<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 June 30, 1994 Commission File Number 1-11792
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Mercantile Bancorporation Inc.
- - -----------------------------------------------------------------------
(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
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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, 43,203,489 shares outstanding as of the close
of business on July 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 June 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
Six Months ended June 30, 1994 and 1993. Page 18
Consolidated Balance Sheet as of June 30, 1994
and December 31, 1993. Page 19
Consolidated Statement of Cash Flows - Six Months
ended June 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 $1.3 billion. Both of these acquisitions were accounted for as
poolings-of-interests. The historical consolidated financial statements as of
December 31, 1993 and for the three and six month periods ended June 30, 1993
have been restated to reflect this transaction.
2
<PAGE> 3
<TABLE>
Net income and net income per share for the Registrant and the pooled
companies prior to restatement were as follows:
<CAPTION>
($ in thousands except
per share data)
----------------------
Three months ended Six months ended
June 30, 1993 June 30, 1993
------------------ ----------------
<S> <C> <C>
REGISTRANT
Net income $28,089 $55,268
Net income per share .80 1.58
METRO BANCORPORATION
Net income 1,675 2,558
Net income per share 3.23 4.93
UNITED POSTAL BANCORP, INC.
Net income 4,083 9,086
Net income per share .68 1.51
</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 June 30, 1994, is incorporated
herein by reference.
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3(i) Articles of Incorporation of the Registrant, as
amended.
10-1 The Mercantile Bancorporation Inc. 1994
Stock Incentive Plan, filed on April 28, 1994 as
Appendix B to the Definitive Proxy Materials of
Registrant, is incorporated herein by reference.
10-2 The Mercantile Bancorporation Inc. 1994
Executive Incentive Compensation Plan, filed on
April 28, 1994 as Appendix C to the Definitive Proxy
Materials of Registrant, is incorporated herein by
reference.
10-3 The Mercantile Bancorporation Inc.
Voluntary Deferred Compensation Plan, filed on
April 28, 1994 as Appendix D to the Definitive Proxy
Materials of Registrant, is incorporated by reference.
10-4 The Mercantile Bancorporation Inc. 1994
Stock Incentive Plan For Non-Employee
Directors, filed on April 28, 1994 as Appendix E to
the Definitive Proxy Materials of Registrant, is
incorporated herein by reference.
19 Quarterly Report of the Registrant to its Shareholders
for the quarter ended June 30, 1994.
3
<PAGE> 4
(b) Reports on Form 8-K:
Registrant filed one (1) report on Form 8-K during the
quarter ended June 30, 1994. In that report, dated June 17,
1994, under Item 5, Registrant filed supplemental
consolidated financial statements for the years
ended December 31, 1993, 1992 and 1991, which statements
restated Registrant's historical consolidated financial
statements for those years to reflect the acquisitions of
Metro Bancorporation ("Metro") on January 3, 1994 and United
Postal Bancorp, Inc. ("UPBI") on February 1, 1994 (the
"Supplemental Financial Statements"). Both transactions were
accounted for under the pooling-of-interests method of
accounting.
In addition, under Item 7, Registrant filed the consent of
KPMG Peat Marwick to incorporation by reference of its
report on the Supplemental Financial Statements into active
registration statements of the Registrant.
The June 17, 1994 Form 8-K included the financial statements,
notes and auditor's report listed below:
Independent Auditors' Report of KPMG Peat Marwick dated
June 3, 1994.
Supplemental Consolidated Statement of Income for the
years ended December 31, 1993, 1992 and 1991.
Supplemental Consolidated Balance Sheet as of
December 31, 1993, 1992 and 1991.
Supplemental Consolidated Statement of Changes in
Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991.
Supplemental Consolidated Statement of Cash Flows for
the years ended December 31, 1993, 1992 and 1991.
Notes to Supplemental Consolidated Financial
Statements.
4
<PAGE> 5
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 August 15 , 1994 s/W. Randolph Adams
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W. Randolph Adams
Chief Financial Officer
5
<PAGE> 6
<TABLE>
EXHIBIT INDEX
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<CAPTION>
Exhibit No. Description Location
- - ----------- ----------- --------
<C> <S>
3(i) Articles of Incorporation of Registrant, <C>
as amended. Included herein
10-1 The Mercantile Bancorporation Inc. 1994
Stock Incentive Plan, filed on
April 28, 1994 as Appendix B to the
Definitive Proxy Materials of Incorporated herein
Registrant. by reference
10-2 The Mercantile Bancorporation Inc. 1994
Executive Incentive Compensation Plan,
filed on April 28, 1994 as Appendix C to
the Definitive Proxy Materials of Incorporated herein
Registrant. by reference
10-3 The Mercantile Bancorporation Inc.
Voluntary Deferred Compensation Plan,
filed on April 28, 1994 as Appendix D
to the Definitive Proxy Materials of Incorporated herein
Registrant. by reference
10-4 The Mercantile Bancorporation Inc. 1994
Stock Incentive Plan for Non-Employee
Directors, filed on April 28, 1994 as
Appendix E to the Definitive Proxy Incorporated herein
Materials of the Registrant. by reference
19 Quarterly Report of the Registrant to its
Shareholders for the quarter ended
June 30, 1994. Included herein
</TABLE>
<PAGE> 1
MERCANTILE BANCORPORATION INC.
ARTICLES OF INCORPORATION
AS OF JULY 11, 1994
<PAGE> 2
ARTICLE 1
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The name of the Corporation is MERCANTILE BANCORPORATION INC.
ARTICLE 2
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The address, including street and number of the Corporation's
registered office in this state is Mercantile Tower, P.O. Box 524, St.
Louis, Missouri 63166, and the name of its registered agent at such
address is Ralph W. Babb, Jr.
ARTICLE 3
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The Corporation shall have authority to issue the following
shares:
A. Common Stock
100,000,000 shares of voting Common Stock with a par value of
$5.00 per share.
B. Preferred Stock
5,000,000 shares of Preferred Stock with no par value which
shall have (i) those voting rights required by law and (ii) voting
rights equal to those of the shares of Common Stock except to the
extent the voting rights of any series of Preferred Stock shall be
denied or limited by the Board of Directors in an authorizing
resolution as hereinafter provided.
(a) The Board of Directors, by adoption of an authorizing
resolution may cause Preferred Stock to be issued from time to
time in one or more series.
(b) The Board of Directors, by adoption of an authorizing
resolution, may with regard to the shares of any series of
Preferred Stock:
(1) Fix the distinctive serial designation of the shares;
(2) Fix the dividend rate, if any;
(3) Fix the date from which dividends on shares issued before
the date for payment of the first dividend shall be
cumulative, if any;
(4) Fix the redemption price and terms of redemption, if any;
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(5) Fix the amounts payable per share in the event of
dissolution or liquidation of the corporation if any;
(6) Fix the terms and amounts of any sinking fund to be used
for the purchase or redemption of shares, if any;
(7) Fix the terms and conditions under which the shares may
be converted, if any;
(8) Deny or limit the voting rights of such Preferred Stock
not required by law; and
(9) Fix such other preferences, qualifications, limitations,
restrictions and special or relative rights not required
by law.
ARTICLE 4
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The number and class of shares that were issued before the
Corporation commenced business, the consideration that was paid therefor
and the capital with which the Corporation commenced business were as
follows:
Consideration
Number of Shares Class To Be Paid Par Value
- - ---------------- ----- ------------- ---------
100 Common $500 $5
The Corporation did not commence business until consideration of the
value of at least $500 had been received for the issuance of shares.
ARTICLE 5
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The name and place or residence of the incorporator was as
follows:
Name Street City
- - ---- ------ ----
Donald E. Lasater 17 Southmoor Clayton, MO 63105
ARTICLE 6
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A. Board of Directors. The number of Directors to constitute
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the Board of Directors shall be eighteen (18); provided, however, that
such number may be fixed, from time to time, at not less than twelve
(12) nor more than twenty-four (24), by, or in the manner provided in,
the By-laws of the Corporation, and any such change shall be reported to
the Secretary of State of the State of Missouri within thirty (30)
calendar days of such change. The Directors shall be divided into three
classes: Class I, Class II and Class III; and the number of Directors
in such classes shall be as nearly equal as possible. The term of
office of the initial Class I Directors shall expire at the annual
meeting of shareholders of the Corporation in 1986; the term of office
of the initial Class II Directors shall expire at the annual meeting of
shareholders of the Corporation in 1987; and the term of office of the
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initial Class III Directors shall expire at the annual meeting of
shareholders of the Corporation in 1988; or in each case until their
respective successors are duly elected and qualified. At each annual
election held after 1985 the Directors chosen to succeed those whose
terms then expire shall be identified as being of the same class as the
Directors they succeed and shall be elected for a term of three (3)
years expiring at the third succeeding annual meeting or thereafter
until their respective successors are duly elected and qualified. If
the number of Directors is changed, any increase or decrease in the
number of Directors shall be apportioned among the classes so as to
maintain the number of Directors in each class as nearly equal as
possible. Any Director elected to fill a vacancy in any class (whether
such vacancy is caused by death, resignation, or removal, or by an
increase in the number of Directors in such class) shall hold office for
a term which shall expire with the term of the Directors in such class.
At a meeting called expressly for that purpose, the entire Board of
Directors, or any individual Director or Directors, may be removed
without cause, only upon the affirmative vote of the holders of at least
seventy-five percent (75%) of the total votes to which all of the shares
then entitled to vote at a meeting of shareholders called for an
election of Directors are entitled; provided, however, that, if less
than the entire Board of Directors is to be so removed without cause, no
individual Director may be so removed if the votes cast against such
Director's removal would be sufficient to elect such Director if then
cumulatively voted at an election of the class of Directors of which
such Director is a part. At a meeting called expressly for that
purpose, any Director may be removed by the shareholders for cause by
the affirmative vote of the holders of a majority of the shares entitled
to vote upon his election.
B. Vote Required for Amendment. In addition to any affirmative
----------------------------
vote required by law or otherwise, any amendment, alteration, change or
repeal of the provisions of this Article 6 shall require the affirmative
vote of the holders of at least seventy-five percent (75%) of the total
votes to which all of the shares then entitled to vote at a meeting of
shareholders called for an election of Directors are entitled, unless
such amendment, alteration, change or repeal has previously been
expressly approved by the Board of Directors of the Corporation by the
affirmative, vote or consent of at least sixty-six and two-thirds
percent (66 2/3%) of the number of Directors then authorized by, or in
the manner provided in, the By-laws, in which case the shareholder vote
required by this Section B of Article 6 shall not apply.
ARTICLE 7
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The duration of the Corporation is perpetual.
