<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file Number 0-4543
MARK TWAIN BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-0895344
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8820 Ladue Road
St. Louis, Missouri
(Address of principal executive offices)
63124
(Zip Code)
Registrant's telephone number, including area code:
(314) 727-1000
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Class Outstanding at March 31, 1997
Common Stock, $1.25 par value 16,827,826
<PAGE> 2
MARK TWAIN BANCSHARES, INC.
AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet
March 31, 1997 and 1996, and December 31, 1996...............3
Condensed Consolidated Statement of Income
Three months ended March 31, 1997 and 1996...................4
Condensed Consolidated Statement of Cash Flows
Three months ended March 31, 1997 and 1996...................5
Notes to Condensed Consolidated Financial
Statements ..................................................6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................................8
PART II. - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K......................18
Signature.......................................................19
Exhibit Index...................................................20
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
<TABLE>
MARK TWAIN BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<CAPTION>
March 31, December 31,
-------------------------
(in thousands of dollars) 1997 1996 1996
- ------------------------------------------------------------------------------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 136,333 $ 139,767 $ 150,926
Interest bearing deposits with banks 2,856 - 4,387
Federal funds sold and securities
purchased under resale agreements 3,193 1,300 23,500
Held-to-maturity securities 209,848 249,190 218,479
Available-for-sale securities 461,905 460,011 458,164
Trading account securities 65,399 72,552 30,772
Loans, net of allowance for loan losses of
$33,436, $31,198 and $33,745, respectively 2,163,159 1,985,438 2,144,170
Premises and equipment 25,498 20,745 24,977
Accrued income receivable 18,616 19,896 18,701
Other assets 141,165 99,081 59,189
- ---------------------------------------------------------------------------------- ---------- ----------
Total assets $3,227,972 $3,047,980 $3,133,265
- ------------------------------------------------------------------------========== ========== ==========
LIABILITIES
Non-interest bearing deposits $ 448,490 $ 440,853 $ 498,431
Interest bearing deposits 2,070,984 1,978,463 2,096,481
- ---------------------------------------------------------------------------------- ---------- ----------
Total deposits 2,519,474 2,419,316 2,594,912
- ---------------------------------------------------------------------------------- ---------- ----------
Short-term borrowings 260,190 261,376 193,591
Other liabilities 125,881 88,815 31,102
Long-term debt 1,989 3,795 2,036
- ---------------------------------------------------------------------------------- ---------- ----------
Total liabilities 2,907,534 2,773,302 2,821,641
- ---------------------------------------------------------------------------------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock, $1.25 par value, authorized
30,000,000 shares, issued 17,114,852,
16,508,220 and 17,114,839 shares, respectively 21,394 20,635 21,394
Surplus 74,130 64,092 75,492
Undivided profits 237,913 202,344 229,149
Net unrealized losses on available-for-sale
securities (4,663) (2,167) (1,774)
- ---------------------------------------------------------------------------------- ---------- ----------
328,774 284,904 324,261
Less common treasury stock at cost, 287,026,
368,213, and 432,333 shares, respectively 8,336 10,226 12,637
- ---------------------------------------------------------------------------------- ---------- ----------
Total shareholders' equity 320,438 274,678 311,624
- ---------------------------------------------------------------------------------- ---------- ----------
Total liabilities and shareholders' equity $3,227,972 $3,047,980 $3,133,265
- ------------------------------------------------------------------------========== ========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 4
<TABLE>
MARK TWAIN BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
(in thousands of dollars except per share data) 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $46,967 $44,775
Interest on held-to-maturity securities:
Taxable 3,390 3,990
Non-taxable 56 34
Interest on available-for-sale securities 7,143 7,083
Interest on trading account securities 1,153 1,194
Interest on deposits with banks 53 -
Interest on federal funds sold and securities
purchased under resale agreements 185 38
- ---------------------------------------------------------------------------------------- -------
Total interest income 58,947 57,114
- ---------------------------------------------------------------------------------------- -------
INTEREST EXPENSE
Interest on deposits 23,460 22,332
Interest on short-term borrowings 2,573 3,161
Interest on long-term debt 34 212
- ---------------------------------------------------------------------------------------- -------
Total interest expense 26,067 25,705
- ---------------------------------------------------------------------------------------- -------
