,989 10,257 39,221 42,431 48,021
Certificates of
deposit . . . . . . . 28,820 83,253
Other securities . . . 1,768 2,777 7,831 7,837 17,707
Total investment -------- ------- --------- --------- ---------
securities. . . . . 202,629 200,800 812,226 747,514 676,168
Federal funds sold. . . 14,663 8,209 42,285 36,436 32,921
Interest bearing due
from banks . . . . . . 1,548 4,027 11,132 8,502 2,879
Total interest -------- ------- --------- --------- ---------
income . . . . . . 590,058 572,066 2,347,194 2,138,245 1,783,638

Interest expense:
Deposits-Note H. . . . 302,217 281,848 1,171,789 1,054,829 840,211
Advances from FHLB . . 5,181 5,307 21,460 15,310 7,990
Notes payable. . . . . 15,426 18,198 69,764 80,542 91,469
Total Interest -------- ------- --------- --------- ---------
Expense. . . . . . 322,824 305,353 1,263,013 1,150,681 939,670
-------- ------- --------- --------- ---------
267,234 266,713 1,084,181 987,564 843,968
Provision for loan
losses. . . . . . . . . 12,000 3,000 33,000 45,000 11,000
-------- ------- --------- --------- ---------
Net interest income
after provision
for loan losses. . 255,234 263,713 1,051,181 942,564 832,968

Other income
Service charges. . . . 52,641 46,885 184,044 169,541 148,308
Insurance commissions. 6,959 4,809 23,476 27,865 25,214
Gain on sale of
investments - Note B. 8,273 8,577 6,849 5,171
Other income . . . . . 12,581 6,937 28,593 32,020 26,605
Total other -------- ------- --------- --------- ---------
income. . . . . . 72,181 66,904 244,690 236,275 205,298

F-31

Three Months Ended
March 31, Year Ended December 31,
------------------ ------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----

Other Expense
Salary and benefits. 145,504 124,427 502,650 477,216 471,906
Occupancy cost . . . 29,073 29,131 106,961 101,521 108,737
FDIC and State deposit
assessment. . . . . 2,836 1,611 25,202 40,763 67,396
Other expenses . . . 65,494 60,248 227,779 219,478 198,023
Minority interest. . 4,183 5,558 21,773 18,002 13,558
Total Other -------- ------- --------- --------- ---------
Expense. . . . 247,090 220,975 884,365 856,980 859,620

Income Before
Income Taxes. . 80,325 109,642 411,506 321,859 178,646

Income taxes - Note K. 31,000 43,000 150,000 119,000 57,000
-------- ------- --------- --------- ---------
Net income . . . . . . $49,325 $66,642 $261,506 $202,859 $121,646
======= ======= ======== ======== ========

Earnings per share . . $0.04 $0.06 $0.23 $0.18 $0.11
===== ===== ===== ===== =====

Weighted average
shares. . . . . . . . 1,129,500 1,129,500 1,129,500 1,129,500 1,129,500
========= ========= ========= ========= =========

See accompanying notes to financial statements.

F-32

Lafayette Bancshares, Inc.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
December 31,
March 31, -----------------
1997 1996 1995
---- ---- ----
ASSETS

Cash and due from banks
(includes interest bearing deposits
of $483,193, $181,876 , $202,075
and $255,408, respectively) . . . . $ 1,868,546 $ 1,890,360 $ 1,443,908
Investment securities -- Note B
Held-to-maturity. . . . . . . . . . 13,992,870 13,280,776 13,543,758
Available-for-sale. . . . . . . . . 112,545 113,422 113,205
Federal funds sold . . . . . . . . . 850,000 925,000 700,000
Stock in Federal Home Loan Bank
of Des Moines . . . . . . . . . . . 113,700 113,700 113,700
Loans receivable, net -- Note C & D. 15,734,692 15,365,571 14,477,006
Accrued interest receivable -- Note E 375,648 377,392 419,460
Premises and equipment -- Note F . . 387,926 397,930 381,171
Goodwill -- Note G . . . . . . . . . 277,203 283,867 310,517
Other assets . . . . . . . . . . . . 157,851 52,753 71,109
----------- ----------- -----------
Total assets . . . . . . . . . . $33,870,981 $32,800,771 $31,573,834
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits -- Note H . . . . . . . . . $30,553,465 $29,510,841 $28,434,379
Advances from Federal Home Loan
Bank of Des Moines -- Note I. . . . 340,000 340,000 340,000
Notes payable -- Note J. . . . . . . 558,219 558,219 653,219
Accrued interest payable . . . . . . 184,043 186,969 164,053
Accrued income tax liability -- Note K 45,138 46,996 78,834
Other liabilities. . . . . . . . . . 54,001 35,268 18,049
Minority interest. . . . . . . . . . 145,651 143,867 134,330
----------- ----------- -----------

Total liabilities . . . . . . . 31,880,517 30,822,160 29,822,864

Stockholders' Equity - Note J & L
Common stock, $1.00 par value
1,250,000 shares authorized,
1,129,500 shares issued. . . . . . 1,129,500 1,129,500 1,129,500
Surplus. . . . . . . . . . . . . . . 35,302 35,302 35,302
Retained earnings. . . . . . . . . . 830,174 826,029 598,408
Net unrealized gain (loss) on securities
available for sale -- Note K. . . . (4,512) (12,220) (12,240)
----------- ----------- -----------
Total stockholders' equity. . 1,990,464 1,978,611 1,750,970
----------- ----------- -----------
Total liabilities and
stockholders' equity . . . . $33,870,981 $32,800,771 $31,573,834
=========== =========== ===========

See accompanying notes to consolidated financial statement.

F-33

Lafayette Bancshares, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Unrealized
Gain (Loss)
on
Securities
Available
For-Sale, Total
Common Retained Net of Stockholders
Stock Surplus Earnings Taxes Equity

Balance at December
31, 1994 $1,129,500 $35,302 $423,787 ($20,680) $1,567,909

Net income for
1995. . . . . . . 202,859 202,859
Cash dividend
declared $.025
cents per
share . . . . . . (28,238) (28,238)
Change in
unrealized gain
(loss) on
securities
available for
sale. . . . . . . 8,440 8,440
---------- ------- -------- ------- ----------
Balance at December
31, 1995 1,129,500 35,302 598,408 (12,240) 1,750,970

Net income for
1996. . . . . . . 261,506 261,506
Cash dividend
declared $.03
cents per
share . . . . . . (33,885) (33,885)
Change in
unrealized
gain (loss) on
securities
available for
sale. . . . . . . 20 20
---------- ------- -------- -------- ----------
Balance at December
31, 1996 1,129,500 35,302 826,029 (12,220) 1,978,611

Net income for the
three months ended
March 31, 1997. . 49,325 49,325
Cash dividend
declared $.04
cents per
share . . . . . . (45,180) (45,180)
Change in
unrealized
gain (loss) on
securities
available for
sale. . . . . . . 7,708 7,708
---------- ------- -------- ------- ----------
Balance at March
31, 1997 $1,129,500 $35,302 $830,174 ($4,512) $1,990,464
========== ======= ======== ======= ==========

See accompanying notes to consolidated financial statements.

F-34

Lafayette Bancshares, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31, Year Ended December 31,
------------------ ---------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----

Cash Flows from
Operating Activities
Net Income . . . . . $49,325 $66,642 $261,506 $202,859 $121,646
Adjustments to
reconcile net
income to net
cash. . . . . . . .
Depreciation and
amortization. . . 23,643 22,353 87,121 83,744 87,021
Amortization of
premiums and
discounts. . . . (1,341) 739 (4,845) 9,567 67,411
Amortization of
letter of
credit fee . . . 2,120 2,806 9,140 10,511 11,936
Provisions for
losses on loan
receivable . . . 12,000 3,000 33,000 45,000 11,000
Adjustment for
permanent decline
in market value
of securities
held available
for sale -- Note
B . . . . . . . 11,219
Cash surrender
charge on life
insurance -- Note
M. . . . . . . . 13,048
Changes in:
Accrued interest
receivable . . 1,744 37,448 42,068 (63,483) (18,493)
Accrued interest
payable. . . . (2,926) 14,414 22,916 39,189 22,201
Other assets. . (4,738) 4,268 17,696 (31,721) 10,244
Other
liabilities. . 15,146 13,190 (5,082) 46,112 (6,914)
---------- ---------- ---------- ---------- ----------
Net cash provided by
operating
activities. . . . 128,716 164,860 463,520 341,778 306,052

Investing Activities
Proceeds from
maturities,
sales/calls on
investment
securities . . . 785,000 3,860,000 7,425,000 7,886,000 5,861,000
Purchases of
investment
securities . . . (1,494,876) (3,763,351) (7,157,370) (8,182,147) (5,805,775)
Payment of
letter of
credit fees. . . (8,481) (9,798) (11,223)
Net (increase)
decrease in
loans
receivable . . . (381,121) (74,702) (921,565) (1,731,211) (1,915,100)
Net (increase)
decrease in
Federal
funds sold . . . 75,000 275,000 (225,000) 75,000 625,000
Purchases of
premises and
equipment. . . . (6,976) (39,237) (77,230) (9,281) (45,097)
Purchase of life
insurance -- Note
M . . . . . . . . (125,000)
Cash paid on
acquisition of
bank stock . . . (24,000)
Net cash provided ---------- ---------- ---------- ---------- ----------
by (used in)
investing
activities. . . . (1,147,973) 257,710 (964,646) (1,971,437) (1,315,195)

Cash Flows
Financing
Activities
Net increase
(decrease) in
deposits . . . . 1,042,623 96,787 1,076,463 1,371,316 1,293,556
Net increase in
advances from
FHLB . . . . . . 200,000 140,000
Repayment of
notes payable. . (95,000) (95,000) (95,000)
Cash dividends. . (45,180) (33,885) (33,885) (28,238) (28,238)
Net cash provided ---------- ---------- ---------- ---------- ----------
by (used in)
financing
activities. . . . 997,443 62,902 947,578 1,448,078 1,310,318
Increase ---------- ---------- ---------- ---------- ----------
(decrease) in
cash and
due from banks. . (21,814) 485,472 446,452 (181,581) 301,175
Cash beginning of ---------- ---------- ---------- ---------- ----------
year. . . . . . . 1,890,360 1,443,908 1,443,908 1,625,489 1,324,314
---------- ---------- ---------- ---------- ----------
Cash end of year . $1,868,546 $1,929,380 $1,890,360 $1,443,908 $1,625,489
========== ========== ========== ========== ==========

See accompanying notes to financial statements.

F-35

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1996, 1995, and 1994 and March 31, 1997 and 1996
(UNAUDITED)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Lafayette Bancshares, Inc. and
its subsidiary conform with generally accepted accounting principles. The
Corporation's significant accounting and reporting policies are:

Principles of Consolidation

The consolidated financial statements include the accounts of Lafayette
Bancshares, Inc. and its 94% owned subsidiary Lafayette County Bank of
Lexington/Wellington. All significant intercompany accounts and transactions
have been eliminated in consolidation.

Investment Securities

Effective January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards ("SFAS") 115, "Accounting for Certain
Investments in Debt and Equity Securities", which established three
classifications of investment securities: trading, held-to-maturity, and
available-for-sale. Trading securities are required principally for the
purpose of near term sales. Such securities are reported at fair value and
unrealized gains and losses are included in income. Securities which are
designated as held-to-maturity are designated as such because the Corporation
has the ability and the intent to hold these securities to maturity. Such
securities are reported at amortized cost. Securities designated as
available-for-sale, a designation which provides the Corporation with certain
flexibility in managing its investment portfolio. Such securities are
reported at fair value; net unrealized gains and losses are excluded from
income and reported net of applicable income taxes as a separated component of
equity.

Gains or losses on sales of securities are recognized in operations at
the time of sale and are determined by the difference between the net sales
proceeds and the cost of the securities using the specific identification
method, adjusted for any unamortized premiums or discounts. Premiums or
discounts are amortized or accredited to income using the interest method over
the period to maturity, except that premiums on callable securities are
amortized to date of first call.

In adopting SFAS No. 115, the Corporation modified its accounting
policies and designated its securities in accordance with the three
classifications. The Corporation's adoption of SFAS No. 115 resulted in the
classification of all securities as either held-to-maturity or
available-for-sale. At December 31, 1996 and 1995 and March 31, 1997, the
Corporation had no securities designated as trading.

Stock in Federal Home Loan Bank of Des Moines

Stock in the Federal Home Loan Bank of Des Moines is stated at cost and
the amount of stock held is determined by the regulation and the amount of
advances from the bank.

F-36

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - cont'd

Loans Receivable

Loans are stated at unpaid principal balances, less the allowance for
loan losses.

