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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-4543
MARK TWAIN BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-0895344
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
8820 Ladue Road, St. Louis, Missouri 63124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 727-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
Common Stock, $1.25 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter)
is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. /X/.
Aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the closing price as of February 15, 1996:
$499,882,999.
Indicate the number of shares outstanding of each of the
registrants' classes of Common Stock, as of the latest practicable date.
Class Outstanding at March 15, 1996
- ----------------------------- -----------------------------
Common Stock, $1.25 par value 16,155,689
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV.
Portions of the Company's Proxy Statement dated March 18, 1996 for the
Annual Meeting to be held April 23, 1996 are incorporated by reference into
Parts I, III and IV.
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PART I
ITEM 1. BUSINESS
Mark Twain Bancshares, Inc. ("Company") is a Missouri chartered multi-bank
holding company which owns or controls substantially all the capital stock of
three banks: Mark Twain Bank, which operates 20 separate banking locations
in the metropolitan St. Louis areas; Mark Twain Kansas City Bank, which
operates eleven separate locations in the metropolitan Kansas City bi-state
area; and Mark Twain Illinois Bank, which operates four locations on the
Illinois side of the St. Louis metropolitan area. The Company was organized
in 1967.
The Company's subsidiaries encounter substantial competition in all of
their banking and related financial service activities from other banking
institutions and from an increasing number of non-banking financial
institutions in its primary market areas.
Non-Banking Subsidiaries
The Company wholly owns the following: Mark Twain Properties, Inc., which
owns, holds under lease, or manages properties occupied by present banking
centers; Mark Twain Community Development Corporation, which provides
services and housing opportunities for low- to moderate-income persons;
Tarquad Corporation, which acts as trustee of deeds of trust of which Company
subsidiaries are the lenders and beneficiaries; and Mark Twain Asset
Recovery, Inc., which acts as purchaser of certain assets acquired by
subsidiary banks in the collection of loans.
Mark Twain Bank wholly owns Mark Twain Brokerage Services, Inc., a member
of the National Association of Securities Dealers, which provides customers
with complete brokerage services on all exchanges and provides the sale of
various insurance company products. Mark Twain Bank and Mark Twain Kansas
City Bank each wholly own a Mark Twain Real Estate Development Corporation
subsidiary and a Mark Twain Community Development Corporation subsidiary.
Supervision and Regulation
The Company is registered with and subject to regulation by the Board of
Governors of the Federal Reserve System and is subject to the Missouri Bank
Holding Company Act. All Company-owned non-bank subsidiaries are subject to
regulation by the Board of Governors of the Federal Reserve System. The
subsidiary state-chartered banks are subject to regulation and supervision by
the banking regulators of the states in which the banking units are located
and the states in which the bank is chartered. All subsidiary banks are
subject to regulation by and are members of the Federal Deposit Insurance
Corporation.
The earnings of the subsidiary banks are affected not only by competing
financial institutions and general economic conditions, but also by the
policies of various governmental regulatory authorities, and state and
federal laws, particularly as they relate to powers authorized to banks and
bank holding companies. The Company and all subsidiary banks are subject to
the provisions of the Community Reinvestment Act. Mark Twain Brokerage
Services, Inc., is subject to supervision and regulation by the National
Association of Securities Dealers, Securities and Exchange Commission,
Missouri Division of Securities, Missouri Division of Insurance, and Missouri
Division of Finance, among others. The mortgage department is subject to
supervision by Department of Housing and Urban Development, Federal Housing
Authority, Veteran's Administration, Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, and Government National Mortgage
Association, among others, concerning mortgage lending.
Further information called for by this item is contained on pages 17 to 29
and Note 2 "Acquisitions" on page 36 of the Company's 1995 Annual Report to
Shareholders and is incorporated by reference herein.
ITEM 2. PROPERTIES
The Company leases its principal executive office which is located at 8820
Ladue Road, Ladue, Missouri. As of December 31, 1995, the Company conducts
its business and operations
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out of 39 locations, which are either owned or leased, in the St. Louis
bi-state, Kansas City bi-state and Chicago metropolitan areas. The Company's
physical properties are in satisfactory condition and suitable and adequate for
present operations.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to a number of lawsuits, most
of which are considered routine litigation incidental to doing business. The
Company, after consultation with legal counsel, does not expect the outcome
of any litigation to have a material effect on its consolidated financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
<TABLE>
EXECUTIVE OFFICERS OF REGISTRANT
The information below on Executive Officers of the Registrant excludes
information on Alvin Siteman - Chairman of the Board, John P. Dubinsky -
President and Chief Executive Officer, Peter F. Benoist - Executive Vice
President, Robert C. Butler - Executive Vice President, and Executive
Officers during 1995 who are also directors or nominees for election as
directors, about whom such information is included on pages 4 to 6 of the
Company's Proxy Statement for its Annual Meeting to be held April 23, 1996,
which information is incorporated by reference herein.
<CAPTION>
Position and Offices with Registrant and Prior Business
Name Age Experience (if not with Registrant During Past Five Years)
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<S> <C> <C>
Sandra Friedman Burnham 45 Vice President, Audit of Mark Twain Bancshares, Inc.
Kevin J. Cody 35 Vice President, Treasurer/Assistant Secretary of Mark Twain
Bancshares, Inc., April 1995; Vice President, Accounting and Chief
Accounting Officer of Mark Twain Bancshares, Inc., May 1993; Staff
through Senior Manager, Ernst & Young LLP, June 1982 - May 1993.
Nancy E. Graves 43 Senior Vice President, Director of Retail Banking of Mark Twain
Bancshares, Inc., December 1994; Senior Vice President of Mark
Twain Bank, 1990 - December 1994.
Keith Miller 44 Senior Vice President, Finance and Chief Financial Officer of Mark
Twain Bancshares, Inc.
Timothy C. Peterson 51 Senior Vice President, Compliance of Mark Twain Bancshares, Inc.,
December 1994; President of Mark Twain Bank Ladue, 1990 - December
1994.
W. Thomas Reeves 41 Senior Vice President of Mark Twain Bank, Director of Loan
Production.
Carl A. Wattenberg, Jr. 57 Senior Vice President, Secretary and General Counsel of Mark
Twain Bancshares, Inc.
Thomas R. Wickenhauser 48 Vice President, Administration of Mark Twain Bancshares, Inc.
Frederick E. Zimmer 47 Senior Vice President of Mark Twain Bank, Director of Loan
Administration.
</TABLE>
No family relationship exists among any of the Executive Officers of
Registrant.
Each officer of the Registrant is appointed to serve, at the pleasure of
its Board of Directors, for the annual period next following the Annual
Meeting of the Shareholders of the Registrant, and until his respective
successor shall have been appointed and qualified. Certain officers were
offered employment agreements; see Exhibit 10.9 below.
No officer of the Registrant was selected so to serve pursuant to any
arrangement or understanding between him and any person other than the
directors and one or more officers of Registrant acting solely in that
capacity.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
<TABLE>
The Common Stock of the Company ($1.25 par value) is traded on the Nasdaq
Stock Market (Symbol: MTWN). The following table presents the range of high
and low sales prices, as furnished by the Nasdaq Stock Market, Inc.
<CAPTION>
Dividends
Common Stock Share Data High Low Declared and Paid
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<S> <C> <C> <C>
1995
Fourth Quarter $39.50 $32.75 $0.27
Third Quarter $35.75 $31.50 $0.27
Second Quarter $32.75 $29.63 $0.27
First Quarter $30.00 $26.00 $0.27
1994
Fourth Quarter $29.50 $25.50 $0.24
Third Quarter $29.00 $27.00 $0.24
Second Quarter $31.00 $27.75 $0.24
First Quarter $30.17 $24.00 $0.24
</TABLE>
At December 31, 1995, there were approximately 2,500 holders of record of
Common Stock. The information in Note 14, "Restrictions of Subsidiary
Dividends," on page 40 of the Company's 1995 Annual Report to Shareholders is
incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
Information called for by this item is contained on page 16 of the
Company's 1995 Annual Report to Shareholders and is incorporated by reference
herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information called for by this item is contained on pages 17 to 29 of the
Company's 1995 Annual Report to Shareholders and is incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is contained on pages 30 to 46 of the
Company's 1995 Annual Report to Shareholders and is incorporated by reference
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors, some of whom are executive officers
of the Registrant, required by this item is set forth on pages 4 to 6 of the
Company's Proxy Statement for its Annual Meeting to be held April 23, 1996
and is incorporated by reference herein.
The information concerning executive officers who are not directors of the
Registrant required by this item is reported in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is contained on pages 9 to 16 and pages
18 to 19 of the Company's Proxy Statement for its Annual Meeting to be held
April 23, 1996 and is incorporated by reference herein.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - Information
concerning persons who are known to own beneficially more than 5% of any
class of the Company's voting shares on March 6, 1996 is contained on page 3
of the Company's Proxy Statement for its Annual Meeting to be held April 23,
1996, which is incorporated by reference herein.
(b) Security Ownership of Management - Information called for by this
item is contained on pages 7 to 9 of the Company's Proxy Statement for its
Annual Meeting to be held April 23, 1996, and is incorporated by reference
herein.
(c) Changes in Control - The Company knows of no contractual arrangements
which may at a subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by this item is contained on page 19 of the
Company's Proxy Statement for its Annual Meeting to be held April 23, 1996,
which is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements - The following consolidated financial
statements of Mark Twain Bancshares, Inc. and Subsidiaries and the
accountants' report thereon are incorporated by reference from the
1995 Annual Report to Shareholders of Mark Twain Bancshares, Inc.:
Consolidated Balance Sheet - December 31, 1995 and 1994
Consolidated Statement of Income - Years ended December 31,
1995, 1994 and 1993
Consolidated Statement of Changes in Shareholders' Equity -
Years ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows - Years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules - All schedules are omitted because
they are not applicable, or not required, or because the required
information is included in the financial statements or the notes
thereto.
(a) (3) Exhibits
Exhibit 10 Material contracts:
Exhibit 10.1 - Mark Twain Bancshares, Inc. 1983 Incentive Stock
Option Plan, as amended 4/4/84, 2/11/87, 3/1/90 and
2/28/95 (incorporated by reference from exhibit 10 of
the Registrant's Form 10-K for the year ended
December 31, 1994).
Exhibit 10.2 - Mark Twain Bancshares, Inc. 1992 Stock Option Plan,
as amended 2/28/95 (restated electronically herewith
pursuant to Regulation S-T, Item 102).
Exhibit 10.3 - Mark Twain Bancshares, Inc. 1995 Stock Option Plan,
as amended 1/12/96.
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Exhibit 10.4 - Mark Twain Bancshares, Inc. Executive Benefit Plan,
as amended and restated 7/1/83 (incorporated by
reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994).
Exhibit 10.5 - First Amendment to Mark Twain Bancshares, Inc.
Executive Benefit Plan dated 8/4/92 (incorporated by
reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994).
Exhibit 10.6 - Second Amendment to Mark Twain Bancshares, Inc.
Executive Benefit Plan dated 10/15/93 (incorporated
by reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994).
Exhibit 10.7 - Third Amendment to Mark Twain Bancshares, Inc.
Executive Benefit Plan dated 10/15/93 (incorporated
by reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994).
Exhibit 10.8 - Supplemental Executive Retirement Plan for Joseph N.
Millard (incorporated by reference from exhibit 10 of
the Registrant's Form 10-K for the year ended
December 31, 1994).
Exhibit 10.9 - Form of Employment Agreements (incorporated by
reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994):
The initial term of the Employment Agreements offered
was for either 12, 18, or 24 months. The initial
terms of the Employment Agreements offered to
Executive Officers named in Part I of this Form were
as follows:
Initial Term of 24 months - Alvin Siteman, John P.
Dubinsky, Peter F. Benoist, Keith Miller, W. Thomas
Reeves and Frederick E. Zimmer.
Initial Term of 18 months - Sandra Friedman Burnham,
Nancy E. Graves, Timothy C. Peterson, Carl A.
Wattenberg, Jr. and Thomas R. Wickenhauser.
Initial Term of 12 months - Kevin J. Cody.
Exhibit 11 - Computation of Earnings Per Share.
Exhibit 13 - Portions of Mark Twain Bancshares, Inc.'s Annual
Report to Shareholders for the year ended December
31, 1995.
Exhibit 21 - Subsidiaries of Mark Twain Bancshares, Inc.
Exhibit 23 - Consent of Independent Auditors.
Exhibit 27 - Financial Data Schedule.
Exhibit 99 - The Company's Proxy Statement dated March 18, 1996
for the Annual Meeting to be held April 23, 1996.
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated October 12, 1995 announcing
earnings for the three and nine month periods ending September 30,
1995. The Company filed a Form 8-K dated January 16, 1996
announcing earnings for the three and twelve month periods ended
December 31, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Bancshares has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the County of
St. Louis, and the State of Missouri, on the 20th day of March, 1996.
MARK TWAIN BANCSHARES, INC.
/s/ JOHN P. DUBINSKY
-------------------------------------
John P. Dubinsky
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
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<S> <C> <C>
/s/ ALVIN J. SITEMAN Chairman of the Board March 20, 1996
- ------------------------------------ and Director
Alvin J. Siteman
/s/ JOHN P. DUBINSKY President and Chief Executive March 20, 1996
- ------------------------------------ Officer and Director
John P. Dubinsky (Principal Executive Officer)
/s/ KEITH MILLER Senior Vice President, Finance March 20, 1996
- ------------------------------------ and Chief Financial Officer
Keith Miller (Principal Financial Officer)
/s/ KEVIN J. CODY Vice President, Treasurer/ March 20, 1996
- ------------------------------------ Assistant Secretary
Kevin J. Cody (Principal Accounting Officer)
/s/ PETER F. BENOIST Executive Vice President and March 20, 1996
- ------------------------------------ Director
Peter F. Benoist
Director
- ------------------------------------
Robert J. Baudendistel
Director
- ------------------------------------
Robert A. Bernstein
/s/ ROBERT C. BUTLER Executive Vice President and March 20, 1996
- ------------------------------------ Director
Robert C. Butler
/s/ JACK DEUTSCH Director March 20, 1996
- ------------------------------------
Jack Deutsch
/s/ HENRY J. GIVENS, JR., PH.D. Director March 20, 1996
- ------------------------------------
Henry J. Givens, Jr., Ph.D
Director
- ------------------------------------
B.D. Hunter
/s/ MICHAEL M. MCCARTHY Director March 20, 1996
- ------------------------------------
Michael M. McCarthy
/s/ JAMES J. MURPHY, JR. Director March 20, 1996
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James J. Murphy, Jr.
</TABLE>
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<TABLE>
INDEX TO EXHIBITS
<CAPTION>
NUMBER EXHIBIT
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<C> <S>
10.1 Mark Twain Bancshares, Inc. 1983 Incentive Stock Option Plan, as amended 4/4/84, 2/11/87
3/1/90 and 2/28/95 (incorporated by reference from exhibit 10 of the Registrant's Form
10-K for the year ended December 31, 1994).
10.2 Mark Twain Bancshares, Inc. 1992 Stock Option Plan, as amended 2/28/95 (restated
electronically herewith pursuant to Regulation S-T, Item 102).
10.3 Mark Twain Bancshares, Inc. 1995 Stock Option Plan, as amended 1/12/96.
10.4 Mark Twain Bancshares, Inc. Executive Benefit Plan, as amended and restated 7/1/83
(incorporated by reference from exhibit 10 of the Registrant's Form 10-K for the year
ended December 31, 1994).
10.5 First Amendment to Mark Twain Bancshares, Inc. Executive Benefit Plan dated 8/4/92
(incorporated by reference from exhibit 10 of the Registrant's Form 10-K for the year
ended December 31, 1994).
10.6 Second Amendment to Mark Twain Bancshares, Inc. Executive Benefit Plan dated 10/15/93
(incorporated by reference from exhibit 10 of the Registrant's Form 10-K for the year
ended December 31, 1994).
10.7 Third Amendment to Mark Twain Bancshares, Inc. Executive Benefit Plan dated 10/15/93
(incorporated by reference from exhibit 10 of the Registrant's Form 10-K for the year
ended December 31, 1994).
10.8 Supplemental Executive Retirement Plan for Joseph N. Millard (incorporated by reference
from exhibit 10 of the Registrant's Form 10-K for the year ended December 31, 1994).
10.9 Form of Employment Agreements (incorporated by reference from exhibit 10 of the
Registrant's Form 10-K for the year ended December 31, 1994):
The initial term of the Employment Agreements offered was for either 12, 18,
or 24 months. The initial terms of the Employment Agreements offered to
Executive Officers named in Part I of this Form were as follows:
Initial Term of 24 months - Alvin Siteman, John P. Dubinsky, Peter F. Benoist,
Keith Miller, W. Thomas Reeves and Frederick E. Zimmer.
Initial Term of 18 months - Sandra Friedman Burnham, Nancy E. Graves, Timothy C.
Peterson, Carl A. Wattenberg, Jr. and Thomas R. Wickenhauser.
Initial Term of 12 months - Kevin J. Cody.
11 Computation of Earnings Per Share.
13 Portions of Mark Twain Bancshares, Inc.'s Annual Report to Shareholders for the year
ended December 31, 1995.
21 Subsidiaries of Mark Twain Bancshares, Inc.
23 Consent of Independent Auditors.
27 Financial data schedule.
99 The Company's Proxy Statement dated March 18, 1996 for the Annual Meeting to be held
April 23, 1996.
</TABLE>
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Exhibit 10.2
MARK TWAIN BANCSHARES, INC.
1992 STOCK OPTION PLAN
(As amended February 28, 1995)
Section 1. Establishment and Purpose.
Mark Twain Bancshares, Inc. (the "Company") hereby
establishes a stock option plan to be named the Mark Twain
Bancshares, Inc. 1992 Stock Option Plan (the "Plan"), for
Eligible Employees of the Company and its Subsidiaries. The
purpose of the Plan is (1) to induce Eligible Employees of the
Company and its Subsidiaries who are in a position to contribute
materially to the prosperity thereof to remain with the Company
or its Subsidiaries, to offer them incentives and rewards in
recognition of their contributions to the Company's progress, and
to encourage them to continue to promote the best interests of
the Company and its Subsidiaries, and (2) to aid the Company and
its Subsidiaries in competing with other enterprises for the
services of new officers and other managerial or supervisory
personnel needed to help insure the Company's continued progress.
Section 2. Definitions.
(a) "Acceleration Event" has the meaning given in
Section 8(c).
(b) "Agreement" has the meaning given in Section 7.
(c) "Board of Directors" means the Board of Directors of
the Company.
(d) "Code" means the Internal Revenue Code as in effect
from time to time. When a specific Section of the Code is
referred to in the Plan or an Agreement, the reference shall mean
such Section and any successor provision from time to time unless
the reference specifically excludes successor provisions.
(e) "Committee" means the Stock Option Committee
referred to in Section 3 hereof.
(f) "Company" means Mark Twain Bancshares, Inc., a
Missouri corporation.
(g) "Disability" means the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code.
(h) "Eligible Employee" has the meaning given in Section
5.
(i) "Employer" means the Company or that Subsidiary
which employs an Optionee.
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(j) "Fair Market Value", for all purposes hereof, shall
be the mean between the high and low selling prices of the
Company's common stock for the appropriate valuation date as
reported by the NASDAQ or other applicable reporting system. If
no sales are reported for the appropriate valuation date, "Fair
Market Value" shall be: (i) if sales are reported within a
reasonable period before and after the appropriate valuation
date, the weighted average of the means between the high and low
selling prices on the nearest date before and nearest date after
such valuation date, with the average to be weighted inversely by
the respective numbers of trading days between the selling dates
and such valuation dates; or (ii) otherwise, the value per share
determined by the Committee in a manner consistent with the
Treasury Regulations under Section 2031 of the Code.
(k) "ISO" or "Incentive Stock Option" means an option
granted under the Plan to purchase Stock which is designated by
the Committee as an Incentive Stock Option and which qualifies as
an "incentive stock option" under Section 422 of the Code.
(l) "NQSO" or "Non-Qualified Stock Option" means an
option granted under the Plan to purchase Stock which is
designated by the Committee as a "Non-Qualified Stock Option," or
which is designated by the Committee as an ISO but which fails or
ceases to qualify as an "incentive stock option" under the Code.
(m) "Option" means an ISO or NQSO.
(n) "Optionee" means the person to whom an Option is
granted.
(o) "Plan" means the Mark Twain Bancshares, Inc. 1992
Stock Option Plan.
(p) "Reporting Person" means an Optionee who is required
to file statements relating to his or her beneficial ownership of
Stock with the Securities and Exchange Commission pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
However, a person shall not be deemed to be a "Reporting Person"
on any given date unless an ordinary purchase or sale of Stock
occurring on such date would be required to be reported to such
Commission.
(q) "Rule 16b-3" means Rule 16b-3 (as amended from time
to time) promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, and any successor
thereto.
(r) "Stock" means authorized and unissued shares of
common stock of the Company, par value $1.25 per share, or
reacquired shares of the Company's common stock held in its
Treasury.
<PAGE> 3
(s) "Subsidiary" means a "subsidiary corporation" of the
Company as defined in Section 424 of the Code.
(t) "Ten Per Cent Shareholder" means any individual who
at the time an Option is granted owns directly or indirectly
capital stock of the Company possessing more than 10% of the
total combined voting power of all classes of capital stock of
the Company or any Subsidiary, taking into account the provisions
of Section 424(d) of the Code.
(u) "Withholding Taxes" means, in connection with the
exercise of an Option, (i) the total amount of Federal and state
income taxes, social security taxes and other taxes which the
Employer of the Optionee is required to withhold ("Required
Withholding Taxes") plus (ii) any other income taxes which the
Employer withholds at the request of the Optionee.
Section 3. Administration.
The Plan shall be administered by a Stock Option Committee
consisting of three or more persons, each of whom at all times
shall be a member of the Board of Directors and a "disinterested
person" as defined in Rule 16b-3 from time to time. Committee
members shall not be eligible for selection to receive Options
under the Plan. The Board of Directors shall appoint the members
of the Committee and may fill vacancies thereon, however caused.
The Committee shall select one of its members as Chairman and
shall hold its meetings at such times and places as it may
determine. A majority of the members of the Committee shall
constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the members of the
Committee, shall be deemed the acts of the Committee. The
Company shall grant Options under the Plan in accordance with
determinations made by the Committee pursuant to the provisions
of the Plan. The Committee may from time to time adopt (and
thereafter may from time to time amend or rescind) such
administrative rules and regulations for carrying out the Plan,
and the Committee may take such action in the administration of
the Plan, not inconsistent with the provisions hereof, as it
shall deem proper. The interpretation and construction of any
provisions of the Plan or the Agreements by the Committee shall,
unless otherwise determined by the Board of Directors, be final
and conclusive.
Section 4. Total Number of Shares of Stock Subject to the Plan.
The maximum number of shares of Stock which may be issued
pursuant to Options granted hereunder (subject to adjustment as
provided in Section 13 hereof) shall be 450,000 shares, and said
number of shares of Stock (subject to adjustment as aforesaid)
shall be reserved for issuance upon the exercise of Options
granted under the Plan. The Company may in its discretion use
reacquired shares held in the Company's treasury in lieu of
<PAGE> 4
authorized but unissued shares. The number of shares which are
optioned shall be charged against such maximum number (as
adjusted). If an Option shall terminate for any reason without
having been exercised in full, the unpurchased shares previously
subject to such Option shall, unless the period during which
Options under the Plan may be granted has expired, again be
available for the purposes of the Plan and such terminated Option
or any portion thereof shall not be taken into account in
computing the total number of shares previously optioned.
Section 5. Eligibility.
The class of employees eligible to receive Options under the
Plan ("Eligible Employees") shall be officers and managerial or
supervisory employees of the Company or of any Subsidiary (not
including directors of the Company or of any Subsidiary who are
not otherwise officers or employees of the Company or of any
Subsidiary). The decision of the Committee regarding which
employees are eligible from time to time shall be conclusive.
Section 6. Granting of Options.
(a) The Committee shall, in its discretion, determine
the Eligible Employees to be granted Options, the time or times
at which Options shall be granted, the number of shares subject
to each Option, whether the Option is an ISO or an NQSO, and
whether the option price shall be payable (i) only with cash or
(ii) either with cash or with Stock, or with a combination of
cash and Stock. In making such determinations, the Committee may
take into consideration the value of the services rendered by the
respective individuals, their present and potential contributions
to the success of the Company or any Subsidiary, and other
factors which the Committee may deem relevant in accomplishing
the purposes of the Plan. Options granted under the Plan shall
not be affected by any change of duties or position of the
Optionee so long as the Optionee continues to be an employee of
the Company or any Subsidiary. An individual may be granted more
than one Option.
(b) In the event the Company or a Subsidiary enters into
a transaction described in Section 424(a) of the Code with any
other corporation, the Committee may grant Options to employees
or former employees of such corporation in substitution of stock
options previously granted to them by such corporation upon such
terms and conditions as shall be necessary to qualify such grant
as a substitution described in Section 424(a) of the Code.
Section 7. Terms of Options.
The Committee, in its sole discretion, shall determine on
and after what date or dates Options granted hereunder shall be
exercisable and whether any particular Option shall be
exercisable in one or more installments, specifying the
installment dates and the number of shares exercisable on and
<PAGE> 5
after each such date, and, within the limits herein provided,
shall determine the total period during which such Option is
exercisable. The Committee, in its sole discretion but within
the limits of the Plan, shall determine when and for how long
Options shall be exercisable after death, Disability, or other
termination of employment. Further, the Committee may include
such other provisions as the Committee may deem (a) acceptable or
desirable to the Committee and not inconsistent with the Plan or
(b) necessary to qualify its grants of ISOs under the provisions
of Section 422 of the Code.
Each Option granted under the Plan shall be evidenced by an
Incentive Stock Option Agreement or a Non-Qualified Stock Option
Agreement (an "Agreement") in such form, not inconsistent with
the Plan, as the Committee shall determine, and shall include the
substance of the following terms and conditions:
(a) The Agreement shall state that the Option is an
Incentive Stock Option or a Non-Qualified Stock Option, as
applicable.
(b) The option price for each share of Stock covered by
such Option shall be an amount not less than 100% of the Fair
Market Value of the Stock on the date the Option is granted, or
such higher price as may be required under the Code at the time
of grant in the case of an ISO granted to a Ten Per Cent
Shareholder.
(c) The Option by its terms shall not be transferable by
the Optionee otherwise than by will or by the laws of descent and
distribution and shall be exercisable, during his or her
lifetime, only by the Optionee.
(d) The Option by its terms shall not be exercisable
after the expiration of five years from the date such Option is
granted.
(e) Each Agreement shall recite or incorporate by
reference the substance of Sections 10 and 11 below.
Section 8. Acceleration.
(a) All Options automatically shall become immediately
exercisable in full upon a termination of employment caused by
the Optionee's death or Disability.
(b) The Committee may accelerate the date on which any
Option shall become exercisable at any time after grant and for
any reason the Committee deems appropriate.
(c) Upon the occurrence of any Acceleration Event, each
Option outstanding under this Plan automatically shall become
immediately exercisable in full. For the purposes of this Plan,
an "Acceleration Event" is any of the following events: (i) any
<PAGE> 6
Person (as defined below) becomes the beneficial owner (directly
or indirectly, within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Act")) of more
than 50% of the Company's then outstanding voting securities;
(ii) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with any other
corporation or entity, other than an agreement providing for (x)
a merger or consolidation in which the beneficial owners of the
Company's voting securities outstanding immediately before the
merger or consolidation continue to beneficially own, in
substantially the same proportions and with substantially the
same rights relative to each other, at least 50% of the Company's
or surviving entity's voting securities outstanding immediately
after such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person acquires more
than 50% of the combined voting power of the Company's then
outstanding securities; (iii) a change occurs in the composition
of the Board of Directors of the Company during any period of
twenty-four consecutive months such that individuals who at the
beginning of such period were members of the Board of Directors
("Old Directors") cease for any reason to constitute at least a
majority thereof, provided that each new director whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the Old Directors
then still in office shall be deemed to be an Old Director; or
(iv) the shareholders of the Company approve a plan of sale or
disposition by the Company of all or substantially all the
Company's assets. For purposes of this paragraph, "Person" shall
have the meaning given in Section 3(a)(9) of the Act, as modified
and used in Sections 13(d) and 14(d) thereof; however, a Person
shall not include (aa) the Company or any of its Subsidiaries,
(bb) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries,
(cc) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (dd) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the
Company's voting securities. The percentage of voting securities
beneficially owned by any Person or other entity or group shall
be measured on the basis of the total voting power of all such
securities which would be entitled to vote at a meeting of
shareholders held at the time in question.
Section 9. Exercise of Options.
(a) An Option shall be exercisable only (i) upon payment
to the Company on the date of exercise of the Option of cash in
the full amount of the option price of the shares with respect to
which the Option is exercised or (ii), if the Agreement relating
to the Option being exercised so permits, upon delivery to the
Company on the date of exercise of the Option of certificates,
duly endorsed for transfer or accompanied by a stock power,
representing shares of Stock owned by the Optionee, having a Fair
<PAGE> 7
Market Value on the date of such exercise and delivery equal to
the full amount of the purchase price of the shares with respect
to which the Option is exercised, or (iii) a combination of (i)
and (ii). In addition, the Committee may permit any Option to be
exercised using shares of Stock which normally would be
deliverable to the Optionee in connection with the exercise; no
Option may be so exercised unless expressly permitted by the
Committee in the Agreement or otherwise in writing.
(b) If requested by an Optionee, the Company may make a
loan or loans to such Optionee of all or part of the option
price, provided that such loan will be made only (i) in
accordance with the provisions of the Company's Officer Loan
Program and (ii) if, and to the extent, the loan can be made in
accordance with all applicable rules and regulations of the
Federal Reserve Board and other regulatory agencies having
jurisdiction over the subject matter.
(c) An Optionee shall have none of the rights of a
shareholder with respect to shares of Stock subject to his or her
Option until shares of Stock are issued to him or her upon the
exercise of his or her Option.