Net interest income 32,880 31,409
Provision for loan losses 245 981
- ---------------------------------------------------------------------------------------- -------
Net interest income after provision for loan losses 32,635 30,428
- ---------------------------------------------------------------------------------------- -------
OTHER INCOME
Service charges on deposit accounts 2,327 1,942
Securities transactions - 234
Other income 9,831 7,791
- ---------------------------------------------------------------------------------------- -------
Total other income 12,158 9,967
- ---------------------------------------------------------------------------------------- -------
OTHER EXPENSES
Salaries 11,437 10,874
Employee benefits 2,159 2,117
Net occupancy expense 2,279 2,199
Furniture and equipment expense 891 873
Other expenses 5,151 4,931
- ---------------------------------------------------------------------------------------- -------
Total other expenses 21,917 20,994
- ---------------------------------------------------------------------------------------- -------
Income before income taxes 22,876 19,401
Applicable income taxes 8,217 6,880
- ---------------------------------------------------------------------------------------- -------
Net income $14,659 $12,521
- ---------------------------------------------------------------------------------======= =======
NET INCOME PER SHARE
- ---------------------------------------------------------------------------------------- -------
Primary $0.85 $0.76
- ---------------------------------------------------------------------------------======= =======
Fully diluted $0.85 $0.75
- ---------------------------------------------------------------------------------======= =======
COMMON DIVIDENDS PAID PER SHARE $0.35 $0.31
- ---------------------------------------------------------------------------------======= =======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 5
<TABLE>
MARK TWAIN BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
(in thousands of dollars) 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 14,659 $ 12,521
Adjustments to reconcile net cash provided by operating activities:
Provision for loan losses 245 981
Provision for depreciation and amortization 1,038 1,125
Amortization of security premiums and accretion of discounts (168) (272)
Net increase in trading account securities (34,627) (8,973)
Securities transactions - (234)
(Increase) decrease in accrued income receivable 85 (2,066)
Decrease in interest payable (46) (19)
Other 14,021 10,865
- ----------------------------------------------------------------------------------------- -------
Net cash provided (used) by operating activities (4,793) 13,928
- ----------------------------------------------------------------------------------------- -------
INVESTING ACTIVITIES
Net increase in loans (19,161) (45,370)
Proceeds from sales of foreclosed property 304 223
Net increase in premises and equipment (1,274) (713)
Purchase of assets to be leased (52) (15)
Proceeds from sale of available-for-sale securities - 36,175
Proceeds from maturities and prepayments of available-
for-sale securities 20,501 11,387
Purchase of available-for-sale securities (28,726) (65,839)
Proceeds from maturities and prepayments of held-
to-maturity securities 8,612 13,940
Purchase of held-to-maturity securities - (19,073)
- ----------------------------------------------------------------------------------------- --------
Net cash used by investing activities (19,796) (69,285)
- ----------------------------------------------------------------------------------------- --------
FINANCING ACTIVITIES
Net decrease in deposits (75,438) (38,076)
Net increase in short-term borrowings 66,599 95,645
Payments on long-term debt - (11,580)
Cash dividends (5,895) (5,066)
Purchase of treasury stock (281) (9,544)
Reissuance of treasury stock 3,173 938
- ----------------------------------------------------------------------------------------- --------
Net cash provided (used) by financing activities (11,842) 32,317
- ----------------------------------------------------------------------------------------- --------
Decrease in cash and cash equivalents (36,431) (23,040)
Cash and cash equivalents at beginning of period 178,813 164,107
- ----------------------------------------------------------------------------------------- --------
Cash and cash equivalents at end of period $142,382 $141,067
- ---------------------------------------------------------------------------------======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 6
MARK TWAIN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report or
Form 10-K for the year ended December 31, 1996.
NOTE B--ACQUISITIONS AND PENDING AFFILIATION
On October 27, 1996, the Company entered into an Agreement and Plan of
Reorganization between the Company, Mercantile Bancorporation Inc.
(Mercantile) and Ameribanc, Inc. (Merger Sub) under which Mercantile would
acquire the Company through a merger of Company with and into Merger Sub.
Upon consummation of the merger, each issued and outstanding share of the
Company's common stock would be converted into and become the right to
receive .952 shares of Mercantile common stock. The pending merger has
received shareholder approval and is expected to close April 25, 1997.
