<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 EXCHANGE ACT OF 1934
MAY 1, 1995
-----------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
MERCANTILE BANCORPORATION INC.
------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 0-6045 43-0951744
- -------- ------ ----------
(STATE OR OTHER (IRS EMPLOYER (COMMISSION
OTHER JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
P.O. BOX 524, ST. LOUIS, MISSOURI 63166-0524
- --------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(314) 425-2525
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 1, 1995, TCBankshares, Inc., ("TCB"), an Arkansas
corporation and a bank holding company registered under the Bank Holding
Company Act of 1956, as amended, was merged (the "Merger") with and into a
wholly owned subsidiary of the Registrant, pursuant to an Agreement and Plan
of Reorganization, dated December 2, 1994, between the Registrant and TCB (the
"Agreement").
Pursuant to the terms of the Agreement, effective upon the Merger,
each outstanding share of (i) TCB's common stock, par value $50.00 per share
("TCB Common Stock"), was converted into the right to receive 2,228.2299
shares of the Registrant's common stock, par value $5.00 per share ("Mer
cantile Common Stock"), (ii) TCB's preferred stock, series A, par value $10.00
("TCB Series A Preferred Stock"), was converted into the right to receive 1
share of the Registrant's preferred stock, series B-1, no par ("Mercantile
Series B-1 Preferred Stock"), and (iii) TCB's preferred stock, series B, par
value $10.00 ("TCB Series B Preferred Stock"), was converted into the right to
receive 1 share of the Registrant's preferred stock, series B-2, no par
("Mercantile Series B-2 Preferred Stock"). In aggregate, (i) 2131.737 shares
of TCB Common Stock were converted into the right to receive 4,749,999 shares
of Mercantile Common Stock, (ii) 5,306 shares of TCB Series A Preferred Stock
were converted into the right to receive 5,306 shares of Mercantile Series B-1
Preferred Stock and (iii) 9,500 shares of TCB Series B Preferred Stock were
converted into the right to receive 9,500 shares of Mercantile Series B-2
Preferred Stock.
The Registrant's Registration Statement on Form S-4 (Registration
No. 33-57489), which was declared effective by the Securities and Exchange
Commission (the "Commission") on February 13, 1995 (the "Registration
Statement"), sets forth certain information regarding the Merger, the
Registrant and TCB, including without limitation the effective time and manner
of the Merger, a description of the assets involved, the nature and amount of
consideration paid by the Registrant therefor, the method used for determining
the amount of such consideration, the nature of any material relationships be
tween TCB and the Registrant, any officer or director of the Registrant, or
any associate of any such officer or director, the nature of TCB's business
and the Registrant's intended use of the assets acquired in the Merger.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired:
The historical financial statements of TCB listed below are
included herein at pages F-1 through F-27:
Report of the Independent Auditors Dated March 10, 1995.
Consolidated Balance Sheets of TCB and Subsidiaries as of
December 31, 1994 and 1993.
Consolidated Statements of Income of TCB and Subsidiaries for
the years ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Shareholders' Equity of TCB and
Subsidiaries for the years ended December 31, 1994, 1993
and 1992.
Consolidated Statements of Cash Flows of TCB and Subsidiaries
for the years ended December 31, 1994, 1993 and 1992.
Notes to the Consolidated Financial Statements .
(b) Pro Forma Financial Information:
The pro forma financial information consisting of the below-listed
documents is included herein at pages F-28 through F-33:
Unaudited Pro Forma Combined Consolidated Balance Sheet of
the Registrant as of December 31, 1994.
Unaudited Pro Forma Combined Consolidated Income Statements
of the Registrant for the years ended December 31, 1994, 1993
and 1992.
Notes to the Unaudited Pro Forma Combined Consolidated
Financial Statements of the Registrant.
(c) Exhibits:
(2) Agreement and Plan of Reorganization between Registrant and
TCBankshares, Inc., dated December 2, 1994, included as Exhibit 2.1
to the Registrant's Registration Statement on Form S-4, number
33-57489, is hereby incorporated by reference.
(23) Consent of Independent Auditors.
(27) Financial Data Schedule.
<PAGE> 4
<TABLE>
TCBankshares, Inc.
Consolidated Financial Statements
Years ended December 31, 1994, 1993 and 1992
CONTENTS
<S> <C>
Report of Independent Auditors F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-5
Consolidated Statements of Shareholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-9
</TABLE>
F-1
<PAGE> 5
Report of Independent Auditors
The Board of Directors and Shareholders
TCBankshares, Inc.
We have audited the accompanying consolidated balance sheets of
TCBankshares, Inc. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of TCBankshares, Inc. and subsidiaries at December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 3, the Company changed its accounting for
investment securities.
/s/ Ernst & Young LLP
Little Rock, Arkansas
March 10, 1995
F-2
<PAGE> 6
<TABLE>
TCBankshares, Inc.
Consolidated Balance Sheets
<CAPTION>
DECEMBER 31
1994 1993
--------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks (Note 15) $ 47,997 $ 36,015
Federal funds sold 175 9,225
--------------------------
Total cash and cash equivalents 48,172 45,240
Interest bearing deposits with other banks 300 1,293
Investment securities held-to-maturity
(estimated market value: 1994--$466,323,000;
1993--$590,577,000) (Notes 3 and 16) 493,455 576,885
Investment securities available-for-sale
(cost of $110,251,000) (Note 3) 106,286 -
Loans (Notes 4, 9, 10, 11, and 16):
Commercial, financial and agricultural 168,233 152,432
Real estate--construction 134,206 101,208
Real estate--mortgage 190,969 178,204
Installment 213,203 131,739
--------------------------
Total loans 706,611 563,583
Less:
Unearned income (804) (1,585)
Allowance for loan losses (Note 4) (9,967) (7,923)
--------------------------
Net loans 695,840 554,075
Premises and equipment, net (Note 5) 27,742 26,473
Accrued interest receivable 9,718 9,189
Intangible assets, less accumulated amortization
(1994--$5,423,000; 1993--$3,373,000) 2,379 4,428
Deferred income taxes (Note 8) 7,789 2,412
Other real estate owned 301 2,465
Other assets 6,050 2,827
--------------------------
Total assets $1,398,032 $1,225,287
==========================
</TABLE>
F-3
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
--------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits $ 142,456 $ 118,642
Interest bearing deposits 1,036,263 966,833
--------------------------
Total deposits (Notes 6 and 16) 1,178,719 1,085,475
Federal funds purchased and securities
sold under agreements to repurchase 92,459 35,346
Short term borrowings (Note 7) 22,719 -
Notes payable (Note 7) 6,500 7,494
Accrued interest payable 5,898 4,704
Other liabilities (Notes 14 and 16) 6,058 3,871
--------------------------
Total liabilities 1,312,353 1,136,890
Commitments (Note 9)
Shareholders' equity (Notes 2, 7 and 12):
Preferred stock, Series A, non-cumulative,
non-voting, $10 par value; liquidation value--$500 per share:
Authorized shares--5,500;
Issued and outstanding shares--5,306 53 53
Preferred stock, Series B, 8.5%, cumulative,
non-voting, $10 par value; liquidation value--$1,000 per share:
Authorized shares--9,500;
Issued and outstanding shares--9,500 95 95
Common stock, $50 par value:
Authorized shares--5,500
Issued and outstanding shares--2,131.737 107 107
Capital surplus:
Common stock 9,182 9,182
Preferred stock 12,005 12,005
Unrealized losses on securities, net of deferred tax benefits (10,173) -
Retained earnings 74,410 66,955
--------------------------
Total shareholders' equity 85,679 88,397
--------------------------
Total liabilities and shareholders' equity $1,398,032 $1,225,287
==========================
See accompanying notes.
</TABLE>
F-4
<PAGE> 8
<TABLE>
TCBankshares, Inc.
