<PAGE> 1
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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1995 COMMISSION FILE NUMBER 1-11792
MERCANTILE BANCORPORATION INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-0951744
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
P.O. BOX 524 ST. LOUIS, MISSOURI 63166-0524
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (314) 425-2525
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD
THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS
BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
X
---- ----
YES NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK, $5.00 PAR VALUE, 55,298,095 SHARES OUTSTANDING AS OF THE
CLOSE OF BUSINESS ON OCTOBER 31, 1995.
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<PAGE> 2
<TABLE>
INDEX
PART I-FINANCIAL INFORMATION
<CAPTION>
PAGE NO.
--------
<S> <C>
Item 1-Financial Statements
Consolidated Statement of Income
Three months and nine months ended September 30, 1995 and 1994 3
Consolidated Balance Sheet
September 30, 1995 and 1994, and December 31, 1994 4
Consolidated Statement of Changes in Shareholders' Equity
Nine months ended September 30, 1995 and 1994 5
Consolidated Statement of Cash Flows
Nine months ended September 30, 1995 and 1994 6
Item 2-Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II-OTHER INFORMATION
Item 6-Exhibits and Reports on Form 8-K
Signature
Exhibit Index
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(THOUSANDS EXCEPT PER COMMON SHARE DATA)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $229,824 $193,848 $673,759 $551,430
Investments in debt and equity securities
Trading 57 127 328 345
Taxable 52,475 50,420 153,571 153,982
Tax-exempt 5,176 5,461 16,190 16,297
-------- -------- -------- --------
Total 57,708 56,008 170,089 170,624
Due from banks-interest bearing 754 357 1,310 2,481
Federal funds sold and repurchase agreements 3,481 1,889 9,246 5,735
-------- -------- -------- --------
Total Interest Income 291,767 252,102 854,404 730,270
INTEREST EXPENSE
Interest bearing deposits 111,416 79,746 307,053 235,635
Foreign deposits 3,201 1,636 9,707 2,936
Short-term borrowings 22,101 13,514 67,007 29,022
Bank notes 4,017 - 9,774 -
Long-term debt 5,415 5,699 16,556 17,346
-------- -------- -------- --------
Total Interest Expense 146,150 100,595 410,097 284,939
-------- -------- -------- --------
NET INTEREST INCOME 145,617 151,507 444,307 445,331
PROVISION FOR POSSIBLE LOAN LOSSES 8,312 8,951 28,928 26,374
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 137,305 142,556 415,379 418,957
OTHER INCOME
Trust 16,548 14,517 48,252 46,560
Service charges 16,852 17,737 50,062 52,089
Credit card fees 3,361 6,378 14,169 18,087
Securitization revenue 8,397 - 12,920 -
Mortgage banking 2,343 2,297 6,763 8,581
Investment banking and brokerage 2,196 1,882 5,582 6,597
Securities gains 1,653 341 3,672 2,168
Other 14,340 8,994 40,060 25,343
-------- -------- -------- --------
Total Other Income 65,690 52,146 181,480 159,425
OTHER EXPENSE
Salaries 55,168 51,008 157,503 153,247
Employee benefits 12,655 12,276 38,322 37,554
Net occupancy 8,959 8,135 24,275 23,664
Equipment 9,937 9,129 29,272 28,173
Other 32,816 39,577 107,572 117,502
-------- -------- -------- --------
Total Other Expense 119,535 120,125 356,944 360,140
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 83,460 74,577 239,915 218,242
INCOME TAXES 26,763 26,417 81,156 78,033
-------- -------- -------- --------
NET INCOME $ 56,697 $ 48,160 $158,759 $140,209
======== ======== ======== ========
PER COMMON SHARE DATA
Average shares outstanding 55,150,062 52,069,711 53,629,980 51,900,015
Net income<F*> $1.02 $.92 $2.95 $2.68
Dividends declared .33 .28 .99 .84
<FN>
<F*>Earnings per common share calculated by dividing net income, after
deducting dividends on preferred stock, by weighted average common
shares outstanding.