Loan origination and commitment fees in amounts that exceed $2,000, are
deferred and amortized as a yield adjustment over the contractual maturity of
the related loan using the interest method. Such fees of lesser amounts are
taken directly into income since the amount of such fees are deemed not
significant and immaterial for deferral.

Loan are placed on nonaccrual status when management deems a loan is
specifically impaired as to principal or interest. Any unpaid interest
previously accrued on those loans is reversed from current income. Once a
loan is on a nonaccrual status, interest is included only to the extent
received in cash until such time as the loan is brought current and the
borrower demonstrates an ability to make future payments of principal and
interest.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level adequate to
absorb potential losses in the loan portfolio. Management's determination of
the adequacy of the allowance is based on a review of the quality of the loan
portfolio, past loan loss experience, examinations and appraisals by
regulatory authorities, and current economic conditions. The allowance is
increased by a provision for loan losses, which is charged to expense, and
reduced by charge-offs, net of recoveries.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation
and amortization. Provisions for depreciation and amortization are computed
principally on the straight-line method over the estimated useful lives of the
assets. For income tax purposes, depreciation is computed using both the
straight-line and accelerated methods.

Income Taxes

The Corporation and its subsidiary file a consolidated federal income
tax return. The income tax effect of timing differences in reporting
transactions for financial reporting and income tax purposes is reflected in
the financial statements as deferred income taxes.

The Corporation adopted SFAS No. 109, "Accounting for Income Taxes",
effective January 1, 1993. Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences, attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
income tax bases. Under SFAS No. 109, the effect deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period that
includes the enactment date. The effect of this accounting change at the date
of adoption was not material.

F-37

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - cont'd

Net Income Per Share

Earnings per share are computed by dividing net income by the weighted
average number of shares outstanding each year.

Statements of Cash Flow

For purposes of the cash flows, cash and amounts due from depository
institutions and interest-bearing deposits in other banks are considered cash
equivalents.

Unaudited Financial Statements

In the opinion of management, the unaudited consolidated financial
statements contain all adjustments (none of which were other than normal
recurring entries) necessary for a fair statement of the results of operations
for the years and interim periods presented.

New Accounting Standards

Accounting for Impairment of Long-Lived Assets

On January 1, 1997, the Corporation implemented The Financial
Accounting Standards Board ("FASB") issued SFAS No 121, "Accounting for the
Impairment of Long-Lived Assets". The effect of the adoption of this
Statement resulted in an adjustment to certain mutual fund holdings in the
amount of $11,219.

Accounting by Creditors for Impairment of a Loan

SFAS No 114, "Accounting by Creditors for Impairment of a Loan" was
issued by FASB in May 1993. This Statement requires that impaired loans be
measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate, at the loan's observable market price
or the fair value of collateral if the loan is collateral dependent. SFAS No.
118 was issued as an amendment to SFAS No. 114 to allow a creditor to use
existing methods for recognizing interest income on an impaired loan. The
implementation of these Statements did not have a significant effect on the
Corporation's financial position or results of operation, since in
management's judgement there were no material loans effected by this
statement.

Accounting for Derivative Financial Instruments

In October 1994, the FASB issued SFAS No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments."
This statement generally addresses required disclosures for derivative
instruments held or issued for trading purposes and for purposes other than
trading. The Corporation currently has no derivative financial instruments.

F-38

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE B -- INVESTMENT SECURITIES

Investment securities are as follows:

Amortized Gross Unrealized Fair
Cost Gains Losses Value

March 31, 1997
Held-to-maturity
US Treasury $ 5,590,511 $ $ 7,575 $ 5,582,936
Federal Agencies 7,733,950 65,655 7,668,295
State and Municipal 668,409 9,978 675,387
----------- ------- ------- ------------
Held-to-Maturity $13,992,870 $ 9,978 $73,230 $13,926,618
Available-for-sale =========== ======= ======= ===========
Mutual funds $ 131,141 $18,596 $ 112,545
=========== ======= ===========

Amortized Gross Unrealized Fair
Cost Gains Losses Value
December 31, 1996
Held-to-maturity
US Treasury $ 4,892,802 $ 1,978 $ 4,894,780
Federal Agencies 7,633,617 17,059 7,616,558
State and Municipal 754,357 9,202 763,559
----------- ------- ------- ------------
Held-to-Maturity $13,280,776 $11,180 $17,059 $13,274,897
Available-for-sale =========== ======= ======= ===========
Mutual funds $ 131,141 $17,719 $ 113,422
=========== ======= ===========

Amortized Gross Unrealized Fair
Cost Gains Losses Value
December 31, 1995
Held-to-maturity
US Treasury $ 6,494,003 $ 47,245 $ $ 6,541,248
Federal Agencies 6,228,873 31,842 6,260,715
State and Municipal 715,912 12,016 727,928
----------- ------- ------- ------------
Certificates of
deposit 104,970 30 105,000
Held-to-Maturity $13,543,758 $ 59,291 $31,842 $13,634,891
Available-for-sale =========== ======= ======= ===========
Mutual funds $ 131,141 $ 17,936 $ 113,205
=========== ======= ===========

On March 31, 1997, the Corporation implemented SFAS 121 which resulted
in the recognization of $11,219 loss on the permanent decline in the value of
one the two mutual funds held.

F-39

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE B -- INVESTMENT SECURITIES - Cont'd

During the years ended December 31, 1996, 1995 and 1994, and the three
month period ended March 31, 1996, securities in the classification
held-to-maturity were sold or called for net realized gains before income
taxes of $8,577, $6,849, $5,171 and $8,273, respectively. There were no
securities sold or called during the three month period ending March 31, 1997.
Sales of securities in the held-to-maturity classification were made within
three months of maturity.

At March 31, 1997 and at December 31, 1996 and 1995 securities in the
amount of $4,519,350, $5,107,374, and $4,712,592, respectively, were pledged
to secure public deposits.

NOTE C -- LOANS RECEIVABLE

Loans receivable consist of the following:

March 31, December 31,
1997 1996 1995
---- ---- ----

Commercial $ 3,267,408 $ 3,277,382 $ 3,312,714
Agriculture 1,498,368 1,342,125 1,692,315
Consumer 4,256,455 4,164,928 3,879,589
Real estate
Commercial 2,533,737 2,414,197 1,796,197
Agriculture 1,043,997 1,018,176 825,399
Residential 3,350,683 3,364,405 3,178,408
----------- ----------- -----------
Total loans receivable 15,950,648 15,581,213 14,684,622
Allowance for loan
losses (215,956) (215,642) (207,616)
----------- ----------- -----------
Net loans receivable $15,734,692 $15,365,571 $14,477,006
=========== =========== ===========

The Corporation's subsidiary had non-contractual lines of credit at
March 31, 1997 and at December 31, 1996 and 1995 aggregating approximately
$776,000, $654,000, and $836,000, respectively.

At March 31, 1997 and at December 31, 1996 and 1995 the Corporation's
subsidiary had loans receivable aggregating $71,962, $108,426, and $110,593,
respectively, from its directors and officers. These loans are made subject
to the same interest rates and underwriting standards used in originating
loans to other borrowers.

F-40

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE D -- ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses for the three month periods
ended March 31, 1997 and 1996 and the three years ended December 31, 1996 were
as follows:

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Balance beginning
of year $215,642 $207,616 $207,616 $165,484 $152,606
Loss provision 12,000 3,000 33,000 45,000 11,000
Charge offs (17,625) (3,950) (42,277) (10,953) (4,772)
Recoveries 5,942 171 17,303 8,085 6,650
Balance at end -------- -------- -------- -------- --------
of period $215,956 $206,837 $215,642 $207,616 $165,484
======== ======== ======== ======== ========

NOTE E -- ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consist of the following:

March 31, December 31,
1997 1996 1995
---- ---- ----

Loans receivable $184,569 $191,500 $195,917
Investment
securities 191,079 185,892 223,543
-------- -------- --------
$375,648 $377,392 $419,460
======== ======== ========

F-41

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE F -- PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

March 31, December 31,
1997 1996 1995
---- ---- ----

Land $ 94,700 $ 94,700 $ 94,700
Building and
improvements 350,597 350,597 350,285
Furniture and
equipment 570,325 545,829 468,911
---------- --------- ---------
1,015,622 991,126 913,896
Less accumulated
depreciation 627,696 593,196 532,725
---------- --------- ---------
$ 387,926 $ 397,930 $ 381,171
========== ========= =========

NOTE G -- GOODWILL

On July 3, 1990, the Corporation acquired control of the Lafayette
County Bank. The cost in excess of the book value of the bank is being
amortized on a straight-line basis over a twenty year period. Amortization
for the year ended December 31, 1996, 1995 and 1994 amounted to $23,277
annually and $5,819 in each of the three month period ended March 31, 1997 and
1996. The unamortized balance of goodwill at March 31, 1997 amounted to
$262,569.

During July 1986, the Corporation's subsidiary acquired from the
Federal Deposit Insurance Corporation, the Callao Community Bank, Callao,
Missouri, for cash resulting in $50,610 of excess cost over book value
acquired. This goodwill is being amortized over a 15 year period with an
annual amortization of $3,394. At March 31, 1997 the unamortized balance of
the goodwill on the Callao purchase was $14,634.

NOTE H-- DEPOSITS

Deposit account balances are summarized as follows:

March 31, December 31,
1997 1996 1995
---- ---- ----
Non interest
bearing checking $ 3,540,801 $ 3,574,157 $ 4,209,895
Interest bearing
checking (NOW) 3,449,914 3,630,141 3,826,824
Money Market 4,357,371 3,608,318 3,021,522
Savings 2,599,489 2,419,278 2,523,393
Certificates of deposit 16,605,890 16,278,947 14,852,745
----------- ----------- -----------
$30,553,465 $29,510,841 $28,434,379
=========== =========== ===========

F-42

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE H -- DEPOSITS Cont'd

The aggregate amount of certificates of deposit with a minimum
denomination of $100,000 was approximately $2,690,883, $2,681,174, and
$2,507,871, at March 31, 1997 and at December 31, 1996 and 1995, respectively.

The components of interest expense are as follows:

Three Months Ended Year Ended
March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----

NOW accounts $ 17,326 $ 19,914 $ 74,926 $ 87,046 $ 131,319
Money market 41,273 32,559 139,432 147,768 126,021
Savings 18,216 19,326 76,937 76,000 71,526
Certificates of
deposits 225,402 210,049 880,495 744,013 511,345
-------- -------- ---------- ---------- ---------
Deposits 302,217 281,848 1,171,790 1,054,827 840,211
FHLB advances 5,181 5,307 21,460 15,310 7,990
Notes payable 15,426 18,198 69,763 80,544 91,469
-------- -------- ---------- ---------- ---------
Total interest $322,824 $305,353 $1,263,013 $1,150,681 $ 939,670
======== ======== ========== ========== =========

NOTE I -- ADVANCES FROM FEDERAL HOME LOAN BANK

The Corporation's subsidiary had the following advances from the
Federal Home Loan Bank of Des Moines outstanding at March 31, 1997 and at
December 31, 1996 and 1995:

Date of Maturity Interest
Advance Date Rate Amount
3-15-94 3-15-99 6.30% $ 35,000
3-15-94 3-15-00 6.50% 35,000
3-15-94 3-15-01 6.70% 35,000
3-15-94 3-15-02 6.80% 35,000
6-8-95 6-08-98 5.86% 100,000
9-15-95 9-25-98 5.93% 100,000
--------
$340,000
========

Federal agency securities with a market value of $395,691 have been
pledged to secure these advances. Interest rates are fixed to maturity and
may be prepaid with a penalty based on existing interest rates at time
prepayment.

F-43

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE J -- NOTES PAYABLE

Notes payable outstanding at March 31, 1997 and at December 31, 1996
and 1995 are payable to the former stockholders of the subsidiary bank
acquired on July 3, 1990. Principal payments are due annually over a twelve
year period with $50,000 due on July 3, 1991 and $95,000 annually thereafter
on July 3rd until 2001 with the final payment in the amount of $83,218 due on
July 3, 2002. The notes accrue interest at the rate of 10% per annum. The
note indenture requires the Corporation to secure the notes with a letter of
credit. The Corporation has obtained a letter of credit from the Mercantile
Bank of Kansas City to secure the notes at an annual fee equal to 1 1/2% on
the balance due on the notes.

