<PAGE> 1
====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 17, 1994
MERCANTILE BANCORPORATION INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 1-11792 43-0951744
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF ORGANIZATION) IDENTIFICATION NUMBER)
P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 425-2525
====================================================================
<PAGE> 2
MERCANTILE
MERCANTILE
BANCORPORATION INC.
SUPPLEMENTAL
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
<PAGE> 3
Item 5. Other Events.
------------
MERCANTILE BANCORPORATION INC.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992, 1991
Effective January 3, 1994, Mercantile Bancorporation Inc.
("Corporation") acquired Metro Bancorporation, and effective
February 1, 1994, the Corporation acquired United Postal
Bancorp, Inc., in transactions accounted for as poolings-of-
interests. The following Supplemental Consolidated Financial
Statements restate the Corporation's historical consolidated
financial statements as of and for the years ended December 31,
1993, 1992 and 1991 to reflect these transactions.
All per share amounts, as well as ending and average common shares
data, reflect a three-for-two stock split distributed in the form
of a dividend on April 11, 1994.
<PAGE> 4
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $621,986 $651,616 $679,319
Investments in debt and equity securities
Trading 678 593 1,288
Taxable 183,233 194,932 164,628
Tax-exempt 13,289 12,319 10,315
-------- -------- --------
Total 197,200 207,844 176,231
Due from banks-interest bearing 2,609 5,900 11,075
Federal funds sold and repurchase agreements 8,135 8,087 12,846
-------- -------- --------
Total Interest Income 829,930 873,447 879,471
INTEREST EXPENSE
Interest bearing deposits 281,621 364,897 441,379
Foreign deposits 1,363 870 1,903
Short-term borrowings 23,709 30,368 42,320
Long-term debt 22,041 21,223 21,314
-------- -------- --------
Total Interest Expense 328,734 417,358 506,916
-------- -------- --------
NET INTEREST INCOME 501,196 456,089 372,555
PROVISION FOR POSSIBLE LOAN LOSSES 61,013 74,579 58,076
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 440,183 381,510 314,479
OTHER INCOME
Trust 61,138 57,501 49,400
Service charges 58,511 55,399 47,504
Credit card fees 24,060 21,487 20,636
Investment banking 8,486 8,918 7,463
Securities gains 3,742 5,518 4,334
Other 43,221 35,121 26,359
-------- -------- --------
Total Other Income 199,158 183,944 155,696
OTHER EXPENSE
Salaries 171,970 158,390 140,877
Employee benefits 43,363 33,625 31,278
Net occupancy 27,628 24,511 20,965
Equipment 35,010 31,077 29,133
Other 166,938 170,465 161,095
-------- -------- --------
Total Other Expense 444,909 418,068 383,348
-------- -------- --------
INCOME BEFORE INCOME TAXES 194,432 147,386 86,827
INCOME TAXES 75,568 52,346 18,673
-------- -------- --------
NET INCOME $118,864 $ 95,040 $ 68,154
======== ======== ========
PER SHARE DATA
Average common shares outstanding 42,439,298 39,492,237 31,790,914
Net income $2.80 $2.36 $2.37
Dividends declared .99 .93 .93
</TABLE>
2
<PAGE> 5
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(THOUSANDS)
<CAPTION>
DECEMBER 31
1993 1992 1991
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 705,673 $ 686,352 $ 589,633
Due from banks-interest bearing 144,538 43,184 150,667
Federal funds sold and repurchase agreements 186,962 241,972 255,720
Investments in debt and equity securities
Trading 15,735 17,684 23,637
Available-for-sale 415,283 89,424 -
Held-to-maturity
(Estimated fair value of $3,020,591,
$3,366,147 and $2,540,324, respectively) 2,970,160 3,294,169 2,451,129
----------- ----------- -----------
Total 3,401,178 3,401,277 2,474,766
Loans and leases, net of unearned income 7,381,774 7,499,221 6,945,537
Reserve for possible loan losses (168,651) (165,575) (146,078)
----------- ----------- -----------
Net Loans and Leases 7,213,123 7,333,646 6,799,459
Bank premises and equipment 199,363 200,552 164,056
Due from customers on acceptances 11,923 7,451 13,332
Other assets 278,367 358,594 317,647
----------- ----------- -----------
Total Assets $12,141,127 $12,273,028 $10,765,280
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 1,713,275 $ 1,532,477 $ 1,392,094
Interest bearing 7,862,723 8,375,832 7,370,390
Foreign 26,085 19,650 13,937
----------- ----------- -----------
Total Deposits 9,602,083 9,927,959 8,776,421
Federal funds purchased and
repurchase agreements 602,997 744,101 613,339
Other short-term borrowings 520,650 241,293 301,436
Long-term debt 272,778 299,109 203,270
Bank acceptances outstanding 11,923 7,451 13,332
Other liabilities 172,139 201,791 167,220
----------- ----------- -----------
Total Liabilities 11,182,570 11,421,704 10,075,018
Commitments and contingent liabilities - - -
<CAPTION>
SHAREHOLDERS' EQUITY
1993 1992 1991
---- ---- ----
Preferred stock-
no par value
Shares authorized 5,000 5,000 5,000
Shares issued - - - - - -
Common stock-
$5.00 par value
Shares authorized 70,000 70,000 35,000
Shares issued and
outstanding 42,802 42,032 33,639 214,012 210,160 168,196
Capital surplus 164,448 148,089 95,124
Retained earnings 580,097 493,075 426,942
----------- ----------- -----------
Total Shareholders' Equity 958,557 851,324 690,262
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,141,127 $12,273,028 $10,765,280
=========== =========== ===========
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
</TABLE>
3
<PAGE> 6
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
($ IN THOUSANDS)
<CAPTION>
COMMON STOCK
----------------- TOTAL
CAPITAL RETAINED SHAREHOLDERS'
SHARES DOLLARS SURPLUS EARNINGS EQUITY
------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990
AS REPORTED 28,527,999 $142,640 $ 47,410 $300,325 $490,375
Adjustment to reflect poolings-of-
interests 1,680,594 8,403 (1,474) 83,609 90,538
---------- -------- --------- -------- --------
BALANCE AT DECEMBER 31, 1990 AS RESTATED 30,208,593 151,043 45,936 383,934 580,913
Net income 68,154 68,154
Dividends declared
Mercantile Bancorporation Inc.-
$.93 per share (24,673) (24,673)
Pooled companies prior to acquisition (1,808) (1,808)
Issuance of common stock
Public offering 2,242,500 11,213 29,740 40,953
Acquisition of
Old National Bancshares, Inc. 742,265 3,711 13,113 16,824
Employee incentive plans 237,514 1,188 2,736 3,924
Change in valuation allowance
for marketable equity securities 2,507 2,507
Pre-merger transactions of
pooled companies 208,376 1,041 3,599 (1,172) 3,468
---------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1991 33,639,248 168,196 95,124 426,942 690,262
Net income 95,040 95,040
Dividends declared
Mercantile Bancorporation Inc.-
$.93 per share (27,506) (27,506)
Pooled companies prior to acquisition (2,923) (2,923)
Issuance of common stock
Acquisition of Ameribanc, Inc. 1,975,421 9,877 41,418 51,295
Employee incentive plans 195,679 978 2,854 3,832
Warrants and convertible notes 347,143 1,736 7,272 9,008
Change in valuation allowance
for marketable equity securities 1,522 1,522
Initial public offering of
United Postal Bancorp, Inc. 5,537,405 27,688 (818) 26,870
Other pre-merger transactions of
pooled companies 337,077 1,685 2,239 3,924
---------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1992 42,031,973 210,160 148,089 493,075 851,324
NET INCOME 118,864 118,864
DIVIDENDS DECLARED
MERCANTILE BANCORPORATION INC.-
$.99 PER SHARE (34,840) (34,840)
POOLED COMPANIES PRIOR TO ACQUISITION (4,195) (4,195)
ISSUANCE OF COMMON STOCK
ACQUISITION OF FIRST NATIONAL
BANK OF FLORA 232,503 1,162 6,879 8,041
ACQUISITION OF MT. VERNON BANCORP, INC. 216,936 1,085 6,056 7,141
EMPLOYEE INCENTIVE PLANS 161,912 809 1,929 2,738
CONVERTIBLE NOTES 73,360 367 1,536 1,903
CHANGE IN VALUATION ALLOWANCE FOR
MARKETABLE EQUITY SECURITIES PRIOR TO
THE ADOPTION OF FAS 115 3,554 3,554
NET FAIR VALUE ADJUSTMENT FOR SECURITIES
AVAILABLE-FOR-SALE 3,636 3,636
PRE-MERGER TRANSACTIONS OF POOLED
COMPANIES 87,907 440 (9) 3 434
OTHER (2,269) (11) (32) (43)
---------- -------- -------- -------- --------
BALANCE AT DECEMBER 31, 1993 42,802,322 $214,012 $164,448 $580,097 $958,557
========== ======== ======== ======== ========
</TABLE>
4
<PAGE> 7
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 118,864 $ 95,040 $ 68,154
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for possible loan losses 61,013 74,579 58,076
Depreciation and amortization 26,491 24,809 21,638
Provision for deferred income taxes (credits) 6,241 1,248 (19,249)
Net change in trading securities 1,949 5,953 (1,158)
Net change in accrued interest receivable 8,505 8,844 788
Net change in accrued interest payable (7,396) (18,922) (13,608)
Net change in accrued taxes payable (10,515) 10,038 (1,115)
Other, net 58,976 33,653 60,754
----------- ----------- -----------
Net Cash Provided by Operating Activities 264,128 235,242 174,280
INVESTING ACTIVITIES
Investments in debt and equity securities, other than
trading securities
Purchases (1,435,988) (1,693,288) (1,088,579)
Proceeds from maturities 1,464,157 1,010,084 519,604
Proceeds from sales of:
Held-to-maturity securities 27,970 166,118 160,361
Available-for-sale securities 538,755 307,597 160,606
Securities from acquired entities 14,491 58,219 -
Proceeds from maturities of short-term floating-rate securities - - 28,000
Loans and leases, net of unearned income