</TABLE>
3
<PAGE> 4
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1995 1994 1994
-------- ------- --------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 822,849 $ 770,710 $ 755,380
Due from banks-interest bearing 97,473 29,166 22,819
Federal funds sold and repurchase agreements 179,778 128,264 231,279
Investments in debt and equity securities
Trading 4,696 14,299 17,290
Available-for-sale 768,422 416,059 648,403
Held-to-maturity (Estimated fair value of $3,094,938,
$3,301,207 and $3,237,609, respectively) 3,074,207 3,413,142 3,290,624
----------- ----------- -----------
Total Investments in Debt and Equity Securities 3,847,325 3,843,500 3,956,317
Loans held-for-sale 91,995 21,383 27,284
Loans and leases, net of unearned income 10,556,013 9,648,595 9,333,192
----------- ----------- -----------
Total Loans and Leases 10,648,008 9,669,978 9,360,476
Reserve for possible loan losses (187,872) (194,515) (189,954)
----------- ----------- -----------
Net Loans and Leases 10,460,136 9,475,463 9,170,522
Bank premises and equipment 269,073 248,318 248,051
Due from customers on acceptances 1,593 6,609 5,928
Other assets 340,426 304,314 333,182
----------- ----------- -----------
Total Assets $16,018,653 $14,806,344 $14,723,478
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 1,798,605 $ 1,763,439 $ 1,678,270
Interest bearing 9,875,943 9,206,676 9,253,732
Foreign 160,736 219,135 92,704
----------- ----------- -----------
Total Deposits 11,835,284 11,189,250 11,024,706
Federal funds purchased and repurchase agreements 1,611,392 1,495,540 1,535,425
Other short-term borrowings 394,906 315,425 458,017
Bank notes 250,000 100,000 -
Long-term debt 304,280 298,664 300,415
Bank acceptances outstanding 1,593 6,609 5,928
Other liabilities 202,031 166,520 175,025
----------- ----------- -----------
Total Liabilities 14,599,486 13,572,008 13,499,516
Commitments and contingent liabilities - - -
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1995 1994 1994
-------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock-no par value
Shares authorized 5,000 5,000 5,000
Shares issued 15 15 15 12,153 12,153 12,153
Common stock-$5.00 par value
Shares authorized 100,000 100,000 100,000
Shares issued 55,931 52,167 52,101 279,658 260,836 260,505
Capital surplus 216,757 166,878 165,769
Retained earnings 936,311 797,423 785,535
Treasury stock, at cost 598 94 - (25,712) (2,954) -
----------- ----------- ----------
Total Shareholders' Equity 1,419,167 1,234,336 1,223,962
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $16,018,653 $14,806,344 $14,723,478
=========== =========== ===========
</TABLE>
4
<PAGE> 5
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
($ IN THOUSANDS)
<CAPTION>
COMMON STOCK
--------------------- TOTAL
OUTSTANDING PREFERRED CAPITAL RETAINED TREASURY SHAREHOLDERS'
SHARES DOLLARS STOCK SURPLUS EARNINGS STOCK EQUITY
----------- ------- --------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993, AS RESTATED 51,666,199 $258,332 $12,153 $161,188 $700,996 $ - $1,132,669
Net income 140,209 140,209
Common dividends declared:
Mercantile Bancorporation Inc.-$.84
per share (36,199) (36,199)
Pooled companies prior to acquisition (2,429) (2,429)
Preferred dividends declared (908) (908)
Issuance of common stock:
Employee incentive plans 283,946 1,420 1,456 2,876
Convertible notes 138,991 695 2,911 3,606
Net fair value adjustment for available-
for-sale securities (16,211) (16,211)
Pre-merger transactions of pooled companies
and other 11,450 58 214 77 349
---------- -------- ------- -------- -------- -------- ----------
BALANCE AT SEPTEMBER 30, 1994 52,100,586 $260,505 $12,153 $165,769 $785,535 $ - $1,223,962
========== ======== ======= ======== ======== ======== ==========
BALANCE AT DECEMBER 31, 1994, AS REPORTED 43,207,524 $216,506 $ - $170,083 $684,615 $ (2,954) $1,068,250