On July 31, 1992, the Corporation entered into a credit facility with
the Mercantile Bank of Kansas City ("Mercantile") whereby Mercantile has
granted a line of credit to the Corporation in the amount of $988,218 for a
five year period ending July 31, 1997. Borrowings under the credit facility
were fixed at a rate of the 8% per annum during the first three years and then
negotiated for borrowings during the remaining two years of the credit
facility. Under terms of the credit facility, the Corporation has pledged all
stock it owns of its subsidiary bank and has agreed to the following
covenants:

1. Payment of dividends to stockholders of the Corporation with
approval of the Federal Reserve Bank of Kansas City.
2. Maintain subsidiary bank's equity capital of at least $1,900,000
and an equity to asset ratio of at least 6.75%.
3. Maintain subsidiary bank's allowance for loan losses to
outstanding loans of at least 1.20%.
4. Not to allow nonperforming assets to, at any time, exceed 20% of
the subsidiary bank's capital.

NOTE K -- INCOME TAXES

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Federal
Current $(20,000) $55,000 $165,000 $121,000 $ 34,000
Deferred 47,000 (15,000) (36,000) (25,000) 13,000
State 4,000 3,000 21,000 23,000 10,000
-------- ------- -------- -------- --------
$ 31,000 $43,000 $150,000 $119,000 $ 57,000
======== ======= ======== ======== ========

In addition, the Corporation recorded deferred income tax to equity
relating to unrealized gains and losses on investment securities available-
for-sale of $2,576, $5,909, $4,719, $4,936, and $10,202, and for the three
month periods ended March 31, 1997 and 1996, and for the years ended December
31, 1996, 1995 and 1994, respectively.

F-44

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE K -- INCOME TAXES Cont'd

The provision for income taxes as shown on the consolidated statements
of income differs from amounts computed by applying the statutory federal
income tax rate of 34% to income before taxes as follows:

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Income tax expense
at statutory rates $27,310 $37,278 $139,912 $109,432 $60,740
Increase (decrease)
in taxes resulting
from:
Tax exempt int (4,357) (4,369) (13,708) (18,583) (17,638)
Amortization of
goodwill 2,265 2,265 9,061 9,061 9,061
Disallowed int 626 523 2,503 2,223 2,360
Dividend exclusion (1,657) (428) (1,894) (2,432) (1,700)
State bank tax 1,280 960 6,762 7,376 3,163
Other 5,533 6,771 (7,364) 11,923 1,014
------- ------- -------- -------- -------
Provision for taxes $31,000 $43,000 $150,000 $119,000 $57,000
======= ======= ======== ======== =======

Effective tax rate 38.6% 39.2% 36.5% 36.9% 31.9%
==== ==== ==== ==== ====

F-45

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE K -- INCOME TAXES - Cont'd

Deferred income taxes reflect the impact of "temporary differences"
between amounts of assets and liabilities for financial purposes and such
amounts as measured by tax laws. Temporary differences which give rise to a
significant portion of deferred tax assets and liabilities included in other
liabilities are as follows:

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
Deferred tax assets
Allowance for
loan losses $49,530 $46,962 $49,530 $46,962 $33,479
Unrealized loss
available for
sale securities 2,576 5,909 4,719 4,936 10,202

Deferred start up cost 865
Deferred tax liabilities
Depreciation (8,124) (9,968) (9,614) (11,810) (14,025)
Allowance for
loan losses
Mark to market (5,446) (5,053) (5,446) (5,053) (11,125)
Accrual to
cash basis (77,475) (79,590) (38,866) (65,688) (60,990)
FHLB stock
dividend (1,152) (1,152) (1,152) (1,152) (448)
Net deferred -------- -------- ------- -------- --------
tax liability ($40,091) ($42,027) ($ 829) ($31,805) ($42,907)
======== ======== ======= ======== ========

NOTE L -- RETAINED EARNINGS

The Corporation is required to maintain minimum amounts of capital to
total "risk weighted" assets, as defined by the banking regulators. The
Corporation is required to have minimum Tier 1 and Total capital ratios of 4%
and 8%, respectively. The Corporation's actual ratios at March 31, 1997 and
December 31, 1996 were as follows:

March 31, December 31,
1997 1996
---- ----

Tier 1 capital ratio 14.1% 14.4%
Total capital ratio 15.5% 15.5%
Leverage capital ratio 7.4% 7.4%

F-46

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE M -- EMPLOYEE BENEFITS

On March 1, 1997, the Corporation has entered into a salary
continuation agreement with two of its officers. These agreements provide for
monthly deferred compensation payments for a period of 180 months following
retirement. The Corporation has purchased life insurance policies to fund
these agreements. Deferred compensation will be charged to operations over
the period to normal retirement age of 65. For the three months ended March
31, 1997, salary continuation expense was $14,748 which included a one-time
surrender charge on purchased life insurance of $13,048.

NOTE N -- FAIR VALUE OF FINANCIAL INSTRUMENTS

On January 1, 1996, the Corporation adopted SFAS No. 107 "Disclosures
about Fair Values of Financial Instruments", which requires disclosure of fair
value information about financial instruments, whether or not recognized in
the statement of financial condition. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do no represent the
underlying value of the Corporation.

The following methods and assumptions were used by the Corporation in
estimating fair values of financial instruments as disclosed herein.

Assets
Cash and due from banks Carrying value
Investment securities Quoted market value
Federal funds sold Carrying value
Stock in FHLB Carrying value
Loans receivable Estimated using discounted
cash flows
Liabilities
Transaction deposit accounts Carrying value
Certificates of deposit Estimated using discounted
cash flows
FHLB advances Estimated using current
rates available to Corp.
Notes payable Estimated using current
rates available to Corp.

F-47

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE N -- FAIR VALUE OF FINANCIAL INSTRUMENTS - cont'd

The estimated fair values of the Corporation's financial instruments at
December 31, 1996 and March 31, 1997 are as follows (in thousands):

1997 1996
Carrying Fair Carrying Fair
Assets Value Value Value Value
Cash and due from banks $ 1,868 $ 1,868 $ 1,890 $ 1,890
Investment securities 14,105 14,038 13,394 13,549
Federal funds sold 850 850 925 925
Loans receivable 15,735 16,083 15,366 15,749
FHLB stock 114 114 114 114
Liabilities
Transaction deposits 13,948 13,948 13,232 13,232
Certificates of deposit 16,606 16,732 16,279 16,451
FHLB advances 340 340 340 340
Notes payable 558 684 558 684

NOTE O -- CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following condensed balance sheet and condensed statements of income
and cash flows for Lafayette Bancshares, Inc. should be read in conjunction
with the consolidated financial statements and the notes thereto, (in
thousands).

March 31, December 31,
1997 1996 1995
---- ---- ----
BALANCE SHEET
Assets
Cash due from subsidiary bank $ 9 $ 8 $ 8
Investment in subsidiary 2,282 2,254 2,105
Cost in excess of net book value
of subsidiary bank acquired 263 268 291
Other assets 4 12 8
------ ------ ------
Total assets $2,558 $2,542 $2,412
====== ====== ======
Liabilities
Notes payable $ 558 $ 558 $ 653
Other liabilities 10 5 8
------ ------ ------
Total liabilities 568 563 661
Stockholders' equity 1,990 1,979 1,751
------ ------ ------
Total liabilities and
stockholders' equity $2,558 $2,542 $2,412
====== ====== ======

F-48

Lafayette Bancshares, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)

NOTE O -- CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS cont'd

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
STATEMENT OF INCOME
Income from subsidiary:
Dividends $ 45 $ 32 $ 191 $ 179 $ 152
Equity in earnings 20 55 150 103 60
Other income 5 0 0 5 0
------ ----- ------ ----- ------
Total income 70 87 341 287 212
Operating expenses 25 25 103 109 122
Income tax (benefit) (4) (5) (23) (25) (31)
------ ----- ------ ----- ------
Net income $ 49 $ 67 $ 261 $ 203 $ 121

March 31, December 31,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
STATEMENT OF CASH FLOWS
Cash flows from operating
activities
Net income $ 49 $ 67 $ 261 $ 203 $ 121
Items not providing or using
Cash:
Amortization of goodwill 6 6 23 23 23
Amortization of letter of
credit fees 2 2 9 11 12
Amortization of deferred
acquisition cost 0 0 0 2 4
Equity in earning of
subsidiary (20) (55) (150) (103) (60)
Other, net 9 7 (6) 3 10
--- --- ---- ---- ----
Net Cash Provided 46 27 137 139 110
Cash flows from investing
activities
Purchase of bank stock 0 0 0 0 (24)
Letter of credit fees 0 0 (8) (10) (11)
--- --- ---- ---- ----
Cash Used 0 0 (8) (10) (35)
Cash flows from financing
activities
Repayment of notes payable 0 0 (95) (95) (95)
Cash dividends paid (45) (34) (34) (28) (28)
--- --- ---- ---- ----
Cash Used (45) (34) (129) (123) (123)
Increase (decrease) in cash 1 (7) 0 6 (48)
Beginning cash balance 8 8 8 2 50
--- --- ---- ---- ----
Ending cash balance $ 9 $ 1 $ 8 $ 8 $ 2
=== === ==== ==== ====

F-49

APPENDIX A

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of the 12th day of March 1997
(this "Agreement"), by and among LEXINGTON B & L FINANCIAL CORP. (the
"Company"), LAFAYETTE BANCSHARES, INC. ("Lafayette") and LAFAYETTE COUNTY BANK
OF LEXINGTON/WELLINGTON (the "Bank").

RECITALS:

(A) THE COMPANY. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Missouri, with its
principal executive offices located in Lexington, Missouri. As of the date
hereof, the Company has 8,000,000 authorized shares of common stock of $.01
par value per share ("Company Common Stock") and 500,000 shares of preferred
stock of $.01 par value per share ("Company Preferred Stock") (no other class
of capital stock being authorized), of which 1,265,000 shares of Company
Common Stock and no shares of Company Preferred Stock are issued and
outstanding.

(B) LAFAYETTE. Lafayette is a corporation duly organized and
existing in good standing under the laws of the State of Missouri, with its
principal executive offices located in Lexington, Missouri. Lafayette is a
registered bank holding company with the Board of Governors of the Federal
Reserve System ("Federal Reserve Board") under the Bank Holding Company Act,
as amended. As of the date hereof, Lafayette has 1,250,000 authorized shares
of common stock of $1.00 par value per share ("Lafayette Common Stock") (no
other class of capital stock being authorized), of which 1,129,500 shares of
Lafayette Common Stock are issued and outstanding.

(C) THE BANK. The Bank is a commercial bank duly organized and
existing in good standing under the laws of the State of Missouri, with its
principal executive offices located in Lexington, Missouri. As of the date
hereof, the Bank has 720 authorized shares of common stock of $100.00 par
value per share ("the Bank Common Stock") (no other class of capital stock
being authorized), of which 720 shares of the Bank Common Stock are issued and
outstanding. As of the date hereof, 676.834 shares of Bank Common Stock are
owned by Lafayette.

(D) VOTING AGREEMENT. As a condition and an inducement to the
Company's willingness to enter into this Agreement, Donald L. Coen, Terry L.
Thompson, Ranie Thompson, William J. Huhmann and Robert F. Jackson have
entered into agreements with the Company pursuant to which, among other
things, they have agreed to vote in favor of approval of the transactions
contemplated by this Agreement at the Meeting (as hereinafter defined).

(E) RIGHTS, ETC. Except as Previously Disclosed in Schedule 4.01(C),
there are no shares of capital stock of Lafayette or the Bank authorized and
reserved for issuance, neither Lafayette nor the Bank has any Rights (as
defined below) issued or outstanding and neither Lafayette nor the Bank has
any commitment to authorize, issue or sell any such shares or any Rights,
except pursuant to this Agreement. The terms "Rights" means securities or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, shares of capital stock. There are no preemptive rights in
respect of Lafayette Common Stock or Bank Common Stock.

(F) APPROVALS. The Board of Directors of each of Lafayette, the
Bank, and the Company has approved, at meetings of each of such Boards of
Directors, this Agreement and has authorized the execution hereof in
counterparts.

In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement and prescribe the terms and conditions
thereof and the manner and basis of carrying it into effect, which shall be as
follows:

I. THE MERGER

1.01. THE MERGER. Subject to the provisions of this Agreement, at the
Effective Time (as hereinafter defined):

(A) THE CONTINUING CORPORATION. Lafayette shall be merged into a
wholly-owned subsidiary of the Company (the "Merger Co.") pursuant to the
terms and conditions set forth herein and pursuant to the Plan of Merger
attached hereto as Exhibit A (the "Merger"). Upon consummation of the Merger,
the separate existence of Lafayette shall cease and Merger Co. (the
"Continuing Corporation") shall survive.

(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities and franchises,
of a public as well as of a private nature, of each of the merging
corporations; and all property, real, personal and mixed, and all debts due on
whatever account, and all other chooses in action, and all and every other
interest, of or belonging to or due to each of the corporations so merged,
shall be deemed to be vested in the Continuing Corporation without further act
or deed; and the title to any real estate or any interest therein, vested in
each of such corporations, shall not revert or be in any way impaired by
reason of the Merger.