ARTICLE 8
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The Corporation is formed for the following purposes:
(1) To undertake, conduct, manage, assist, promote, operate and to
engage or participate in every kind of commercial, industrial,
electronic, manufacturing, agricultural,
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<PAGE> 5
scientific or other enterprise, business, undertaking, venture, corporation,
co-partnership, association or operation of every kind and description;
(2) To acquire by purchase, exchange, lease, devise or otherwise
and to hold, maintain, manage, improve, develop and operate and to sell,
transfer, convey, lease, mortgage, exchange or otherwise dispose of or
deal in or with real property wheresoever situated, either within or
without the State of Missouri, and any and all rights, interests or
privileges therein; and to erect, construct, make, improve and operate
or aid or subscribe toward the erection, construction, making
improvement and operation of offices, warehouses, plants, mills, stores,
laboratories, studios, workshops, buildings and other establishments and
installations or improvements on any real estate or any right, interest
or privilege therein;
(3) To acquire by purchase, exchange, lease, bequest or otherwise,
to import, export, manufacture, produce, hold, own, use, manage,
improve, alter, develop and to mortgage, pledge, sell, assign, transfer,
lease, exchange or otherwise dispose of or deal in or with goods,
commodities, wares, automobiles, aircraft, machinery, equipment,
supplies, merchandise and all other personal property of every kind,
nature and description, tangible or intangible, wheresoever situated,
either within or without the State of Missouri and any and all other
rights, interests or privileges therein;
(4) To adopt, apply for, obtain, register, purchase, lease, take
assignment or licenses of or otherwise acquire or obtain the use of, to
hold, protect, own, use, develop and introduce, and to sell, assign,
lease, grant licenses or other rights in respect to, make contracts
concerning or otherwise deal with, dispose of or turn to account any
copyrights, trademarks, trade names, brands, labels, patent rights,
letters patent and patent applications of the United States of America
or of any other country, government or authority, and any inventions,
improvements, processes, formulae, mechanical and other combinations,
licenses and privileges, whether in connection with or secured under
letters patent or otherwise; and to carry on any business, whether
manufacturing or otherwise, which is or shall be necessary, convenient,
advisable or adaptable for the utilization by this corporation in any
way, directly or indirectly, of such copyrights, trademarks, trade
names, brands, labels, patent rights, letters patent, patent
applications, inventions, improvements, processes, formulae, mechanical
and other combinations, licenses and privileges;
(5) To acquire by purchase, exchange, gift, bequest, subscription,
or by acting as an original incorporator or otherwise, and to own, hold,
invest in, sell, assign, transfer, exchange, pledge, hypothecate, deal
in and otherwise dispose of stocks (preferred as well as common), bonds,
notes, debentures, mortgages or other evidences of indebtedness and
obligations and securities of, and shares of other interests in or
created or issued by any corporation, trust companies or banks (whether
incorporated under the laws of Missouri, or other states or under the
laws of the United States or any other country), company or joint stock
association, persons, firms, associations, copartnerships, domestic or
foreign, or of any domestic or foreign state, government, or
governmental authority or of any political or administrative subdivision
or department thereof, and certificates or receipts of any kind
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<PAGE> 6
representing or evidencing any interest in any such stocks, bonds,
shares of stock, notes, debentures, mortgages or other evidences of
indebtedness, obligations or securities including, but not limited to,
electronic, commercial, manufacturing, agricultural, industrial,
scientific and insurance companies, corporations or agencies, trust
companies or banks, whether incorporated under the laws of Missouri or
of the United States or of foreign states or countries; to issue its own
shares of stock, bonds, notes, debentures, or other evidences of
indebtedness and obligations and securities for the acquisition of any
such stocks, bonds, notes, debentures, mortgages or other evidences of
indebtedness, obligations, securities, certificates or receipts
purchased or otherwise acquired by it; and, while the owner or holder of
any such stocks, bonds, notes, debentures, mortgages, evidences of
indebtedness, obligations, securities, certificates or receipts to
exercise all the rights, powers and privileges of ownership in respect
thereof, including the right to vote thereon for any and all purposes;
(6) To make loans or advances, to guarantee the obligations of, or
purchase or acquire shares of stock of, or make contributions to capital
or surplus, and to aid in any other manner by providing financial
assistance to any corporation, association or copartnership, including,
but not by way of limitation, any corporation all or substantially all
of the shares of voting stock of which is owned by this Corporation and
any affiliate or subsidiary of any such Corporation. Any such loan,
advance or other assistance to be with or without interest, unsecured,
or secured in any manner, and upon such other terms and conditions as
the Board of Directors of this Corporation shall approve;
(7) To form general or limited partnerships for any lawful
purpose, irrespective of whether any such partnership is to engage in a
business in which this Corporation would otherwise be authorized to
engage under these Articles of Incorporation, such partnerships to be
formed under any present or future laws of the State of Missouri or any
other state, and to enter into and execute general or limited
partnership agreements and certificates in reference to any such
partnerships as either a general or limited partner or as both a general
and limited partner, and otherwise to acquire the interests of a general
or a limited partner in any such general or limited partnerships, and to
act as a general or limited partner in any such general or limited
partnerships, and, as such, to perform all obligations thereby imposed
upon it by law or by contract including, but not by way of limitation,
the use and delivery of the funds and other property of this Corporation
to any such partnership as payment of this Corporation's contribution to
such partnership or otherwise, all for such purposes and in such amount
and subject to such terms and conditions as the Board of Directors of
this Corporation deems to be in the best interests of the stockholders
of this Corporation;
(8) To borrow or raise moneys for any of the purposes of the
Corporation, from time to time, without limit as to amount, with or
without security, all as determined by the Board of Directors; to issue
and sell or exchange its own securities, Common or Preference or other
Stock or debt obligations, including but without limitation debentures,
either nonconvertible or convertible into any class of stock authorized
by the Articles, in such amounts, on such terms and conditions, for such
purposes and at such prices as the Board of Directors may determine; to
a like extent when deemed desirable, to secure such debt
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<PAGE> 7
obligations by liens upon, or the pledge of, or the conveyance or
assignment in trust of, the whole or any part of the properties, assets,
business, and good will of the Corporation, whether at the time owned or
thereafter acquired; and, to a like extent, to purchase, acquire, hold,
own, cancel, re-issue, sell, assign, transfer, exchange, or otherwise
dispose of or deal in or with, its own securities (including shares of
its stock, common or preferred) in any manner whatsoever;
(9) To enter into, make and perform contracts of every sort and
description with any person, firm, copartnership, association,
corporation, public or private;
(10) To carry out all or any part of the foregoing objects and
purposes as principal, agent, partner, either limited or general,
contractor, or otherwise, either alone or in conjunction with any other
persons, firms, copartnerships, associations or corporations and in any
part of the world, and in carrying on any of its business and for the
attainment or furtherance of any of its objects and purposes to make and
perform such agreements and contracts of any kind and description, and
to do such acts and things and to exercise any and all such powers as a
natural person could lawfully make, perform, do or exercise and, as
aforesaid, to do anything and everything which is or may appear
necessary, useful, convenient or appropriate for the attainment,
furtherance or exercise of any of its purposes, objects or powers.
The foregoing provisions of this Article shall be construed both
as purposes and powers and each as an independent purpose and power in
furtherance of, and not in limitation of, the powers which the
Corporation may have under present or future laws of the State of
Missouri, and the purposes and powers hereinbefore specified shall,
except when otherwise provided in this Article 8 be in no wise limited,
or restricted by reference to, or inference from the terms or any
provisions of this or any other Article of these Articles of
Incorporation; but such provisions shall not be construed to permit the
Corporation to carry on any business, or to exercise any power, or to do
any act which a corporation now or hereafter organized under The General
and Business Corporation Law of Missouri may not at the time lawfully
carry on, exercise, or do; and provided further that the Corporation
shall not carry on any business or exercise any power in any state,
territory, or country which under the laws thereof the Corporation may
not lawfully carry on or exercise.
ARTICLE 9
---------
The power to make, alter, amend or repeal the By-laws of the
Corporation shall be vested in the Board of Directors.
In addition to the powers which it has pursuant to law, the Board
of Directors shall have all the powers herein contained which shall
include the power:
(i) from time to time to fix the compensation of its members for
attending meetings of the Board of Directors,
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<PAGE> 8
(ii) to adopt, amend, change and readjust any type of pension,
retirement, profit sharing or bonus plan, contributing or
non-contributing, covering any or all of the officers and employees of
said Corporation.
ARTICLE 10
----------
Any person, upon becoming the owner or holder of any shares of
stock or other securities issued by this Corporation, does thereby
consent and agree that all rights, powers, privileges, obligations or
restrictions pertaining to such person or such securities in any way may
be altered, amended, restricted, enlarged or repealed by legislative
enactments of the State of Missouri or of the United States hereinafter
adopted which have reference to or affect corporations, such securities,
or such persons in any way; and that the Corporation reserves the right
to transact any business of the Corporation, to alter, amend or repeal
these Articles of Incorporation, or to do any other act or things as
authorized, permitted or allowed by such legislative enactments.
ARTICLE 11
----------
No holder of any share or shares of stock of any kind, series or
class now or hereafter authorized shall be entitled as such as a matter
of right to subscribe for or purchase any stock of any kind, series or
class, whether now or hereafter authorized or outstanding, which may
hereafter be issued or sold by this Corporation, or any securities
including, but without limitation, debentures convertible into stock of
any class, and whether issued or sold for cash, property, services or
otherwise.
ARTICLE 12
----------
(1) This Corporation shall and does hereby indemnify any person
who is or was a director or officer of the Corporation or any Subsidiary
against any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred by such person in
connection with any civil, criminal, administrative or investigative
action, suit, proceeding or claim (including an action by or in the
right of the Corporation or a Subsidiary) by reason of the fact that
such person is or was serving in such capacity; provided however, that
-----------------
no such person shall be entitled to any indemnification pursuant to this
subsection (l) on account of: (i) conduct which is finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful
misconduct; or (ii) an accounting for profits pursuant to Section 16(b)
of the Securities Exchange Act of 1934, as amended from time to time, or
pursuant to a successor statute or regulation.
(2) This Corporation may, to the extent that the Board of
Directors deems appropriate and as set forth in a bylaw or resolution,
indemnify any person who is or was an employee or agent of this
Corporation or any Subsidiary or who is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, banking association, partnership, joint venture, trust or
other enterprise (including an
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<PAGE> 9
employee benefit plan) against any and all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
incurred by such person in connection with any civil, criminal,
administrative or investigative action, suit, proceeding or claim
(including an action by or in the right of the Corporation or a
Subsidiary) by reason of the fact that such person is or was serving in
such capacity; provided however, that no such person shall be entitled
-----------------
to any indemnification pursuant to this subsection (2) on account of:
(i) conduct which is finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct; or (ii) an accounting for
profits pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended from time to time, or pursuant to a successor statute
or regulation.