Consolidated Statements of Income
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------
(In Thousands)
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 49,919 $ 42,067 $ 40,306
Investment securities:
Taxable 31,214 31,074 30,960
Tax-exempt 6,103 5,741 5,235
Other 312 384 687
------------------------------------
Total interest income 87,548 79,266 77,188
Interest expense (Note 13):
Deposits 37,674 32,354 34,230
Other 2,162 1,558 1,532
------------------------------------
Total interest expense 39,836 33,912 35,762
------------------------------------
Net interest income 47,712 45,354 41,426
Provision for loan losses (Note 4) 2,899 1,224 2,085
------------------------------------
Net interest income after provision for loan losses 44,813 44,130 39,341
Other income:
Service charges on deposit accounts 6,110 5,471 4,804
Investment securities gains, net (Note 3) 1,350 1,379 2,634
Trust fees 902 793 686
Gain on sale of loans 351 881 319
Other 3,668 3,011 1,795
------------------------------------
12,381 11,535 10,238
Other expenses:
Salaries and employee benefits (Note 14) 17,966 15,730 13,596
Net occupancy and equipment expense (Notes 5 and 9) 5,967 5,075 4,309
Amortization of intangible assets (Note 1) 2,099 332 390
Merchandising expense 3,088 2,923 2,472
Data processing expense 2,232 1,995 1,789
FDIC assessment 2,444 2,216 1,943
Merger costs 2,900 - -
Other 7,179 6,767 6,741
------------------------------------
43,875 35,038 31,240
------------------------------------
Income before income taxes 13,319 20,627 18,339
Income taxes (Note 8) 4,589 5,438 4,941
------------------------------------
Net income $ 8,730 $ 15,189 $ 13,398
====================================
See accompanying notes.
</TABLE>
F-5
<PAGE> 9
<TABLE>
TCBankshares, Inc.
Consolidated Statements of Shareholders- Equity
<CAPTION>
CAPITAL SURPLUS NET
--------------------- UNREALIZED
PREFERRED COMMON COMMON PREFERRED LOSSES ON RETAINED
STOCK STOCK STOCK STOCK SECURITIES EARNINGS TOTAL
---------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $148 $107 $9,182 $12,005 $ - $40,918 $ 62,360
Net income - - - - - 13,398 13,398
Cash dividends:
Preferred stock, Series A - - - - - (212) (212)
Preferred stock, Series B - - - - - (808) (808)
Common stock - - - - - (255) (255)
---------------------------------------------------------------------------------
Balance at December 31, 1992 148 107 9,182 12,005 - 53,041 74,483
Net income - - - - - 15,189 15,189
Cash dividends:
Preferred stock, Series A - - - - - (212) (212)
Preferred stock, Series B - - - - - (808) (808)
Common stock - - - - - (255) (255)
---------------------------------------------------------------------------------
Balance at December 31, 1993 148 107 9,182 12,005 - 66,955 88,397
Net income - - - - - 8,730 8,730
Adjustment to January 1, 1994 balance
for change in accounting method, net
of deferred taxes of $(2,918,000)
(Note 1) - - - - 5,666 - 5,666
Amortization of unrealized loss on
investments transferred from
available-for-sale to held-to-maturity,
net of deferred taxes of $(266,000) - - - - 516 - 516
Change in unrealized loss on
available-for-sale securities, net of
deferred tax benefits of $8,424,000 - - - - (16,355) - (16,355)
Cash dividends:
Preferred stock, Series A - - - - - (212) (212)
Preferred stock, Series B - - - - - (808) (808)
Common stock - - - - - (255) (255)
---------------------------------------------------------------------------------
Balance at December 31, 1994 $148 $107 $9,182 $12,005 $(10,173) $74,410 $ 85,679
=================================================================================
See accompanying notes
</TABLE>
F-6
<PAGE> 10
<TABLE>
TCBankshares, Inc.
Consolidated Statements of Cash Flows
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
-----------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,730 $ 15,189 $ 13,398
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 2,899 1,224 2,085
Provision for depreciation and losses on other real estate 123 174 206
Depreciation and amortization 3,069 2,485 2,273
Amortization of intangible assets 2,049 332 390
Amortization of investment security premiums, net of accretion of discounts (995) 1,331 945
Deferred income tax benefit - (365) (388)
Gain on sale of loans (351) (880) (319)
(Gain) loss on sales of other real estate (43) 8 (129)
(Gain) loss on disposal of premises and equipment (470) (28) 326
First mortgage loans held for resale:
Proceeds collected on loans sold 58,690 87,684 41,754
Loans made to customers (48,112) (92,034) (45,039)
Realized investment security gains (1,350) (1,379) (2,634)
(Increase) decrease in deferred taxes (138) 314 (388)
(Increase) decrease in accrued interest receivable and other assets (3,899) 1,372 (1,782)
Increase (decrease) in accrued interest payable and other liabilities 3,539 55 (4,811)
-----------------------------------
Net cash provided by operating activities 23,741 15,482 5,887
INVESTING ACTIVITIES
Net increase in loans (155,355) (93,832) (51,745)
Purchases of premises and equipment (4,602) (8,243) (4,349)
Proceeds from sales of premises and equipment 881 227 901
Purchase of available-for-sale securities (176,665) - -
Purchase of held-to-maturity securities (169,073) (240,032) (402,172)
Proceeds from sales and maturities of held-to-maturity securities and
principal payments on mortgage-backed held-to-maturity securities 20,851 207,357 251,334
Proceeds from sales maturities of available-for-sale securities and
principal payments on mortgage-backed available-for-sale securities 288,964 - -
Net decrease in interest bearing deposits with other banks 993 3,466 17,217
Proceeds from sales of other real estate 2,548 611 2,282
-----------------------------------
Net cash used in investing activities (191,458) (130,446) (186,532)
</TABLE>
F-7
<PAGE> 11
<TABLE>
TCBankshares, Inc.
Consolidated Statements of Cash Flows (continued)
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
----------------------------------
(In Thousands)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits $ 93,244 $104,798 $201,563
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 57,113 11,216 (1,639)
Net increase in short-term borrowings 22,719 - -
Cash dividends paid (1,275) (1,275) (1,073)
Principal payments on notes payable (994) (745) (2,980)
Proceeds from notes payable - - 2,545
Principal payment on capital note (158) (17) (18)
----------------------------------
Net cash provided by financing activities 170,649 113,977 198,398
----------------------------------
Increase (decrease) in cash and cash equivalents 2,932 (987) 17,753
Cash and cash equivalents at beginning of year 45,240 46,227 28,474
----------------------------------
Cash and cash equivalents at end of year $ 48,172 $ 45,240 $ 46,227
==================================
See accompanying notes.
</TABLE>
F-8
<PAGE> 12
TCBankshares, Inc.
Notes to Consolidated Financial Statements
December 31, 1994
1. ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of
TCBankshares, Inc. and its six majority-owned banking subsidiaries
(the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
INVESTMENT SECURITIES
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." As permitted under the
Statement, the Company elected to adopt the provisions of the
Statement as of January 1, 1994. In accordance with the Statement,
prior period financial statements were not restated to reflect this
change in accounting principle. The cumulative effect as of January 1,
1994 of adopting Statement 115 increased stockholders' equity by
$5,666,000 (net of $2,918,000 in deferred income taxes). Shareholders'
equity was decreased by $10,173,000 as of December 31, 1994, to
reflect unrealized losses on securities classified as available-for-
sale or transferred from available-for-sale to held-to-maturity. These
amounts are net of a deferred tax benefit of $5,240,000 at December
31, 1994.
Trading Portfolio - Trading portfolio assets are held for resale in
anticipation of short-term market movements. Trading portfolio assets,
consisting of debt securities, are stated at fair value. Gains and
losses, both realized and unrealized, are included in net investment
securities gains (losses) in the accompanying statement of income. The
Company did not hold any trading securities at December 31, 1994 and
1993.
Securities Held-to-Maturity and Available-for-Sale - Management
determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance
sheet date. Securities are classified as held-to-maturity when the
Bank has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost,
less the valuation allowance on securities transferred from available-
for-sale.
Investment securities not classified as held-to-maturity or trading
are classified as available-for-sale. Available-for-sale securities
are carried at fair value, with the unrealized gains and losses, net
of tax, reported in shareholders' equity.
F-9
<PAGE> 13
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
The amortized cost of debt securities classified as held-to-maturity
or available-for-sale is adjusted for amortization of premiums and
accretion of discounts to maturity, or in the case of mortgage backed
securities, over the estimated life of the security. Such amortization
is included in investment income. Realized gains and losses and
declines in value judged to be other-than-temporary are included in
net investment securities gains (losses).
REVENUE RECOGNITION
Interest on loans is accrued and credited to operations generally
based upon the principal amount outstanding. Interest on loans is not
accrued when amounts are considered doubtful of collection. If the
ultimate collectibility of principal is in doubt, any payment received
on a loan, on which the accrual of interest has been suspended, is
applied to reduce principal to the extent necessary to eliminate such
doubt. When interest accruals are discontinued, interest credited to
income on the loan in the current year is reversed, and interest
accrued in the prior year is charged to the allowance for loan losses.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level management
believes is adequate to absorb potential losses in the loan portfolio.