(d) When the Optionee's Employer becomes required to
collect Required Withholding Taxes, the Optionee shall promptly
pay to the Company or Employer (as required by the Committee) the
amount of such Required Withholding Taxes in cash, unless the
Agreement or the Committee permits or requires payment in another
form. In the discretion of the Committee or its delegate and at
the Optionee's request, the Committee or its delegate may cause
the Company or Employer to pay Withholding Taxes in excess of
Required Withholding Taxes on behalf of an Optionee, which shall
be reimbursed by the Optionee. The Committee may allow an
Optionee to reimburse the Company or Employer for payment of
Withholding Taxes with shares of Stock, including Stock otherwise
issuable upon exercise of the Option. The Committee may require
the satisfaction of any rules or conditions in connection with
any non-cash payment of Withholding Taxes. If the Optionee is a
Reporting Person at the time of grant or during the Option's term
and is given an election to pay any Withholding Taxes with Stock,
the Committee shall have sole discretion to approve or disapprove
such election at any time after the election is made. If the
Committee permits Withholding Taxes to be paid with Stock, the
Committee shall adopt such rules as it deems appropriate to
qualify Withholding Tax elections by Reporting Persons for
exemption in whole or part from Section 16(b) liability.
(e) If provided in the Agreement relating to an ISO, the
Committee may prohibit the transfer by an Optionee of shares of
Stock issued to him or her upon exercise of an ISO into the name
of a nominee, and the Committee may require the placement of a
legend on certificates for such shares reflecting such
prohibition or adopt other appropriate enforcement procedures.
<PAGE> 8
Section 10. Forfeitures.
(a) If any Optionee to whom an Option is granted
voluntarily terminates employment within two years of the grant
of such Option, or is dismissed from employment at any time for
any reason, such Option shall immediately terminate and be
forfeited to the extent not previously exercised. For this
purpose, terminations due to death, Disability, and other
circumstances which may be designated by the Committee from time
to time, shall be regarded neither as voluntary terminations nor
as dismissals.
(b) Notwithstanding any other provision in this Plan
except paragraph (c) below, the receipt or exercise of any
Option, and the receipt of any share of Stock or other benefit in
connection with or derived from any Option, shall be subject to
the following provisions:
(i) At all times during his or her employment with
his or her Employer, each Optionee shall continuously satisfy his
or her duties of loyalty and faithful service to the Company and
Employer and shall refrain from engaging in any undisclosed
conflict of interest or from otherwise acting in any manner
inimical to or contrary to the best interests of the Company or
Employer. Any violation of law or of any Company or Employer
policy or any business practices or ethics manual or code of the
Company or Employer shall be considered conduct inimical to or
contrary to the best interests of the Company and Employer for
the purposes of this Section. The exercise of any Option, or the
acceptance of any share of Stock or other benefit hereunder in
connection with any Option, shall be deemed to be the
certification by the Optionee that he or she has satisfied this
condition. In addition, each Optionee shall furnish to the
Committee on request any other information concerning
satisfaction of such condition which the Committee may request.
(ii) This Section 10(b) is intended to establish,
as a condition to the realization of economic benefits from all
Options and the Plan, a standard of conduct consistent with (A)
the duties of loyalty and faithful performance of services
imposed on an employee, officer, and/or director (as the case may
be) by the common law, and (B) the Company's and Employer's
published standards and policies which each Optionee is bound to
observe. This Section shall in no way impair or derogate from
the rights or remedies which the Company or Employer may have at
law or in equity or under any employment contract or agreement
with an Optionee to prevent or to recover damages (including
exemplary damages) for the disclosure of trade secrets or
confidential or proprietary information, or to receive any
restitution or recover any damages (including exemplary damages)
properly owing the Company or Employer because of any theft,
fraud, embezzlement, other illegal conduct, breach of duty, or
other misconduct on the part of an Optionee.
<PAGE> 9
(iii) If the Committee determines that an Optionee
has not observed the standard of conduct required by this Section
10(b), the Committee may cause the Optionee to forfeit any right
to or in all or any part of his or her Options which either were
outstanding on the date of the first act of misconduct which gave
rise to such determination or were granted thereafter, and may
require repayment of any Stock or other benefit received in
connection with or derived from such Options by the Optionee
after such first act of misconduct. For the purposes of this
Section 10(b), "other benefit" shall include (without limitation)
any cash or other proceeds from the sale or disposition of Stock
received upon exercise of any Option, and any cash, Stock, or
other dividends received in connection with such Stock. If the
Company or Employer brings suit to enforce its rights hereunder,
each Optionee shall agree to pay any costs (including court costs
and attorneys' fees) incurred in connection therewith.
(iv) This Section 10(b) shall not be interpreted as
requiring the Committee to take action in each and every instance
of suspected misconduct, and in determining to attempt to enforce
the forfeiture and repayment provisions of this Section, the
Committee may consider, among other things, the nature of the
misconduct, its relationship to the Optionee's employment with
the Employer, its seriousness, the impact on the Company, the
possible economic effects, the circumstances surrounding any
discontinuance of the Optionee's employment with the Employer,
and the amount of proof which the Employer may have of any
alleged misconduct. Any decision by the Committee to forego
enforcement of this Section in whole or in part in any particular
instance shall in no way constitute a waiver of the right to
enforce this Section in any other instance.
(v) During the period of any investigation into
whether an Optionee has engaged in conduct prohibited by this
Section 10(b), the Optionee's rights to receive delivery of any
Stock or other benefits, or to have any restrictive legends
removed from Stock certificates, or to have any transfer of Stock
recognized on the stock books of the Company, shall be suspended.
No Optionee shall be prohibited by this paragraph (v) from
exercising his or her Options, subject to the previous sentence.
(c) The provisions of this Section 10 shall terminate
upon the occurrence of an Acceleration Event.
Section 11. Competing with the Company.
(a) For the purposes of this Section 11, an Optionee
shall "compete with the Company" if (i) while the Optionee is
employed by the Company or any Subsidiary and for three years
thereafter, the Optionee accepts employment with, or serves as an
agent, employee, or director of or a consultant to, a competitor
of the Company or any Subsidiary, or (ii) during such time the
Optionee acquires or has an interest (direct or indirect) in any
firm, corporation or enterprise engaged in a business which is in
<PAGE> 10
competition with the Company or any Subsidiary, or (iii) at any
time, either during employment or thereafter, the Optionee
divulges any information concerning the Company or any Subsidiary
which is or could be of aid to any such competitor. The mere
ownership of a less than a 1% debt and/or equity interest in a
competing company whose stock is publicly held shall not be
considered as having the prohibited interest in a competitor, and
neither shall the mere ownership of a less than a 5% debt and/or
equity interest in a competing company whose stock is not
publicly held. For purposes of this Plan, any commercial bank,
savings and loan association, securities broker or dealer, or
other business or financial institution that offers any major
service at the time offered by the Company or any of its
Subsidiaries, and which conducts business in any location
encompassed within the areas circumscribed by circles, of which
the radii are 25 miles and the mid-points are the main front
doors of each place of business of the Company and each of its
Subsidiaries, shall be deemed to be a competitor.
(b) If an Optionee competes with the Company, the
Optionee shall have failed to satisfy a condition subsequent to
the grant or exercise of each Option granted to the Optionee.
Accordingly, in such instance, the Optionee shall forfeit each of
his or her Options which were outstanding on the date such
competition began or were granted thereafter, along with all
Stock and other benefits (as defined in Section 10(b)(iii))
received in connection therewith or derived therefrom.
(c) In consideration of receiving each Option and the
benefits thereof, each Optionee shall be required in his or her
Agreement to covenant and agree not to compete with the Company.
If an Optionee violates the foregoing covenant and agreement, the
Optionee shall have breached his or her Agreement. Accordingly,
in such instance, the Optionee shall be liable to the Company and
its subsidiaries for any actual damages caused by such breach,
including the actual costs of investigating such breach and
enforcing the Company's or Subsidiary's rights hereunder
(including court costs and attorneys' fees). Each Optionee shall
be required to acknowledge that monetary damages may be
inadequate to fully compensate the Company for the consequences
of any violation of the foregoing covenant and agreement; the
Company shall have the right to obtain injunctive and other
appropriate equitable relief in addition to obtaining actual
damages as aforesaid.
(d) The provisions of this Section 11 shall terminate
upon the occurrence of an Acceleration Event.
Section 12. General Provisions.
(a) The Company shall not be required to issue or
deliver any certificates for shares of Stock to an Optionee upon
the exercise of his or her Option prior to:
<PAGE> 11
(i) if requested by the Company, the filing with
the Company by the person exercising an Option of a
representation in writing that at the time of such exercise it is
his or her then present intention to acquire the shares of Stock
being purchased for investment and not for resale, and/or the
completion of any registration or other qualification of such
shares of Stock under any state or Federal laws or rulings or
regulations of any government regulatory body, which the Company
shall determine to be necessary or advisable, and
(ii) the listing, or approval for listing upon
notice of issuance, of such shares of Stock on such securities
exchange or national market system as may at the time be the
principal market for the Stock, and
(iii) the obtaining of any other consent, approval
or permit from any state or federal governmental agency which the
Committee shall, in its absolute discretion upon the advice of
counsel, determine to be necessary or advisable.
(b) It is intended that all ISOs at the time of grant
will meet the requirements for "incentive stock options" within
the meaning of Section 422 of the Code. The Plan shall in all
respects be so interpreted and construed as to be consistent with
this intention. This Section shall not prohibit the
disqualification of an ISO after its grant; however, the
Committee may disqualify an outstanding ISO only with the consent
of the affected Optionee.
(c) The Committee shall not act with respect to any
Reporting Person in a manner which would contravene any
requirement of Rule 16b-3 as in effect at the time of such
action, except with the informed consent of such Reporting
Person. Likewise, no Reporting Person shall act with respect to
any Option in a manner which would contravene any requirement of
Rule 16b-3 as in effect at such time, unless such Reporting
Person acknowledges to the Company that he or she understands the
consequences of such action and the Company (in its sole
discretion) consents to such action.
Section 13. Change in Stock, Adjustments, Etc.
In the event any stock dividend is declared upon the Stock
or in the event outstanding shares of Stock shall be changed into
or exchanged for a different number, class or kind of shares of
Stock or other securities of the Company or of another
corporation, whether by reason of a split or combination of
shares, recapitalization, reclassification, reorganization,
merger, consolidation, or otherwise, the number of shares of
Stock which may be optioned under the Plan shall be appropriately
and proportionately adjusted and in any such event a
corresponding adjustment shall be made changing the number, class
or kind of shares of Stock or other securities which are
deliverable upon the exercise of any Option previously granted
<PAGE> 12
without change in the total price applicable to the unexercised
portion of such Option, but with a corresponding adjustment in
the price for each share of Stock or other securities covered by
the unexercised portion of such Option. In the event the Company
is merged, consolidated or reorganized with another corporation,
appropriate provision shall be made for the continuance of
outstanding option rights and to prevent their dilution or
enlargement compared to the total shares issuable therein in
respect of the Stock. Adjustments under this Section 13 shall be
made in an equitable manner by the Committee, whose determination
shall be conclusive and binding on all concerned.
Section 14. Duration, Amendment and Termination.
The Board of Directors may at any time terminate the Plan or
make such amendments thereof as it shall deem advisable and in
the best interests of the Company, without further action on the
part of the shareholders of the Company; provided, however, that
no such termination or amendment shall, without the consent of
the Optionee, adversely affect or impair the rights of such
Optionee, and provided further, that, unless the shareholders of
the Company shall have approved thereof, no amendment of this
Plan shall be made whereby (a) the total number of shares of
Stock which may be optioned under the Plan shall be increased,
except by operation of the adjustment provisions of Section 13
hereof, or (b) the class of Eligible Employees shall be changed.
The Committee may amend the Plan from time to time to the extent
necessary to comply with Rule 16b-3.
The period during which Options may be granted under the
Plan shall terminate on January 21, 2002 unless the Plan shall
have been terminated previously as provided above.
Section 15. Shareholder Approval.
No Option granted under the Plan may be exercised in whole
or in part unless and until adoption of the Plan is approved by
the Company's shareholders within twelve months of its adoption
by the Board of Directors. Such shareholder approval shall
consist of the affirmative vote of a majority of the outstanding
shares of the Company present (in person or by proxy) at a
meeting of the shareholders duly called for the purpose of voting
thereon at which a quorum is present, unless a greater vote is
required by the Company's Articles of Incorporation or By-Laws,
or by applicable law.
Section 16. Date of Granting of Options.
Nothing contained in the Plan or in any resolution adopted
or to be adopted by the Board of Directors or the shareholders of
the Company shall constitute the granting of any Option
hereunder. The date of grant of an Option pursuant to the Plan
shall be the date of grant thereof by action of the Committee.
Promptly after the grant of the Option, the Company shall mail or
<PAGE> 13
deliver to the Optionee an Agreement, duly executed by and on
behalf of the Company, with the request that the Optionee execute
the Agreement within thirty days after the date of mailing or
delivery. If the Optionee shall fail to execute the Agreement
within said thirty-day period, his or her Option shall be
automatically terminated unless the Committee determines
otherwise in its sole discretion.
Section 17. Severability.
In case any provision of this Plan shall be held by any
court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and
this Plan shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein, so long as
the remaining provisions shall be sufficient, as determined by
such court, to carry out the overall intent of the Company and
its Board of Directors as expressed herein.
<PAGE> 1
Exhibit 10.3
MARK TWAIN BANCSHARES, INC.
1995 STOCK OPTION PLAN
(As amended January 12, 1996)
Section 1. Establishment and Purpose.
Mark Twain Bancshares, Inc. (the "Company") hereby
establishes a stock option plan to be named the Mark Twain
Bancshares, Inc. 1995 Stock Option Plan (the "Plan"), for
Eligible Employees of the Company and its Subsidiaries. The
purpose of the Plan is (1) to induce Eligible Employees of the
Company and its Subsidiaries who are in a position to contribute
materially to the prosperity thereof to remain with the Company
or its Subsidiaries, to offer them incentives and rewards in
recognition of their contributions to the Company's progress, and
to encourage them to continue to promote the best interests of
the Company and its Subsidiaries, and (2) to aid the Company and
its Subsidiaries in competing with other enterprises for the
services of new officers and other managerial or supervisory
personnel needed to help insure the Company's continued progress.
Section 2. Definitions.
(a) "Acceleration Event" has the meaning given in
Section 8(c).
(b) "Agreement" has the meaning given in Section 7.
(c) "Board of Directors" means the Board of Directors of
the Company.
(d) "Code" means the Internal Revenue Code as in effect
from time to time. When a specific Section of the Code is
referred to in the Plan or an Agreement, the reference shall mean
such Section and any successor provision from time to time unless
the reference specifically excludes successor provisions.
(e) "Committee" means the Stock Option Committee
referred to in Section 3 hereof.
(f) "Company" means Mark Twain Bancshares, Inc., a
Missouri corporation.
(g) "Disability" means the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code.
(h) "Eligible Employee" has the meaning given in Section
5.
<PAGE> 2
(i) "Employer" means the Company or that Subsidiary
which employs an Optionee.
(j) "Fair Market Value" for all purposes hereof, shall
be the mean between the high and low selling prices of the
Company's common stock for the appropriate valuation date as
reported by the NASDAQ or other applicable reporting system. If
no sales are reported for the appropriate valuation date, "Fair
Market Value" shall be: (i) if sales are reported within a
reasonable period before and after the appropriate valuation
date, the weighted average of the means between the high and low
selling prices on the nearest date before and nearest date after
such valuation date, with the average to be weighted inversely by
the respective numbers of trading days between the selling dates
and such valuation dates; or (ii) otherwise, the value per share
determined by the Committee in a manner consistent with the
Treasury Regulations under Section 2031 of the Code.
(k) "ISO" or "Incentive Stock Option" means an option
granted under the Plan to purchase Stock which is designated by
the Committee as an Incentive Stock Option and which qualifies as
an "incentive stock option" under Section 422 of the Code.
(l) "NQSO" or "Non-Qualified Stock Option" means an
option granted under the Plan to purchase Stock which is
designated by the Committee as a "Non-Qualified Stock Option" or
which is designated by the Committee as an ISO but which fails or
ceases to qualify as an "incentive stock option" under the Code.
(m) "Option" means an ISO or NQSO.
(n) "Optionee" means the person to whom an Option is
granted.
(o) "Plan" means the Mark Twain Bancshares, Inc. 1995
Stock Option Plan.
(p) "Reporting Person" means an Optionee who is required
to file statements relating to his or her beneficial ownership of
Stock with the Securities and Exchange Commission pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
However, a person shall not be deemed to be a "Reporting Person"
on any given date unless an ordinary purchase or sale of Stock
occurring on such date would be required to be reported to such
Commission.
(q) "Rule 16b-3" means Rule 16b-3 (as amended from time
to time) promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, and any successor
thereto.
(r) "Stock" means authorized and unissued shares of
common stock of the Company, par value $1.25 per share, or
<PAGE> 3
reacquired shares of the Company's common stock held in its
Treasury.
(s) "Subsidiary" means a "subsidiary corporation" of the
Company as defined in Section 424 of the Code.
(t) "Ten Per Cent Shareholder" means any individual who
at the time an Option is granted owns directly or indirectly
capital stock of the Company possessing more than 10% of the
total combined voting power of all classes of capital stock of
the Company or any Subsidiary, taking into account the provisions
of Section 424(d) of the Code.
(u) "Withholding Taxes" means, in connection with an
Option, (i) the total amount of federal and state income taxes,
social security taxes and other taxes which the Employer of the
Optionee is required to withhold ("Required Withholding Taxes")
plus (ii) any other income taxes which the Employer withholds at
the request of the Optionee.
Section 3. Administration.
The Plan shall be administered by a Stock Option Committee
consisting of three or more persons, each of whom at all times
shall be a member of the Board of Directors, a "disinterested
person" as defined in Rule 16b-3 from time to time and an
"outside director" as defined for purposes of Section 162(m) of
the Code from time to time. Committee members shall not be
eligible for selection to receive Options under the Plan. The
Board of Directors shall appoint the members of the Committee and
may fill vacancies thereon, however caused. The Committee shall
select one of its members as Chairman and shall hold its meetings
at such times and places as it may determine. A majority of the
members of the Committee shall constitute a quorum and the acts
of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of
the members of the Committee, shall be deemed the acts of the
Committee. The Company shall grant Options under the Plan in
accordance with determinations made by the Committee pursuant to
the provisions of the Plan. The Committee may from time to time
adopt (and thereafter may from time to time amend or rescind)
such administrative rules and regulations for carrying out the
Plan, and the Committee may take such action in the
administration of the Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The interpretation and
construction of any provisions of the Plan or the Agreements by
the Committee shall, unless otherwise determined by the Board of
Directors, be final and conclusive.
Section 4. Total Number of Shares of Stock Subject to the Plan.
The maximum number of shares of Stock which may be issued
pursuant to Options granted hereunder (subject to adjustment as
provided in Section 13 hereof) shall be 900,000 shares, and said
<PAGE> 4
number of shares of Stock (subject to adjustment as aforesaid)
shall be reserved for issuance upon the exercise of Options
granted under the Plan. The Company may in its discretion use
reacquired shares held in the Company's treasury in lieu of
authorized but unissued shares. The number of shares which are
optioned shall be charged against such maximum number (as
adjusted). If an Option shall terminate for any reason without
having been exercised in full, the unpurchased shares previously
subject to such Option shall, unless the period during which
Options under the Plan may be granted has expired, again be
available for the purposes of the Plan and such terminated Option
or any portion thereof shall not be taken into account in
computing the total number of shares previously optioned.
Section 5. Eligibility.
The class of employees eligible to receive Options under the
Plan ("Eligible Employees") shall be officers and key employees
of the Company or of any Subsidiary (not including directors of
the Company or of any Subsidiary who are not otherwise officers
or employees of the Company or of any Subsidiary). The decision
of the Committee regarding which employees are eligible from time
to time shall be conclusive.
Section 6. Granting of Options.
(a) The Committee shall, in its discretion, determine
the Eligible Employees to be granted Options, the time or times
at which Options shall be granted, the number of shares subject
to each Option, whether the Option is an ISO or an NQSO, and
whether the option price shall be payable (i) only with cash or
(ii) either with cash or with Stock, or with a combination of
cash and Stock. In making such determinations, the Committee may
take into consideration the value of the services rendered by the
respective individuals, their present and potential contributions
to the success of the Company or any Subsidiary, and other
factors which the Committee may deem relevant in accomplishing
the purposes of the Plan. Options granted under the Plan shall
not be affected by any change of duties or position of the
Optionee so long as the Optionee continues to be an employee of
the Company or any Subsidiary. An individual may be granted more
than one Option.
(b) In the event the Company or a Subsidiary enters into
a transaction described in Section 424(a) of the Code with any
other corporation, the Committee may grant Options to employees
or former employees of such corporation in substitution of stock
options previously granted to them by such corporation upon such
terms and conditions as shall be necessary to qualify such grant
as a substitution described in Section 424(a) of the Code.
(c) Notwithstanding any other provisions of this Plan,
the maximum number of Options that may be granted to any Eligible
<PAGE> 5
Employee under the Plan during any calendar year shall be 60,000,
subject to adjustment as provided in Section 13.
(d) All action taken by the Committee under the Plan
prior to its adoption by the full Board of Directors and/or its
approval by the shareholders is ratified and confirmed. Such
action includes, without limitation, grants of certain NQSOs on
January 16, 1995, as well as the adoption of administrative rules
relating to the payment of Withholding Taxes with Stock.
Section 7. Terms of Options.
The Committee, in its sole discretion, shall determine on
and after what date or dates Options granted hereunder shall be
exercisable and whether any particular Option shall be
exercisable in one or more installments, specifying the
installment dates and the number of shares exercisable on and
after each such date, and, within the limits herein provided,
shall determine the total period during which such Option is
exercisable. The Committee, in its sole discretion but within
the limits of the Plan, shall determine when and for how long
Options shall be exercisable after death, Disability, or other
termination of employment. Further, the Committee may include
such other provisions as the Committee may deem (a) acceptable or
desirable to the Committee and not inconsistent with the Plan or
(b) necessary to qualify its grants of ISOs under the provisions
of Section 422 of the Code.
Each Option granted under the Plan shall be evidenced by an
Incentive Stock Option Agreement or a Non-Qualified Stock Option
Agreement (an "Agreement") in such form, not inconsistent with
the Plan, as the Committee shall determine, and shall include the
substance of the following terms and conditions:
(a) The Agreement shall state that the Option is an
Incentive Stock Option or a Non-Qualified Stock Option, as
applicable.
(b) The option price for each share of Stock covered by
such Option shall be an amount not less than 100% of the Fair
Market Value of the Stock on the date the Option is granted, or
such higher price as may be required under the Code at the time
of grant in the case of an ISO granted to a Ten Per Cent
Shareholder.
(c) The Option by its terms shall not be transferable by
the Optionee otherwise than by will or by the laws of descent and
distribution and shall be exercisable, during his or her
lifetime, only by the Optionee.
(d) The Option by its terms shall not be exercisable
after the expiration of five years from the date such Option is
granted.
<PAGE> 6
(e) Each Agreement shall recite or incorporate by
reference the substance of Sections 10 and 11 below.
Section 8. Acceleration.
(a) All Options automatically shall become immediately
exercisable in full upon a termination of employment caused by
the Optionee's death or Disability.
(b) The Committee may accelerate the date on which any
Option shall become exercisable at any time after grant and for
any reason the Committee deems appropriate.
(c) Upon the occurrence of any Acceleration Event, each
Option outstanding under this Plan automatically shall become
immediately exercisable in full. For the purposes of this Plan,
an "Acceleration Event" is any of the following events: (i) any
Person (as defined below) becomes the beneficial owner (directly
or indirectly, within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Act") of more
than 50% of the Company's then outstanding voting securities;
(ii) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with any other
corporation or entity, other than an agreement providing for (x)
a merger or consolidation in which the beneficial owners of the
Company's voting securities outstanding immediately before the
merger or consolidation continue to beneficially own, in
substantially the same proportions and with substantially the
same rights relative to each other, at least 50% of the Company's
or surviving entity's voting securities outstanding immediately
after such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person acquires more
than 50% of the combined voting power of the Company's then
outstanding securities; (iii) a change occurs in the composition
of the Board of Directors of the Company during any period of
twenty-four consecutive months such that individuals who at the
beginning of such period were members of the Board of Directors
("Old Directors") cease for any reason to constitute at least a
majority thereof, provided that each new director whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the Old Directors
then still in office shall be deemed to be an Old Director; or
(iv) the shareholders of the Company approve a plan of sale or
disposition by the Company of all or substantially all the
Company's assets. For purposes of this paragraph, "Person" shall
have the meaning given in Section 3(a)(9) of the Act, as modified
and used in Sections 13(d) and 14(d) thereof; however, a Person
shall not include (aa) the Company or any of its Subsidiaries,
(bb) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Subsidiaries,
(cc) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (dd) a corporation owned,
directly or indirectly, by the stockholders of the Company in
<PAGE> 7
substantially the same proportions as their ownership of the
Company's voting securities. The percentage of voting securities
beneficially owned by any Person or other entity or group shall
be measured on the basis of the total voting power of all such
securities which would be entitled to vote at a meeting of
shareholders held at the time in question.
Section 9. Exercise of Options.
(a) An Option shall be exercisable only (i) upon payment
to the Company on the date of exercise of the Option of cash in
the full amount of the option price of the shares with respect to
which the Option is exercised or (ii), if the Agreement relating
to the Option being exercised so permits, upon delivery to the
Company on the date of exercise of the Option of certificates,
duly endorsed for transfer or accompanied by a stock power,
representing shares of Stock owned by the Optionee, having a Fair
Market Value on the date of such exercise and delivery equal to
the full amount of the purchase price of the shares with respect
to which the Option is exercised, or (iii) a combination of (i)
and (ii). In addition, the Committee may permit any Option to be
exercised using shares of Stock which normally would be
deliverable to the Optionee in connection with the exercise; no
Option may be so exercised unless expressly permitted by the
Committee in the Agreement or otherwise in writing.
(b) If requested by an Optionee, the Company may make a
loan or loans to such Optionee of all or part of the option
price, provided that such loan will be made only (i) in
accordance with the provisions of the Company's Officer Loan
Program and (ii) if, and to the extent, the loan can be made in
accordance with all applicable rules and regulations of the
Federal Reserve Board and other regulatory agencies having
jurisdiction over the subject matter.
(c) An Optionee shall have none of the rights of a
shareholder with respect to shares of Stock subject to his or her
Option until shares of Stock are issued to him or her upon the
exercise of his or her Option.
(d) When the Optionee's Employer becomes required to
collect Required Withholding Taxes, the Optionee shall promptly
pay to the Company or Employer (as required by the Committee) the
amount of such Required Withholding Taxes in cash, unless the
Agreement or the Committee permits or requires payment in another
form. In the discretion of the Committee or its delegate and at
the Optionee's request, the Committee or its delegate may cause
the Company or Employer to pay Withholding Taxes in excess of
Required Withholding Taxes on behalf of an Optionee, which shall
be reimbursed by the Optionee. The Committee may allow an
Optionee to reimburse the Company or Employer for payment of
Withholding Taxes with shares of Stock, including Stock otherwise
issuable upon exercise of the Option. The Committee may require
the satisfaction of any rules or conditions in connection with
<PAGE> 8
any non-cash payment of Withholding Taxes. If the Optionee is a
Reporting Person at the time of grant or during the Option's term
and is given an election to pay any Withholding Taxes with Stock,
the Committee shall have sole discretion to approve or disapprove
such election at any time after the election is made. If the
Committee permits Withholding Taxes to be paid with Stock, the
Committee shall adopt such rules as it deems appropriate to
qualify Withholding Tax elections by Reporting Persons for
exemption in whole or part from liability under Section 16(b) of
the Securities Exchange Act of 1934, as amended.
(e) If provided in the Agreement relating to an ISO, the
Committee may prohibit the transfer by an Optionee of shares of
Stock issued to him or her upon exercise of an ISO into the name
of a nominee, and the Committee may require the placement of a
legend on certificates for such shares reflecting such
prohibition or adopt other appropriate enforcement procedures.
Section 10. Forfeitures.
(a) If any Optionee to whom an Option is granted
voluntarily terminates employment within two years of the grant
of such Option, or is dismissed from employment at any time for
any reason, such Option shall immediately terminate and be
forfeited to the extent not previously exercised. For this
purpose, terminations due to death, Disability, and other
circumstances which may be designated by the Committee from time
to time, shall be regarded neither as voluntary terminations nor
as dismissals.
(b) Notwithstanding any other provision in this Plan
except paragraph (c) below, the receipt or exercise of any
Option, and the receipt of any share of Stock or other benefit in
connection with or derived from any Option, shall be subject to
the following provisions:
(i) At all times during his or her employment with
his or her Employer, each Optionee shall continuously satisfy his
or her duties of loyalty and faithful service to the Company and
Employer and shall refrain from engaging in any undisclosed
conflict of interest or from otherwise acting in any manner
inimical to or contrary to the best interests of the Company or
Employer. Any violation of law or of any Company or Employer
policy or any business practices or ethics manual or code of the
Company or Employer shall be considered conduct inimical to or
contrary to the best interests of the Company and Employer for
the purposes of this Section. The exercise of any Option, or the
acceptance of any share of Stock or other benefit hereunder in
connection with any Option, shall be deemed to be the
certification by the Optionee that he or she has satisfied this
condition. In addition, each Optionee shall furnish to the
Committee on request any other information concerning
satisfaction of such condition which the Committee may request.
<PAGE> 9
(ii) This Section 10(b) is intended to establish,
as a condition to the realization of economic benefits from all
Options and the Plan, a standard of conduct consistent with (A)
the duties of loyalty and faithful performance of services
imposed on an employee, officer, and/or director (as the case may
be) by the common law, and (B) the Company's and Employer's
published standards and policies which each Optionee is bound to
observe. This Section shall in no way impair or derogate from
the rights or remedies which the Company or Employer may have at
law or in equity or under any employment contract or agreement
with an Optionee to prevent or to recover damages (including
exemplary damages) for the disclosure of trade secrets or
confidential or proprietary information, or to receive any
restitution or recover any damages (including exemplary damages)
properly owing the Company or Employer because of any theft,
fraud, embezzlement, other illegal conduct, breach of duty, or
other misconduct on the part of an Optionee.
(iii) If the Committee determines that an Optionee
has not observed the standard of conduct required by this Section
10(b), the Committee may cause the Optionee to forfeit any right
to or in all or any part of his or her Options which either were
outstanding on the date of the first act of misconduct which gave
rise to such determination or were granted thereafter, and may
require repayment of any Stock or other benefit received in
connection with or derived from such Options by the Optionee
after such first act of misconduct. For the purposes of this
Section 10(b), "other benefit" shall include (without limitation)
any cash or other proceeds from the sale or disposition of Stock
received upon exercise of any Option, and any cash, Stock, or
other dividends received in connection with such Stock. If the
Company or Employer brings suit to enforce its rights hereunder,
each Optionee shall agree to pay any costs (including court costs
and attorneys' fees) incurred in connection therewith.