(3) This Corporation may, to the extent that the Board of
Directors deems appropriate, make advances of expenses, including
attorneys' fees, incurred prior to the final disposition of a civil,
criminal, administrative or investigative action, suit, proceeding or
claim (including an action by or in the right of the Corporation or a
Subsidiary) to any person to whom indemnification is or may be available
under this Article 12; provided however, that prior to making any
-----------------
advances, the Corporation shall receive a written undertaking by or on
behalf of such person to repay such amounts advanced in the event that
it shall be ultimately determined that such person is not entitled to
such indemnification.
(4) The indemnification and other rights provided by this Article
12 shall not be deemed exclusive of any other rights' to which a person
to whom indemnification is or may be otherwise available under these
Articles of Incorporation, the By-laws or any agreement, vote of
shareholders or disinterested directors or otherwise. This Corporation
is authorized to purchase and maintain insurance on behalf of the
Corporation or any person to whom indemnification is or may be available
against any liability asserted against such person in, or arising out
of, such person's status as director, officer, employee or agent of this
Corporation, any of its Subsidiaries or another corporation, banking
association, partnership, joint venture, trust or other enterprise
(including an employee benefit plan) which such person is serving at the
request of the Corporation.
(5) Each person to whom indemnification is granted under
subsection (1) of this Article 12 is entitled to rely upon the
indemnification and other rights granted hereby as a contract with this
Corporation and such person and such person's heirs, executors,
administrator and estate shall be entitled to enforce against this
Corporation all indemnification and other rights granted to such person
by subsections (1) and (3) and this subsection (5) of this Article 12.
The indemnification and other rights granted by subsections (1) and (3)
and this subsection (5) of this Article 12 shall survive amendment,
modification or repeal of this Article, and no such amendment,
modification or repeal shall act to reduce, terminate or otherwise
adversely affect the rights to indemnification granted hereby, with
respect to any expenses, judgments, fines and amounts paid in settlement
incurred by a person to whom indemnification is granted under subsection
(1) of this Article 12 with respect to an action, suit, proceeding or
claim that arises out of acts or omissions of such person that occurred
prior to the effective date of such amendment, modification or repeal.
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Any indemnification granted by the Board of Directors pursuant
to subsection (2) of this Article 12, shall inure to the person to whom
the indemnification is granted, and such person's heirs, executors,
administrator and estate; provided however, that such indemnification
-----------------
may be changed, modified or repealed, at any time or from time to time,
at the discretion of the Board of Directors and the survival of such
indemnification shall be in accordance with terms determined by the
Board of Directors.
(6) For the purposes of this Article 12, "Subsidiary" shall mean
any corporation, banking association, partnership, joint venture, trust,
or other enterprise of which a majority of the equity or ownership
interest is directly or indirectly owned by this Corporation.
ARTICLE 13
----------
A. Vote Required for Business Combinations. In addition to
----------------------------------------
any affirmative vote required by law, and except as otherwise expressly
provided in Section B of this Article 13, a Business Combination (as
hereinafter defined) may not be consummated or effected unless such
transaction shall first have received the affirmative vote of the
holders of at least seventy-five percent (75%) of the total votes to
which all of the then outstanding shares of capital stock of the
Corporation are entitled, voting together as a Single class (it being
understood that for the purposes of this Article 13, each share of the
voting stock shall be entitled to the number of votes granted to it by
law or pursuant to Article 3 of these Articles of Incorporation)
("Voting Stock"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by or pursuant to law, these Articles of
Incorporation, or any agreement.
B. Exception. Section A of this Article 13 shall not be
----------
applicable to a Business Combination, and such Business Combination
shall require only the affirmative vote (if any) as required by law or
otherwise, if the Business Combination shall have been expressly
approved by the Board of Directors of the Corporation by the affirmative
vote or consent of at least sixty-six and two-thirds percent (66 2/3%)
of the number of directors of the Corporation as then authorized by, or
in the manner provided in, the By-laws. In determining whether or not
to approve any such Business Combination, the Board of Directors shall
give due consideration to all factors the Board may consider relevant,
including without limitation:
(1) the legal and economic effects on the depositors and
customers of the Corporation and its subsidiaries, on the
communities and geographic areas in which the Corporation and its
subsidiaries operate or are located, and on any of she businesses
and properties of the Corporation and its subsidiaries, and
(2) the adequacy of the consideration offered in relation not
only to the current market price of the outstanding securities
of the Corporation but also to the current value of the
Corporation in a freely negotiated transaction and the Board
-9-
<PAGE> 11
of Directors' estimate of the future value of the Corporation
(including the unrealized value of its properties and assets) as
an independent going concern.
C. Definitions. For the purposes of Article 13 of the
------------
Articles of Incorporation:
(1) A "Business Combination" shall mean:
(a) any merger, consolidation or exchange of shares of
capital stock of the Corporation or any Subsidiary (as hereinafter
defined) with or into any Interested Person (as hereinafter
defined) or any other corporation or entity (whether or not it is
an Interested Person) which is, or after such merger,
consolidation or exchange of shares would be, an Interested Person
or an Affiliate (as hereinafter defined) of an Interested Person,
regardless of the surviving entity; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with an Interested Person or any Affiliate
of any Interested Person (in a single transaction or a series of
related transactions) other than in the ordinary course of
business, of all or a substantial part of the assets of the
Corporation or of any Subsidiary, or both; or
(c) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition to or with the Corporation or any Subsidiary (in
a single transaction or a series of related transactions) other
than in the ordinary course of business, of all or a substantial
part of the assets of an Interested Person or any Affiliate of an
Interested Person, or both; or
(d) any issuance or transfer by the Corporation or any
Subsidiary of any securities of the Corporation or any Subsidiary
to an Interested Person or any Affiliate of an Interested Person
(other than an issuance or transfer of securities which is
effected on a pro rata basis to all shareholders of the
Corporation); or
(e) any acquisition by the Corporation or any Subsidiary,
other than in the ordinary course of business, of: (i) any
securities of an Interested Person or any Affiliate of an
Interested Persons, or (ii) any securities of the Corporation
which are owned by an Interested Person or an Affiliate of an
Interested Person; or
(f) any recapitalization or reclassification of shares of
any class of capital stock of the Corporation or any Subsidiary,
or any merger or consolidation of the Corporation with any
Subsidiary (whether or not involving an Interested Person), which
transaction would have the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of
-10-
<PAGE> 12
any class of capital stock of the Corporation (or any securities
convertible into any class of such capital stock) with respect to
which an Interested Person or an Affiliate of an Interested Person
is the "Beneficial Owner" (as hereinafter defined); or
(g) any merger or consolidation of the Corporation with any
Subsidiary after which the provisions of this Article 13 shall
not be contained in the articles of incorporation of the surviving
entity; or
(h) any plan or proposal for the liquidation or dissolution
of the Corporation proposed by or on behalf of an interested Person
or an Affiliate of an Interested Person; or
(i) any agreement, contract, plan, proposal or other
arrangement providing for any of the foregoing.
(2) An "Interested Person" shall mean any individual,
partnership, firm, corporation or other entity (other than the
Corporation or any subsidiary) who or which, directly or indirectly,
together with any of his or its Affiliates and Associates (as
hereinafter defined), is, or at any time within the one-year period
immediately prior to the date in question was, the Beneficial Owner of
five percent (5%) or more of the voting power of the outstanding Voting
Stock.
(3) A "Subsidiary" shall mean any corporation, of which a
majority of its capital stock is directly or indirectly owned by the
Corporation.
(4) The term "Beneficial Owner" shall have the meaning ascribed
to such term by Rule l3d-3 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as in effect
on February 1, 1985.
(5) The term "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule l2b-2 promulgated by
the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as in effect on February 1, 1985.
D. Vote Required for Amendment. Any amendment, alteration,
----------------------------
change or repeal of the provisions of this Article 13 shall, in addition
to any affirmative vote required by law or otherwise, require the
affirmative vote of the holders of at least seventy-five percent (75%)
of the Voting Stock of the Corporation, unless such amendment,
alteration, change or repeal has previously been expressly approved by
the Board of Directors of the Corporation by the affirmative vote or
consent of at least sixty-six and two-thirds percent (66 2/3%) of the
number of Directors then authorized by, or in the manner provided in,
the By-laws, in which case the shareholder vote required by this Section
D of Article 13 shall not apply.
-11-
<PAGE> 1
MERCANTILE
BANCORPORATION INC.
SECOND 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(1)
<CAPTION>
SECOND QUARTER SIX 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 $ .93 $ .80 16.3% $ 1.84 $ 1.58 16.5%
Dividends declared .28 .24 3/4 13.1 .56 .49 1/2 13.1
Book value at June 30 23.49 21.50 9.3 23.49 21.50 9.3
Market price at June 30 35 1/8 32 7/8 6.8 35 1/8 32 7/8 6.8
Average common shares outstanding 43,036,984 42,406,339 1.5 42,947,890 42,243,319 1.7
- - ----------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Taxable-equivalent net interest income $129,013 $128,299 .6% $256,715 $255,176 .6%
Tax-equivalent adjustment 2,288 2,307 (.8) 4,597 4,804 (4.3)
Net interest income 126,725 125,992 .6 252,118 250,372 .7
Provision for possible loan losses 8,015 14,485 (44.7) 16,398 28,534 (42.5)
Other income 47,016 50,232 (6.4) 95,938 99,872 (3.9)
Other expense 102,663 108,015 (5.0) 206,487 215,376 (4.1)
Income taxes 22,860 19,877 15.0 46,113 39,422 17.0
Net income 40,203 33,847 18.8 79,058 66,912 18.2
- - ----------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCES
Total assets $11,933,901 $11,778,361 1.3%
Loans and leases 7,619,002 7,468,807 2.0
Deposits 9,140,506 9,321,063 (1.9)
Shareholders' equity 1,013,443 912,679 11.0
Reserve for possible loan losses 172,493 151,694 13.7
- - ----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Total assets $12,047,036 $12,230,024 (1.5)% $12,129,981 $12,247,440 (1.0)%
Earning assets 10,987,413 11,113,524 (1.1) 11,065,463 11,155,457 (.8)
Loans and leases 7,459,588 7,494,829 (.5) 7,410,535 7,473,564 (.8)
Deposits 9,711,800 10,014,108 (3.0) 9,824,344 10,032,384 (2.1)
Shareholders' equity 1,001,636 902,933 10.9 988,845 884,162 11.8
- - ----------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Return on assets 1.33% 1.11% 1.30% 1.09%
Return on equity 16.05 14.99 15.99 15.14
Overhead ratio 58.32 60.50 58.55 60.66
Net interest rate margin 4.70 4.62 4.64 4.57
Equity to assets 8.49 7.75
Tier I capital to risk-adjusted assets 11.58 10.53
Total capital to risk-adjusted assets 15.61 14.05
Leverage 7.90 6.93
Reserve for possible loan losses to outstanding
loans 2.26 2.03
Reserve for possible loan losses to non-performing
loans 495.20 238.41
Non-performing assets to outstanding loans
and foreclosed assets .87 1.60
- - ----------------------------------------------------------------------------------------------------------------------------------
SELECTED DATA
Banks(2) 42 40
Banking offices(2) 254 236
Full-time equivalent employees 5,825 5,977
- - ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 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.
