<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1994 Commission File Number 1-11792
-------------------- ---------
Mercantile Bancorporation Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Missouri 43-0951744
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(State of Incorporation) (IRS Employer Identification No.)
P.O. Box 524 St. Louis, Missouri 63166-0524
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (314) 425-2525
-------------------
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.
X
----- -----
Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $5.00 par value, 43,278,025 shares outstanding as of the close
of business on October 31, 1994.
<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
The following consolidated financial statements, included in the Quarterly
Report of the Registrant to its Shareholders for the quarter ended
September 30, 1994, attached hereto as Exhibit 19, are incorporated herein
by reference:
<CAPTION>
Quarterly Report
STATEMENT Reference
- ------------------------------------------------------- ----------------
<S> <C>
Consolidated Statement of Income - Three Months and
Nine Months ended September 30, 1994 and 1993. Page 18
Consolidated Balance Sheet as of September 30, 1994
and December 31, 1993. Page 19
Consolidated Statement of Cash Flows - Nine Months
ended September 30, 1994 and 1993. Page 21
</TABLE>
The following notes to the consolidated financial statements are included
as a part of this report:
Mercantile Bancorporation Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1
The consolidated financial statements include all adjustments which are,
in the opinion of management, necessary for the fair statement of the
results of these periods and are of a normal recurring nature.
NOTE 2
On February 10, 1994, the Registrant declared a three-for-two stock split,
in the form of a dividend, which was distributed on April 11, 1994 to
shareholders of record on March 10, 1994. All per share amounts and
average shares outstanding have been restated to give effect to the stock
split.
NOTE 3
Effective January 3, 1994, the Registrant acquired Metro Bancorporation, a
Waterloo, Iowa-based bank holding company with assets totaling $370
million. Effective February 1, 1994, the Registrant acquired United
Postal Bancorp, Inc., holding company for United Postal Savings
Association, with total assets approximating $1.3 billion. Both of these
acquisitions were accounted for as poolings-of-interests. The historical
consolidated financial statements as of December 31, 1993 and for the
three and nine month periods ended September 30, 1993 have been restated
to reflect this transaction.
2
<PAGE> 3
<TABLE>
Net income and net income per share for the Registrant and the pooled
companies prior to restatement were as follows:
<CAPTION>
($ in thousands except
per share data)
----------------------
Three months ended Nine months ended
September 30, 1993 September 30, 1993
---------------------- ----------------------
<S> <C> <C>
REGISTRANT
Net income $30,263 $85,531
Net income per share .85 2.43
METRO BANCORPORATION
Net income 1,044 3,602
Net income per share 2.01 6.94
UNITED POSTAL BANCORP, INC.
Net income 4,254 13,340
Net income per share .71 2.23
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included on pages 4 - 17 in the Quarterly Report of the Registrant
to its Shareholders for the quarter ended September 30, 1994, is incorporated
herein by reference.
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
19 Quarterly Report of the Registrant to its Shareholders
for the quarter ended September 30, 1994.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Registrant filed one (1) Current Report on Form 8-K during
the quarter ended September 30, 1994. In that report dated
October 3, 1994, under Item 5, Registrant disclosed that on
September 21, 1994 it had entered into, and briefly
described certain of the terms of, an Agreement and Plan of
Merger (the "Merger Agreement") with Central Mortgage
Bancshares, Inc. ("Central"). Pursuant to that Merger
Agreement Registrant would acquire Central through merger of
Central with and into a wholly-owned subsidiary of
Registrant, with the shareholders of Central to receive
0.5970 of a share of Registrant common stock, par value
$5.00 per share, for each share of Central common stock, par
value $1.00 per share. Said Current Report also briefly
described the terms of an Investment Agreement between
Registrant and Central and Voting Agreements between
Registrant and certain directors of Central entered into
simultaneously with the execution of the Merger Agreement.
3
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCANTILE BANCORPORATION INC.
(Registrant)
Date November 14, 1994 s/W. Randolph Adams
------------------------- -------------------------------------
W. Randolph Adams
Chief Financial Officer
4
<PAGE> 5
<TABLE>
EXHIBIT INDEX
-------------
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<C> <S> <C>
19 Quarterly Report of the Registrant to its
Shareholders for the quarter ended September 30, 1994. Included herein
27 Financial Data Schedule Included herein
</TABLE>
<PAGE> 1
MERCANTILE
BANCORPORATION INC.
THIRD QUARTER REPORT 1994
<TABLE>
Table of Contents
<S> <C>
Highlights...........................................................1
Letter to Shareholders...............................................2
Corporate News Developments..........................................3
Financial Section
Financial Commentary................................................4
Condensed Consolidated Quarterly
Statement of Income...............................................15
Consolidated Quarterly Average
Balance Sheet.....................................................16
Financial Statements...............................................18
Banks and Other Subsidiaries........................................22
Directors and Executive Officers....................................23
Investor Information................................................24
</TABLE>
<PAGE> 2
<TABLE>
HIGHLIGHTS<F1>
<CAPTION>
THIRD QUARTER NINE MONTHS
($ IN THOUSANDS EXCEPT PER SHARE DATA) 1994 1993 CHANGE 1994 1993 CHANGE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net income $ .95 $ .84 13.1% $ 2.79 $ 2.42 15.3%
Dividends declared .28 .24 3/4 13.1 .84 .74 1/4 13.1
Book value at September 30 24.12 22.19 8.7 24.12 22.19 8.7
Market price at September 30 36 7/8 33 5/8 9.7 36 7/8 33 5/8 9.7
Average common shares outstanding 43,203,882 42,526,822 1.6 43,034,158 42,338,859 1.6
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OPERATING RESULTS
Taxable-equivalent net interest income $131,854 $127,455 3.5% $388,569 $382,631 1.6%
Tax-equivalent adjustment 2,236 2,430 (8.0) 6,833 7,234 (5.5)
Net interest income 129,618 125,025 3.7 381,736 375,397 1.7
Provision for possible loan losses 8,511 12,906 (34.1) 24,909 41,440 (39.9)
Other income 46,851 49,063 (4.5) 142,789 148,935 (4.1)
Other expense 103,516 106,057 (2.4) 310,003 321,433 (3.6)
Income taxes 23,399 19,564 19.6 69,512 58,986 17.8
Net income 41,043 35,561 15.4 120,101 102,473 17.2
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ENDING BALANCES
Total assets $12,237,672 $11,895,616 2.9%
Loans and leases 7,873,054 7,369,829 6.8
Deposits 8,946,082 9,360,097 (4.4)
Shareholders' equity 1,042,990 947,077 10.1
Reserve for possible loan losses 171,691 160,132 7.2
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AVERAGE BALANCES
Total assets $12,109,487 $12,253,688 (1.2)% $12,123,075 $12,249,546 (1.0)%
Earning assets 11,099,439 11,139,329 (.4) 11,076,913 11,150,023 (.7)
Loans and leases 7,702,126 7,348,597 4.8 7,508,800 7,431,455 1.0
Deposits 9,543,121 9,985,217 (4.4) 9,729,569 10,016,488 (2.9)
Shareholders' equity 1,032,902 930,906 11.0 1,003,692 899,914 11.5
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SELECTED RATIOS
Return on assets 1.36% 1.16% 1.32% 1.12%
Return on equity 15.89 15.28 15.95 15.18
Overhead ratio 57.93 60.08 58.34 60.47
Net interest rate margin 4.75 4.58 4.68 4.58
Equity to assets 8.52 7.96
Tier I capital to risk-adjusted assets 11.64 11.02
Total capital to risk-adjusted assets 15.58 14.56
Leverage 8.14 7.19
Reserve for possible loan losses to
outstanding loans 2.18 2.17
Reserve for possible loan losses to
non-performing loans 585.44 286.22
Non-performing assets to outstanding loans
and foreclosed assets .76 1.39
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SELECTED DATA
Banks 41 41
Banking offices 244 243
Full-time equivalent employees 5,645 5,937
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<FN>
<F1>All 1993 financial information has been restated to reflect the
January 3, 1994 merger with Metro Bancorporation and the February 1,
1994 merger with United Postal Bancorp, Inc., which were accounted for
as poolings-of-interests.
</TABLE>
1
<PAGE> 3
LETTER TO SHAREHOLDERS
Mercantile's earnings for the third quarter of 1994 represented
another record performance for the Corporation. As has been the case
throughout this year, asset quality, expense reduction, a strong
interest rate margin and increased loan demand were the principal
contributors to improved earnings.
Third quarter net income was $41,043,000, up 15.4% from $35,561,000 in
1993. Net income per share grew by 13.1% to $.95 from $.84 last year.
Net interest income for the quarter was up a modest 3.7% to
$129,618,000 in 1994 from $125,025,000 the previous year. This growth
reflects a 17 basis point improvement in the net interest rate margin,
which was 4.75% in the third quarter of 1994 versus 4.58% last year,
and a 6.8% increase in total loans outstanding, which grew to $7.9
billion at September 30, 1994 compared with $7.4 billion one year
earlier.
Mercantile's asset quality continues to be among the best in the
nation, as non-performing loans were $29,327,000 or .37% of total
loans at the end of the quarter. The third quarter provision for
possible loan losses declined 34.1% to $8,511,000 in 1994 from
$12,906,000 last year and third quarter 1994 charge-offs were
$9,313,000. The reserve of $171,691,000 at period end resulted in
coverage ratios representing 2.18% of total loans compared with 2.17%
the prior year and 585.44% of non-performing loans versus 286.22% in
1993.
The Corporation continued the strategic expansion of its banking
franchise by agreeing to a merger with Kansas City, Missouri-based
Central Mortgage Bancshares, Inc., which owns four banks in the Kansas
City area and western Missouri. Mercantile also completed the
integration of the operations of United Postal Savings Association
into its St. Louis-area banks during the quarter, enhancing its retail
presence and mortgage lending business in the market.