On December 27, 1996, the Company acquired First City Bancshares,
Incorporated of Springfield, Missouri, owner of First City National Bank,
Springfield, Missouri (First City) for 243,656 shares of the Company's
common stock. An additional 25,011 shares (not shown as outstanding) are
contingently issuable and are held in escrow. The acquisition was
accounted for under the purchase method of accounting, and accordingly, the
results of operations were included in the financial statements from the
acquisition date. The excess of the purchase price over the fair value of
net assets acquired was approximately $4.920 millon.
On September 10, 1996, the Company acquired Northland Bancshares, Inc.,
owner of First National Bank of Platte County, in Kansas City, Missouri
(Platte) for 362,963 shares of the Company's common stock. The transaction
was accounted for under the pooling-of-interests method of accounting.
Prior period financial information was not restated as the transaction was
not material to the consolidated financial position or results of
operations of the Company.
NOTE C--STOCK EXCHANGE
On September 19, 1996, the Company listed and began trading its common
stock on the New York Stock Exchange under the symbol MTB.
<PAGE> 7
NOTE D--LONG-TERM DEBT
On January 16, 1996, the Company instructed the trustee to call the 8 1/2%
debentures due 1999 for redemption at a premium over par of 1% effective
March 1, 1996. The outstanding balance of the debentures at the time of
redemption was $11,579,000.
<PAGE> 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
March 31,
(in thousands of dollars except per share data) 1997 1996 % Change
-----------------------------------------
<S> <C> <C> <C>
PER SHARE DATA
Primary earnings $ .85 $ .76 11.8%
Fully diluted earnings .85 .75 13.3%
Common dividends declared .35 .31 12.9%
Common dividend payout ratio 41.18% 40.79%
Book value per share 19.04 17.02
Fully diluted book value per share 19.02 17.00
Market price 50.50 37.50 34.7%
AVERAGE BALANCES
Total assets $3,121,755 $2,949,837 5.8%
Earning assets 2,921,637 2,756,891 6.0%
Total loans 2,159,999 1,983,358 8.9%
Total deposits 2,515,027 2,356,490 6.7%
Long-term debt 2,006 12,168 (83.5%)
Shareholders' equity 318,135 279,241 13.9%
Net interest margin 4.61% 4.62%
AT MARCH 31
Total assets $3,227,972 $3,047,980 5.9%
Earning assets 2,947,333 2,803,191 5.1%
Total loans 2,196,595 2,016,636 8.9%
Total deposits 2,519,474 2,419,316 4.1%
Total long-term debt 1,989 3,795 (47.6%)
Total shareholders' equity 320,438 274,678 16.7%
SELECTED RATIOS AND DATA
Return on average assets 1.90% 1.71%
Return on average shareholders' equity 18.69% 18.03%
Return on average realized shareholders' equity 18.57% 18.10%
Average shareholders' equity to average assets 10.19% 9.47%
Average shareholders' equity to average loans 14.73% 14.08%
Average loans to average deposits 85.88% 84.17%
Efficiency ratio 48.32% 50.72%
Net interest income, FTE $ 33,199 $ 31,658 4.9%
Net income 14,659 12,521 17.1%
</TABLE>
RESULTS OF OPERATIONS
- ----------------------
Net income for the three month period ended March 31, 1997 was $14.659
million, an increase of $2.1 million or 17.1% from the first quarter of
1996. Primary earnings per share for the first quarter of 1997 increased
11.8% to total $0.85, compared to $0.76 for the first quarter of 1996.
Fully diluted earnings per share for the first quarter of 1997 were $0.85,
an increase of 13.3% over $0.75 for the first quarter of 1996. Total
assets increased $180.0 million or 5.9% to total $3,228.0 million at March
31, 1997, compared to the same period last year. Total earning assets were
$2,947.3 million, an increase of $144.1 million or 5.1% from the end of
first quarter of 1996. Total loans increased $180.0 million or 8.9% to
total $2,196.6 million at March 31, 1997. Total deposits were $2,519.5
million at the end of first quarter 1997, an increase of $100.2 million or
4.1% from the same period last year.
NET INTEREST INCOME
- -------------------
Measured on a fully tax equivalent basis, net interest income totaled $33.2
million for the first quarter of 1997 compared to $31.7 million for the
first quarter of 1996. Net interest margin for the first quarter of 1997
was 4.61% compared to 4.62% for the first quarter of 1996. The average
<PAGE> 9
prime rate for the first quarter of 1997 was 7 basis points less than the
average prime rate for the same period of 1996. As earning assets and
interest bearing liabilities repriced during 1997 and as the mix of earning
assets and interest bearing liabilities changed between periods, the gross
yield on earning assets decreased 14 basis points for the first three
months of 1997 compared to same period last year. The average cost of
interest bearing liabilities decreased by 10 basis point for the first
quarter of 1997. The interest rate spread for the first quarter of 1997
decreased 4 basis points to 3.67% compared to the same period last year.