(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged, in accordance with applicable law.

(D) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Articles of Incorporation and Bylaws of the Continuing Corporation shall be
those of Merger Co., as in effect immediately prior to the Merger becoming
effective. The directors and officers of Merger Co. in office immediately
prior to the Merger becoming effective shall be the directors and officers of
the Continuing Corporation, together with such additional directors and
officers as may thereafter be elected, who shall hold office until such time
as their successors are elected and qualified.

1.02. EFFECTIVE DATE. Subject to the conditions to the obligations of
the parties to effect the Merger as set forth in Article VI, the effective
date (the "Effective Date") of the Merger shall be such date as the Company
shall notify Lafayette in writing not less than five days prior thereto, which
date shall not be more than 30 days after such conditions have been satisfied
or waived in writing. Prior to the Effective Date, the Company and Lafayette
shall execute and deliver to the Secretary of State of the State of Missouri,
Articles of Merger in accordance with applicable law. The time on the
Effective Date at which the Merger becomes effective is referred to as the
"Effective Time."

II. CONSIDERATION

2.01. MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time:

(A) OUTSTANDING MERGER CO. COMMON STOCK. The shares of common stock
of Merger Co. issued and outstanding immediately prior to the Effective Time
shall, on and after the Effective Time, remain as issued and outstanding
shares of common stock of Merger Co.

(B) OUTSTANDING LAFAYETTE COMMON STOCK. Each share (excluding (i)
shares ("Dissenters' Shares") that have not been voted in favor of approval of
this Agreement and with respect to which dissenters' rights have been
perfected in accordance with Section 351.455 of the Missouri General and
Business Corporation Law (the "MGBCL") or (ii) shares held by Lafayette or any
of its subsidiaries or by the Company or any of its subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted ("Excluded Shares")) of Lafayette Common Stock issued and
outstanding immediately prior to the Effective Time shall become and be
converted into the right to receive $0.92 in cash plus a number of shares of
Company Common Stock equal to the Exchange Ratio.

A-2

The "Exchange Ratio" shall be equal (rounded to the nearest
ten-thousandth) to: (i) .0977 if the Company Price (as defined below) is
greater than $12.00 and less than $14.00, (ii) the result obtained by dividing
$1.17 by the Company Price if the Company Price is $12.00 or less; or (iii)
the result obtained by dividing $1.37 by the Company Price if the Company
Price is $14.00 or greater. The "Company Price" shall be the average last
price per share of Company Common Stock as reported in The Wall Street Journal
for each of the twenty trading days immediately preceding the Effective Date.
In the event the Company Common Stock does not trade on one or more of the
trading days in such period, any such date shall be disregarded in computing
the average last price per share and the average shall be based upon the last
price per share and number of days on which Company Common Stock actually
traded during such period.

2.02. SHAREHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time,
holders of Lafayette Common Stock shall cease to be, and shall have no rights
as, stockholders of Lafayette, other than to receive the Merger Consideration
provided under this Article II. After the Effective Time, there shall be no
transfers on the stock transfer books of Lafayette or the Continuing
Corporation of the shares of Lafayette Common Stock which were issued and
outstanding immediately prior to the Effective Date.

2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof,
no fractional shares of Company Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Merger; instead, the Company shall pay to each holder of Lafayette Common
Stock who would otherwise be entitled to a fractional share an amount in cash
determined by multiplying such fraction by a number equal to (i) $0.92 plus
(ii) the Company Price multiplied by the Exchange Ratio.

2.04 EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Date, the Company shall send or cause to be sent to each former
shareholder of Lafayette of record immediately prior to the Effective Date
transmittal materials for use in exchanging such shareholder's certificates
for Lafayette Common Stock for the consideration set forth in this Article II.
The certificates representing the shares of Company Common Stock into which
shares of such shareholder's Lafayette Common Stock are converted on the
Effective Date, a check in the amount equal to the cash which such holder has
the right to receive pursuant to the provisions of this Article II (including
any cash in lieu of fractional shares of the Company pursuant to Section
2.03), and any dividends paid on such shares of Company Common Stock for which
the record date for determination of shareholders entitled to such dividends
is on or after the Effective Date, will be delivered to such shareholder only
upon delivery to an independent exchange agent selected by the Company (the
"Exchange Agent") of the certificates representing all of such shares of
Lafayette Common Stock (or indemnity satisfactory to the Company and the
Exchange Agent, in their judgement, if any of such certificates are lost,
stolen or destroyed). No interest will be paid on any cash or dividends to
which the holder of such shares shall be entitled to receive upon such
delivery. Certificates surrendered for exchange by any person constituting an
"affiliate" of Lafayette for purposes of Rule 145 of the Securities Act of
1933, as amended ("Securities Act"), shall not be exchanged for certificates
representing Company Common Stock until the Company has received a written
agreement from such person as specified in Section 5.17.

2.05. ANTI-DILUTION PROVISIONS. In the event the Company changes the
number of shares of Company Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization
or similar transaction with respect to the outstanding Company Common Stock
and the record date therefor shall be prior to the Effective Date, the Merger
Consideration shall be proportionately adjusted.

2.06. EXCLUDED SHARES; DISSENTERS' SHARES. Each of the Excluded Shares
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor. Dissenters' Shares shall be purchased and
paid for in accordance with Section 351.455 of the MGBCL.

2.07. RESERVATION OF RIGHT TO REVISE TRANSACTION. The Company may at
any time change the method of effecting the acquisition of Lafayette and the
Bank by the Company (including without limitation the provisions of this
Article II) if and to the extent it deems such change to be desirable;
PROVIDED,
A-3

HOWEVER, that no such change shall (i) alter or change the amount or kind of
consideration to be issued to holders of Lafayette Common Stock as provided
for in this Agreement or (ii) adversely affect the tax treatment to Lafayette
shareholders as a result of receiving such consideration.

III. ACTIONS PENDING CONSUMMATION

Without the prior written consent of the Company, each of Lafayette and
the Bank shall conduct its and each of the Lafayette Subsidiaries' (as
hereinafter defined) business in the ordinary and usual course consistent with
past practice and shall use its best efforts to maintain and preserve its and
each of the Lafayette Subsidiaries' business organization, employees and
advantageous business relationships and retain the services of its and each of
its Subsidiaries' officers and key employees, and each of Lafayette and the
Bank will not, and will cause each of the Lafayette Subsidiaries not to, agree
to:

3.01. CAPITAL STOCK. Except for or as otherwise permitted in or
expressly contemplated by this Agreement or as Previously Disclosed in
Schedule 4.01(C), issue, sell or otherwise permit to become outstanding any
additional shares of capital stock of Lafayette, the Bank or any Lafayette
Subsidiary, or any Rights with respect thereto, or enter into any agreement
with respect to the foregoing, or permit any additional shares of Lafayette
Common Stock to become subject to grants of employee stock options, stock
appreciation rights or similar stock based employee compensation rights.

3.02. DIVIDENDS, ETC. Make, declare or pay any dividend on or in
respect of, or declare or make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock or, other than as permitted in or contemplated by this
Agreement, authorize the creation or issuance of, or issue, any additional
shares of its capital stock or any Rights with respect thereto.

3.03. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary
course of business consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for the obligations of any other individual,
corporation or other entity.

3.04. LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Except as may be
directed by any regulatory agency, (i) change its lending, investment,
liability management or other material banking policies in any material
respect, except such changes as are in accordance and in an effort to comply
with Section 5.10, or (ii) commit to incur any further capital expenditures
beyond those Previously Disclosed in Schedule 3.04 other than in the ordinary
course of business and not exceeding $10,000 individually or $15,000 in the
aggregate.

3.05. LIENS AND ENCUMBRANCES. Impose, or suffer the imposition, on any
shares of capital stock of any of the Lafayette Subsidiaries, or on any of its
or the Lafayette Subsidiaries' other assets, any lien, charge or encumbrance,
or permit any such lien, charge or encumbrance to exist.

3.06. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in Schedule 3.06, enter into or amend any employment, severance or
similar agreement or arrangement with any of its directors, officers or
employees, or grant any salary or wage increase, amend the terms of any stock
option or increase any employee benefit (including incentive or bonus
payments), except normal individual increases in regular compensation to
employees in the ordinary course of business consistent with past practice.

3.07. BENEFIT PLANS. Except as Previously Disclosed in Schedule 3.07,
enter into or modify (except as may be required by applicable law) any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
other employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable thereunder.

A-4

3.08. CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion
of its assets, business or properties, which is material to Lafayette and the
Lafayette Subsidiaries taken as a whole, or merge or consolidate with, or
acquire all or any portion of, the business or property of any other entity
which is material to Lafayette and the Lafayette Subsidiaries taken as a whole
(except foreclosures or acquisitions by the Bank in a fiduciary capacity, in
each case in the ordinary course of business consistent with past practice).

3.09. AMENDMENTS. Amend its Articles of Incorporation, Charter or
Bylaws.

3.10. CLAIMS. Settle any claim, litigation, action or proceeding
involving any liability for money damages in excess of $25,000 or restrictions
upon the operations of Lafayette or any Lafayette Subsidiary.

3.11 CONTRACTS. Except as previously disclosed on Schedule 3.11,
enter into, renew, terminate or make any change in any material contract,
agreement or lease, except in the ordinary course of business consistent with
past practice with respect to contracts, agreements and leases that are
terminable by it without penalty on more than 60 days prior written notice.

3.12. LOANS. Extend credit other than in accordance with existing
lending policies, except that the Bank shall not, without the prior written
consent of the Company, make any new loan or modify, restructure or renew any
existing loan to any borrower if the amount of the resulting loan, when
aggregated with all other loans or extensions of credit to such person (or
which would be required to be aggregated for loans to one borrower
limitations) would be in excess of $150,000.

IV. REPRESENTATIONS AND WARRANTIES

4.01. REPRESENTATIONS AND WARRANTIES OF LAFAYETTE AND THE BANK. Each
of Lafayette and the Bank hereby represents and warrants to the Company as
follows:

(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.

(B) ORGANIZATION, STANDING AND AUTHORITY. It is duly qualified to do
business and is in good standing in the States of the United States and
foreign jurisdictions where the failure to be duly qualified, individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect (as
hereinafter defined) on it. Each of Lafayette and the Lafayette Subsidiaries
has in effect all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease its properties and assets and
to carry on its business as it is now conducted, the absence of which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it.

(C) SHARES. The outstanding shares of it are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive
rights. Except as Previously Disclosed in Schedule 4.01(C), there are no
shares of capital stock or other equity securities of Lafayette or the Bank
outstanding and no outstanding Rights with respect thereto.

(D) LAFAYETTE SUBSIDIARIES. Lafayette has Previously Disclosed in
Schedule 4.01(D) a list of all the subsidiaries of Lafayette (each a
"Lafayette Subsidiary" and, collectively, the "Lafayette Subsidiaries"). Each
of the Lafayette Subsidiaries that is a commercial bank is an "insured
depository institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder. No equity securities of any of the
Lafayette Subsidiaries are or may become required to be issued (other than to
Lafayette or a wholly-owned Lafayette Subsidiary) by reason of any Rights with
respect thereto. There are no contracts, commitments, understandings or
arrangements by which any of the Lafayette Subsidiaries is or may be bound to
sell or otherwise issue any shares of its capital stock, and there are no
contracts, commitments, understandings or arrangements relating to the rights
of Lafayette or the Bank,

A-5

as applicable, to vote or to dispose of such shares. All of the shares of
capital stock of each Lafayette Subsidiary held by Lafayette or a Lafayette
Subsidiary are fully paid and nonassessable and are owned by Lafayette or a
Lafayette Subsidiary free and clear of any charge, mortgage, pledge, security
interest, restriction, claim, lien or encumbrance. Each Lafayette Subsidiary
is in good standing under the laws of the jurisdiction in which it is
incorporated or organized, and is duly qualified to do business and in good
standing in the jurisdictions where the failure to be duly qualified is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on it. Except as Previously Disclosed in Schedule 4.01(D),
Lafayette does not own beneficially, directly or indirectly, any shares of any
equity securities or similar interests of any corporation, bank, partnership,
joint venture, business trust, association or other organization. The
deposits of the Bank are insured by the Bank Insurance Fund (the "BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"). The Bank is a member in
good standing with the FHLB of Des Moines and the Federal Reserve Bank of
Kansas City.

(E) CORPORATE POWER. It and each of the Lafayette Subsidiaries has
the corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.

(F) CORPORATE AUTHORITY. Subject to any necessary receipt of
approval by its stockholders referred to in Section 6.01, this Agreement has
been authorized by all necessary corporate action of it and is a valid and
binding agreement of it enforceable against it in accordance with its terms,
subject as to enforcement as to bankruptcy, insolvency and other similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.