Mercantile has made tremendous strides over the past five years, and
can now count itself among the best banks in the nation by many
standards. The outstanding efforts of the Corporation's employees, and
the continuing loyalty of our valued customers and shareholders has
made this progress possible. We thank all of you for your past support
and look forward to rewarding partnerships as we move ahead.
/s/ THOMAS H. JACOBSEN
Thomas H. Jacobsen
Chairman of the Board and
Chief Executive Officer
October 28, 1994
2 MERCANTILE BANCORPORATION INC.
<PAGE> 4
CORPORATE NEWS DEVELOPMENTS
/ / MERCANTILE BANK OF ST. LOUIS N.A., THROUGH AN ALLIANCE WITH FIRST
CHICAGO CORPORATION, WILL DEVELOP A NATIONWIDE ELECTRONIC TAX
PAYMENT SYSTEM FOR THE U.S. TREASURY DEPARTMENT. Mercantile's
strong, long-term relationship with the IRS, and participation in
the pilot program that led to the Electronic Federal Tax Payment
System (EFTPS) were critical elements in the government's decision
to award the contract.
The Mercantile/First Chicago alliance was awarded a seven-year
contract for the development, installation, operation and
management of the EFTPS. Within a few years, the EFTPS will
convert 135 million annual corporate tax payments worth $1
trillion from a paper-based system to an electronic system and may
be used by up to 10 million individual taxpayers.
/ / MERCANTILE HAS AGREED TO MERGE WITH KANSAS CITY, MISSOURI-BASED
CENTRAL MORTGAGE BANCSHARES, INC. Central Mortgage, which has
approximately $629 million in assets, owns Citizens-Jackson County
Bank, one of the largest institutions in the eastern suburbs of
Kansas City. This addition will significantly strengthen
Mercantile's presence in the area. Central also owns three other
banks in the western portion of Missouri, and operates a mortgage
banking unit based in Springfield, Missouri.
/ / AT ITS JULY MEETING, THE BOARD OF DIRECTORS DECLARED A THIRD-
QUARTER DIVIDEND OF $.28 PER SHARE OF COMMON STOCK. The dividend
was payable October 3, 1994 to shareholders of record September
10, 1994.
/ / MERCANTILE BANK OF SPRINGFIELD AND MERCANTILE BANK OF TABLE ROCK
LAKE PLAN TO MERGE INTO A SINGLE BANK BY THE END OF 1994. The
combined bank, which will retain the Mercantile Bank of
Springfield name, will offer more banking locations and services
for customers of both banks. With assets of approximately $300
million, the new Mercantile Bank of Springfield will be the fourth
largest Springfield-based bank.
/ / MERCANTILE BANK OF MONTGOMERY CITY HAS CHANGED ITS NAME TO
MERCANTILE BANK OF EAST CENTRAL MISSOURI. The new name more
accurately reflects the expanding regional character of the bank,
which is opening a second office in Warrenton, Missouri to serve
customers in the Warren County area.
3
<PAGE> 5
FINANCIAL COMMENTARY
PERFORMANCE SUMMARY
Net income for the third quarter of 1994 was $41,043,000, a 15.4%
improvement from the $35,561,000 earned in the same period a year ago.
On a per share basis, net income was $.95, up 13.1% from the $.84
earned in last year's third quarter. Return on assets improved to
1.36% in the third quarter compared with 1.33% in the second quarter
of this year and 1.16% last year, while return on average equity was
15.89% versus 15.28% in 1993.
For the first nine months of 1994, net income was $120,101,000, up
17.2% from the $102,473,000 earned last year, and on a per share basis
was $2.79, an improvement of 15.3% from the $2.42 recorded in the
first nine months of 1993. When compared with last year, year-to-date
1994 overall results reflected a slight improvement in net interest
income, lower levels of operating expenses, a decline in the provision
for possible loan losses and a small decrease in other income. For the
first nine months of 1994, return on average assets was 1.32% compared
with 1.12% last year, while return on average equity was 15.95% in
1994, up from 15.18% last year.
The financial statements have been restated to include the pre-
acquisition accounts and results of operations of United Postal
Bancorp, Inc. and Metro Bancorporation, which were merged with
Mercantile on February 1, 1994 and January 3, 1994, respectively, in
transactions accounted for as poolings-of-interests. In addition, the
restatement reflected a three-for-two stock split, which was paid in
the form of a dividend on April 11, 1994 to shareholders of record on
March 10, 1994.
On July 6, 1994, Mercantile announced plans to expand its banking
operations in southwestern Illinois through the acquisition of Wedge
Bank, a $210 million-asset bank headquartered in Alton, Illinois. One
week later, the Corporation reached an agreement to acquire UNSL
Financial Corp of Lebanon, Missouri, a $464 million-asset Missouri-
chartered savings and loan in southwestern Missouri. On September 21,
1994, Mercantile announced plans to acquire Central Mortgage
Bancshares, Inc. of Kansas City, Missouri, a $629 million-asset bank
holding company with four banking subsidiaries. All three transactions
will be accounted for as poolings-of-interests.
Net interest income increased 3.7% to $129,618,000 for the third
quarter of 1994 and 1.7% to $381,736,000 for the first nine months of
1994. The net interest rate margin was 4.75% this quarter compared
with 4.70% in the second quarter and 4.58% for the third quarter of
1993, while the year-to-date margin was 4.68% compared with 4.58% last
year. Average earning assets for the first nine months of 1994 of
$11.1 billion were flat with last year; however, a positive trend
developed in the quarter as loans grew by $242,538,000 or 3.3% from
the second quarter of 1994.
Other income was $46,851,000 for the third quarter of 1994, a decrease
of $2,212,000 or 4.5% from a year ago. For the nine months of 1994,
other income was $142,789,000, a decrease of $6,146,000 or 4.1% from
last year. Modest growth in trust fees, service charges, and credit
card and letters of credit fees were offset by a significant decrease
of $3,209,000 in net securities gains and by declines in mortgage
banking income, investment banking income and miscellaneous revenues.
4 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 6
Third-quarter non-interest expenses were down 2.4% from a year ago and
totaled $103,516,000 compared with $106,057,000 last year, and year-
to-date were $310,003,000, down 3.6%. The reduction in expense levels
resulted primarily from the realization of synergies from mergers
completed in prior years and lower foreclosed property expense. The
result was an improvement in the year-to-date overhead ratio to 58.34%
compared with 60.47% last year, and a lowering of the operating
expense to average assets ratio to 3.41% versus 3.50% in the first
nine months of 1993.
The provision for possible loan losses for the third quarter of 1994
was $8,511,000 compared with $12,906,000 the prior year, and was
$24,909,000 for the first nine months of 1994 compared with
$41,440,000 in 1993. Net charge-offs for the first nine months of 1994
and 1993 were $21,869,000 and $49,125,000, respectively, and on an
annualized basis were .39% of average loans compared with .88% last
year. At September 30, 1994, the reserve for possible loan losses was
$171,691,000 and covered 585.44% of non-performing loans compared with
293.39% at year-end and 286.22% last September 30.
Non-performing loans as of September 30, 1994 were $29,327,000 or .37%
of total loans, down from the year-end 1993 figures of $57,483,000 or
.78%, and $55,948,000 or .76% at September 30, 1993. Foreclosed assets
declined to $30,356,000 compared with $36,014,000 at year's end and
$47,455,000 last September 30.
<TABLE>
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EXHIBIT 1
ORGANIZATIONAL CONTRIBUTION
($ IN THOUSANDS)
<CAPTION>
SEPTEMBER 30, 1994
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KANSAS PARENT
ST. LOUIS CITY COMMUNITY COMPANY AND
AREA<F1> AREA BANKS ELIMINATIONS CONSOLIDATED
--------- ------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net income $ 65,371 $ 15,535 $ 51,701 $ (12,506) $ 120,101
Average assets 6,355,524 1,613,691 4,373,248 (219,388) 12,123,075
Return on assets 1.37% 1.28% 1.58% 1.32%
Net interest rate margin 4.19 4.76 5.20 4.68
Overhead ratio 54.92 59.54 54.30 58.34
Equity to assets 8.14 8.90 9.01 8.52
Reserve for possible loan losses to
outstanding loans 2.08 2.32 2.27 2.18
Reserve for possible loan losses to
non-performing loans 669.63 544.60 521.31 585.44
Non-performing loans to outstanding loans .31 .43 .43 .37
Non-performing assets to outstanding loans
and foreclosed assets .90 .64 .53 .76
<FN>
<F1>Includes the results of Mercantile Bank of St. Louis N.A., Mercantile
Trust Company N.A., Mercantile Business Credit, Inc. (asset-based
lending), Mercantile Investment Services, Inc. (brokerage),
Mississippi Valley Advisors Inc. (investment management),
Mississippi Valley Life Insurance Co. (credit life) and Merc
Mortgage (mortgage banking).
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</TABLE>
5
<PAGE> 7
FINANCIAL COMMENTARY (cont'd)
Earnings in the St. Louis Area banks (Mercantile Bank of St. Louis
N.A. and Mercantile Trust Company N.A.) for the first nine months of
1994 were $65,371,000, up 16.5% from 1993. These results reflected
significant reductions in operating expenses and the provision for
possible loan losses, as well as a slight improvement in net interest
income, partially offset by reduced other income, due largely to a
higher level of securities gains during 1993 at United Postal, which
was merged into Mercantile Bank of St. Louis N.A. on August 16, 1994.
Return on average assets for the two banks was 1.37% compared with
1.16% for the first nine months of 1993.
In the 36 Community Banks, net income was $51,701,000, an increase of
15.7%, while return on average assets improved to 1.58% compared with
1.35% last year. Earnings for the three banks in the Kansas City Area
for the first nine months of 1994 were $15,535,000, up 21.6% from a
year ago. Return on average assets was 1.28% compared with 1.05% last
year.