The ratio of average interest bearing liabilities to average earning assets
decreased slightly to 79.4% for the first quarter of 1997 compared to 80.5%
for the first quarter of 1996.
Average earning assets totaled $2,921.6 million for the first quarter of
1997 compared to $2,756.9 million for the first quarter of 1996, an
increase of $164.7 million or 6.0%. Growth in loan volume continued with
loans averaging $2,160.0 million for the first quarter of 1997 compared to
$1,983.4 million for the first quarter of 1996 (an increase of $176.6
million) and $2,100.6 million for the fourth quarter of 1996 (an increase
of $59.4 million). Available-for-sale and held-to-maturity securities
averaged $676.9 million for the first quarter of 1997, a decrease of $21.1
million compared to the same period last year. Average deposit volume for
the first quarter of 1997 increased $158.5 million to $2,515.0 million
compared to the same period in 1996. Time deposits increased $65.7 million
for the first quarter of 1997 compared to the first quarter of 1996.
Savings and money market deposits increased $63.2 million for the first
three months of 1997 compared to the same period last year. Interest
bearing demand deposits increased $8.0 million for the same respective
periods. Non-interest bearing demand deposits increased $21.6 million and
comprised 16.7% of average deposits for the first quarter of 1997 compared
to 16.9% for the same period last year. Average long-term debt decreased
$10.2 million, primarily due to the redemption of the 8 1/2% debentures on
March 1, 1996.
<PAGE> 10
<TABLE>
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
The following table shows the condensed average balance sheets for each of the interim periods presented, and the average
yield on such categories of interest earning assets and the average rates paid on such categories of interest bearing
liabilities for each of the periods reported.
<CAPTION>
Three Months Ended March 31, 1997 Three Months Ended March 31, 1996
------------------------------------- -------------------------------------
Average Yield/ Average Yield/
(in thousands of dollars) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans <F1><F2> $2,159,999 $47,243 8.87% $1,983,358 $44,991 9.12%
Held-to-maturity securities:
Taxable 210,650 3,390 6.53% 245,801 3,990 6.53%
Non-taxable <F1> 4,179 86 8.35% 2,596 52 8.06%
Available-for-sale securities <F1> 462,052 7,156 6.28% 449,564 7,098 6.35%
Trading account securities 68,174 1,153 6.86% 73,213 1,194 6.56%
Interest bearing deposits with banks 3,616 53 5.94% - - -
Federal funds sold and securities
purchased under resale agreements 12,967 185 5.79% 2,359 38 6.48%
- ------------------------------------------------------------------------------ ----------------------------------
Total interest earning assets 2,921,637 59,266 8.23% 2,756,891 57,363 8.37%
- ------------------------------------------------------------------------------ ----------------------------------
Cash and due from banks 100,231 108,319
Other assets 136,583 113,659
FASB No. 115 allowance (3,173) 1,615
Allowance for loan losses (33,523) (30,647)
- ------------------------------------------------------ ----------
Total $3,121,755 $2,949,837
- --------------------------------------------========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $ 235,885 1,154 1.98% $ 227,880 1,129 1.99%
Savings and money market deposits 731,850 6,630 3.67% 668,600 6,064 3.65%
Time deposits 1,127,814 15,676 5.64% 1,062,137 15,139 5.73%
Short-term borrowings 221,803 2,573 4.70% 249,817 3,161 5.09%
Long-term debt 2,006 34 6.87% 12,168 212 7.01%
- ------------------------------------------------------------------------------ ----------------------------------
Total interest bearing liabilities 2,319,358 26,067 4.56% 2,220,602 25,705 4.66%
- ------------------------------------------------------------------------------ ----------------------------------
Non-interest bearing deposits 419,478 397,873
Other liabilities 64,784 52,121
Shareholders' equity 318,135 279,241
- ------------------------------------------------------ ----------
Total $3,121,755 $2,949,837
- --------------------------------------------========== ==========
Net interest income $33,199 $31,658
- ------------------------------------------------------------======= =======
Net interest margin 4.61% 4.62%
- -------------------------------------------------------------------------===== =====
<FN>
<F1>Adjusted to a fully taxable basis using federal statutory rate of 35%.