Management's determination of the adequacy of the allowance is based
on an evaluation of potential losses in the loan portfolio considering
current economic conditions, past loan loss experience, volume, growth
and composition of the loan portfolio, nonperforming loans, and other
relevant factors. The allowance is increased by provisions for loan
losses charged against income and reduced by charge-offs, net of
recoveries.
PREMISES AND EQUIPMENT
The Company's premises and equipment are stated at cost, less
accumulated depreciation and amortization. The provision for
depreciation and amortization is computed generally by the straight-
line method based upon the estimated useful lives of the assets. The
carrying amount of assets sold, retired or disposed of and the related
accumulated depreciation and amortization are eliminated from the
accounts and the resulting gain or loss is recorded in operating
results.
F-10
<PAGE> 14
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Effective January 1, 1994, the Company made a prospective change in
the estimated useful lives of certain property and equipment.
Estimated useful lives for certain buildings which were 25 to 30 years
were reduced to 20 years. These changes were made to reflect the
estimated periods during which such assets will remain in service. For
1994, these changes increased depreciation expense by approximately
$97,000 and reduced net income by approximately $60,000.
FIRST MORTGAGE REAL ESTATE LOANS HELD FOR RESALE
First mortgage real estate loans held for resale ($983,000 at December
31, 1994 and $10,742,000 at December 31, 1993) are classified with
real estate mortgage loans in the accompanying consolidated balance
sheet and are carried at the lower of cost or fair market value on a
net aggregate basis. These loans are generally pre-sold or subject to
firm purchase commitments.
OTHER REAL ESTATE
Other real estate consists of properties acquired through foreclosure
proceedings or acceptance of a deed in lieu of foreclosure. These
properties are initially recorded at the lower of cost or estimated
fair market value based on appraised value at the date acquired or
transferred from loans less estimated selling expenses. Losses arising
from the acquisition of such property are charged against the
allowance for loan losses. Subsequent valuation adjustments, if any,
and gains or losses resulting from sales are recorded in operating
results.
The Company's state banking subsidiary is required to amortize other
real estate over sixty months, in accordance with state banking
regulations. The regulators may grant deferrals of this required
amortization, if requested by the Company. Net expenses relating to
other real estate (included in other expenses) were $45,000, $101,000,
and $211,000 during the years ended December 31, 1994, 1993, and 1992,
respectively. These amounts include the state regulators mandated
amortization expense. Loans aggregating approximately $464,000,
$(184,000), and $643,000 were transferred to (from) other real estate
during 1994, 1993, and 1992, respectively.
INTANGIBLE ASSETS
Intangible assets consist of the unamortized excess cost of purchased
banking subsidiaries and premiums paid for the acquisition of deposits
from failed financial institutions. Unamortized costs of purchased
subsidiaries in excess of the fair value of underlying net tangible
assets acquired are being amortized over 15 years using the straight-
line method.
F-11
<PAGE> 15
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
Premiums associated with the future earnings potential of acquired
deposits are being amortized, using the straight-line method, over the
estimated five to ten year life of the deposits. The net costs
associated with acquired deposits were $671,000 at December 31, 1994,
$763,000 at December 31, 1993 and $856,000 at December 31, 1992.
Effective January 1, 1994, the Company made a prospective change in
the estimated useful life of goodwill related to certain subsidiary
bank acquisitions. The estimated useful lives related to the goodwill
amounts which were 25 years were reduced to 15 years. These changes
were made to more accurately reflect the estimated periods during
which such assets provide a future economic benefit. For 1994, these
changes increased amortization expense and reduced net income by
approximately $1,708,000.
INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
It is the Company's practice to have its subsidiaries pay to or
receive from the Company and other affiliates amounts based on the
taxable income (or loss) of the subsidiary. Certain items, primarily
additions to the allowance for loan losses, are recognized as income
or expense in different periods for financial and for income tax
reporting purposes. Deferred taxes are provided for such timing
differences.
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes." The Company adopted
the provisions of the new standard in its consolidated financial
statements as of January 1, 1993. As permitted by the Statement, prior
year financial statements have not been restated to reflect the change
in accounting method. The effect as of January 1, 1993 of adopting
Statement 109 increased consolidated net income by approximately
$126,000. This amount is included as a reduction of the provision for
income taxes in the 1993 consolidated statement of income.
Under Statement 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. Prior to the adoption of Statement 109, income
tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expense that were reported in
different years in the financial statements and tax returns and were
measured at the tax rate in effect in the year the difference
originated.
F-12
<PAGE> 16
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
STATEMENT OF CASH FLOWS
Cash equivalents include amounts due from banks and federal funds
sold. Generally, federal funds are purchased and sold for one day
periods.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures" require that impaired
loans that are within the scope of the Statements be measured based on
the present value of expected future cash flows discounted at the
loan's effective rate, or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the
loan is collateral dependent. The Company will be required to adopt
Statements 114 and 118 in 1995. Management does not believe the
adoption of these new standards will have a material impact on the
Company's financial position or results of operations.
RECLASSIFICATIONS
Certain amounts in the 1992 and 1993 consolidated financial statements
have been reclassified to conform to the reporting format used for the
1994 consolidated financial statements.
2. MERGERS AND ACQUISITIONS
On December 2, 1994, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement") with Mercantile Bancorporation, Inc.,
("MBI") whereby (1) each share of the Company's common stock will be
converted into the right to receive 2,228.2299 shares of MBI common
stock, (2) each share of the Company's Series A preferred stock will
be converted into the right to receive one share of MBI Series B-1
preferred stock, and (3) each share of the Company's Series B
preferred stock will be converted into the right to receive one share
of MBI Series B-2 preferred stock. Consummation of the Agreement is
subject to certain terms and conditions, including the approval of the
Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of the Company's common and preferred stock and
receipt of all requisite regulatory approvals.
In connection with this transaction, the Company had accrued estimated
costs associated with the merger of $2,900,000 at December 31, 1994.
F-13
<PAGE> 17
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT SECURITIES
<TABLE>
The amortized cost and estimated market value of investment securities
at December 31, 1994 are as follows (in thousands):
<CAPTION>
1994
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------------------------------------------------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES
United States Treasury securities and obligations of
United States Government agencies and corporations $ 57,807 $ 6 $ (4,559) $ 53,254
Obligations of states and political subdivisions 102,295 1,315 (4,338) 99,272
Mortgage-backed securities 333,353 - (19,556) 313,797
---------------------------------------------------
Total $493,455 $1,321 $(28,453) $466,323
===================================================
AVAILABLE-FOR-SALE SECURITIES
United States Treasury securities and obligations of
United States Government agencies and corporations $ 63,070 $ 65 $ (2,461) $ 60,674
Mortgage-backed securities 43,054 79 (1,648) 41,485
---------------------------------------------------
Total debt securities 106,124 144 (4,109) 102,159
Federal Home Loan Bank stock 3,823 - - 3,823
Federal Reserve Bank stock 304 - - 304
---------------------------------------------------
Total $110,251 $ 144 $ (4,109) $106,286
===================================================
</TABLE>
<TABLE>
The amortized cost and estimated market value of
investment securities at December 31, 1993 are as follows (in thousands):
<CAPTION>
1993
---------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUES
---------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury securities and obligations of
United States Government agencies and corporations $153,713 $ 6,707 $ (73) $160,347
Obligations of states and political subdivisions 99,496 5,367 (260) 104,603
Mortgage-backed securities 323,007 4,209 (2,258) 324,958
---------------------------------------------------
Total debt securities 576,216 16,283 (2,591) 589,908
SLMA stock 365 - - 365
Federal Reserve Bank stock 304 - - 304
---------------------------------------------------
Total investment securities $576,885 $16,283 $(2,591) $590,577
===================================================
</TABLE>
F-14
<PAGE> 18
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
The amortized cost and estimated market value of investment securities
at December 31, 1994, by contractual maturity, are shown below (in
thousands). Expected maturities could differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------------------------------
<S> <C> <C>
HELD-TO-MATURITY
Due in one year or less $ 14,150 $ 14,262
Due in one year through five years 61,190 57,412
Due after five years through ten years 26,632 25,692
Due after ten years 58,130 55,160
----------------------------------
160,102 152,526
Mortgage-backed securities 333,353 313,797
----------------------------------
$493,455 $466,323
==================================
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
----------------------------------
<S> <C> <C>
AVAILABLE-FOR-SALE
Due in one year or less $ 1,001 $ 986
Due in one year through five years 55,906 53,995
Due after five years through ten years 6,163 5,693
Due after ten years - -
----------------------------------
63,070 60,674
Mortgage-backed securities 43,054 41,485
----------------------------------
106,124 102,159
Federal Home Loan Bank stock 3,823 3,823
Federal Reserve Bank stock 304 304
----------------------------------
$110,251 $106,286
==================================
</TABLE>
The Company maintains an allowance for permanent declines in value on
obligations of state and political subdivisions and other securities.