(G) NO DEFAULTS. Subject to the approval by its shareholders
referred to in Section 6.01, the required regulatory approvals referred to in
Section 6.02, and the required filings under federal and state securities
laws, and except as Previously Disclosed in Schedule 4.01(G), the execution,
delivery and performance of this Agreement and the consummation by it of the
transactions contemplated hereby, does not and will not (i) constitute a
breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it or of any of the Lafayette Subsidiaries or to
which it or any of the Lafayette Subsidiaries or its or their properties is
subject or bound, which breach, violation or default is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on it,
(ii) constitute a breach or violation of, or a default under, its Articles of
Incorporation, Charter or Bylaws, or (iii) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license or the consent or approval of any other party to any such
agreement, indenture or instrument, other than any such consent or approval,
which if not obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Lafayette.

(H) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.01(H), (i) as to Lafayette, its consolidated balance sheet as of December
31, 1996 and 1995 and related consolidated statements of income and changes in
stockholders' equity and cash flows for the years ended December 31, 1996,
1995 and 1994, and (ii) as to the Bank, its call report for the fiscal year
ended December 31, 1996, and all other financial reports filed or to be filed
subsequent to December 31, 1996, in the form filed with the FDIC and the
Missouri State Division of Finance ("Division") (together, the "Lafayette
Financial Reports") did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the Lafayette Financial
Reports (including the related notes and schedules thereto) fairly presents
and will fairly present the financial position of the entity or entities to
which it relates as of its date and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements in the
Lafayette Financial Reports (including any related notes and schedules
thereto) fairly presents and will fairly present the results of operations,
changes in stockholders' equity and cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as may
be noted therein.

A-6

(I) ABSENCE OF UNDISCLOSED LIABILITIES. None of Lafayette or the
Lafayette Subsidiaries has any obligation or liability (contingent or
otherwise) that, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on it, except (i) as reflected in Lafayette
Financial Reports prior to the date of this Agreement, and (ii) for
commitments and obligations made, or liabilities incurred, in the ordinary
course of its business consistent with past practice since December 31, 1996.
Since December 31, 1996, none of Lafayette or the Lafayette Subsidiaries has
incurred or paid any obligation or liability (including any obligation or
liability incurred in connection with any acquisitions in which any form of
direct financial assistance of the federal government or any agency thereof
has been provided to any Lafayette Subsidiary) which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.

(J) NO EVENTS. Except as Previously Disclosed on Schedule 4.01(J),
since December 31, 1996, no events have occurred which, individually or in the
aggregate, have had or are reasonably likely to have a Material Adverse Effect
on it.

(K) PROPERTIES. Except as reserved against in the Lafayette
Financial Reports, Lafayette and the Lafayette Subsidiaries have good and
marketable title, free and clear of all liens, encumbrances, charges,
defaults, or equities of any character, to all of the properties and assets,
tangible and intangible, reflected in the Lafayette Financial Reports as being
owned by Lafayette or the Lafayette Subsidiaries as of the dates thereof other
than those that, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on it, except those properties or assets
sold or otherwise disposed of in the ordinary course of business. All
buildings and all material fixtures, equipment, and other property and assets
which are held under leases or subleases by any of Lafayette or Lafayette
Subsidiaries are held under valid leases or subleases enforceable in
accordance with their respective terms, other than any such exceptions to
validity or enforceability that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on Lafayette.

(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.01(L), no litigation, proceeding or controversy before any court or
governmental agency is pending which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Lafayette or which
alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened; and except as
Previously Disclosed in Schedule 4.01(L), neither it nor any of the Lafayette
Subsidiaries or any of its or their material properties or their officers,
directors or controlling persons is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with, or
a commitment letter or similar submission to, any federal or state
governmental agency or authority charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits (together with
any and all agencies or departments of federal, state or local government
(including, without limitation, the Division, the FHL Bank, the Federal
Reserve Board, the FDIC and any other federal or state bank, or other
financial institution, insurance and securities regulatory authorities, the
"Regulatory Authorities")) and neither it nor any of the Lafayette
Subsidiaries has been advised by any of such Regulatory Authorities that such
authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum or understanding, commitment letter or similar submission.

(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in Schedule
4.01(M), each of Lafayette and the Lafayette Subsidiaries:

(1) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Regulatory Authorities that are required
in order to permit it to own its businesses presently conducted
and that are material to the business of Lafayette and the
Lafayette Subsidiaries taken as a whole; all such permits,
licenses, certificates of authority, orders and approvals are in
full force and effect and, to the best of its knowledge, no
suspension
A-7

or cancellation of any of them is threatened; and all
such filings, applications and registrations are current;

(2) has received no notification or communication from any
Regulatory Authority or the staff thereof (i) asserting that any
of Lafayette or the Lafayette Subsidiaries is not in compliance
with any of the statutes, regulations or ordinances which such
Regulatory Authority enforces, which, as a result of such
noncompliance in any such instance, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect
on Lafayette, (ii) threatening to revoke any license, franchise,
permit or governmental authorization, which revocation,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Lafayette, or (iii) requiring any of
Lafayette or the Lafayette Subsidiaries (or any of its officers,
directors or controlling persons) to enter into a cease and
desist order, agreement or memorandum of understanding (or
requiring the board of directors thereof to adopt any resolution
or policy);

(3) is not required to give prior notice to any federal
banking or thrift agency of the proposed addition of an
individual to its board of directors or the employment of an
individual as a senior executive; and

(4) is in compliance in all material respects with all fair
lending laws or other laws relating to discrimination, including,
without limitation, the Truth in Lending Act, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act and the Home Mortgage Disclosure Act.

(N) MATERIAL CONTRACTS.

(1) Except as Previously Disclosed in Schedule 4.01(N), (and
with a true and correct copy of the document or other item in
question attached to such Schedule), neither Lafayette nor any
Lafayette Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):

(i) any agreement, arrangement or commitment (a) not
made in the ordinary course of business or (b) pursuant to which
Lafayette or any Lafayette Subsidiary is or may become obligated
to invest in or contribute capital to any Lafayette Subsidiary or
any other entity;

(ii) any agreement, indenture or other instrument not
disclosed in the Lafayette Financial Reports relating to the
borrowing of money by Lafayette or any Lafayette Subsidiary or
the guarantee by Lafayette or any Lafayette Subsidiary of any
such obligation (other than trade payables or instruments related
to transactions entered into in the ordinary course of business
by any Lafayette Subsidiary, such as deposits, Fed Funds
borrowings and repurchase agreements);

(iii) any contract containing covenants that limit the
ability of Lafayette or any Lafayette Subsidiary to compete in
any line of business or with any person or containing any
restriction of the geographical area in which, or method by
which, Lafayette or any Lafayette Subsidiary may carry on its
business (other than as may be required by law or any applicable
Regulatory Authority);

(iv) any contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K
promulgated by the Securities and Exchange Commission ("SEC");

(v) any lease with annual rental payments aggregating
$10,000 or more;
A-8

(vi) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the
ordinary course of business) involving the payment of more than
$10,000 per annum;

(vii) any agreement with any executive officer or other
key employee of Lafayette or any Lafayette Subsidiary the
benefits of which are contingent, or the terms of which are
materially altered or any payments or rights are accelerated,
upon the occurrence of a transaction involving Lafayette or any
of Lafayette Subsidiaries of the nature contemplated by this
Agreement;

(viii) any agreement with respect any executive officer of
Lafayette or any Lafayette Subsidiary providing any term of
employment or compensation guarantee extending for a period
longer than one year and for the payment of in excess of $50,000
per annum; or

(ix) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement.

(2) Except as Previously Disclosed on Schedule 4.01(N), no
officer or director of Lafayette or any "associate" (as such
term is defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of any such officer or
director, has any material interest in any material contract or
property (real or personal), tangible or intangible, used in or
pertaining to the business of Lafayette or any Lafayette
Subsidiary.

(3) None of Lafayette or the Lafayette Subsidiaries is in
default under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a
party, by which its respective assets, business or operations may
be bound or affected, or under which it or any of its respective
assets, business or operations receives benefits, which default,
individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on Lafayette, and there has not occurred
any event that, with the lapse of time or the giving of notice or
both, would constitute such a default. Except as Previously
Disclosed in Schedule 4.01(N), neither Lafayette nor any
Lafayette Subsidiary is subject to or bound by any contract
containing covenants which limit the ability of Lafayette or any
Lafayette Subsidiary to compete in any line of business or with
any person or which involve any restriction of geographical area
in which, or method by which, Lafayette or any Lafayette
Subsidiary may carry on its business (other than as may be
required by law or any applicable Authority).

(O) REPORTS. Since January 1, 1992, each of Lafayette and the
Lafayette Subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the FDIC, (ii) the Division, (iii) the FHL Bank and the FHL Bank
System, (iv) the Federal Reserve Board and (v) any other applicable Regulatory
Authorities. As of their respective dates (and without giving effect to any
amendments or modifications filed after the date of this Agreement with
respect to reports and documents filed before the date of this Agreement),
each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the Regulatory
Authority with which they were filed and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.

(P) NO BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by it directly with the
other parties hereto and no action has been taken by it that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment.
A-9

(Q) EMPLOYEE BENEFIT PLANS.

(1) Schedule 4.01(Q)(1) contains a complete list of all bonus,
deferred compensation, pension, retirement, profit-sharing,
thrift savings, employee stock ownership, stock bonus, stock
purchase restricted stock and stock option plans, all employment
or severance contracts, all medical, dental, health and life
insurance plans, all other employee benefit plans, contracts or
arrangements and any applicable "change of control" or similar
provisions in any plan, contract or arrangement maintained or
contributed to by it or any of the Lafayette Subsidiaries for the
benefit of employees, former employees, directors, former
directors or their beneficiaries (the "Compensation and Benefit
Plans"). True and complete copies of all Compensation and
Benefit Plans, including, but not limited to, any trust
instruments and/or insurance contracts, if any, forming a part
thereof, and all amendments thereto have been supplied to the
Company.

(2) All "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA ("Multiemployer Plans"),
covering employees or former employees of it and the Lafayette
Subsidiaries (the "ERISA Plans"), to the extent subject to ERISA,
are in substantial compliance with ERISA. Except as Previously
Disclosed in Schedule 4.01(Q)(2) each ERISA Plan which is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986 (as amended, the "Code") has received a favorable
determination letter from the Internal Revenue Service, and it is
not aware of any circumstances reasonably likely to result in the
revocation or denial of any such favorable determination letter
or the inability to receive such a favorable determination
letter. There is no material pending or, to its knowledge,
threatened litigation relating to the ERISA Plans. Neither it
nor any of the Lafayette Subsidiaries has engaged in a
transaction with respect to any ERISA Plan that could subject it
or any of the Lafayette Subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in
an amount which would be material.

(3) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by it or any of the
Lafayette Subsidiaries with respect to any ongoing, frozen or
terminated "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is
considered one employer with it under Section 4001(a)(15) of
ERISA or Section 414 of the Code (an "ERISA Affiliate"). Neither
it nor any of the Lafayette Subsidiaries presently contributes to
a Multiemployer Plan, nor have they contributed to such a plan
within the past five calendar years. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA
Affiliate within the past 12-month period.

(4) All contributions required to be made under the terms of
any ERISA Plan have been timely made. Neither any Pension Plan
nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither it nor any of the Lafayette Subsidiaries has provided, or
is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.

(5) Under each Pension Plan which is a single-employer plan,
as of the last day of the most recent plan year, the actuarially
determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the
basis of the actuarial assumptions contained in the plan's most
recent actuarial valuation) did not exceed the then current value
of
A-10

the assets of such plan, and there has been no material change
in the financial condition of such plan since the last day of the
most recent plan year.

(6) Neither it nor any of the Lafayette Subsidiaries has any
obligations for retiree health and life benefits under any plan,
except as set forth in Schedule 4.01(Q)(6). There are no
restrictions on the rights of it or any of the Lafayette
Subsidiaries to amend or terminate any such plan without
incurring any liability thereunder.

(7) Except as Previously Disclosed in Schedule 4.01(Q)(7),
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of it or any of the
Lafayette Subsidiaries under any Compensation and Benefit Plan or
otherwise from it or any of the Lafayette Subsidiaries, (ii)
increase any benefits otherwise payable under any Compensation
and Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.

(R) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in Section 6.02 should not be obtained.

(S) LABOR AGREEMENTS. Neither it nor any Lafayette Subsidiary is a
party to, or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is it or any Lafayette Subsidiary the subject of a proceeding asserting that
it or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or such
subsidiary to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike or other labor dispute involving it or
any Lafayette Subsidiary, pending or, to the best of its knowledge,
threatened, nor is it aware of any activity involving its or any Lafayette
Subsidiary's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.