<F2>Includes non-accrual loans.
</FN>
</TABLE>
<PAGE> 11
<TABLE>
The following table sets forth, on a tax equivalent basis, the effect of changes in interest income and interest
expense resulting from changes in volumes and rates for the period shown.
<CAPTION>
Three Months Ended March 31,
1997 Compared to 1996
-------------------------------------------
Increase (Decrease) Total
Attributable to Change in<F1> Increase
(in thousands of dollars) Volume Rate (Decrease)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 3,905 $(1,653) $ 2,252
Held-to-maturity securities:
Taxable (566) (34) (600)
Non-taxable 33 1 34
Available-for-sale securities 195 (137) 58
Trading account securities (84) 43 (41)
Interest bearing deposits with banks 53 - 53
Federal funds sold and securities
purchased under resale agreements 152 (5) 147
- ----------------------------------------------------------------------------- ------- -------
Total increase (decrease) in interest earned on assets 3,688 (1,785) 1,903
- ----------------------------------------------------------------------------- ------- -------
INTEREST EXPENSE
Interest bearing demand deposits 39 (14) 25
Savings and money market deposits 573 (7) 566
Time deposits 920 (383) 537
Short-term borrowings (338) (250) (588)
Long-term debt (178) - (178)
- ----------------------------------------------------------------------------- ------- -------
Total increase (decrease) in interest paid on liabilities 1,016 (654) 362
- ----------------------------------------------------------------------------- ------- -------
Total increase (decrease) in net interest income $ 2,672 $(1,131) $ 1,541
- ----------------------------------------------------------------------======= ======= =======
<FN>
<F1> For the purposes 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.
</FN>
</TABLE>
<PAGE> 12
<TABLE>
NON-INTEREST INCOME
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1997 1996 % Change
- -----------------------------------------------------------------------------------------------------------------
(in thousands of dollars)
<S> <C> <C> <C>
Service charges on deposit accounts $ 2,327 $1,942 19.8%
Securities transactions - 234 -
Bond Division revenue 3,084 3,817 (19.2%)
Brokerage revenue 1,244 1,345 (7.5%)
Trust Division revenue 1,811 1,704 6.3%
Net gains on foreclosed property 15 30 (50.0%)
All other income 3,677 895 310.8%
- ------------------------------------------------------------------ ------ -------
Total non-interest income $12,158 $9,967 22.0%
- -----------------------------------------------------------======= ====== =======
</TABLE>
NON-INTEREST INCOME
- -------------------
Non-interest income of $12.158 million increased $2.191 million or 22.0%
for the first quarter of 1997 as compared to the same period of 1996. On
February 28, 1997, the Company assigned its merchant credit card processing
agreements to a third party for a one-time fee of $2.310 million. Excluding
this one-time fee, non-interest income decreased $119 thousand or 1.2%
period to period.
Service charges on deposit accounts showed an increase of $385 thousand or
19.8% in the first three months of 1997 as compared to the same period in
1996. The two bank acquisitions in late 1996 account for $230 thousand of
the increase period to period. The remaining variance is primarily due to
an increase in charges on first presentment of items against demand deposit
accounts with insufficient balances.
There were no sales of securities in the first quarter of 1997. In the
first quarter of 1996, $36.175 million in securities were sold, resulting
in $234 thousand of security gains.
The Capital Markets Group (including Bond and Brokerage operations) showed
a decrease of $834 thousand or 16.2% in revenues for the three month period
ending March 31, 1997 as compared to the same period last year. Bond
Division revenues decreased $733 thousand or 19.2% in the first three
months of 1997 compared to the first three months of 1996. This is
indicative of the general activity in the secondary market. Revenues for
the Bond Division's foreign exchange operation increased $288 thousand for
the first quarter of 1997 compared to the first quarter of 1996. Brokerage
revenues decreased $101 thousand or 7.5% in the first three months of 1997
compared to the same period last year. Brokerage revenues increased $241
thousand over fourth quarter 1996.
Trust Division revenues increased $107 thousand or 6.3% for the first
quarter of 1997 compared to the same period last year. The increase is
attributed fees associated with increased sales of proprietary mutual funds
and fees resulting from growth in managed asset market values.