The allowance was $180,000 and $90,000 at December 31, 1994 and 1993,
respectively. During 1994 and 1992, provisions for permanent declines
in value of $180,000 and $568,000, respectively, were recorded and are
included in net securities gains and losses. No such provisions were
made in 1993.
F-15
<PAGE> 19
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
3. INVESTMENT SECURITIES (CONTINUED)
Proceeds from sales of available-for-sale securities during 1994 were
$20,851,000. Gross gains of $2,391,000 and gross losses of $861,000
were realized on those sales.
Proceeds from sales of investments in debt securities during 1993 and
1992 were $4,779,000 and $105,530,000, respectively. Gross gains of
$1,383,000 and $3,179,000 and gross losses of $4,000 and $545,000 in
1993 and 1992, respectively, were realized on those sales.
There were no sales of held-to-maturity securities during 1994. On
October 1, 1994, the Company transferred securities from the available-
for-sale classification to the held-to-maturity classification. The
securities transferred had an amortized cost basis of $238,018,000 and
an estimated market value of $225,792,000 on the transfer date. The
unrealized loss on the date of the transfer remained in shareholders'
equity and is accreted over the remaining life of the transferred
securities. The amortized cost basis of the Company's held-to-maturity
securities is reduced by a valuation allowance of $11,444,000 relating
to the unaccreted holding losses as of December 31, 1994.
Investment securities with a book value of $385,741,000 and
$240,235,000 were pledged to secure public deposits and for other
purposes as required by law, at December 31, 1994 and 1993,
respectively.
4. ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING LOANS
<TABLE>
Summarized below are the transactions in the allowance for loan losses
(in thousands):
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 7,923 $ 7,135 $ 6,236
Provision for loan losses 2,899 1,224 2,085
Charge-offs (deduction) (1,186) (812) (1,763)
Recoveries 331 376 577
---------------------------------
Net charge-offs (855) (436) (1,186)
---------------------------------
Balance at December 31 $ 9,967 $ 7,923 $ 7,135
=================================
</TABLE>
F-16
<PAGE> 20
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
4. ALLOWANCE FOR LOAN LOSSES AND NONPERFORMING LOANS (CONTINUED)
<TABLE>
The following table presents information concerning the aggregate
amount of nonperforming loans (in thousands):
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 1,673 $ 2,210 $ 4,810
Accruing loans past due ninety days or more as to interest or principal payments 2,737 2,445 627
Interest income that would have been recorded under original terms for nonaccrual loans 142 180 445
Interest income recorded during the period for nonaccrual loans 43 62 79
</TABLE>
Interest is not accrued on loans when principal or interest is in
default for 90 days or more unless the loans are well secured and in
the process of collection. The Company's state banking subsidiary is
required by state bank regulations to place on nonaccrual status loans
105 days or more past due. There were no significant commitments to
lend additional funds to borrowers included in the nonperforming loan
categories.
In 1993, the Company moved a nonaccrual loan back to accrual status
due to sustained performance by the borrower for an extended period,
which allowed the loan to meet regulatory guidelines for accrual of
interest. However, until the customer has paid all delinquent interest
earned by the Company during the nonaccrual period, the loan is
required to be reported as past due. As such, accruing loans past due
ninety days or more include this loan, which had a principal balance
of $2,317,000 at December 31, 1994 and $2,379,000 at December 31,
1993.
F-17
<PAGE> 21
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
5. PREMISES AND EQUIPMENT
<TABLE>
A summary of premises and equipment is as follows (in thousands):
<CAPTION>
1994 1993
----------------------
<S> <C> <C>
Land and land improvements $ 3,032 $ 2,867
Buildings and building improvements 19,506 18,172
Leasehold improvements 5,229 4,831
Furniture, fixtures and equipment 12,762 11,844
Construction in progress 1,829 1,353
Less accumulated depreciation and amortization (14,616) (12,594)
----------------------
$ 27,742 $ 26,473
======================
</TABLE>
Depreciation and amortization of bank premises and equipment was
$2,922,000, $2,159,000, and $1,833,000 in 1994, 1993, and 1992,
respectively.
6. DEPOSITS
<TABLE>
The following summarizes information on deposits as of December 31 (in
thousands):
<CAPTION>
1994 1993
---------------------------
<S> <C> <C>
Demand, noninterest bearing $ 146,675 $ 118,641
Demand, interest bearing:
NOW accounts 179,890 171,887
Money market accounts 97,811 99,804
Savings 71,682 65,921
Certificates of deposit 682,661 629,222
---------------------------
$ 1,178,719 $ 1,085,475
===========================
Certificates of deposit of $100,000 or more $ 180,825 $ 179,646
===========================
</TABLE>
7. SHORT-TERM BORROWINGS AND NOTES PAYABLE
Short-term borrowings include $5,144,000 due on demand under the
Federal Reserve Bank's treasury, tax, and loan note option. Interest on
this unsecured obligation accrues at the weekly average federal funds
rate less .25% (5.2% at December 31, 1994).
F-18
<PAGE> 22
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
7. SHORT-TERM BORROWINGS AND NOTES PAYABLE (CONTINUED)
Also included in short-term borrowings is $17,575,000 due to the
Federal Home Loan Bank ("FHLB"). Monthly payments are approximately
$1,800,000 including interest through October 1995. The borrowing
accrues interest at 5.15% and is secured by investments with a book
value of $15,617,000 and first mortgage loans with a book value of
$14,681,000 at December 31, 1994 .
<TABLE>
Notes payable consists of the following:
<CAPTION>
1994 1993
---------------------
(In thousands)
<S> <C> <C>
Note payable at prime (8.5% at December 31, 1994), payable $185,000 plus
interest quarterly through November 1, 1997; collateralized by the common
stock of subsidiary banks owned by the Company $ 4,465 $ 5,205
Amortizing revolving line of credit at LIBOR plus 2.25%
(8.37% at December 31, 1994), payable $64,000 plus interest quarterly
through November 1, 1995; collateralized by the common stock of subsidiary
banks owned by the Company 2,035 2,289
---------------------
$ 6,500 $ 7,494
=====================
</TABLE>
Maturities of long-term debt are $2,775,000 in 1995, $740,000 in 1996,
and $2,985,000 in 1997.
The loan agreements for both notes include, among other things,
provisions relative to additional borrowings, maintenance of capital,
and restrictions on the payment of cash dividends, which are no more
restrictive than those required by the bank regulators (see Note 12).
The Company has $5,965,000 available under the amortizing revolving
line at December 31, 1994. In January 1995, the Company borrowed
$1,330,000 on the revolving line to pay dividends.
8. INCOME TAXES
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method as required by FASB Statement No. 109 (see Note 1). Deferred
income taxes reflect the net tax effects of temporary
F-19
<PAGE> 23
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The significant components of the Company's deferred tax
liabilities and assets as of December 31 are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
---------------------
<S> <C> <C>
Deferred tax liabilities:
Purchase accounting-basis differences $ 486 $ 596
Investment in securities 338 -
Prepaid assets 82 279
Prepaid pension 208 279
Other 65 11
---------------------
Total deferred tax liabilities 1,179 1,165
Deferred tax assets:
Unrealized security losses 5,240 -
Loan loss reserve 3,480 2,574
Other real estate owned 82 480
Other 166 523
---------------------
Total deferred tax assets 8,968 3,577
---------------------
Net deferred tax assets $ 7,789 $ 2,412
=====================
</TABLE>
<TABLE>
The income tax provision (benefit) consists of the following (in
thousands):
<CAPTION>
LIABILITY METHOD DEFERRED
-------------------- METHOD
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Current:
Federal $ 4,289 $ 5,330 $ 4,854
State 438 473 475
---------------------------------
Total current provision 4,727 5,803 5,329
Deferred:
Federal (93) (329) (315)
State (45) (36) (73)
---------------------------------
Total deferred benefit (138) (365) (388)
---------------------------------
Provision for income taxes $ 4,589 $ 5,438 $ 4,941
=================================
</TABLE>
F-20
<PAGE> 24
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
<TABLE>
The sources of timing differences resulting in deferred income taxes
(benefits) and the approximate income tax effect of each under the
deferred method of accounting for income taxes for the year ended
December 31, 1992 are as follows (in thousands):
<S> <C>
Deferred compensation $ 425
Depreciation (253)
Provision for possible loan losses (325)
Net employee benefit accruals 17
Discounts on investment securities (144)
Other (108)
--------
$ (388)
========
</TABLE>
<TABLE>
The reasons for the difference between the effective income tax rates
and the statutory Federal income tax rate are as follows:
<CAPTION>
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 34.0%
Nontaxable interest income (16.0) (9.5) (9.1)
Nondeductible expenses 7.7 - -
Other, net 7.8 0.9 2.0
--------------------------------
Effective income tax rate 34.5% 26.4% 26.9%
================================
</TABLE>
The provision for income taxes includes income taxes applicable to
investment securities gains of $459,000 in 1994, $469,000 in 1993, and
$896,000 in 1992.