Purchases (84,134) (113,311) (62,182)
Proceeds from sales 258,769 81,410 73,420
Other, net change (621,973) (192,671) (167,713)
Purchases of premises and equipment (26,551) (29,589) (21,902)
Proceeds from sales of premises and equipment 480 2,722 1,414
Proceeds from sales of foreclosed property 44,974 5,559 38,387
Cash and cash equivalents from acquisitions, net of cash paid 11,085 401,312 314,618
Other, net 23,632 15,317 11,777
----------- ----------- -----------
Net Cash Provided (Used) by Investing Activities 215,667 19,479 (32,189)
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing demand
and money market deposit accounts 238,651 514,545 225,983
Net change in time certificates of deposit under $100,000 (572,890) (819,135) (310,263)
Net change in time certificates of deposit $100,000 and over (58,082) (143,041) (84,571)
Net change in other time deposits (88,231) 45,411 7,600
Net change in foreign deposits 6,435 5,713 2,923
Sale of branch deposits, net of premium received (14,130) - -
Net change in short-term borrowings 138,253 35,377 34,891
Issuance of long-term debt - 163,152 4,150
Principal payments on long-term debt (27,738) (83,324) (36,508)
Cash dividends paid (39,035) (30,429) (26,481)
Proceeds from issuance of common stock
Public offering - - 40,953
Employee incentive plans and warrants 2,203 3,904 1,508
Initial public offering of United Postal Bancorp, Inc. - 26,870 -
Other, net 434 1,724 (618)
----------- ----------- -----------
Net Cash Used by Financing Activities (414,130) (279,233) (140,433)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 65,665 (24,512) 1,658
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 971,508 996,020 994,362
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,037,173 $ 971,508 $ 996,020
=========== =========== ===========
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
</TABLE>
5
<PAGE> 8
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
NOTE A
ACCOUNTING POLICIES
Mercantile Bancorporation Inc. ("Corporation" or "Mercantile")
and its subsidiaries follow generally accepted accounting
principles and reporting practices applicable to the banking
industry. The significant accounting policies are summarized
below.
BASIS OF PRESENTATION:
Consolidation: The Supplemental Consolidated Financial
Statements include the accounts of Mercantile Bancorporation
Inc. and its subsidiaries. All subsidiaries are wholly-owned.
Material intercompany transactions are eliminated.
Restatements: Effective January 3, 1994, Mercantile
Bancorporation Inc. acquired Metro Bancorporation ("Metro"),
and effective February 1, 1994, the Corporation acquired United
Postal Bancorp, Inc. ("United Postal"), in transactions
accounted for as poolings-of-interests.
The Supplemental Consolidated Financial Statements give
retroactive effect to the transactions and, as a result, the
Supplemental Consolidated Statement of Income, Balance Sheet
and Statement of Cash Flows are presented as if the combining
companies had been consolidated for all periods presented. (As
required by generally accepted accounting principles, the
Supplemental Consolidated Financial Statements will become the
historical consolidated financial statements upon issuance of
the financial statements for the period that includes the date
of the transactions.) The Supplemental Consolidated Statement
of Changes in Shareholders' Equity reflects the accounts of
Mercantile Bancorporation Inc. as if the common stock issued in
the Metro acquisition had been outstanding during all periods
presented. The Supplemental Statement of Changes in
Shareholders' Equity reflects the accounts of the Corporation
as if the additional common stock issued in the United Postal
acquisition was outstanding effective March 20, 1992, the date
United Postal made its initial public offering of common stock.
The Supplemental Consolidated Financial Statements, including
the notes thereto, should be read in conjunction with the
historical consolidated financial statements of the Corporation
included in its 1993 Annual Report on Form 10-K.
A three-for-two stock split, which was paid in the form of a
dividend, was distributed on April 11, 1994 to shareholders of
record March 10, 1994. All per share amounts, as well as ending
and average common shares data, reflect the three-for-two stock
split.
Reclassification: Certain reclassifications have been made to
the 1992 and 1991 historical financial statements to conform
with the 1993 presentation.
NEW ACCOUNTING STANDARDS:
Financial Accounting Standard ("FAS") 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions,"
was adopted by the Corporation in the first quarter of 1993.
The Corporation adopted FAS 109, "Accounting for Income Taxes,"
in the first quarter of 1993 with an effective date of January
1, 1988. FAS 115, "Accounting for Certain Investments in Debt
and Equity Securities," was adopted by the Corporation on
December 31, 1993.
FAS 112, "Employers' Accounting for Postemployment Benefits,"
effective for fiscal years beginning after December 31, 1993,
and FAS 114, "Accounting by Creditors for Impairments of a
Loan," effective for fiscal years beginning after December 15,
1994, had not been adopted by the Corporation at December 31,
1993. The adoptions of FAS 112 and FAS 114 are not expected to
have a material impact on the Corporation's financial condition
or results of operations.
EARNINGS PER COMMON SHARE:
Earnings per common share data is based on the weighted average
number of common shares outstanding during the period.
Earnings of United Postal are excluded from the earnings per
share calculation from January 1, 1991 through March 20, 1992,
which is the date United Postal made its initial public
offering of common stock. Also on March 20, 1992, United Postal
Savings Association, a wholly-owned subsidiary of United
Postal, converted from a Missouri state-chartered mutual
savings association to a Missouri state-chartered stock
association.
INVESTMENTS IN DEBT AND EQUITY SECURITIES:
Trading securities, which include any security held primarily
for near-term sale, are valued at fair value. Gains and losses
on trading securities, both realized and unrealized, are
recorded in investment banking income.
Available-for-sale securities, which include any security for
which the Corporation has no immediate plan to sell but which
may be sold in the future under different circumstances, are
valued at fair value. Realized gains and losses, based on the
amortized cost of the specific security, are included in other
income as securities gains. Unrealized gains and losses are
recorded, net of related income tax effects, in retained
earnings.
6
<PAGE> 9
Held-to-maturity securities, which include any security for
which the Corporation has the positive intent and ability to
hold until maturity, are valued at historical cost adjusted for
amortization of premiums and accretion of discounts computed by
the level-yield method. Prior to December 31, 1993, realized
gains and losses, based on the amortized cost of the specific
security, were included in other income as securities gains.
Prior to December 31, 1993, marketable equity securities were
stated at the lower of cost or fair value. Changes in the
valuation of marketable equity securities which were considered
to be temporary were recorded as adjustments to retained
earnings. At December 31, 1993, these securities were
classified as available-for-sale.
LOANS AND LEASES:
Interest income on loans not discounted is generally accrued on
a simple interest basis. Interest income on discounted loans is
computed on the sum-of-the-months'-digits method, which
approximates the interest method.
Loan fees and direct costs of loan originations are deferred
and amortized over the life of the loans under methods
approximating the interest method.
The finance method is used to account for direct and leveraged
equipment lease contracts. Income is recorded over the lease
periods in proportion to the unrecovered investment in the
leases after consideration of investment tax credits and other
related income tax effects.
When, in management's opinion, the collection of interest on a
loan is unlikely, or when either principal or interest is past
due over 90 days, that loan is generally placed on non-accrual
status. When a loan is placed on non-accrual status, accrued
interest for the current year is reversed and charged against
current earnings, and accrued interest from prior years is
charged against the reserve for possible loan losses. Interest
payments received on non-accrual loans are applied to principal
if there is doubt as to the collectibility of such principal;
otherwise, these receipts are recorded as interest income. A
loan remains on non-accrual status until the loan is current as
to payment of both principal and interest, and/or the borrower
demonstrates the ability to pay and remain current.
RESERVE FOR POSSIBLE LOAN LOSSES:
The reserve for possible loan losses is increased by provisions
charged to expense and reduced by loans charged off, net of
recoveries. The reserve is maintained at a level considered
adequate to provide for potential loan losses based on
management's evaluation of current economic conditions, changes
in the character and size of the portfolio, past experience,
expected future losses, and other pertinent factors.