Proceeds from sales of foreclosed property in the first quarter 1997
totaled $304 thousand. Net gains recognized on these sales were $15
thousand. Proceeds from sales of foreclosed property in the first quarter
of 1996 were $223 thousand with net gains recognized of $30 thousand.
<PAGE> 13
All other income increased $2.782 million or 310.8% for the first three
months of 1997 as compared to the same period of 1996. Excluding the one-
time fee as discussed above, other non-interest income increased $472
thousand or 52.7%. Changes in the market value of the Company's
proprietary trading accounts showed a net gain of $126 thousand for the
first three months of 1997 compared to a net loss of $78 thousand for the
same period in 1996, resulting in a increase period to period of $204
thousand. Revenue received on official check funds held with a third party
contributed to approximately $106 thousand of the increase. The Company's
debit card and ATM products contributed an $81 thousand increase in fee
revenue for first quarter of 1997 compared to first quarter of 1996. The
remaining variance is comprised of various individual categories.
<TABLE>
NON-INTEREST EXPENSE
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1997 1996 % Change
- -----------------------------------------------------------------------------------------------------------------------
(in thousands of $)
<S> <C> <C> <C>
Salary expense $11,437 $10,874 5.2%
Employee benefits 2,159 2,117 2.0%
Net occupancy 2,279 2,199 3.6%
FDIC premiums 75 3 -
Furniture & equipment 891 873 2.1%
Advertising 279 333 (16.2%)
Data processing 1,306 1,190 9.8%
Legal fees 24 241 (90.0%)
Postage & freight 413 430 (4.0%)
Amortization expense 265 358 (26.0%)
Expenses on foreclosed property 21 51 (58.8%)
Taxes other than income 104 125 (16.8%)
Other 2,664 2,200 21.1%
- -------------------------------------------------------------------- ------- ------
Total non-interest expense $21,917 $20,994 4.4%
- -------------------------------------------------------------======= ======= ======
</TABLE>
NON-INTEREST EXPENSE
- --------------------
Non-interest expense for the first three months of 1997 was $21.917 million
compared to $20.994 million for the first three months of 1996, an increase
of 4.4% or $923 thousand. The Company's efficiency ratio for the first
quarter of 1997 was 48.32% compared to 50.72% for the same period last
year. Expenses for the first quarter of 1997 include expenses of the two
banks purchased in late 1996 as discussed in NOTE B of the "Notes to
Condensed Consolidated Financial Statements".
Salary expense for the first three months of 1997 increased $563 thousand
or 5.2% as compared to the same period last year. The increase is
attributed to the acquisition of two banks in late 1996. Employee benefit
expense increased $42 thousand or 2.0% for the first three months of 1997
compared to the same period of last year. Employee benefit expenses
directly related to the two banks acquired in late 1996 increased
approximately $87 thousand. This was offset by a $45 thousand reduction in
employee retirement expense.
<PAGE> 14
Data processing fees for the first three months of 1997 increased $116
thousand or 9.7% compared to the same period last year. This is attributed
to the acquisition of two banks in late 1996.
Legal fees continued to decline period to period, with a decrease of $217
thousand or 90.0% for the first quarter of 1997 compared to the same period
last year.
Amortization expense decreased $93 thousand or 26.0% for the first quarter
of 1997 compared to the same period of 1996. Amortization of capital note
fees decreased $179 thousand from first quarter of 1996, of which $122
thousand relates to the 8 1/2% debentures that were called for redemption
on March 1, 1996. The decrease in amortization expense is offset by an
increase in goodwill amortization associated with the bank acquired in
December 1996.
Expenses on foreclosed property decreased $30 thousand or 58.8% for the
first three months of 1997 compared to the first three months of last year.
Foreclosed property at March 31, 1997 totaled $3.150 million compared to
$6.105 million at March 31, 1996.
Other non-interest expenses for the first three months of 1997 increased
$464 thousand or 21.1% from the same period last year. Operating losses
increased $223 thousand for the first quarter 1997 over the same period
last year due to an accrual for a contingent liability.
Insurance expense increased $160 thousand for the first three months of
1997 as compared to the same period in 1996. An upward adjustment to the
cash surrender value of life insurance policies (purchased to partially
finance benefits under the Company's non-qualified non-contributory pension
plan) was recorded in the first quarter of 1996. Period to period,
convention & meeting expense increased $71 thousand related to accrued
expenses for a 1997 director trip, travel expense increased $53 thousand
and other outside service fees increased $54 thousand. The above increases
in non-interest expense were offset by a $116 thousand decrease in
miscellaneous fees attributed to a 1% call premium paid on the redemption
of the 8 1/2% debentures on March 1, 1996.