The Company made income tax payments of approximately $6,415,000,
$5,208,000, and $4,474,000 during 1994, 1993, and 1992, respectively.
9. COMMITMENTS
At December 31, 1994 future minimum payments under noncancelable
operating leases for branch or office locations with initial or
remaining terms of one year or more are $972,000, $953,000, $849,000,
$539,000, and $424,000 for l995 through 1999, respectively, and
$2,291,000 thereafter. Net rental expense for all operating leases
amounted to $1,166,000 in 1994, $1,032,000 in 1993 and $736,000 in
1992. The lease agreements contain options to renew at various dates
for periods ranging from five to twenty-one years. Eight of the
locations, with future minimum lease payments totaling approximately
$3,585,000, are leased from officers and/or directors of the Company.
F-21
<PAGE> 25
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS (CONTINUED)
At December 31, 1994, future minimum payments due under noncancelable
data processing agreements are approximately $1,479,000, $1,553,000,
$1,630,000, $1,712,000, and $1,798,000 for 1995 through 1999,
respectively. Additional amounts may be due based on the number of
transactions processed by the servicer and annual payments may
increase by up to 5% based on the Consumer Price Index.
In the normal course of business there are various commitments
outstanding, such as guarantees and commitments to extend credit,
including standby letters of credit to assure performance or to
support debt obligations, and loans sold subject to repurchase
agreements, which are not reflected in the accompanying consolidated
financial statements. These arrangements have credit risk essentially
the same as that involved in extending loans to customers.
<TABLE>
The Company's exposure to credit loss in the event of nonperformance
by the other party to financial instruments for commitments to extend
credit, standby letters of credit, and loans sold subject to
repurchase agreements is represented by the contractual amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-
sheet instruments. Financial instruments whose contract amounts
represent credit risk were as follows (in thousands):
<CAPTION>
DECEMBER 31
1994 1993
-----------------------
<S> <C> <C>
Commitments to extend credit $ 128,561 $ 89,714
Standby letters of credit 3,986 5,064
Loans sold subject to repurchase agreement 5,620 21,721
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit-worthiness
on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Company upon extension of credit is based on
management's credit evaluation of the counter-party. Collateral held
varies but may include real estate, accounts receivable, inventory,
property, plant and equipment, and income-producing commercial
properties.
F-22
<PAGE> 26
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS (CONTINUED)
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements and similar transactions.
In 1994, the Company sold approximately $16,622,000 of loans to third
parties subject to repurchase agreements. These agreements generally
require the Company to repurchase loans that do not meet the standards
of the related sale agreements or that become 90 days delinquent within
a stated period of time (4 to 12 months) after being sold to the
permanent investor. At December 31, 1994, the Company held no loans
which it had been required to repurchase.
10. CONCENTRATION OF CREDIT RISK
Most of the Company's lending activity is with customers located within
the state of Arkansas. The loan portfolio is diversified with no
industry comprising greater than 10% of total loans. The Company's
subsidiary banks require collateral on most loans and generally
maintains loan to value ratios of no greater than 90%.
11. TRANSACTIONS WITH RELATED PARTIES
The Company's bank subsidiaries have had, and expect to have in the
future, banking transactions in the ordinary course of business with
officers and directors of the Company and its subsidiaries. Such
transactions have been on similar terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable
transactions with others, and have involved no more than normal risk or
other potential unfavorable aspects. Loans made to such borrowers
(including companies in which they are principal owners) amounted to
approximately $14,610,000 at December 31, 1994 and $15,171,000 at
December 31, 1993.
12. DIVIDEND RESTRICTIONS
The Company has five national bank subsidiaries and one state bank
subsidiary. National and state banking regulations place certain
restrictions on the ability of banks to pay dividends without
regulatory approvals. The approval of the Comptroller of the Currency
is required for national banks to pay dividends in excess of earnings
retained in the current year plus retained net profits for the
preceding two years. State-chartered banks may pay dividends up to 50%
of current year net income without obtaining regulatory approval.
F-23
<PAGE> 27
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
13. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid approximately $38,642,000, $33,459,000, and
$36,825,000 in interest on deposits and other borrowings during 1994,
1993, and 1992, respectively.
14. BENEFIT PLANS
The Company provides a defined benefit pension plan which covers
substantially all employees of the Company meeting certain age and
length of service requirements. The benefits are based on years of
service and the employee's average compensation during the last five
years of employment. The Company's funding policy is to contribute
annually the maximum that can be deducted for federal income tax
purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned
in the future.
<TABLE>
The following table sets forth the plan's funded status:
<CAPTION>
DECEMBER 31
1994 1993 1992
----------------------------------
(In thousands)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$3,835,000 in 1994, $3,913,000 in 1993, and $3,715,000 in 1992 $ (4,128) $ (4,336) $ (4,448)
==================================
Projected benefit obligation for service rendered to date $ (5,583) $ (5,974) $ (5,728)
Plan assets at fair value, primarily listed stocks and U.S. bonds 5,303 5,140 4,522
----------------------------------
Projected benefit obligation in excess of plan assets (280) (834) (1,206)
Unrecognized net loss 1,068 1,542 380
Unrecognized net asset at January 1 (46) (52) (58)
Unrecognized prior service cost (11) (364) 897
----------------------------------
Prepaid pension cost $ 731 $ 292 $ 13
==================================
</TABLE>
F-24
<PAGE> 28
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
14. BENEFIT PLANS (CONTINUED)
<TABLE>
Net pension cost included the following components:
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
-------------------------------
(In thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 437 $ 326 $ 309
Interest cost on projected benefit obligations 456 451 426
Actual return on plan assets 150 (278) (165)
Net amortization and deferral (712) (173) (174)
-------------------------------
Net periodic pension cost $ 331 $ 326 $ 396
===============================
</TABLE>
<TABLE>
Assumptions used in determining net periodic pension cost
for the defined benefit plan were:
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Weighted-average discount rate 7.50% 7.50% 8.25%
Annual compensation increases 5.00 5.00 5.00
Expected long-term rate of return on plan assets 10.00 10.00 10.00
</TABLE>
In 1993, the Company approved a defined contribution 401(k) plan which
covers all eligible employees who attain the age of eighteen and are
employed by the Company. The Company's policy is to match employee
contributions up to 3% of each participant's annual compensation. Plan
contribution expense was approximately $306,000 and $138,000 for the
years ended December 31, 1994 and 1993, respectively.
15. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Company is required to maintain reserve balances with the Federal
Reserve Bank. The average amount of those reserve balances was
approximately $17,899,000 in 1994 and $10,764,000 in 1993.
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments", requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which
it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using
F-25
<PAGE> 29
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
16. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
present value, discounted cash flows, or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of
the instrument. Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
to the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and short-term instruments approximate the fair values
of these assets.
Investment securities (including mortgage-backed securities): Fair
values of investment securities are primarily based on quoted market
prices (see Note 3).
Loans receivable: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values approximate
carrying amounts. The fair values for construction and mortgage real
estate, installment and commercial, financial and agricultural loans,
with fixed rates, are estimated using discounted cash flow analyses,
using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.
<TABLE>
The carrying amount and estimated fair value of loans net of the
allowance for loan losses consisted of the following (in thousands):
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------------------------------
<S> <C> <C>
December 31, 1994 $ 695,840 $ 687,721
December 31, 1993 554,075 553,575
</TABLE>
F-26
<PAGE> 30
TCBankshares, Inc.
Notes to Consolidated Financial Statements (continued)
16. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Deposit liabilities: The fair values for demand deposits (e.g.,
interest and noninterest checking, passbook savings, and certain types
of money market accounts), are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying
amounts). The carrying amounts for variable-rate, fixed term money
market accounts approximate their fair values at the reporting date.