(2) Includes United Postal Savings Association, a state-chartered thrift institution.
</TABLE>
1
<PAGE> 3
LETTER TO SHAREHOLDERS
During the second quarter of the year, Mercantile continued a pattern
of solid earnings growth that has been consistent over the past four
years. This record-setting performance was driven by improvements in
operating efficiencies and asset quality combined with a strong net
interest rate margin and an increase in loan demand.
Net income for the quarter was $40,203,000, an increase of 18.8% over
the $33,847,000 earned during the same period last year. On a per
share basis, net income increased by 16.3% to $.93 this year from $.80
in 1993.
For the second quarter of 1994, net interest income was $126,725,000,
and the net interest rate margin was a strong 4.70% compared to 4.62%
last year. Increased loan demand in Mercantile's markets was reflected
in loan growth of 2.0% year-to-year, as total loans outstanding at
period end were more than $7.6 billion, up from less than $7.5 billion
in 1993.
Asset quality measures for the Corporation continued to improve,
placing Mercantile among the top banks in the U.S. Non-performing
loans at June 30, 1994 declined to $34,833,000 or .46% of total loans
from $63,627,000 or .85% last year. Foreclosed assets also declined,
and were $31,608,000 at the end of the second quarter of this year
versus $56,934,000 in 1993.
The reserve for possible loan losses grew to $172,493,000 at June 30
of this year and represented 2.26% of total loans and 495.20% of non-
performing loans compared with a reserve of $151,694,000 and ratios of
2.03% and 238.41%, respectively, at the end of 1993's second quarter.
The provision for possible loan losses for the quarter decreased 44.7%
to $8,015,000 in 1994 from $14,485,000 last year.
The Corporation has announced two new merger agreements-one with Wedge
Bank in Alton, Illinois, the other with UNSL Financial Corp in
Lebanon, Missouri. These mergers will further strengthen Mercantile's
franchise in a number of its existing markets, and provide the
Corporation with entry into several attractive new communities.
Mercantile has established a track record of strong financial
performance, while significantly expanding its franchise through
mergers. The Corporation continues along the strategic path that has
made these accomplishments possible and that is leading Mercantile to
the ranks of the best banks in the United States.
Thomas H. Jacobsen
Chairman of the Board and
Chief Executive Officer
July 29, 1994
2 MERCANTILE BANCORPORATION INC.
<PAGE> 4
CORPORATE NEWS DEVELOPMENTS
/ / SIX MEMBERS OF MERCANTILE BANCORPORATION'S BOARD OF DIRECTORS WERE
REELECTED AT THE CORPORATION'S ANNUAL SHAREHOLDERS' MEETING ON
APRIL 28. In addition, shareholders approved an increase in the
number of shares of common stock authorized for issue, and
measures related to Mercantile's executive compensation and stock
purchase plans. The six directors reelected for terms expiring in
1997 were Harry M. Cornell, Jr., Bernard A. Edison, Thomas H.
Jacobsen, Craig D. Schnuck, Robert W. Staley and Robert L. Stark.
/ / AT ITS MAY MEETING, THE BOARD OF DIRECTORS DECLARED A DIVIDEND OF
$.28 PER SHARE OF COMMON STOCK, which was paid July 1 to
shareholders of record as of the close of business on June 10.
/ / ON JULY 6, MERCANTILE ANNOUNCED PLANS TO EXPAND ITS OPERATIONS IN
SOUTHWESTERN ILLINOIS THROUGH A MERGER WITH WEDGE BANK, BASED IN
ALTON. Wedge Bank has approximately $210 million in assets and
operates six offices in the Madison County communities of Alton,
East Alton, Bethalto and Godfrey, as well as an office in
Brighton, in southern Macoupin County.
/ / MERCANTILE ANNOUNCED PLANS FOR A MERGER WITH LEBANON, MISSOURI-
BASED UNSL FINANCIAL CORP ON JULY 13, 1994. UNSL is the $464
million-asset holding company for United Savings Bank, a savings
and loan with 21 offices in southwest and central Missouri, and a
leading residential mortgage lender in the region. This merger
will establish a presence for Mercantile in Lebanon and the
surrounding area, and further strengthen its positions in
Springfield, Columbia, Monett, the Lake of the Ozarks region and
other Missouri communities.
/ / MERCANTILE WILL HAVE COMPLETED THE INTEGRATION OF UNITED POSTAL
SAVINGS ASSOCIATION INTO ITS ST. LOUIS-AREA OPERATIONS BY AUGUST 17.
O United Postal's St. Louis, St. Louis County and St. Charles
County offices are merging into Mercantile Bank of St. Louis
N.A., expanding its retail network to 40 branches.
O The United Postal branches in Jefferson County are becoming
part of Mercantile Bank of Jefferson County, which will now
operate five offices.
O On July 22, United Postal's agency office in Troy, Missouri
became the second full-service branch of Mercantile Bank of
Pike County, based in Bowling Green.
O The residential mortgage lending and servicing units of
Mercantile Bank of St. Louis and United Postal were combined
on July 1, to create Merc Mortgage-the #1 home lender in the
St. Louis area and a leading local mortgage servicer.
/ / MERCANTILE BANCORPORATION INC. CHAIRMAN AND CEO THOMAS H. JACOBSEN
IS HEADING THE 1994 ST. LOUIS AREA UNITED WAY CAMPAIGN IN ITS
DRIVE FOR A RECORD GOAL. Mercantile's Officer Call Program has 800
corporate officers calling on 5,000 St. Louis companies in an
unprecedented effort to support the United Way by expanding its
roster of contributors among small- and medium-sized businesses.
3
<PAGE> 5
FINANCIAL COMMENTARY
PERFORMANCE SUMMARY
Net income for the second quarter of 1994 was $40,203,000, an 18.8%
improvement from the $33,847,000 earned in the same period a year ago.
On a per share basis, net income was $.93, up 16.3% from the $.80
earned in last year's second quarter. Return on assets improved to
1.33% in the second quarter compared with 1.27% in the first quarter
of this year and 1.11% last year, while return on average equity was
16.05% versus 14.99% in 1993.
For the first half of 1994, net income was $79,058,000, up 18.2% from
the $66,912,000 earned last year, and on a per share basis was $1.84,
an improvement of 16.5% from the $1.58 recorded in the first half of
1993. When compared with last year, first-half 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 six months
of 1994, return on average assets was 1.30% compared with 1.09% last
year, while return on average equity was 15.99% in 1994, up from
15.14% 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 a merger with Wedge Bank,
a $210 million-asset bank headquartered in Alton, Illinois. On July
13, 1994, the Corporation announced plans to merge with UNSL Financial
Corp of Lebanon, Missouri, a $464 million-asset Missouri-chartered
savings and loan association in southwestern Missouri. Both
transactions will be accounted for as poolings-of-interests and are
expected to close by year-end 1994.
Net interest income increased .6% to $126,725,000 for the second
quarter of 1994 and .7% to $252,118,000 for the first six months of
1994. The net interest rate margin was 4.70% this quarter compared
with 4.58% in the first quarter and 4.62% for the second quarter of
1993, while the year-to-date margin was 4.64% compared with 4.57% last
year. Average earning assets for the first half of 1994 of $11.1
billion were flat in comparison with the $11.2 billion last year.
However, a positive trend emerged as quarterly average loans grew by
$98,653,000 or 1.3% from the first quarter of 1994.
Other income was $47,016,000 for the second quarter of 1994, a
decrease of $3,216,000 or 6.4% from a year ago. For the six months of
1994, other income was $95,938,000, a decrease of $3,934,000 or 3.9%
from last year. Modest growth
4 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 6
in trust fees, service charges and letters of credit fees were offset
by a significant decrease of $2,246,000 in net securities gains and by
declines in credit card fees, mortgage and investment banking income,
and miscellaneous revenues.
Second-quarter non-interest expenses were down 5.0% from a year ago
and totaled $102,663,000 compared with $108,015,000 last year, and
year-to-date were $206,487,000, down 4.1%. 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 58.55% compared with 60.66% last year, and a lowering of the
other expense to average assets ratio to 3.40% versus 3.52% in the
first half of 1993.
The provision for possible loan losses for the second quarter of 1994
was $8,015,000 compared with $14,485,000 the prior year, and was
$16,398,000 for the first six months of 1994 compared with $28,534,000
in 1993. Net charge-offs for the first six months of 1994 and 1993
were $12,556,000 and $43,410,000, respectively, and on an annualized
basis were .34% of average loans compared with 1.16% last year. At
June 30, 1994, the reserve for possible loan losses was $172,493,000
and covered 495.20% of non-performing loans compared with 293.39% at
year-end and 238.41% last June 30.
Non-performing loans as of June 30, 1994 were $34,833,000 or .46% of
total loans, down from the year-end 1993 figures of $57,483,000 or
.78%, and $63,627,000 or .85% at June 30, 1993. Foreclosed assets
declined to $31,608,000 compared with $36,014,000 at year's end and
$56,934,000 last June 30.
Earnings in the St. Louis Area (Mercantile Bank of St. Louis N.A.,
United Postal Savings Association and Mercantile Trust Company N.A.)
for the first half of 1994 were $43,339,000, up 20.4% from 1993. These
results reflected significant reductions in operating expenses and the
provision for possible loan losses, partially offset by a slight
decline in net interest income and other income. The other income
decrease was due largely to a higher level of securities gains during
the first half of 1993 at United Postal. Return on average assets for
the group was 1.36% compared with 1.12% for the first half of 1993. It
is currently anticipated that United Postal Savings Association will
be merged into Mercantile Bank of St. Louis N.A. in mid-August 1994.
In the 36 Community Banks, net income was $33,852,000, an increase of
6.9%, while return on average assets improved to 1.55% compared with
1.43% last year. Earnings for the three banks in the Kansas City Area
for the first half of 1994 were $10,164,000, up 19.5% from a year ago.
Return on average assets was 1.26% compared with 1.04% last year.