Adjustment to reflect poolings-of-interests 8,865,829 44,330 12,153 (3,205) 112,808 - 166,086
---------- -------- ------- --------- -------- -------- ----------
BALANCE AT DECEMBER 31, 1994, AS RESTATED 52,073,353 260,836 12,153 166,878 797,423 (2,954) 1,234,336
Net income 158,759 158,759
Common dividends declared:
Mercantile Bancorporation Inc.-$.99 per
share (50,557) (50,557)
Pooled companies prior to acquisition (3,715) (3,715)
Preferred dividends declared (765) (765)
Issuance of common stock in acquisitions of:
Southwest Bancshares, Inc. 674,975 3,375 625 9,797 13,797
AmeriFirst Bancorporation, Inc. 661,356 3,307 5,367 3,781 12,455
Plains Spirit Financial Corporation 1,301,180 2,639 22,930 27,701 53,270
Wedge Bank 969,954 4,850 1,649 7,314 13,813
Issuance of common stock for:
Employee incentive plans 602,685 2,996 10,554 112 13,662
Convertible notes 331,075 1,655 6,935 8,590
Net fair value adjustment for available-
for-sale securities 14,274 14,274
Purchase of treasury stock (1,280,700) (50,571) (50,571)
Pre-merger transactions of pooled companies
and other 1,819 1,819
---------- -------- ------- -------- -------- -------- ----------
BALANCE AT SEPTEMBER 30, 1995 55,333,878 $279,658 $12,153 $216,757 $936,311 $(25,712) $1,419,167
========== ======== ======= ======== ======== ======== ==========
</TABLE>
5
<PAGE> 6
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 158,759 $ 140,209
Adjustments to reconcile net income to net cash provided by operating activities
Provision for possible loan losses 28,928 26,374
Depreciation and amortization 25,679 22,855
Provision for deferred income taxes 1,030 (1,400)
Net change in loans held-for-sale (70,612) 114,184
Net change in accrued interest receivable (8,441) (8,509)
Net change in accrued interest payable 24,611 (1,226)
Other, net 1,318 (26,524)
---------- ----------
Net Cash Provided by Operating Activities 161,272 265,963
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading securities
Purchases (761,986) (1,036,494)
Proceeds from maturities 866,095 996,035
Proceeds from sales of available-for-sale securities 147,309 234,814
Net change in loans and leases (813,136) (959,430)
Purchases of loans and leases (105,234) (20,063)
Proceeds from sales of loans and leases 558,980 165,231
Purchases of premises and equipment (38,802) (30,437)
Proceeds from sales of premises and equipment 4,215 2,677
Proceeds from sales of foreclosed property 13,839 19,535
Cash and cash equivalents from acquisitions, net of cash paid 46,732 -
Other, net 192 25,645
---------- ----------
Net Cash Used by Investing Activities (81,796) (602,487)
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing demand and
money market deposit accounts (390,376) (455,402)
Net change in time certificates of deposit under $100,000 175,145 (198,524)
Net change in time certificates of deposit $100,000 and over 129,832 10,970
Net change in other time deposits 96,280 6,330
Net change in foreign deposits (58,399) 66,619
Net change in short-term borrowings 102,981 791,049
Issuance of bank notes 150,000 -
Issuance of long-term debt 2,996 75,000
Principal payments on long-term debt (14,399) (57,946)
Cash dividends paid (55,037) (39,738)
Proceeds from issuance of common stock 2,209 2,442
Purchase of treasury stock (50,571) -
Other, net 1,823 (3,447)
---------- ----------
Net Cash Provided by Financing Activities 92,484 197,353
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 171,960 (139,171)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 928,140 1,148,649
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,100,100 $1,009,478
========== ==========
</TABLE>
6
<PAGE> 7
NOTE 1
The consolidated financial statements include all adjustments which
are, in the opinion of management, necessary for the fair statement of
the results of these periods and are of a normal recurring nature.