(iv) This Section 10(b) shall not be interpreted as
requiring the Committee to take action in each and every instance
of suspected misconduct, and in determining to attempt to enforce
the forfeiture and repayment provisions of this Section, the
Committee may consider, among other things, the nature of the
misconduct, its relationship to the Optionee's employment with
the Employer, its seriousness, the impact on the Company, the
possible economic effects, the circumstances surrounding any
discontinuance of the Optionee's employment with the Employer,
and the amount of proof which the Employer may have of any
alleged misconduct. Any decision by the Committee to forego
enforcement of this Section in whole or in part in any particular
instance shall in no way constitute a waiver of the right to
enforce this Section in any other instance.
(v) During the period of any investigation into
whether an Optionee has engaged in conduct prohibited by this
Section 10(b), the Optionee's rights to receive delivery of any
Stock or other benefits, or to have any restrictive legends
<PAGE> 10
removed from Stock certificates, or to have any transfer of Stock
recognized on the stock books of the Company, shall be suspended.
No Optionee shall be prohibited by this paragraph (v) from
exercising his or her Options, subject to the previous sentence.
(c) The provisions of this Section 10 shall terminate
upon the occurrence of an Acceleration Event.
Section 11. Competing with the Company.
(a) For the purposes of this Section 11, an Optionee
shall "compete with the Company" if (i) while the Optionee is
employed by the Company or any Subsidiary and for three years
thereafter, the Optionee accepts employment with, or serves as an
agent, employee, or director of or a consultant to, a competitor
of the Company or any Subsidiary, or (ii) during such time the
Optionee acquires or has an interest (direct or indirect) in any
firm, corporation or enterprise engaged in a business which is in
competition with the Company or any Subsidiary, or (iii) at any
time, either during employment or thereafter, the Optionee
divulges any information concerning the Company or any Subsidiary
which is or could be of aid to any such competitor. The mere
ownership of a less than a 1% debt and/or equity interest in a
competing company whose stock is publicly held shall not be
considered as having the prohibited interest in a competitor, and
neither shall the mere ownership of a less than a 5% debt and/or
equity interest in a competing company whose stock is not
publicly held. For purposes of this Plan, any commercial bank,
savings and loan association, securities broker or dealer, or
other business or financial institution that offers any major
service at the time offered by the Company or any of its
Subsidiaries, and which conducts business in any location
encompassed within the areas circumscribed by circles, of which
the radii are 25 miles and the mid-points are the main front
doors of each place of business of the Company and each of its
Subsidiaries, shall be deemed to be a competitor.
(b) If an Optionee competes with the Company, the
Optionee shall have failed to satisfy a condition subsequent to
the grant or exercise of each Option granted to the Optionee.
Accordingly, in such instance, the Optionee shall forfeit each of
his or her Options which were outstanding on the date such
competition began or were granted thereafter, along with all
Stock and other benefits (as defined in Section 10(b)(iii))
received in connection therewith or derived therefrom.
(c) In consideration of receiving each Option and the
benefits thereof, each Optionee shall be required in his or her
Agreement to covenant and agree not to compete with the Company.
If an Optionee violates the foregoing covenant and agreement, the
Optionee shall have breached his or her Agreement. Accordingly,
in such instance, the Optionee shall be liable to the Company and
its subsidiaries for any actual damages caused by such breach,
including the actual costs of investigating such breach and
<PAGE> 11
enforcing the Company's or any Subsidiary's rights hereunder
(including court costs and attorneys' fees). Each Optionee shall
be required to acknowledge that monetary damages may be
inadequate to fully compensate the Company for the consequences
of any violation of the foregoing covenant and agreement; the
Company shall have the right to obtain injunctive and other
appropriate equitable relief in addition to obtaining actual
damages as aforesaid.
(d) The provisions of this Section 11 shall terminate
upon the occurrence of an Acceleration Event for those options
granted prior to 1996. For options granted after 1995, the
provisions of this Section 11 may be terminated upon the
occurrence of an Acceleration Event, as the Committee may
determine in its sole discretion.
Section 12. General Provisions.
(a) The Company shall not be required to issue or
deliver any certificates for shares of Stock to an Optionee upon
the exercise of his or her Option prior to:
(i) if requested by the Company, the filing with
the Company by the person exercising an Option of a
representation in writing that at the time of such exercise it is
his or her then present intention to acquire the shares of Stock
being purchased for investment and not for resale, and/or the
completion of any registration or other qualification of such
shares of Stock under any state or Federal laws or rulings or
regulations of any government regulatory body, which the Company
shall determine to be necessary or advisable, and
(ii) the listing, or approval for listing upon
notice of issuance, of such shares of Stock on such securities
exchange or national market system as may at the time be the
principal market for the Stock, and
(iii) the obtaining of any other consent, approval
or permit from any state or federal governmental agency which the
Committee shall, in its absolute discretion upon the advice of
counsel, determine to be necessary or advisable.
(b) It is intended that all ISOs at the time of grant
will meet the requirements for "incentive stock options" within
the meaning of Section 422 of the Code. The Plan shall in all
respects be so interpreted and construed as to be consistent with
this intention. This Section shall not prohibit the
disqualification of an ISO after its grant; however, the
Committee may disqualify an outstanding ISO only with the consent
of the affected Optionee.
(c) The Committee shall not act with respect to any
Reporting Person in a manner which would contravene any
requirement of Rule 16b-3 as in effect at the time of such
<PAGE> 12
action, except with the informed consent of such Reporting
Person. Likewise, no Reporting Person shall act with respect to
any Option in a manner which would contravene any requirement of
Rule 16b-3 as in effect at such time, unless such Reporting
Person acknowledges to the Company that he or she understands the
consequences of such action and the Company (in its sole
discretion) consents to such action.
Section 13. Change in Stock, Adjustments, Etc.
In the event any stock dividend is declared upon the Stock
or in the event outstanding shares of Stock shall be changed into
or exchanged for a different number, class or kind of shares of
Stock or other securities of the Company or of another
corporation, whether by reason of a split or combination of
shares, recapitalization, reclassification, reorganization,
merger, consolidation, or otherwise, the number of shares of
Stock which may be optioned under the Plan and the maximum number
of shares which may be granted to any Eligible Employee during
any calendar year shall be appropriately and proportionately
adjusted and in any such event a corresponding adjustment shall
be made changing the number, class or kind of shares of Stock or
other securities which are deliverable upon the exercise of any
Option previously granted without change in the total price
applicable to the unexercised portion of such Option, but with a
corresponding adjustment in the price for each share of Stock or
other securities covered by the unexercised portion of such
Option. In the event the Company is merged, consolidated or
reorganized with another corporation, appropriate provision shall
be made for the continuance of outstanding option rights and to
prevent their dilution or enlargement compared to the total
shares issuable therein in respect of the Stock. Adjustments
under this Section 13 shall be made in an equitable manner by the
Committee, whose determination shall be conclusive and binding on
all concerned.
Section 14. Duration, Amendment and Termination.
The Board of Directors may at any time terminate the Plan or
make such amendments thereof as it shall deem advisable and in
the best interests of the Company, without further action on the
part of the shareholders of the Company; provided, however, that
no such termination or amendment shall, without the consent of
the Optionee, adversely affect or impair the rights of such
Optionee, and provided further, that, unless the shareholders of
the Company shall have approved thereof, no amendment of this
Plan shall be made whereby (a) the total number of shares of
Stock which may be optioned under the Plan or the maximum number
of shares which may be granted to any Eligible Employee during
any calendar year shall be increased, except by operation of the
adjustment provisions of Section 13 hereof, or (b) the class of
Eligible Employees shall be changed. The Committee may amend the
Plan from time to time to the extent necessary (x) to comply with
Rule 16b-3 and (y) to prevent benefits under the Plan from
<PAGE> 13
constituting "applicable employee remuneration" within the
meaning of Section 162(m) of the Code.
The period during which Options may be granted under the
Plan shall terminate on January 15, 2005 unless the Plan shall
have been terminated previously as provided above.
Section 15. Shareholder Approval.
No Option granted under the Plan may be exercised in whole
or in part unless and until adoption of the Plan is approved by
the Company's shareholders within twelve months of its adoption
by the Board of Directors. Such shareholder approval shall
consist of the affirmative vote of a majority of the outstanding
shares of the Company present (in person or by proxy) at a
meeting of the shareholders duly called for the purpose of voting
thereon at which a quorum is present, unless a greater vote is
required by the Company's Articles of Incorporation or By-Laws,
or by applicable law.
Section 16. Date of Granting of Options.
Nothing contained in the Plan or in any resolution adopted
or to be adopted by the Board of Directors or the shareholders of
the Company shall constitute the granting of any Option
hereunder. The date of grant of an Option pursuant to the Plan
shall be the date of grant thereof by action of the Committee.
Promptly after the grant of the Option, the Company shall mail or
deliver to the Optionee an Agreement, duly executed by and on
behalf of the Company, with the request that the Optionee execute
the Agreement within thirty days after the date of mailing or
delivery. If the Optionee shall fail to execute the Agreement
within said thirty-day period, his or her Option shall be
automatically terminated unless the Committee determines
otherwise in its sole discretion.
Section 17. Severability.
In case any provision of this Plan shall be held by any
court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and
this Plan shall be construed as if such invalid, illegal or
unenforceable provision had not been contained herein, so long as
the remaining provisions shall be sufficient, as determined by
such court, to carry out the overall intent of the Company and
its Board of Directors as expressed herein.
<PAGE> 1
EXHIBIT 11
MARK TWAIN BANCSHARES, INC.
AND SUBSIDIARIES
<TABLE>
Computation of Earnings Per Share
<CAPTION>
For the Years Ended
December 31,
(In thousands of dollars except per share data) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
PRIMARY
Earnings:
Net income $47,713 $40,982 $35,103
======= ======= =======
Shares:
Weighted average number of common shares outstanding 16,056,927 15,887,699 15,434,857
Weighted average number of common share equivalents 231,912 215,410 238,574
---------- ---------- ----------
16,288,839 16,103,109 15,673,431
========== ========== ==========
Primary earnings per common share $2.93 $2.54 $2.24
===== ===== =====
ASSUMING FULL DILUTION
Earnings:
Net Income $47,713 $40,982 $35,103
After tax interest applicable to convertible notes 343 426 505
After tax amortization of capital note fees 51 62 115
------- ------- -------
Fully diluted net income $48,107 $41,470 $35,723
======= ======= =======
Shares:
Weighted average number of common shares outstanding 16,056,927 15,887,699 15,434,857
Assuming conversion of Convertible Notes and dilutive
stock options 847,186 828,164 1,003,117
---------- ---------- ----------
16,904,113 16,715,863 16,437,974
========== ========== ==========
Earnings per common share assuming full dilution $2.85 $2.48 $2.17
===== ===== =====
</TABLE>
<PAGE> 1
Exhibit 13
Contents
16 Financial Highlights
17 Financial Review
30 Statement by Management and
Report of Independent Auditors
31 Consolidated Balance Sheet
32 Consolidated Statement of Income
33 Consolidated Statement of Changes
in Shareholders' Equity
34 Consolidated Statement of Cash Flows
35 Notes to Consolidated Financial Statements
FINANCIALS 1995
<PAGE> 2
<TABLE>
<CAPTION>
Financial Highlights
Years Ended December 31,
----------------------------------------------------------------------
(in thousands of dollars, except per share data) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income, fully tax equivalent<F1> $ 224,361 $ 195,959 $ 177,079 $ 178,954 $ 204,823
Interest expense 94,932 70,592 63,896 79,195 113,313
- --------------------------------------------------------------------- ---------- ----------- ---------- ----------
Net interest income, fully tax equivalent 129,429 125,367 113,183 99,759 91,510
Provision for loan losses 5,003 5,526 6,282 8,687 15,338
- --------------------------------------------------------------------- ---------- ----------- ---------- ----------
Net interest income after provision for loan losses 124,426 119,841 106,901 91,072 76,172
Non-interest income 36,786 35,500 43,996 37,090 31,118
Non-interest expense 86,522 90,282 95,649 84,040 76,133
- --------------------------------------------------------------------- ---------- ----------- ---------- ----------
Income before taxes 74,690 65,059 55,248 44,122 31,157
Taxable equivalent adjustment<F1> 1,188 1,346 1,451 1,687 2,096
Applicable income taxes 25,789 22,731 18,694 14,092 8,659
- --------------------------------------------------------------------- ---------- ----------- ---------- ----------
Net income $ 47,713 $ 40,982 $ 35,103 $ 28,343 $ 20,402
- -----------------------------------------------------------========== ========== =========== ========== ==========
Per Share Data
Primary earnings $ 2.93 $ 2.54 $ 2.24 $ 1.91 $ 1.48
Fully diluted earnings $ 2.85 $ 2.48 $ 2.17 $ 1.84 $ 1.43
Common dividends declared $ 1.08 $ 0.96 $ 0.81 $ 0.68 $ 0.61
Common dividend payout ratio 36.86% 37.80% 36.17% 35.52% 41.34%
Book value $ 17.09 $ 14.65 $ 13.63 $ 12.20 $ 10.88
Fully diluted book value $ 17.05 $ 14.68 $ 13.71 $ 12.39 $ 11.15
Averages for the Year
Total assets $2,766,634 $2,645,508 $ 2,484,696 $2,341,473 $2,290,979
Earning assets 2,571,745 2,460,554 2,289,298 2,168,834 2,105,020
Total loans 1,916,374 1,748,639 1,626,068 1,563,903 1,604,090
Total deposits 2,282,771 2,199,501 2,089,102 1,989,108 1,969,209
Long-term debt 19,666 23,144 26,358 28,613 30,631
Shareholders' equity 255,433 223,972 197,401 167,556 139,753
Net interest margin 5.03% 5.10% 4.94% 4.60% 4.35%
At December 31
Total assets $2,968,231 $2,688,716 $ 2,595,451 $2,376,312 $2,327,718
Earning assets 2,731,663 2,492,839 2,407,669 2,167,852 2,130,620
Total loans 1,971,939 1,860,155 1,716,394 1,541,083 1,573,154
Total deposits 2,457,392 2,272,057 2,191,913 2,034,404 1,984,921
Long-term debt 18,490 20,389 24,696 28,822 28,819
Shareholders' equity 275,906 234,049 214,994 179,046 158,958
Return on
Average total assets 1.72% 1.55% 1.41% 1.21% 0.89%
Average shareholders' equity 18.68% 18.30% 17.78% 16.92% 14.60%
Selected Ratios
Average shareholders' equity to:
Assets 9.23% 8.47% 7.94% 7.16% 6.10%
Loans 13.33% 12.81% 12.14% 10.71% 8.71%
Period-end shareholders' equity to:
Assets 9.30% 8.70% 8.28% 7.53% 6.83%
Loans 13.99% 12.58% 12.53% 11.62% 10.10%
Long-term debt to shareholders' equity 6.70% 8.71% 11.49% 16.10% 18.13%
Efficiency ratio 52.15% 56.23% 61.19% 62.03% 62.89%
<FN>
<F1> The taxable equivalent adjustments are calculated using the federal
statutory tax rate of 35% for 1995, 1994 and 1993, and 34% for 1992 and
1991.
</TABLE>
16 Mark Twain Bancshares, Inc.
<PAGE> 3
Financial Review
Income Statement Analysis
- ------------------------------------------------------------------------------
Earnings Summary
Mark Twain Bancshares, Inc. reported record earnings for 1995 with
consolidated net income of $47.71 million, an increase of 16.4% over 1994
earnings of $40.98 million. Primary earnings per share were $2.93 compared to
$2.54 in 1994, an increase of 15.4%. Fully diluted earnings per share were
$2.85, a 14.9% increase over the $2.48 earned in 1994. Net income has grown
at a compound rate of 23.5% over the last five years. Fully diluted earnings
per share have grown 18.1% on a compound basis over the same period.
Return on assets for 1995 was 1.72% compared to 1.55% for 1994 and 1.41% for
1993. Return on shareholders' equity was 18.68% for the year compared to
18.30% for 1994 and 17.78% for 1993.
Net interest income, on a fully tax equivalent basis, increased 3.2% for 1995
to total $129.43 million. Net interest margin for the year was 5.03% compared
to 5.10% for 1994 and 4.94% for 1993. Average earning assets increased 4.5%
in 1995 compared to increases of 7.5% in 1994 and 5.6% in 1993.
The provision for loan losses was less than the prior year due to lower net
charge-offs and consistent asset quality. The allowance for loan losses as a
percentage of loans was 1.55% at December 31, 1995 compared to 1.55% at
December 31, 1994 and 1.57% at December 31, 1993. Net charge-offs as
a percentage of average loans decreased to 0.18% in 1995 compared to 0.21% in
1994 and 0.35% in 1993. The percentage of non-performing assets to loans plus
foreclosed real estate was 1.00% at December 31, 1995 compared to 0.95% at
year-end 1994 and 1.20% at year-end 1993.
Non-interest income increased 3.6% in 1995 following a decrease of 19.3% in
1994 and an increase of 18.6% in 1993. The increase in non-interest income
during 1995 was primarily due to increased revenue from the Company's Bond
Division and appreciation in the Company's proprietary trading account. This
follows 1994 when the decrease in non-interest income was due to the
Company's decision to curtail its Mortgage Division as a line of business and
when Bond and Brokerage revenues fell below expectations due to market
conditions. This followed 1993 which saw record levels of mortgage
refinancing activities and Bond and Brokerage revenues.
Non-interest expenses decreased 4.2% in 1995 following a decrease of 5.6% in
1994 and an increase of 13.8% in 1993. The Company's efficiency ratio for
1995 was 52.15% compared to 56.23% for 1994 and 61.19% for 1993. Other
operating expenses decreased $3.0 million or 10.4% in 1995 compared to a
decrease of 14.6% in 1994 and an increase of 14.6% in 1993. During 1995, the
Company's FDIC insurance premiums decreased $2.3 million. Offsetting the
reduction in FDIC insurance premiums was a non-recurring charitable
contribution of foreclosed real estate made in the fourth quarter of 1995.
While increasing non-interest expense by $2.1 million, the effect of the
transaction on net income was zero, due to a combination of tax credits and
tax deductions associated with the donation. The remainder of the decrease for
1995 reflects the Company's continued focus on improving productivity. The
changes for 1994 and 1993 primarily reflect expenses directly associated with
the change in revenues in the fee-based divisions.
Net Interest Income
Tax equivalent net interest income increased $4.1 million in 1995 or 3.2%
compared to increases of 10.8% in 1994 and 13.5% in 1993. Net interest margin
was 5.03% in 1995 versus 5.10% in 1994 and 4.94% in 1993. The increase in net
interest income was primarily due to changes in average loan volume, which was
partially offset by narrowing spreads, particularly in the fourth quarter. Net
interest income declined 2.1% or $674,000 in the fourth quarter of 1995
compared to fourth quarter 1994. Net interest margin was 4.85% compared to
5.23% during the same periods. Most of the variance is attributable to the
differences in the timing of repricing of loans and the Company's cost of
funds. Table 1 provides the components of average assets and liabilities
together with their respective yields. Table 2 provides a reconciliation of
the changes in net interest income attributable to variations in balances and
yields.
Average earning assets increased $111.2 million in 1995, compared to an
increase of $171.3 million in 1994. Average loans increased $167.7 million or
9.6% in 1995 compared to an increase of $122.6 million or 7.5% in 1994.
Average loan outstandings between the two years were bolstered by strong
growth in the fourth quarter of 1994 and the first half of 1995. At year-end
1995, loan outstandings increased $111.8 million or 6.0% compared to year-end
1994. The Company's security portfolio (held-to-maturity and
available-for-sale securities) decreased on average $3.6 million or 0.6% in
1995 compared to an increase of 15.6% or $80.3 million in 1994. The decrease
in volumes is attributable to funding loan growth in the first half of the
year with principal returned from the securities portfolio. Combined with a
lower trading account average of $16.9 million and the elimination of
mortgage loans held for resale of $33.5 million, the Company shifted its
average earning asset mix during the year to higher yielding loans.
The Company's earning assets comprised 93.0% of average total assets in 1995,
compared to 93.0% in 1994 and 92.1% in 1993. The Company strives to maintain
this ratio at or above 92%.
Average interest bearing liabilities increased $63.2 million or 3.2% in 1995
compared to increases of 5.8% in 1994 and 2.1% in 1993. The lesser growth
relative to earning assets caused the ratio of interest bearing liabilities
to earning assets to decline for the third consecutive year: 80.0% in 1995,
81.0% in 1994, and 82.4% in 1993. This primarily represents the extent to
which capital is being deployed to support earning assets.
1995 Annual Report 17
<PAGE> 4
Financial Review (continued)
<TABLE>
<CAPTION>
Table 1: Consolidated Average Balance Sheet and Net Interest Margin
Year Ended December 31, 1995 Year Ended December 31, 1994 Year Ended December 31, 1993
---------------------------- ---------------------------- ----------------------------
Average Yield/ Average Yield/ Average Yield/
(in thousands of dollars) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans<F1><F2> $1,916,374 $181,975 9.50% $1,748,639 $147,817 8.45% $1,626,068 $129,221 7.95%
Held-to-maturity securities:
Taxable 331,174 22,207 6.71% 356,037 24,581 6.90% 446,369 32,547 7.29%
Non-taxable<F1> 3,161 266 8.42% 12,019 1,034 8.60% 15,352 1,297 8.45%
Trading account securities 47,559 3,003 6.31% 64,466 4,197 6.51% 46,291 3,006 6.49%
Securities available for sale 257,669 15,959 6.19% 227,591 15,070 6.62% 53,632 4,520 8.43%
Mortgage loans held for resale -- -- -- 33,513 2,453 7.32% 79,166 5,775 7.29%
Interest bearing
deposits with banks -- -- -- 114 3 2.63% 923 30 3.25%
Federal funds sold and
securities purchased
under resale agreements 15,808 951 6.02% 18,175 804 4.42% 21,497 683 3.18%
- ---------------------------------------------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest earning assets 2,571,745 224,361 8.72% 2,460,554 195,959 7.96% 2,289,298 177,079 7.74%
- ---------------------------------------------- -------- ---- ---------- -------- ---- ---------- -------- ----
Cash and due from banks 107,551 115,279 110,349
Other assets 122,970 104,662 111,116
FASB No. 115 allowance (5,938) (7,431) --
Allowance for loan losses (29,694) (27,556) (26,067)
- ---------------------------------------------- ---------- ----------
Total $2,766,634 $2,645,508 $2,484,696
- ------------------------------------========== ========== ==========
Liabilities and Shareholders' Equity
Interest bearing demand deposits $ 225,609 4,833 2.14% $ 251,849 4,933 1.96% $ 227,946 5,258 2.31%
Savings and money
market deposits 678,466 25,950 3.82% 727,797 22,018 3.03% 724,843 20,756 2.86%
Time deposits 977,600 54,223 5.55% 821,545 35,528 4.32% 764,401 31,760 4.15%
Short-term borrowings 155,939 8,414 5.40% 169,715 6,337 3.73% 141,889 4,193 2.96%
Long-term debt 19,666 1,512 7.69% 23,144 1,776 7.67% 26,358 1,929 7.32%
- ---------------------------------------------- -------- ---- ---------- -------- ---- ---------- ------- ----
Total interest bearing
liabilities 2,057,280 94,932 4.61% 1,994,050 70,592 3.54% 1,885,437 63,896 3.39%
- ---------------------------------------------- -------- ---- ---------- -------- ---- ---------- -------- ----
Non-interest bearing deposits 401,096 398,310 371,912
Other liabilities 52,825 29,176 29,946
Shareholders' equity 255,433 223,972 197,401
- ---------------------------------------------- ---------- ----------
Total $2,766,634 $2,645,508 $2,484,696
- ------------------------------------========== ========== ==========
Net interest income $129,429 $125,367 $113,183
- ---------------------------------------------- ======== ======== ========
Net interest margin 5.03% 5.10% 4.94%
- ---------------------------------------------- ==== ==== ====
<FN>
<F1> Adjusted to a fully taxable basis using federal statutory rate of 35%.
<F2> Includes non-accrual loans.
</TABLE>
In 1994, the Company was able to retain its core deposit base without
significantly increasing its liability costs. In 1995, interest rates exerted
pressures on the Company's pricing and product mix. The composition of
average interest bearing liabilities changed between 1994 and 1995 from
non-maturity deposits, interest bearing checking accounts, savings accounts,
and money markets to more expensive time deposits. This shift represents the
Company's strategy of employing the lowest marginal cost funding in the
existing interest rate environment. It also represents shifts in consumer
rate preferences. Time deposits, on average, increased $156.1 million or
19.0% as savings and money market deposits decreased $49.3 million or 6.8%
and interest bearing demand deposits decreased $26.2 million or 10.4%.
Average non-interest bearing deposits grew $2.8 million or 0.7% during 1995
compared to increases of 7.1% in 1994 and 26.0% in 1993. The rate of growth
in 1993 and decelerating growth thereafter was related to the Company's
mortgage servicing portfolio, which was sold in 1994. The increase of 7.1% in
1994 occurred in spite of the loss of custodial accounts associated with
mortgage servicing portfolio in the second half of the year. The interest
rate and economic environment is also partially responsible for the declining
growth in 1995 as businesses, the primary source of non-interest bearing
deposits for the Company, were able to maintain similar or smaller balances
without incurring fees due to higher earnings credit rates in effect for the
majority of 1995.
18 Mark Twain Bancshares, Inc.
<PAGE> 5
<TABLE>
<CAPTION>
Table 2: Rate/Volume Analysis 1995 Compared to 1994 1994 Compared to 1993
---------------------------------------- ----------------------------------------
Increase (Decrease) Increase (Decrease)
Attributable to Attributable to
Total Change in<F1> Total Change in<F1>
Increase ---------------------- Increase ----------------------
(in thousands of dollars) (Decrease) Volume Rate (Decrease) Volume Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans $34,158 $14,944 $19,214 $18,596 $10,077 $ 8,519
Held-to-maturity securities:
Taxable (2,374) (1,682) (692) (7,966) (6,309) (1,657)
Non-taxable (768) (746) (22) (263) (286) 23
Trading account securities (1,194) (1,071) (123) 1,191 1,183 8
Securities available for sale 889 1,905 (1,016) 10,550 11,713 (1,163)
Mortgage loans held for resale (2,453) (2,453) -- (3,322) (3,342) 20
Interest bearing deposits with banks (3) (3) -- (27) (22) (5)
Federal funds sold and securities purchased
under resale agreements 147 (115) 262 121 (117) 238
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total increase in interest earned on
assets 28,402 10,779 17,623 18,880 12,897 5,983
- ------------------------------------------------------ ------- ------- ------- ------- -------
Interest Expense
Interest bearing demand deposits (100) (539) 439 (325) 517 (842)
Savings and money market deposits 3,932 (1,573) 5,505 1,262 85 1,177
Time deposits 18,695 7,515 11,180 3,768 2,437 1,331
Short-term borrowings 2,077 (550) 2,627 2,144 915 1,229
Long-term debt (264) (267) 3 (153) (243) 90
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total increase in interest paid on
liabilities 24,340 4,586 19,754 6,696 3,711 2,985
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total increase in net interest income $ 4,062 $ 6,193 $(2,131) $12,184 $ 9,186 $ 2,998
- -----------------------------------------------======= ======= ======= ======= ======= =======
<FN>
<F1> For the purpose of this table, changes which are not due solely to volume
changes or rate changes are allocated to such categories based on the
respective percentage changes in average balances and average rates.
</TABLE>
Average short-term borrowings declined $13.8 million or 8.1% during 1995
compared to increases of 19.6% in 1994 and 14.0% in 1993. The decline
represents the extent to which the average trading account declined between
1994 and 1995. Average long-term borrowings declined $3.5 million or 15.0%
due to the conversion of 7% convertible subordinated capital notes and the
retirement of long-term debt of United Kansas Bank Group, Inc. acquired in
1994.
The Company's net interest spread declined 31 basis points from 4.42% in 1994
to 4.11% in 1995. This follows increases of 7 basis points in 1994 and 36
basis points in 1993. The current year decline occurred from the rates paid
for interest bearing liabilities increasing 107 basis points while the yields
on earning assets rose 76 basis points. The earning asset yield increase
compares to an increase of 22 basis points in 1994 and a decline of 51 basis
points in 1993. The increase in 1995 is largely attributable to the Company's
prime rate loan portfolio which represents 62% of the Company's loan
portfolio and 41% of the Company's earning assets. The average prime rate in
1995 was 168 basis points higher than in 1994, which resulted in the average
loan yield increasing by 105 basis points.
Yields on the held-to-maturity and available-for-sale security portfolios
decreased during 1995 by 34 basis points compared to a decrease of 61 basis
points in 1994. The decline is attributable to two factors. First,
reinvestment of principal during the year was at rates significantly below
maturing rates. Second, in 1994 the Company received $1.5 million in accretion
income from accelerated prepayments of mortgage-backed securities. Principal
payments of $81.6 million from securities was available to be reinvested
during 1995 compared to $216.0 million and $196.5 million in 1994 and 1993,
respectively. The Company also sold securities available for sale with a
carrying value of $28.9 million during 1995. Total security purchases amounted
to $199.4 million.
The increase in rates paid on interest bearing liabilities of 107 basis
points in 1995 compares with an increase of 15 basis points during 1994 and a
decrease of 90 basis points in 1993. The increase represents the impact from
changes in rates paid due to market pressures and changes in the composition
of interest bearing liabilities as discussed above.
Non-Interest Income
Non-interest income, excluding securities gains, increased 3.7% and totaled
$36.5 million in 1995. This follows an 18.3% decrease in 1994 and a 21.5%
increase in 1993. Non-interest income has increased at a five-year compound
growth rate of 9.5% without adjusting for the effects of mortgage division
revenues.
Service charges on deposits decreased $347 thousand or 4.7% in 1995. Service
charges on commercial transaction accounts decreased approximately $500
thousand in 1995, while service charges on retail transaction accounts
experienced an increase for the first time in several years. Factors
1995 Annual Report 19
<PAGE> 6
Financial Review (Continued)
affecting the decrease in commercial account service charges included a
reduction in the FDIC insurance premium passed through to commercial demand
deposits accounts and higher earnings credit rates paid to commercial
accounts to offset the cost of deposit services. This decline in revenue
followed a 10.9% decrease in 1994 and a 4.6% increase in 1993.
Other income, as shown in Table 3, increased 5.9% or
$1.6 million in 1995. This follows a 20.2% decrease in 1994 and a 26.4%
increase in 1993.