(T) ASSET CLASSIFICATION. It has Previously Disclosed in Schedule
4.01(T) a list, accurate and complete in all material respects, of the
aggregate amounts of loans, extensions of credit or other assets of Lafayette
and the Lafayette Subsidiaries that have been classified by it as of December
31, 1996 (the "Asset Classification"); and no amounts of loans, extensions of
credit or other assets that have been classified as of December 31, 1996 by
any regulatory examiner as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful," "Loss," or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans, extensions
of credit or other assets that were charged off by Lafayette or any Lafayette
Subsidiary prior to December 31, 1996.

(U) ALLOWANCE FOR LOAN AND LEASE LOSSES. The allowance for loan and
lease losses shown on the consolidated balance sheets of Lafayette included in
the December 31, 1996 Lafayette Financial Reports was, and the allowance for
possible loan losses to be shown on subsequent Lafayette Financial Reports,
will be, adequate in the opinion of the Board of Directors, to provide for
possible losses, net of recoveries relating to loans previously charged off,
on loans outstanding (including accrued interest receivable) as of the date
thereof.

(V) INSURANCE. Each of Lafayette and the Lafayette Subsidiaries has
taken all requisite action (including without limitation the making of claims
and the giving of notices) pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all rights thereunder with
respect to all matters that are known to Lafayette, except for such matters
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it. Previously Disclosed in Schedule 4.01(V) is a
list of all insurance policies maintained by or for the benefit of Lafayette
or the Lafayette Subsidiaries or their directors, officers, employees or
agents.
A-11

(W) STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. It has taken all
necessary action to exempt this Agreement and the transactions contemplated
hereby and thereby from, and this Agreement and the transactions contemplated
hereby are exempt from, (i) any applicable state takeover laws, including
Section 351.459 of the MGBCL, and (ii) any supermajority provisions or other
provisions imposing special conditions on business combinations contained in
Lafayette's Articles of Incorporation.

(X) NO FURTHER ACTION. It has taken all action so that the entering
into of this Agreement and the consummation of the transactions contemplated
hereby (including without limitation the Merger), or any other action or
combination of actions, or any other transactions, contemplated hereby or
thereby do not and will not (i) require a vote of shareholders (other than as
set forth in Section 6.01), or (ii) result in the grant of any rights to any
person under the Articles of Incorporation, Charter or Bylaws of Lafayette or
any Lafayette Subsidiary or under any agreement to which Lafayette or any
Lafayette Subsidiary is a party, or (iii) restrict or impair in any way the
ability of the Company to exercise the rights granted hereunder.

(Y) ENVIRONMENTAL MATTERS.

(1) To its knowledge, it and each of the Lafayette
Subsidiaries, the Participation Facilities and the Loan/Fiduciary
Properties (each as defined below) are, and have been, in
compliance with all Environmental Laws (as defined below), except
for instances of noncompliance which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on Lafayette.

(2) There is no proceeding pending or, to its knowledge,
threatened before any court, governmental agency or board or
other forum in which it or any of the Lafayette Subsidiaries or
any Participation Facility has been, or with respect to
threatened proceedings, reasonably would be expected to be, named
as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any
Environmental Law, or (ii) relating to the release or threatened
release into the environment of any Hazardous Material (as
defined below), whether or not occurring at or on a site owned,
leased or operated by it or any of the Lafayette Subsidiaries or
any Participation Facility, except for such proceedings pending
or threatened that are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on it or have
been Previously Disclosed in Schedule 4.01(Y)(2).

(3) There is no proceeding pending or, to its knowledge,
threatened before any court, governmental agency or board or
other forum in which any Loan/Fiduciary Property (or it or any of
the Lafayette Subsidiaries in respect of any Loan/Fiduciary
Property) has been, or with respect to threatened proceedings,
reasonably would be expected to be, named as a defendant or
potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or
(ii) relating to the release or threatened release into the
environment of any Hazardous Material, whether or not occurring
at or on a Loan/Fiduciary Property, except for such proceedings
pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse
Effect on it or have been Previously Disclosed in Schedule
4.01(Y)(3).

(4) To its knowledge, there is no reasonable basis for any
proceeding of a type described in subparagraphs (2) or (3) above,
except as has been Previously Disclosed in Schedule 4.01(Y)(4).

(5) To its knowledge, during the period of (i) its or any of
the Lafayette Subsidiaries' ownership or operation of any of
their respective current properties, (ii) its or any of the
Lafayette Subsidiaries' participation in the management of any
Participation Facility, or (iii) its or any of Lafayette
Subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there have been no releases of Hazardous
Material in, on, under or affecting any such property,
Participation Facility or Loan/Fiduciary Property, except for
such releases that are not reasonably

A-12
PAGE

likely, individually or in the aggregate, to have a Material
Adverse Effect on it or have been Previously Disclosed in
Schedule 4.01(Y)(5).

(6) To its knowledge, prior to the period of (i) its or any of
the Lafayette Subsidiaries' ownership or operation of any of
their respective current properties, (ii) its or any of the
Lafayette Subsidiaries' participation in the management of any
Participation Facility, or (iii) its or any of the Lafayette
Subsidiaries' holding of a security or other interest in a
Loan/Fiduciary Property, there were no releases of Hazardous
Material in, on, under or affecting any such property,
Participation Facility or Loan/Fiduciary Property, except for
such releases that are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on it or have
been Previously Disclosed in Schedule 4.01(Y)(6).

(7) The following definitions apply for purposes of this
Section 4.01(Y): "Loan/Fiduciary Property" means any property
owned or controlled by it or any of the Lafayette Subsidiaries or
in which it or any of the Lafayette Subsidiaries holds a security
or other interest, and, where required by the context, includes
any such property where Lafayette or any of the Lafayette
Subsidiaries constitutes the owner or operator of such property,
but only with respect to such property; "Participation Facility"
means any facility in which it or any of the Lafayette
Subsidiaries participates in the management and, where required
by the context, includes the owner or operator of such property,
but only with respect to such property; "Environmental Law" means
(i) any federal, state and local law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, judgment, decree, injunction,
requirement or agreement with any governmental entity, relating
to (a) the protection, preservation or restoration of the
environment, (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (b) the exposure to,
or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Material, in each case as
amended and as now in effect and includes, without limitation,
the Federal Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control
Act, and the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as
amended and as now in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass
and strict liability) that may impose liability or obligations
for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; "Hazardous
Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or quantity, and includes, without limitation,
any oil or other petroleum product, toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous
waste, special waste or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos
containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.

(Z) TAX REPORTS. Except as Previously Disclosed in Schedule 4.01(Z),
(i) all reports and returns with respect to Taxes (as defined below) that are
required to be filed by or with respect to it or the Lafayette Subsidiaries,
including without limitation consolidated federal income tax returns of it and
the Lafayette Subsidiaries (collectively, the "Lafayette Tax Returns"), have
been duly filed, or requests for extensions have been timely filed and have
not expired, except to the extent all such failures to file, taken together,
are not reasonably likely to have a Material Adverse Effect on it, and such
Lafayette Tax Returns were true, complete and accurate in all material
respects, (ii) all taxes (which shall mean federal, state, local or foreign
income, gross receipts, windfall profits,

A-13

severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes imposed on the income, properties or
operations of it or the Lafayette Subsidiaries, together with any interest,
additions, or penalties with respect thereto and any interest in respect of
such additions or penalties, collectively the "Taxes") shown to be due on
Lafayette Tax Returns have been paid in full, (iii) the Lafayette Tax Returns
have been examined by the Internal Revenue Service or the appropriate state,
local or foreign taxing authority or the period for assessment of the Taxes in
respect of which such Lafayette Tax Returns were required to be filed has
expired, (iv) all Taxes due with respect to completed and settled examinations
have been paid in full, (v) no issues have been raised by the relevant taxing
authority in connection with the examination of any of the Lafayette Tax
Returns which are reasonably likely, individually or in the aggregate, to
result in a determination that would have a Material Adverse Effect on it,
except as reserved against in the Lafayette Financial Reports, and (vi) no
waivers of statutes of limitations (excluding such statutes that relate to
years under examination by the Internal Revenue Service) have been given by or
requested with respect to any Taxes of it or the Lafayette Subsidiaries.

(AA) ACCURACY OF INFORMATION. The statements with respect to
Lafayette and the Lafayette Subsidiaries contained in this Agreement, the
Schedules and any other written documents executed and delivered by or on
behalf of Company or the Bank pursuant to the terms of this Agreement are true
and correct in all material respects, and such statements and documents do not
omit any material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.

(BB) DERIVATIVES CONTRACTS. None of Lafayette or the Lafayette
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on the balance sheet which is a
derivative contract (including various combinations thereof) (each a
"Derivatives Contract") or owns securities that are referred to as "structured
notes" except for those Derivatives Contracts and structured notes Previously
Disclosed in Schedule 4.01(BB), including a list, as applicable, of any
Lafayette or Lafayette Subsidiary assets pledged as security for each such
Derivatives Contract.

(CC) ACCOUNTING CONTROLS. Each of Lafayette and the Lafayette
Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances that (i) all material
transactions are executed in accordance with management's general or specific
authorization; (ii) all material transactions are recorded as necessary to
permit the preparation of financial statements in conformity with generally
accepted accounting principles consistently applied with respect to banks or
any other criteria applicable to such statements, and to maintain proper
accountability for items; (iii) access to the material property and assets of
Lafayette and the Lafayette Subsidiaries is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any differences.

4.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company hereby represents and warrants to Lafayette and the Bank,
as follows:

(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.

(B) CORPORATE AUTHORITY. Subject to the required regulatory
approvals referred to in Section 6.02, this Agreement has been authorized by
all necessary corporate action of it and is a valid and binding agreement of
it enforceable against it in accordance with its terms, subject as to
enforcement as to bankruptcy, insolvency and other similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.

(C) NO DEFAULTS. Subject to the required regulatory approvals
referred to in Section 6.02 herein and the required filings under federal and
state securities' laws, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby and
thereby by it, do not and will not (i)
A-14
PAGE

constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or of any of its subsidiaries or to
which it or any of its subsidiaries or properties is subject or bound, which
breach, violation or default is reasonably likely to have a Material Adverse
Effect on it, (ii) constitute a breach or violation of, or a default under,
its Articles of Incorporation or Bylaws, or (iii) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, or the consent or approval of any other party
to any such agreement, indenture or instrument.

(D) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.02(D), its Registration Statement on Form S-1, and all documents filed or to
be filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the
form filed with the SEC (in each such case, the "the Company Financial
Reports"), did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; and each of the balance sheets in
or incorporated by reference into the Company Financial Reports (including the
related notes and schedules thereto) fairly presents and will fairly present
the financial position of the entity or entities to which it relates as of its
date and each of the statements of income and changes in stockholders' equity
and cash flows or equivalent statements in the Company Financial Reports
(including any related notes and schedules thereto) fairly presents and will
fairly present the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the entity or entities to which
it relates for the periods set forth therein, in each case in accordance with
generally accepted accounting principles consistently applied to savings
associations and savings and loan holding companies during the periods
involved, except as may be noted therein, subject to normal and recurring
year-end audit adjustments in the case of unaudited statements.

(E) NO EVENTS. Except as Previously Disclosed in Schedule
4.02(E),since September 30, 1996, no events have occurred which, individually
or in the aggregate, have had or are reasonably likely to have a Material
Adverse Effect on it.

(F) SHARES AUTHORIZED. The shares of Company Common Stock to be
issued in exchange for shares of Lafayette Common Stock upon consummation of
the Merger in accordance with Article II of this Agreement have been duly
authorized and, when issued in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable and subject to no
preemptive rights.

(G) CORPORATE POWER. The Company has the corporate power and
authority to carry on its business as it is now being conducted and to own all
its material properties and assets.

(H) ACCURACY OF INFORMATION. The statements with respect to the
Company and its subsidiaries contained in this Agreement, the Schedules and
any other written documents executed and delivered by or on behalf of the
Company pursuant to the terms of this Agreement are true and correct in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

V. COVENANTS

Each of Lafayette and the Bank hereby covenants to the Company and the
Company hereby covenants to Lafayette and the Bank, that:

5.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement and to the exercise by its Board of Directors of such Board's
fiduciary duties, it shall use its best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or desirable, or advisable under applicable laws, so as to
permit consummation of the Merger on the Effective Date and to otherwise
enable
A-15

consummation of the transactions contemplated hereby and shall cooperate fully
with the other parties hereto to that end.