Consolidated assets of $12.2 billion were up 2.9% from last September
30. Core deposits decreased by 5.3% to $8.4 billion, loans were $7.9
billion, up 6.8% from last year, and shareholders' equity of $1.0
billion was 10.1% higher than at September 30, 1993. Tier I capital to
risk-adjusted assets improved to 11.64% compared with 11.02% last
year, while Total capital to risk-adjusted assets at September 30,
1994 and 1993 was 15.58% and 14.56%, respectively.
The following financial commentary presents a more thorough discussion
and analysis of the results of operations and financial position of
the Corporation for the third quarter and first nine months of 1994.
NET INTEREST INCOME
Net interest income for the third quarter of 1994 was $129,618,000, a
3.7% increase over the $125,025,000 earned last year and for the first
nine months of 1994 was $381,736,000, a 1.7% improvement over last
year. This slight growth was the net result of a widening in the net
interest rate margin, while average earning assets remained
essentially flat. Factors contributing to the higher net interest rate
margins in 1994 included higher levels of shareholders' equity, a
continued decline in non-performing assets, a decrease in higher-
costing retail certificates of deposit as a percentage of total
funding, a contraction in lower-yielding money market investments,
volume growth in the higher-yielding consumer loan categories, and the
generally higher level of interest rates throughout 1994. For the
first nine months of 1994, average loans increased slightly by
$77,345,000 or 1.0%, while investments in debt and equity securities
decreased by $62,367,000 or 1.8%.
For the first nine months of 1994, average loans in the St. Louis Area
banks and in the Community Banks increased by .1% and 2.9%,
respectively, offset slightly by a volume decline in the Kansas City
Area banks of .9%. A more
6 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 8
meaningful comparison of loan volumes is between the second and third
quarters of 1994, during which average loans grew by 3.3% or
$242,538,000, or 13.0% on an annualized basis. Year-to-date commercial
loan growth was $35,706,000, up 1.8%. Residential mortgage loans were
down 3.2%, but that trend has reversed as evidenced by the
$107,937,000 growth in average residential mortgage loans from the
second quarter to the third quarter of 1994. Average credit card loans
grew by 14.8% from 1993 due to focused marketing. Other consumer loans
increased by 6.7% due to strong growth in indirect auto lending.
<TABLE>
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EXHIBIT 2
LOANS AND LEASES
($ IN THOUSANDS)
<CAPTION>
SEPTEMBER 30
1994 1993 CHANGE
---- ---- ------
<S> <C> <C> <C>
Commercial $2,160,963 $1,985,346 8.8%
Real estate-commercial 1,238,909 1,265,040 (2.1)
Real estate-construction 189,702 162,769 16.5
Real estate-residential 2,419,633 2,302,239 5.1
Consumer 1,104,859 942,574 17.2
Credit card 758,554 710,930 6.7
Foreign 434 931 (53.4)
---------- ----------
Total Loans and Leases $7,873,054 $7,369,829 6.8
========== ==========
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</TABLE>
The year-to-date average investment portfolio declined by
$62,367,000 or 1.8%. Approximately 10% of the portfolio was
classified as available-for-sale; the FAS 115 impact on
shareholders' equity was not material. The average maturity of the
investment portfolio at September 30, 1994 was two years and three
months. Short-term investments are primarily used for short-term
excess liquidity or balancing the interest rate sensitivity of the
Corporation, and on average decreased by $88,088,000 or 26.8% during the
first nine months of 1994.
Changes in the year-to-date mix of deposits reflected the continuing
strategy to be substantially funded by core deposits, and the
disintermediation of retail certificates of deposit into interest
bearing demand and savings accounts. Core deposits were 94.39% of
total deposits, yet on average were down 3.5% from last year. On
average, interest bearing demand accounts increased by $90,797,000 or
6.1%, money market accounts grew by $5,707,000 or .3% and savings
accounts grew by $61,694,000 or 7.2%, while retail certificates of
deposit declined by $444,886,000 or 12.6%. This more costly source of
funds declined to 33.69% of total core deposits from 37.18% in 1993,
as customers preferred maturity flexibility with their investments.
Average short-term borrowings increased by $57,862,000 or 6.8%, while
purchased deposits increased by $47,647,000 or 9.6%. Average
shareholders' equity increased by $103,778,000 or 11.5% due to
earnings retained and stock issued under employee benefit plans.
The factors discussed above are consistent with Mercantile's overall
corporate policy relative to rate sensitivity and liquidity, which is
to produce the optimal yield and maturity mix consistent with interest
rate expectations and projected liquidity needs. With increased loan
demand, Mercantile is currently evaluating other funding sources to
meet such demand and to enhance liquidity. Mercantile currently does
not utilize derivative instruments for speculation and uses only a
very small portfolio of derivative instruments for balance sheet
hedging. The Consolidated Quarterly Average Balance Sheet, with rates
earned and paid, is summarized by quarter on Pages 16 and 17.
7
<PAGE> 9
FINANCIAL COMMENTARY (cont'd)
OTHER INCOME
Non-interest income decreased 4.5% during the third quarter of 1994 to
$46,851,000, and for the nine months was $142,789,000 compared with
$148,935,000 a year ago, a decline of 4.1%. Year-to-date trust fees,
service charges, credit card and letters of credit fees all improved
from last year while investment banking revenue, mortgage banking
income and miscellaneous income declined. Net securities gains were
$380,000 this year compared with $3,589,000 last year.
<TABLE>
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EXHIBIT 3
OTHER INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Trust $14,270 $15,104 (5.5)% $ 45,844 $ 45,723 .3%
Service charges 14,869 14,748 .8 43,810 43,367 1.0
Credit card fees 6,320 5,700 10.9 17,918 17,550 2.1
Mortgage banking 1,214 3,058 (60.3) 5,063 7,163 (29.3)
Investment banking 1,827 1,878 (2.7) 6,459 6,653 (2.9)
Letters of credit fees 2,024 1,783 13.5 5,051 4,720 7.0
Foreclosed property income 357 602 40.7 2,125 1,727 23.0
Securities gains (losses) (53) 910 - 380 3,589 (89.4)
Other 6,023 5,280 14.1 16,139 18,443 (12.5)
------- ------- -------- --------
Total Other Income $46,851 $49,063 (4.5) $142,789 $148,935 (4.1)
======= ======= ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Trust fees continued to be the largest source of non-interest income
and were $14,270,000 for the third quarter of 1994; the 5.5% decrease
was due primarily to reduced termination fees and weakness in the
stock and bond markets. On a year-to-date basis, trust fees totaled
$45,844,000, an increase of .3%. Exhibit 4 further details comparative
trust revenue by line of business for 1994 and 1993.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 4
TRUST INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Personal trust-St. Louis Area banks $ 4,820 $ 4,862 (.9)% $14,898 $15,333 (2.8)%
Mississippi Valley Advisors Inc. 3,037 3,219 (5.7) 9,483 9,413 .7
Corporate and institutional services 2,607 2,716 (4.0) 8,729 8,065 8.2
Kansas City Area banks and Community Banks 3,806 4,307 (11.6) 12,734 12,912 (1.4)
------- ------- ------- -------
Total Trust Income $14,270 $15,104 (5.5) $45,844 $45,723 .3
======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 10
Service charge income of $14,869,000 was up .8% or $121,000 for the
third quarter and up 1.0% or $443,000 for the first nine months of
1994, as deposit volumes were flat with 1993 and some corporate
customers opted to use compensating deposit balances to offset account
analysis charges rather than pay fees.
Credit card fee income was $6,320,000 for the third quarter of 1994,
10.9% higher than the 1993 level. For the first nine months of 1994,
credit card income was $17,918,000 or 2.1% better than the comparable
1993 period. Credit card income primarily represents fees charged
merchants for processing credit card transactions, fees received on
transactions of Mercantile cardholders and cardholders' annual fees.
Competitive market factors have tightened credit card fee and
transaction pricing.
Mortgage banking is now a significant line of business for Mercantile,
with the merger of United Postal; total mortgage loans serviced
exceeded $3.3 billion at September 30, 1994. These revenues decreased
by $2,100,000 or 29.3% from the first nine months of 1993 due to lower
origination volume and losses on the sale of loans. A breakout of
mortgage banking revenues is provided in Exhibit 5.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 5
MORTGAGE BANKING INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Servicing fees $1,083 $1,182 (8.4)% $3,817 $3,234 18.0%
Gains on sales of loans 33 1,525 (97.8) 265 2,754 (90.4)
Origination fees 34 142 (76.1) 317 496 (36.1)
Other 64 209 (69.4) 664 679 (2.2)
------ ------ ------ ------
Total Mortgage Banking Income $1,214 $3,058 (60.3) $5,063 $7,163 (29.3)
====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment banking fees and commissions, which consists of transaction
fees for services performed as a dealer bank for both individual and
corporate customers, including sales of annuities and mutual funds,
profits earned on limited trading positions, and foreign exchange
revenues, were $1,827,000 for the third quarter of 1994, a decline of
2.7% from 1993. For the first nine months, revenues were down $194,000
or 2.9% from the 1993 results. This source of revenue can vary
depending on movements in interest rates and overall market
conditions.
9
<PAGE> 11
FINANCIAL COMMENTARY (cont'd)
Securities gains declined by $3,209,000 from the first nine months of
1993, when United Postal sold significant volumes of securities in a
portfolio restructuring. All other non-interest income was up 14.1%
for the quarter and down 12.5% year-to-date, as the first half of 1993
included significant lease termination gains.