5
<PAGE> 7
FINANCIAL COMMENTARY (CONT'D)
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 1
ORGANIZATIONAL CONTRIBUTION
($ IN THOUSANDS)
<CAPTION>
JUNE 30, 1994
----------------------------------------------------------------------------
KANSAS PARENT
ST. LOUIS CITY COMMUNITY COMPANY AND
AREA* AREA BANKS ELIMINATIONS CONSOLIDATED
--------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income $ 43,339 $ 10,164 $ 33,852 $ (8,297) $ 79,058
Average assets 6,378,370 1,609,798 4,359,312 (217,499) 12,129,981
Return on assets 1.36% 1.26% 1.55% 1.30%
Net interest rate margin 4.19 4.68 5.15 4.64
Overhead ratio 55.19 59.95 54.54 58.55
Equity to assets 8.04 9.03 9.11 8.49
Reserve for possible loan losses to outstanding
loans 2.10 2.54 2.40 2.26
Reserve for possible loan losses to non-
performing loans 485.43 707.17 462.12 495.20
Non-performing loans to outstanding loans .43 .36 .52 .46
Non-performing assets to outstanding loans
and foreclosed assets 1.09 .58 .64 .87
<FN>
*Includes the results of Mercantile Bank of St. Louis N.A., United Postal Savings Association, Mercantile Trust Company N.A.,
Mercantile Business Credit, Inc. (asset-based lending), Mercantile Investment Services, Inc. (brokerage), Mississippi Valley
Advisors Inc. (investment management) and Mississippi Valley Life Insurance Co. (credit life).
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated assets of $11.9 billion were up 1.3% from last June 30.
Core deposits decreased by 2.7% to $8.6 billion, loans were $7.6
billion, up 2.0% from last year, and shareholders' equity of $1.0
billion was 11.0% higher than at June 30, 1993. Tier I capital to
risk-adjusted assets improved to 11.58% compared with 10.53% last
year, while Total capital to risk-adjusted assets at June 30, 1994 and
1993 was 15.61% and 14.05%, 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 second quarter and first half of 1994.
NET INTEREST INCOME
Net interest income for the second quarter of 1994 was $126,725,000, a
.6% increase over the $125,992,000 earned last year, and for the first
six months of 1994 was $252,118,000, a .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 average levels of non-interest bearing
deposits
6 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 8
and shareholders' equity, a continued decline in non-performing
assets, a decrease in higher-costing retail certificates of deposit as
a result of the movement of these consumer deposits to lower-costing
checking, savings and money market accounts, a contraction in lower-
yielding money market investments, growth in the higher-yielding
consumer loan categories, and the generally higher level of interest
rates in the second quarter of 1994. For the first half of 1994,
average loans decreased slightly by $63,029,000 or .8%, while
investments in debt and equity securities decreased by $42,785,000 or
1.3%.
For the first six months of 1994, average loans in the St. Louis
Area and Kansas City Area banks declined by 1.9% and 4.5%,
respectively, partially offset by a volume increase at the
Community Banks of 1.7%. A more meaningful comparison of loan
volumes is between the first and second quarters of 1994, during
which average loans grew by 1.3% or $98,653,000, or 5.2% on an
annualized basis. Commercial loan growth was $83,679,000 or 4.2%.
Residential mortgage loans were down slightly, but that trend is
now reversing, as the pipeline mix is changing to adjustable-rate
from fixed-rate loans, which will be added to the loan portfolio in
the third quarter. Average credit card loans were down by 2.1% due
to seasonal factors and the current competitive nature of that
market. Other consumer loans increased by 3.0% due to strong growth
in indirect auto lending.
<TABLE>
- - ---------------------------------------------------------------------------------------------------------------------------
EXHIBIT 2
LOANS AND LEASES
($ IN THOUSANDS)
<CAPTION>
JUNE 30
1994 1993 CHANGE
---- ---- ------
<S> <C> <C> <C>
Commercial $2,147,591 $2,073,003 3.6%
Real estate-commercial 1,250,157 1,300,933 (3.9)
Real estate-construction 178,901 141,982 26.0
Real estate-residential 2,300,318 2,373,054 (3.1)
Consumer 1,013,858 924,796 9.6
Credit card 727,994 654,738 11.2
Foreign 183 301 (39.2)
---------- ----------
Total Loans and Leases $7,619,002 $7,468,807 2.0
========== ==========
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The year-to-date average investment portfolio declined by $42,785,000
or 1.3% from last year. Approximately 10% of the portfolio was
classified as available-for-sale; the FAS 115 impact on shareholders'
equity was not material. Short-term investments are primarily used for
short-term excess liquidity or balancing the interest rate sensitivity
of the Corporation, and on average increased by $15,820,000 or 5.9%
during the first half of 1994.
Significant 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 in the current low rate
environment. Core deposits were 94.57% of total deposits, yet on
average were down 2.4% from last year. On average, interest bearing
demand accounts increased by $123,910,000 or 8.4%, money market
accounts grew by
7
<PAGE> 9
FINANCIAL COMMENTARY (CONT'D)
$8,127,000 or .5% and savings accounts grew by $77,176,000 or 9.2%,
while retail certificates of deposit declined by $462,274,000 or
12.8%. This more costly source of funds declined to 33.78% of total
core deposits from 37.84% in 1993, as customers preferred maturity
flexibility with their investments. Average short-term borrowings
decreased by $19,304,000 or 2.3%, while purchased deposits increased
by $17,354,000 or 3.4%.
Non-interest bearing funds grew substantially in 1994 compared with a
year ago, thereby enhancing the level of net interest income and the
net interest rate margin. Average non-interest bearing demand balances
(net of cash and due from bank balances) grew by $81,646,000 or 7.3%,
primarily due to new customer relationships and higher compensating
balance requirements for corporate services. Average shareholders'
equity increased by $104,683,000 or 11.8% due to earnings retained,
new shares issued in the Mt. Vernon purchase during the third quarter
of 1993, 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. Mercantile currently
does not utilize derivative instruments for speculation or in the
hedging of its balance sheet, and has only a very small portfolio of
interest rate swaps, which were assumed in the United Postal
transaction. The Consolidated Quarterly Average Balance Sheet, with
rates earned and paid, is summarized by quarter on Pages 16 and 17.
OTHER INCOME
Non-interest income decreased 6.4% during the second quarter of 1994
to $47,016,000, and for the six months was $95,938,000 compared with
$99,872,000 a year ago, a decline of 3.9%. Trust fees, service charges
and letters of credit fees all improved from last year, while
investment banking revenue, credit card fees, mortgage banking income
and miscellaneous income declined. Securities gains were $433,000 this
year compared with $2,679,000 last year.
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 3
OTHER INCOME
($ IN THOUSANDS)
<CAPTION>
SECOND QUARTER SIX MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Trust $15,917 $15,746 1.1% $31,574 $30,619 3.1%
Service charges 14,486 14,511 (.2) 28,941 28,619 1.1
Credit card fees 5,797 6,404 (9.5) 11,598 11,850 (2.1)
Mortgage banking 1,444 2,312 (37.5) 3,849 4,105 (6.2)
Investment banking 2,263 2,184 3.6 4,632 4,775 (3.0)
Letters of credit fees 1,506 1,417 6.3 3,027 2,937 3.1
Foreclosed property income 482 521 (7.5) 1,768 1,125 57.2
Securities gains 208 15 - 433 2,679 (83.8)
Other 4,913 7,122 (31.0) 10,116 13,163 (23.1)
------- ------- ------- -------
Total Other Income $47,016 $50,232 (6.4) $95,938 $99,872 (3.9)
======= ======= ======= =======
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 10
Trust fees continued to be the largest source of non-interest income
and were $15,917,000 for the second quarter of 1994, up 1.1%. On a
year-to-date basis, trust fees totaled $31,574,000, an increase of
3.1%. Exhibit 4 further details comparative trust revenue by line of
business for 1994 and 1993.
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 4
TRUST INCOME
($ IN THOUSANDS)
<CAPTION>
SECOND QUARTER SIX MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Personal trust-St. Louis Area $ 5,468 $ 5,744 (4.8)% $10,078 $10,471 (3.8)%
Mississippi Valley Advisors Inc. 3,202 3,116 2.8 6,446 6,194 4.1
Corporate and institutional services 2,884 2,592 11.3 6,122 5,349 14.5
Kansas City Area banks and Community Banks 4,363 4,294 1.6 8,928 8,605 3.8
------- ------- ------- -------
Total Trust Income $15,917 $15,746 1.1 $31,574 $30,619 3.1
======= ======= ======= =======
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Service charge income of $14,486,000 was down .2% or $25,000 for the
second quarter and up 1.1% or $322,000 for the first six months of
1994, as deposit volumes were flat with 1993 and corporate customers
opted to use compensating deposit balances to offset analysis service
charges rather than pay fees.
Credit card fee income was $5,797,000 for the second quarter of 1994,
a 9.5% decrease from the 1993 level. For the first six months of 1994,
credit card income decreased $252,000 or 2.1% from 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 a significant line of business for Mercantile
following the merger of United Postal; total loans serviced exceeded
$3.2 billion at June 30, 1994. Overall, mortgage banking revenues
decreased by $256,000 or 6.2% from the first half of 1993. A breakout
of mortgage banking revenues is provided in Exhibit 5.
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 5
MORTGAGE BANKING INCOME
($ IN THOUSANDS)
<CAPTION>
SECOND QUARTER SIX MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Servicing fees $1,582 $1,067 48.3% $2,734 $2,052 33.2%
Gains/(losses) on sales of loans (628) 754 - 232 1,229 (81.1)
Origination fees 128 255 (49.8) 283 354 (20.1)
Other 362 236 53.4 600 470 27.7
------ ------ ------ ------
$1,444 $2,312 (37.5) $3,849 $4,105 (6.2)
====== ====== ====== ======
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
FINANCIAL COMMENTARY (CONT'D)
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 $2,263,000 for the second quarter of 1994, an increase
of 3.6% from 1993. For the first six months, revenues were down
$143,000 or 3.0% from the 1993 results. This source of revenue can
vary depending on movements in interest rates and overall market
conditions.
Securities gains declined by $2,246,000 from the first six months of
1993, when United Postal sold significant volumes of securities in a
portfolio restructuring. All other non-interest income was down 23.8%
for the quarter and 13.4% year-to-date, as 1993 included significant
lease termination gains.