5.02. REGISTRATION STATEMENT. The Company, in cooperation with
Lafayette, shall prepare and file with the SEC a Registration Statement with
respect to the shares of Company Common Stock to be issued in the Merger.
Such Registration Statement shall contain a Proxy Statement/Prospectus which
shall serve as the proxy statement of Lafayette for the Meeting (as defined
below) and as the prospectus of the Company for the shares of Company Common
Stock to be issued in the Merger. The Company shall use its best efforts to
cause the Registration Statement to become effective.

5.03 LAFAYETTE MEETING. With respect to Lafayette, it shall call a
special meeting (the "Meeting") of the holders of Lafayette Common Stock to be
held as soon as practicable for purposes of voting upon the transactions
contemplated hereby and Lafayette shall use its best efforts to solicit and
obtain votes of the holders of Lafayette Common Stock in favor of the
transactions contemplated hereby and, subject to the exercise of its fiduciary
duties, the Board of Directors of Lafayette shall recommend approval of such
transactions by such holders. In connection with the Meeting, the Company and
Lafayette shall cooperate in the preparation of the Proxy Statement/Prospectus
and, with the approval of each of the Company and Lafayette, which approvals
will not be unreasonably withheld, the Proxy Statement/Prospectus will be
mailed to the shareholders of Lafayette.

5.04. REGISTRATION STATEMENT EFFECTIVENESS. The Company will advise
Lafayette, promptly after the Company receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the suspension
of the qualification of the Company Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.

5.05. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS. When the
Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness, up
to and including the date of the Meeting, such Registration Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by or on behalf of Lafayette relating to
Lafayette or the Lafayette Subsidiaries and by or on behalf of the Company
relating to the Company or its subsidiaries, (i) will comply in all material
respects with the provisions of the Securities Act and any other applicable
statutory or regulatory requirements, and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; PROVIDED, HOWEVER, in no event shall any party hereto be liable
for any untrue statement of a material fact or omission to state a material
fact in the Registration Statement made in reliance upon, and in conformity
with, written information concerning another party furnished by or on behalf
of such other party specifically for use in the Registration Statement.

5.06. PRESS RELEASES. Lafayette and the Bank will not, without the
prior approval of the Company, and the Company will not, without the prior
approval of Lafayette, issue any press release or written statement for
general circulation relating to the transactions contemplated hereby, except
as otherwise required by law.

5.07. ACCESS; INFORMATION.

(1) Upon reasonable notice, Lafayette and the Bank shall
afford the Company and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout
the period up to the Effective Date, to all of its and the Lafayette
Subsidiaries' properties, books, contracts, commitments and records and,
during such period, Lafayette and the Bank shall furnish promptly to the
Company (i) a copy of each material report, schedule and other document filed
by Lafayette and the Lafayette Subsidiaries with any Regulatory Authority, and
(ii) all other information concerning the business, properties and personnel
of Lafayette and the Lafayette Subsidiaries as the Company may reasonably
request, provided that no
A-16

investigation pursuant to this Section 5.07 shall affect or be deemed to
modify or waive any representation or warranty made by Lafayette or the Bank
or the conditions to the obligations of Lafayette and the Bank to consummate
the transactions contemplated by this Agreement; and

(2) The Company will not use any information obtained pursuant
to this Section 5.07 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement and, if this Agreement is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 8.06) unless and until such
time as such information or documents become publicly available other than by
reason of any action or failure to act by the Company or as it is advised by
counsel that any such information or document is required by law or applicable
stock exchange rule to be disclosed, and in the event of the termination of
this Agreement, the Company will, upon request by Lafayette, deliver to
Lafayette all documents so obtained by the Company or destroy such documents
and, in the case of destruction, will certify such fact to Lafayette.

5.08. ACQUISITION PROPOSALS. In the case of Lafayette, without the
prior written consent of the Company, it shall not, and it shall cause the
Lafayette Subsidiaries not to, solicit, initiate or encourage inquiries or
proposals with respect to, or furnish any nonpublic information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, Lafayette or any of the Lafayette Subsidiaries or any
merger or other business combination with Lafayette or any of the Lafayette
Subsidiaries other than as contemplated by this Agreement; it shall instruct
its and the Lafayette Subsidiaries' officers, directors, agents, advisors and
affiliates to refrain from doing any of the foregoing; and it shall notify the
Company immediately if any such inquiries or proposals are received by, or any
such negotiations or discussions are sought to be initiated with, Company or
any of the Lafayette Subsidiaries.

5.09. BLUE-SKY FILINGS. In the case of the Company, it shall use its
best efforts to obtain all necessary state securities laws or "blue sky"
permits and approvals, provided that the Company shall not be required by
virtue thereof to submit to general jurisdiction in any state.

5.10. CERTAIN POLICIES OF LAFAYETTE AND THE BANK. In the case of each
of Lafayette and the Bank, it shall, at the Company's request: (i) modify and
change its loan, litigation and other reserve and real estate valuation
policies and practices (including loan classifications and levels of
reserves), and (ii) generally conform its operating, lending and compliance
policies and procedures, prior to the Effective Date so as to be consistent on
a mutually satisfactory basis with those of the Company and generally accepted
accounting principles; PROVIDED, HOWEVER, Lafayette and the Bank shall not be
required to take any such action set forth in (i) above until all regulatory
approvals set forth in Section 6.02 shall have been obtained. Lafayette's and
the Bank's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 5.10.

5.11. STATE TAKEOVER LAW. In the case of Lafayette, Lafayette shall
not take any action that would cause the transactions contemplated by this
Agreement to be subject to any applicable state takeover statute and Lafayette
shall take all necessary steps to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or, if necessary,
challenge the validity or applicability of, any applicable state takeover law,
as now or hereafter in effect, including, without limitation, Section 351.459
of the MGBCL.

5.12. NO RIGHTS TRIGGERED. In the case of Lafayette, Lafayette shall
take all necessary steps to ensure that the entering into of this Agreement
and the consummation of the transactions contemplated hereby and thereby
(including without limitation the Merger) and any other action or combination
of actions, or any other transactions contemplated hereby or thereby do not
and will not (i) result in the grant of any rights to any person under the
Articles of Incorporation or Bylaws of Lafayette or under any agreement to
which Lafayette or any Lafayette Subsidiary is a party, or (ii) restrict or
impair in any way the ability of the Company to exercise the rights granted
hereunder.
A-17

5.13. SHARES LISTED. In the case of the Company, it shall file with
the Nasdaq Stock Market a Notification Form for Listing of Additional Shares.

5.14. REGULATORY APPLICATIONS. In the case of the Company, (i) it shall
promptly prepare and submit applications to the appropriate Regulatory
Authorities for approval of the Merger, and (ii) promptly make all other
appropriate filings to secure all other approvals, consents and rulings which
are necessary for the consummation of the Merger by the Company.

5.15 REGULATORY DIVESTITURES. In the case of Lafayette, effective on
or before the Effective Date, Lafayette shall cease engaging in such
activities as the Company shall advise Lafayette in writing are not permitted
to be engaged in by the Company under applicable law following the Effective
Date and, to the extent required by any Regulatory Authority as a conditional
approval of the transactions contemplated by this Agreement, Lafayette shall
divest any subsidiary engaged in activities or holding assets that are
impermissible for the Company on terms and conditions agreed to by the
Company.

5.16 CURRENT INFORMATION.

(a) During the period from the date of this Agreement to the
Effective Date, each of Lafayette, the Bank and the Company shall, and shall
cause its representatives to, confer on a regular and frequent basis with
representatives of the other.

(b) Lafayette and the Bank shall promptly notify the Company of (i)
any material change in the business or operations of Lafayette, the Bank or
any Lafayette Subsidiary, (ii) any material complaints, investigations or
hearings (or communications indicating that the same may be contemplated) of
any Regulatory Authority relating to Lafayette, the Bank, or any Lafayette
Subsidiary, (iii) the initiation or threat of material litigation involving or
relating to Lafayette, the Bank or any Lafayette Subsidiary, or (iv) any event
or condition that might reasonably be expected to cause any of Lafayette's or
the Bank' representation or warranties set forth herein not to be true and
correct in all material respects as of the Effective Date or prevent Lafayette
or the Bank from fulfilling its or their obligations hereunder; and in each
case shall keep the Company informed with respect thereto.

(c) The Company shall (i) promptly notify Lafayette of any event or
condition that might reasonably be expected to cause any of the Company's
representations or warranties set forth herein not to be true and correct in
all material respects as of the Effective Date, and (ii) notify Lafayette
immediately of any denial of any application filed by the Company with any
Regulatory Authority with respect to this Agreement, and in each case shall
keep Lafayette and the Bank informed with respect thereto.

5.17 AFFILIATE AGREEMENTS. In the case of Lafayette, it will cause
each person who is an "affiliate" of Lafayette for purposes of Rule 145 under
the Securities Act (each an "Affiliate") to execute and deliver to the Company
on or before the mailing of the Proxy Statement/Prospectus for the Meeting an
agreement in the form attached hereto as Exhibit B restricting the disposition
of the shares of Company Common Stock to be received by such person in
exchange for such person's shares of Lafayette Common Stock. Previously
Disclosed on Schedule 5.17 is a list of Affiliates as of the date hereof.

5.18 BANK COMMON STOCK. In the case of Lafayette, it will use its
best efforts to acquire all of the outstanding shares of Bank Common Stock
that it does not own, provided that the price to be paid to acquire such
shares shall not exceed one and one-half times the book value per share of the
Bank on September 30, 1996.
A-18

VI. CONDITIONS TO CONSUMMATION OF THE MERGER

Consummation of the Merger is conditioned upon:

6.01. SHAREHOLDER VOTE. Approval of the transactions contemplated
hereby by the requisite vote of the shareholders of Lafayette.

6.02. REGULATORY APPROVALS. Procurement by the Company of all required
regulatory consents and approvals by the appropriate Regulatory Authorities
and the expiration of the statutory waiting period relating thereto; PROVIDED,
HOWEVER, that no such approval or consent shall have imposed any condition or
requirement which, in the opinion of the Company, would so materially
adversely impact the economic or business benefits to the Company of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.

6.03. NO INJUNCTION. There shall not be in effect any order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated hereby.

6.04. LEGAL OPINION. Lafayette and the Bank shall have received an
opinion, dated the Effective Date, of Breyer & Aguggia, special counsel for
the Company, in form reasonably satisfactory to Lafayette, which shall cover
the matters contained in Exhibit C hereto.

6.05. LEGAL OPINION. The Company shall have received an opinion, dated
the Effective Date, of Humphrey, Farrington & McClain, P.C., counsel for
Lafayette and the Bank, in form reasonably satisfactory to the Company, which
shall cover the matters contained in Exhibit D hereto.

6.06. OFFICER'S CERTIFICATE. (i) Each of the representations and
warranties contained herein of the Company shall be true and correct as of the
date of this Agreement and upon the Effective Date with the same effect as
though all such representations and warranties had been made on the Effective
Date, except for any such representations and warranties made as of a
specified date, which shall be true and correct as of such date, and (ii) each
and all of the agreements and covenants of the Company to be performed and
complied with pursuant to this Agreement on or prior to the Effective Date
shall have been duly performed and complied with in all material respects, and
Lafayette and the Bank shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of the Company dated the
Effective Date, to such effect.

6.07. OFFICERS' CERTIFICATE. (i) Each of the representations and
warranties contained herein of Lafayette and the Bank shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date and
except as otherwise provided in Section 5.10, and (ii) each and all of the
agreements and covenants of Lafayette and the Bank to be performed and
complied with pursuant to this Agreement on or prior to the Effective Date
shall have been duly performed and complied with in all material respects, and
the Company shall have received a certificate signed by the Chief Executive
Officers and the Chief Financial Officers of Lafayette and the Bank dated the
Effective Date, to such effect.

6.08. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order or other order suspending the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
Regulatory Authority.

6.09. BLUE-SKY PERMITS. The Company shall have received all state
securities laws and "blue sky" permits necessary to consummate the Merger.

A-19

6.10. TAX OPINION. The Company and Lafayette shall have received an
opinion from Breyer & Aguggia to the effect that (i) the Merger constitutes a
reorganization under Section 368 of the Code, and (ii) no gain or loss will be
recognized by shareholders of Lafayette who receive shares of the Company
Common Stock in exchange for their shares of Lafayette Common Stock, and, in
rendering their opinion, Breyer & Aguggia may require and rely upon
representations contained in certificates of officers of the Company,
Lafayette and others.

6.11. EMPLOYMENT AGREEMENTS. The Employment Agreements attached as
Exhibits E-1 through E-3 shall have been duly executed and delivered by all
parties to such agreements.