<TABLE>
<CAPTION>
Table 3: Other Income
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Division revenue $11,903 $ 8,897 $ 9,227
Brokerage revenue 4,215 5,174 5,757
Trust Division revenue 6,364 6,084 5,430
Mortgage Division revenue -- 2,178 8,143
Credit card income 676 764 600
International Division revenue 973 1,046 947
Net losses on foreclosed real estate (330) (85) (330)
Other bank income 1,020 896 812
All other income 4,618 2,839 4,238
- ------------------------------------------------------ ------- -------
Total $29,439 $27,793 $34,824
- -----------------------------------------------======= ======= =======
</TABLE>
The Company's Bond Division produced a $3.0 million or 33.8% increase in
gross revenues in 1995 as compared to the prior year. The Division's foreign
exchange operation produced record volumes resulting from the dollar's
volatility during 1995 which accounted for $2.7 million of the increase. This
increase follows a 3.6% decline in 1994 compared to 1993, which was primarily
due to market conditions with interest rates rising throughout the year.
The Brokerage operation reported an 18.5% or $959 thousand decrease in gross
revenues for 1995. This follows a 10.1% decrease in Brokerage revenues
experienced in 1994 compared to 1993. The decrease in Brokerage revenues
reflects changes in the mix of products purchased by brokerage customers and
general market conditions.
The Trust Division generated revenues of $6.4 million in 1995 which
represented an increase of 4.6% over 1994. This compares to a 12.0% increase
in revenues in 1994 over 1993 levels. Over the last five years, trust income
has been increasing at a compound annual rate of 15.7%.
Mortgage Division revenues during 1994 totaled $2.2 million. This represented
a 73.2% decrease in revenues from 1993. The Company made the decision to
curtail the Mortgage Division during 1994 due to decreasing revenues and a
lack of profitability associated with the drop in mortgage refinancings as
interest rates rose in 1994.
Net credit card income for 1995 totaled $676 thousand which represented an
$88 thousand or 11.5% decline from 1994. Credit card income is primarily
generated from processing merchant deposits, net of third party expenses
associated with processing the deposits. The third party expenses have
increased 15% while revenue has increased 6%.
The International Division revenues for 1995 totaled $973 thousand and
represented a 7.5% decline from the prior year. This followed increases of
10.5% in 1994 and 4.3% in 1993. The majority of revenues were derived from
letter of credit fees.
Losses on foreclosed real estate represent net losses on the disposition of
foreclosed real estate. Additionally, losses are recorded when the carrying
values of existing foreclosed real estate are adjusted for declines in market
values. The Company attempts to take conservative positions by periodically
revaluing its foreclosed real estate.
Other bank income increased 13.8% or $124 thousand during 1995. The primary
factors leading to this increase were increased debit card and ATM transaction
fees resulting from an expanded cardholder base.
The all other income category increased $1.8 million or 62.7% in 1995
compared to a $1.3 million decrease in 1994. The primary reason for the 1995
increase was $2.1 million of net realized and unrealized appreciation in the
Company's proprietary trading account compared to net realized and unrealized
depreciation of $408 thousand in 1994. Other factors affecting 1995 compared
to 1994 were a $546 thousand decrease in rental income resulting from the
sale of a low- to moderate-income housing project owned by one of the
Company's community development corporations; a $206 thousand gain recorded on
the sale of the low- to moderate-income housing project; a general decline in
Small Business Administration transaction fees in 1995, and $258 thousand in
gains recorded in 1994 from the sale of assets previously under lease
financing agreements.
Non-Interest Expense
Total operating expenses decreased $3.8 million or 4.2% during 1995 as
compared to a $5.4 million or 5.6% decrease in 1994 and an increase of $11.6
million or 13.8% in 1993. The largest item impacting the level of operating
expenses over the past two years was the decision to exit mortgage as a line
of business in 1994. This decision resulted in a reduction in operating
expenses of approximately $6.7 million in 1994 and an additional reduction of
operating expenses of approximately $2.0 million in 1995. In 1995, the
Company's FDIC insurance premiums decreased by $2.3 million. This was offset
by a non-recurring charitable contribution of foreclosed real estate of $2.1
million. The effect of the transaction on net income was zero due to a
combination of tax credits and tax deductions associated with the donation.
Approximately $7.0 million of the 1993 increase in operating expenses
occurred in the Company's fee based divisions and were primarily related to
the increase in volumes experienced by these divisions. In addition,
approximately $2.7 million represented operating expenses of the banks
acquired in 1993. The Company's efficiency ratio, determined by dividing
total operating expenses by total tax-equivalent revenue excluding securities
transactions, improved to 52.15% in 1995 compared to 56.23% in 1994 and
61.19% in 1993.
20 Mark Twain Bancshares, Inc.
<PAGE> 7
Excluding the 1995 non-recurring item, the efficiency ratio for 1995 was
50.90%.
Total salaries and employee benefits decreased $120 thousand or 0.3% during
1995 compared to a decrease of $922 thousand or 1.9% during 1994 and an
increase of 12.8% in 1993. Salary expense decreased $2.2 million or 6.9% for
1995 compared to a decrease of 1.2% in 1994. The number of full-time
equivalent employees at December 31, 1995 was 989 compared to 1,014 and 1,096
the previous two years. The average number of full-time equivalent employees
was 998 for 1995, 1,066 for 1994 and 1,087 for 1993. The decrease in the
average number of full-time equivalent employees for 1995 and 1994 relates
primarily to the reduction in support staff in the Company's mortgage
division which occurred mid-year 1994 and the reduction of staff associated
with banks acquired during 1993 and 1994. For 1993, the majority of the
increase in the average number of full-time equivalent employees reflects the
staffing levels of the banks acquired in 1993 and an increase in the number
of support staff in the Company's mortgage division to handle the level of
originations and refinancings experienced in 1993.
Bonuses increased $506 thousand or 22.6% during 1995 compared to increases of
7.2% in 1994 and 14.9% in 1993. In light of another record year of earnings,
the Company paid a one-time bonus to all employees not already participating
in a commission or incentive-based program. This accounted for approximately
50% of the current year increase. The Company continues to emphasize
incentive compensation based on achieving annual profitability goals. The
incentive compensation arrangements are reviewed annually by the Compensation
Committee of the Company's Board of Directors.
Commissions, which are directly related to the level of sales revenues
reported by the Company's fee divisions previously discussed, increased 27.2%
or $1.7 million for 1995. For 1994, commissions paid decreased $627 thousand
or 9.2% compared to an increase of $1.0 million in 1993.
Benefit expenses decreased $69 thousand and $55 thousand during 1995 and
1994, respectively, following an increase of $637 thousand in 1993.
Retirement and pension expense increased $161 thousand in 1995 compared to
$329 thousand in 1994 and $433 thousand in 1993, and are associated with
changes in actuarial assumptions and higher wages. The remaining changes in
benefit expense is directly related to the levels of compensation expense
discussed earlier. Table 4 provides a summary of personnel costs for the
years indicated.
<TABLE>
<CAPTION>
Table 4: Personnel Costs
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salary expense $30,407 $32,645 $33,036
Bonuses 2,749 2,243 2,092
Commissions 7,855 6,174 6,801
Employee benefits 6,520 6,589 6,644
- ------------------------------------------------------ ------- -------
Total $47,531 $47,651 $48,573
- -----------------------------------------------======= ======= ========
</TABLE>
Occupancy and furniture and equipment costs decreased $648 thousand or 4.7%
during 1995 compared to increases of 3.6% in 1994 and 15.6% in 1993. In June
1995, the Company sold a low-to moderate-income housing project which it
owned and operated. This resulted in a reduction of $522 thousand in expenses
associated with the property for 1995 as compared to 1994. The expiration of
a computer equipment lease and subsequent equipment acquisition in late 1994
also contributed to the decrease in 1995. Expenses for 1994 reflected
increases in real estate rental rates and equipment rental expenses
associated with system conversions. For 1993, approximately $600 thousand of
the increase was associated with the banks acquired in 1993 and increased
depreciation for improvements to income producing properties owned by the
Company's community development corporations. The properties owned by the
community development corporations provided low- to moderate-income housing
in the metropolitan areas served by the Company.
During 1995, other expenses decreased $3.0 million or 10.4%. This compares to
a decrease of $4.9 million or 14.6% in 1994 and an increase of $4.3 million
or 14.6% in 1993. Table 5 shows the major categories of other expenses.
<TABLE>
<CAPTION>
Table 5: Other Expenses
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
FDIC premiums $ 2,558 $ 4,833 $ 4,882
Charitable contributions 3,057 713 705
Data processing 4,461 4,764 4,079
Legal fees 1,003 1,287 2,153
Loan and collection 525 876 2,498
Marketing and advertising 1,665 1,928 1,891
Amortization 900 1,501 4,829
Postage and freight 1,474 1,482 1,595
Telecommunication 1,327 1,295 1,345
Insurance expense 850 1,132 1,338
Expenses on foreclosed real estate 426 616 986
Conventions and meetings 502 554 435
Stationery and supplies 710 756 726
Distribution expenses 681 666 619
Consulting services 744 605 429
Taxes other than income 525 430 392
Operating losses 629 1,063 275
All other expenses 3,732 4,260 4,510
- ------------------------------------------------------ ------- -------
Total $25,769 $28,761 $33,687
- -----------------------------------------------======= ======= =======
</TABLE>
FDIC insurance premiums decreased $2.3 million in 1995. The FDIC Board of
Directors voted to reduce deposit
insurance premiums to $.04 from $.23 per $100 assessable deposits effective
June 1, 1995. As a result of the rate change, the Company's banking
subsidiaries received a refund of previously paid insurance premiums in 1995
of approximately $1.4 million. The expense decreased $49 thousand for 1994
and increased 9.4% for 1993. For 1994, the increase in premiums resulting
from increased deposit levels was offset by a decrease in the premium rate
charged under the FDIC tiered premium schedule. The increase in 1993 was
directly attributable to the increase in deposits.
1995 Annual Report 21
<PAGE> 8
Financial Review (continued)
Charitable contributions increased $2.3 million for 1995. The expense for
1995 includes $2.1 million related to the donation of a parcel of foreclosed
real estate as described earlier. Charitable contribution expense remained
level in 1994 following a decrease of $2.4 million in 1993.
Amortization expense decreased $601 thousand during 1995. This follows a
decrease of $3.3 million during 1994 and an increase of $3.4 million in 1993.
In 1994, proceeds received from the sale of its mortgage servicing portfolio
approximated the remaining carrying value of purchased mortgage servicing
rights and excess servicing fees. This resulted in the reduction of
amortization expense in 1995 and 1994. The increase in 1993 was directly
attributable to writedowns in the carrying value of purchased mortgage
servicing rights and excess servicing fees brought about by the high level of
refinancings during 1993.
Loan and collection expenses decreased $351 thousand
for 1995. The expenses decreased $1.6 million in 1994
compared to an increase of $746 thousand in 1993. The decreases in 1995 and
1994, and the increase in 1993 were attributable to the loan servicing and
loan origination volumes in the Company's mortgage division. These expenses
include such items as appraisal fees paid by the Company
for mortgage loan applications and curtailment payments associated with
prepayments of mortgage-backed securities serviced by the Company.
Data processing expenses decreased $303 thousand in 1995. In the third
quarter of 1995, a $355 thousand reduction of data processing expense was
recorded related to a settlement of a contract dispute with a systems vendor
which essentially reimbursed the Company for the difference between the
contract rates and actual expenses paid by the Company due to nonperformance
under the contract. Excluding the effect of the settlement, 1995 expense
increased $52 thousand or 1.1% primarily related to accrued conversion costs.
The increases in data processing expense of $685 thousand in 1994 and $884
thousand in 1993 were due primarily to conversion costs and increased
transaction volumes resulting from acquisitions.
Legal fees decreased $284 thousand or 22.1% for 1995 compared to decreases of
$866 thousand in 1994 and $30 thousand in 1993. Costs for 1994 included legal
fees incurred with respect to the U.S. Treasury Department settlement noted
below. Three specific lawsuits from 1992 carried over into 1993 before
resolution was obtained, and accounted for the higher costs that year.
Insurance expense decreased $282 thousand during 1995 compared to a decrease
of $206 thousand in 1994 and an increase of $382 thousand in 1993. The
Company changed insurance carriers and renegotiated insurance contract terms
in 1995 resulting in reduced premiums. In 1993, the Company purchased life
insurance policies (Company as beneficiary) to partially finance benefits
under the non-qualified non-contributory pension plan. Increases in the cash
surrender value of these life insurance policies offsetting the premium
expense also contributed to the reduction in expense in 1995 and 1994.
Expenses on foreclosed real estate decreased $190 thousand during 1995
compared to decreases of $370 thousand in 1994 and $11 thousand in 1993.
Other real estate owned at year-end 1995 was $6.1 million compared to $10.5
million at year-end 1994 and $11.2 million at the end of 1993.
Operating losses decreased $434 thousand in 1995 compared to an increase of
$788 thousand in 1994. Operating losses for 1994 included a $750 thousand
settlement agreement reached with the U.S. Treasury Department regarding
compliance by a subsidiary with record keeping and reporting requirements
under the Currency and Foreign Transactions Reporting Act. For 1995, there
were no individually significant items.
Balance Sheet Analysis
- ------------------------------------------------------------------------------
Securities Portfolio
The Company's security portfolio consists of securities
classified as held-to-maturity, available-for-sale and trading account. The
Company designates securities upon purchase into one of these three
categories. As of December 31, 1995, held-to-maturity securities amounted to
$209.7 million and represented securities that the Company has the intent and
ability to hold to maturity. Securities designated as available-for-sale
totaled $421.1 million. This account represents securities which the Company
may sell to meet liquidity needs or in response to significant changes in
interest rates or prepayment risks. The trading account portfolio totaled
$63.5 million at December 31, 1995. This account represents the securities
involved in the normal operations of the Company's brokerage and bond
businesses and approximately $21.0 million in the Company's proprietary
trading account.
For purposes of the following discussion, the held-to-maturity and
available-for-sale security portfolios will be described in the aggregate as
the securities portfolio. At December 31, 1995, the securities portfolio
totaled $630.7 million, an increase of 8.3% from year-end 1994. On average,
however, the securities portfolio declined by $3.6 million or 0.6% in 1995
compared to an increase in 1994 of 15.6%. Average securities represented
24.9%, 26.8% and 24.5% of earning assets in 1995, 1994, and 1993,
respectively. The decrease in 1995 is due in part to the Company's decision
early in the year to fund loan growth with maturing securities.
The Company continues to have a large percentage of its securities portfolio
in mortgage-backed securities. Mortgage-backed securities, including
Collateralized Mortgage Obligations (CMOs), totaled $513.8 million or 73.3%
of the securities portfolio. These securities were either obligations of
Government Standard Equivalent Agencies or otherwise carried triple A credit
ratings. Mortgage-backed securities offer the Company enhanced yields for
accepting prepayment
22 Mark Twain Bancshares, Inc.
<PAGE> 9
risk associated with the underlying mortgages. The Company manages prepayment
risk by having 50% of the portfolio in CMOs, such as Planned Amortization
Class tranches, which can limit the prepayment risk of the portfolio. The
Company utilizes analytical systems to monitor the prepayment risk of the
portfolio and estimate principal payments. Table 6 summarizes the composition
of the Company's securities portfolio. The maturity distribution for the
securities portfolio, together with the weighted average yields for each
maturity range is provided in Table 7.
<TABLE>
<CAPTION>
Table 6: Held-to-Maturity and Available-for-Sale Securities
December 31,
----------------------------------
(in millions of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States Treasuries and agencies $164 $125 $110
Obligations of states and
political subdivisions 5 12 14
Mortgage-backed securities 513 437 391
Other securities 8 8 7
- ------------------------------------------------------ ---- ----
Total $690 $582 $522
- --------------------------------------------------==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Table 7: Maturity Distribution at December 31, 1995<F1><F2> After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
--------------- ----------------- ---------------- ---------------
(in thousands of dollars) Amount Yield Amount Yield Amount Yield Amount Yield
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States Treasuries and agencies $46,929 5.93% $116,857 6.42% $ -- -- $ -- --
Obligations of states and political subdivisions 780 8.52% 1,825 7.90% 1,439 8.17% 400 9.77%
Mortgage-backed securities 31,106 6.44% 299,807 6.43% 180,806 6.37% 1,466 6.20%
Other securities 8,001 7.46% 5 5.50% 300 7.56% 181 8.20%
- ------------------------------------------------------------ -------- -------- ------
Total $86,816 $418,494 $182,545 $2,047
- -----------------------------------------------------======= ======== ======== ======
<FN>
<F1> The carrying value of the securities portfolio at December 31, 1995, by
expected maturity, are shown above. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<F2> Weighted average yields on tax-exempt obligations have been computed on a
fully tax equivalent basis using a tax rate of 35%, and mortgage-backed
securities have been presented based on the expected final maturity
dates, rather than contractual maturity dates.
</TABLE>
Loan Portfolio
The loan portfolio totaled $1,971.9 million at December 31, 1995, an increase
of 6.0% from December 31, 1994. This follows an 8.4% increase in 1994 over
year-end 1993 levels. Average total loan outstandings for 1995 were $1,916.4
million, a 9.6% increase over 1994 average outstandings. Loan outstandings
have grown at a five-year compound annual growth rate of 4.5% based on both
average and year-end totals. Refer to Table 8 for an expanded categorization
of the loan portfolio to provide a greater understanding of the Company's
loan portfolio.
Commercial and industrial loans increased $26.4 million or 3.1% for the year
and represented 44% of the total loan portfolio. The growth rate in this
category has slowed slightly from prior years as a result of higher interest
rates and increased competition. Both components of the commercial and
industrial classification involve a diverse mix of middle-market borrowers
and owner/operators in the manufacturing, wholesaling, retail, and service
industries, with no concentration in any one segment. Real estate is often a
material component of collateral on the commercial and industrial loans even
though cash flows are unrelated to the real estate. This real estate provides
the bank with additional collateral protection. Essentially all of the loans
were generated within the Company's two market areas. The Company has no
highly leveraged transactions or foreign credits, and has only an
insignificant amount of participations purchased.
Real estate construction loans have increased $42.2 million or 18.3% from the
previous year. This growth can be attributed to increased economic activity
within the Company's two primary markets. Commercial construction increased
$31.0 million while residential construction and development increased $11.3
million in 1995. Commercial construction now makes up 32.4% of the real
estate construction category as compared to 25.0% in 1994. This shift in the
portfolio mix is a result of business development efforts to expand
commercial and industrial lending as a means of diversifying risk.
Residential construction still remains an important part of the construction
portfolio. Both commercial and residential construction cover a diverse
number of builders and developers within the Company's primary market areas.
The majority of residential construction loans are originated after the
builder has received a signed purchase contract. The majority of commercial
construction loans are originated once minimum pre-leasing levels are
achieved. The Company monitors construction disbursements, and controls the
number of display and inventory homes by builder and location.
Real estate mortgage loans represent 35% of the loan portfolio, and are split
74% commercial and 26% residential. The commercial mortgage category has
increased 8.8% from the previous year while the residential mortgage loans
have increased 2.7%. The growth in residential mortgage loans experienced in
1994 slowed during 1995 as the result of the Company reallocating resources
away from the mortgage origination effort. The Company employed a strategy of
selling newly originated mortgage loans in an attempt to control the size and
composition of the residential mortgage loan portfolio.
Consumer loans decreased $2.4 million or 1.6% from the previous year-end
total. Declines in the traditional installment loan category were primarily
responsible for the change. Prime Equity Accounts, which represent lines of
credit secured by the borrower's primary residence, remained stable and
accounted for 70% of the consumer loan portfolio.
1995 Annual Report 23
<PAGE> 10
Financial Review (continued)
<TABLE>
<CAPTION>
Table 8: Summary of Loan Portfolio December 31,
----------------------------------------------------------------------
(in thousands of dollars) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and industrial:
Commercial and industrial $ 745,193 $ 724,491 $ 694,590 $ 520,810 $ 513,473
Commercial and industrial secured by real estate 122,706 117,007 81,773 115,316 128,487
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total commercial and industrial 867,899 841,498 776,363 636,126 641,960
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Real estate construction:
Residential construction and development 184,621 173,325 164,435 144,938 135,161
Commercial office 21,841 8,155 14,746 5,194 11,216
Commercial warehouse 10,989 9,359 6,060 6,960 3,924
Commercial retail centers 28,812 20,944 7,417 13,603 29,527
Commercial land and development 26,934 19,167 7,951 6,203 12,971
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate construction 273,197 230,950 200,609 176,898 192,799
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Real estate mortgage:
Residential 177,285 172,613 134,665 153,721 174,816
Commercial office 126,473 114,012 113,343 107,346 96,957
Commercial warehouse 96,712 92,113 79,134 71,762 58,289
Commercial retail centers 60,747 58,559 62,093 56,941 45,102
Other commercial 222,376 200,795 189,447 163,642 179,403
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate mortgage 683,593 638,092 578,682 553,412 554,567
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Consumer 147,250 149,615 160,740 174,647 183,828
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total loans 1,971,939 1,860,155 1,716,394 1,541,083 1,573,154
Less allowance for loan losses 30,508 28,894 27,012 25,356 24,096
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Net loans $1,941,431 $1,831,261 $1,689,382 $1,515,727 $1,549,058
- -----------------------------------------------------------========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Table 9: Maturity Distribution December 31, 1995
-----------------------------------------------------------------------------------
Over 1 Year
Through 5 Years Over 5 Years
----------------------- ----------------------
One Year Fixed Floating Fixed Floating
(in thousands of dollars) Or Less Rate Rate Rate Rate Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial and industrial $475,514 $149,653 $213,862 $15,594 $13,276 $867,899
Real estate construction 170,588 51,522 48,004 3,083 -- 273,197
Real estate mortgage 216,955 215,976 131,502 97,490 21,670 683,593
</TABLE>
The amount of certain loans outstanding as of December 31, 1995, is shown in
Table 9 based on time remaining to maturity. Demand loans are reported in the
one-year-or-less category. All other loans are reported at contracted
maturities. See liquidity and rate sensitivity for further discussion.
Allowance for Loan Losses
The allowance for loan losses increased by $1.6 million in 1995 and
represented 1.55% of loans at year-end. The provision for loan losses was
$5.0 million in 1995, a reduction of $523 thousand from the prior year.
Net charge-offs for the year were $3.4 million, a decrease of $255 thousand
from 1994. The ratio of net charge-offs to average loans was 0.18% in 1995
which compares favorably with the 0.21% in 1994 and 0.35% in 1993.
The level and allocation of the allowance for loan losses are based upon
qualitative and quantitative factors. Qualitative factors include assessments
of current economic conditions, particularly as those conditions affect
segments of the Company's primary markets. Quantitative factors include the
level and composition of non-performing assets, recent and expected net
charge-offs, and a detailed review by the Company's loan review staff. The
results of the quarterly internal loan reviews are the primary basis upon
which the adequacy of the reserve is determined.
Table 11 summarizes the allocation of the allowance for loan losses by major
loan category and identifies the percentage of each loan category to the
total loan balance. This reserve allocation follows very closely the loan
portfolio risk classifications assigned by individual loan officers which are
reviewed by internal loan review. In addition, prior loss experience,
anticipated volume levels, and management's evaluation of the effect of
general economic conditions are factored into the allocation. As each of
these criteria are subject to change, the allocation of the allowance is not
necessarily indicative of the trend of future losses in a particular loan
category.
24 Mark Twain Bancshares, Inc.
<PAGE> 11
<TABLE>
<CAPTION>
Table 10: Summary of Loan Loss Experience
(in thousands of dollars) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans at year-end $1,971,939 $1,860,155 $1,716,394 $1,541,083 $1,573,154
- -----------------------------------------------------------========== ========== ========== ========== ==========
Average loan outstandings $1,916,374 $1,748,639 $1,626,068 $1,563,903 $1,604,090
- -----------------------------------------------------------========== ========== ========== ========== ==========
Allowance at beginning of year $ 28,894 $ 27,012 $ 25,356 $ 24,096 $ 19,944
Allowance of acquired banks -- -- 1,091 -- --
Loans charged off:
Commercial and industrial 1,959 3,601 3,834 4,516 1,529
Commercial and industrial secured by real estate 51 123 192 2,641 5,043
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total commercial and industrial 2,010 3,724 4,026 7,157 6,572
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Commercial real estate construction -- -- 278 253 893
Residential real estate construction 217 117 78 213 1,166
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate construction 217 117 356 466 2,059
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Commercial real estate mortgage 1,027 238 2,067 136 2,174
Residential real estate mortgage 528 353 257 217 783
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate mortgage 1,555 591 2,324 353 2,957
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Consumer 560 336 671 695 1,212
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total loans charged off 4,342 4,768 7,377 8,671 12,800
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Recoveries:
Commercial and industrial 281 743 369 722 163
Commercial and industrial secured by real estate -- 8 467 142 133
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total commercial and industrial 281 751 836 864 296
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Commercial real estate construction -- 3 114 30 62
Residential real estate construction 16 47 55 74 367
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate construction 16 50 169 104 429
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Commercial real estate mortgage 261 71 305 39 133
Residential real estate mortgage 306 172 13 52 422
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total real estate mortgage 567 243 318 91 555
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Consumer 89 80 337 185 334
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Total recoveries 953 1,124 1,660 1,244 1,614
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Net loans charged off 3,389 3,644 5,717 7,427 11,186
Additions to allowance charged to expense 5,003 5,526 6,282 8,687 15,338
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Allowance at end of year $ 30,508 $ 28,894 $ 27,012 $ 25,356 $ 24,096
- -----------------------------------------------------------========== ========== ========== ========== ==========
Net charge-offs to average loans 0.18% 0.21% 0.35% 0.47% 0.70%
Allowance to year-end loans 1.55% 1.55% 1.57% 1.65% 1.53%
Earnings coverage of net charge-offs 21.69x 17.48x 9.41x 5.71x 2.60x
</TABLE>
<TABLE>
<CAPTION>
Table 11: Allocation of the Allowance for Loan Losses at December 31
1995 1994 1993 1992 1991
---------------- ---------------- ---------------- ---------------- --------------
(in thousands of dollars) Allowance % Allowance % Allowance % Allowance % Allowance %
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industrial $10,934 44% $10,355 45% $ 9,681 45% $ 8,723 42% $ 8,163 41%
Real estate construction 3,156 14% 2,989 13% 2,795 12% 2,708 11% 5,225 12%
Real estate mortgage 12,897 35% 12,215 34% 11,419 34% 11,041 36% 7,130 35%
- ------------------------------------ --- ------- --- ------- --- ------- --- ------- ---
Total real estate loans 16,053 49% 15,204 47% 14,214 46% 13,749 47% 12,355 47%
- ------------------------------------ --- ------- --- ------- --- ------- --- ------- ---
Consumer loans 918 7% 870 8% 814 9% 906 11% 2,598 12%
Not allocated 2,603 -- 2,465 -- 2,303 -- 1,978 -- 980 --
- ------------------------------------ --- ------- --- ------- --- ------- --- ------- ---
Total $30,508 100% $28,894 100% $27,012 100% $25,356 100% $24,096 100%
- -----------------------------======= === ======= === ======= === ======= === ======= ===
</TABLE>
1995 Annual Report 25
<PAGE> 12
Financial Review (continued)
Risk Elements
Non-performing assets totaled $19.9 million at December 31, 1995, an increase
of $2.0 million over December 31, 1994. The primary reason for the increase
was the placement of one relationship totaling $5.5 million on non-accrual
during the fourth quarter of 1995. The decrease in foreclosed real estate
principally relates to the donation of a parcel in the fourth quarter of 1995
as discussed earlier. As a percentage of loans plus foreclosed real estate,
non-performing assets were 1.00% at December 31, 1995 compared to 0.95% at
year-end 1994 and 1.20% at year-end 1993.
Non-performing assets plus loans past due 90 days or more totaled $20.4
million and represent 1.03% of loans plus foreclosed real estate at December
31, 1995. This total risk element ratio represented only a 2 basis point
increase over the year-end 1994 percentage which was the lowest level
experienced in the previous five years.
The allowance for loan losses currently covers 213.31% of non-performing
loans. While this represents a decline from the previous two years, the
coverage ratio is reasonable.
Table 13 summarizes the composition of the Company's risk elements.
Loans not included in the past due, non-accrual or restructured categories,
but where known information about possible credit problems causes management
to be uncertain as to the ability of the borrowers to comply with the present
loan repayment terms over the next six months totaled approximately $17.6
million at December 31, 1995. Principal and interest payments on these loans
were current at December 31, 1995.
The Company is continually analyzing its loan portfolio in order to identify
early risk elements that require management attention. The loan portfolio is
subject to review by lending management, the Company's internal loan review
staff, the Company's independent auditors, and various regulatory agencies.
The Company believes that its consistently low levels of risk elements are a
reflection of both the Company's strict underwriting discipline and its
practice of early problem recognition and resolution.
<TABLE>
<CAPTION>
Table 12: Changes in Non-performing Assets
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $17,820 $20,793
Additions 23,457 15,919
Payments received and loans
returned to accrual status (9,941) (11,904)
Sales of foreclosed real estate (7,218) (2,977)
Charge-offs and writedowns (4,247) (4,011)
- ------------------------------------------------------ -------
Balance at end of year $19,871 $17,820
- -----------------------------------------------======= =======
</TABLE>
<TABLE>
<CAPTION>
Table 13: Risk Elements December 31,
-------------------------------------------------------------------
(in thousands of dollars) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $13,663 $ 6,813 $ 9,079 $15,161 $14,502
Restructured loans 109 484 484 -- --
Foreclosed real estate 6,099 10,523 11,230 12,167 17,538
- --------------------------------------------------------------------- ------- ------- ------- -------
Total non-performing assets $19,871 $17,820 $20,793 $27,328 $32,040
- --------------------------------------------------------------======= ======= ======= ======= =======
Percentage of non-performing assets to loans plus
foreclosed real estate 1.00% 0.95% 1.20% 1.76% 2.01%
Loans contractually past due 90 days or more $ 530 $ 1,132 $ 251 $ 791 $ 1,318
Percentage of non-performing assets plus 90 days
past due to loans plus foreclosed real estate 1.03% 1.01% 1.22% 1.81% 2.10%
Percentage of allowance for loan losses to
non-performing loans 213.31% 342.79% 275.24% 158.95% 152.31%
Percentage of allowance for loan losses to
total non-performing assets 153.53% 162.14% 129.91% 92.78% 75.21%
Percentage of allowance for loan losses to
risk elements<F*> 149.54% 152.46% 128.36% 90.17% 72.23%
Percentage of risk elements<F*>
to total average assets 0.74% 0.72% 0.85% 1.20% 1.46%
<FN>
<F*>Risk elements include total non-performing assets plus loans contractually
past due 90 days or more.