FORECLOSED ASSETS:
Foreclosed assets include real estate and other assets acquired
through foreclosure or other proceedings, and in-substance
foreclosures. In-substance foreclosures represent loans
accounted for as foreclosed assets due to the borrower having
limited equity in the underlying collateral, anticipated
repayment only through the operation or sale of the collateral,
or the borrower either formally or effectively abandoning
control of the collateral. Foreclosed assets are included in
other assets in the Supplemental Consolidated Balance Sheet.
Foreclosed assets are valued at the lower of cost or fair
value. Losses arising at the time of transfer from loans are
charged to the reserve for possible loan losses. Subsequent
valuation changes based upon periodic appraisals are charged
against current earnings.
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated
depreciation. Provisions for depreciation are computed
principally by the straight-line method and are based on
estimated useful lives of the assets. The carrying value of
assets sold or retired and the related accumulated depreciation
are eliminated from the accounts, and the resulting gains or
losses are reflected in income.
Expenditures for maintenance and repairs are charged to
expense, while expenditures for major renewals are capitalized.
INTANGIBLE ASSETS:
Intangible assets, consisting primarily of goodwill and core
deposit premium, are included in other assets in the
Supplemental Consolidated Balance Sheet.
Goodwill, the excess of cost over the net assets acquired in
business combinations accounted for as purchases, is amortized
using the straight-line method over the estimated period to be
benefited, most recently 15 years, but not exceeding 40 years.
Core deposit premium represents the premiums paid, net of any
rebate on assets acquired, plus the insurance funds' entrance
and exit fees, for deposits acquired from failed thrift
institutions in Resolution Trust Corporation-assisted
transactions. This intangible asset is amortized, on an
accelerated basis, over the estimated life of the core deposit
base acquired, but not exceeding 10 years.
7
<PAGE> 10
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
INCOME TAXES:
Deferred income taxes, computed using the asset and liability
method, are provided on temporary differences between the
financial reporting basis and the tax basis of the assets and
liabilities of the Corporation.
CASH EQUIVALENTS:
Cash and due from banks, federal funds sold, and repurchase
agreements are considered cash equivalents for purposes of the
Supplemental Consolidated Statement of Cash Flows.
FINANCIAL INSTRUMENTS:
Financial instruments include cash, evidence of an ownership
interest in an entity or a contract that both (a) imposes on
the Corporation a contractual obligation, (1) to deliver a
financial instrument to another party or (2), to exchange other
financial instruments on potentially unfavorable terms with
another party; and (b) conveys to another party a contractual
right, (1) to receive a financial instrument from the
Corporation or (2), to exchange other financial instruments on
potentially favorable terms with the Corporation.
NOTE B
SUBSIDIARIES
ACQUISITIONS:
As described in Note A, effective February 1, 1994, the
Corporation acquired United Postal, holding company for
St. Louis, Missouri-based United Postal Savings Association,
with assets totaling $1.3 billion. Effective January 3, 1994,
Mercantile completed a merger with Metro, a Waterloo, Iowa-
based holding company for The Waterloo Savings Bank with assets
totaling $370 million. A total of 5,631,953 and 1,638,278
shares of Mercantile common stock were issued in the United
Postal and Metro transactions, respectively, which were
accounted for as poolings-of-interests.
<TABLE>
Net income and net income per share for the Corporation and the
pooled companies prior to restatement were as follows:
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
($ IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Corporation
Net income $116,972 $85,295 $72,318
Net income per share 3.32 2.53 2.40
United Postal
Net income (loss) $ (58) $ 7,259 $(7,269)
Net income (loss) per share (.01) 1.21 -
Metro
Net income $ 1,950 $ 2,486 $ 3,105
Net income per share 3.76 4.81 5.81
</TABLE>
During the fourth quarter of 1993, certain adjustments were
recorded by United Postal to conform their accounting and
credit policies regarding loan, other real estate and other
asset valuations to those of the Corporation. These adjustments
amounted to $15 million on an after-tax basis.
On September 1, 1993, Mercantile completed a merger with Mt.
Vernon Bancorp, Inc., a $113,128,000-asset holding company for
First Bank and Trust Co. in Mt. Vernon, Illinois. The total
cost of the acquisition was $1,805,000 in cash and 216,936
shares of Mercantile common stock. The excess of the purchase
price over the fair value of net assets acquired was estimated
to be $4,515,000. On April 1, 1993, Mercantile completed the
merger with the $70,725,000-asset First National Bank of Flora
in Clay County, Illinois. The total cost of the acquisition was
$3,004,000 in cash and 232,503 shares of Mercantile common
stock. The excess of the purchase price over the fair value of
net assets acquired was estimated to be $2,734,000. Both
transactions were accounted for as purchases and, accordingly,
the results of operations were included in the Supplemental
Consolidated Financial Statements from the respective
acquisition dates.
On January 4, 1993, the Corporation acquired MidAmerican
Corporation and Johnson County Bankshares, Inc., two northeast
Kansas-based holding companies with assets totaling $1.1
billion. A total of 4,736,424 shares of Mercantile common stock
was issued in the transaction, which was accounted for as a
pooling-of-interests.
<TABLE>
Net income and net income per share for the Corporation,
MidAmerican Corporation and Johnson County Bankshares, Inc. prior
to restatement were as follows:
<CAPTION>
YEAR ENDED DECEMBER 31
1992 1991
($ IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Corporation
Net income $85,003 $66,555
Net income per share 2.91 2.57
MidAmerican Corporation
Net income $ 1,007 $ 6,320
Net income per share .30 1.96
Johnson County Bankshares, Inc.
Net loss $ (715) $ (557)
Net loss per share (36.70) (28.57)
</TABLE>
During the fourth quarter of 1992, certain adjustments were
recorded by MidAmerican Corporation and Johnson County
Bankshares, Inc. to conform their accounting and credit
policies regarding loan, other real estate and other asset
valuations to those of the Corporation. These adjustments
amounted to $8 million on an after-tax basis.
8
<PAGE> 11
MidAmerican Corporation acquired Jayhawk Bancshares, Inc., a
$52,000,000-asset, one-bank holding company in Lawrence,
Kansas, in July 1992. This acquisition was accounted for as a
purchase and, accordingly, the results of operations, which
were not material, were included in the Supplemental
Consolidated Financial Statements from the acquisition date.
The total cost of the acquisition was $10,872,000 in cash and
$2,200,000 in notes, which are subject to offset based upon the
outcome of certain litigation and losses in the loan portfolio
of the acquired bank subsidiary. The excess of the purchase
price over the fair value of net assets acquired was
$9,347,000.
On April 30, 1992, the Corporation acquired Ameribanc, Inc., a
$1.2 billion-asset, 11-bank holding company headquartered in
St. Joseph, Missouri. This acquisition was accounted for as a
purchase and, accordingly, the results of operations were
included in the Supplemental Consolidated Financial Statements
from the acquisition date. The total cost of the acquisition
was $8,851,000 in cash and 1,975,421 shares of Mercantile
common stock.
<TABLE>
The following unaudited pro forma combined consolidated
financial information gives effect to the April 30, 1992
acquisition of Ameribanc, Inc. as if it had been consummated on
January 1, 1991.
<CAPTION>
YEAR ENDED DECEMBER 31
1992 1991
($ IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net interest income $468,362 $407,453
Other income 188,053 166,957
Net income 95,115 68,916
Net income per share 2.32 2.25
</TABLE>
The Corporation acquired Old National Bancshares, Inc., a
$169,205,000-asset, two-bank holding company in southwestern
Illinois, in December 1991. This acquisition was accounted for
as a purchase and, accordingly, the results of operations,
which were not material, were included in the Supplemental
Consolidated Financial Statements from the acquisition date.
The total cost of the acquisition was $5,027,000 in cash and
742,265 shares of Mercantile common stock. The excess of the
purchase price over the fair value of net assets acquired was
$8,759,000.
MidAmerican Corporation acquired Kaw Valley Bancshares, Inc. a
$75,000,000-asset, one-bank holding company in Overland Park,
Kansas, in October 1991. This acquisition was accounted for as
a purchase and, accordingly, the results of operations, which
were not material, were included in the Supplemental
Consolidated Financial Statements from the acquisition date.
The total cost of the acquisition was $4,085,000 in cash and
the equivalent of 261,864 shares of Mercantile common stock.
The excess of the purchase price over the fair value of net
assets acquired was $3,807,000.
For all acquisitions accounted for as purchases, the
unamortized excess of cost over the fair value of assets
acquired was $56,808,000, $56,121,000 and $48,622,000 at
December 31, 1993, 1992 and 1991, respectively.