OTHER EXPENSE
Expenses other than interest expense and the provision for possible
loan losses for the second quarter of 1994 were $102,663,000, a
decline of 1.1% from last quarter and 5.0% from the second quarter of
1993. For the first half of 1994, total other expenses were
$206,487,000, a 4.1% decrease from the 1993 level. Total operating
expenses were 3.40% of
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 6
OTHER EXPENSE
($ IN THOUSANDS)
<CAPTION>
SECOND QUARTER SIX MONTHS
1994 1993 CHANGE 1994 1993 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 44,201 $ 42,129 4.9% $ 88,549 $ 84,241 5.1%
Employee benefits 11,026 11,083 (.5) 22,415 21,399 4.7
-------- -------- -------- --------
Total Personnel Expense 55,227 53,212 3.8 110,964 105,640 5.0
Net occupancy 6,470 6,423 .7 12,930 12,742 1.5
Equipment 8,084 8,473 (4.6) 16,755 16,825 (.4)
Advertising/business development 2,595 2,727 (4.8) 4,831 5,738 (15.8)
Postage and freight 3,618 3,318 9.0 7,293 6,750 8.0
Office supplies 1,866 2,278 (18.1) 3,867 4,392 (12.0)
Communications 1,802 1,643 9.7 3,386 3,120 8.5
Legal and professional 2,355 2,574 (8.5) 4,669 5,428 (14.0)
Credit card 2,875 2,813 2.2 5,118 5,255 (2.6)
FDIC insurance 5,304 5,577 (4.9) 10,603 11,309 (6.2)
Foreclosed property expense 346 1,607 (78.5) 751 4,055 (81.5)
Intangible asset amortization 1,780 1,469 21.2 3,518 3,290 6.9
Other 10,341 15,901 (35.0) 21,802 30,832 (29.3)
-------- -------- -------- --------
Total Other Expense $102,663 $108,015 (5.0) $206,487 $215,376 (4.1)
======== ======== ======== ========
RATIOS
Overhead ratio 58.32% 60.50% 58.55% 60.66%
Other expense to average assets 3.41 3.53 3.40 3.52
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 12
average assets compared with 3.52% for the first half of 1993. The
overhead ratio, defined as operating expenses as a percentage of
taxable-equivalent net interest income and other income, improved to
58.32% in the current quarter from 58.78% last quarter, while the
overhead ratio was 58.55% for the first six months of 1994 compared
with 60.66% last year.
Personnel costs increased 3.8% and 5.0%, respectively, during the
second quarter and first half of 1994, reflecting the costs associated
with staffing additional offices, support services and merit
increases. Year-to-date benefit costs were up by 4.7%, in line with
the 5.1% growth in salaries. Occupancy and equipment costs were up .4%
during the first six months of 1994, reflecting the costs of
maintaining additional offices and a consistent program of upgrading
systems and equipment, offset by productivity gains.
Expenses related to foreclosed property totaled only $751,000 compared
with $4,055,000 last year, a decline of $3,304,000. FDIC insurance
costs decreased by 6.2%, as the deposit base was lower and all
Mercantile banks in 1994 were 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 $172,493,000 or 2.26% of
loans outstanding at June 30, 1994. This compares favorably with
$168,651,000 or 2.28% at year's end and $151,694,000 or 2.03% at June
30, 1993. The reserve for possible loan losses as a percentage of non-
performing loans improved to 495.20% compared with 293.39% at year-end
and 238.41% last year, and the earnings coverage of net charge-offs
for the first half of 1994 was 11.28x compared with 3.11x last year.
The year-to-date 1994 provision for possible loan losses was
$16,398,000 compared with $28,534,000 last year, a decline of 42.5%.
The annualized ratio of net charge-offs to average loans for the first
six months of 1994 was .34% compared with 1.16% last year, while the
corresponding net charge-off figures were $12,556,000 and $43,410,000,
respectively.
In the St. Louis Area, the annualized ratio of net charge-offs to
average loans for the first half of 1994 was .11% compared with 1.71%
in 1993, when significant write-downs were taken on two commercial
real estate loans and one commercial loan. The second quarter of 1994
included a significant recovery at Mercantile Bank of St. Louis N.A.
on one commercial real estate loan, while the first quarter included
charge-offs taken on three United Postal commercial real estate loans
for which reserves were provided in the fourth quarter of 1993. In the
Kansas City Area banks, the ratio of net charge-offs to average loans
was .34% versus .32% last year. For the Community Banks as a group,
the comparative ratios were .64% and .69% during the first half of
1994 and 1993, respectively.
11
<PAGE> 13
FINANCIAL COMMENTARY (CONT'D)
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------------------
EXHIBIT 7
RESERVE FOR POSSIBLE LOAN LOSSES
($ IN THOUSANDS)
<CAPTION>
SECOND QUARTER SIX MONTHS ENDED
JUNE 30 JUNE 30
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING BALANCE $165,373 $155,658 $168,651 $165,575
PROVISION 8,015 14,485 16,398 28,534
CHARGE-OFFS (16,543) (28,076) (32,252) (56,615)
RECOVERIES 15,648 8,632 19,696 13,205
-------- -------- -------- --------
NET CHARGE-OFFS (895) (19,444) (12,556) (43,410)
ACQUIRED RESERVES - 995 - 995
------- -------- ------- --------
ENDING BALANCE $172,493 $151,694 $172,493 $151,694
======== ======== ======== ========
LOANS AND LEASES
June 30 balance $7,619,002 $7,468,807 $7,619,002 $7,468,807
========== ========== ========== ==========
Average balance $7,459,588 $7,494,829 $7,410,535 $7,473,564
========== ========== ========== ==========
RATIOS
Reserve balance to outstanding loans 2.26% 2.03% 2.26% 2.03%
Reserve balance to non-performing loans 495.20 238.41 495.20 238.41
Earnings coverage of net charge-offs 79.42X 3.51x 11.28X 3.11x
Net charge-offs to average loans .05% 1.04% .34% 1.16%
Credit card net charge-offs to average credit card loans 5.00 4.18 4.88 4.19
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Credit card losses were 4.88% of average credit card loans in the
first six months of 1994 compared with 4.19% in 1993, as net credit
card charge-offs were $18,016,000 compared with $13,094,000 last year.
Excluding credit card net charge-offs, Mercantile experienced net
recoveries of $5,460,000 for the first six months of 1994.
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 June 30, 1994, the
level of the individual Community Bank reserves as a percentage of
total loans outstanding ranged from 1.46% to 6.36%, with a combined
ratio of 2.40%. The coverage of non-performing loans was 462.12% on a
combined basis. The St. Louis Area combined reserve was 2.10% of loans
with a resulting coverage ratio of 485.43%, while the Kansas City Area
banks combined reserve was 2.54% with 707.17% coverage of non-
performing loans. Management believes the consolidated reserve of
2.26% of total loans and 495.20% of non-performing loans as of June
30, 1994 was adequate based on the risks identified at such date in
the portfolios.
12 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 14
NON-PERFORMING ASSETS
Non-performing loans (non-accrual and renegotiated loans) continued
their decline to $34,833,000 or .46% of total loans outstanding at
June 30, 1994 compared with $40,840,000 or .54% at March 31, 1994 and
$63,627,000 or .85% at June 30, 1993. Foreclosed assets at June 30,
1994 also were reduced to $31,608,000, compared with $34,417,000 at
March 31, 1994 and $56,934,000 last year. The ratio of non-performing
assets to outstanding loans and foreclosed assets declined to .87% at
June 30, 1994 compared with 1.00% at March 31, 1994 and 1.60% last
year.
As noted in Exhibit 8, non-accrual loans declined by $19,987,000 from
the year-end level, and were down $6,809,000 since March 31, 1994. The
current year decline was primarily in the commercial and commercial
real estate loan portfolios of United Postal, due to first-quarter
write-downs on two credits and resolution of a significant credit. In
the Kansas City Area banks and in the Community Banks as a group, non-
accrual loans continued their decline and were down significantly from
year-end.
Exhibit 8 also summarizes comparative data on renegotiated loans and
loans past due 90 days yet still accruing interest. The past due loans
consisted largely of credit card and residential mortgage loans.
<TABLE>
- - --------------------------------------------------------------------------------------------------------------------------
EXHIBIT 8
NON-PERFORMING ASSETS
($ IN THOUSANDS)
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 30
1994 1993 1993
------- ----------- -------
<S> <C> <C> <C>
NON-ACCRUAL LOANS
Commercial $ 6,009 $11,949 $20,551
Real estate-commercial 13,583 25,059 19,785
Real estate-construction 977 785 1,392
Real estate-residential 7,216 9,407 9,699
Consumer 1,246 1,818 2,630
------- ------- -------
Total Non-accrual Loans 29,031 49,018 54,057
RENEGOTIATED LOANS 5,802 8,465 9,570
------- ------- -------
TOTAL NON-PERFORMING LOANS $34,833 $57,483 $63,627
======= ======= =======
FORECLOSED ASSETS
Foreclosed real estate $28,990 $16,771 $35,673
In-substance foreclosures 1,663 18,044 19,820
Other foreclosed assets 955 1,199 1,441
------- ------- -------
TOTAL FORECLOSED ASSETS $31,608 $36,014 $56,934
======= ======= =======
TOTAL NON-PERFORMING ASSETS $66,441 $93,497 $120,561
======= ======= ========
PAST-DUE LOANS
(90 DAYS OR MORE) $15,627 $14,096 $12,473
======= ======= =======
RATIOS
Non-performing loans to outstanding loans .46% .78% .85%
Non-performing assets to outstanding loans and
foreclosed assets .87 1.26 1.60
Non-performing assets to total assets .56 .77 1.02
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 June 30, 1994, shareholders' equity surpassed $1 billion and was
$1,013,443,000, an increase of 11.0% from June 30, 1993. Net earnings
retained, the common shares issued in the Mt. Vernon purchase
transaction and stock issued under various employee benefit plans
accounted for the majority of the increase. Equity represented 8.49%
of assets at June 30, 1994 compared with 7.75% 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 banks 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.
Book value per share was $23.49 at June 30, 1994 compared with
$21.50 a year earlier, an increase of 9.3%. On May 12, 1994, the
Board of Directors declared a cash dividend of $.28 per share,
which was paid July 1, 1994, representing a 30.11% payout of
second-quarter 1994 earnings. An increase in the authorized common
stock of the Corporation from 70,000,000 shares to 100,000,000
shares was approved by shareholders on April 28, 1994. Further
information relating to dividends, as well as to quarterly stock
prices, is included in the Investor Information summary on Page 24
of this report.