</TABLE>
Deposits
Average deposits, as shown in Table 14, increased 3.8% in 1995. Average time
deposits, less than $100 thousand, increased $104.4 million or 15.6% for
1995. Average time deposits, $100 thousand or greater, increased $51.7
million or 33.6% in 1995. Average non-interest bearing demand deposit
accounts remained relatively stable year-to-year while interest bearing
demand deposits declined $26.2 million and savings and money market deposit
accounts declined $49.3 million. This movement of deposits from the lower
yielding products to higher yielding time deposits is a result of customers
shifting from variable rate non-maturity accounts to longer term fixed-rate
time deposits.
Table 15 sets forth, by time remaining to maturity, time deposits in amounts
of $100 thousand or greater as of December 31, 1995.
<TABLE>
<CAPTION>
Table 15: Time Deposits $100 Thousand or Greater
(in thousands of dollars)
- ------------------------------------------------------
<S> <C>
Less than three months $ 79,398
Three to six months 42,451
More than six months to twelve months 19,638
More than twelve months 56,961
- ------------------------------------------------------
Total $198,448
- ----------------------------------------------========
</TABLE>
26 Mark Twain Bancshares, Inc.
<PAGE> 13
<TABLE>
<CAPTION>
Table 14: Deposit Composition December 31,
----------------------------------------
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-interest bearing demand deposits $ 401,096 $ 398,310 $ 371,912
Interest bearing demand deposits 225,609 251,849 227,946
Savings and money market deposits 678,466 727,797 724,843
Time deposits (less than $100 thousand) 771,989 667,605 617,128
Time deposits ($100 thousand or greater) 205,611 153,940 147,273
- ------------------------------------------------------ ---------- ----------
Total average deposits $2,282,771 $2,199,501 $2,089,102
- --------------------------------------------========== ========== ==========
Non-interest bearing demand deposits $ 519,155 $ 461,958 $ 420,882
Interest bearing demand deposits 234,686 240,290 250,771
Savings and money market deposits 664,155 700,258 734,764
Time deposits (less than $100 thousand) 840,948 718,955 629,545
Time deposits ($100 thousand or greater) 198,448 150,596 155,951
- ------------------------------------------------------ ---------- ----------
Total deposits $2,457,392 $2,272,057 $2,191,913
- --------------------------------------------========== ========== ==========
</TABLE>
Interest Rate Derivatives
During 1995, the Company engaged in a limited number of interest rate
derivative transactions to reduce the Company's sensitivity to falling rates.
There were no such transactions prior to 1995. The Company has established
policies and procedures to manage the risks associated with these financial
instruments. Such transactions are directly approved by the Company's
Asset/Liability Committee. Only those products which qualify under current
accounting rules for hedge accounting treatment are allowed by policy.
Management believes that interest rate derivatives are a critical tool in
managing the Company's net interest income and net income through periods of
sudden changes in interest rates.
Table 16 summarizes the Company's interest rate derivative transactions as of
December 31, 1995. The Company has transacted two types of interest rate
derivatives: interest rate floors and interest rate swaps. Interest rate
floors are transactions whereby the Company pays another party an upfront
premium to receive the difference of a fixed rate less than referenced rate,
with no further obligation from the Company. Premiums paid and amounts due
from the floors are accrued over the term of the floor. Interest rate swaps
are transactions whereby the Company has swapped its floating rate assets to
a fixed rate. Amounts due from or to the Company are accrued during the term
of the swap. All of the Company's current interest rate derivatives reduce
the sensitivity of the Company's earnings from decreases in the prime rate.
Interest Rate Sensitivity
The Company's Asset/Liability Committee monitors the interest rate
sensitivity of the balance sheet on a monthly basis. The committee reviews
asset and liability repricing in the context of current and possible interest
rate scenarios and the economic climate, both nationally and in the Company's
market areas. The Company manages interest rate sensitivity in terms of
changes in net interest income on a continuous 12-month cycle through various
interest rate scenarios and simulations. The objective of the committee is to
minimize the earnings sensitivity to changes in interest rates while
maintaining a net interest margin in keeping with the Company's objectives.
Table 17 represents a point in time analysis of the Company's interest rate
sensitivity, using known repricing times of loans, deposits, and estimated
payments from mortgage-backed securities. The estimates on mortgage-backed
security prepayments is based upon management's experience of how these bonds
will perform over their expected lives. These estimates are believed to be
conservative.
While this table indicates the expected timing in repricing,
it does not address the extent to which changes in market prices impact rates
earned and paid or the basis on which those rates may change. To allow for
more dynamic changes in the balance sheet and repricing, the bank utilizes
simulation modeling. Using simulations, management can more effectively
determine the interest rate sensitivity of net interest income in a wide
variety of interest rate environments.
<TABLE>
<CAPTION>
Table 16: Maturities of Off-Balance Sheet Investment Products Total
Notional Unrealized
(in thousands of dollars) 1996 1997 1998 1999 2000+ Value Gain
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed generic interest rate swaps
(Prime Rate)
Notional value $ -- $ -- $50,000 $ -- $ -- $ 50,000 $998
Weighted average receive rate -- -- 8.82% -- -- 8.82%
Purchased interest rate floors (Prime Rate):
Notional value $ -- $75,000<F1> $40,000 $ -- $ -- $115,000 $670
Weighted average receive rate -- 9.00% 8.50% -- -- 8.83%
<FN>
<F1> The maximum rate received on the $75 million floor is 1.00%.
</TABLE>
1995 Annual Report 27
<PAGE> 14
Financial Review (continued)
<TABLE>
<CAPTION>
Table 17: Rate Sensitivity at December 31, 1995
0-1 2-12 13-24 25-36 Over 36
(in thousands of dollars) Months Months Months Months Months Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Loans $1,220,382 $ 188,602 $170,275 $128,340 $264,340 $1,971,939
Federal funds sold and securities
purchased under resale agreements 7,900 -- -- -- -- 7,900
Trading account securities 63,579 -- -- -- -- 63,579
Securities available for sale 34,626 59,914 74,859 80,492 195,917 445,808
Held-to-maturity securities 4,028 37,267 36,421 41,483 124,895 244,094
Interest rate swaps and interest rate
floors (50,000) (75,000) 35,000 90,000 -- --
- ------------------------------------------------------ --------- -------- -------- -------- ----------
Total earning assets $1,280,515 $ 210,783 $316,555 $340,315 $585,152 $2,733,320
- --------------------------------------------========== ========= ======== ======== ======== ==========
Interest Bearing Liabilities
Interest bearing demand deposits $ 112,274 $ -- $ 20,403 $ 20,402 $ 81,607 $ 234,686
Savings and money market deposits 621,614 -- 7,091 7,091 28,359 664,155
Time deposits 79,306 578,716 198,650 77,581 105,143 1,039,396
Short-term borrowings 165,731 -- -- -- -- 165,731
Long-term debt -- 11,579 -- -- 6,911 18,490
- ------------------------------------------------------ --------- -------- -------- -------- ----------
Total interest bearing liabilities $ 978,925 $ 590,295 $226,144 $105,074 $222,020 $2,122,458
- --------------------------------------------========== ========= ======== ======== ======== ==========
Monthly Gap $ 301,590 $(379,512) $ 90,411 $235,241 $363,132
- --------------------------------------------========== ========= ======== ======== ========
Cumulative Gap $ 301,590 $ (77,922) $ 12,489 $247,730 $610,862
- --------------------------------------------========== ========= ======== ======== ========
</TABLE>
Using both the information from the simulations and from Table 17, the
Company is asset sensitive in the most immediate time frames and liability
sensitive thereafter. The structure of the balance sheet is deliberately
positioned for a rising rate environment by policy and management preference.
Declines in interest rates could have a short term adverse effect on net
interest income of the Company.
Liquidity
Long-term liquidity is a function of a large core deposit base and a strong
capital position. The Company remains committed to growth of its stable core
deposit base through pricing and product development as the primary source
of long-term liquidity. The capital position of the Company is a result of
earnings growth and earnings retention. The Company manages dividends to
retain sufficient capital for long-term liquidity and growth.
Short-term liquidity needs arise from the continuous fluctuations in the
flow of funds on both sides of the balance sheet from growth and, to a
lesser extent, seasonal and cyclical customer demands. The Asset/Liability
Committee analyzes its liquidity position by projecting cash flows from the
balance sheet on a monthly basis and by taking appropriate measures. The
position of the balance sheet is then analyzed by comparing net cash flows
to external sources of liquidity.
The securities portfolio provides a stable long-term earnings base, provides
sources of liquidity and represents one of the primary means of adjusting and
managing interest rate risk. The designation of securities as available-for-
sale and held-to-maturity does not impact the portfolio as a source of
liquidity due to the ability to transact repurchase agreements using those
securities. The Company maintains federal funds lines of over $200 million
and repurchase agreement lines for the sale and repurchase of securities.
Liquidity needs, as well as the economic and interest rate environment, are
all assessed on a continuous basis when analyzing the Company's security
portfolio. If alterations in the securities portfolio are deemed necessary,
decisions are not materially influenced by unrealized gains or losses that
exist at any point in time in the portfolio.
Effects of Inflation
Balance sheets of financial institutions typically contain assets and
liabilities that are monetary in nature and, therefore, differ greatly from
most commercial and industrial companies which have significant investments
in premises, equipment, and inventory. During periods of inflation, financial
institutions that are in a net positive monetary position will experience a
decline in purchasing power, which does have an impact on growth. Another
significant effect on internal equity growth is other expenses, which tend to
rise during periods of inflation.
Management believes the most significant impact on financial results is the
Company's ability to align its asset/liability management program to react to
changes in interest rates.
28 Mark Twain Bancshares, Inc.
<PAGE> 15
Capital
Shareholders' equity increased 17.9% in 1995 to $275.9 million as compared to
$234.0 million at year-end 1994. Excluding the change in net unrealized gains
(losses) on securities available for sale, shareholders' equity increased
12.8% in 1995. The Company's average equity-to-asset ratio was 9.23% for
1995, the highest level in the history of the Company. At year-end 1995, the
Company's equity-to-asset ratio was 9.30%, also the highest level in Company
history.
Dividends paid during 1995 increased 12.5% to $1.08 per share from $0.96 per
share in 1994. This represents a dividend payout ratio of 36.86%. The Company
expects to maintain a payout ratio between 35% and 45%.
The Company also analyzes its capital and the capital position of its
subsidiaries in terms of regulatory risk-based capital guidelines. Under the
capital adequacy guidelines regulatory framework for prompt corrective
action, the Company and its subsidiaries must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The capital amounts and classification are also subject to
qualitative judgements by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its subsidiaries to maintain minimum amounts and
ratios of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to
average assets (as defined). Management believes, as of December 31, 1995,
that the Company and its subsidiaries meet all capital adequacy requirements
to which they are subject. Table 18 summarizes the capital ratios for the
Company and its significant subsidiaries.
As of December 31, 1995, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Company's significant
subsidiaries as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the subsidiaries
must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios as set forth in Table 18. There are no conditions or events
since that notification that management believes have changed the
subsidiaries' classifications.
In April 1995, the Company's board of directors authorized the purchase of
up to 1 million shares of the Company's common stock in a systematic pattern
to meet the common stock issuance requirements of the Company's 1995 Stock
Option Plan and other corporate purposes. During 1995, the Company
repurchased 109,000 shares under this program for the benefit plan and other
ongoing needs.
<TABLE>
<CAPTION>
Table 18: Capital Adequacy To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- ---------------------- -----------------------
(in thousands of dollars) Amount Ratio Amount Ratio Amount Ratio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1995:
Total capital (to risk weighted assets):
Consolidated $304,647 13.0% >=$188,022 >=8.0% N/A N/A
Mark Twain Bank 197,676 12.6% >=125,351 >=8.0% >=$125,351 >=10.0%
Mark Twain Kansas City Bank 76,702 12.3% >= 49,900 >=8.0% >=49,900 >=10.0%
Mark Twain Illinois Bank 23,393 15.8% >=11,816 >=8.0% >=11,816 >=10.0%
Tier I capital (to risk weighted assets):
Consolidated $268,344 11.4% >=$94,011 >=4.0% N/A N/A
Mark Twain Bank 178,074 11.4% >=62,676 >=4.0% >=$62,676 >=6.0%
Mark Twain Kansas City Bank 69,074 11.1% >=24,950 >=4.0% >=24,950 >=6.0%
Mark Twain Illinois Bank 21,545 14.6% >=5,908 >=4.0% >=5,908 >=6.0%
Tier I capital (to average assets):
Consolidated $268,344 9.5% >=$112,945 >=4.0% N/A N/A
Mark Twain Bank 178,074 9.3% >=76,525 >=4.0% >=$76,525 >=5.0%
Mark Twain Kansas City Bank 69,074 10.5% >=26,311 >=4.0% >=26,311 >=5.0%
Mark Twain Illinois Bank 21,545 11.5% >=7,488 >=4.0% >=7,488 >=5.0%
</TABLE>
1995 Annual Report 29
<PAGE> 16
Statement by Management
The financial statements and related financial information presented here
were prepared by management in accordance with generally accepted accounting
principles and include amounts that are based on management's best estimates
and judgements. The Company maintains an accounting system and related
controls that are sufficient to provide reasonable assurance that assets are
safeguarded and that transactions are properly authorized and recorded. The
concept of reasonable assurance is based on the recognition that the cost of
an accounting and control system must be related to the benefits derived. The
accounting system and related controls are monitored by an extensive internal
audit program and by the Company's independent auditors in accordance with
generally accepted auditing standards. The Company's internal auditor and
independent auditors meet regularly with the Audit Committee of the Board of
Directors to ensure that respective responsibilities are being properly
discharged and to discuss the results of examinations.
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
Mark Twain Bancshares, Inc.
We have audited the accompanying consolidated balance sheet of Mark Twain
Bancshares, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mark Twain
Bancshares, Inc. at December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
St. Louis, Missouri
January 16, 1996
30 Mark Twain Bancshares, Inc.
<PAGE> 17
<TABLE>
Consolidated Balance Sheet
<CAPTION>
December 31,
-------------------------
(in thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 156,207 $ 139,947
Interest bearing deposits with banks -- 54
Federal funds sold and securities purchased under resale agreements 7,900 1,600
Trading account securities 63,579 32,909
Securities available for sale 445,808 228,359
Held-to-maturity securities (market value of $245,355 and $340,117, respectively) 244,094 353,958
Loans, net of allowance for loan losses of $30,508 and $28,894, respectively 1,941,431 1,831,261
Premises and equipment 20,764 27,910
Accrued income receivable 17,830 17,572
Other assets 70,618 55,146
- --------------------------------------------------------------------------------------------------- ----------
Total assets $2,968,231 $2,688,716
- -----------------------------------------------------------------------------------------========== ==========
Liabilities
Non-interest bearing deposits $ 519,155 $ 461,958
Interest bearing deposits 1,938,237 1,810,099
- --------------------------------------------------------------------------------------------------- ----------
Total deposits 2,457,392 2,272,057
- --------------------------------------------------------------------------------------------------- ----------
Short-term borrowings 165,731 148,118
Other liabilities 50,712 14,103
Long-term debt 18,490 20,389
- --------------------------------------------------------------------------------------------------- ----------
Total liabilities 2,692,325 2,454,667
- --------------------------------------------------------------------------------------------------- ----------
Shareholders' Equity
Common stock, $1.25 par value, authorized 30,000,000 shares,
issued 16,508,220 and 16,375,527 shares, respectively 20,635 20,469
Surplus 63,630 60,246
Undivided profits 194,888 164,513
Net unrealized gains (losses) on securities available for sale 1,026 (9,623)
- --------------------------------------------------------------------------------------------------- ----------
280,179 235,605
Less common treasury stock at cost, 362,685 and 398,633 shares, respectively 4,273 1,556
- --------------------------------------------------------------------------------------------------- ----------
Total shareholders' equity 275,906 234,049
- --------------------------------------------------------------------------------------------------- ----------
Total liabilities and shareholders' equity $2,968,231 $2,688,716
- -----------------------------------------------------------------------------------------========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
1995 Annual Report 31
<PAGE> 18
<TABLE>
Consolidated Statement of Income
<CAPTION>
Years Ended December 31,
-----------------------------------------
(in thousands of dollars, except per share data) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans $ 180,955 $ 146,845 $ 128,189
Interest on held-to-maturity securities:
Taxable 22,207 24,581 32,547
Non-taxable 173 674 878
Interest on trading account securities 3,003 4,197 3,006
Interest on securities available for sale 15,884 15,056 4,520
Interest on mortgage loans held for resale -- 2,453 5,775
Interest on deposits with banks -- 3 30
Interest on federal funds sold and securities
purchased under resale agreements 951 804 683
- --------------------------------------------------------------------------------------------------- ----------- -----------
Total interest income 223,173 194,613 175,628
- --------------------------------------------------------------------------------------------------- ----------- -----------
Interest Expense
Interest on deposits 85,006 62,479 57,774
Interest on short-term borrowings 8,414 6,337 4,193
Interest on long-term debt 1,512 1,776 1,929
- --------------------------------------------------------------------------------------------------- ----------- -----------
Total interest expense 94,932 70,592 63,896
- --------------------------------------------------------------------------------------------------- ----------- -----------
Net interest income 128,241 124,021 111,732
Provision for loan losses 5,003 5,526 6,282
- --------------------------------------------------------------------------------------------------- ----------- -----------
Net interest income after provision for loan losses 123,238 118,495 105,450
- --------------------------------------------------------------------------------------------------- ----------- -----------
Other Income
Service charges on deposit accounts 7,051 7,398 8,301
Securities transactions 296 309 871
Other income 29,439 27,793 34,824
- --------------------------------------------------------------------------------------------------- ----------- -----------
Total other income 36,786 35,500 43,996
- --------------------------------------------------------------------------------------------------- ----------- -----------
Other Expenses
Salaries and employee benefits 47,531 47,651 48,573
Net occupancy and furniture and equipment expense 13,222 13,870 13,389
Other expenses 25,769 28,761 33,687
- --------------------------------------------------------------------------------------------------- ----------- -----------
Total other expenses 86,522 90,282 95,649
- --------------------------------------------------------------------------------------------------- ----------- -----------
Income before income taxes 73,502 63,713 53,797
Applicable income taxes 25,789 22,731 18,694
- --------------------------------------------------------------------------------------------------- ----------- -----------
Net income $ 47,713 $ 40,982 $ 35,103
- ----------------------------------------------------------------------------------------=========== =========== ===========
Primary Earnings per Share
Weighted average shares 16,288,839 16,103,109 15,673,431
- ----------------------------------------------------------------------------------------=========== =========== ===========
Net income $ 2.93 $ 2.54 $ 2.24
- ----------------------------------------------------------------------------------------=========== =========== ===========
Fully Diluted Earnings per Share
Weighted average shares 16,904,113 16,715,863 16,437,974
- ----------------------------------------------------------------------------------------=========== =========== ===========
Net income $ 2.85 $ 2.48 $ 2.17
- ----------------------------------------------------------------------------------------=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
32 Mark Twain Bancshares, Inc.
<PAGE> 19
<TABLE>
Consolidated Statement of Changes in Shareholders' Equity
<CAPTION>
Net Unrealized
Gains (Losses)
Common Stock on Securities Total
----------------- Undivided Available Treasury Shareholders'
(in thousands) Shares Amount Surplus Profits for Sale Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 15,305 $19,131 $51,092 $112,174 $ -- $3,351 $179,046
Net income -- -- -- 35,103 -- 35,103
Cash dividends declared -- -- -- (11,383) -- (11,383)
Changes in equity due to acquisitions 743 929 3,167 1,919 -- 6,015
Common stock issued upon conversion of 7%
convertible subordinated notes 224 280 3,279 -- -- 3,559
Reissuance of treasury stock pursuant to
employee benefit and stock issuance plans
(136 shares) -- -- 61 -- (1,330) 1,391
Change in net unrealized gain on securities
available for sale, net of tax -- -- -- -- 1,013 -- 1,013
Other, net (5) (6) 256 -- -- 250
- ------------------------------------------------------- ------- ------- -------- -------- ------ --------
Balance, December 31, 1993 16,267 20,334 57,855 137,813 1,013 2,021 214,994
Net income -- -- -- 40,982 -- 40,982
Cash dividends declared -- -- -- (14,282) -- (14,282)
Common stock issued upon conversion of 7%
convertible subordinated notes 109 135 1,588 -- -- 1,723
Reissuance of treasury stock pursuant to
employee benefit and stock issuance plans
(95 shares) -- -- 776 -- (465) 1,241
Change in net unrealized loss on securities
available for sale, net of tax -- -- -- (10,636) -- (10,636)
Other, net -- -- 27 -- -- 27
- ------------------------------------------------------- ------- ------- -------- -------- ------ --------
Balance, December 31, 1994 16,376 20,469 60,246 164,513 (9,623) 1,556 234,049
Net income -- -- -- 47,713 -- -- 47,713
Cash dividends declared -- -- -- (17,338) -- -- (17,338)
Common stock issued upon conversion of 7%
convertible subordinated notes 117 147 1,719 -- -- -- 1,866
Purchase of treasury stock (109 shares) -- -- -- -- -- 3,303 (3,303)
Reissuance of treasury stock pursuant to
employee benefit and stock issuance plans
(145 shares) -- -- 1,241 -- (586) 1,827
Change in net unrealized gain on securities
available for sale, net of tax -- -- -- -- 10,649 -- 10,649
Other, net 15 19 424 -- -- -- 443
- ------------------------------------------------------- ------- ------- -------- -------- ------ --------
Balance, December 31, 1995 16,508 $20,635 $63,630 $194,888 $ 1,026 $4,273 $275,906
- -------------------------------------------------====== ======= ======= ======== ======== ====== ========
See accompanying notes to consolidated financial statements.
</TABLE>
1995 Annual Report 33
<PAGE> 20
<TABLE>
Consolidated Statement of Cash Flows
<CAPTION>
Years Ended December 31,
---------------------------------------
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 47,713 $ 40,982 $ 35,103
Adjustments to reconcile net cash provided by operating activities:
Provision for loan losses 5,003 5,526 6,282
Provision for depreciation and amortization 4,883 5,758 9,090
Amortization of security premiums and accretion of discounts (1,194) (2,104) 1,396
Provision for deferred income taxes 216 (3,248) (737)
Net (increase) decrease in mortgage loans held for resale -- 112,304 (40,274)
Net (increase) decrease in trading account securities (30,670) 8,556 (18,451)
Securities transactions (296) (309) (871)
(Increase) decrease in accrued income receivable (258) (3,001) 625
Increase (decrease) in interest payable 1,771 1,862 (609)
Other 7,144 (1,913) (7,245)
- ------------------------------------------------------------------------------------ -------- --------
Net cash provided (used) by operating activities 34,312 164,413 (15,691)
- ------------------------------------------------------------------------------------ -------- --------
Investing Activities
Net increase in loans (112,292) (144,731) (114,864)
Net proceeds from sales of foreclosed real estate 4,864 2,977 9,010
Net (increase) decrease in premises and equipment 3,133 (2,354) (1,565)
Purchase of assets to be leased (2,979) (2,664) (3,266)
Proceeds from sale of securities available for sale 29,185 2,962 10,952
Proceeds from maturities and prepayments of securities
available for sale 26,584 50,132 15,173
Purchase of securities available for sale (99,593) (53,106) (122,304)
Proceeds from sales of held-to-maturity securities -- -- 4,994
Proceeds from maturities and prepayments of
held-to-maturity securities 55,049 165,911 181,346
Purchase of held-to-maturity securities (99,805) (241,361) (86,088)
Net cash of acquired companies -- -- 13,154
- ------------------------------------------------------------------------------------ -------- --------
Net cash used by investing activities (195,854) (222,234) (93,458)
- ------------------------------------------------------------------------------------ -------- --------
Financing Activities
Net increase in deposits 185,335 80,144 65,319
Net increase in short-term borrowings 17,613 8,422 31,584
Payments on long-term debt (32) (2,582) (567)
Cash dividends (17,338) (14,282) (11,383)
Purchase of treasury stock (3,303) -- --
Reissuance of treasury stock 1,827 1,241 1,391
Other -- 25 250
- ------------------------------------------------------------------------------------ -------- --------
Net cash provided by financing activities 184,102 72,968 86,594
- ------------------------------------------------------------------------------------ -------- --------
Increase (decrease) in cash and cash equivalents 22,560 15,147 (22,555)
Cash and cash equivalents at beginning of year 141,547 126,400 148,955
- ------------------------------------------------------------------------------------ -------- --------
Cash and cash equivalents at end of year $164,107 $141,547 $126,400
- ----------------------------------------------------------------------------======== ======== ========
See Note 13 for supplemental disclosures.
See accompanying notes to consolidated financial statements.
</TABLE>
34 Mark Twain Bancshares, Inc.
<PAGE> 21
Notes to Consolidated Financial Statements
1 Summary of Significant
Accounting Policies
- ------------------------------------------------------------------------------
Mark Twain Bancshares, Inc. (the Company) is a multi-bank holding company
which, through its subsidiaries, operates 34 banking locations in the St.
Louis, Missouri and Kansas City, Missouri metropolitan areas. The Company's
subsidiaries provide commercial and retail financial services which include
providing financing to small and middle-market businesses, bond and brokerage
services, and trust services.
The accounting and reporting policies of the Company and its subsidiaries
conform to generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements, and reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
The following is a summary of significant accounting policies followed in the
preparation of the financial statements:
Basis of Presentation. For purposes of comparability, certain prior year
amounts have been reclassified to conform with current year presentation.
Principles of Consolidation. The consolidated financial
statements include the accounts of the Company and all its subsidiaries.
Intercompany accounts and transactions have been eliminated.
Cash Equivalents. For purposes of the Consolidated Statement of Cash Flows,
the Company considers cash and due from banks and federal funds sold and
securities purchased under resale agreements as cash and cash equivalents.
Securities. Securities that management has both the positive intent and
ability to hold to maturity are classified as held-to-maturity securities and
are carried at cost, adjusted for amortization of premiums and accretion of
discounts using the interest method. Securities which are purchased with the
intent to hold for an indefinite period of time, including securities that
management intends to use as part of its asset/liability strategy or that may
be sold to meet liquidity needs, are classified as securities available for
sale. Securities available for sale are carried at fair value, with
unrealized gains and losses reflected as a separate component of
shareholders' equity, net of tax, until realized. Securities which are
purchased with the intent to hold for a short period of time are classified
as trading account securities and are carried at fair value, with unrealized
gains and losses reflected as adjustments to other income.
Interest and dividends on securities, including the amortization of premiums
and accretion of discounts, are reported in interest income using the
interest method. Gains and losses on securities are determined on an
identified certificate basis.
Mortgage Loans Held for Resale. Prior to December 31, 1994, in its mortgage
lending activities, the Company originated and purchased certain loans which
were sold in the secondary mortgage market. Mortgage loans held for resale
were hedged primarily with forward delivery contracts. Gains and losses from
hedging transactions were deferred and included in the cost of the loans
until the loans were sold. Mortgage loans held for resale were carried at the
lower of aggregate cost or fair value.
Interest and Fees on Loans. Interest on loans is accrued on the basis of the
daily amount of principal outstanding. The accrual of interest on loans is
discontinued when, in management's judgement, the interest will not be
collected in the normal course of business. When a loan is placed on
non-accrual status, the accrued interest for the current year is reversed
against interest income, and accrued interest from prior years is charged
against the allowance for loan losses. Interest on these loans is accounted
for on the cash basis or cost recovery method, until qualifying for return to
accrual status. Loans are returned to accrual status when all the principal
and interest amounts contractually due are brought current, the borrower has
demonstrated payment performance for a reasonable period of time, and the
ultimate collectibility of the total contractual principal and interest is no
longer in doubt.
The Company defers and amortizes all non-refundable loan fees and direct
costs of origination over the respective life of the loans as an adjustment
to the yield of the related loan.
Allowance for Loan Losses. The allowance for loan losses is increased by the
provision for loan losses charged to operating expenses and reduced by net
loans charged off. The level of the allowance and the current year provision
are based on management's evaluation of potential losses in the loan
portfolio, past loan loss experience, and other factors that warrant current
recognition in providing an adequate allowance.
Premises and Equipment. Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
charged to expense using the straight-line method over the estimated useful
lives of the assets.
Foreclosed Real Estate. Foreclosed real estate represents properties acquired
through customer loan defaults and is classified as other assets. The real
estate is stated at an amount equal to the lesser of the loan balance prior
to foreclosure, plus certain costs incurred for improvements to the property,
or fair value less estimated selling costs of the property. The carrying
value of foreclosed real estate at December 31, 1995 and 1994 was $6,099,000
and $10,523,000, respectively.
1995 Annual Report 35
<PAGE> 22
Notes to Consolidated Financial Statements (continued)
Intangible Assets. The unamortized amount of intangible assets is included in
other assets. The excess of cost over the fair value of net assets acquired
for all acquisitions accounted for as purchases is amortized on a
straight-line basis over periods ranging from 25 to 40 years from the
respective dates of acquisition. The identifiable intangible assets,
representing the acquired deposit base premium on all acquisitions accounted
for as purchases, are being amortized on a straight-line basis over a period
of 5 to 10 years from the respective dates of acquisition.
At December 31, 1995 and 1994, the Company had no capitalized purchased mortgage
servicing rights and excess servicing fees. Total amortization expense for
purchased mortgage servicing rights and excess servicing fees was $0, $450,000,
and $3,983,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.
Derivative Financial Instruments. The Company utilizes a limited number of
derivative financial instruments as part of its interest rate risk management
strategy and in conjunction with its customer service activities. Derivative
financial instruments utilized include interest rate swaps, interest rate caps
and floors, and foreign forward exchange contracts.
Interest rate swaps are used principally as a tool to manage the interest
sensitivity of the Company's balance sheet. These contracts represent an
exchange of interest payment streams based on an agreed-upon notional
principal amount with at least one stream based on a specified floating-rate
index. The underlying principal balances of the assets or liabilities are not
affected. Net settlements are reported as adjustments to interest income or
interest expense, as appropriate. The swap agreements are carried on the
accrual basis and are not adjusted to fair values in the consolidated
financial statements.
Interest rate caps and floors require the seller (for an initial fee) to pay
the purchaser, at specified dates, the amount, if any, by which a market
interest rate exceeds the agreed-upon cap or falls below the agreed-upon
floor, applied to a notional principal amount. Realized gains and losses on
positions used in the management of specific asset and liability positions
are amortized (including periodic amortization of the premium paid) over the
terms of the items hedged as adjustments to interest income or expense. The
interest caps and floors are carried on the accrual basis and are not
adjusted to fair values in the consolidated financial statements.