RTC TRANSACTIONS:
During 1992 and 1991, certain subsidiaries of the Corporation
acquired from the Resolution Trust Corporation the deposits and
certain assets of failed thrift institutions. Transactions
during 1992 included: Mercantile Bank of Joplin N.A. and
Mercantile Bank of Kansas City acquired $222,304,000 in
deposits of two branches of the former Home Federal Savings
Association in Joplin and Kansas City, Missouri in March 1992;
Mercantile Bank of West Central Missouri acquired $163,055,000
in deposits and $156,818,000 in assets of First State Savings
Association of Sedalia in April 1992; and United Postal Savings
Association acquired $79,000,000 in deposits and $80,000,000 in
assets of First Federal Savings and Loan Association in
Manchester, Missouri in December 1992. In July 1991, Mercantile
Bank of Illinois N.A. and Mercantile Bank of St. Louis N.A.
jointly acquired $296,408,000 in deposits and $108,483,000 in
assets of Germania Bank FSB. During the year ended December 31,
1991, The Waterloo Savings Bank acquired the Waterloo and Cedar
Falls, Iowa offices of Statesman Federal Savings Bank and
American Federal Savings Association, with assets of
$33,000,000 and deposits of $142,000,000. Unamortized core
deposit premium was $11,261,000, $14,047,000 and $12,879,000 at
December 31, 1993, 1992 and 1991, respectively.
The effect of the Mt. Vernon, Flora, Jayhawk, Old National, Kaw
Valley and Resolution Trust Corporation acquisitions on the
Corporation's operating results from January 1, 1991 through
the respective acquisition dates and for the years ended
December 31, 1993, 1992 and 1991, was not material.
SUBSIDIARY MERGERS:
During 1993, the Corporation effected several reorganization
transactions among certain subsidiary banks. On February 5,
1993, certain assets and liabilities of the Marceline, Missouri
office of American Bank of North Central Missouri were sold to
Mercantile Bank of North Central Missouri. On the same date,
the remaining offices of American Bank of North Central
Missouri were merged with Mercantile Bank of Trenton N.A.
During June 1993, Mercantile Bank of Kansas N.A. merged with
MidAmerican Bank and Trust Company to form Mercantile Bank of
Kansas.
9
<PAGE> 12
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE C
CASH FLOWS
The Corporation paid interest on deposits, short-term
borrowings and long-term debt of $335,574,000, $429,793,000 and
$516,099,000 in 1993, 1992 and 1991, respectively. The
Corporation paid Federal income taxes of $61,493,000,
$45,174,000 and $35,745,000 in 1993, 1992 and 1991,
respectively.
<TABLE>
The following details cash and cash equivalents from
acquisitions, net of cash paid:
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Fair value of assets purchased $(186,391) $(1,679,456) $(697,675)
Liabilities assumed 166,400 1,603,529 663,391
Issuance of common stock 15,182 51,295 20,908
--------- ----------- ---------
Net cash paid for acquisitions (4,809) (24,632) (13,376)
Cash and cash equivalents acquired 15,894 425,944 327,994
--------- ----------- ---------
CASH AND CASH EQUIVALENTS FROM ACQUISITIONS, NET OF
CASH PAID $ 11,085 $ 401,312 $ 314,618
========= =========== =========
</TABLE>
NOTE D
CASH AND DUE FROM BANKS RESTRICTIONS
The Corporation's subsidiary banks and thrift institution are
required to maintain average reserve balances which place
withdrawal and/or usage restrictions on cash and due from banks
balances. The average amount of these restricted balances for
the year ended December 31, 1993 was $166,330,000.
NOTE E
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective December 31, 1993, the Corporation adopted FAS 115,
and its cumulative effect was recorded on the Supplemental
Consolidated Balance Sheet on that date. The most significant
impact of the new accounting requirements is that unrealized
holding gains and losses, net of applicable income taxes, on
securities classified as available-for-sale are recorded as an
adjustment to retained earnings. In 1992 these securities were
classified as held-for-sale, and were carried at the lower of
amortized cost or fair value determined on an aggregate basis
with adjustments recorded in current year earnings. The
adoption of FAS 115 did not have a material effect on the
financial condition or results of operations for the year ended
December 31, 1993, and prior year Supplemental Consolidated
Financial Statements have not been restated.
On December 31, 1993, debt securities with an amortized cost of
$2,970,160,000 were classified as "held-to-maturity;" and debt
and equity securities with an amortized cost of $409,688,000
were classified as "available-for-sale." A market valuation
account of $5,595,000 was established for the available-for-
sale securities to increase the recorded balance of such
securities at December 31, 1993 to their estimated fair value
on that date. A tax liability of $1,959,000 established the
deferred tax effect of the market valuation account. The net
increase resulting from the market valuation adjustment at
December 31, 1993 was recorded as an adjustment to retained
earnings.
AVAILABLE-FOR-SALE:
<TABLE>
The amortized cost, estimated fair values, and unrealized gains
and losses of available-for-sale securities at December 31,
1993 and December 31, 1992 were as follows:
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
(THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
U.S. government $359,362 $2,289 $ 604 $361,047
State and political subdivisions-
tax-exempt 14,259 925 11 15,173
Other 36,067 4,240 1,244 39,063
-------- ------ ------ --------
Total $409,688 $7,454 $1,859 $415,283
======== ====== ====== ========
DECEMBER 31, 1992
U.S. government $89,424 $2,672 $ - $92,096
======= ====== === =======
</TABLE>
10
<PAGE> 13
HELD-TO-MATURITY:
<TABLE>
The amortized cost, estimated fair values, and unrealized gains
and losses of held-to-maturity securities were as follows:
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
(THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1993
U.S. government $2,492,458 $42,756 $3,492 $2,531,722
State and political subdivisions
Tax-exempt 235,030 10,290 272 245,048
Taxable 101,467 338 671 101,134
---------- ------- ------ ----------
Total State and Political
Subdivisions 336,497 10,628 943 346,182
Other 141,205 1,809 327 142,687
---------- ------- ------ ----------
Total $2,970,160 $55,193 $4,762 $3,020,591
========== ======= ====== ==========
DECEMBER 31, 1992
U.S. government $2,664,816 $67,137 $7,055 $2,724,898
State and political subdivisions
Tax-exempt 216,060 7,839 1,052 222,847
Taxable 12,195 317 131 12,381
---------- ------- ------ ----------
Total State and Political
Subdivisions 228,255 8,156 1,183 235,228
Other 401,098 5,782 859 406,021
---------- ------- ------ ----------
Total $3,294,169 $81,075 $9,097 $3,366,147
========== ======= ====== ==========
DECEMBER 31, 1991
U.S. government $1,888,213 $78,400 $ 394 $1,966,219
State and political subdivisions
Tax-exempt 173,071 5,658 1,912 176,817
Taxable 3,479 244 1 3,722
---------- ------- ------ ----------
Total State and Political
Subdivisions 176,550 5,902 1,913 180,539
Other 386,366 7,850 650 393,566
---------- ------- ------ ----------
Total $2,451,129 $92,152 $2,957 $2,540,324
========== ======= ====== ==========
</TABLE>
Securities with a carrying value of $1,963,837,000 at December 31,
1993, $2,084,829,000 at December 31, 1992 and $1,778,625,000 at
December 31, 1991 were pledged to secure public and trust deposits,
securities sold under agreements to repurchase, and for other
purposes required by law.
Included in other held-to-maturity securities at December 31, 1992
and 1991 were marketable equity securities with a cost of
$16,675,000 at both dates, and a carrying value of $13,121,000 and
$11,599,000, at December 31, 1992 and 1991, respectively. At
December 31, 1993, these same securities were classified as
available-for-sale upon the adoption of FAS 115. Additional
securities with carrying values of $752,000 became marketable
equity securities during 1993, and at December 31, 1993, these
securities were classified as available-for-sale.
<TABLE>
The following table presents proceeds from sales of securities and
the components of net securities gains.
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Proceeds from sales of:
Held-to-maturity securities $ 27,970 $166,118 $160,361
Available-for-sale securities 538,755 307,597 160,606
Securities from acquired entities 14,491 58,219 -
Securities gains on:
Held-to-maturity securities $ 1,013 $ 4,141 $ 4,925
Available-for-sale securities 5,230 3,610 -
------- ------- ------
Total Securities Gains 6,243 7,751 4,925
Securities losses on:
Held-to-maturity securities 863 1,362 591
Available-for-sale securities 1,638 871 -
------- ------- ------
Total Securities Losses 2,501 2,233 591
------- ------- -------
Net Securities Gains
Before Income Taxes 3,742 5,518 4,334
Applicable income taxes (1,310) (1,876) (1,474)
------- ------- -------
Net Securities Gains $ 2,432 $ 3,642 $ 2,860
======= ======= =======
</TABLE>
NOTE F
LOANS AND LEASES
<TABLE>
Loans and leases consisted of the following:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Commercial $1,932,116 $2,033,191 $2,006,501
Real estate-commercial 1,267,085 1,350,775 1,175,380
Real estate-construction 162,765 163,764 159,357
Real estate-residential 2,315,059 2,403,917 2,241,945
Consumer 941,044 935,471 875,924
Credit card 763,243 610,429 483,208
Foreign 462 1,674 3,222
---------- ---------- ----------
Loans and Leases $7,381,774 $7,499,221 $6,945,537
========== ========== ==========
</TABLE>
<TABLE>
Changes in the reserve for possible loan losses were as follows:
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Beginning Balance $165,575 $146,078 $148,660
Provision 61,013 74,579 58,076
Charge-offs (83,811) (88,387) (77,132)
Recoveries 23,632 15,317 11,777
-------- -------- --------
Net Charge-offs (60,179) (73,070) (65,355)
Acquired Reserves 2,242 17,988 4,697
-------- -------- --------
Ending Balance $168,651 $165,575 $146,078
======== ======== ========
</TABLE>
11
<PAGE> 14
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
Non-performing loans consisted of the following:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Non-accrual $49,018 $ 91,679 $125,504
Renegotiated 8,465 13,881 3,606
------- -------- --------
Non-performing Loans $57,483 $105,560 $129,110
======= ======== ========
</TABLE>
Certain directors and executive officers of the Corporation and
Mercantile Bank of St. Louis N.A. were loan customers of the
Corporation's banks during 1993, 1992 and 1991. Such loans were
made in the ordinary course of business at normal terms,
including interest rate and collateralization, and did not
represent more than a normal risk. Loans to those persons,
their immediate families and companies in which they were
principal owners were $6,873,000, $39,126,000 and $35,895,000
at December 31, 1993, 1992 and 1991, respectively. During 1993,
$1,869,000 of new loans were made to these persons; repayments
totaled $34,122,000.