NOTE 2
Effective January 3, 1995, Mercantile Bancorporation Inc.
("Corporation" or "Mercantile") acquired UNSL Financial Corp ("UNSL"),
a $508 million-asset holding company for the Lebanon, Missouri-based
United Savings Bank. Effective May 1, 1995, the Corporation acquired
TCBankshares, Inc. ("TCB"), a $1.4 billion-asset holding company based
in North Little Rock, Arkansas. Also effective May 1, 1995, the
Corporation acquired Central Mortgage Bancshares, Inc. ("Central"), a
$655 million-asset bank holding company based in Kansas City, Missouri.
The UNSL, TCB, and Central acquisitions were accounted for as poolings-
of-interests. The historical consolidated financial statements have
been restated to reflect these transactions.
<TABLE>
Net income and net income per share for Mercantile, UNSL, TCB and
Central prior to restatement were as follows:
<CAPTION>
(THOUSANDS EXCEPT PER
COMMON SHARE DATA)
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1994
------------- -------------
<S> <C> <C>
MERCANTILE
Net income $41,043 $120,101
Net income per common share .95 2.79
UNSL
Net income 1,020 3,063
Net income per common share .65 1.97
TCB
Net income 4,117 11,658
Net income per common share 1,811.67 5,109.92
CENTRAL
Net income 1,980 5,387
Net income per common share .50 1.38
</TABLE>
Effective January 3, 1995, the Corporation acquired Wedge Bank
("Wedge"), an Alton, Illinois bank with assets totaling $196 million.
On August 1, 1995, the Corporation completed its acquisitions of
Southwest Bancshares, Inc. ("Southwest"), a Springfield, Missouri bank
holding company with assets totaling $188 million, and AmeriFirst
Bancorporation, Inc. ("AmeriFirst"), a $156 million-asset bank holding
company based in Sikeston, Missouri. The Wedge, Southwest and
AmeriFirst transactions meet the requirements for treatment as
poolings-of-interests; however, due to the immateriality of the
financial condition and results of operations of Wedge, Southwest and
AmeriFirst to those of Mercantile, the historical financial statements
of the Corporation have not been restated for these transactions.
On July 7, 1995, the Corporation completed a merger with Plains Spirit
Financial Corporation ("Plains Spirit"), a $401 million-asset holding
company for a federal savings bank headquartered in Davenport, Iowa.
The Plains Spirit transaction was accounted for as a purchase and,
accordingly, the results of operations, which were not material, have
been included in the financial statements from the acquisition date.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 1
HIGHLIGHTS<F1>
<CAPTION>
THIRD QUARTER NINE MONTHS
($ IN THOUSANDS EXCEPT PER COMMON SHARE DATA) 1995 1994 CHANGE 1995 1994 CHANGE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income $ 1.02 $ .92 10.9 % $ 2.95 $ 2.68 10.1 %
Dividends declared .33 .28 17.9 .99 .84 17.9
Book value at September 30 25.43 23.26 9.3 25.43 23.26 9.3
Market price at September 30 44 3/4 36 7/8 21.4 44 3/4 36 7/8 21.4
Average shares outstanding 55,150,062 52,069,711 5.9 53,629,980 51,900,015 3.3
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Taxable-equivalent net interest income $148,951 $154,852 (3.8)% $454,655 $455,366 (.2)%
Tax-equivalent adjustment 3,334 3,345 (.3) 10,348 10,035 3.1
Net interest income 145,617 151,507 (3.9) 444,307 445,331 (.2)
Provision for possible loan losses 8,312 8,951 (7.1) 28,928 26,374 9.7
Other income 65,690 52,146 26.0 181,480 159,425 13.8
Other expense 119,535 120,125 (.5) 356,944 360,140 (.9)
Income taxes 26,763 26,417 1.3 81,156 78,033 4.0
Net income 56,697 48,160 17.7 158,759 140,209 13.2
- --------------------------------------------------------------------------------------------------------------------------------
ENDING BALANCES
Total assets $16,018,653 $14,723,478 8.8 %
Loans and leases 10,648,008 9,360,476 13.8
Deposits 11,835,284 11,024,706 7.4