<TABLE>
- - --------------------------------------------------------------------------------------------------------------------------
EXHIBIT 9
RISK-BASED CAPITAL
($ IN THOUSANDS)
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 30
1994 1993 1993
------- ----------- -------
<S> <C> <C> <C>
Capital
Tier I $ 946,538 $ 883,162 $ 842,784
Total 1,275,404 1,161,071 1,124,513
Risk-adjusted assets 8,171,874 7,985,847 8,004,266
Tier I capital to risk-adjusted assets
Capital ratio 11.58% 11.06% 10.53%
Regulatory minimum ratio 4.00 4.00 4.00
Total capital to risk-adjusted assets
Capital ratio 15.61 14.54 14.05
Regulatory minimum ratio 8.00 8.00 8.00
Leverage 7.90 7.33 6.93
Double leverage 108.63 111.97 114.28
Long-term debt to total
capitalization 22.26 22.15 23.08
Intangible assets $68,748 $71,759 $69,895
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
-------- -------- -------- -------- -------- --------
<S> <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
Investments in debt and equity securities 52,557 50,751 47,366 46,526 46,219 45,333
Short-term investments 2,688 1,878 3,673 2,505 3,470 1,684
-------- -------- -------- -------- -------- --------
Total Interest Income 212,332 209,180 205,427 202,991 200,013 202,451
Tax-equivalent adjustment 2,497 2,307 2,430 2,340 2,309 2,288
-------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INTEREST INCOME 214,829 211,487 207,857 205,331 202,322 204,739
INTEREST EXPENSE
Deposits 75,969 71,538 68,866 66,611 62,888 62,474
Borrowed funds 11,983 11,650 11,536 10,581 11,732 13,252
-------- -------- -------- -------- -------- --------
Total Interest Expense 87,952 83,188 80,402 77,192 74,620 75,726
-------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT NET INTEREST INCOME 126,877 128,299 127,455 128,139 127,702 129,013
PROVISION FOR POSSIBLE LOAN LOSSES 14,049 14,485 12,906 19,573 8,383 8,015
OTHER INCOME
Trust 14,873 15,746 15,104 15,415 15,657 15,917
Service charges 14,108 14,511 14,748 15,144 14,455 14,486
Credit card fees 5,446 6,404 5,700 6,510 5,801 5,797
Mortgage banking 1,793 2,312 3,058 3,378 2,405 1,444
Investment banking 2,591 2,184 1,878 1,833 2,369 2,263
Securities gains 2,664 15 910 153 225 208
Other 8,165 9,060 7,665 7,790 8,010 6,901
-------- -------- -------- -------- -------- --------
Total Other Income 49,640 50,232 49,063 50,223 48,922 47,016
OTHER EXPENSE
Personnel expense 52,428 53,212 54,167 55,526 55,737 55,227
Net occupancy and equipment 14,671 14,896 16,046 17,025 15,131 14,554
Other 40,262 39,907 35,844 50,925 32,956 32,882
-------- -------- -------- -------- -------- --------
Total Other Expense 107,361 108,015 106,057 123,476 103,824 102,663
-------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INCOME BEFORE INCOME TAXES 55,107 56,031 57,555 35,313 64,417 65,351
INCOME TAXES
Income taxes 19,545 19,877 19,564 16,582 23,253 22,860
Tax-equivalent adjustment 2,497 2,307 2,430 2,340 2,309 2,288
-------- -------- -------- -------- -------- --------
Adjusted Income Taxes 22,042 22,184 21,994 18,922 25,562 25,148
-------- -------- -------- -------- -------- --------
NET INCOME $ 33,065 $ 33,847 $ 35,561 $ 16,391 $ 38,855 $ 40,203
======== ======== ======== ======== ======== ========
NET INCOME PER SHARE $.79 $.80 $.84 $.38 $.91 $.93
SIGNIFICANT RATIOS
Return on assets 1.08% 1.11% 1.16% .54% 1.27% 1.33%
Return on equity 15.29 14.99 15.28 6.85 15.93 16.05
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 15
<PAGE> 17
<TABLE>
CONSOLIDATED QUARTERLY AVERAGE BALANCE SHEET
($ IN THOUSANDS)
<CAPTION>
1993
1ST QTR. 2ND QTR. 3RD QTR.
--------------- --------------- ---------------
VOLUME RATE* VOLUME RATE* VOLUME RATE*
------ ----- ------ ----- ------ -----
<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>
*Taxable-equivalent basis.
16 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 18
<CAPTION>
1994
4TH QTR. 1ST QTR. 2ND QTR.
--------------- --------------- ---------------
VOLUME RATE* VOLUME RATE* VOLUME RATE*
------ ----- ------ ----- ------ -----
<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>
*Taxable-equivalent basis.
<CAPTION>
1993 1994
SIX MONTHS SIX MONTHS
--------------- ---------------
VOLUME RATE* VOLUME RATE*
------ ----- ------ -----
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,051,440 6.51% $ 2,037,955 6.64%
Real estate-commercial 1,332,139 7.99 1,271,031 7.85
Real estate-construction 153,965 7.17 154,110 7.78
Real estate-residential 2,377,627 8.02 2,252,953 7.41
Consumer 932,758 9.17 956,624 8.30
Credit card 624,299 16.45 737,626 16.37
Foreign 1,336 7.34 236 5.93
----------- -----------
Total Loans and Leases 7,473,564 8.43 7,410,535 8.29
Investments in debt and equity securities
Trading 13,046 5.32 8,260 5.86
Taxable 3,178,252 6.08 3,118,822 5.43
Tax-exempt 223,557 8.75 244,988 8.04
----------- -----------
Total 3,414,855 6.25 3,372,070 5.62
Short-term investments 267,038 3.42 282,858 3.64
----------- -----------
Total Earning Assets 11,155,457 7.64 11,065,463 7.36
Non-earning Assets 1,091,983 1,064,518
----------- -----------
Total Assets $12,247,440 $12,129,981
=========== ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 1,843,042 $ 1,953,875
Interest bearing demand 1,468,334 2.17 1,592,244 1.84
Money market accounts 1,644,280 2.76 1,652,407 2.74
Savings 843,102 2.62 920,278 2.30
Consumer time certificates under $100,000 3,600,980 4.79 3,138,706 4.25
Other time 116,562 2.84 33,396 3.07
----------- -----------
Total Core Deposits 9,516,300 3.59 9,290,906 3.14
Time certificates $100,000 and over 478,261 3.90 472,398 3.79
Foreign 37,823 3.23 61,040 4.26
----------- -----------
Total Purchased Deposits 516,084 3.85 533,438 3.85
----------- -----------
Total Deposits 10,032,384 3.60 9,824,344 3.19
Short-term borrowings 846,066 2.98 826,762 3.32
Long-term debt 275,664 8.01 295,683 7.61
----------- -----------
Total Acquired Funds 11,154,114 3.68 10,946,789 3.34
Other Liabilities 209,164 194,347
SHAREHOLDERS' EQUITY 884,162 988,845
----------- -----------
Total Liabilities and Shareholders' Equity $12,247,440 $12,129,981
=========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 3.96% 4.02%
Net interest rate margin 4.57 4.64
<FN>
*Taxable-equivalent basis.
</TABLE>
17
<PAGE> 19
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $155,434 $156,551 $305,758 $313,638
Investments in debt and equity securities
Trading 92 156 218 314
Taxable 41,909 47,262 84,631 96,418
Tax-exempt 3,332 3,333 6,703 6,576
-------- -------- -------- --------
Total 45,333 50,751 91,552 103,308
Due from banks-interest bearing 582 81 1,716 523
Federal funds sold and repurchase agreements 1,102 1,797 3,438 4,043
-------- -------- -------- --------
Total Interest Income 202,451 209,180 402,464 421,512
INTEREST EXPENSE
Interest bearing deposits 61,640 71,176 124,061 146,897
Foreign deposits 834 362 1,301 610
Short-term borrowings 7,737 6,138 13,733 12,588
Long-term debt 5,515 5,512 11,251 11,045
-------- -------- -------- --------
Total Interest Expense 75,726 83,188 150,346 171,140
-------- -------- -------- --------
NET INTEREST INCOME 126,725 125,992 252,118 250,372
PROVISION FOR POSSIBLE LOAN LOSSES 8,015 14,485 16,398 28,534
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 118,710 111,507 235,720 221,838
OTHER INCOME
Trust 15,917 15,746 31,574 30,619
Service charges 14,486 14,511 28,941 28,619
Credit card fees 5,797 6,404 11,598 11,850
Mortgage banking 1,444 2,312 3,849 4,105
Investment banking 2,263 2,184 4,632 4,775
Securities gains 208 15 433 2,679
Other 6,901 9,060 14,911 17,225
-------- -------- -------- --------
Total Other Income 47,016 50,232 95,938 99,872
OTHER EXPENSE
Salaries 44,201 42,129 88,549 84,241
Employee benefits 11,026 11,083 22,415 21,399
Net occupancy 6,470 6,423 12,930 12,742
Equipment 8,084 8,473 16,755 16,825
Other 32,882 39,907 65,838 80,169
-------- -------- -------- --------
Total Other Expense 102,663 108,015 206,487 215,376
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 63,063 53,724 125,171 106,334
INCOME TAXES 22,860 19,877 46,113 39,422
-------- -------- -------- --------
NET INCOME $ 40,203 $ 33,847 $ 79,058 $ 66,912
======== ======== ======== ========
PER SHARE DATA
Average common shares outstanding 43,036,984 42,406,339 42,947,890 42,243,319
Net income* $.93 $.80 $1.84 $1.58
Dividends declared .28 .24 3/4 .56 .49 1/2
<FN>
*Based on weighted average common shares outstanding.