NOTE G
BANK PREMISES AND EQUIPMENT
<TABLE>
Bank premises and equipment were as follows:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Land $ 35,993 $ 33,901 $ 25,359
Bank premises 200,552 194,605 154,222
Leasehold improvements 17,907 17,129 14,806
Furniture and equipment 167,856 156,658 133,121
--------- --------- --------
Total Cost 422,308 402,293 327,508
Accumulated depreciation (222,945) (201,741) (163,452)
--------- --------- ---------
Net Carrying Value $ 199,363 $ 200,552 $164,056
========= ========= ========
</TABLE>
<TABLE>
At December 31, 1993, the Corporation had certain long-term
leases, none of which were considered to be capital leases,
which were principally related to the use of land, buildings
and equipment. The following table summarizes the future
minimum rental commitments for all noncancelable operating
leases which had initial or remaining noncancelable lease terms
in excess of one year:
<CAPTION>
PERIOD MINIMUM RENTAL
(THOUSANDS)
<S> <C>
1994 $ 4,463
1995 3,609
1996 3,030
1997 2,547
1998 1,178
1999 and later 4,884
-------
Total $19,711
=======
</TABLE>
Net rental expense for all operating leases was $6,775,000 in
1993, $7,165,000 in 1992 and $6,455,000 in 1991.
NOTE H
SHORT-TERM BORROWINGS
<TABLE>
Short-term borrowings were as follows:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Federal funds purchased and repurchase agreements $ 602,997 $744,101 $613,339
Treasury tax and loan notes 502,260 215,521 253,074
Commercial paper 18,390 9,198 7,928
Other short-term borrowings - 16,574 40,434
--------- -------- --------
Total $1,123,647 $985,394 $914,775
========== ======== ========
</TABLE>
The Corporation had unused lines of credit arrangements with
unaffiliated banks in support of commercial paper outstanding
of $40,000,000 at December 31, 1993.
NOTE I
LONG-TERM DEBT
<TABLE>
Long-term debt consisted of the following:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
MERCANTILE BANCORPORATION INC. (PARENT COMPANY ONLY)
7.625% subordinated notes, due 2002 $150,000 $150,000 $ -
11.750% notes, due 1992 - - 60,000
8.500% debentures, due 2004 30,550 31,171 31,171
8.000% convertible subordinated
capital notes, due 1995 13,522 15,426 -
Notes issued in acquisitions - 120 240
------- -------- --------
Total 194,072 196,717 91,411
SECOND-TIER HOLDING COMPANIES 1,905 24,850 18,108
BANKS AND OTHER SUBSIDIARIES
9.000% mortgage-backed notes, due 1999 53,041 52,966 52,783
Mortgage payable 23,653 24,337 24,968
Advance from Federal Home Loan Bank - - 16,000
Other 107 239 -
-------- -------- -------
Total 76,801 77,542 93,751
-------- -------- --------
Total Long-term Debt $272,778 $299,109 $203,270
======== ======== ========
</TABLE>
On October 15, 1992, the Corporation issued $150,000,000 of
subordinated notes with a ten-year maturity and a coupon rate
of 7.625% to yield 7.741%. These notes qualify as Tier II
capital under current regulatory guidelines.
12
<PAGE> 15
On January 25, 1994, Mercantile Bank of St. Louis N.A. issued
$75,000,000 of 6.375% 10-year, non-callable subordinated debt,
due January 15, 2004. This debt qualifies as Tier II capital.
The Corporation used the proceeds of this subordinated debt
issue to: (1) prepay in full on February 23, 1994 the
$30,550,000 8.500% unsecured debentures of the Corporation; and
(2) prepay in full on February 1, 1994 the $23,653,000 8.250%
mortgage secured by the Corporation's headquarters building.
The 11.750% notes were direct, unsecured obligations of the
Corporation. The notes were paid in full upon maturity in
December 1992.
The 8.500% debentures were direct, unsecured obligations of the
Corporation. Required minimum annual redemptions of $1,050,000
were met through 1993. These debentures were prepaid in full on
February 23, 1994 as part of the debt refinancing described
above.
The 8.000% convertible subordinated capital notes were issued
by Ameribanc, Inc. prior to its acquisition by the Corporation.
At December 31, 1993, these notes were convertible into
approximately 520,000 shares of the Corporation's common stock.
Notes issued in acquisitions by the parent company with an
interest rate of 6.500% matured in November 1993.
All second-tier holding company debt was issued by either
MidAmerican Corporation or Johnson County Bankshares, Inc.
prior to their acquisition by the Corporation. Except for the
notes issued in acquisitions, all second-tier holding company
debt was paid off on January 5, 1993. Notes issued in
acquisitions by a second-tier holding company were issued at a
variable rate and are due in 1994. The notes are subject to
offset based upon the outcome of certain litigation and losses
in the loan portfolio of the acquired bank subsidiary.
In July 1989, United Postal Savings Association issued $100
million of 9.000% fixed-rate mortgage-backed notes with a
maturity of July 1999. United Postal Savings Association used a
portion of the proceeds from the sale of the notes as, or to
purchase, eligible collateral which was pledged to the trustee
simultaneously with the initial sale of the notes. During 1990,
$46,600,000 of the mortgage-backed notes were repurchased on
the open market at a discount.
The mortgage payable, which bears interest at a rate of 8.250%,
was a direct obligation of a bank subsidiary secured by the
Corporation's headquarters building, Mercantile Tower, which
had a carrying value of $23,548,000 at December 31, 1993. The
Corporation prepaid this mortgage in full on February 1, 1994
as part of the debt refinancing described above.
The advance from the Federal Home Loan Bank was paid in full
during 1993 by United Postal Savings Association.
<TABLE>
A summary of annual principal reductions of long-term debt, after
the effects of the debt refinancing described above, is presented
below:
<CAPTION>
ANNUAL
PERIOD PRINCIPAL REDUCTIONS
(THOUSANDS)
<S> <C>
1994 $ 1,939
1995 13,557
1996 38
1997 -
1998 -
1999 and later 257,244
--------
Total $272,778
========
</TABLE>
NOTE J
INCOME TAXES
The Corporation adopted FAS 109, "Accounting for Income Taxes,"
in the first quarter of 1993 and applied the provisions
retroactively to January 1, 1988. The cumulative effect of this
change in accounting for income taxes was a $6,900,000
reduction of retained earnings as of that date. Adoption of FAS
109 had no material impact on net income for the years ended
December 31, 1993 and 1992. The effect on 1991 net income of
adopting FAS 109 was a reduction to income tax expense of
$18,000,000.
<TABLE>
Income tax expense was as follows:
<CAPTION>
CURRENT DEFERRED TOTAL
(THOUSANDS)
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
U.S. FEDERAL $58,989 $5,479 $64,468
STATE AND LOCAL 10,338 762 11,100
------- ------ -------
TOTAL $69,327 $6,241 $75,568
======= ====== =======
Year ended December 31, 1992
U.S. Federal $44,020 $ 915 $44,935
State and local 7,078 333 7,411
------- ------ -------
Total $51,098 $1,248 $52,346
======= ====== =======
Year ended December 31, 1991
U.S. Federal $31,516 $(18,995) $12,521
State and local 6,406 (254) 6,152
------- -------- -------
Total $37,922 $(19,249) $18,673
======= ======== =======
</TABLE>
13
<PAGE> 16
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
The tax effects of temporary differences that gave rise to the
deferred tax assets and deferred tax liabilities are presented
below.