<PAGE> 15
ALLOWANCE FOR LOAN LOSSES
- -------------------------
<TABLE>
SUMMARY OF ALLOWANCE FOR LOAN LOSSES
<CAPTION>
Three Months Ended March 31,
(in thousands of dollars) 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Allowance at beginning of period $33,745 $30,508
Charge-offs (867) (749)
Recoveries 313 458
- -----------------------------------------------------------------------------------
Net charge-offs (554) (291)
- -----------------------------------------------------------------------------------
Additions to allowance charged to expense 245 981
- -----------------------------------------------------------------------------------
Allowance at end of period $33,436 $31,198
- ----------------------------------------------------------=========================
Loans, net of unearned income at end of period $2,196,595 $2,016,636
Average loan balance for the period $2,159,999 $1,983,358
Allowance as % of loans at end of period 1.52% 1.55%
Allowance as % of non-performing loans 272.32% 358.23%
Net charge-offs as % of average loans for the period .03% .01%
Annualized net charge-offs as % of average loans
for the period .10% .06%
</TABLE>
The provision for loan losses for the first three months of 1997 was $245
thousand compared to $981 thousand for the first three months of 1996. Net
charge-offs totaled $554 thousand for the first three months of 1997
compared to $291 thousand for the first three months of 1996, an increase
of $263 thousand. Net charge-offs on an annualized basis were .10% of
average loans for the first quarter of 1997 compared to .06% for the same
period in 1996.
The Company evaluates the reserves of its subsidiary banks on an ongoing
basis to ensure the timely charge-off of loans and to determine the
adequacy of each bank's allowance for loan losses. At March 31, 1997, the
level of the affiliate bank reserves as a percentage of total loans
outstanding ranged from 1.45% to 1.55%, with a combined ratio of 1.52%.
Management believes the current consolidated allowance at 1.52% of total
loans outstanding is adequate to absorb future possible losses.
<PAGE> 16
NON-PERFORMING ASSETS
- ---------------------
<TABLE>
NON-PERFORMING ASSETS
<CAPTION>
March 31, March 31, December 31,
(in thousands of dollars) 1997 1996 1996
- ---------------------------------------------- --------- ------------
<S> <C> <C> <C>
Non-accrual loans $ 8,924 $ 7,764 $ 7,086
Restructured loans 2,243 109 2,244
Foreclosed property 3,150 6,105 3,424
- ---------------------------------------------- ------- -------
Total non-performing assets $14,317 $13,978 $12,754
- ---------------------------------------======= ======= =======
Percentage of non-performing assets
to loans plus foreclosed property .65% .69% .58%
Loans contractually past due ninety
days or more $1,111 $836 $321
Percentage of non-performing assets
plus ninety days past due to loans
plus foreclosed property .70% .73% .60%
Percentage of allowance to
non-performing loans 272.32% 358.23% 349.65%
Percentage of allowance to total
non-performing assets 233.54% 223.19% 264.58%
Percentage of allowance to
risk elements<F1> 216.72% 210.60% 258.09%
Percentage of risk elements<F1>
to total average assets .49% .50% .44%
<FN>
<F1> Risk elements include total non-performing assets plus loans contractually past due ninety days or more.
</FN>
</TABLE>
<TABLE>
The following table summarizes the changes in non-performing assets for the periods shown:
<CAPTION>
Three Months Ended
March 31,
(in thousands of dollars) 1997 1996
- -----------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $12,754 $19,871
Additions 3,480 1,234
Payments received and loans
returned to accrual status (1,392) (6,275)
Sales of foreclosed property (289) (190)
Charge-offs and writedowns (236) (662)
- ---------------------------------------------------- -------
Balance, end of period $14,317 $13,978
- ---------------------------------------------======= =======
</TABLE>
Loan quality remained strong at the end of first quarter 1997 reflecting
the Company's continued focus on maintaining high quality assets. Non-
performing assets at March 31, 1997 were .65% of loans plus foreclosed
property compared to .69% at March 31, 1996 and .58% at December 31, 1996.