Shareholders' equity 1,419,167 1,223,962 15.9
Reserve for possible loan losses 187,872 189,954 (1.1)
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Total assets $15,867,317 $14,554,563 9.0 % $15,405,979 $14,474,720 6.4 %
Earning assets 14,675,759 13,399,388 9.5 14,239,180 13,283,005 7.2
Loans and leases 10,530,841 9,148,008 15.1 10,136,331 8,876,826 14.2
Deposits 12,208,891 11,619,475 5.1 11,864,912 11,753,489 .9
Shareholders' equity 1,405,255 1,213,560 15.8 1,321,875 1,183,126 11.7
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Return on assets 1.43% 1.32% 1.37% 1.29%
Return on equity 16.14 15.87 16.01 15.80
Overhead ratio 55.69 58.03 56.11 58.58
Other expense to average assets 3.01 3.30 3.09 3.32
Net interest rate margin 4.06 4.62 4.26 4.57
Equity to assets 8.86 8.31
Tier I capital to risk-adjusted assets 12.29 11.73
Total capital to risk-adjusted assets 15.63 15.28
Leverage 8.45 8.00
Reserve for possible loan losses to outstanding
loans 1.76 2.03
Reserve for possible loan losses to non-performing
loans 352.34 469.36
Non-performing assets to outstanding loans
and foreclosed assets .64 .77
- --------------------------------------------------------------------------------------------------------------------------------
SELECTED DATA
Banks<F2> 52 51
Banking offices<F2> 322 318
Full-time equivalent employees 6,840 6,558
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> All previously reported financial information has been restated to reflect the January 3, 1995 merger with UNSL
Financial Corp and the May 1, 1995 mergers with TCBankshares, Inc. and Central Mortgage Bancshares, Inc., which were
accounted for as poolings-of-interests.
<F2> Includes Mercantile Bank, FSB, a federally-chartered savings bank.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
PERFORMANCE SUMMARY
Net income for Mercantile Bancorporation Inc. ("Corporation" or
"Mercantile") for the third quarter of 1995 was $56,697,000, a 17.7%
improvement from the $48,160,000 earned in the same period a year ago.
On a per common share basis, net income was $1.02, up 10.9% from the
$.92 earned in last year's third quarter. Return on assets improved to
1.43% in the third quarter compared with 1.37% in the second quarter
of this year and 1.32% last year, while return on average equity for
the quarter was 16.14% versus 15.87% in 1994.
Year-to-date 1995 net income was $158,759,000, up 13.2% from the
$140,209,000 earned last year, and on a per common share basis was
$2.95, an improvement of 10.1% from the $2.68 recorded in the first
nine months of 1994. When compared with 1994, year-to-date 1995
overall results reflected a consistent level of net interest income,
lower levels of operating expenses, a higher provision for possible
loan losses and a significant increase in other income. For the first
nine months of 1995, return on average assets was 1.37% compared with
1.29% last year, while return on average equity was 16.01%, up from
15.80% last year.
The financial statements have been restated to include the pre-
acquisition accounts and results of operations of UNSL Financial Corp
("UNSL"), Central Mortgage Bancshares, Inc. ("Central") and
TCBankshares, Inc. ("TCB"). UNSL was acquired by Mercantile on January
3, 1995 while Central and TCB were acquired by Mercantile on May 1,
1995 in transactions accounted for as poolings-of-interests,
hereinafter referred to as Pooled Transactions. Also effective January
3, 1995, Mercantile completed a merger with Wedge Bank ("Wedge"), and
on August 1, 1995, completed mergers with Southwest Bancshares, Inc.
("Southwest") and AmeriFirst Bancorporation, Inc. ("AmeriFirst"). All
three transactions also met the requirements for treatment as
poolings-of-interests; however, due to their immateriality,
Mercantile's historical financial statements were not restated.