The Company enters into forward exchange contracts to hedge foreign currency
transactions on a continuing basis for periods consistent with its committed
exposures. Committed exposures include foreign currency denominated deposit
accounts and commercial letters of credit. Realized and unrealized gains and
losses are deferred and recognized in other income in the same period as the
hedged transactions.
See Note 22 for a discussion of the risks associated with derivatives and the
Company's policies to monitor such risks.
Stock Based Compensation. The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to the fair value of the
shares at the time of grant or such higher price as may be required under the
Internal Revenue Code at the time of grant in the case of a grant to a ten
percent shareholder. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense for the stock
option grants.
Income Taxes. The liability method is used in accounting
for income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax
basis of assets and liabilities, and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
Earnings Per Share. Primary earnings per share is based on the average number
of common shares and common share equivalents outstanding during each year,
and elimination of interest and dividends paid on the common share
equivalents. Fully diluted earnings per share gives effect to both the
increase in the average shares outstanding which would have resulted from
conversion of all of the outstanding convertible notes and the elimination of
interest paid thereon and the exercise of dilutive stock options as of the
beginning of each year.
2 Acquisitions
- ------------------------------------------------------------------------------
On February 10, 1993, the Company acquired First Shawnee Bancshares, Inc.,
owner of First National Bank of Shawnee (Shawnee) in Kansas. Shawnee was
subsequently renamed Mark Twain Kansas Bank. On August 11, 1993, the Company
acquired Parkway Financial, Inc., owner of Parkway Bank (Parkway) in Overland
Park, Kansas. On September 13, 1993, Parkway was merged into Mark Twain
Kansas Bank. The acquisitions were accounted for under the
pooling-of-interests method of accounting. The financial statements for prior
periods were not restated as the transactions were not material to the
consolidated financial statements.
On August 12, 1994, the Company acquired C.B. Bancshares, Inc., owner of
Century Bank (Century) in St. Louis, Missouri, for 705,110 shares of the
Company's common stock. Subsequent to the acquisition, Century was merged
into Mark Twain Bank. On November 15, 1994, the Company acquired United
Kansas Bank Group, Inc., owner of United Kansas Bank in Merriam, Kansas, for
473,866 shares of the Company's common stock. The acquisitions were accounted
for under the pooling-of-interests method of accounting and, accordingly,
prior period financial statements were restated. On February 6, 1995, United
Kansas Bank was merged into Mark Twain Kansas Bank. On November 6, 1995, Mark
Twain Kansas Bank was merged into Mark Twain Kansas City Bank.
36 Mark Twain Bancshares, Inc.
<PAGE> 23
3 Held-to-Maturity Securities
- ------------------------------------------------------------------------------
The amortized cost and fair value of held-to-maturity
securities are as follows:
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of states
and political
subdivisions $ 2,269 $ 14 $ 12 $ 2,271
Mortgage-backed
securities 241,339 1,940 682 242,597
Other securities 486 1 -- 487
- ----------------------------------------------------- ------ ---- --------
Total $244,094 $1,955 $694 $245,355
- ---------------------------------------------======== ====== ==== ========
<CAPTION>
December 31, 1994
------------------------------------------------------
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries
and agencies $ 83,294 $ 498 $ 2,653 $ 81,139
Obligations of states
and political
subdivisions 10,189 113 189 10,113
Mortgage-backed
securities 259,980 645 12,256 248,369
Other securities 495 1 -- 496
- ----------------------------------------------------- ------ ------- --------
Total $353,958 $1,257 $15,098 $340,117
- ---------------------------------------------======== ====== ======= ========
</TABLE>
Held-to-maturity securities with a carrying value at December 31, 1995 and
1994, of $78,555,000 and $192,828,000, respectively, were pledged to secure
public deposits and short-term borrowings and for other purposes required by
law.
The following table summarizes the maturity distribution of the
held-to-maturity portfolio at December 31, 1995:
<TABLE>
<CAPTION>
Amortized Fair
(in thousands of dollars) Cost Value
- ---------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 355 $ 359
Due after one year through five years 729 727
Due after five years through ten years 1,090 1,090
Due after ten years 581 582
- ------------------------------------------------------ --------
2,755 2,758
Mortgage-backed securities 241,339 242,597
- ------------------------------------------------------ --------
Total $244,094 $245,355
- ----------------------------------------------======== ========
</TABLE>
There were no sales of held-to-maturity securities during 1995 and 1994.
Proceeds from sales of held-to-maturity securities during 1993 were
$4,994,000. Gross gains of $256,000 and gross losses of $11,000 were realized
on the sales.
4 Securities Available for Sale
- ------------------------------------------------------------------------------
The amortized cost and fair value of securities available for sale are as
follows:
<TABLE>
<CAPTION>
December 31, 1995
------------------------------------------------------
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries
and agencies $161,549 $2,305 $ 68 $163,786
Obligations of states
and political
subdivisions 2,112 73 10 2,175
Mortgage-backed
securities 272,489 1,405 2,048 271,846
Other securities 8,001 -- -- 8,001
- ------------------------------------------------------ ------ ------ --------
Total $444,151 $3,783 $2,126 $445,808
- ----------------------------------------------======== ====== ====== ========
<CAPTION>
December 31, 1994
------------------------------------------------------
Amortized Unrealized Unrealized Fair
(in thousands of dollars) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries
and agencies $ 43,559 $ 3 $ 1,345 $ 42,217
Obligations of states
and political
subdivisions 1,401 5 9 1,397
Mortgage-backed
securities 191,680 482 14,940 177,222
Other securities 7,523 -- -- 7,523
- ------------------------------------------------------ ---- ------- --------
Total $244,163 $490 $16,294 $228,359
- ----------------------------------------------======== ==== ======= ========
</TABLE>
Securities available for sale with a carrying value at
December 31, 1995 and 1994, of $189,680,000 and $92,459,000, respectively,
were pledged to secure public deposits and short-term borrowings and for
other purposes required by law.
The following table summarizes the maturity distribution of the
available-for-sale portfolio at December 31, 1995:
<TABLE>
<CAPTION>
Amortized Fair
(in thousands of dollars) Cost Value
- ---------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 55,195 $ 55,355
Due after one year through five years 115,853 117,958
Due after five years through ten years 614 649
Due after ten years -- --
- ------------------------------------------------------ --------
171,662 173,962
Mortgage-backed securities 272,489 271,846
- ------------------------------------------------------ --------
Total $444,151 $445,808
- ----------------------------------------------======== ========
</TABLE>
The following table summarizes the proceeds, gross gains, and gross losses
from sales of available-for-sale securities for the years ended December 31,
1995, 1994, and 1993:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds $29,185 $2,962 $10,952
Gross gains 302 3 628
Gross losses 6 2 2
</TABLE>
1995 Annual Report 37
<PAGE> 24
Notes to Consolidated Financial Statements (continued)
5 Loans
- ------------------------------------------------------------------------------
At December 31, 1995 and 1994, loans consisted of
the following:
<TABLE>
<CAPTION>
Carrying Carrying
Value Value
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial and industrial $ 867,899 $ 841,498
Real estate construction 273,197 230,950
Real estate mortgage 683,593 638,092
Consumer 147,250 149,615
- ------------------------------------------------------ ----------
Loans 1,971,939 1,860,155
Less allowance for loan losses 30,508 28,894
- ------------------------------------------------------ ----------
Net loans $1,941,431 $1,831,261
- --------------------------------------------========== ==========
</TABLE>
Loans are presented net of unearned discount and net deferred loan fees
(expenses) of $(162,000) and $832,000 at December 31, 1995 and 1994,
respectively.
During 1995 and 1994, the subsidiary banks made loans to some of the
directors and officers of the Company and its significant subsidiaries, as
well as to certain related persons, interests or organizations of the
directors and executive officers. All such loans were made in the ordinary
course of business and on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for comparable
loans made to other persons. None involved more than normal risk of
collectibility or presented other unfavorable features. At December 31, 1995
and 1994, these loans, exclusive of any loans to any such persons for which
the aggregate did not exceed $60,000 during the latest year, amounted to
approximately $67,726,000 and $59,766,000, respectively. For the year ended
December 31, 1995, $21,077,000 in new loans were made, and $13,117,000
represented repayments. At December 31, 1995 and 1994, the Company had
advanced $2,169,000 and $2,577,000, respectively, to 23 and 27 officers of the
Company or its subsidiaries for the purpose of purchasing shares of stock of
the Company.
Transactions in the allowance for loan losses for the years ended December
31, 1995, 1994, and 1993, are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $28,894 $27,012 $25,356
Allowance of acquired banks -- -- 1,091
Provision for loan losses 5,003 5,526 6,282
- ------------------------------------------------------ ------- -------
33,897 32,538 32,729
- ------------------------------------------------------ ------- -------
Loans charged-off 4,342 4,768 7,377
Recoveries of loans charged-off 953 1,124 1,660
- ------------------------------------------------------ ------- -------
Net loans charged-off 3,389 3,644 5,717
- ------------------------------------------------------ ------- -------
Balance at end of year $30,508 $28,894 $27,012
- -----------------------------------------------======= ======= =======
</TABLE>
At December 31, 1995, the recorded investment in loans
(all of which are on non-accrual status) that are considered to be impaired
under FASB Statement No. 114 as amended by FASB Statement No. 118 was
$13,663,000. Included in this amount is $13,387,000 of impaired loans for
which the related allowance for loan losses is $2,009,000 and $276,000 of
impaired loans that as a result of write-downs do not have an allowance for
loan losses. The average recorded investment in impaired loans during the
year ended December 31, 1995, was approximately $8,933,000. The interest
income that would have been recorded if all non-accrual loans had been
current, in accordance with their original terms, amounted to $926,000 for
1995. Interest income, recorded using the cash basis method, for those loans
for the year ended December 31, 1995 was insignificant.
At December 31, 1994, subsidiaries of the Company had non-accrual loans of
$6,813,000 (all of which would be considered impaired under Statement No. 114,
as amended). The interest income that would have been recorded if all these
non-accrual loans had been current in accordance with their original terms
amounted to $719,000 for 1994. Interest income recorded using the cash basis
method for those loans for the year ended December 31, 1994 was insignificant.
6 Premises and Equipment
- ------------------------------------------------------------------------------
A summary of premises and equipment by classification is
as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
(in thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 3,334 $ 3,131
Buildings 9,727 17,496
Leasehold improvements 17,510 17,288
Furniture, fixtures and equipment 20,226 20,303
- --------------------------------------------------------------------- -------
Total cost 50,797 58,218
Less accumulated depreciation and amortization 30,033 30,308
- --------------------------------------------------------------------- -------
Net carrying value $20,764 $27,910
- --------------------------------------------------------------======= =======
</TABLE>
Depreciation and amortization charged to expense amounted to $3,983,000,
$4,257,000 and $4,136,000 for the years ended December 31, 1995, 1994 and
1993, respectively.
7 Deposits
- ------------------------------------------------------------------------------
At December 31, 1995 and 1994, deposits consisted of
the following:
<TABLE>
<CAPTION>
Carrying
Value Value
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Non-interest bearing demand deposits $ 519,155 $ 461,958
Interest bearing demand deposits 234,686 240,290
Savings and money market deposits 664,155 700,258
Time deposits (less than $100,000) 840,948 718,955
Time deposits ($100,000 or greater) 198,448 150,596
- ------------------------------------------------------ ----------
Total deposits $2,457,392 $2,272,057
- --------------------------------------------========== ==========
</TABLE>
38 Mark Twain Bancshares, Inc.
<PAGE> 25
8 Short-term Borrowings
- ------------------------------------------------------------------------------
Short-term borrowings consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased and
securities sold under agreements
to repurchase $163,964 $ 93,174 $124,690
Treasury tax and loan,
note option accounts 1,767 2,317 2,358
Commercial paper -- 9,455 10,121
Other short-term borrowings -- 43,172 2,527
- ------------------------------------------------------ --------- --------
Total short-term borrowings $165,731 $148,118 $139,696
- ----------------------------------------------======== ========= ========
</TABLE>
The Company has available lines of credit of $12,000,000 of which none had
been utilized at December 31, 1995. Commitment fees range up to 1/4% for these
lines of credit, and they may be withdrawn at any time without prior notice.
The table below presents data concerning federal funds
purchased and securities sold under repurchase agreements, which generally
mature in less than 30 days:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount outstanding at year-end $163,964 $ 93,174 $124,690
Weighted average interest
rate at year-end 5.13% 4.84% 2.54%
Average balances outstanding
for the year $137,771 $149,970 $106,420
Average interest rate for the year 5.31% 3.63% 2.58%
Maximum amount outstanding at
any month-end during the year $191,271 $235,867 $141,264
</TABLE>
9 Long-term Debt
- ------------------------------------------------------------------------------
At December 31, 1995 and 1994, long-term debt was
as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Parent Company:
8-1/2% debentures due 1999 $11,579 $11,611
7% convertible subordinated
capital notes due 1999 6,911 8,778
- ------------------------------------------------------ -------
Total long-term debt $18,490 $20,389
- -----------------------------------------------======= =======
</TABLE>
The 8-1/2% debentures due 1999 were issued on February 27, 1987. On January
16, 1996, the Company instructed the trustee to call the debentures for
redemption at a premium over par of 1%, effective March 1, 1996. The
debentures are redeemable by the holders in accordance with certain
limitations beginning March 1, 1989, at 100% of the principal amount.
The 7% convertible subordinated capital notes due in 1999, issued on June 23,
1987, are convertible into the Company's common stock at a conversion price
of $15.889 per share. The notes are redeemable with certain limitations by
the holders and by the Company beginning June 1, 1988, at a premium over par
declining from 7% (0% as of December 31, 1995). At maturity, noteholders will
receive common stock or cash to the extent that qualified funds are
available. During 1995, 1994, and 1993, the noteholders converted notes into
117,467, 108,530 shares, and 224,067 shares of common stock, respectively.
Scheduled maturities for the borrowed funds as of December 31, 1995, are:
1996 - $11,579,000 and 1999 - $6,911,000, after giving effect to the
announced March 1, 1996 call of the 812% debentures.
10 Income Taxes
- ------------------------------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1995, 1994,
and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Reserve for loan losses $11,709 $10,672 $10,047
Tax effect of FASB
No. 115 Allowance -- 6,181 --
Pension obligation 2,194 2,013 1,945
Tax over book basis of
premises and equipment 672 1,132 1,840
Tax over book basis of
foreclosed real estate 560 573 464
Deferred gain on sale/leaseback 336 410 430
Deferred loan fees -- 484 624
- ------------------------------------------------------ ------- -------
Total deferred tax assets 15,471 21,465 15,350
- ------------------------------------------------------ ------- -------
Deferred tax liabilities:
Purchased servicing rights -- -- 1,083
Lease financing transactions 1,146 1,644 3,245
Tax effect of FASB
No. 115 Allowance 631 -- 647
Book over tax basis of
partnership investments -- 418 316
Discount accretion 444 293 189
Others, net 1,368 553 1,289
- ------------------------------------------------------ ------- -------
Total deferred tax liabilities 3,589 2,908 6,769
- ------------------------------------------------------ ------- -------
Net deferred tax asset $11,882 $18,557 $ 8,581
- -----------------------------------------------======= ======= =======
</TABLE>
1995 Annual Report 39
<PAGE> 26
Notes to Consolidated Financial Statements (continued)
Applicable income taxes (benefits) for the years ended December 31, 1995,
1994, and 1993, including the tax effect of securities transactions of
$103,000, $108,000 and $320,000, respectively, are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (Federal and State) $25,573 $25,979 $19,431
Deferred 216 (3,248) (737)
- ------------------------------------------------------ ------- -------
Total applicable income taxes $25,789 $22,731 $18,694
- -----------------------------------------------======= ======= =======
</TABLE>
The total tax differs from that computed by applying the U.S. Federal income tax
rate of 35% to income before taxes. A reconciliation of these differences is as
follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected
Federal tax expense $25,726 $22,299 $18,830
Increase (decrease) in Federal
taxes resulting from:
State income taxes (net of
Federal income tax benefit) 608 1,841 1,608
Tax-exempt interest (825) (870) (1,098)
Low-income housing tax credit (806) (1,095) (869)
Disallowed expenses 548 971 689
Proceeds from life insurance -- -- (175)
Change in statutory rate -- -- (233)
Other, net 538 (415) (58)
- ------------------------------------------------------ ------- -------
Total applicable income taxes $25,789 $22,731 $18,694
- -----------------------------------------------======= ======= =======
</TABLE>
11 Shareholders' Equity
- ------------------------------------------------------------------------------
At December 31, 1995, there were 434,955 shares of common stock reserved for
issuance upon conversion of the 7% convertible subordinated notes.
On May 6, 1993, the shareholders of the Company approved increasing the
number of authorized shares of common stock from 14,000,000 to 30,000,000
shares.
12 Restrictions on Cash
and Due From Banks
- ------------------------------------------------------------------------------
At December 31, 1995, $49,032,000 in cash and due from banks were the
balances maintained in accordance with the guidelines as set forth by the
Federal Reserve Bank to maintain certain average reserve balances.
13 Supplemental Disclosures for the
Consolidated Statement of Cash Flows
- ------------------------------------------------------------------------------
Supplemental disclosures of noncash investing and financing activities, and
additional disclosures, are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conversion of 7% convertible
subordinated notes into
common stock $ 1,866 $ 1,723 $ 3,559
Held-to-maturity securities
transferred to securities
available for sale 184,801 -- 106,715
Securities available for sale
transferred to held-to-maturity
securities 29,378 -- --
Transfer from loans to foreclosed
real estate 1,940 2,386 7,431
Additional disclosures:
Interest paid 93,161 68,732 64,081
Income taxes paid 27,370 26,232 17,129
</TABLE>
In December 1995, the Financial Accounting Standards Board issued a special
report, "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," which allowed all entities a
one-time opportunity to reconsider the classification of securities.
Accordingly, the Company reclassified certain securities during December 1995
between held-to-maturity securities and securities available for sale.
During 1993, certain securities were reclassified from held-to-maturity
securities to securities available for sale. These reclassifications were
made as a result of management no longer having the positive intent to hold
these securities to maturity.
14 Restrictions on Subsidiary Dividends
- ------------------------------------------------------------------------------
Subsidiary bank dividends are the principal source of funds for payment of
dividends by the Company to its shareholders. The payment of dividends by the
banks, all of which are state-chartered, are subject to regulation by the
Federal Deposit Insurance Corporation and the states of Missouri, Kansas and
Illinois. These payments are not restricted as to the amount of dividends
that can be paid, other than what prudent and sound banking principles permit
and what must be retained to meet minimum legal capital requirements.
Accordingly, approximately $104,870,000 could be paid at December 31, 1995,
without prior regulatory approval.
Extensions of credit by subsidiaries to the Company are
permitted by regulatory authorities but are limited in amount and subject to
collateral requirement. At December 31, 1995, approximately $19,290,000 would
have been available under Federal Reserve guidelines.
40 Mark Twain Bancshares, Inc.
<PAGE> 27
15 Stock Option Plans
- ------------------------------------------------------------------------------
Under the 1995, 1992, and 1983 Incentive Stock Option Plans, 900,000,
675,000, and 450,000 shares of common stock, respectively, were available for
grant to officers and key employees. Options are granted at fair market value
at the date of grant for a term of five to 10 years.
The following table summarizes option activity during 1995, 1994, and 1993:
<TABLE>
<CAPTION>
Number of Shares Option Price per Share
- ------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding-January 1, 1993 464,100 $7.583-$18.333
Granted 220,500 $22.333-$24.567
Cancelled (6,000) $16.667-$22.333
Exercised (116,363) $7.583-$18.333
- ------------------------------------------------------ ---------------
Outstanding-December 31, 1993 562,237 $7.583-$24.567
Granted 220,700 $25.250-$27.775
Cancelled (7,350) $7.583-$22.333
Exercised (75,223) $7.583-$22.333
- ------------------------------------------------------ ---------------
Outstanding-December 31, 1994 700,364 $7.583-$27.775
Granted 244,500 $27.500-$30.250
Exercised (127,723) $7.583-$22.333
- ------------------------------------------------------ --------------
Outstanding-December 31, 1995 817,141 $7.583-$30.250
- ----------------------------------------------======== ===============
</TABLE>
At December 31, 1995, options representing 254,298 shares were exercisable.
16 Net Trading Revenue
- ------------------------------------------------------------------------------
The Company's securities trading activities involve secondary marketing in
several financial markets. Trading revenue is earned on an as agent or
principal basis in executing transactions for customers. The Company
maintains a trading account in which it takes positions, primarily to provide
a resource for institutional and retail activity to fill customers'
investment needs. In addition, the Company maintains trading accounts in which
it takes positions in the bond and equity markets based on expectations of
future market conditions. Trading revenue results from combined portfolios of
instruments that are managed on an aggregate basis. The following table
summarizes the components of net trading revenue for the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Mortgage-backed securities $ 4,105 $3,437
U.S. Treasury and agency securities 1,675 1,796
Foreign securities 3,314 1,239
Corporate debt securities 379 406
Corporate equity securities 2,091 (408)
State and political subdivision securities 608 550
Other 106 344
- ------------------------------------------------------ ------
Total net trading revenue $12,278 $7,364
- -----------------------------------------------======= ======
</TABLE>
For the years ended December 31, 1995 and 1994, change
in net unrealized holding gains (losses) on trading account securities
included in net trading revenue was $2,267,000 and $(307,000), respectively.
17 Retirement Plans
- ------------------------------------------------------------------------------
The Company maintains both qualified and non-qualified non-contributory
pension plans that cover substantially all employees who meet certain age and
service requirements. The Company does not provide any other post-retirement
benefits.
The qualified plan was established in 1989 and provides pension benefits based
on the employee's length of service and compensation levels. The Company's
funding policy is to contribute annually at least the minimum amount required
by government funding standards but not more than is tax deductible. In 1995,
1994, and 1993, $1,600,000, $1,600,000, and $1,250,000, respectively, was
contributed to the plan.
The non-qualified plan provides pension benefits to certain employees of the
Company, which would have been provided under the qualified plan in the
absence of limits placed on qualified plan benefits by the Internal Revenue
Service. The Company's funding policy has been to fund benefits as they are
paid. In 1993, the Company also purchased life insurance policies (Company as
beneficiary) with a face value of $19,500,000 as a method to partially
finance benefits under this plan. The cash surrender value of these policies
was $1,176,000 and $714,000 at December 31, 1995 and 1994. Contributions under
the non-qualified plan were not material for the three years in the period
ended December 31, 1995.
At December 31, 1995, 1994, and 1993, the qualified plan's assets were
invested in the Arrow Equity Portfolio and Fixed Income Portfolio mutual
funds (formerly the Mark Twain Equity Portfolio and Fixed Income Portfolio
mutual funds) managed by the Company's Trust Division, and in 26,666, 22,250
and 20,454 shares of common stock of the Company, respectively.
The net periodic pension expense included in the consolidated statement of
income is summarized as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the year $ 956 $ 891 $ 719
Interest cost on projected
benefit obligation 1,409 1,178 1,066
Net amortization and deferral 2,039 (154) 203
Actual return on assets (2,092) 236 (166)
- ------------------------------------------------------ ------ ------
Total $2,312 $2,151 $1,822
- ------------------------------------------------====== ====== ======
</TABLE>
1995 Annual Report 41
<PAGE> 28
Notes to Consolidated Financial Statements (continued)
The following table sets forth the plans' statuses and amounts recognized in
the consolidated balance sheet:
<TABLE>
<CAPTION>
December 31,
----------------------
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $15,792 $12,033
- -----------------------------------------------======= =======
Accumulated benefit obligation $16,338 $12,444
- -----------------------------------------------======= =======
Projected benefit obligation $21,778 $16,316
Plan assets at fair value (10,065) (6,540)
- ------------------------------------------------------ -------
Projected benefit obligation in
excess of plan assets 11,713 9,776
Unrecognized net transition obligation (3,157) (3,600)
Unrecognized net gain (loss) (2,756) (838)
- ------------------------------------------------------ -------
Accrued pension liability $ 5,800 $ 5,338
- -----------------------------------------------======= =======
</TABLE>
Assumptions used in the actuarial present value determinations were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate in determining
benefit obligations 7.50% 8.00% 7.50%
Rate of increase in compensation levels 4.50% 4.50% 5.00%
Expected long-term rate on assets 8.50% 8.50% 8.50%
</TABLE>
18 Other Income and Expenses
- ------------------------------------------------------------------------------
A summary of the components of other income and other expenses exceeding one
percent of revenues in any of the years presented is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
(in thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bond Division revenue $11,903 $8,897 $9,227
Trust Division revenue 6,364 6,084 5,430
Brokerage revenue 4,215 5,174 5,757
Mortgage Division revenue -- 2,178 8,143
FDIC premiums 2,558 4,833 4,882
Data processing expense 4,461 4,764 4,079
Amortization expense 900 1,501 4,829
Legal fees 1,003 1,287 2,153
Loan and collection expense 525 876 2,498
Charitable contributions 3,057 713 705
Net losses and expenses on
foreclosed real estate 756 701 1,316
</TABLE>
19 Leases
- ------------------------------------------------------------------------------
Commitments for leased banking and other premises and equipment expire or may
be terminated at various dates through the year 2073. The future minimum
annual rentals required under noncancelable leases, all of which are
operating leases, having terms in excess of one year as of December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
(in thousands of dollars)
- ------------------------------------------------------
<S> <C>
1996 $ 5,316
1997 5,101
1998 4,561
1999 4,476
2000 3,532
Thereafter to 2073 15,696
</TABLE>
Certain leases are renewable at the Company's option for varying extended
terms at renewal rates relating to the then fair value of the item. The total
rent expense for equipment, bank premises, and other property was $6,258,000,
$6,473,000, and $6,174,000 for the years ended December 31, 1995, 1994, and
1993, respectively.
20 Legal Proceedings
- ------------------------------------------------------------------------------
The Company and its subsidiaries are parties to a number of lawsuits, most of
which are considered routine litigation incidental to doing business. The
Company, after consultation with legal counsel, does not expect the outcome of
any litigation to have a material effect on its consolidated financial
position.
21 Fair Value of Financial Instruments
- ------------------------------------------------------------------------------
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in
the balance sheet for cash and due from banks and federal
funds sold and securities purchased under resale agreements approximate those
assets' fair values.
Held-to-maturity securities: Fair values for held-to-maturity
securities are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.
42 Mark Twain Bancshares, Inc.
<PAGE> 29
Trading account and available-for-sale securities: Fair values
for the Company's trading account and available-for-sale securities, which
are also the amounts recognized in the consolidated balance sheet, are based
on quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans receivable: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for certain mortgage loans, prime home equity loans, and
credit card loans were based on quoted market prices of similar loans sold in
conjunction with securitization transactions. The fair values for other loans
(e.g., commercial real estate, real estate construction, real estate, mortgage
loans, and commercial and industrial loans) are estimated using discounted
cash flow analyses, using interest rates currently offered for loans with
similar terms to borrowers of similar credit quality.
Deposit liabilities: The fair values of demand deposits (e.g., interest and
non-interest checking, savings, and certain types of money market accounts)
are, by definition, equal to the amount payable on demand at the reporting
date (i.e., their carrying amounts). The carrying amounts for variable-rate,
fixed-term certificates of deposit and money market accounts approximate
their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Long-term borrowings: The fair values of the Company's fixed-rate long-term
borrowings are estimated using discounted cash flow analyses based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
Commitments to extend credit and letters of credit: Fair values for the
Company's loan commitments and letters of credit are based upon fees
currently charged to enter into similar agreements.
Interest rate swaps, interest rate caps and floors, and foreign exchange
contracts: The fair value of interest rate swaps, interest rate caps and
floors, and foreign exchange contracts is estimated, using quoted market
prices or dealer quotes, as the amount that the Company would receive or pay
to execute a new agreement with terms identical to those remaining on the
current agreements, considering current interest and exchange rates and the
current creditworthiness of the counterparties.
The estimated fair values of the Company's financial instruments as of
December 31, 1995 and 1994, are summarized in the following table:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
Carrying/ Estimated Carrying/ Estimated
(in thousands of dollars) Contract Value Fair Value Contract Value Fair Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and due from banks $ 156,207 $ 156,207 $ 139,947 $ 139,947
Interest bearing deposits with banks -- -- 54 54
Federal funds sold and securities purchased under resale agreements 7,900 7,900 1,600 1,600
Trading account securities 63,579 63,579 32,909 32,909
Securities available for sale 445,808 445,808 228,359 228,359
Held-to-maturity securities 244,094 245,355 353,958 340,117
Loans, net of allowance 1,941,431 1,995,038 1,831,261 1,784,326
Financial Liabilities
Deposits $2,457,392 $2,493,275 $2,272,057 $2,235,472
Short-term borrowings 165,731 165,731 148,118 148,118
Long-term debt 18,490 18,872 20,389 19,190
Foreign currency contracts 137,272 135,993 74,774 75,023
Unrecognized Financial Instruments<F*>
Commitments to extend credit $ 314 $ 314 $ 269 $ 269
Commercial letters of credit 3 3 5 5
Standby letters of credit 291 291 342 342
Interest rate swaps 8 1,006 -- --
Interest rate caps and floors 258 928 -- --
<FN>
<F*>The amounts shown under "carrying amount" represent accruals or deferred
fees arising from those unrecognized financial instruments.
</TABLE>
1995 Annual Report 43
<PAGE> 30
Notes to Consolidated Financial Statements (continued)
22 Off-Balance Sheet Risk
- ------------------------------------------------------------------------------
In the normal course of business, the Company utilizes a variety of
off-balance sheet financial instruments to service the financial needs of its
customers and as part of its interest rate risk management strategy. These
instruments involve varying degrees of risk in excess of the amount
recognized in the Company's balance sheet as either an asset or liability. As
such, the contractual or notional amounts of these instruments may or may not
be an appropriate indicator of the credit or market risk associated with
these instruments.
The Company controls the credit risk arising from these instruments through
its credit approval process and through the use of risk control limits and
monitoring procedures.
The Company issues loan commitments, commercial letters of credit, and
standby letters of credit. For these instruments, the contractual amount
represents the maximum potential credit risk if the counterparty does not
perform according to the terms of the contract. A large majority of these
commitments expire without being drawn upon. As a result, total contractual
amounts do not represent future credit exposure or liquidity requirements.