OTHER EXPENSE
Expenses other than interest expense and the provision for possible
loan losses for the third quarter of 1994 were $103,516,000, a decline
of 2.4% from the third quarter of 1993. For the first nine months of
1994, total other expenses were $310,003,000, a 3.6% decrease from the
1993 level. Total operating expenses were 3.41% of average assets
compared with 3.50% for the first nine months of 1993. The overhead
ratio, defined as operating expenses as a percentage of taxable-
equivalent net interest income and other income, improved to 57.93% in
the current quarter from 58.32% last quarter, while the overhead ratio
was 58.34% for the first nine months of 1994 compared with 60.47% last
year.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 6
OTHER EXPENSE
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 43,993 $ 42,988 2.3% $132,542 $127,229 4.2%
Employee benefits 10,875 11,179 (2.7) 33,290 32,578 2.2
-------- -------- -------- --------
Total Personnel Expense 54,868 54,167 1.3 165,832 159,807 3.8
Net occupancy 6,788 7,325 (7.3) 19,718 20,067 (1.7)
Equipment 7,857 8,721 (9.9) 24,612 25,546 (3.7)
Advertising/business development 2,602 2,555 1.8 7,433 8,293 (10.4)
Postage and freight 3,483 3,289 5.9 10,776 10,039 7.3
Office supplies 2,118 2,348 (9.8) 5,985 6,740 (11.2)
Communications 1,738 1,660 4.7 5,124 4,780 7.2
Legal and professional 2,095 2,615 (19.9) 6,764 8,043 (15.9)
Credit card 2,876 3,098 (7.2) 7,994 8,353 (4.3)
FDIC insurance 5,134 5,102 .6 15,737 16,411 (4.1)
Foreclosed property expense (357) 1,406 - 394 5,461 (92.8)
Intangible asset amortization 1,714 1,696 1.1 5,232 4,986 4.9
Other 12,600 12,075 4.3 34,402 42,907 (19.8)
-------- -------- -------- --------
Total Other Expense $103,516 $106,057 (2.4) $310,003 $321,433 (3.6)
======== ======== ======== ========
RATIOS
Overhead ratio 57.93% 60.08% 58.34% 60.47%
Other expense to average assets 3.42 3.46 3.41 3.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 12
Personnel costs increased 1.3% and 3.8%, respectively, during the
third quarter and first nine months of 1994, reflecting the costs
associated with staffing product expansion and merit increases. Year-
to-date benefit costs were up by 2.2%, in line with the 4.2% growth in
salaries. Occupancy and equipment costs declined by 2.8% during the
first nine months of 1994, reflecting productivity gains and the
closing of United Postal overlapping offices, offset by the costs of
maintaining additional offices and a consistent program of upgrading
systems and equipment.
For the first nine months of 1994, expenses related to foreclosed
property totaled only $394,000 compared with $5,461,000 last year, a
decline of $5,067,000. FDIC insurance costs decreased by 4.1%, as the
deposit base is lower and all Mercantile banks in 1994 are assessed
premiums at the lowest $.23 rate. Exhibit 6 details the composition of
all other operating expenses, which in general have declined due to
greater expense controls and the benefits of acquisition consolidation
efforts.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses was $171,691,000 or 2.18% of
loans outstanding at September 30, 1994. This compares favorably with
$168,651,000 or 2.28% at year's end and $160,132,000 or 2.17% at
September 30, 1993. The reserve for possible loan losses as a
percentage of non-performing loans improved to 585.44% compared with
293.39% at year-end and 286.22% last year, and the earnings coverage
of net charge-offs for the first nine months of 1994 was 9.81x
compared with 4.13x last year.
The year-to-date 1994 provision for possible loan losses was
$24,909,000 compared with $41,440,000 last year, a decline of 39.9%.
The annualized ratio of net charge-offs to average loans for the first
nine months of 1994 was .39% compared with .88% last year, while the
corresponding net charge-off figures were $21,869,000 and $49,125,000,
respectively.
In the St. Louis Area banks, the annualized ratio of net charge-offs
to average loans for the first nine months of 1994 was .16% compared
with 1.16% in 1993, when significant write-downs were taken on two
commercial real estate loans and one commercial loan. The second
quarter of 1994 included a significant recovery at Mercantile Bank of
St. Louis N.A. on one commercial real estate loan, while the first
quarter included charge-offs taken on three United Postal commercial
real estate loans for which reserves were provided in the fourth
quarter of 1993. In the Kansas City Area banks, the ratio of net
charge-offs to average loans was .56% versus .33% last year. For the
Community Banks as a group, the comparative ratios were .64% and .68%
during the first nine months of 1994 and 1993, respectively.
Credit card losses were 4.92% of average credit card loans in the
first nine months of 1994 compared with 4.08% in 1993, as net credit
card charge-offs were $27,275,000 compared with $19,690,000 last year.
Excluding credit card net charge-offs, Mercantile experienced net
recoveries of $5,406,000 for the first nine months of 1994.
11
<PAGE> 13
FINANCIAL COMMENTARY (cont'd)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 7
RESERVE FOR POSSIBLE LOAN LOSSES
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING BALANCE $172,493 $151,694 $168,651 $165,575
PROVISION 8,511 12,906 24,909 41,440
CHARGE-OFFS (14,433) (11,129) (46,685) (67,744)
RECOVERIES 5,120 5,414 24,816 18,619
-------- -------- -------- --------
NET CHARGE-OFFS (9,313) (5,715) (21,869) (49,125)
ACQUIRED RESERVES - 1,247 - 2,242
------- -------- ------- --------
ENDING BALANCE $171,691 $160,132 $171,691 $160,132
======== ======== ======== ========
LOANS AND LEASES
September 30 balance $7,873,054 $7,369,829 $7,873,054 $7,369,829
========== ========== ========== ==========
Average balance $7,702,126 $7,348,597 $7,508,800 $7,431,455
========== ========== ========== ==========
RATIOS
Reserve balance to outstanding loans 2.18% 2.17% 2.18% 2.17%
Reserve balance to non-performing loans 585.44 286.22 585.44 286.22
Earnings coverage of net charge-offs 7.83X 11.90x 9.81X 4.13x
Net charge-offs to average loans .48% .31% .39% .88%
Credit card net charge-offs to average credit card loans 4.98 3.87 4.92 4.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Mercantile evaluates the reserves of all banks on a quarterly basis to
ensure the timely charge-off of loans and to determine the adequacy of
each bank's reserve for possible loan losses. At September 30, 1994,
the level of the individual Community Bank reserves as a percentage of
total loans outstanding ranged from 1.42% to 6.35%, with a combined
ratio of 2.27%. The coverage of non-performing loans was 521.31% on a
combined basis. The St. Louis Area banks combined reserve was 2.08% of
loans with a resulting coverage ratio of 669.63%, while the Kansas
City Area banks combined reserve was 2.32% with 544.60% coverage of
non-performing loans. Management believes the consolidated reserve of
2.18% of total loans and 585.44% of non-performing loans as of
September 30, 1994 was adequate based on the risks identified at such
date in the portfolios.
NON-PERFORMING ASSETS
Non-performing loans (non-accrual and renegotiated loans) continued
their decline to $29,327,000 or .37% of total loans outstanding at
September 30, 1994 compared with $34,833,000 or .46% at June 30, 1994
and $55,948,000 or .76% at September 30, 1993. Foreclosed assets at
September 30, 1994 also were reduced to $30,356,000 compared with
12 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 14
$31,608,000 at June 30, 1994 and $47,455,000 last year. The ratio of
non-performing assets to outstanding loans and foreclosed assets
declined to .76% at September 30, 1994 compared with .87% at June 30,
1994 and 1.39% last year.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 8
NON-PERFORMING ASSETS
($ IN THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1994 1993 1993
-------- ------- --------
<S> <C> <C> <C>
NON-ACCRUAL LOANS
Commercial $ 4,726 $11,949 $15,601
Real estate-commercial 13,055 25,059 19,750
Real estate-construction 128 785 537
Real estate-residential 6,910 9,407 8,838
Consumer 1,719 1,818 1,883
------- ------- -------
Total Non-accrual Loans 26,538 49,018 46,609
RENEGOTIATED LOANS 2,789 8,465 9,339
------- ------- -------
TOTAL NON-PERFORMING LOANS $29,327 $57,483 $55,948
======= ======= =======
FORECLOSED ASSETS
Foreclosed real estate $27,222 $16,771 $29,196
In-substance foreclosures 1,651 18,044 17,034
Other foreclosed assets 1,483 1,199 1,225
------- ------- -------
TOTAL FORECLOSED ASSETS $30,356 $36,014 $47,455
======= ======= =======
TOTAL NON-PERFORMING ASSETS $59,683 $93,497 $103,403
======= ======= ========
PAST-DUE LOANS
(90 DAYS OR MORE) $16,283 $14,096 $13,290
======= ======= =======
RATIOS
Non-performing loans to outstanding loans .37% .78% .76%
Non-performing assets to outstanding loans and
foreclosed assets .76 1.26 1.39
Non-performing assets to total assets .49 .77 .87
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As noted in Exhibit 8, non-performing loans declined by $28,156,000
from the year-end level and were down $5,506,000 since June 30,
1994. The current-year decline was primarily in the commercial and
commercial real estate loan portfolios of United Postal, due to
first quarter write-downs on two credits and the resolution of two
significant credits. In the Kansas City Area banks and in the
Community Banks as a group, non-performing loans continued their
decline and were down significantly from year-end.
Exhibit 8 also summarizes comparative data on loans past due 90
days yet still accruing interest. The past due loans consisted
largely of credit card and residential mortgage loans.
CAPITAL RESOURCES
The current economic and regulatory environment has placed an
increased emphasis on capital strength. Capital provides a solid
foundation for anticipated future asset growth, and promotes
depositor and investor confidence. Capital management is a
continuous process at Mercantile, and ensures that capital is
provided for current needs and anticipated growth. Mercantile's
strong capital position has enabled it to profitably expand both
its asset and deposit bases in the past four years, while
maintaining its capital ratios at levels comparable to other
quality banking organizations and substantially in excess of
regulatory standards.