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets
Reserve for possible loan losses $ 53,507 $ 54,245 $ 45,375
Foreclosed property 2,172 2,745 3,041
Deferred compensation 2,792 1,874 1,447
Net operating losses from pooled subsidiary 4,527 10,377 15,192
Expenses not currently allowable for tax purposes 7,598 5,802 1,769
State tax liabilities 1,266 1,567 1,462
Other 3,066 11,447 10,206
-------- -------- --------
Total Gross Deferred Tax Assets 74,928 88,057 78,492
Deferred tax liabilities
Leasing (55,050) (55,187) (49,460)
Pension settlement gain (6,005) (5,833) (5,833)
Intangible assets (8,369) (8,355) (6,936)
Depreciation (2,542) (2,793) (2,826)
Investments in debt and equity securities-FAS 115 (1,959) - -
Other (1,819) (8,505) (8,592)
-------- -------- --------
Total Gross Deferred Tax Liabilities (75,744) (80,673) (73,647)
-------- -------- --------
Net Deferred Tax Assets/(Liabilities) $ (816) $ 7,384 $ 4,845
======== ======== ========
</TABLE>
The 1992 and 1993 net deferred tax assets/(liabilities) reflect
amounts attributable to entities acquired in purchase
transactions.
<TABLE>
Income tax expense as reported differs from the amounts
computed by applying the statutory U.S. Federal income tax rate
to pretax income as follows:
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense $68,051 $50,112 $29,521
Increase (reduction) in income taxes resulting from
Tax-exempt income (5,565) (4,023) (5,661)
State and local income taxes, net of federal income
tax benefit 7,214 4,892 4,060
Change in valuation allowance for deferred tax assets - - (21,080)
Goodwill write-off - - 10,874
Thrift bad debt recapture 6,070 - -
Other, net (202) 1,365 959
------- ------- -------
Total Tax Expense $75,568 $52,346 $18,673
======= ======= =======
</TABLE>
NOTE K
RETIREMENT PLANS
PENSION PLANS:
The Corporation maintains both qualified and nonqualified
noncontributory pension plans that cover all employees meeting
certain age and service requirements.
The qualified plan provides pension benefits based on the
employee's length of service and compensation earned during the
five years prior to retirement. The Corporation's funding
policy is to contribute annually at least the minimum amount
required by government funding standards but not more than is
tax deductible. No contribution was required or made during
1993, 1992 or 1991.
United Postal Savings Association is a member of the Financial
Institutions Retirement Fund ("Fund"). This trust provides
retirement and death benefits to multiple employers. All
contributions to the Fund are comingled, and all assets of the
Fund are invested on a pooled basis, without allocation to the
individual employers. Therefore, United Postal Savings
Association's pension plan assets and actuarial liabilities are
not included in the qualified plan tables listed below. Due to
an overfunding of the Fund, pension expense for the periods
presented has been comprised primarily of an administrative
fee.
<TABLE>
The net periodic pension expense (credit) related to the
qualified plan included in the Supplemental Consolidated
Statement of Income is summarized as follows:
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 4,762 $3,661 $ 3,270
Interest cost on projected benefit obligation 7,293 5,811 4,893
Actual return on plan assets (9,839) (7,807) (18,542)
Net amortization and deferral (959) (1,547) 10,181
------- ------- --------
Net Periodic Pension Expense (Credit) $ 1,257 $ 118 $ (198)
======= ====== ========
</TABLE>
14
<PAGE> 17
<TABLE>
The table below sets forth the funded status and amounts
recognized in the Supplemental Consolidated Balance Sheet for
the qualified plan:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of Vested benefit obligation $77,877 $63,328 $49,944
======= ======= =======
Accumulated benefit obligation $84,795 $67,862 $53,392
======= ======= =======
Projected benefit obligation $103,744 $ 83,237 $ 66,960
Plan assets at fair value 118,159 112,087 103,004
-------- -------- --------
Plan assets in excess of projected benefit
obligation (overfunded) (14,415) (28,850) (36,044)
Unrecognized net gain (loss) (10,671) 1,885 7,909
Unrecognized prior service cost 1,843 1,608 2,104
Unrecognized net asset at December 31 6,865 8,078 9,292
-------- -------- --------
Prepaid Pension $ (16,378) $ (17,279) $(16,739)
========= ========= ========
<CAPTION>
Assumptions used were as follows:
1993 1992 1991
Discount rate in determining benefit obligations 7.50% 8.00% 8.50%
Rate of increase in compensation levels 5.00 5.25 6.00
Expected long-term rate on assets 9.00 8.50 8.50
</TABLE>
At December 31, 1993, approximately 57% of the plan's assets
was invested in listed common stocks; the remaining 43% was
invested in government and corporate bonds rated A or better. A
nominal amount of common stock of the Corporation was held by
the plan.
During 1991 the Corporation announced an early retirement
program available to certain employees. The pension expense
related to this program was $2,529,000.
The nonqualified plans provide pension benefits which would
have been provided under the qualified plan in the absence of
limits placed on qualified plan benefits by the Internal
Revenue Service. The Corporation's funding policy is to fund
benefits as they are paid. Contributions under the nonqualified
plans were not material for the three years ended December 31,
1993, 1992 and 1991. The expense related to these plans was
$1,641,000 in 1993, $1,337,000 in 1992 and $996,000 in 1991.
OTHER POSTRETIREMENT BENEFITS:
In addition to the pension plans described above, the
Corporation provides other postretirement benefits, largely
medical benefits and life insurance, to its retirees.
The Corporation adopted FAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in the first
quarter of 1993. Expense for 1993 under FAS 106, assuming a 20-
year amortization period for the transition obligation, was
$4,917,000 compared with the cash basis cost of $2,225,000 in
1992 and $1,846,000 in 1991.
<TABLE>
The table below sets forth the funded status and the amount
recognized in the Supplemental Consolidated Balance Sheet
regarding other postretirement benefits:
<CAPTION>
DECEMBER 31
(THOUSANDS)
1993 1992
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO)
Retirees $ 25,893 $ 25,900
Active employees fully eligible for benefits 1,359 1,149
Other active employees 7,747 6,523
-------- --------
Total APBO 34,999 33,572
Assets at fair value - -
-------- -------
APBO in excess of assets 34,999 33,572
Unrecognized transition obligation (31,893) (33,572)
Unrecognized service cost 1,500 -
Unrecognized net loss (1,268) -
-------- -------
Accrued Postretirement Benefit Obligation $ 3,338 $ -
======== =======
<CAPTION>
Assumptions used were as follows:
1993 1992
Discount rate in determining benefits obligation 7.50% 8.00%
Health care cost trend
Year 1 12.00 13.00
Year 8 6.00 6.00
</TABLE>
An increase in the health care cost trend of one percent would
increase the aggregate of service and interest cost components
of net periodic postretirement benefit costs and the APBO by
$1,796,000 in 1993 compared with $1,717,000 in 1992.
NOTE L
SHAREHOLDERS' EQUITY
COMMON STOCK:
The authorized common stock of the Corporation consists of
70,000,000 shares as of December 31, 1993 and 1992, and
35,000,000 shares as of December 31, 1991, $5.00 par value, of
which 42,802,322, 42,031,973 and 33,639,248 shares were issued
and outstanding at December 31, 1993, 1992 and 1991,
respectively. An increase of authorized common stock to
100,000,000 shares was approved by the Corporation's
shareholders on April 28, 1994.
15
<PAGE> 18
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The Corporation's Dividend Reinvestment Plan allows
shareholders of record to reinvest dividends and/or make
voluntary cash contributions to purchase additional shares of
the Corporation's common stock. Under the Plan, stock is
purchased in the open market by the Plan Trustee with no
service charge to the shareholder.
PREFERRED STOCK:
The authorized preferred stock of the Corporation consists of
5,000,000 shares, no par value, of which none were issued or
outstanding at December 31, 1993, 1992 and 1991, although 700,000
shares were reserved at December 31, 1993, for issuance pursuant to
the Preferred Share Purchase Rights Plan. The preferred stock,
which is issuable in series, shall have specific terms, preferences
and other rights as determined by the Board of Directors for each
series.
PREFERRED SHARE PURCHASE RIGHTS PLAN:
One Preferred Share Purchase Right ("Right") is attached to each
share of common stock and trades automatically with such shares.
The Rights, which can be redeemed by the Board of Directors in
certain circumstances and expire by their terms on June 3, 1998,
have no voting rights.
The Rights become exercisable and will trade separately from the
common stock 10 days after a person or a group either becomes the
beneficial owner or announces an intention to commence a tender
offer for 20% or more of the Corporation's outstanding common
stock. When exercisable, each Right entitles the registered holder
to purchase from the Corporation 1/100 of a share of Series A
Junior Participating Preferred Stock for $100 per 1/100 of a
preferred share.
In the event a person acquires beneficial ownership of 20% or more
of the Corporation's common stock, holders of Rights (other than
the acquiring person or group) may purchase, at the Rights' then
current exercise price, common stock of the Corporation having a
value at that time equal to twice the exercise price. In the event
the Corporation merges into or otherwise transfers 50% or more of
its assets or earnings power to any person after the Rights become
exercisable, holders of Rights may purchase, at the then current
exercise price, common stock of the acquiring entity having a value
at that time equal to twice the exercise price.