The Plains Spirit Financial Corporation ("Plains Spirit") merger
closed on July 7, 1995 and was accounted for as a purchase. On August
4, 1995, the Corporation announced plans to expand its presence in
Iowa through a merger with Hawkeye Bancorporation, a $2.0 billion-
asset holding company based in Des Moines. There are currently three
smaller pending acquisitions in various stages of approval which are
summarized in Exhibit 2.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 2
ACQUISITIONS
($ IN THOUSANDS)
<CAPTION>
CONSIDERATION
------------------ ACCOUNTING
DATE ASSETS DEPOSITS CASH SHARES METHOD
---- ------ -------- ---- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
ACQUISITIONS COMPLETED
Southwest Bancshares, Inc. Aug. 1, 1995 $ 187,701 155,628 $ 1 674,975 Pooling
AmeriFirst Bancorporation, Inc. Aug. 1, 1995 155,521 130,179 1 661,356 Pooling
Plains Spirit Financial Corporation July 7, 1995 400,754 276,887 6,697 1,301,180 Purchase
TCBankshares, Inc. May 1, 1995 1,422,798 1,217,740 - 4,749,999<F1> Pooling
Central Mortgage Bancshares, Inc. May 1, 1995 654,584 571,105 8 2,537,723 Pooling
UNSL Financial Corp Jan. 3, 1995 508,346 380,716 11 1,578,107 Pooling
Wedge Bank Jan. 3, 1995 195,716 152,865 1 969,954 Pooling
United Postal Bancorp, Inc. Feb. 1, 1994 1,260,765 1,025,252 39 5,631,953 Pooling
Metro Bancorporation Jan. 3, 1994 370,175 333,183 6 1,638,278 Pooling
ACQUISITIONS PENDING
Hawkeye Bancorporation 4th Qtr. 1995 1,992,565 1,717,075 - 7,874,903<F2> Pooling
First Sterling Bancorp, Inc. 4th Qtr. 1995 170,002 132,513 - 521,424<F2> Pooling
Security Bank of Conway, F.S.B. 1st Qtr. 1996 100,323 87,758 - 322,000<F2> Pooling
Metro Savings Bank, F.S.B. 1st Qtr. 1996 83,349 76,125 199,446<F2> Pooling
<FN>
<F1> In addition to Mercantile common stock issued, the Corporation assumed, through an exchange, the outstanding,
non-convertible preferred stock of TCBankshares, Inc.
<F2> Estimated shares to be issued in acquisition.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
On May 17, 1995, the Corporation securitized $400,000,000 of its
MasterCard(R) and VISA(R) credit card loans through the Mercantile
Credit Card Master Trust, largely in a public underwriting. The Class
A Floating Rate Credit Card Participation Certificates were rated AAA
by Moody's and Standard & Poor's, while the Class B Certificates were
rated A. Overnight borrowings were reduced accordingly. The financial
statement impact of the securitization is to reduce net interest
income, credit card income, the provision for possible loan losses and
operating expenses with a net offsetting increase in securitization
revenue, which is classified as other income. There is minimal effect
on net income.
Net interest income decreased 3.9% to $145,617,000 for the third
quarter of 1995 and .2% to $444,307,000 for the first nine months of
1995. The net interest rate margin was 4.06% this quarter compared
with 4.25% in the second quarter of 1995 and 4.62% for the third
quarter of 1994, while the year-to-date margin was 4.26% compared with
4.57% last year. Average earning assets for the first nine months of
1995 of $14.2 billion were 7.2% higher than last year as average loan
volume was up 14.2%, offset by declines in investments.
Other income was $65,690,000 for the third quarter of 1995, an
increase of $13,544,000 or 26.0% from a year ago. For the first nine
months of 1995, other income was $181,480,000, an improvement of
$22,055,000 or 13.8% from last year. Trust fees, securities gains and
miscellaneous income all improved from the first nine months of 1994.
Securitization revenue in 1995 of $12,920,000 also significantly
enhanced other income.