13
<PAGE> 15
FINANCIAL COMMENTARY (cont'd)
At September 30, 1994, shareholders' equity was $1,042,990,000, an
increase of 10.1% from September 30, 1993. Net earnings retained
and stock issued under various employee benefit plans accounted for
the majority of the increase. Equity represented 8.52% of assets at
September 30, 1994 compared with 7.96% a year ago. Significant
capital ratios and intangible assets are summarized in Exhibit 9,
while Exhibit 1 details the equity capital ratios of the St. Louis
Area, Kansas City Area and Community Banks in total. The
Corporation has restructured its long-term debt over the past two
years and there are no maturities before 1999, other than the 8%
convertible subordinated capital notes due April 1, 1995.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 9
RISK-BASED CAPITAL
($ IN THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1994 1993 1993
-------- ------- --------
<S> <C> <C> <C>
Capital
Tier I $ 980,002 $ 883,162 $ 876,367
Total 1,311,873 1,161,071 1,157,550
Risk-adjusted assets 8,419,326 7,985,847 7,952,570
Tier I capital to risk-adjusted assets 11.64% 11.06% 11.02%
Total capital to risk-adjusted assets 15.58 14.54 14.56
Leverage 8.14 7.33 7.19
Double leverage 107.86 111.97 112.01
Long-term debt to total
capitalization 21.66 22.15 22.42
Intangible assets $65,510 $71,759 $70,710
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Book value per share was $24.12 at September 30, 1994 compared with
$22.19 a year earlier, an increase of 8.7%. On July 14, 1994, the
Board of Directors declared a cash dividend of $.28 per share,
which was paid October 3, 1994, representing a 29.47% payout of
third quarter 1994 earnings. Further information relating to
dividends, as well as to quarterly stock prices, is included in the
Investor Information summary on Page 24 of this report.
14 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 16
<TABLE>
CONDENSED CONSOLIDATED QUARTERLY STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
1993 1994
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. 1ST QTR. 2ND QTR. 3RD QTR.
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $157,087 $156,551 $154,388 $153,960 $150,324 $155,434 $165,427
Investments in debt and equity securities 52,557 50,751 47,366 46,526 46,219 45,333 43,750
Short-term investments 2,688 1,878 3,673 2,505 3,470 1,684 1,880
-------- -------- -------- -------- -------- -------- --------
Total Interest Income 212,332 209,180 205,427 202,991 200,013 202,451 211,057
Tax-equivalent adjustment 2,497 2,307 2,430 2,340 2,309 2,288 2,236
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INTEREST INCOME 214,829 211,487 207,857 205,331 202,322 204,739 213,293
INTEREST EXPENSE
Deposits 75,969 71,538 68,866 66,611 62,888 62,474 64,155
Borrowed funds 11,983 11,650 11,536 10,581 11,732 13,252 17,284
-------- -------- -------- -------- -------- -------- --------
Total Interest Expense 87,952 83,188 80,402 77,192 74,620 75,726 81,439
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT NET INTEREST INCOME 126,877 128,299 127,455 128,139 127,702 129,013 131,854
PROVISION FOR POSSIBLE LOAN LOSSES 14,049 14,485 12,906 19,573 8,383 8,015 8,511
OTHER INCOME
Trust 14,873 15,746 15,104 15,415 15,657 15,917 14,270
Service charges 14,108 14,511 14,748 15,144 14,455 14,486 14,869
Credit card fees 5,446 6,404 5,700 6,510 5,801 5,797 6,320
Mortgage banking 1,793 2,312 3,058 3,378 2,405 1,444 1,214
Investment banking 2,591 2,184 1,878 1,833 2,369 2,263 1,827
Securities gains (losses) 2,664 15 910 153 225 208 (53)
Other 8,165 9,060 7,665 7,790 8,010 6,901 8,404
-------- -------- -------- -------- -------- -------- --------
Total Other Income 49,640 50,232 49,063 50,223 48,922 47,016 46,851
OTHER EXPENSE
Personnel expense 52,428 53,212 54,167 55,526 55,737 55,227 54,868
Net occupancy and equipment 14,671 14,896 16,046 17,025 15,131 14,554 14,645
Other 40,262 39,907 35,844 50,925 32,956 32,882 34,003
-------- -------- -------- -------- -------- -------- --------
Total Other Expense 107,361 108,015 106,057 123,476 103,824 102,663 103,516
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INCOME BEFORE INCOME TAXES 55,107 56,031 57,555 35,313 64,417 65,351 66,678
INCOME TAXES
Income taxes 19,545 19,877 19,564 16,582 23,253 22,860 23,399
Tax-equivalent adjustment 2,497 2,307 2,430 2,340 2,309 2,288 2,236
-------- -------- -------- -------- -------- -------- --------
Adjusted Income Taxes 22,042 22,184 21,994 18,922 25,562 25,148 25,635
-------- -------- -------- -------- -------- -------- --------
NET INCOME $ 33,065 $ 33,847 $ 35,561 $ 16,391 $ 38,855 $ 40,203 $ 41,043
======== ======== ======== ======== ======== ======== ========
NET INCOME PER SHARE $.79 $.80 $.84 $.38 $.91 $.93 $.95
SIGNIFICANT RATIOS
Return on assets 1.08% 1.11% 1.16% .54% 1.27% 1.33% 1.36%
Return on equity 15.29 14.99 15.28 6.85 15.93 16.05 15.89
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 15
<PAGE> 17
<TABLE>
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET
($ IN THOUSANDS)
<CAPTION>
1993
1ST QTR. 2ND QTR. 3RD QTR.
--------------------------------------------------------------------------
VOLUME RATE<F1> VOLUME RATE<F1> VOLUME RATE<F1>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,029,956 6.56% $ 2,072,698 6.46% $ 1,970,795 6.60%
Real estate-commercial 1,323,304 8.01 1,340,876 7.96 1,275,280 8.05
Real estate-construction 158,195 7.49 149,783 6.83 154,679 7.33
Real estate-residential 2,391,674 8.05 2,363,734 7.99 2,334,896 7.81
Consumer 936,745 9.21 928,809 9.13 929,740 8.97
Credit card 610,553 16.62 637,894 16.30 682,604 16.22
Foreign 1,639 6.83 1,035 8.12 603 5.97
----------- ----------- -----------
Total Loans and Leases 7,452,066 8.47 7,494,829 8.39 7,348,597 8.45
Investments in debt and equity securities
Trading 12,008 5.80 14,073 4.92 14,417 5.60
Taxable 3,204,699 6.15 3,152,093 6.01 3,090,005 5.68
Tax-exempt 216,373 8.93 230,660 8.59 237,107 8.30
----------- ----------- -----------
Total 3,433,080 6.32 3,396,826 6.18 3,341,529 5.87
Short-term investments 312,710 3.44 221,869 3.39 449,203 3.27
----------- ----------- -----------
Total Earning Assets 11,197,856 7.67 11,113,524 7.61 11,139,329 7.46
Non-earning Assets 1,067,197 1,116,500 1,114,359
----------- ----------- -----------
Total Assets $12,265,053 $12,230,024 $12,253,688
=========== ============ ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 1,799,185 $ 1,886,413 $ 2,022,041
Interest bearing demand 1,435,068 2.21 1,501,234 2.13 1,520,332 2.12
Money market accounts 1,659,430 2.77 1,629,303 2.75 1,628,648 2.78
Savings 823,718 2.70 862,268 2.53 878,280 2.52
Consumer time certificates under $100,000 3,673,361 4.89 3,529,399 4.69 3,416,365 4.56
Other time 130,999 2.82 102,285 2.86 56,703 2.40
----------- ----------- -----------
Total Core Deposits 9,521,761 3.67 9,510,902 3.50 9,522,369 3.42
Time certificates $100,000 and over 498,721 3.94 458,022 3.85 441,198 3.92
Foreign 30,380 3.27 45,184 3.20 21,650 6.23
----------- ----------- -----------
Total Purchased Deposits 529,101 3.90 503,206 3.79 462,848 4.03
----------- ----------- -----------
Total Deposits 10,050,862 3.68 10,014,108 3.52 9,985,217 3.46
Short-term borrowings 861,397 3.00 830,904 2.95 852,097 2.84
Long-term debt 276,850 7.99 274,491 8.03 274,074 8.01
----------- ----------- -----------
Total Acquired Funds 11,189,109 3.75 11,119,503 3.60 11,111,388 3.54
Other Liabilities 210,763 207,588 211,394
SHAREHOLDERS' EQUITY 865,181 902,933 930,906
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,265,053 $12,230,024 $12,253,688
=========== =========== ============
SIGNIFICANT RATIOS
Net interest rate spread 3.92% 4.01% 3.92%
Net interest rate margin 4.53 4.62 4.58
<FN>
<F1>Taxable-equivalent basis.
</TABLE>
16 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 18
<TABLE>
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET
($ IN THOUSANDS)
<CAPTION>
1993 1994
4TH QTR. 1ST QTR. 2ND QTR.