STOCK OPTIONS:
The Corporation had stock options outstanding under various plans
at December 31, 1993, including plans assumed in acquisitions. The
original Mercantile plans provide for the granting to employees of
the Corporation and its subsidiaries of options to purchase shares
of common stock of the Corporation over periods of up to 10 years
at a price not less than the market value of the shares at the date
the options are granted. The plans provide for the granting of
options which either qualify or do not qualify as Incentive Stock
Options as defined by Section 422 of the Internal Revenue Code of
1986, as amended. A summary of the plans follows:
<TABLE>
<CAPTION>
SHARES PRICE
------ -----
<S> <C> <C>
AT DECEMBER 31, 1993
Available for grant 233,523
Outstanding 2,263,103 $5.41-$34.33
Exercisable 887,871 5.41- 29.00
<CAPTION>
Changes in options outstanding were as follows:
SHARES PRICE
------ -----
BALANCE AT DECEMBER 31, 1990 1,052,334 $11.19-$17.83
Granted 272,400 14.67- 21.78
Exercised (127,293) 11.19- 17.17
Canceled (50,730) 11.19- 17.50
---------
BALANCE AT DECEMBER 31, 1991 1,146,711 11.19- 21.78
Granted 1,146,347 5.41- 29.00
Exercised (320,565) 5.41- 24.09
Canceled (60,582) 17.00- 26.33
Assumed 72,223 14.60- 25.83
---------
BALANCE AT DECEMBER 31, 1992 1,984,134 5.41- 29.00
GRANTED 580,419 18.01- 34.33
EXERCISED (261,225) 5.41- 26.33
CANCELED (40,225) 17.17- 32.67
---------
BALANCE AT DECEMBER 31, 1993 2,263,103 5.41- 34.33
=========
</TABLE>
As of February 1, 1994, the acquisition date of United Postal, the
remaining unvested options, totaling 391,082 shares, of the United
Postal plans became exercisable.
No amounts have been charged to income in connection with any plan.
DEBT AND DIVIDEND RESTRICTIONS:
Consolidated retained earnings at December 31, 1993 were not
restricted under any debenture agreement as to payment of
dividends and reacquisition of common stock.
The primary source of funds for dividends paid by the
Corporation to its shareholders is dividends received from bank
and thrift subsidiaries. At December 31, 1993, approximately
$251,139,000 of the equity of bank and thrift subsidiaries was
available for distribution as dividends to the Parent Company
without prior regulatory approval or without reducing the
capital of the respective subsidiary banks and thrift
institution below present minimum standards. An additional
$94,218,000 would be available for loans to the Parent Company
under Federal Reserve regulations. The remaining equity of bank
and thrift subsidiaries approximating $679,312,000 was
restricted as to transfers to the Parent Company.
16
<PAGE> 19
NOTE M
CONCENTRATIONS OF CREDIT
The Corporation's primary market area is the state of Missouri and
the lower Midwest. At December 31, 1993, approximately 93% of the
total loan portfolio, and 91% of the commercial and commercial real
estate loan portfolio, were to borrowers within this region. The
diversity of the region's economic base tends to provide a stable
lending environment.
Real estate lending constituted the only other significant
concentration of credit risk. Real estate-related financial
instruments (loans, commitments and standby letters of credit)
comprised 36% of all such instruments of the Corporation. However,
of this total, approximately 64% was consumer-related in the form
of residential real estate mortgages and home equity lines of
credit.
The Corporation is, in general, a secured lender. At December 31,
1993, approximately 83% of the loan portfolio was secured.
Collateral is required in accordance with the normal credit
evaluation process based upon the creditworthiness of the customer
and the credit risk associated with the particular transaction.
NOTE N
FINANCIAL INSTRUMENTS
FAIR VALUES:
Fair values for financial instruments are management's
estimates of the values at which the instruments could be
exchanged in a transaction between willing parties. These
estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In
addition, certain financial instruments and all non-financial
instruments are excluded from the fair value disclosure
requirements of FAS 107. Therefore, the fair values presented
below should not be construed as the underlying value of the
Corporation.
The following methods and assumptions were used in estimating
fair values for financial instruments.
Cash and Due from Banks, Short-term Investments and Short-
term Borrowings: The carrying values reported in the
Supplemental Consolidated Balance Sheet approximated fair
values.
Investments in Debt and Equity Securities: Fair values for
held-to-maturity and available-for-sale securities were based
upon quoted market prices where available. Fair values for
trading securities, which also were the amounts reported in
the Supplemental Consolidated Balance Sheet, were based on
quoted market prices where available. If quoted market prices
were not available, fair values were based upon quoted market
prices of comparable instruments.
Loans and Leases: The fair values for most loans were
estimated utilizing discounted cash flow calculations that
applied interest rates currently being offered for similar
loans to borrowers with similar risk profiles. Loans with
similar characteristics were aggregated for purposes of these
calculations. Non-accrual loans were valued at face value
adjusted for potential credit loss. The par value of credit
card loans was assumed to be the same as the fair value. The
fair value estimate of the credit card portfolio does not
include any value attributable to the ongoing cardholder
relationship. That component was estimated to be
approximately $135,000,000 to $165,000,000 in excess of the
fair value at December 31, 1993 as compared to approximately
$110,000,000 to $135,000,000 in excess of the fair value at
December 31, 1992.
Deposits: The fair values disclosed for deposits generally
payable on demand (i.e., interest bearing and non-interest
bearing demand, savings, and money market accounts) were
considered equal to their respective carrying amounts as
reported in the Supplemental Consolidated Balance Sheet. Fair
values for certificates of deposit and foreign deposits were
estimated using a discounted cash flow calculation that
applied interest rates currently being offered on similar
certificates to a schedule of aggregated expected monthly
maturities of time deposits. The fair value estimate of the
deposit portfolio has not been adjusted for any value derived
from the retention of those deposits for an expected future
period of time. That component, commonly referred to as core
deposit premium, was estimated to be approximately
$180,000,000 to $275,000,000 at December 31, 1993 as compared
to approximately $185,000,000 to $280,000,000 at December 31,
1992 and was neither considered in the fair value amounts
below nor recorded as an intangible asset in the Supplemental
Consolidated Balance Sheet.
Long-term Debt: The fair value of publicly traded debt was
based upon quoted market prices, where available, or upon
quoted market prices of comparable instruments. The fair
values of other long-term debt were estimated using
discounted cash flow analyses, based on the Corporation's
current incremental borrowing rates for similar types of
borrowing arrangements.
Off-Balance-Sheet Instruments: Fair values of foreign
exchange contracts and interest rate contracts were
determined from quoted market prices. Fair values of
commitments to extend credit, standby letters of credit and
commercial letters of credit were based on fees currently
charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the counterparties'
credit standings.
17
<PAGE> 20
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
The estimated fair values of the Corporation's financial
instruments were as follows:
<CAPTION>
DECEMBER 31
1993 1992
-------------------------------------- --------------------------------------
(THOUSANDS)
CARRYING FAIR CARRYING FAIR
FINANCIAL ASSETS VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
Cash and due from banks and
short-term investments $1,037,173 $1,037,173 $ 971,508 $ 971,508
Trading securities 15,735 15,735 17,684 17,684
Held-to-maturity securities 2,970,160 3,020,591 3,294,169 3,366,147
Available-for-sale securities 415,283 415,283 89,424 92,096
Net loans and leases 7,213,123 7,298,682 7,333,646 7,440,358
FINANCIAL LIABILITIES
Deposits 9,602,083 9,658,117 9,927,959 10,007,100
Short-term borrowings 1,123,647 1,123,647 985,394 985,394
Long-term debt 272,778 301,669 299,109 302,112
<CAPTION>
FAIR FAIR
VALUE VALUE
OFF-BALANCE-SHEET
Foreign exchange contracts
purchased $ 5,375 $(2,034)
Foreign exchange contracts
sold (6,890) 1,392
Interest rate contracts (4,125) (5,300)
Commitments to extend credit (11,950) (9,307)
Standby letters of credit (2,247) (2,051)
Commercial letters of credit (4,321) (4,774)
</TABLE>
OFF-BALANCE-SHEET RISK:
The Corporation is, in the normal course of business, a party to
certain off-balance-sheet financial instruments with inherent
credit and/or market risk. These instruments, which include
commitments to extend credit, standby letters of credit, interest
options written, interest futures contracts and foreign exchange
contracts, are used by the Corporation to meet the financing needs
of its customers and, to a lesser degree, to reduce its own
exposure to interest rate fluctuations. These instruments involve,
to varying degrees, credit and market risk in excess of the amount
recognized in the Supplemental Consolidated Balance Sheet.
<TABLE>
Financial instruments with off-balance-sheet credit risk for which
the contract amounts represent potential credit risk were as
follows:
<CAPTION>
DECEMBER 31
1993 1992 1991
(THOUSANDS)
<S> <C> <C> <C>
Commitments to extend credit
Commercial $1,589,036 $1,567,572 $1,490,550
Consumer 2,988,382 2,585,768 1,969,493
---------- ---------- ----------
Total $4,577,418 $4,153,340 $3,460,043
========== ========== ==========
Standby letters of credit $231,647 $212,179 $251,553
======== ======== ========
Interest rate contracts $37,500 $71,000 $84,737
======= ======= =======
</TABLE>
The Corporation's maximum exposure to credit loss under commitments
to extend credit and standby letters of credit is the equivalent of
the contractual amount of those instruments. The same credit
policies are used by the Corporation in granting commitments and
conditional obligations as are used in the extension of credit.