6.12. ADVERSE CHANGE. During the period from December 31, 1996 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of Lafayette or the Bank, nor
shall Lafayette or the Bank have sustained any loss or damage to its
properties, whether or not insured, that materially affects its ability to
conduct its business; and the Company shall have received a certificate dated
the Effective Date signed by the Chief Executive Officers of Lafayette and the
Bank to such effect.

6.13. DISSENTERS' RIGHTS. The number of Dissenters' Shares shall not
exceed in the aggregate five percent of the outstanding shares of Lafayette
Common Stock.

6.14. BANK COMMON STOCK. There shall be no more than 11.666 shares of
Bank Common Stock outstanding that are not owned by Lafayette.

6.15. RECEIPT OF AFFILIATE AGREEMENTS. The Company shall have received
from each Affiliate of Lafayette the agreements referred to in Section 5.17.

PROVIDED, HOWEVER, that a failure to satisfy any of the conditions set
forth in the proviso following Section 6.02 or in Sections 6.05, 6.07, 6.11,
6.12, 6.13, 6.14 or, 6.15 shall only constitute conditions if asserted by the
Company, and a failure to satisfy any of the conditions set forth in Section
6.04 or 6.07 shall only constitute conditions if asserted by Lafayette.

VII. TERMINATION

This Agreement may be terminated prior to the Effective Date, either
before or after receipt of required shareholder approvals:

7.01. MUTUAL CONSENT. By the mutual consent of the Company and
Lafayette, if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board.

7.02. BREACH. By the Company or Lafayette, if its Board of Directors
so determines by vote of a majority of the members of its entire Board, in the
event of (i) a material breach by the other party of any representation or
warranty contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of
such breach, or (ii) a breach by the other party of any of the material
covenants or agreements contained herein, which breach cannot be or has not
been cured within thirty (30) days after the giving of written notice to the
breaching party of such breach.

7.03. DELAY. By the Company or Lafayette, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Merger is not consummated by December 31, 1997.

7.04. NO SHAREHOLDER OR REGULATORY APPROVAL. By the Company or
Lafayette, if its Board of Directors so determines by a vote of a majority of
the members of its entire Board, (i) in the event that any shareholder
approval contemplated by Section 6.01 is not obtained at the Meeting,
including any adjournment
A-20

or adjournments thereof, or (ii) in the event that written notice is received
which states that any required regulatory approval contemplated by Section
6.02 has not been approved or has been denied.

7.05. DUE DILIGENCE REVIEW. By the Company in the event that (i) any
situation, event, circumstance or other matter shall come to the attention of
the Company during the course of the Company Due Diligence Review which the
Company shall, in a good faith exercise of its reasonable discretion, believe
(a) to be inconsistent in any material respect with any of the representations
and warranties of Lafayette or the Bank, (b) to be of such significance as to
have a Material Adverse Effect on the financial condition, prospects, results
of operations or business of Lafayette and the Bank, taken as a whole, or (c)
is a material deviation from the Lafayette Financial Reports, and (ii) the
Company notifies Lafayette of such matters within five (5) business days after
the end of the Company Due Diligence Review Period and such matters are not
capable of being cured or have not been cured within thirty (30) days after
written notice thereof to Lafayette. For purposes of this Section 7.05, (i)
the "Company Due Diligence Review" shall mean a review by the Company of
Lafayette's and the Bank's operations, business affairs, prospects and
financial condition, including without limitation, those matters which are the
subject of Lafayette's and the Bank's representations and warranties and (ii)
the "Company Due Diligence Review Period" shall mean a thirty (30) day period
beginning on the date of this Agreement. Notwithstanding anything in this
Section 7.05 contained or implied to the contrary, the Company Due Diligence
Review shall not limit, restrict or preclude the Company, at any time or from
time to time, from conducting such reviews or from exercising any rights
available to it hereunder as a result of the existence or occurrence prior to
the Company Due Diligence Review Period of any event or condition which was
not detected in the Company Due Diligence Review by the Company and which
constitutes a breach of any representation or warranty of Lafayette or the
Bank under this Agreement.

VIII. OTHER MATTERS

8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Agreement shall not
survive the Effective Date. If this Agreement is terminated prior to the
Effective Date, the agreements and representations of the parties in Section
4.01(P), Sections 5.05, 5.07(2), 5.11 and 5.12, and Sections 8.01, 8.03, 8.04,
8.05, 8.06, 8.07, 8.09 and 8.11 shall survive such termination.

8.02. WAIVER; AMENDMENT. Prior to the Effective Date, any provision of
this Agreement may be (i) waived in writing by the party benefitted by the
provision, or (ii) amended or modified at any time (including the structure of
the transactions contemplated hereby) by an agreement in writing among the
parties hereto approved by their respective Boards of Directors and executed
in the same manner as this Agreement, except that, after the vote by the
shareholders of Lafayette, the consideration to be received by the
shareholders of Lafayette for each share of Lafayette Common Stock shall not
thereby be decreased.

8.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original. This
Agreement shall become effective when one counterpart has been signed by each
party hereto.

8.04. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Missouri, except as
federal law may be applicable.

8.05. EXPENSES. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby.

8.06. CONFIDENTIALITY. Except as otherwise provided in Section
5.07(2), each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed.

A-21

8.07. NOTICES. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, telegram or telex (confirmed in writing) to such
party at its address set forth below or such other address as such party may
specify by notice to the parties hereto.

If to the Company to: Lexington B&L Financial Corp.
919 Franklin Avenue
Lexington, Missouri 64067
Attn: Erwin Oetting, Jr.

Copies to: Paul M. Aguggia, Esq.
Breyer & Aguggia
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005

If to Lafayette or the Bank to: Lafayette Bancshares, Inc.
20th and 13 Highway
Lexington, Missouri 64067
Attn: William J. Huhmann

Copies to: Buford L. Farrington, Esq.
Humphrey, Farrington & McClain, P.C.
221 West Lexington
Suite 400
Independence, Missouri 64051

8.08. DEFINITIONS. Any term defined anywhere in this Agreement shall
have the meaning ascribed to it for all purposes of this Agreement (unless
expressly noted to the contrary). In addition:

(A) the term "Material Adverse Effect," when applied to a
party, shall mean an event, occurrence or circumstance (including
without limitation (i) the making of any provisions for possible
loan and lease losses, write-downs of other real estate and taxes
and (ii) any breach of a representation or warranty contained
herein by such party) which (a) has or is reasonably likely to
have a material adverse effect on the financial condition,
results of operations, business or prospects of the party and its
subsidiaries, taken as a whole, or (b) would materially impair
the party's ability to perform its obligations under this
Agreement or the consummation of any of the transaction
contemplated hereby; and

(B) the term "Previously Disclosed" by a party shall mean
information set forth in a Schedule that is delivered by that
party to the other party contemporaneously with the execution of
this Agreement and specifically designated as information
"Previously Disclosed" pursuant to this Agreement.

8.09. BREAK-UP FEE. The parties hereby acknowledge that, in
negotiating and executing this Agreement and in taking the steps necessary or
appropriate to effect the transaction contemplated hereby, the Company has
incurred and will incur direct and indirect monetary and other costs
(including, without limitation, attorney's fees and costs and costs of the
Company employee and management time) and will forego discussion with respect
to other potential acquisitions. To compensate the Company for such cost and
to induce it to forego initiating discussions regarding other acquisitions,
Lafayette and the Bank shall be obligated to pay the Company on demand

A-22

(and in no event more than three days after such demand) in immediately
available funds $100,000 ("Break-up Fee") if:

(A) (i) this Agreement terminates because Lafayette and the Bank and
their respective directors do not use all reasonable efforts to consummate the
transactions contemplated by this Agreement in accordance with the terms of
this Agreement, (ii) Lafayette terminates this Agreement for any reason other
than the grounds for termination set out in Sections 7.01, 7.02 (but only in
the event that the Company willfully breaches a representation, warranty or
covenant contained herein and, as a result thereof, Lafayette exercises its
right to terminate this Agreement under Section 7.02 at a time when the
Company was not entitled to terminate this Agreement under Section 7.02, 7.03
or 7.04) or 7.03, or (iii) the Company terminates this Agreement pursuant to
Section 7.02 as a result of Lafayette's breach of a representation, warranty
or covenant, including, but not limited to its covenants contained in Section
5.08; or

(B) within 12 months after the date hereof, the Merger has not been
completed and there occurs any of the events set forth in subparagraphs (i),
(ii) or (iii) below.

(i) Any person other than the Company or an affiliate of the
Company acquires beneficial ownership of 25% or more of the then-outstanding
Lafayette Common Stock;

(ii) Lafayette or any of its affiliates, without having
received the Company's prior written consent, enters into an agreement to
engage in an Acquisition Transaction (as defined below) with any person (the
term "person" for purposes of this section having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and
regulations thereunder) other than the Company or any of its subsidiaries, or
Lafayette's Board of Directors recommends that the shareholders of Lafayette
approve or accept any Acquisition Transaction with any person other than the
Company or any of its subsidiaries. For purposes of this section,
"Acquisition Transaction" shall mean (a) a merger or consolidation, or any
similar transaction, involving Lafayette or the Bank, (b) a purchase, lease or
other acquisition of all or substantially all of the assets of Lafayette or
the Bank, or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Lafayette or the Bank; or

(iii) A bona fide proposal is made by a third party to Lafayette
or the Bank to engage in an Acquisition Transaction and after such proposal is
made any of the following events occurs: Lafayette willfully breaches this
Agreement and such breach entitles the Company to terminate this Agreement;
the holders of Lafayette Common Stock do not approve this Agreement at the
Meeting; the Meeting is not held or is canceled prior to termination of this
Agreement for reasons other than the fault of the Company; or Lafayette's
Board of Directors modifies in a manner adverse to the Company the
recommendation of Lafayette's Board of Directors with respect to this
Agreement.

Notwithstanding the foregoing, Lafayette and the Bank shall not be
obligated to pay to the Company the Break-up Fee if, prior to the occurrence
of any of the events specified in 8.09(B)(i), (ii) or (iii), Lafayette validly
terminates this Agreement pursuant to Section 7.01 or clause (ii) of Section
7.04. The parties further agree that this Section 8.09 is without prejudice
to any other rights that the parties hereto may have for any failure to
perform this Agreement.

8.10. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement together represent the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and thereby and
supersede any and all other oral or written agreements heretofore made.
Nothing in this Agreement expressed or implied, is intended to confer upon any
person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

8.11. HEADINGS. The headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.

A-23

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers, all as of the
day and year first above written.

LEXINGTON B&L FINANCIAL CORP.

By: /s/ Erwin Oetting, Jr.
----------------------
NAME: Erwin Oetting, Jr.
TITLE: President

LAFAYETTE BANCSHARES, INC.

By: /s/ William J. Huhmann
----------------------
NAME: William J. Huhmann
TITLE: Chairman

LAFAYETTE COUNTY BANK OF
LEXINGTON/WELLINGTON

By: /s/ William J. Huhmann
-----------------------
NAME: William J. Huhmann
TITLE: Chairman

A-24

Appendix B

GENERAL AND BUSINESS CORPORATION LAW OF MISSOURI

351.455 SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE
OF SHARES, WHEN. --

1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall
not vote in favor thereof, and such shareholder, within twenty days after the
merger or consolidation is effected, shall make written demand on the
surviving or new corporation for payment of the fair value of his shares as of
the day prior to the date on which the vote was taken approving the merger or
consolidation, the surviving or new corporation shall pay to such shareholder,
upon surrender of his certificate or certificates representing said shares,
the fair value thereof. Such demand shall state the number and class of the
shares owned by such dissenting shareholder. Any shareholder failing to make
demand within the twenty day period shall be conclusively presumed to have
consented to the merger or consolidation and shall be bound by the terms
thereof.

2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in
the corporation.

3. If within such period of thirty days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder
may, within sixty days after the expiration of the thirty day period, file a
petition in any court of competent jurisdiction within the county in which the
registered office of the surviving or new corporation is situated, asking for
a finding and determination of the fair value of such shares, and shall be
entitled to judgment against the surviving or new corporation for the amount
of such fair value as of the day prior to the date on which such vote was
taken approving such merger or consolidation, together with interest thereon
to the date of such judgment. The judgment shall be payable only upon and
simultaneously with the surrender to the surviving or new corporations of the
certificate or certificates representing said shares. Upon the payment of the
judgement, the dissenting shareholder shall cease to have any interest in such
shares, or in the surviving or new corporation. Such shares may be held and
disposed of by the surviving or new corporation as it may see fit. Unless the
dissenting shareholder shall file such petition within the time herein
limited, such shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the merger or
consolidation, and shall be bound by the terms thereof.

4. The right of a dissenting shareholder to be paid the fair value of
his shares on herein provided shall cease if and when the corporation shall
abandon the merger or consolidation.

B-1