--------------------------------------------------------------------------
VOLUME RATE<F1> VOLUME RATE<F1> VOLUME RATE<F1>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 1,962,432 6.53% $ 1,995,885 6.35% $ 2,079,564 6.92%
Real estate-commercial 1,264,795 7.97 1,274,504 7.62 1,267,588 8.07
Real estate-construction 160,112 7.44 143,455 7.46 164,641 8.06
Real estate-residential 2,298,589 7.76 2,259,090 7.39 2,246,892 7.43
Consumer 941,992 8.73 942,256 8.31 970,836 8.29
Credit card 728,730 16.05 745,456 16.64 729,883 16.10
Foreign 845 5.21 289 5.54 184 6.52
----------- ----------- -----------
Total Loans and Leases 7,357,495 8.41 7,360,935 8.20 7,459,588 8.37
Investments in debt and equity securities
Trading 15,493 5.06 10,516 5.44 6,028 6.57
Taxable 3,130,103 5.50 3,124,082 5.48 3,113,623 5.39
Tax-exempt 251,136 7.93 246,381 8.00 243,617 8.08
----------- ----------- -----------
Total 3,396,732 5.68 3,380,979 5.66 3,363,268 5.58
Short-term investments 291,897 3.43 402,468 3.45 164,557 4.09
----------- ----------- -----------
Total Earning Assets 11,046,124 7.44 11,144,382 7.26 10,987,413 7.45
Non-earning Assets 1,068,428 1,069,466 1,059,623
----------- ----------- -----------
Total Assets $12,114,552 $12,213,848 $12,047,036
=========== ============ ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 2,024,089 $ 2,023,107 $ 1,885,405
Interest bearing demand 1,570,416 2.01 1,594,965 1.85 1,589,551 1.83
Money market accounts 1,653,236 2.74 1,658,069 2.66 1,646,808 2.82
Savings 894,558 2.51 911,930 2.31 928,529 2.30
Consumer time certificates under $100,000 3,310,430 4.46 3,189,057 4.27 3,088,914 4.23
Other time 38,588 2.66 33,201 2.75 33,587 3.38
----------- ----------- -----------
Total Core Deposits 9,491,317 3.32 9,410,329 3.14 9,172,794 3.14
Time certificates $100,000 and over 442,615 3.78 486,406 3.68 458,541 3.91
Foreign 27,297 6.10 41,399 4.51 80,465 4.15
----------- ----------- -----------
Total Purchased Deposits 469,912 3.92 527,805 3.74 539,006 3.95
----------- ----------- -----------
Total Deposits 9,961,229 3.36 9,938,134 3.18 9,711,800 3.19
Short-term borrowings 728,648 2.79 813,488 2.95 839,894 3.68
Long-term debt 273,500 8.05 298,915 7.68 292,487 7.54
----------- ----------- -----------
Total Acquired Funds 10,963,377 3.45 11,050,537 3.31 10,844,181 3.38
Other Liabilities 194,045 187,408 201,219
SHAREHOLDERS' EQUITY 957,130 975,903 1,001,636
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,114,552 $12,213,848 $12,047,036
=========== =========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 3.99% 3.95% 4.07%
Net interest rate margin 4.64 4.58 4.70
<FN>
<F1>Taxable-equivalent basis.
</TABLE>
17
<TABLE>
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET
($ IN THOUSANDS)
<CAPTION>
1994 1993 1994
3RD QTR. NINE MONTHS NINE MONTHS
--------------------------------------------------------------------------
VOLUME RATE<F1> VOLUME RATE<F1> VOLUME RATE<F1>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,103,305 7.52% $ 2,024,266 6.54% $ 2,059,972 6.94%
Real estate-commercial 1,248,970 8.30 1,312,979 8.01 1,263,597 8.00
Real estate-construction 183,451 8.75 154,206 7.22 163,995 8.13
Real estate-residential 2,354,829 7.56 2,363,226 7.95 2,287,286 7.46
Consumer 1,068,096 8.39 931,742 9.10 994,196 8.33
Credit card 743,139 15.98 643,947 16.36 739,484 16.24
Foreign 336 7.14 1,089 7.10 270 6.42
----------- ----------- -----------
Total Loans and Leases 7,702,126 8.63 7,431,455 8.44 7,508,800 8.40
Investments in debt and equity securities
Trading 12,736 4.24 13,508 5.42 9,768 5.15
Taxable 2,989,445 5.41 3,148,516 5.95 3,075,222 5.43
Tax-exempt 238,442 8.00 228,118 8.59 242,785 8.03
----------- ----------- -----------
Total 3,240,623 5.59 3,390,142 6.13 3,327,775 5.62
Short-term investments 156,690 4.79 328,426 3.34 240,338 3.90
----------- ----------- -----------
Total Earning Assets 11,099,439 7.69 11,150,023 7.58 11,076,913 7.47
Non-earning Assets 1,010,048 1,099,523 1,046,162
----------- ----------- -----------
Total Assets $12,109,487 $12,249,546 $12,123,075
=========== =========== ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 1,848,011 $ 1,903,360 $ 1,918,201
Interest bearing demand 1,545,999 1.86 1,485,859 2.15 1,576,656 1.85
Money market accounts 1,629,590 2.98 1,639,013 2.76 1,644,720 2.82
Savings 909,527 2.33 854,959 2.58 916,653 2.31
Consumer time certificates under $100,000 3,005,688 4.36 3,538,765 4.72 3,093,879 4.29
Other time 34,204 3.17 96,388 2.76 33,669 3.10
----------- ----------- -----------
Total Core Deposits 8,973,019 3.24 9,518,344 3.53 9,183,778 3.17
Time certificates $100,000 and over 433,991 4.43 465,771 3.91 459,453 4.00
Foreign 136,111 4.80 32,373 3.90 86,338 4.53
----------- ----------- -----------
Total Purchased Deposits 570,102 4.52 498,144 3.91 545,791 4.08
----------- ----------- -----------
Total Deposits 9,543,121 3.33 10,016,488 3.56 9,729,569 3.23
Short-term borrowings 1,061,746 4.44 848,095 2.93 905,957 3.75
Long-term debt 289,218 7.62 275,127 8.01 293,505 7.61
----------- ----------- -----------
Total Acquired Funds 10,894,085 3.60 11,139,710 3.63 10,929,031 3.43
Other Liabilities 182,500 209,922 190,352
SHAREHOLDERS' EQUITY 1,032,902 899,914 1,003,692
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,109,487 $12,249,546 $12,123,075
=========== =========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 4.09% 3.95% 4.04%
Net interest rate margin 4.75 4.58 4.68
<FN>
<F1>Taxable-equivalent basis.
</TABLE>
17
<PAGE> 19
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $165,427 $154,388 $471,185 $468,026
Investments in debt and equity securities
Trading 127 185 345 499
Taxable 40,368 43,864 124,999 140,282
Tax-exempt 3,255 3,317 9,958 9,893
-------- -------- -------- --------
Total 43,750 47,366 135,302 150,674
Due from banks-interest bearing 96 759 1,812 1,282
Federal funds sold and repurchase agreements 1,784 2,914 5,222 6,957
-------- -------- -------- --------
Total Interest Income 211,057 205,427 613,521 626,939
INTEREST EXPENSE
Interest bearing deposits 62,520 68,529 186,581 215,426
Foreign deposits 1,635 337 2,936 947
Short-term borrowings 11,775 6,046 25,508 18,634
Long-term debt 5,509 5,490 16,760 16,535
-------- -------- -------- --------
Total Interest Expense 81,439 80,402 231,785 251,542
-------- -------- -------- --------
NET INTEREST INCOME 129,618 125,025 381,736 375,397
PROVISION FOR POSSIBLE LOAN LOSSES 8,511 12,906 24,909 41,440
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 121,107 112,119 356,827 333,957
OTHER INCOME
Trust 14,270 15,104 45,844 45,723
Service charges 14,869 14,748 43,810 43,367
Credit card fees 6,320 5,700 17,918 17,550
Mortgage banking 1,214 3,058 5,063 7,163
Investment banking 1,827 1,878 6,459 6,653
Securities gains (losses) (53) 910 380 3,589
Other 8,404 7,665 23,315 24,890
-------- -------- -------- --------
Total Other Income 46,851 49,063 142,789 148,935
OTHER EXPENSE
Salaries 43,993 42,988 132,542 127,229
Employee benefits 10,875 11,179 33,290 32,578
Net occupancy 6,788 7,325 19,718 20,067
Equipment 7,857 8,721 24,612 25,546
Other 34,003 35,844 99,841 116,013
-------- -------- -------- --------
Total Other Expense 103,516 106,057 310,003 321,433
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 64,442 55,125 189,613 161,459
INCOME TAXES 23,399 19,564 69,512 58,986
-------- -------- -------- --------
NET INCOME $ 41,043 $ 35,561 $120,101 $102,473
======== ======== ======== ========
PER SHARE DATA
Average common shares outstanding 43,203,882 42,526,822 43,034,158 42,338,859
Net income<F1> $.95 $.84 $2.79 $2.42
Dividends declared .28 .24 3/4 .84 .74 1/4
<FN>
<F1>Based on weighted average common shares outstanding.