Commitments to extend credit are legally binding agreements to lend
to a borrower as long as the borrower performs in accordance with
the terms of the contract. Commitments generally have fixed
expiration dates or other termination clauses, and may require
payment of a fee. As many of the commitments are expected to expire
without being drawn upon, the total commitment amount does not
necessarily represent future cash requirements. Included in
consumer commitments are the unused portions of lines of credit for
credit card and home equity credit line loans.
Standby letters of credit are commitments issued by the Corporation
to guarantee specific performance of a customer to a third party.
Collateral is required for both commitments and standby letters of
credit in accordance with the normal credit evaluation process
based upon the creditworthiness of the customer and the credit risk
associated with the particular transaction. Collateral held varies,
but may include commercial real estate, accounts receivable,
inventory and equipment.
Included in interest rate contracts are interest rate exchange
agreements with major investment banking firms to convert short-
term variable-rate liabilities into long-term fixed-rate
liabilities, to secure interest margins, and to hedge against
interest rate movements.
18
<PAGE> 21
For interest options written and foreign exchange contracts, the
contractual or notional amounts of $31,400,000 and $287,030,000,
respectively, at December 31, 1993 do not represent exposure to
credit loss. These commitments are generally entered into on behalf
of customers and result in the Corporation being in a matched
position. Credit risk in the transactions is minimal. The
Corporation controls the credit risk of these instruments through
established credit approvals, risk control limits and other
monitoring procedures. Market risk to the Corporation could result
from non-performance by the counterparty to a contract.
NOTE O
CONTINGENT LIABILITIES
In the ordinary course of business there are various legal
proceedings pending against the Corporation and its
subsidiaries. Management, after consultation with legal
counsel, is of the opinion that the ultimate resolution of
these proceedings will have no material adverse effect on the
consolidated financial position or results of operations of the
Corporation.
NOTE P
PARENT COMPANY FINANCIAL INFORMATION
Following are the condensed financial statements of Mercantile
Bancorporation Inc. (Parent Company Only) for the periods
indicated.
For the Statement of Cash Flows (Parent Company Only), cash and
short-term investments were considered cash equivalents.
Interest paid on commercial paper and long-term debt was
$15,881,000, $10,618,000 and $11,011,000 for the years ended
December 31, 1993, 1992 and 1991, respectively.
<TABLE>
STATEMENT OF INCOME
(THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
INCOME
Dividends from banking subsidiaries $ 77,548 $44,077 $32,254
Other interest and dividends 5,538 3,320 3,959
Management fees 13,392 12,320 10,151
Other 2,687 2,994 3,434
-------- ------- -------
Total Income 99,165 62,711 49,798
EXPENSE
Interest on commercial paper 733 416 1,137
Interest on long-term debt 15,157 12,497 9,818
Salaries and benefits 11,544 10,489 8,588
Other operating expenses 14,301 15,743 12,980
-------- ------- -------
Total Expense 41,735 39,145 32,523
INCOME BEFORE INCOME TAX CREDITS AND EQUITY IN
UNDISTRIBUTED INCOME OF SUBSIDIARIES 57,430 23,566 17,275
Income tax credits 6,708 6,469 4,898
-------- ------- -------
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES 64,138 30,035 22,173
Equity in undistributed income of subsidiaries 54,726 65,005 45,981
-------- ------- -------
NET INCOME $118,864 $95,040 $68,154
======== ======= =======
</TABLE>
<TABLE>
BALANCE SHEET
(THOUSANDS)
<CAPTION>
DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
ASSETS
Cash $ 628 $ 175 $ 339
Short-term investments 47,776 63,766 42,406
Available-for-sale securities 16,569 - -
Marketable equity securities - 13,121 11,599
Investment in subsidiaries 1,016,395 917,403 705,062
Goodwill 45,912 27,383 26,410
Loans and advances to subsidiaries 53,390 44,248 7,915
Other assets 8,414 14,350 12,318
---------- ---------- --------
Total Assets $1,189,084 $1,080,446 $806,049
========== ========== ========
LIABILITIES
Commercial paper $ 18,390 $ 9,198 $ 7,928
Long-term debt 194,072 196,717 91,411
Other liabilities 18,065 23,207 16,448
---------- ---------- --------
Total Liabilities 230,527 229,122 115,787
SHAREHOLDERS' EQUITY 958,557 851,324 690,262
---------- ---------- --------
Total Liabilities and Shareholders' Equity $1,189,084 $1,080,446 $806,049
========== ========== ========
</TABLE>
19
<PAGE> 22
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
<TABLE>
STATEMENT OF CASH FLOWS
(THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 118,864 $ 95,040 $ 68,154
Adjustments to reconcile net income
to net cash provided by operating
activities
Net income of subsidiaries (132,274) (109,082) (78,235)
Dividends from subsidiaries 62,430 44,077 32,254
Other, net 2,038 4,023 4,915
--------- -------- --------
Net Cash Provided by
Operating Activities 51,058 34,058 27,088
INVESTING ACTIVITIES
Investments in debt and equity
securities
Purchases (2,054) (1,858) (1,526)
Proceeds from maturities 5,878 1,807 1,000
Maturity of short-term floating
rate securities - - 28,000
Contributions of capital to subsidiaries (31,705) (31,209) (2,700)
Investment in note from banking subsidiary - (35,000) -
Other, net (9,280) (1,412) (7,971)
--------- --------- --------
Net Cash Provided (Used) by
Investing Activities (37,161) (67,672) 16,803
FINANCING ACTIVITIES
Cash dividends paid by Mercantile Bancorporation Inc. (34,840) (27,506) (24,673)
Issuance of common stock
Public offering - - 40,953
Employee incentive plans
and warrants 2,203 3,904 1,508
Issuance of long-term debt - 150,000 -
Principal payments on
long-term debt (742) (60,207) (397)
Acquisitions (4,809) (8,347) (5,027)
Net change in commercial paper 9,192 1,271 (22,150)
Other, net (438) (4,305) 255
--------- --------- --------
Net Cash Provided (Used) by
Financing Activities (29,434) 54,810 (9,531)
--------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (15,537) 21,196 34,360
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 63,941 42,745 8,385
--------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 48,404 $ 63,941 $ 42,745
========= ======== ========
</TABLE>
20
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick
Certified Public Accounts
1010 Market Street
St. Louis, MO 63101
Shareholders and Board of Directors
Mercantile Bancorporation Inc.:
We have audited the accompanying supplemental consolidated balance
sheets of Mercantile Bancorporation Inc. and subsidiaries as of
December 31, 1993, 1992, and 1991, and the related supplemental
consolidated statements of income, changes in shareholders' equity,
and cash flows for the years then ended. These supplemental
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. The
supplemental consolidated financial statements give retroactive
effect to the mergers of Metro Bancorporation and United Postal
Bancorp, Inc. on January 3, 1994 and February 1, 1994,
respectively, which have been accounted for using the pooling of
interests method as described in the notes to the supplemental
consolidated financial statements. Generally accepted accounting
principles proscribe giving effect to consummated business
combinations accounted for by the pooling of interest method in
financial statements that do not include the dates of consummation.
These financial statements do not extend through the dates of
consummation; however, they will become the historical consolidated
financial statements of Mercantile Bancorporation Inc. and
subsidiaries after financial statements covering the dates of
consummation of the business combinations are issued.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Mercantile Bancorporation Inc. and
subsidiaries as of December 31, 1993, 1992, and 1991, and the
results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles
applicable after financial statements are issued for a period which
includes the date of consummation of the business combinations.
/s/ KPMG PEAT MARWICK
June 3, 1994
<PAGE> 24
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not Applicable
(b) PRO FORMA FINANCIAL INFORMATION.
Not Applicable
(c) EXHIBITS. The following exhibit is included
herein:
23.1 Consent of KPMG Peat Marwick
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 17, 1994 MERCANTILE BANCORPORATION INC.
By /s/ MICHAEL T. NORMILE
-------------------------------
Michael T. Normile
Senior Vice President
and Treasurer
<PAGE> 26
EXHIBIT INDEX
Exhibit No. Description Page No.
- - - ----------- ----------- --------
23.1 Consent of KPMG Peat Marwick
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Mercantile Bancorporation Inc.
We consent to the incorporation by reference in the Registration
Statements No. 2-78395, No. 33-15265, No. 33-33870, No. 33-35139,
No. 33-43694, and No. 33-48952, each on Form S-8, and No. 33-45863
and No. 33-50981, each on Form S-4, of Mercantile Bancorporation Inc.
of our report dated June 3, 1994, relating to the supplemental
consolidated balance sheets of Mercantile Bancorporation Inc. and
subsidiaries as of December 31, 1993, 1992 and 1991, and the related
supplemental consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1993, which report appears in the
Current Report of Form 8-K dated June 17, 1994 of Mercantile
Bancorporation Inc.
/s/ KPMG PEAT MARWICK
St. Louis, Missouri
June 16, 1994