Commercial and standby letters of credit are subject to the same credit
policies and underwriting standards used when making loans or extending loan
commitments. The amount of collateral obtained is based on management's
credit evaluation of the customer and generally consists of securities,
receivables, inventory, fixed assets, and deeds of trust.
Interest rates, in the event of funding these commitments, are predominantly
based on floating rates or prevailing market rates at the time of funding.
Substantially all of the loan commitments and standby letters of credit expire
within one year unless renewed by the Company.
The Company enters into forward exchange contracts to hedge foreign currency
transactions on a continuing basis for periods consistent with its committed
exposures. Committed exposures include foreign currency denominated deposit
accounts and commercial letters of credit. The risks inherent in these
contracts are the potential inability of a counterparty to meet the terms of
each contract and the risk associated with changes in the market values of
the underlying contracts. The contractual amounts of these instruments
greatly exceed the possible loss that could arise from counterparty
default or changes in currency rates. The Company does not engage in
speculation. The Company's foreign exchange contracts do not subject the
Company to significant risk due to exchange rate movements because gains and
losses on these contracts offset gains or losses on the liabilities and
transactions being hedged. The exposure to credit loss for foreign exchange
contracts can be estimated by calculating the cost to replace all profitable
outstanding contracts at current market rates. At December 31, 1995 and 1994,
the Company's exposure to credit loss from commitments to purchase and sell
foreign exchange contracts was $1,006,000 and $588,000, respectively.
The Company enters into interest rate swap and interest rate cap and floor
contracts as part of its interest rate risk management strategy. These
contracts involve the exchange of interest payments without the exchange of
the underlying notional amount on which the interest payments are calculated.
The notional amounts do not represent direct credit risk exposures. The
Company's direct credit exposure is limited to the net difference between the
calculated pay and receive amounts on each transaction, which is generally
netted and paid quarterly, and the ability of the counterparty to
perform its payment obligation under the contract. The Company has very
strict policies governing such contracts, including the evaluation of the
creditworthiness of the counterparties and the inclusion of collateral
arrangements within the contracts to minimize credit risk. The methods used
to determine counterparties are formally reviewed and approved annually. At
December 31, 1995, there were no past due payments related to the interest
rate contracts.
The following table summarizes the contractual amounts of the Company's
off-balance sheet financial instruments as of December 31, 1995 and 1994, as
defined under FASB Statement No. 119.
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Financial instruments, the maximum
credit risk of which is represented by
contract amount:
Commitments to extend credit $502,443 $430,277
Commercial letters of credit 2,058 4,086
Standby letters of credit 83,174 75,545
Financial instruments, the credit risk of
which is represented by other than
contract amounts:
Foreign forward exchange contracts 137,272 74,774
Interest rate swaps 50,000 --
Interest rate caps and floors 115,000 --
</TABLE>
44 Mark Twain Bancshares, Inc.
<PAGE> 31
23 Condensed Financial Information-Parent Company Only
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Condensed Balance Sheet
December 31,
-----------------------
(in thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash $ 6,828 $ 94
Securities available for sale 2,505 2,161
Trading account securities 6,441 5,043
Receivables from non-banking subsidiaries 299 5,501
Investment in subsidiaries representing the
Company's equity in underlying assets:
Bank subsidiaries 272,416 244,373
Other subsidiaries 1,981 2,911
Premises and equipment, less accumulated
depreciation and amortization of $2,558
and $2,311, respectively 582 705
Excess of cost over equity in underlying net
assets of subsidiary banks at dates of
acquisition, less accumulated amortization
of $2,430 and $2,304, respectively 3,836 3,980
Other assets 7,677 6,539
- --------------------------------------------------------------------- --------
Total assets $302,565 $271,307
- -------------------------------------------------------------======== ========
Liabilities
Payable to subsidiaries $ -- $ 46
Short-term borrowings -- 10,365
Other liabilities 8,169 6,458
Long-term debt 18,490 20,389
- --------------------------------------------------------------------- --------
Total liabilities 26,659 37,258
- --------------------------------------------------------------------- --------
Shareholders' Equity
Common stock 20,635 20,469
Surplus 63,630 60,246
Undivided profits 194,888 164,513
Net unrealized gains (losses) on
securities available for sale 1,026 (9,623)
- --------------------------------------------------------------------- --------
280,179 235,605
Less common treasury stock at cost 4,273 1,556
- --------------------------------------------------------------------- --------
Total shareholders' equity 275,906 234,049
- --------------------------------------------------------------------- --------
Total liabilities and shareholders' equity $302,565 $271,307
- -------------------------------------------------------------======== ========
</TABLE>
<TABLE>
<CAPTION>
Condensed Statement of Income
Years Ended December 31,
-------------------------------------
(in thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Revenues from subsidiaries:
Dividends from bank and
non-bank subsidiaries $32,585 $22,314 $13,709
Service fees 8,856 6,950 6,223
Other income 228 425 506
Other interest income 523 415 256
Other 2,181 (268) 28
- --------------------------------------------------------------------- ------- -------
Total revenue 44,373 29,836 20,722
- --------------------------------------------------------------------- ------- -------
Expenses
Interest on short-term borrowings 269 481 345
Interest on long-term debt 1,512 1,773 1,912
Salaries and benefits 7,176 5,673 4,637
Occupancy expense 547 472 474
Furniture and equipment expense 275 286 272
Other 3,348 3,645 3,564
- --------------------------------------------------------------------- ------- -------
Total expenses 13,127 12,330 11,204
- --------------------------------------------------------------------- ------- -------
Income before income tax benefit
and equity in undistributed
earnings of subsidiaries 31,246 17,506 9,518
Income tax benefit 5 1,928 652
- --------------------------------------------------------------------- ------- -------
Income before equity in undistri-
buted earnings of subsidiaries 31,251 19,434 10,170
Equity in undistributed earnings
of subsidiaries:
Bank subsidiaries 17,390 21,476 25,267
Non-bank subsidiaries (928) 72 (334)
- --------------------------------------------------------------------- ------- -------
Net income $47,713 $40,982 $35,103
- --------------------------------------------------------------======= ======= =======
</TABLE>
1995 Annual Report 45
<PAGE> 32
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Condensed Statement of Cash Flows
Years Ended December 31,
-------------------------------------
(in thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $47,713 $40,982 $35,103
Adjustments to reconcile net cash
provided by operating activities:
Equity in undistributed earnings
of subsidiaries (16,462) (21,548) (24,933)
Trading account securities (1,398) (5,043) --
Other 856 107 5,368
- --------------------------------------------------------------------- ------- -------
Net cash provided by
operating activities 30,709 14,498 15,538
- --------------------------------------------------------------------- ------- -------
Investing Activities
Investment in subsidiaries 2 (106) (10,277)
Net decrease in loans 5,414 1,136 1,059
Other (180) 1,921 (146)
- --------------------------------------------------------------------- ------- -------
Net cash provided (used)
by investing activities 5,236 2,951 (9,364)
- --------------------------------------------------------------------- ------- -------
Financing Activities
Increase (decrease) in borrowings (10,365) (2,276) 4,074
Payments on long-term debt (32) (2,307) (539)
Cash dividends (17,338) (14,282) (11,383)
Purchase of treasury stock (3,303) -- --
Reissuance of treasury stock 1,827 1,241 1,391
Other -- 27 250
- --------------------------------------------------------------------- ------- -------
Net cash used by
financing activities (29,211) (17,597) (6,207)
- --------------------------------------------------------------------- ------- -------
Increase (decrease) in cash
and cash equivalents 6,734 (148) (33)
Cash and cash equivalents
at beginning of year 94 242 275
- --------------------------------------------------------------------- ------- -------
Cash and cash equivalents
at end of year $ 6,828 $ 94 $ 242
- --------------------------------------------------------------======= ======= =======
</TABLE>
24 Summary of Quarterly Financial
Information (Unaudited)
- ------------------------------------------------------------------------------
The following is a summary of quarterly operating results for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(in thousands of dollars, First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Interest income $53,779 $56,170 $56,700 $56,504
Interest expense 21,759 24,023 24,517 24,633
- ------------------------------------------------------ ------- ------- -------
Net interest income 32,040 32,147 32,183 31,871
- ------------------------------------------------------ ------- ------- -------
Provision for loan losses 1,332 1,299 713 1,659
Securities transactions 46 -- -- 250
Net income $11,368 $11,625 $12,223 $12,497
Net income per share:
Primary $ 0.70 $ 0.72 $ 0.75 $ 0.76
Fully diluted $ 0.68 $ 0.70 $ 0.73 $ 0.74
1994
Interest income $46,018 $47,655 $48,709 $52,231
Interest expense 16,270 16,892 17,633 19,797
- ------------------------------------------------------ ------- ------- -------
Net interest income 29,748 30,763 31,076 32,434
- ------------------------------------------------------ ------- ------- -------
Provision for loan losses 1,422 2,037 1,040 1,027
Securities transactions -- 309 -- --
Net income $ 9,574 $ 9,918 $10,370 $11,120
Net income per share:
Primary $ 0.60 $ 0.62 $ 0.64 $ 0.69
Fully diluted $ 0.58 $ 0.60 $ 0.63 $ 0.67
</TABLE>
46 Mark Twain Bancshares, Inc.
<PAGE> 1
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF MARK TWAIN BANCSHARES, INC.
The following list contains information regarding the Company and its
subsidiaries (some of which do not constitute significant subsidiaries) as of
December 31, 1995. The list also includes the state or jurisdiction of
incorporation of each as well as names under which they do business, some
names of which are service marks.
<CAPTION>
NAME UNDER WHICH
CORPORATION STATE IT DOES BUSINESS
- ------------ ----- ----------------
<S> <C> <C>
Mark Twain Bancshares, Inc. Missouri Mark Twain Bancshares, Inc.
Gateway Research Associates
Omne Advertising Agency
Mark Twain "Advantage Club"<F**>
Mark Twain Banks<F**>
SUBSIDIARIES
- ------------
Mark Twain Bank Missouri Mark Twain Bank<F**>
Mark Twain Banks<F**>
Mark Twain Bank Ladue
Mark Twain Bank Frontenac
Mark Twain Trust Division
Mark Twain International Banking Division
Mark Twain Investment Services
Mark Twain Municipal Securities
Mark Twain Capital Markets Group
Mark Twain Bond Department
Mark Twain International Markets Group
Mark Twain Commercial Finance Division
Mark Twain Credit Services
Mark Twain Services
Mark Twain Bank South County
Mark Twain Bank 21
Mark Twain Bank State
Mark Twain Bank Northland
Mark Twain Bank Parkway
Mark Twain Bank O'Fallon
Mark Twain Bank St. Charles
Mark Twain Bank St. Peters
Mark Twain Bank Progress
Mark Twain Bank Fenton
Mark Twain Bank St. Louis
Mark Twain Bank Clarkson/Clayton
Mark Twain Bank Clarkson Square
Mark Twain Bank Creve Coeur
Mark Twain Bank Ellisville
Mark Twain Bank Clayton
Mark Twain Bank Des Peres
Mark Twain Operations Center
Mark Twain Leasing Division
Mark Twain Mortgage Department
Mark Twain Mortgage Shenandoah
Mark Twain Illinois Bank Illinois Mark Twain Illinois Bank
Mark Twain Bank Belleville
Mark Twain Bank Edwardsville
Mark Twain Trust Division
Mark Twain Kansas City Bank Missouri Mark Twain Kansas City Bank
Mark Twain Bank Kansas City
Mark Twain Bank Plaza
Mark Twain Bank South
Mark Twain Bank Noland
Mark Twain Bank Tower
Mark Twain Bank North
Mark Twain Trust Division
Mark Twain Commercial Finance Division
Mark Twain Bank Kansas
Mark Twain Bank Shawnee
Mark Twain Bank Parkway
Mark Twain Bank Mission
Mark Twain Bank Olathe
Mark Twain Brokerage Services, Inc. Missouri Mark Twain Brokerage Services
(owned by Mark Twain Bank) Mark Twain Brokerage Services, Inc.
Mark Twain Brokerage
Mark Twain Insurance Agency
Infinet Securities
1
<PAGE> 2
<CAPTION>
NAME UNDER WHICH
CORPORATION STATE IT DOES BUSINESS
- ------------ ----- ----------------
<S> <C> <C>
Mark Twain Real Estate Missouri Mark Twain Real Estate Development Corp. I
Development Corp. I
(owned by Mark Twain Kansas City Bank)
Mark Twain Real Estate Missouri Mark Twain Real Estate Development Corp. II
Development Corp. II
(owned by Mark Twain Bank)
Mark Twain Bank Community Missouri Mark Twain Bank Community Development
Development Corp., Inc. Corp., Inc.
(owned by Mark Twain Bank)
Mark Twain Kansas City Bank Missouri Mark Twain Kansas City Bank Community
Community Development Corp., Inc. Development Corp., Inc.
(owned by Mark Twain Kansas City Bank)
Tarquad Corporation Missouri Tarquad Corporation
Mark Twain Asset Recovery, Inc. Missouri Mark Twain Asset Recovery, Inc.
MARI
Mark Twain Community Missouri Mark Twain Community Development Corp.
Development Corporation
Mark Twain Services, Inc. Missouri Mark Twain Services, Inc.
Mark Twain Gatesworth
Mark Twain Acquisition Corp. II Missouri Mark Twain Acquisition Corp. II
Mark Twain Properties, Inc. Missouri Mark Twain Properties, Inc.
<FN>
<F**>Name/Service Mark used by all banking units.
December, 1995
</TABLE>
2
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Mark Twain Bancshares, Inc. of our report dated January 16, 1996, included
in the 1995 Annual Report to Shareholders of Mark Twain Bancshares, Inc.
We also consent to the incorporation by reference into each registration
statement listed below of our report dated January 16, 1996, with respect to
the consolidated financial statements incorporated herein by reference of
Mark Twain Bancshares, Inc. in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
<TABLE>
<CAPTION>
FORM NO.
--------- --------
<C> <C> <S>
S-8 33-59075 Mark Twain Bancshares, Inc. 1995 Stock Option Plan
S-8 33-48078 Mark Twain Bancshares, Inc. 1992 Stock Option Plan
S-8 2-86364 Mark Twain Bancshares, Inc. 1983 Incentive Stock
Option Plan
As amended through Post Effective Amendment
Number 6 dated May 2, 1992
S-8 2-88720 The Mark Twain Savings Challenge Plan
As amended through Post Effective Amendment
Number 4 dated April 28, 1987
</TABLE>
ERNST & YOUNG LLP
--------------------
Ernst & Young LLP
St. Louis, Missouri
March 15, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND
CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 156,207
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,900
<TRADING-ASSETS> 63,579
<INVESTMENTS-HELD-FOR-SALE> 445,808
<INVESTMENTS-CARRYING> 244,094
<INVESTMENTS-MARKET> 245,355
<LOANS> 1,971,939
<ALLOWANCE> 30,508
<TOTAL-ASSETS> 2,968,231
<DEPOSITS> 2,457,392
<SHORT-TERM> 165,731
<LIABILITIES-OTHER> 50,712
<LONG-TERM> 18,490
0
0
<COMMON> 20,635
<OTHER-SE> 255,271
<TOTAL-LIABILITIES-AND-EQUITY> 2,968,231
<INTEREST-LOAN> 180,955
<INTEREST-INVEST> 38,264
<INTEREST-OTHER> 951
<INTEREST-TOTAL> 223,173
<INTEREST-DEPOSIT> 85,006
<INTEREST-EXPENSE> 94,932
<INTEREST-INCOME-NET> 128,241
<LOAN-LOSSES> 5,003
<SECURITIES-GAINS> 296
<EXPENSE-OTHER> 86,522
<INCOME-PRETAX> 73,502
<INCOME-PRE-EXTRAORDINARY> 47,713
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,713
<EPS-PRIMARY> 2.93
<EPS-DILUTED> 2.85
<YIELD-ACTUAL> 5.03
<LOANS-NON> 13,663
<LOANS-PAST> 530
<LOANS-TROUBLED> 109
<LOANS-PROBLEM> 17,600
<ALLOWANCE-OPEN> 28,894
<CHARGE-OFFS> 4,342
<RECOVERIES> 953
<ALLOWANCE-CLOSE> 30,508
<ALLOWANCE-DOMESTIC> 30,508
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,603
</TABLE>
<PAGE> 1
Exhibit 99
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mark Twain Bancshares, Inc.
---------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
MARK TWAIN BANKS
MEMBERS FDIC
MARK TWAIN BANCSHARES, INC.
8820 Ladue Road
St. Louis, Missouri 63124
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996
TO THE SHAREHOLDERS OF
MARK TWAIN BANCSHARES, INC.:
We are pleased to notify you that the Annual Meeting of the Shareholders of
Mark Twain Bancshares, Inc., a Missouri corporation (``Bancshares''), will be
held at the Omnimax Theatre in the St. Louis Science Center, 5050 Oakland
Avenue, St. Louis, Missouri, on Tuesday, April 23, 1996 at 4:00 P.M. of the
standard of time then prevailing, for the following purposes:
1. To elect four (4) directors for a three-year term expiring in 1999.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The record date for determining shareholders entitled to notice of and to
vote at the meeting is the close of business of March 6, 1996.
Copies of Bancshares' Annual Report for 1995 have been mailed to you prior
to or simultaneously herewith.
By order of the Board of Directors
CARL A. WATTENBERG, JR.
Corporate Secretary
March 18, 1996
PLEASE DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE.
<PAGE> 3
MARK TWAIN BANCSHARES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mark Twain Bancshares, Inc.
(``Bancshares''), for use at the Annual Meeting of Shareholders of Bancshares to
be held on April 23, 1996 and at any adjournment thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. If the
enclosed proxy card is executed and returned, it may nevertheless be revoked at
any time insofar as it has not been exercised.
A copy of Bancshares' Annual Report containing financial statements for the
year ended December 31, 1995 has been mailed to each shareholder of record as of
the close of business on March 6, 1996.
PROXY SOLICITATION
Proxies will be solicited by mail. They may also be solicited by officers
and regular employees of Bancshares and its subsidiaries including the
``Subsidiary Banks,'' being Mark Twain Kansas City Bank, Mark Twain Bank, and
Mark Twain Illinois Bank, personally by telephone or telegraph. The cost of
soliciting proxies will be borne by Bancshares.
RECORD DATE, VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
All holders of record on the record date of shares of the Common Stock,
$1.25 par value (``Common Stock'') of Bancshares are entitled to vote at the
meeting. Each share entitles the holder to one vote on each matter to be
considered at the meeting other than the election of directors. Cumulative
voting for directors is required by the By-Laws of Bancshares; consequently,
each shareholder is entitled to cast as many votes in the aggregate as shall
equal the number of shares of Common Stock held by such shareholder, multiplied
by the number of directors to be elected, and each shareholder may cast the
whole number of such shareholder's votes for one candidate or distribute them
among two or more candidates. The four nominees who receive the highest number
of votes will be elected directors. Except when otherwise indicated for a
specific proposal, the affirmative vote of a majority of the shares of Common
Stock that are entitled to vote and represented in person or by proxy at the
annual meeting is required for approval. Proxies for shares marked ``abstain''
will be considered represented at the meeting, but not voted, for these
purposes. Shares registered in the names of brokers or other ``street name''
agents for which proxies are voted on some but not all matters will be
considered represented at the meeting but voted only as to those matters
actually marked on the proxy card.
THE BOARD OF DIRECTORS IS SOLICITING DISCRETIONARY AUTHORITY PERMITTING THE
PROXIES NAMED ON THE ENCLOSED FORM OF PROXY TO CUMULATE THE VOTES WHICH THEY
HAVE BEEN AUTHORIZED TO CAST AND TO DISTRIBUTE SUCH VOTES AMONG THE NOMINEES IN
SUCH AMOUNTS AS THE PROXIES SHALL DETERMINE.
2
<PAGE> 4
The record date fixed by the Board of Directors for determining shareholders
entitled to vote at the meeting is the close of business on March 6, 1996. There
were 16,159,476 shares of Common Stock outstanding and entitled to vote at the
close of business on the record date.
The only person who is known to Bancshares to be the beneficial owner of
more than 5% of its voting securities is Alvin Siteman, who beneficially owns
2,281,077 shares (14.0%) of Common Stock. This amount includes currently
exercisable stock options to acquire 31,560 shares of Common Stock. Mr. Siteman
is Chairman of the Board of Bancshares and can be contacted through Bancshares.
PROPOSAL 1
ELECTION OF DIRECTORS
As permitted by Bancshares' Articles of Incorporation and By-Laws and The
General and Business Corporation Law of Missouri, there are presently eleven
members serving on the Board of Directors, divided into three groups, each group
to be as equal in number as may be and to be elected for a three-year term. At
this election, four directors will be elected for a term expiring in 1999.
Under Bancshares' By-Laws, vacancies in the Board of Directors which may
occur during the year may be filled by a majority of the Directors then in
office although less than a quorum. So long as the Directors are divided into
groups, any Director chosen to fill a vacancy shall be of the same group as the
Director he or she succeeded and shall hold office until the next election of
Directors by the shareholders of Bancshares and until his or her successor is
duly elected and qualified.
Proxies will be voted for the election of all of the nominees of the Board
of Directors listed below unless such authority is withheld as to all or as to
any specific nominees. Should any nominee become unavailable, for any reason,
before the election (which is not anticipated), the proxy will be voted for
substitute person(s) to be selected by the Board of Directors of Bancshares
unless authority to vote for all of the nominees is withheld.
INFORMATION AS TO NOMINEES FOR ELECTION AS DIRECTORS
Members of the Executive Committee of the Board of Directors are Michael M.
McCarthy, John Dubinsky, Robert J. Baudendistel, and Alvin Siteman, any member
of which may be contacted at the address of Bancshares. Members of the
Compensation, Benefits and Stock Option Committee are B.D. Hunter, Chairman,
Michael M. McCarthy, and Robert J. Baudendistel. Members of the Audit Committee
are Jack Deutsch, Chairman, Robert A. Bernstein, James J. Murphy, Jr., and
Robert J. Baudendistel.
The Board of Directors has nominated four persons, each of whom is currently
a director, for election for a three-year term expiring in 1999. These director
nominees are Robert J. Baudendistel, Peter F. Benoist, Jack Deutsch, and Alvin
Siteman.
3
<PAGE> 5
The following table shows each director's principal occupation for at least
the last five years, his present position with Bancshares, the year in which the
director was first elected or appointed a director, the director's age and
directorships with other companies whose securities are registered pursuant to
the Exchange Act with the Securities and Exchange Commission.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED.
<TABLE>
GROUP I
TERM EXPIRING IN 1997
<CAPTION>
OFFICES HELD, PRINCIPAL OCCUPATION, ORGANIZATION AND PRINCIPAL
BUSINESS OF ORGANIZATION IN WHICH PRINCIPAL OCCUPATION YEAR FIRST
NAME OF DIRECTOR CARRIED ON (IF NOT BANKING) DURING PAST FIVE YEARS AND AGE BECAME A DIRECTOR
---------------- -------------------------------------------------------------- -----------------
<S> <C> <C>
Robert C. Butler.............. Executive Vice President of Bancshares since 1982, Senior 1973
Vice President since 1974 and Vice President since 1970;
Chairman of the Board, Mark Twain South County Bank
1973-1978; President, Mark Twain State Bank 1970-1974;
President, Mark Twain National Bank 1976-1979. Age: 62
Henry J. Givens, Jr., Ph.D.... President, Harris-Stowe State College since 1979; Di- 1992
rector, Laclede Gas Company; Director, Mark Twain Bank St.
Louis, a division of Mark Twain Bank; Director, Arts and
Education Council; Director, American Red Cross, St. Louis
Bi-State Chapter; Director, National Conference of
Christians and Jews; Director, Urban League of
Metropolitan St. Louis; Director, Blue Cross/Blue Shield
of Missouri; Director, St. Louis Symphony Orchestra. Age:
63<F1>
Michael M. McCarthy........... Chairman of the Board and Chief Executive Officer since 1981
1977, McCarthy Building Companies, a group of construction
and building design consulting companies; Chairman and
Chief Executive Officer since 1976, McCarthy Brothers
Company, a building construction company; Director of
Huntco Inc.; Advisory Director, Rossman School; Advisory
Director, St. Louis Science Center. Age: 57<F2>
James J. Murphy, Jr........... President and Chief Executive Officer, Murphy Company 1992
Mechanical Contractors and Engineers; Director, Mark Twain
Bank; Director, Mechanical Contractors Association of
America; Chair, Board of Trustees, Maryville University;
Director, PRIDE; Director, St. Louis Priory. Age: 52
4
<PAGE> 6
<CAPTION>
GROUP II
TERM EXPIRING IN 1998
OFFICES HELD, PRINCIPAL OCCUPATION, ORGANIZATION AND PRINCIPAL
BUSINESS OF ORGANIZATION IN WHICH PRINCIPAL OCCUPATION YEAR FIRST
NAME OF DIRECTOR CARRIED ON (IF NOT BANKING) DURING PAST FIVE YEARS AND AGE BECAME A DIRECTOR
---------------- -------------------------------------------------------------- -----------------
<S> <C> <C>
Robert A. Bernstein........... Director, President, and Chief Executive Officer, 1994
Bernstein-Rein Advertising, Inc., an advertising agency;
Director, Mark Twain Kansas City Bank; Steering Committee
Member, COMBAT (Community Backed Anti-Drug Tax) Community
Action Coalition in Jackson County, Missouri; Director,
Kansas City Art Institute; President of the Board,
Starlight Theatre Association; Board of Governors, Jewish
Community Center. Age: 57
John Dubinsky................. President and Chief Executive Officer of Bancshares since 1973
1986, President since 1975; Member of Executive Committee,
Washington University Medical Center; Director,
Barnes-Jewish Hospital; Co-Chairman, Barnes-Jewish
Hospital Foundation; Director and Member of Executive
Committee, Arts & Education Council of Greater St. Louis;
Trustee, St. Louis Science Center; Director, BJC Health
System, Inc.; National Trustee, National Symphony
Orchestra, Washington D.C.; Director and Vice Chairman,
Regional Housing Alliance; Director, Mark Twain Bank;
Director, Mark Twain Kansas City Bank. Age: 52
B.D. Hunter................... Chairman and Chief Executive Officer of Huntco Inc., which 1981
owns and operates Steel Processing Centers. Director,
Service Corporation International; Director, Cash America
International, Inc.; Director, Celebrity, Inc.; Trustee,
Lone Star Flight Museum. Age: 66<F3>
5
<PAGE> 7
<CAPTION>
GROUP III
TO BE ELECTED FOR A THREE-YEAR
TERM EXPIRING IN 1999
OFFICES HELD, PRINCIPAL OCCUPATION, ORGANIZATION AND PRINCIPAL
BUSINESS OF ORGANIZATION IN WHICH PRINCIPAL OCCUPATION YEAR FIRST
NAME OF DIRECTOR CARRIED ON (IF NOT BANKING) DURING PAST FIVE YEARS AND AGE BECAME A DIRECTOR
---------------- -------------------------------------------------------------- ------------------
<S> <C> <C>
Robert J. Baudendistel........ Vice Chairman of Bancshares since 1979; Partner, Fox 1967
Associates, a theatrical production company; consultant
and investor; former Chairman, St. Anthony's Hospital.
Age: 63
Peter F. Benoist.............. Executive Vice President of Mark Twain Bancshares, Inc. 1991
since 1984; Chairman of Mark Twain Bank since 1989, and
Chairman of Mark Twain Kansas City Bank since 1992;
President of Mark Twain Bank from 1986 until 1989;
Director, President and Executive Committee, Ecumenical
Housing Production Corp.; Director and Vice Chairman, St.
Louis Priory; Trustee, Maryville University; Director, St.
Louis Equity Fund. Age: 48
Jack Deutsch.................. President of Standard Machine and Manufacturing Company 1990
since 1991, prior thereto Executive Vice President since
1980, a manufacturer of refrigeration and industrial
valves; Executive Vice President of Dema Engineering
Company since 1982, manufacturer of automatic and
hydraulic dispensing devices; Director, Vice President,
and Treasurer, Jewish Federation of St. Louis. Age: 57
Alvin Siteman................. Chairman of the Board of Bancshares since 1986; Vice 1972
Chairman of Bancshares 1979-1986; President and Director,
Flash Oil Corporation, a petroleum product distributor;
President and Director, The Siteman Organization, Inc., a
real estate development and management company; Director
and President, Site Oil Company of Missouri; Commissioner,
St. Louis Art Museum; Director, Barnes-Jewish Hospital;
Director, Insituform Technologies, Inc. Age 68<F4>
<FN>
- -------
<F1> Dr. Givens is a Director of Laclede Gas Company, the securities of which
are registered pursuant to the Exchange Act.
<F2> Mr. McCarthy is a Director of Huntco, Inc., the securities of which are
registered pursuant to the Exchange Act.
<F3> Mr. Hunter is Chairman and Chief Executive Officer of Huntco, Inc., a
Director (and formerly Vice Chairman) of Service Corporation International,
and a Director of Cash America Investment, Inc., and Celebrity, Inc., the
securities of each of which are registered pursuant to the Exchange Act.
<F4> Mr. Siteman is a Director of Insituform Technologies, Inc., the securities
of which are registered pursuant to the Exchange Act.
</TABLE>
6
<PAGE> 8
BOARD OF DIRECTORS MEETINGS, COMMITTEES, AND COMPENSATION
Meetings. During 1995, the Board of Directors met eight times. The Board of
Directors has an Executive Committee; Compensation, Benefits and Stock Option
Committee; and Audit Committee, but in 1995 no standing nominating committee.
During 1995 the Compensation, Benefits and Stock Option Committee met two times
and the Audit Committee met four times. During 1995, no incumbent Director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board of Directors and all committees of the Board on which he served during the
period that he served.
Compensation of Directors. Directors of Bancshares who were not employees
for 1995 generally received compensation for their services as directors based
upon an annual retainer fee of $8,000 plus $500 per Board of Directors meeting
attended. In addition to regularly scheduled meetings, a number of directors
were involved in numerous informal meetings with management, offering valuable
advice and suggestions on a broad range of corporate matters.
Information concerning certain standing committees of the Board of Directors
is set out below.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Bancshares' Common Stock as of February 15, 1996, for (a) each
director and nominee for director; (b) each of the executive officers named in
the Summary Compensation Table not listed as a director; and (c) directors and
executive officers as a group. Except as otherwise noted, the individuals have
sole voting and investment power with respect to such securities. Included are
amounts of shares which may be acquired on February 15, 1996 or within 60 days
of February 15, 1996 pursuant to exercisable employee stock options or through
conversion of Bancshares 7% Convertible Notes due 1999 (``Notes'').