Non-performing assets of $14.317 million at March 31, 1997 were $339
thousand or 2.4% higher than at March 31, 1996 and $1.6 million or 12.3%
higher than at December 31, 1996. Non-accrual loans increased $1.2 million
from March 31, 1996 and increased $1.8 million from December 31, 1996. A
significant portion of this increase is attributed to the bank acquired in
December 1996 and the quarterly evaluation of its loan portfolio.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
There have not been any significant changes in liquidity or capital
resources since December 31, 1996. The Company and its subsidiaries
<PAGE> 17
continue to surpass the capital adequacy requirements for which they are
subject. At March 31, 1997, the Company's total shareholders' equity was
$320.4 million, a $45.8 million or 16.7% increase over total shareholders'
equity at March 31, 1996. During the first three months of 1996, the
Company purchased approximately 244,000 shares of common stock to fund
commitments for employee stock plans and programs. In accordance with the
merger agreement, no shares were repurchased during the first quarter of
1997 other than shares reacquired upon cashless stock option exercises as
allowed for in the plans.
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Statement of Computation of Earnings Per Common Share
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
Report on form 8-K dated January 15, 1997 reporting the Company's
earnings release for the fourth quarter and year ending December 31,
1997.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MARK TWAIN BANCSHARES, INC.
(Registrant)
Date: April 24, 1997 /s/ KEITH MILLER
----------------- -------------------------------
Keith Miller
Executive Vice President - Finance
and Chief Financial Officer
/s/ JOHN P. DUBINSKY
-------------------------------
John P. Dubinsky
President and Chief
Executive Officer
<PAGE> 20
EXHIBIT INDEX
Exhibit No. Description
- ------------------------------------------------------------------
11 Earnings Per Common Share Computation
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
<TABLE>
MARK TWAIN BANCSHARES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
For The Three Months Ended
March 31,
(in thousands of dollars except per share data) 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Earnings:
Net income $14,659 $12,521
- -----------------------------------------------------------===========================
Shares:
Weighted average number of common shares outstanding 16,796,703 16,206,002
Weighted average number of common share equivalents 396,109 285,953
- --------------------------------------------------------------------------------------
17,192,812 16,491,955
- -----------------------------------------------------------===========================
Primary earnings per common share $0.85 $0.76
- -----------------------------------------------------------===========================
ASSUMING FULL DILUTION
Earnings:
Net income $14,659 $12,521
After tax interest applicable to convertible notes 22 31
After tax amortization of capital note fees 2 39
- --------------------------------------------------------------------------------------
Fully diluted net income $14,683 $12,591
- -----------------------------------------------------------===========================
Shares:
Weighted average number of common shares outstanding 16,796,703 16,206,002
Assuming conversion of Convertible Notes and dilutive
stock options 522,635 571,247
- --------------------------------------------------------------------------------------
17,319,338 16,777,249
- -----------------------------------------------------------===========================
Earnings per common share assuming full dilution $0.85 $0.75
- -----------------------------------------------------------===========================
</TABLE>
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 136,333
<INT-BEARING-DEPOSITS> 2,856
<FED-FUNDS-SOLD> 3,193
<TRADING-ASSETS> 65,399
<INVESTMENTS-HELD-FOR-SALE> 461,905
<INVESTMENTS-CARRYING> 209,848
<INVESTMENTS-MARKET> 206,578
<LOANS> 2,196,595
<ALLOWANCE> 33,436
<TOTAL-ASSETS> 3,227,972
<DEPOSITS> 2,519,474
<SHORT-TERM> 260,190
<LIABILITIES-OTHER> 125,881
<LONG-TERM> 1,989
0
0
<COMMON> 21,394
<OTHER-SE> 299,044
<TOTAL-LIABILITIES-AND-EQUITY> 3,227,972
<INTEREST-LOAN> 46,967
<INTEREST-INVEST> 10,589
<INTEREST-OTHER> 238
<INTEREST-TOTAL> 58,947
<INTEREST-DEPOSIT> 23,460
<INTEREST-EXPENSE> 26,067
<INTEREST-INCOME-NET> 32,880
<LOAN-LOSSES> 245
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 21,917
<INCOME-PRETAX> 22,876
<INCOME-PRE-EXTRAORDINARY> 14,659
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,659
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
<YIELD-ACTUAL> 4.61
<LOANS-NON> 8,924
<LOANS-PAST> 1,111
<LOANS-TROUBLED> 2,243
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 33,745
<CHARGE-OFFS> 867
<RECOVERIES> 313
<ALLOWANCE-CLOSE> 33,436
<ALLOWANCE-DOMESTIC> 33,436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