Third-quarter non-interest expenses were down .5% from a year ago and
totaled $119,535,000 compared with $120,125,000 last year, and year-
to-date were $356,944,000, down .9%. Likewise, there was an
improvement in the year-to-date overhead ratio to 56.11% compared with
58.58% last year, and a lowering of the operating expense to average
assets ratio to 3.09% versus 3.32% in the first nine months of 1994.
The reduction in expense levels resulted primarily from the
realization of synergies from mergers completed in prior years and
lower FDIC insurance expense. The FDIC insurance rebate for the period
June 1 to September 30, 1995 was $5,500,000, and was reflected as a
reduction in operating expenses.
The provision for possible loan losses for the third quarter of 1995
was $8,312,000 compared with $8,951,000 the prior year, and was
$28,928,000 for the first nine months of 1995 compared with
$26,374,000 in 1994. Net charge-offs for the
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 3
ORGANIZATIONAL CONTRIBUTION
($ IN THOUSANDS)
<CAPTION>
SEPTEMBER 30, 1995
---------------------------------------------------------------------------
KANSAS PARENT
ST. LOUIS CITY COMMUNITY COMPANY AND
AREA<F1> AREA BANKS<F2> ELIMINATIONS CONSOLIDATED
--------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income $ 73,737 $ 17,666 $ 71,820 $ (4,464) $ 158,759
Average assets 7,027,093 1,730,021 7,145,635 (496,770) 15,405,979
Return on assets 1.40% 1.36% 1.34% 1.37%
Net interest rate margin 3.82 4.60 4.37 4.26
Overhead ratio 56.36 56.13 53.02 56.11
Equity to assets 8.06 8.12 8.86 8.86
Reserve for possible loan losses to outstanding
loans 1.57 2.00 1.87 1.76
Reserve for possible loan losses to non-
performing loans 290.70 345.51 419.62 352.34
Non-performing loans to outstanding loans .54 .58 .45 .50
Non-performing assets to outstanding loans
and foreclosed assets .70 .69 .56 .64
<FN>
<F1> Includes the results of Mercantile Bank of St. Louis N.A., Mercantile Bank of Illinois N.A., Mercantile Trust Company
N.A., Mercantile Business Credit, Inc. (asset-based lending), Mercantile Investment Services, Inc. (brokerage),
Mississippi Valley Advisors Inc. (investment management) and Mississippi Valley Life Insurance Co. (credit life).
<F2> Includes the pre-acquisition financial performance of Pooled Transactions consummated prior to September 30, 1995.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
first nine months of 1995 and 1994 were $37,320,000 and
$21,703,000, respectively, and on an annualized basis were .49%
of average loans compared with .33% last year, when significant
commercial real estate recoveries were realized. At September
30, 1995, the reserve for possible loan losses was $187,872,000,
which was 1.76% of total loans and 352.34% of non-performing
loans.
Non-performing assets as of September 30, 1995 were $68,400,000 or
.64% of total loans and foreclosed assets, compared with the year-end
1994 figures of $47,716,000 or .49%, and $72,670,000 or .77% at
September 30, 1994. Foreclosed assets included above were $15,079,000
compared with $14,157,000 at year-end and $32,199,000 last
September 30.
Earnings in the St. Louis Area banks (Mercantile Bank of St. Louis
N.A., Mercantile Bank of Illinois N.A. and Mercantile Trust Company
N.A.) for the first nine months of 1995 were $73,737,000, the same
level as the first nine months of 1994. Return on average assets for
the three banks was 1.40% compared with 1.46% for the first nine
months of 1994.
In the 46 Community Banks, net income was $71,820,000, an increase of
11.3%, while return on average assets was 1.34% compared with 1.36%
last year. Earnings for the three banks in the Kansas City Area for
the first nine months of 1995 were $17,666,000, up 13.7% from a year
ago. Return on average assets was 1.36% compared with 1.28% last year.
The results for Community Banks included the pre-acquisition financial
performance of the Pooled Transactions.