7
<PAGE> 9
<TABLE>
COMMON STOCK OWNERSHIP TABLE
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNERSHIP OF CLASS
---- ----------------------- --------
<S> <C> <C>
(a)
Robert J. Baudendistel................................. 52,500<F1> .3%
Peter F. Benoist....................................... 101,655<F2> .6%
Robert A. Bernstein.................................... 12,443 .1%
Robert C. Butler....................................... 89,568<F3> .6%
Jack Deutsch........................................... 147,507<F4> .9%
John Dubinsky.......................................... 260,363<F5> 1.6%
Henry J. Givens, Jr., Ph.D............................. 600 <F*>
B.D. Hunter............................................ 20,238<F6> .1%
Michael M. McCarthy.................................... 169,431<F7> 1.0%
James J. Murphy, Jr.................................... 19,397<F8> .1%
Alvin Siteman.......................................... 2,281,077<F9> 14.0%
(b)
W. Thomas Reeves....................................... 59,006<F10> .4%
Keith Miller........................................... 46,365<F11> .3%
Frederick Zimmer....................................... 54,246<F12> .3%
(c)
Directors and Executive Officers as a Group (20
persons)............................................... 3,469,760<F13> 21.1%
<FN>
- -------
<F*>less than .1%
<F1> Includes 7,500 shares held by a partnership affiliate of
Mr. Baudendistel.
<F2> Includes 37,250 shares subject to currently exercisable stock options.
<F3> Includes 10,750 shares subject to currently exercisable stock options.
<F4> Includes 85,642 shares held by Mr. Deutsch or his wife as Trustee or
Custodian for their children or other family members, and 4,500 shares
owned by a company of which Mr. Deutsch is a shareholder and President,
the beneficial ownership of all of which is disclaimed.
<F5> Includes 311 shares owned by Mr. Dubinsky or his wife as custodian for
their daughter, 4,549 shares held by testamentary trusts, and 30,000
shares held by two trusts of which Mr. Dubinsky is trustee, the
beneficial ownership of all of which is disclaimed. Also includes 3,146
shares available through conversion of Notes and 33,634 shares subject
to currently exercisable stock options.
<F6> Includes 8,488 shares held by an affiliate of Mr. Hunter.
<F7> Includes 3,006 shares held by two trusts of which Mr. McCarthy is
trustee, the beneficial ownership of which is disclaimed, and 146,499
shares held by an affiliate of Mr. McCarthy.
<F8> Includes 5,347 shares available through conversion of Notes. Also
includes 300 shares owned by the wife of Mr. Murphy, the beneficial
ownership of which is disclaimed.
8
<PAGE> 10
<F9> Includes 192,808 shares owned by the wife of Mr. Siteman individually or
by Mr. Siteman as trustee of trusts for four daughters, the beneficial
ownership of all of which is disclaimed, and 423,325 shares held by two
corporate affiliates of Mr. Siteman. Also includes 31,560 shares subject
to currently exercisable stock options.
<F10>Includes 45 shares held by Mr. Reeves as custodian for his children, the
beneficial ownership of which is disclaimed. Also includes 26,175 shares
subject to currently exercisable stock options.
<F11>Includes 17,175 shares subject to currently exercisable stock options.
<F12>Includes 15,320 shares subject to currently exercisable stock options.
<F13>Includes 216,476 shares subject to currently exercisable stock options
and 8,493 shares available through conversion of Notes.
</TABLE>
As required by the Securities and Exchange Commission rules under Section 16
of the Securities and Exchange Act of 1934, Bancshares believes, based upon
review and representations, that during 1995 all Securities and Exchange
Commission filing requirements applicable to executive officers and directors
have been complied with.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION, BENEFITS AND STOCK OPTION COMMITTEE
The Committee is composed of three independent non-employee directors. The
Committee is responsible for setting and administering senior executive officer
salaries, annual bonus, and incentive stock option grants; and, reviewing
employee benefit plans generally.
COMPENSATION POLICY
Bancshares' compensation programs are designed to link executives'
compensation to the performance of Bancshares and provide competitive
compensation for executives with regard to similar companies of similar
performance levels. The compensation program includes a blend of annual cash
compensation, including incentive awards, and equity-based incentives, all under
a policy that a substantial part of overall compensation for senior management
should be at risk, based on Bancshares' performance.
Bancshares' executive officer compensation, as with other members of senior
management, consists of two primary elements: (1) an annual component comprised
of base salary and annual incentive bonus and (2) a longer-term component
comprised of stock option incentives.
(1) ANNUAL COMPONENT: BASE SALARY AND ANNUAL BONUS
Base salaries for executive officers are initially determined by evaluating
the responsibilities of the position held and the experience of the individual,
and by reference to the competitive market place for executive talent, including
a comparison to base salaries for comparable positions at other companies.
Annual salary adjustments are determined by evaluating the performance of
Bancshares and of each executive officer, and also take into account new
responsibilities, if any. The Committee,
9
<PAGE> 11
where appropriate, also considers non-financial performance measures. To assist
the Committee, each officer's performance is evaluated annually by his or her
immediate supervisor.
Bancshares' executive officers are eligible for annual cash bonuses under
Bancshares' bonus plan for certain key supervisor and management personnel.
Under such plan, the Committee establishes bonuses as a percentage of base
salary to be paid if and to the extent the annual projections and objectives for
net earnings are met or exceeded. The Committee believes that for a bonus
program to be effective, it must be easily understood so that managers clearly
understand what the rewards are and what they must do to earn them. The concept
underlying the bonus plan is to link a significant part of compensation to the
performance of Bancshares. Under the plan Bancshares must produce a
pre-established level of income before any performance awards are paid. The plan
is designed to challenge management to achieve levels of performance
significantly higher than the Company's peer group.
(2) LONG-TERM COMPONENT: STOCK OPTIONS
The Committee believes that significant equity interest in Bancshares held
by Bancshares' management aligns the interests of management with the interests
of shareholders. To align shareholders' and executive officers' interests,
Bancshares' long-term compensation plan uses stock option grants whose value is
related to the value of Bancshares' common shares. Grants of stock options are
made under Bancshares' stock option plans which are approved by the shareholders
and are described more fully in this Proxy Statement. Stock options are granted
annually to executive officers also in numbers based on their position in
management, their current level of responsibility, and their performance during
the prior year. Stock options provide incentive for the creation of shareholder
value over the long term since the full benefit of the compensation package
cannot be realized unless an appreciation in the price of Bancshares' common
shares occurs over a specified number of years. Long-term stock option
incentives are used to retain and reward senior management who have demonstrated
the ability over time to achieve superior results related to peer groups (and
consistent with the Bancshares' overall mission statement and strategic plan)
and who through their position of authority and responsibility demonstrate
success in enhancing shareholder value.
CONCLUSION
Through the programs described above, a significant portion of Bancshares'
executive compensation is linked to individual and corporate performance. The
Committee intends to continue the policy of linking executive compensation to
corporate performance while recognizing the desirability to retain superior
executives, the goal of achieving both long-term objectives as well as
short-term objectives, and recognizing that many external factors can affect
corporate performance which may result in imbalances, for a particular time
period.
CEO COMPENSATION
During 1995, Bancshares' most highly compensated executive officer was John
Dubinsky, President and Chief Executive Officer. Mr. Dubinsky's 1995 performance
was reviewed by the Committee which approved, on behalf of the Board of
Directors, the annual component of base
10
<PAGE> 12
salary and annual bonus and the long-term component of stock options. The
actions were based on the following considerations.
Bancshares reported record profits for the fifth consecutive year, as more
fully described in the 1995 Annual Report to Shareholders. Bancshares not only
achieved its performance goals for 1995, but surpassed the established
objectives by attaining an increase of 16.4% in consolidated net income and an
increase of 14.9% in fully diluted earnings per share over 1994. In 1995,
Bancshares' return on equity of 18.68% and return on assets of 1.72% were among
the best for similar banks in the country. Bancshares' strong profits in 1995,
as well as in past years, have in turn increased shareholder value
significantly. That value has been reflected in the market value of Bancshares'
stock, increasing during 1995 approximately 42.2% following a 10.1% increase in
1994. Total return to Bancshares' shareholders over the last five years has
averaged 40.42% on an annual compounded basis.
In addition to overall company performance the committee reviewed various
Peer Group Comparisons on Bank CEO Compensation prepared by SNL Securities L.P.
arranged by asset size, region, and performance levels of return on assets, all
of which review led the Committee to conclude that 1995 compensation levels, and
those approved for 1996, are within the middle percentile range for comparable
companies by size and performance.
The Committee also reviewed Mr. Dubinsky's performance as the leader of the
management team and took particular note of the management team's budgeting and
strategic planning, its leadership role in achieving diversity within the
company, its management development program, and its maintaining a consistent,
growing earnings stream, among others.
The Committee has concluded that Mr. Dubinsky's performance warrants the
compensation for 1995 as reflected in the Summary Compensation Table.
COMPENSATION, BENEFITS AND STOCK OPTION COMMITTEE
B.D. Hunter, Committee Chairman
Robert J. Baudendistel
Michael M. McCarthy
11
<PAGE> 13
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------
OTHER ALL OTHER
ANNUAL COMPEN-
NAME AND COMPEN- OPTIONS SATION
PRINCIPAL POSITION <F1> YEAR SALARY ($) BONUS ($) SATION <F2> (#)<F3> ($)<F4>
- ----------------------- ---- ---------- --------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John Dubinsky 1995 410,285 207,836 0 27,500 3,750
President & Chief 1994 389,869 178,213 0 25,000 3,750
Executive Officer 1993 367,144 150,635 0 18,000 4,497
Alvin Siteman 1995 374,184 205,801 0 27,500 3,750
Chairman 1994 354,046 176,501 0 25,000 3,750
1993 331,076 148,984 0 18,000 4,497
Peter F. Benoist 1995 296,224 143,054 0 20,000 3,300
Executive Vice 1994 281,460 122,667 0 18,000 3,300
President 1993 266,617 103,722 0 15,000 3,212
W. Thomas Reeves 1995 219,655 110,239 0 13,200 3,750
Senior Vice 1994 209,457 94,596 0 12,000 3,750
President 1993 198,413 80,637 0 10,500 4,480
Keith Miller 1995 187,518 92,833 0 13,200 3,750
Senior Vice 1994 196,384<F5> 75,365 0 12,000 3,750
President, Finance 1993 148,730 66,808 0 10,500 3,250
Frederick E. Zimmer 1995 172,889 84,281 0 11,000 3,532
Senior Vice 1994 164,085 72,217 0 10,000 3,300
President 1993 157,050 61,830 0 9,000 3,435
<FN>
- -------
<F1> Includes the President and Chief Executive Officer and the five other most
highly compensated Executive Officers.
<F2> See ``Personal Benefits'' at page 17 below.
<F3> See ``Stock Option Plans'' and two tables concerning options at pages 14
and 17 below.
<F4> See ``Mark Twain Savings Challenge Plan'' at page 16 below.
<F5> Includes base salary of $177,922 and a salary adjustment of $18,462.
</TABLE>
12
<PAGE> 14
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN<F*>
Among Mark Twain Bancshares, Inc., NASD Stock Index
and SNL Securities $1-$5 Billion Bank Stock Index
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
INVESTMENT VALUES<F*> AT DECEMBER 31
-----------------------------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mark Twain Bancshares 100.00 199.76 288.12 328.92 374.98 551.87
NASD Stock Index 100.00 160.56 186.86 214.51 209.68 296.30
SNL $1B - $5B Bank Index 100.00 149.53 217.07 260.24 274.26 379.46
<FN>
- -------
<F*>The graph and table above show the values of $100 invested on December 31,
1990 in Bancshares' Common Stock, the NASD Stock Index and the SNL
Securities $1-$5 Billion Bank Stock Index, assuming reinvestment of all
dividends.
The NASD Stock Index reflects the performance of approximately 4,700
publicly traded companies having their stock prices quoted on the NASDAQ system.
The SNL Securities $1-$5 Billion Bank Stock Index reflects the performance of
over 100 publicly traded financial institutions having gross assets of $1-$5
billion.
</TABLE>
13
<PAGE> 15
<TABLE>
OPTIONS GRANTED IN 1995
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL OPTIONS ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION FOR
EMPLOYEES IN EXERCISE OPTION TERM<F1>
OPTIONS FISCAL YEAR PRICE EXPIRATION -----------------------------
NAME GRANTED (#) <F2> ($/SH) DATE 5% 10%
---- ----------- ------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John Dubinsky, CEO.... 27,500 11.2% $27.50 January, 2000 $209,000 $461,725
Alvin Siteman......... 27,500 11.2% 30.25 January, 2000 133,375 386,100
Peter F. Benoist...... 20,000 8.2% 27.50 January, 2000 152,000 335,800
W. Thomas Reeves...... 13,200 5.4% 27.50 January, 2000 100,320 221,628
Keith Miller.......... 13,200 5.4% 27.50 January, 2000 100,320 221,628
Frederick E. Zimmer... 11,000 4.5% 27.50 January, 2000 83,600 184,690
<FN>
- --------
<F1> The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the SEC and therefore are not intended to
forecast possible future appreciation of Bancshares stock. Bancshares did
not use an alternative formula for a grant date valuation, as Bancshares is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors. The assumed
annual rates of appreciation of five and ten percent would result in the
price of Bancshares' stock increasing to $35.10 and $44.29, respectively.
<F2> This column will not total 100% as employees other than those named in the
Summary Compensation Table received Options during the year.
<F3> See ``Stock Option Plans'' for additional information.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN 1995 AND 1995
YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END AT FISCAL YEAR END ($)
VALUE ----------------- ----------------------
SHARES ACQUIRED REALIZED EXERCISABLE (E) EXERCISABLE (E) <F2>
NAME ON EXERCISE <F1> UNEXERCISABLE (U) UNEXERCISABLE (U)
---- --------------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
John Dubinsky, CEO................. 18,973 $418,303 19,000(E) $317,330(E)
59,000(U) $800,455(U)
Alvin Siteman...................... 7,500 $102,019 15,250(E) $198,120(E)
59,000(U) $651,101(U)
Peter F. Benoist................... 12,600 $364,261 21,000(E) $385,245(E)
44,000(U) $602,140(U)
W. Thomas Reeves................... 9,000 $169,155 15,000(E) $277,620(E)
29,700(U) $409,598(U)
Keith Miller....................... 9,000 $169,155 15,000(E) $277,620(E)
29,700(U) $409,598(U)
Frederick E. Zimmer................ 5,250 $107,205 12,625(E) $233,418(E)
24,875(U) $343,399(U)
<FN>
- --------
<F1> Values realized are calculated by subtracting the exercise price from the
fair market value of the stock on each exercise date.
<F2> Year-end values of unexercised options are calculated by subtracting the
exercise price from the fair market value of Bancshares' stock as of the
fiscal year end ($38.875, the average of the high and low prices quoted for
December 29, 1995).
</TABLE>
14
<PAGE> 16
RETIREMENT PLANS
Effective January 1, 1989, Bancshares established a Defined Benefit Pension
Plan covering all eligible officers and employees of Bancshares and its
subsidiaries. All officers and employees participate in the Pension Plan upon
the completion of one year of service and the attainment of age 21.
Under the Pension Plan, eligible employees receive annual retirement
benefits based on the average of the highest five consecutive calendar years of
compensation during the ten-year period ending on the normal retirement date or
termination of employment.
Benefits under the Pension Plan are computed on the basis of 0.9% of average
compensation up to Covered Compensation wage base (the 35-year average of Social
Security wage bases ending in the year Social Security retirement age is
attained) plus 1.5% of average compensation over Covered Compensation wage base,
times benefit service up to 30 years. Federal tax law limits the benefit payable
under the Pension Plan.
In 1983, Bancshares established an Executive Benefit Plan, as an amendment
and restatement of an Officers' Benefit Plan established in 1978. The Executive
Plan is an unfunded plan which provides for payments to participating officers
and employees on retirement or other termination of employment, and which
supplements the Pension Plan. In order to participate, an employee must have
been employed by Bancshares for ten years and must earn base pay at least equal
to Social Security Taxable Wage Base for the year for which the employee becomes
a participant. The Executive Benefit Plan operated until January 1, 1989 as the
sole retirement plan of the Company. This Plan was phased out when the Pension
Plan was adopted on January 1, 1989, although those covered under the Plan as of
that date continue to be so covered.
The annual benefit payable under the Executive Benefit Plan is 25% of the
average annual compensation for the five highest years of compensation,
increased for each year of employment in excess of ten years, up to a maximum of
50% for employees with more than 25 years service; but the benefit is reduced by
any benefits payable under the Pension Plan.
The Executive Benefit Plan provides for a normal retirement date at age 65,
and employees who retire on or after that age are entitled to receive the full
accrued benefit. Employees who retire after age 55 with 15 years service with
the consent of Bancshares, and employees who retire with 20 years service, are
entitled to the full accrued benefit, actuarily reduced if retirement occurs
prior to age 65. The normal method of payment of benefits is the payment of the
basic annual benefit in equal monthly installments over the participant's
lifetime, with a minimum of 120 months guaranteed. Benefits are fully vested on
death or disability, and are vested on other termination of employment based on
length of service. Participants must refrain from competing with Bancshares
until at least three years after termination of employment in order to be
eligible to continue to receive payments under the Executive Plan.
15
<PAGE> 17
<TABLE>
PENSION PLAN TABLE
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------
REMUNERATION 15 20 25 30 OR MORE
- ------------ ------- ------- ------- ----------
<S> <C> <C> <C> <C>
$150,000.............................. 45,000 60,000 75,000 75,000
300,000.............................. 90,000 120,000 150,000 150,000
400,000.............................. 120,000 160,000 200,000 200,000
450,000.............................. 135,000 180,000 225,000 225,000
600,000.............................. 180,000 240,000 300,000 300,000
750,000.............................. 225,000 300,000 375,000 375,000
</TABLE>
The table above presents annual combined retirement benefits payable under
the Pension and Executive Benefit Plans, based upon various assumed final
average salaries and years of credited service for a person reaching age 65 in
1995 with benefits computed on a straight life annuity basis. Amounts shown
reflect the actual benefit under the Plan. There is no Social Security benefit
offset. ``Remuneration'' is the average annual compensation for the highest five
years of compensation as described above for each plan. The compensation used by
Bancshares to compute the benefit under the Pension Plan includes 100% of base
salary, 100% of the first $25,000 of variable compensation and 50% of variable
compensation over $25,000.
The credited service under the Pension and Executive Benefit Plans for each
of the individuals named in the Summary Compensation Table are as follows: Alvin
Siteman, 22 years (by separate agreement, Mr. Siteman is to be credited with 25
years upon termination of employment with Bancshares); John Dubinsky, 28 years;
Peter F. Benoist, 19 years; W. Thomas Reeves, 15 years; Keith Miller, 17 years;
and Frederick Zimmer, 21 years. Remuneration covered by the Plan is included in
the Summary Compensation Table.
MARK TWAIN SAVINGS CHALLENGE PLAN
Bancshares has an employee benefit plan under Section 401(k) of the Internal
Revenue Code. The Plan allows employees to contribute up to 8-15% of their base
pay of which 50% of the amount up to 5% of base pay is matched by Bancshares.
Employees may elect to have their contributions invested in Bancshares Common
Stock, an equity mutual fund, and a balanced fund, all of which are managed by
Mark Twain Bank Trust Division, and a pooled GIC fund, a managed small to
midsized stock fund, and a managed small to midsized balanced fund, all of which
are managed in whole or part by a non-affiliate company. All company matching
contributions are contributed or invested in Mark Twain Common Stock. All common
stock held by the Trustee (Mark Twain Bank Trust Division) is voted as directed
by the respective participants to the extent vested, and otherwise by the Board
of Directors. At December 31, 1995, there were 499,541 shares held by the
Trustee. The amounts contributed by Bancshares to the persons listed in the
Summary Compensation Table includes $3,750 for Alvin Siteman, $3,750 for John
Dubinsky, $3,300 for Peter F. Benoist, $3,750 for W. Thomas Reeves, $3,750 for
Keith Miller, and $3,532 for Frederick Zimmer.
16
<PAGE> 18
PERSONAL BENEFITS
After inquiry, Bancshares has concluded that the aggregate amounts of
personal benefits which cannot be specifically or precisely ascertained do not
in any event exceed $15,000 as to each individual named in the Summary
Compensation Table above and has concluded that the information set forth in the
table is not rendered materially misleading by virtue of the omission of the
value of such personal benefits.
OFFICER LOAN PROGRAM AND OFFICER STOCK PURCHASE PLAN
Bancshares has an Officer Loan Program for executive officers (as that term
is defined by certain federal banking laws) and for certain key supervisors for
the purpose of providing loans for personal purposes, including specifically,
under the Officer Stock Purchase Plan, the purpose of providing secured
financing for such personnel in their acquisition of Bancshares' securities,
pursuant to Regulation G of the Board of Governors of the Federal Reserve
System, whether acquired through Stock Option Plans or otherwise. As of December
31, 1995, loans to the executive officers as a group totalled $523,681. These
loans bear interest at a rate of Prime plus 1/2% floating.
STOCK OPTION PLANS
Bancshares has three plans providing for the grant of stock options (the
``Option Plans''). The 1983 Incentive Stock Option Plan (``1983 Plan'') was
adopted and approved by shareholders in 1983, and expired in 1993 with some
grants outstanding. The 1992 Stock Option Plan (the ``1992 Plan'') was adopted
and approved by shareholders in 1992, and will expire on January 21, 2002. The
1995 Stock Option Plan (the ``1995 Plan'') was adopted and approved by
shareholders in 1995, and will expire on January 15, 2005.
The 1983 Plan authorized the grant of incentive stock options, as defined by
federal tax law (``ISOs''). The 1992 and 1995 Plans authorize the grant of ISOs
and non-qualified stock options (``NQSOs''). Up to 675,000 shares of Bancshares'
Common Stock may be issued under the 1992 Plan, and up to 900,000 shares may be
issued under the 1995 Plan. Appropriate adjustments in the number of shares
available under the Option Plans and in the terms of outstanding ISOs and NQSOs
(``options'') are required for stock splits and similar events.
Approximately 40 officers and management and supervisory employees of
Bancshares and its subsidiaries are eligible to receive options under the Option
Plans. Non-employee directors are ineligible for any option grant under any
Plan.
The Option Plans are administered by the Board's Compensation, Benefits and
Stock Option Committee, which consists entirely of non-employee directors.
Within the limits of each Plan, the Committee determines when and to whom
options are granted, the number of shares subject to each option, each option's
price and duration, when options become exercisable, whether the option is an
ISO or NQSO, and other terms and conditions which the Committee deems
appropriate. The 1992 and 1995 Plans impose a five-year limit on all options
granted under them. All options granted to date under all plans become
exercisable in four equal annual installments, beginning one year after grant;
all outstanding options terminate five years after grant. All options reported
in the table entitled ``Option Grants in 1995'' above were granted on January
16, 1995.
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<PAGE> 19
The option price of options cannot be less than 100% of the market value of
Bancshares common Stock on the grant date (110% in the case of ISOs granted to a
10% stockholder). Optionees may pay the option price in cash or Bancshares
Common Stock. Bancshares may loan the option price to optionees to the extent
allowed by law. The Committee permits required withholding taxes to be paid with
Common Stock, including stock otherwise issuable in connection with an option
exercise.
The Committee may accelerate the exercisability of options at any time. All
Option Plans provide for automatic acceleration upon death or disability of an
optionee, or upon the occurrence of certain takeover events relating to
Bancshares. Options may be forfeited if the optionee terminates employment
within two years of grant or is dismissed at any time. Options (and any stock or
other benefits derived from options) may be forfeited if the optionee competes
with, or acts in any manner inimical to the best interests of, Bancshares and
its subsidiaries. In addition, optionees must expressly covenant not to compete
with Bancshares and its subsidiaries during the term of their employment and for
three years thereafter.
The Option Plans may be amended by the Board of Directors at any time. Under
the 1992 and 1995 Plans, certain amendments which increase the number of
authorized shares or change the class of eligible employees must be approved by
Bancshares' shareholders.
EXECUTIVE EMPLOYMENT AGREEMENTS
Bancshares has entered into employment and compensation agreements with
certain of its officers and directors. The basic purpose of these agreements is
to provide a commitment to Bancshares from its key executives, and a reciprocal
commitment to each of them from Bancshares. The Board believes that the
agreements will have the effect of providing Bancshares with greater continuity
of management by giving key personnel incentives to remain with Bancshares, as
well as disincentives to leaving.
The standard agreements provide that each covered employee's base salary and
incentive compensation (including bonus) will be determined each year by the
Board of Directors or its delegatee. The standard agreements are for initial
terms ranging from twelve to twenty-four months. Messrs. Dubinsky, Siteman,
Benoist, Reeves, Miller, and Zimmer each have standard agreements with initial
terms of twenty-four months which began in 1995. The initial term normally is
extended automatically for successive twelve month periods, with a maximum term
of five years. Each standard agreement contains covenants not to compete or
engage in activities which would be detrimental to Bancshares or its
subsidiaries, which covenants survive termination.
Each standard agreement is subject to: (i) termination by Bancshares or the
employee upon at least twelve months' notice, except that the initial term
cannot be shortened by giving this notice; (ii) termination by Bancshares
without cause (as provided in the agreement); (iii) termination by the employee
in response to certain actions by Bancshares affecting the employee's position
or geographic location; (iv) termination by the employee for other reasons; (v)
termination by Bancshares for cause; and (vi) termination upon the employee's
death. If terminated by Bancshares under clause (i), the employee would receive
whatever standard severance benefit Bancshares is paying at that time upon
execution of Bancshares' standard severance agreement then being used. If
terminated
18
<PAGE> 20
under clauses (ii) or (iii) in accordance with the terms of the agreement, the
employee would be entitled, upon execution of Bancshares' standard severance
agreement, to receive each month for a period equal to the initial term a
special monthly severance benefit based generally upon the employee's average
salary and regular incentive compensation paid during the preceding three years.
If terminated under clauses (iv), (v), or (vi), no severance benefit would be
payable.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for Bancshares and its subsidiaries for
the year ended December 31, 1995 is the independent certified public accounting
firm of Ernst & Young LLP, which firm was selected by the Audit Committee and
Board of Directors of Bancshares. A representative of Ernst & Young LLP is
expected to attend the annual meeting with the opportunity to make a statement
and respond to appropriate questions from shareholders.
The members of the Board of Directors Audit Committee, established in 1975,
were in 1995 Jack Deutsch, Committee Chairman, Robert J. Baudendistel, Robert A.
Bernstein, and James J. Murphy, Jr. The Audit Committee, whose activities
include the engagement of the independent auditors, reviewing with independent
auditors the plan and results of the audit engagement, reviewing the scope and
results of Bancshares' internal auditing procedures, reviewing the degree of
independence of the auditors, considering the range of audit and nonaudit fees
and reviewing the adequacy of Bancshares' system of internal accounting
controls, met four times during 1995.
CERTAIN TRANSACTIONS
During 1995, as in prior years, Bancshares' Subsidiary Banks made loans to
certain directors and executive officers of Bancshares and its principal
subsidiaries, as well as to certain persons or organizations related to the
directors and executive officers. All such loans were made in the ordinary
course of business, and on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans to
other persons, and none involved more than a normal risk of collectibility or
presented other unfavorable features.
During 1995, rental payments for certain premises of Bancshares and its
subsidiaries, aggregating approximately $78,398 were made to The Siteman
Organization, Inc., a real estate development and management company which is an
affiliate of Mr. Siteman. Management believes that all such rental payments are
comparable to fair market rates for such premises.
OTHER BUSINESS
Management of Bancshares does not intend to bring any other matters before
the Annual Meeting and, at the date of this Proxy Statement, management is not
informed of any matters that others may bring before the meeting. However, if
any other matters properly come before the meeting, the persons named in the
form of proxy submitted herewith will vote such proxy in accordance with their
best judgment on such matters, determined in the manner provided therein.
19
<PAGE> 21
SHAREHOLDER PROPOSALS
Shareholder proposals must be received by Bancshares no later than November
28, 1996 to be included in Bancshares' proxy materials for its next Annual
Meeting of Shareholders pursuant to Regulation 240.14a-8 under the Securities
Exchange Act of 1934.
FORM 10-K NOTICE
Pursuant to Rules of the Securities and Exchange Commission, Bancshares will
provide to each person receiving a Proxy Statement, upon a written request of
such person, without charge, a copy of Bancshares' Annual Report on Form 10-K
including the financial statements and schedules thereto, for its most recent
fiscal year required to be filed with the Securities and Exchange Commission.
Bancshares may impose a reasonable fee for expenses in connection with providing
copies of the separate exhibits to such report when such exhibits are requested.
Requests should be directed to Carl A. Wattenberg, Jr., Mark Twain Bancshares,
Inc., 8820 Ladue Road, St. Louis, Missouri 63124.
SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOUR COOPERATION WILL BE APPRECIATED.
St. Louis, Missouri
March 18, 1996
20
<PAGE> 22
P MARK TWAIN BANKS(R)
R MEMBERS FDIC
O
X
Y MARK TWAIN BANCSHARES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 23, 1996
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alvin Siteman and John Dubinsky and
each of them proxy or proxies to represent the undersigned, with full
power of substitution, at the Annual Meeting of Shareholders of Mark
Twain Bancshares, Inc., to be held on Tuesday, April 23, 1996, and any
and all adjournments thereof.
PLEASE SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON THE REVERSE
SIDE. IF NO SPECIFICATION IS MADE, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR ELECTION OF THE NOMINEES AND FOR ITEM 2. THE AGENTS NAMED ABOVE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS PROXY CARD.
---------------
! SEE REVERSE !
! SIDE !
---------------
<PAGE> 23
- ----- PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
! X ! VOTES AS IN THIS
- ----- EXAMPLE.
FOR WITHHELD
1. Election of / / / / FOR A TERM OF THREE (3)
Directors YEARS ENDING 1999:
Robert J. Baudendistel
For, except vote withheld from the following Peter F. Benoist
nominee(s): Jack Deutsch
Alvin Siteman
- --------------------------------------------
FOR AGAINST ABSTAIN
2. Authority to proxies / / / / / /
to vote upon such
other business that
may properly come
before the meeting.
The Board of Directors recommends a vote FOR the above proposals.
SIGNATURE(S) ______________________________________ DATE ___________
SIGNATURE(S) ______________________________________ DATE ___________
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
full title as such. In case of a corporation, a duly
authorized officer should sign on its behalf.
<PAGE> 24
APPENDIX
Page 13 of the printed proxy contains a Comparison of Five Year
Cumulative Total Return graph. The information contained in that
graph is depicted in the table that immediately follows the graph.