</TABLE>
18 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 20
<TABLE>
CONSOLIDATED BALANCE SHEET
(THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1994 1993 1993
-------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 667,577 $ 705,673 $ 590,814
Due from banks-interest bearing 231 144,538 144,324
Federal funds sold and repurchase agreements 225,472 186,962 46,872
Investments in debt and equity securities
Trading 17,290 15,735 21,685
Available-for-sale 271,709 415,283 114,867
Held-to-maturity (Estimated fair value of
$2,815,964, $3,020,591 and $3,305,273, respectively) 2,859,335 2,970,160 3,239,589
----------- ----------- -----------
Total 3,148,334 3,401,178 3,376,141
Loans held-for-sale 20,581 117,290 92,105
Loans and leases, net of unearned income 7,852,473 7,264,484 7,277,724
----------- ----------- -----------
Total Loans and Leases 7,873,054 7,381,774 7,369,829
Reserve for possible loan losses (171,691) (168,651) (160,132)
----------- ----------- -----------
Net Loans and Leases 7,701,363 7,213,123 7,209,697
Bank premises and equipment 202,372 199,363 200,471
Due from customers on acceptances 5,928 11,923 12,483
Other assets 286,395 278,367 314,814
----------- ----------- -----------
Total Assets $12,237,672 $12,141,127 $11,895,616
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 1,456,287 $ 1,713,275 $ 1,445,096
Interest bearing 7,397,091 7,862,723 7,882,860
Foreign 92,704 26,085 32,141
----------- ----------- -----------
Total Deposits 8,946,082 9,602,083 9,360,097
Federal funds purchased and repurchase agreements 1,455,765 602,997 583,848
Other short-term borrowings 338,362 520,650 536,392
Long-term debt 288,447 272,778 273,751
Bank acceptances outstanding 5,928 11,923 12,483
Other liabilities 160,098 172,139 181,968
----------- ----------- -----------
Total Liabilities 11,194,682 11,182,570 10,948,539
Commitments and contingent liabilities - - -
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1994 1993 1993
-------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock-no par value
Shares authorized 5,000 5,000 5,000
Shares issued - - - - - -
Common stock-$5.00 par value
Shares authorized 100,000 70,000 70,000
Shares issued and outstanding 43,235 42,802 42,677 216,175 214,012 213,388
Capital surplus 168,974 164,448 163,784
Retained earnings 657,841 580,097 569,905
----------- ----------- -----------
Total Shareholders' Equity 1,042,990 958,557 947,077
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,237,672 $12,141,127 $11,895,616
=========== =========== ===========
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 19
<PAGE> 21
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
($ IN THOUSANDS)
<CAPTION>
COMMON STOCK TOTAL
------------------------------- CAPITAL RETAINED SHAREHOLDERS'
SHARES DOLLARS SURPLUS EARNINGS EQUITY
------ ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992, AS RESTATED 42,031,973 $210,160 $148,089 $493,075 $851,324
Net income 102,473 102,473
Dividends declared
Mercantile Bancorporation Inc.-$.74 1/4 per share (26,075) (26,075)
Pooled companies prior to acquisition (3,122) (3,122)
Issuance of common stock
Acquisition of First National Bank of Flora 232,503 1,162 6,879 8,041
Acquisition of Mt. Vernon Bancorp, Inc. 216,936 1,085 6,056 7,141
Employee incentive plans 143,910 719 1,752 2,471
Convertible notes 64,011 320 1,340 1,660
Change in valuation allowance for marketable
equity securities 3,554 3,554
Pre-merger transactions of pooled companies (9,623) (47) (301) (348)
Other (2,250) (11) (31) (42)
---------- --------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1993 42,677,460 $213,388 $163,784 $569,905 $947,077
========== ======== ======== ======== ========
BALANCE AT DECEMBER 31, 1993, AS RESTATED 42,802,322 $214,012 $164,448 $580,097 $958,557
Net income 120,101 120,101
Dividends declared-$.84 per share (36,199) (36,199)
Issuance of common stock
Employee incentive plans 283,946 1,420 1,456 2,876
Convertible notes 138,991 695 2,911 3,606
Net fair value adjustment for available-for-sale
securities (6,158) (6,158)
Pre-merger transactions of pooled companies 12,562 63 88 151
Other (3,064) (15) 71 56
---------- -------- -------- -------- ----------
BALANCE AT SEPTEMBER 30, 1994 43,234,757 $216,175 $168,974 $657,841 $1,042,990
========== ======== ======== ======== ==========
</TABLE>
20 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 22
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 120,101 $ 102,473
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for possible loan losses 24,909 41,440
Depreciation and amortization 19,890 20,001
Provision for deferred income taxes (1,653) 718
Net change in trading securities (1,555) (4,001)
Net change in accrued interest receivable (6,908) 5,512
Net change in accrued interest payable (5,146) (5,903)
Net change in accrued taxes payable (15,862) 2,167
Other, net 10,471 25,202
---------- -----------
Net Cash Provided by Operating Activities 144,247 187,609
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading securities
Purchases (670,265) (1,088,896)
Proceeds from maturities 827,742 1,155,703
Proceeds from sales of:
Held-to-maturity securities - 22,749
Available-for-sale securities 276,657 349,215
Securities from acquired entities 79,388 12,254
Net change in loans and leases (954,045) (354,780)
Purchases of loans and leases (20,063) (23,117)
Proceeds from sales of loans and leases 154,754 152,929
Purchases of premises and equipment (25,166) (18,451)
Proceeds from sales of premises and equipment 2,296 486
Proceeds from sales of foreclosed property 14,560 35,036
Cash and cash equivalents from acquisitions, net of cash paid - 11,085
Other, net 24,816 18,619
---------- -----------
Net Cash Provided (Used) by Investing Activities (289,326) 272,832
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing demand and
money market deposit accounts (474,344) (172,002)
Net change in time certificates of deposit under $100,000 (259,603) (444,026)
Net change in time certificates of deposit $100,000 and over 10,773 (42,785)
Net change in other time deposits 554 (69,781)
Net change in foreign deposits 66,619 12,491
Sale of branch deposits, net of premium received - (14,130)
Net change in short-term borrowings 670,480 134,846
Issuance of long-term debt 75,000 -
Principal payments on long-term debt (54,743) (26,990)
Cash dividends paid (36,199) (29,197)
Proceeds from issuance of common stock 2,442 1,983
Other, net 207 (348)
---------- -----------
Net Cash Provided (Used) by Financing Activities 1,186 (649,939)
---------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (143,893) (189,498)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,037,173 971,508
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 893,280 $ 782,010
========== ===========
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 21
<PAGE> 23
<TABLE>
BANKS AND OTHER SUBSIDIARIES
<CAPTION>
TOTAL ASSETS
SEPT. 30, 1994
BANK MAIN OFFICE (THOUSANDS)
- ---- ----------- ------------------------
<S> <C> <C>
Mercantile Bank of St. Louis N.A. St. Louis, MO $6,356,923
Mercantile Bank of Kansas City Kansas City, MO 787,282
Mercantile Bank of Kansas Overland Park, KS 591,562
Mercantile Bank of Joplin Joplin, MO 386,345
Mercantile Bank of Illinois N.A. Alton, IL 365,599
Mercantile Bank of Northern Iowa Waterloo, IA 364,803
Mercantile Bank of St. Joseph St. Joseph, MO 320,163
Mercantile Bank of Springfield Springfield, MO 244,098
Mercantile Bank of Lawrence N.A. Lawrence, KS 223,887
Mercantile Bank of Jefferson County High Ridge, MO 210,362
Mercantile Bank of Topeka N.A. Topeka, KS 193,548
Mercantile Bank of Cape Girardeau Cape Girardeau, MO 165,117
Mercantile Bank of North Central Missouri Macon, MO 158,338
Mercantile Bank of the Mineral Area Farmington, MO 158,302
Mercantile Bank of Franklin County Washington, MO 156,340
Mercantile Bank of West Central Missouri Sedalia, MO 151,942
Mercantile Bank of Lake of the Ozarks Eldon, MO 125,627
Mercantile Bank of Poplar Bluff Poplar Bluff, MO 107,672
Mercantile Bank of Mt. Vernon Mt. Vernon, IL 94,286
Mercantile Bank of Centralia N.A. Centralia, IL 93,853
Mercantile Bank of Missouri Valley Richmond, MO 84,053
<CAPTION>
TOTAL ASSETS
SEPT. 30, 1994
BANK MAIN OFFICE (THOUSANDS)
- ---- ----------- -------------------------
<S> <C> <C>
Mercantile Bank of Monett Monett, MO $80,657
Mercantile Bank of Trenton Trenton, MO 79,927
Mercantile Bank of Stoddard/Bollinger
Counties Dexter, MO 78,444
Mercantile Bank of Phelps County Rolla, MO 68,927
Mercantile Bank of Perryville Perryville, MO 68,404
Mercantile Bank of Flora N.A. Flora, IL 67,666
Mercantile Bank of Table Rock Lake Branson West, MO 57,394
Mercantile Bank of Pike County Bowling Green, MO 56,801
Mercantile Bank of Memphis Memphis, MO 52,580
Mercantile Bank of Ste. Genevieve Ste. Genevieve, MO 51,232
Mercantile Bank of Doniphan Doniphan, MO 50,388
Mercantile Bank of East Central Missouri Montgomery City, MO 49,079
Mercantile Bank of Boone County Columbia, MO 46,040
Mercantile Bank of Northwest Missouri Maryville, MO 45,554
Mercantile Bank of Carlyle Carlyle, IL 39,015
Mercantile Bank of Willow Springs Willow Springs, MO 38,753
Mercantile Bank of Sikeston Sikeston, MO 38,615
Mercantile Bank of Wright County Hartville, MO 38,339
Mercantile Bank of Plattsburg Plattsburg, MO 36,667
Mercantile Trust Company N.A. St. Louis, MO 7,683
</TABLE>
- ------------------------------------------------------------------------
ASSET-BASED LENDING
Mercantile Business Credit, Inc.
12443 Olive Blvd.
St. Louis, MO 63141-6432
BROKERAGE SERVICES
Mercantile Investment Services, Inc.
Mercantile Tower
St. Louis, MO 63101-1643
CREDIT CARD SERVICES
Mercantile Card Services Inc.
12443 Olive Blvd.
St. Louis, MO 63141-6432
CREDIT LIFE INSURANCE
Mississippi Valley Life Insurance Co.
Mercantile Tower
St. Louis, MO 63101-1643
INSURANCE AGENCY
Mercantile Insurance Services, Inc.
Mercantile Tower
St. Louis, MO 63101-1643
INVESTMENT MANAGEMENT
Mississippi Valley Advisors Inc.
Mercantile Tower
St. Louis, MO 63101-1643
OFF-SHORE BRANCH
Mercantile Bank of St. Louis N.A.
Cayman Branch
Grand Cayman, B.W.I.
PENDING AFFILIATIONS
Wedge Bank
Alton, IL
UNSL Financial Corp
Lebanon, MO
Central Mortgage Bancshares, Inc.
Kansas City, MO
22 MERCANTILE BANCORPORATION INC.
<PAGE> 24
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
RICHARD P. CONERLY<F1><F3>
Chairman
Orion Capital Inc.
HARRY M. CORNELL, JR.<F2><F4>
Chairman and
Chief Executive Officer
Leggett & Platt, Inc.
EARL K. DILLE<F3><F5><F6>
Retired President
Union Electric Company
J. CLIFF EASON<F1>
President, Network Services
Southwestern Bell Telephone Company
BERNARD A. EDISON<F2><F3>
Director Emeritus
Edison Brothers Stores, Inc.
WILLIAM A. HALL<F1>
Assistant to the Chairman
Hallmark Cards, Inc.
THOMAS A. HAYS<F2><F3><F4>
Deputy Chairman
The May Department Stores
Company
WILLIAM G. HECKMAN<F3><F6>
Chairman Emeritus
Arch Mineral Corporation
THOMAS H. JACOBSEN<F3><F4>
Chairman and
Chief Executive Officer
Mercantile Bancorporation Inc.