</TABLE>
18 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 20
<TABLE>
CONSOLIDATED BALANCE SHEET
(THOUSANDS)
<CAPTION>
JUNE 30 DECEMBER 31 JUNE 30
1994 1993 1993
------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 556,843 $ 705,673 $ 560,150
Due from banks-interest bearing 10,992 144,538 278
Federal funds sold and repurchase agreements 113,939 186,962 34,349
Investments in debt and equity securities
Trading 6,020 15,735 15,128
Available-for-sale 315,152 415,283 55,301
Held-to-maturity (Estimated fair value of
$2,948,771, $3,020,591 and $3,318,198,
respectively) 2,980,348 2,970,160 3,249,104
----------- ----------- -----------
Total 3,301,520 3,401,178 3,319,533
Loans held-for-sale 38,095 117,290 134,823
Loans and leases, net of unearned income 7,580,907 7,264,484 7,333,984
----------- ----------- -----------
Total Loans and Leases 7,619,002 7,381,774 7,468,807
Reserve for possible loan losses (172,493) (168,651) (151,694)
----------- ----------- -----------
Net Loans and Leases 7,446,509 7,213,123 7,317,113
Bank premises and equipment 203,040 199,363 199,621
Due from customers on acceptances 12,174 11,923 10,842
Other assets 288,884 278,367 336,475
----------- ----------- -----------
Total Assets $11,933,901 $12,141,127 $11,778,361
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 1,473,103 $ 1,713,275 $ 1,365,096
Interest bearing 7,551,827 7,862,723 7,923,562
Foreign 115,576 26,085 32,405
----------- ----------- -----------
Total Deposits 9,140,506 9,602,083 9,321,063
Federal funds purchased and repurchase agreements 673,345 602,997 551,835
Other short-term borrowings 628,374 520,650 510,872
Long-term debt 290,162 272,778 273,874
Bank acceptances outstanding 12,174 11,923 10,842
Other liabilities 175,897 172,139 197,196
----------- ----------- -----------
Total Liabilities 10,920,458 11,182,570 10,865,682
Commitments and contingent liabilities - - -
<CAPTION>
JUNE 30 DEC. 31 JUNE 30
1994 1993 1993
------- ------- -------
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 43,147 42,802 42,447 215,734 214,012 212,237
Capital surplus 168,140 164,448 157,634
Retained earnings 629,569 580,097 542,808
----------- ----------- -----------
Total Shareholders' Equity 1,013,443 958,557 912,679
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $11,933,901 $12,141,127 $11,778,361
=========== =========== ===========
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 19
<PAGE> 21
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
($ 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 $851,324
Net income 66,912 66,912
Dividends declared
Mercantile Bancorporation Inc.-$.49 1/2 per share (17,315) (17,315)
Pooled companies prior to acquisition (2,060) (2,060)
Issuance of common stock
Acquisition of First National Bank of Flora 232,503 1,162 6,879 8,041
Employee incentive plans 139,901 699 1,751 2,450
Convertible notes 59,737 299 1,250 1,549
Change in valuation allowance for marketable
equity securities 2,196 2,196
Pre-merger transactions of pooled companies (14,681) (72) (304) (376)
Other (2,250) (11) (31) (42)
---------- --------- -------- -------- --------
BALANCE AT JUNE 30, 1993 42,447,183 $212,237 $157,634 $542,808 $912,679
========== ======== ======== ======== ========
BALANCE AT DECEMBER 31, 1993, AS RESTATED 42,802,322 $214,012 $164,448 $580,097 $958,557
Net income 79,058 79,058
Dividends declared-$.56 per share (24,107) (24,107)
Issuance of common stock
Employee incentive plans 202,399 1,012 912 1,924
Convertible notes 132,312 662 2,771 3,433
Net fair value adjustment for available-for-sale
securities (5,479) (5,479)
Pre-merger transactions of pooled companies 12,562 63 88 151
Other (3,064) (15) (79) (94)
---------- -------- -------- -------- ----------
BALANCE AT JUNE 30, 1994 43,146,531 $215,734 $168,140 $629,569 $1,013,443
========== ======== ======== ======== ==========
</TABLE>
20 MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
<PAGE> 22
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 79,058 $ 66,912
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for possible loan losses 16,398 28,534
Depreciation and amortization 13,397 13,254
Provision for deferred income taxes (2,194) 1,205
Net change in trading securities 9,715 2,556
Net change in accrued interest receivable (375) 4,129
Net change in accrued interest payable (7,519) (6,277)
Net change in accrued taxes payable 4,412 12,370
Other, net (1,646) 14,704
---------- ---------
Net Cash Provided by Operating Activities 111,246 137,387
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading securities
Purchases (560,324) (690,093)
Proceeds from maturities 558,336 750,816
Proceeds from sales of:
Held-to-maturity securities - 22,688
Available-for-sale securities 206,944 172,443
Securities from acquired entities 79,388 12,254
Net change in loans and leases (603,264) (216,346)
Purchases of loans and leases (20,063) (23,117)
Proceeds from sales of loans and leases 144,871 61,759
Purchases of premises and equipment (18,582) (12,622)
Proceeds from sales of premises and equipment 1,532 407
Proceeds from sales of foreclosed property 9,672 23,775
Cash and cash equivalents from acquisitions, net of cash paid - 3,634
Other, net 19,696 13,204
---------- ---------
Net Cash Provided (Used) by Investing Activities (181,794) 118,802
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing demand and
money market deposit accounts (309,649) (231,377)
Net change in time certificates of deposit under $100,000 (217,846) (326,117)
Net change in time certificates of deposit $100,000 and over (23,537) (45,210)
Net change in other time deposits (36) (64,493)
Net change in foreign deposits 89,491 12,755
Sale of branch deposits, net of premium received - (14,130)
Net change in short-term borrowings 178,072 77,313
Issuance of long-term debt 75,000 -
Principal payments on long-term debt (54,220) (23,724)
Cash dividends paid (24,107) (19,375)
Proceeds from issuance of common stock 1,924 1,814
Other, net 57 (376)
---------- ---------
Net Cash Used by Financing Activities (284,851) (632,920)
---------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (355,399) (376,731)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,037,173 971,508
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 681,774 $ 594,777
========== =========
</TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES 21
<PAGE> 23
<TABLE>
BANKS AND OTHER SUBSIDIARIES
<CAPTION>
TOTAL ASSETS
JUNE 30, 1994
BANK MAIN OFFICE (THOUSANDS)
- - ---- ----------- ------------
<S> <C> <C>
Mercantile Bank of St. Louis N.A. St. Louis, MO $4,978,622
United Postal Savings Association St. Louis, MO 1,224,290
Mercantile Bank of Kansas City Kansas City, MO 787,423
Mercantile Bank of Kansas Overland Park, KS 583,057
Mercantile Bank of Joplin Joplin, MO 384,316
Mercantile Bank of Northern Iowa Waterloo, IA 357,450
Mercantile Bank of Illinois N.A. Alton, IL 349,064
Mercantile Bank of St. Joseph St. Joseph, MO 327,286
Mercantile Bank of Springfield Springfield, MO 230,945
Mercantile Bank of Lawrence N.A. Lawrence, KS 214,183
Mercantile Bank of Topeka N.A. Topeka, KS 189,381
Mercantile Bank of Cape Girardeau Cape Girardeau, MO 162,579
Mercantile Bank of the Mineral Area Farmington, MO 160,054
Mercantile Bank of North Central Missouri Macon, MO 155,822
Mercantile Bank of West Central Missouri Sedalia, MO 153,280
Mercantile Bank of Franklin County Washington, MO 151,848
Mercantile Bank of Lake of the Ozarks Eldon, MO 127,350
Mercantile Bank of Jefferson County High Ridge, MO 125,411
Mercantile Bank of Poplar Bluff Poplar Bluff, MO 110,240
Mercantile Bank of Mt. Vernon Mt. Vernon, IL 97,262
Mercantile Bank of Centralia N.A. Centralia, IL 94,792
Mercantile Bank of Missouri Valley Richmond, MO 83,919
<CAPTION>
TOTAL ASSETS
JUNE 30, 1994
BANK MAIN OFFICE (THOUSANDS)
- - ---- ----------- -------------
Mercantile Bank of Trenton Trenton, MO $81,628
Mercantile Bank of Monett Monett, MO 81,243
Mercantile Bank of Stoddard/Bollinger
Counties Dexter, MO 77,535
Mercantile Bank of Perryville Perryville, MO 76,676
Mercantile Bank of Flora N.A. Flora, IL 66,996
Mercantile Bank of Phelps County Rolla, MO 66,836
Mercantile Bank of Table Rock Lake Branson West, MO 58,488
Mercantile Bank of Ste. Genevieve Ste. Genevieve, MO 52,318
Mercantile Bank of Memphis Memphis, MO 51,404
Mercantile Bank of Doniphan Doniphan, MO 50,188
Mercantile Bank of Montgomery City Montgomery City, MO 47,055
Mercantile Bank of Pike County Bowling Green, MO 46,788
Mercantile Bank of Northwest Missouri Maryville, MO 46,756
Mercantile Bank of Carlyle Carlyle, IL 42,675
Mercantile Bank of Boone County Columbia, MO 42,018
Mercantile Bank of Willow Springs Willow Springs, MO 39,037
Mercantile Bank of Wright County Hartville, MO 38,920
Mercantile Bank of Sikeston Sikeston, MO 38,193
Mercantile Bank of Plattsburg Plattsburg, MO 37,331
Mercantile Trust Company N.A. St. Louis, MO 7,383
- - ------------------------------------------------------------------------------------------------------------------------
</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
22 MERCANTILE BANCORPORATION INC.
<PAGE> 24
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
RICHARD P. CONERLY(1,3)
Chairman
Orion Capital Inc.
HARRY M. CORNELL, JR.(2,4)
Chairman and
Chief Executive Officer
Leggett & Platt, Inc.
EARL K. DILLE(3,5,6)
Retired President
Union Electric Company
J. CLIFF EASON(1)
President, Network Services
Southwestern Bell Telephone Company
BERNARD A. EDISON(2,3)
Director Emeritus
Edison Brothers Stores, Inc.
WILLIAM A. HALL(1)
Assistant to the Chairman
Hallmark Cards, Inc.
THOMAS A. HAYS(2,3,4)
Deputy Chairman
The May Department Stores
Company
WILLIAM G. HECKMAN(3,6)
Chairman Emeritus
Arch Mineral Corporation
THOMAS H. JACOBSEN(3,4)
Chairman and
Chief Executive Officer
Mercantile Bancorporation Inc.
JAMES B. MALLOY(2,6)
Chairman and
Chief Executive Officer
Smurfit Packaging Corporation
CHARLES H. PRICE II(6)
Chairman
Mercantile Bank of Kansas City
HARVEY SALIGMAN(2)
Managing Partner
Cynwyd Investments
CRAIG D. SCHNUCK(5)
Chairman and
Chief Executive Officer
Schnuck Markets, Inc.
ROBERT W. STALEY(6)
Vice Chairman
Emerson Electric Co.
ROBERT L. STARK(6)
Dean
University of Kansas
Regents Center
PATRICK T. STOKES(1)
President
Anheuser-Busch, Inc.
FRANCIS A. STROBLE(1)
Retired Chief
Financial Officer
Monsanto Company
JOSEPH G. WERNER(5)
President
Werner Investments
JOHN A. WRIGHT(1)
President and
Chief Executive Officer
Big River Minerals Corp.
(1) Member of Audit Committee
(2) Member of Compensation and
Management Development
Committee
(3) Member of Executive Committee
(4) Member of Nominating and Board
Affairs Committee
(5) Member of Community Relations
Committee
(6) 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(1)
SELECTED DATA
<CAPTION>
JUNE 30
1994 1993
---- ----
<S> <C> <C>
Market Price $35 1/8 $32 7/8
Yield 3.19% 3.01%
Price Earnings Ratio 11.48X 12.55x
Book Value $23.49 $21.50
Shares Outstanding
Average 42,947,890 42,243,319
Period-end 43,146,531 42,447,183
Shareholders of Record 13,506 14,041
Average Daily Volume(2) 54,342 90,012
</TABLE>
<TABLE>
- - --------------------------------------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION
<CAPTION>
MARKET PRICE AVERAGE
----------------------------------- DAILY DIVIDEND
HIGH LOW CLOSE VOLUME(2) 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
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>
(1) Generally appears as MercBcpMO or MercBc in newspaper stock tables.
(2) 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>
[COMMON STOCK PRICE RANGE GRAPH]
DIVIDEND REINVESTMENT PLAN AND DIVIDEND DIRECT DEPOSIT
If you wish to participate in or want further information concerning
the Dividend Reinvestment Plan or Dividend Direct Deposit, please
contact Society 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>
JUNE 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 10,088
</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+
Certificates of Deposit TBW-1 A-/A-2
Letters of Credit TBW-1 A-/A-2
UNITED POSTAL SAVINGS ASSOCIATION
9.000% Mortgage-backed Notes, due 1999 AAA
- - -----------------------------------------------------------------------------------------------------------------------------
</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
1010 Market Street
St. Louis, MO 63101-2085
25
<PAGE> 27
MERCANTILE
BANCORPORATION INC.
SECOND 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 Second Quarter Report. The graph plots Fiscal Quarters to Dollars on
the X and Y axis respectively. This graph shows six quarters of market price
ranges from the first quarter of 1993 to the second 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.