Fair values for fixed rate certificates of deposit are estimated using
a discounted cash flow calculation that applies interest rates
currently being offered to a schedule of aggregated expected monthly
maturities of certificates of deposit.
<TABLE>
For deposits with no defined maturities, fair value is the amount
payable on demand. The carrying amounts reported in the balance sheet
for demand deposits, money market and passbook savings accounts
approximate their fair values. The carrying amount and estimated fair
value of certificates of deposit consisted of the following (in
thousands):
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------------------------------
<S> <C> <C>
December 31, 1994 $ 682,661 $ 681,622
December 31, 1993 629,222 630,984
</TABLE>
Short-term borrowings: The carrying amounts of federal funds
purchased, borrowings under repurchase agreements, and other short-
term borrowings approximate their fair values.
Off-balance sheet financial instruments: The Company has two types of
off-balance sheet financial instruments--commitments to extend credit
and standby letters of credit. These types of credit are made at
market rates; therefore, there would be no market risk associated with
these credits which would create a significant fair value liability
for the Company.
F-27
<PAGE> 31
Pro Forma Combined Consolidated Financial Statements
(Unaudited)
The following unaudited pro forma combined consolidated financial
statements give effect to the acquisition of TCBankshares, Inc. ("TCB") and
the acquisitions of UNSL Financial Corp ("UNSL"), Wedge Bank ("Wedge"),
Central Mortgage Bancshares, Inc. ("Central Mortgage") and Ameribanc, Inc.
("ABNK") and the proposed acquisitions of Southwest Bancshares, Inc.
("Southwest"), AmeriFirst Bancorporation, Inc. ("AmeriFirst") and Plains
Spirit Financial Corporation ("Plains Spirit") as if each had been
consummated at the beginning of the periods presented for income statement
information and as of the date presented for balance sheet information.
MBI acquired ABNK on April 30, 1992, which acquisition was accounted
for under the purchase method of accounting. Accordingly, the historical
results of operations of MBI include the results of operations of ABNK from May
1, 1992 forward. The following pro forma combined consolidated income
statements for the year ended December 31, 1992 include the results of
operations of ABNK from January 1, 1992 through the date of acquisition. MBI
acquired UNSL and Wedge on January 3, 1995 and Central Mortgage on May 1, 1995,
which acquisitions were accounted for as poolings-of-interests. The following
data set forth the results of operations of MBI combined with the results of
operations of TCB, UNSL, Wedge, Southwest, AmeriFirst, Plains Spirit and
Central Mortgage as if such acquisitions and the Merger had occurred as of
the first day of the period presented.
The data presented are based upon, and should be read in conjunction
with, the consolidated financial statements and related notes and TCB included
in this Form 8-K and the pro forma combined consolidated balance sheet and
income statements, including the notes thereto, appearing herein.
The pro forma combined consolidated financial data is intended
for informational purposes and is not necessarily indicative of the future
financial position or future results of operations of the combined company
or of the financial position or the results of operations of the combined
company that would have actually occurred had the acquisition of TCB, the
acquisitions of UNSL, Wedge and Central Mortgage or the proposed acquisitions
of Southwest, AmeriFirst and Plains Spirit been in effect as of the date or
for the periods presented.
The following information should be read in conjunction with the
consolidated financial statements of MBI and TCB and the related notes
thereto.
F-28
<PAGE> 32
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(THOUSANDS)
(UNAUDITED)
<CAPTION>
MBI, UNSL,
Wedge
MBI TCB
UNSL, Wedge Pro Forma
Pro Forma TCB Combined
MBI Combined<F1><F2> TCB Adjustments<F1> Consolidated
----------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $683,259 $693,731 $47,691 $ $741,422
Due from banks - interest bearing 234 28,433 300 28,733
Federal funds sold and repurchase
agreements 112,514 112,514 175 112,689
Investments in debt and equity securities
Trading 14,299 14,299 0 14,299
Available-for-sale 269,232 323,799 115,423 439,222
Held-to-maturity 2,750,244 2,783,927 482,552 3,266,479
----------- ----------- ---------- ------- -----------
Total 3,033,775 3,122,025 597,975 0 3,720,000
Loans and leases 8,114,845 8,685,101 705,807 9,390,908
Reserve for possible loan losses (170,940) (178,607) (9,967) (188,574)
----------- ----------- ---------- ------- -----------
Net Loans and Leases 7,943,905 8,506,494 695,840 0 9,202,334
Other assets 468,107 482,647 55,081 537,728
84,908 <F8>
(84,908)<F9>
----------- ----------- ---------- ------- -----------
Total Assets $12,241,794 $12,945,844 $1,397,062 $ 0 $14,342,906
=========== =========== ========== ======= ===========
<CAPTION>
Central
Mortgage,
Plains Spirit, All Entities
Southwest Pro Forma
Central Plains Southwest and and AmeriFirst Combined
Mortgage Spirit AmeriFirst Adjustments<F1><F3> Consolidated
-------- -------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $27,756 $4,906 $13,438 $(19,725) <F4> $731,538
(36,259) <F7>
Due from banks - interest bearing 1,947 0 3,641 34,321
Federal funds sold and repurchase
agreements 15,575 400 8,100 136,764
Investments in debt and equity securities
Trading 0 0 0 14,299
Available-for-sale 33,764 93,893 44,773 611,652
Held-to-maturity 159,564 81,122 19,978 3,527,143
-------- -------- -------- -------- -----------
Total 193,328 175,015 64,751 0 4,153,094
Loans and leases 390,701 249,396 242,835 10,273,840
Reserve for possible loan losses (7,989) (1,956) (2,124) (200,643)
-------- -------- -------- -------- -----------
Net Loans and Leases 382,712 247,440 240,711 0 10,073,197
Other assets 28,718 10,918 9,207 596,494
54,077 <F4>
9,923 <F5>
(54,077) <F6>
52,285 <F10>
(52,285)<F11>
29,018 <F13>
(29,018)<F14>
-------- -------- -------- -------- -----------
Total Assets $650,036 $438,679 $339,848 $(46,061) $15,725,408
======== ======== ======== ======== ===========
</TABLE>
F-29
<PAGE> 33
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(THOUSANDS)
(UNAUDITED)
<CAPTION>
MBI, UNSL,
Wedge
MBI TCB
UNSL, Wedge Pro Forma
Pro Forma TCB Combined
MBI Combined<F1><F2> TCB Adjustments<F1> Consolidated
----------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $1,529,052 $1,553,193 $142,151 $ $1,695,344
Interest bearing 7,305,672 7,815,112 1,036,263 8,851,375
Foreign 219,135 219,135 0 219,135
----------- ----------- ---------- -------- -----------
Total Deposits 9,053,859 9,587,440 1,178,414 0 10,765,854
Federal funds purchased and repurchase
agreements 1,382,519 1,396,499 92,459 1,488,958
Other borrowings 587,525 692,097 29,168 721,265
Other liabilities 149,641 156,618 12,113 168,731
----------- ----------- ---------- -------- -----------
Total Liabilities 11,173,544 11,832,654 1,312,154 0 13,144,808
SHAREHOLDERS' EQUITY
Preferred stock - - 148 12,153 <F8> 12,153
(148)<F9>
Common stock 216,506 229,246 107 23,750 <F8> 252,996
(107)<F9>
Capital surplus 107,083 169,142 21,186 (14,462)<F8> 154,680
(21,186)<F9>
Retained earnings 684,615 717,756 63,467 63,467 <F8> 781,223
(63,467)<F9>
Treasury stock (2,964) (2,954) (2,954)
----------- ----------- ---------- ------- -----------
Total Shareholders' Equity 1,068,250 1,113,190 84,908 0 1,198,098
----------- ----------- ---------- ------- -----------
Total Liabilities and Shareholders'
Equity $12,241,794 $12,945,844 $1,397,062 $ 0 $14,342,906
=========== =========== ========== ======= ===========
<CAPTION>
Central
Mortgage,
Plains Spirit, All Entities
Southwest Pro Forma
Central Plains Southwest and and AmeriFirst Combined
Mortgage Spirit AmeriFirst Adjustments<F1><F3> Consolidated
-------- -------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits
Non-interest bearing $78,664 $5,762 $94,716 $ $1,874,486
Interest bearing 487,322 260,060 193,860 9,792,617
Foreign 0 0 0 219,135
-------- -------- -------- -------- -----------
Total Deposits 565,986 265,822 288,576 0 11,886,238
Federal funds purchased and repurchase
agreements 20,446 0 12,793 1,522,197
Other borrowings 4,022 110,900 5,536 841,723
Other liabilities 7,297 7,880 3,925 187,833
-------- -------- -------- -------- -----------
Total Liabilities 597,751 384,602 310,830 0 14,437,991
SHAREHOLDERS' EQUITY
Preferred stock 12,153
Common stock 4,284 20 1,882 7,000 <F4> 279,368
(20) <F6>
12,690 <F10>
(4,284)<F11>
6,682 <F14>
(1,882)<F15>
Capital surplus 24,252 23,092 10,769 37,275 <F4> 213,598
(23,092) <F6>
15,674 <F10>
(24,252)<F11>
5,969 <F13>
(10,769)<F14>
Retained earnings 23,921 30,965 16,367 (30,965) <F6> 821,511
23,921 <F10>
(23,921)<F11>
16,367 <F13>
(16,367)<F14>
Treasury stock (172) (36,259) <F7> (39,213)
172 <F11>
-------- -------- -------- -------- -----------
Total Shareholders' Equity 52,285 54,077 29,018 (46,061) 1,287,417
-------- -------- -------- -------- -----------
Total Liabilities and Shareholders'
Equity $650,036 $438,679 $339,848 $(46,061) $15,725,408
======== ======== ======== ======== ===========
See notes to pro forma combined consolidated financial statements.