JAMES B. MALLOY<F2><F6>
Chairman and
Chief Executive Officer
Smurfit Packaging Corporation
CHARLES H. PRICE II<F6>
Chairman
Mercantile Bank of Kansas City
HARVEY SALIGMAN<F2>
Managing Partner
Cynwyd Investments
CRAIG D. SCHNUCK<F5>
Chairman and
Chief Executive Officer
Schnuck Markets, Inc.
ROBERT W. STALEY<F6>
Vice Chairman
Emerson Electric Co.
ROBERT L. STARK<F6>
Dean
University of Kansas
Regents Center
PATRICK T. STOKES<F1>
President
Anheuser-Busch, Inc.
FRANCIS A. STROBLE<F1>
Retired Chief
Financial Officer
Monsanto Company
JOSEPH G. WERNER<F5>
President
Werner Investments
JOHN A. WRIGHT<F1>
President and
Chief Executive Officer
Big River Minerals Corp.
<F1>Member of Audit Committee
<F2>Member of Compensation and
Management Development
Committee
<F3>Member of Executive Committee
<F4>Member of Nominating and Board
Affairs Committee
<F5>Member of Community Relations
Committee
<F6>Member of Credit Policy
Committee
- ------------------------------------------------------------------------
EXECUTIVE OFFICERS
THOMAS H. JACOBSEN
Chairman and
Chief Executive Officer
RALPH W. BABB, JR.
Vice Chairman
W. RANDOLPH ADAMS
Executive Vice President
and Chief Financial Officer
JOHN Q. ARNOLD
Executive Vice President and
Chief Credit Officer
JOHN H. BEIRISE
President and Chief Institutional
Banking Officer
Mercantile Bank of St. Louis N.A.
RICHARD H. GOLDBERG
Executive Vice President
Mercantile Bank of St. Louis N.A.
Operations
MICHAEL J. GORMAN
Chairman and Chief
Consumer Banking Officer
Mercantile Bank of St. Louis N.A.
RICHARD C. KING
President and Chief Executive Officer
Mercantile Bank of Kansas City
JOHN W. MCCLURE
Executive Vice President
Community Banking
JON P. PIERCE
Executive Vice President
Human Resources
JON W. BILSTROM
General Counsel and
Secretary
PATRICK STRICKLER
Senior Vice President
Public Affairs
ARTHUR G. HEISE
Senior Vice President and
Auditor
MICHAEL T. NORMILE
Senior Vice President and
Treasurer
MERCANTILE BANCORPORATION INC. 23
<PAGE> 25
INVESTOR INFORMATION
<TABLE>
NEW YORK STOCK EXCHANGE: MTL<F1>
SELECTED DATA
<CAPTION>
SEPTEMBER 30
1994 1993
---- ----
<S> <C> <C>
Market Price $36 7/8 $33 5/8
Yield 3.04% 2.94%
Price Earnings Ratio 11.63X 11.97x
Book Value $24.12 $22.19
Shares Outstanding
Average 43,034,158 42,338,859
Period-end 43,234,757 42,677,460
Shareholders of Record 13,471 13,958
Average Daily Volume<F2> 52,815 74,150
</TABLE>
- ------------------------------------------------------------------------
<TABLE>
COMMON STOCK INFORMATION
<CAPTION>
MARKET PRICE AVERAGE
----------------------------------- DAILY DIVIDEND
HIGH LOW CLOSE VOLUME<F2> DECLARED
---- --- ----- ---------- --------
<S> <C> <C> <C> <C> <C>
1994
1ST QUARTER $34 1/8 $29 7/8 $31 7/8 62,279 $.28
2ND QUARTER 38 1/8 31 1/8 35 1/8 48,340 .28
3RD QUARTER 39 1/4 34 7/8 36 7/8 47,814 .28
1993
1st Quarter $35 5/8 $30 5/8 $34 5/8 126,042 $.24 3/4
2nd Quarter 37 5/8 29 3/8 32 7/8 54,552 .24 3/4
3rd Quarter 34 3/8 31 5/8 33 5/8 43,167 .24 3/4
4th Quarter 34 5/8 29 1/8 30 1/8 52,058 .24 3/4
--------
Total $.99
========
- ------------------------------------------------------------------------
<FN>
<F1> Generally appears as MercBcpMO or MercBc in newspaper stock tables.
<F2> The average daily volume subsequent to March 24, 1993 reflects the
listing of Mercantile Bancorporation Inc. common stock on the New
York Stock Exchange.
</TABLE>
DIVIDEND REINVESTMENT PLAN AND DIVIDEND DIRECT DEPOSIT
The Dividend Reinvestment Plan provides shareholders of record a
regular way of investing cash dividends in additional shares at an
average market price and/or investing optional cash payments without
payment of brokerage commissions or service charges.
Dividend Direct Deposit is a timesaving method of receiving cash
dividends through automatic deposit on date of payment to a checking,
savings or money market account at any financial institution which
participates in an Automated Clearing House.
If you wish to participate in or want further information concerning
the Dividend Reinvestment Plan or Dividend Direct Deposit, please
contact KeyCorp Shareholder Services, Inc., One Mercantile Center,
Suite 2120, St. Louis, MO 63101-1673, telephone 314-241-4002.
DIVIDEND DATES
Dividends are normally paid the first business day of January, April,
July and October.
24 MERCANTILE BANCORPORATION INC.
<PAGE> 26
<TABLE>
DEBT SECURITIES OUTSTANDING
(THOUSANDS)
<CAPTION>
SEPT. 30
1994
------
<S> <C>
7.625% Subordinated Notes, due 2002 $150,000
6.375% Subordinated Notes, due 2004 75,000
9.000% Mortgage-backed Notes, due 1999 53,450
8.000% Convertible Subordinated Capital
Notes, due 1995 9,915
</TABLE>
- ------------------------------------------------------------------------
<TABLE>
DEBT RATINGS
<CAPTION>
THOMSON STANDARD
MOODY'S FITCH BANKWATCH & POOR'S
------- ----- --------- --------
<S> <C> <C> <C> <C>
MERCANTILE BANCORPORATION INC.
Issuer Rating B
Commercial Paper P-2 TBW-1 A-2
Subordinated Debt
7.625% Subordinated Notes, due 2002 Baa1 BBB+ BBB
MERCANTILE BANK OF ST. LOUIS N.A.
6.375% Subordinated Notes, due 2004 A3 A- A- BBB+
9.000% Mortgage-backed Notes, due 1999 AAA
Certificates of Deposit TBW-1 A-/A-2
Letters of Credit TBW-1 A-/A-2
</TABLE>
- ------------------------------------------------------------------------
INVESTOR RELATIONS
Ralph W. Babb, Jr.
Vice Chairman
Mercantile Bancorporation Inc.
P.O. Box 524
St. Louis, MO 63166-0524
GENERAL COUNSEL
Thompson & Mitchell
One Mercantile Center
St. Louis, MO 63101-1693
TRANSFER AGENT
Society National Bank
P.O. Box 6477
Cleveland, OH 44101-1477
INDEPENDENT
ACCOUNTANTS
KPMG Peat Marwick LLP
1010 Market Street
St. Louis, MO 63101-9982
25
<PAGE> 27
- ------------------------------------------------------------------------
MERCANTILE
BANCORPORATION INC.
THIRD QUARTER REPORT 1994
Mercantile Bancorporation Inc.
Mercantile Tower
P.O. Box 524
St. Louis, MO 63166-0524
<PAGE> 28
APPENDIX
There is a bar-graph titled "COMMON STOCK PRICE RANGE" on page 24 of the
printed Third Quarter Report. The graph plots Fiscal Quarters to Dollars on
the X and Y axis respectively. This graph shows seven quarters of market price
ranges from the first quarter of 1993 to the third quarter of 1994. Each bar
indicates the dollar range of the stock price for the period. The high price
is printed above and the low price below the bar. These figures correspond
with the Common Stock Information table also on page 24.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT OF MERCANTILE BANCORPORATION INC. TO ITS SHAREHOLDERS FOR
THE QUARTER ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 667,577
<INT-BEARING-DEPOSITS> 231
<FED-FUNDS-SOLD> 225,472
<TRADING-ASSETS> 17,290
<INVESTMENTS-HELD-FOR-SALE> 271,709
<INVESTMENTS-CARRYING> 2,859,335
<INVESTMENTS-MARKET> 2,815,964
<LOANS> 7,873,054
<ALLOWANCE> 171,691
<TOTAL-ASSETS> 12,237,672
<DEPOSITS> 8,946,082
<SHORT-TERM> 1,794,127
<LIABILITIES-OTHER> 166,026
<LONG-TERM> 288,447
0
0
<COMMON> 216,175
<OTHER-SE> 826,815
<TOTAL-LIABILITIES-AND-EQUITY> 12,237,672
<INTEREST-LOAN> 471,185
<INTEREST-INVEST> 135,302
<INTEREST-OTHER> 7,034
<INTEREST-TOTAL> 613,521
<INTEREST-DEPOSIT> 189,517
<INTEREST-EXPENSE> 231,785
<INTEREST-INCOME-NET> 381,736
<LOAN-LOSSES> 24,909
<SECURITIES-GAINS> 380
<EXPENSE-OTHER> 310,003
<INCOME-PRETAX> 189,613
<INCOME-PRE-EXTRAORDINARY> 189,613
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,101
<EPS-PRIMARY> 2.79
<EPS-DILUTED> 2.79
<YIELD-ACTUAL> 4.68
<LOANS-NON> 26,538
<LOANS-PAST> 16,283
<LOANS-TROUBLED> 2,789
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 168,651
<CHARGE-OFFS> 46,685
<RECOVERIES> 24,816
<ALLOWANCE-CLOSE> 171,691
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1> Information not currently available; is reported on an
annual basis only.
</TABLE>