</TABLE>
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1994
(Thousands except per share data)
(Unaudited)
<CAPTION>
MBI, UNSL,
MBI Wedge,
UNSL, Wedge TCB
Pro Forma Pro Forma
Combined Combined Central Plains
MBI Consolidated <F2> TCB Consolidated Mortgage Spirit <F15>
----------- ---------------- --------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income $835,006 $878,986 $87,549 $966,535 $43,773 $24,807
Interest Expense 324,343 346,422 39,835 386,257 18,700 12,271
----------- ---------------- --------- --------------- ----------- --------------
Net Interest Income 510,663 532,564 47,714 580,278 25,073 12,536
Provision for Possible Loan Losses 33,472 38,943 2,899 41,842 2,909 200
----------- ---------------- --------- --------------- ----------- --------------
Net Interest Income after Provision
for Possible Loan Losses 477,191 493,621 44,815 538,436 22,164 12,336
Other Income
Trust 59,824 60,283 902 61,185 0 0
Service charges 57,593 59,546 6,110 65,656 3,092 2,191
Credit card fees 24,691 24,719 0 24,719 0 0
Securities gains 405 534 1,350 1,884 450 734
Other 45,783 47,208 4,133 51,341 3,961 322
----------- ---------------- --------- --------------- ----------- --------------
Total Other Income 188,296 192,290 12,495 204,785 7,503 3,247
Other Expense
Salaries and employee benefits 220,950 231,468 17,966 249,434 10,606 4,869
Net occupancy and equipment 59,306 63,070 5,872 68,942 2,742 1,341
Other 132,113 139,346 19,801 159,147 8,020 2,542
----------- ---------------- --------- --------------- ----------- --------------
Total Other Expense 412,369 433,884 43,639 477,523 21,368 8,752
----------- ---------------- --------- --------------- ----------- --------------
Income Before Income Taxes 253,118 252,027 13,671 265,698 8,299 6,831
Income Taxes 92,089 96,603 4,749 101,352 2,453 2,359
----------- ---------------- --------- --------------- ----------- --------------
Net Income $161,029 $155,424 $8,922 $164,346 $5,846 $4,472
=========== ================ ========= =============== =========== ==============
Per Share Data
Average Common Shares Outstanding 43,091,152 45,639,294 50,389,294
Net Income $3.74 $3.41 $3.26
See notes to pro forma combined consolidated financial statements.
<CAPTION>
All Entities
Pro Forma
Southwest and Combined
AmeriFirst Consolidated
------------- --------------
<S> <C> <C>
Interest Income $21,736 $1,056,851
Interest Expense 10,121 427,349
------------- --------------
Net Interest Income 11,615 629,502
Provision for Possible Loan Losses (123) 44,828
------------- --------------
Net Interest Income after Provision
for Possible Loan Losses 11,738 584,674
Other Income
Trust 10 61,195
Service charges 1,120 72,059
Credit card fees 19 24,738
Securities gains 45 3,113
Other 508 56,132
------------- --------------
Total Other Income 1,702 217,237
Other Expense
Salaries and employee benefits 4,388 269,297
Net occupancy and equipment 950 73,975
Other 2,899 172,608
------------- --------------
Total Other Expense 8,237 515,880
------------- --------------
Income Before Income Taxes 5,203 286,031
Income Taxes 1,686 107,850
------------- --------------
Net Income $3,517 $178,181
============= ==============
Per Share Data
Average Common Shares Outstanding 54,586,833
Net Income $3.26
</TABLE>
F-30
<PAGE> 34
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1993
(Thousands except per share data)
(Unaudited)
<CAPTION>
MBI, UNSL,
MBI Wedge,
UNSL, Wedge TCB
Pro Forma Pro Forma
Combined Combined Central Plains
MBI Consolidated <F2> TCB Consolidated Mortgage Spirit <F15>
----------- ---------------- --------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income $829,930 $873,022 $79,266 $952,288 $34,452 $23,774
Interest Expense 328,734 348,310 33,912 382,222 14,194 11,569
----------- ---------------- --------- --------------- ----------- --------------
Net Interest Income 501,196 524,712 45,354 570,066 20,258 12,205
Provision for Possible Loan Losses 61,013 61,573 1,224 62,797 956 706
----------- ---------------- --------- --------------- ----------- --------------
Net Interest Income after Provision
for Possible Loan Losses 440,183 463,139 44,130 507,269 19,302 11,499
Other Income
Trust 61,138 61,547 793 62,340 0 0
Service charges 58,511 60,719 5,471 66,190 2,254 1,921
Credit card fees 24,060 24,060 0 24,060 0 0
Securities gains 3,742 3,937 1,379 5,316 0 1,477
Other 51,707 54,916 3,892 58,808 3,615 360
----------- ---------------- --------- --------------- ----------- --------------
Total Other Income 199,158 205,179 11,535 216,714 5,869 3,758
Other Expense
Salaries and employee benefits 215,333 225,614 15,730 241,344 9,161 4,656
Net occupancy and equipment 62,638 64,497 5,075 69,572 2,162 1,248
Other 166,938 172,462 14,233 186,695 6,805 2,626
----------- ---------------- --------- --------------- ----------- --------------
Total Other Expense 444,909 462,573 35,038 497,611 18,128 8,530
----------- ---------------- --------- --------------- ----------- --------------
Income Before Income Taxes 194,432 205,745 20,627 226,372 7,043 6,727
Income Taxes 75,568 79,081 5,438 84,519 1,913 2,459
----------- ---------------- --------- --------------- ----------- --------------
Net Income Before Change in
Accounting Principle $118,864 $126,664 $15,189 $141,853 $5,130 $4,268
=========== ================ ========= =============== =========== ==============
Per Share Data
Average Common Shares Outstanding 42,439,298 44,997,436 49,747,436
Net Income Before Change in Accounting
Principle $2.80 $2.81 $2.85
See notes to pro forma combined consolidated financial statements.
<CAPTION>
All Entities
Pro Forma
Southwest and Combined
AmeriFirst Consolidated
------------- --------------
<S> <C> <C>
Interest Income $19,644 $1,030,158
Interest Expense 9,241 417,226
------------- --------------
Net Interest Income 10,403 612,932
Provision for Possible Loan Losses 124 64,583
------------- --------------
Net Interest Income after Provision
for Possible Loan Losses 10,279 548,349
Other Income
Trust 0 62,340
Service charges 1,062 71,427
Credit card fees 0 24,060
Securities gains 0 6,793
Other 425 63,208
------------- --------------
Total Other Income 1,487 227,828
Other Expense
Salaries and employee benefits 4,129 259,290
Net occupancy and equipment 915 73,897
Other 2,776 198,902
------------- --------------
Total Other Expense 7,820 532,089
------------- --------------
Income Before Income Taxes 3,946 244,088
Income Taxes 1,343 90,234
------------- --------------
Net Income Before Change in
Accounting Principle $2,603 $153,854
============= ==============
Per Share Data
Average Common Shares Outstanding 53,602,821
Net Income Before Change in Accounting
Principle $2.87
</TABLE>
F-31
<PAGE> 35
<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1992
(Thousands except for per share data)
(Unaudited)
<CAPTION>
MBI, UNSL,
MBI, UNSL, Wedge, ABNK,
Wedge, ABNK TCB
Pro Forma Pro Forma
Combined Combined
MBI Consolidated <F2,F12> TCB Consolidated
------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Interest Income $873,447 $950,658 $77,188 $1,027,846
Interest Expense 417,358 459,299 35,761 495,060
------------- ---------------- --------- ----------------
Net Interest Income 456,089 491,359 41,427 532,786
Provision for Possible Loan Losses 74,579 76,979 2,086 79,065
------------- ---------------- --------- ----------------
Net Interest Income after Provision
for Possible Loan Losses 381,510 414,380 39,341 453,721
Other Income
Trust 57,501 58,558 686 59,244
Service charges 55,399 59,678 4,804 64,482
Credit card fees 21,487 21,574 0 21,574
Securities gains 5,518 5,957 2,634 8,591
Other 44,039 48,100 2,114 50,214
------------- ---------------- --------- ----------------
Total Other Income 183,944 193,867 10,238 204,105
Other Expense
Salaries and employee benefits 192,015 208,858 13,596 222,454
Net occupancy and equipment 55,588 59,299 4,308 63,607
Other 170,465 181,344 13,336 194,680
------------- ---------------- --------- ----------------
Total Other Expense 418,068 449,501 31,240 480,741
------------- ---------------- --------- ----------------
Income Before Income Taxes 147,386 158,746 18,339 177,085
Income Taxes 52,346 55,829 4,941 60,770
------------- ---------------- --------- ----------------
Net Income $95,040 $102,917 $13,398 $116,315
============= ================ ========= ================
Per Share Data
Average Common Shares Outstanding 39,492,237 42,774,654 47,524,654
Net Income $2.36 $2.36 $2.41
See notes to pro forma combined consolidated financial statements.
<CAPTION>
All Entities
Pro Forma
Central Plains Southwest and Combined
Mortgage Spirit <F15> AmeriFirst Consolidated
----------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Interest Income $28,577 $26,962 $21,160 $1,104,545
Interest Expense 13,616 16,385 11,259 536,320
----------- ------------- --------------- ----------------
Net Interest Income 14,961 10,577 9,901 568,225
Provision for Possible Loan Losses 913 583 309 80,870
----------- ------------- --------------- ----------------
Net Interest Income after Provision
for Possible Loan Losses 14,048 9,994 9,592 487,355
Other Income
Trust 0 0 0 59,244
Service charges 1,559 1,280 1,025 68,346
Credit card fees 0 0 0 21,574
Securities gains 0 477 10 9,078
Other 3,233 139 458 54,044
----------- ------------- --------------- ----------------
Total Other Income 4,792 1,896 1,493 212,286
Other Expense
Salaries and employee benefits 7,617 3,880 3,902 237,853
Net occupancy and equipment 1,630 927 902 67,066
Other 4,607 2,604 2,928 204,819
----------- ------------- --------------- ----------------
Total Other Expense 13,854 7,411 7,732 509,738
----------- ------------- --------------- ----------------
Income Before Income Taxes 4,986 4,479 3,353 189,903
Income Taxes 1,245 1,718 1,165 64,898
----------- ------------- --------------- ----------------
Net Income $3,741 $2,761 $2,188 $125,005
=========== ============= =============== ================
Per Share Data
Average Common Shares Outstanding 50,610,039
Net Income $2.43
</TABLE>
F-32
<PAGE> 36
MERCANTILE BANCORPORATION INC.
Notes to Pro Forma Combined Consolidated Financial Statements
(Unaudited)
(1) The acquisitions of Southwest, TCB, UNSL, Wedge, Central Mortgage and
AmeriFirst will be accounted for as poolings-of-interests.
(2) The acquisition of Wedge and UNSL closed on January 3, 1995 and are not
included in the first column representing MBI's reported results.
(3) The acquisition of Plains Spirit will be accounted for as a purchase
transaction. Purchase accounting adjustments are considered
immaterial to the balance sheet and income statements of the proforma
combined entity.
(4) Purchase entry with consideration of $64 million consisting of cash and
1,400,000 shares of MBI Common Stock at $31.625 per share, which was the
closing price on December 22, 1994, the day preceding the execution of
the Merger Agreement.
(5) The pro forma excess of cost over fair value of net assets acquired
("goodwill") was $9,923,000 as of December 31, 1994. This amount will
vary depending on final purchase price adjustments and adjustments to
equity of Plains Spirit for income, dividends, and FAS No. 115 prior to
the Closing Date. See footnote 3 above.
(6) Elimination of MBI's investment in Plains Spirit.
(7) As part of an ongoing stock repurchase program, MBI will repurchase
1,132,000 shares of its own common stock in the open market. Assumed
weighted average price of $32.03 per share.
(8) Acquisition of TCB with 4,750,000 shares of MBI Common Stock. In
addition, MBI will assume, through an exchange, the outstanding, non-
convertible preferred stock of TCB, amounting to $12,153,000.
(9) Elimination of MBI's investment in TCB.
(10) Acquisition of Central Mortgage with 2,537,952 shares of MBI Common
Stock, based on exchange ratio of .5970 of a share of MBI Common Stock per
share of Central Mortgage Common Stock.
(11) Elimination of MBI's investment in Central Mortgage.
(12) The acquisition of ABNK by MBI, on April 30, 1992, was accounted for as
a purchase transaction. The MBI historical financial data includes ABNK
from the date of acquisition. The results of operations of ABNK were
included in the MBI pro forma combined income statement from January 1,
1992.
(13) Acquisition of Southwest with 675,000 shares of MBI Common Stock, and
AmeriFirst with 661,385 shares of MBI Common Stock.
(14) Elimination of MBI's investment in Southwest and AmeriFirst.
(15) Plains Spirit's fiscal year end is September 30, so those amounts are
used for the December 31, 1994, 1993, and 1992 income statements.
F-33
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MERCANTILE BANCORPORATION INC.
Dated as of May 12, 1995 By /s/ Jon W. Bilstrom
--------------------------
Jon W. Bilstrom
General Counsel and Secretary
<PAGE> 38
<TABLE>
EXHIBIT INDEX
<CAPTION>
<C> <S>
(23) Consent of Independent Auditors.
(27) Financial Data Schedule.
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
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, No. 33-
48952, and No. 33-57543, each on Form S-8, and No. 33-45863, No. 33-50981, No.
33-52986, No. 33-50579, No. 33-55439, No. 33-58467, and No. 33-56603, each on
Form S-4, of Mercantile Bancorporation Inc. of our report dated March 10,
1995, with respect to the consolidated financial statements of TCBankshares,
Inc. included in this Mercantile Bancorporation Inc. Current Report on Form 8-
K dated May 1, 1995.
/s/ Ernst & Young LLP
Little Rock, Arkansas
May 11, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 47,997
<INT-BEARING-DEPOSITS> 300
<FED-FUNDS-SOLD> 175
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 106,286
<INVESTMENTS-CARRYING> 493,455
<INVESTMENTS-MARKET> 466,323
<LOANS> 705,807
<ALLOWANCE> 9,967
<TOTAL-ASSETS> 1,398,032
<DEPOSITS> 1,178,719
<SHORT-TERM> 117,953
<LIABILITIES-OTHER> 11,956
<LONG-TERM> 3,725
0
12,153
<COMMON> 9,289
<OTHER-SE> 64,237
<TOTAL-LIABILITIES-AND-EQUITY> 1,398,032
<INTEREST-LOAN> 49,919
<INTEREST-INVEST> 37,317
<INTEREST-OTHER> 312
<INTEREST-TOTAL> 87,548
<INTEREST-DEPOSIT> 37,674
<INTEREST-EXPENSE> 39,836
<INTEREST-INCOME-NET> 47,712
<LOAN-LOSSES> 2,899
<SECURITIES-GAINS> 1,350
<EXPENSE-OTHER> 43,875
<INCOME-PRETAX> 13,319
<INCOME-PRE-EXTRAORDINARY> 13,319
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,730
<EPS-PRIMARY> 3,616.77
<EPS-DILUTED> 3,616.77
<YIELD-ACTUAL> 3.65
<LOANS-NON> 1,673
<LOANS-PAST> 2,737
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,200
<ALLOWANCE-OPEN> 7,923
<CHARGE-OFFS> 1,186
<RECOVERIES> 331
<ALLOWANCE-CLOSE> 9,967
<ALLOWANCE-DOMESTIC> 9,967
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