Consolidated assets of $16.0 billion were up 8.8% from last September
30. Core deposits increased by 5.4% to $10.8 billion, loans were $10.6
billion, up 13.8% from last year, and shareholders' equity of $1.4
billion was 15.9% higher than at September 30, 1994. Tier I capital to
risk-adjusted assets improved to 12.29% compared with 11.73% last
year, while Total capital to risk-adjusted assets at September 30,
1995 and 1994 was 15.63% and 15.28%, respectively.
The following financial commentary presents a more thorough discussion
and analysis of the results of operations and financial position of
the Corporation for the third quarter and first nine months of 1995.
NET INTEREST INCOME
Net interest income for the third quarter of 1995 was $145,617,000, a
3.9% decline from the $151,507,000 earned last year, and for the first
nine months of 1995 was $444,307,000, a .2% drop from last year. For
the quarter, the net interest rate margin was 4.06% compared with
4.62% last year, while the year-to-date 1995 margin was 4.26% versus
4.57% in 1994. Factors contributing to the lower net interest rate
margins in 1995 included more competitive pricing for both loans and
deposits, the movement of retail deposits from savings and transaction
accounts to higher-costing, longer-term certificates of deposit, a
decline in core deposit funding as a percentage of total funding,
introductory rates on the SBC Communications Inc. co-branded credit
card program, and the credit card securitization. Also, the companies
acquired in 1995 have generally had lower net interest rate margins,
thereby further diluting the Corporation's margin. Partially
offsetting these negative factors was average loan growth of $1.3
billion or 14.2% for the first nine months of 1995.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
EXHIBIT 4
LOANS AND LEASES
($ IN THOUSANDS)
<CAPTION>
SEPTEMBER 30
1995 1994 CHANGE
---- ---- ------
<S> <C> <C> <C>
Commercial $ 2,623,217 $2,379,135 10.3%
Real estate-commercial 1,714,975 1,546,104 10.9
Real estate-construction 280,139 276,361 1.4
Real estate-residential 3,742,007 2,981,166 25.5
Consumer 1,545,909 1,418,351 9.0
Credit card loans issued 1,141,761 758,925 50.4
Securitized credit card loans (400,000) - -
Foreign - 434 -
---------- ----------
Total Loans and Leases $10,648,008 $9,360,476 13.8
=========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Year-to-date 1995 average loans in the St. Louis Area, Kansas City
Area and Community Banks grew by 7.7%, 22.5% and 18.8%, respectively.
Exhibit 4 portrays loan volumes at September 30, 1995 and 1994 by
category. Total average
11
<PAGE> 12
loans grew by 14.2% or $1.3 billion. Including the securitized loans,
growth was $1.5 billion or 16.4% on an annualized basis. From June 30,
1995 to September 30, 1995, loans outstanding grew by 5.5%, with most
of that increase attributable to the three acquisitions which closed
in the quarter and growth in the co-branded credit card loans.
Year-to-date average commercial loan growth was $223,634,000, up 9.8%,
and was broad-based across the system. Commercial real estate and
construction loans grew by $181,428,000 or 10.2% with the growth
generally in the smaller markets served by Mercantile. Residential
mortgage loans were up $600,464,000 or 21.4%, due largely to the
Wedge, Plains Spirit, Southwest and AmeriFirst acquisitions. Internal
growth is now stabilizing in the current lower interest rate
environment as the pipeline mix is changing from adjustable-rate
loans, which are generally retained as earning assets, to fixed-rate
loans, which are generally sold with servicing retained. Average
credit card loans grew by 2.2%, due primarily to the volume generated
by the SBC Communications Inc. co-branded card, partially offset by
the impact of the securitization and a decline in the core Mercantile
MasterCard(R) and VISA(R) portfolio. The co-branded card should
continue to add significantly to loan growth in future periods. On a
managed portfolio basis, average credit card loan volume was up
$192,389,000 or 21.2% from the second quarter of 1995. Other consumer
loans increased by $237,531,000 or 18.8% in the first nine months of
1995, due primarily to loans added from the four acquisitions cited
above.
The 6.3% year-to-date decline in average investments in debt and
equity securities came largely through maturities in which the
proceeds were used to fund loan growth. Short-term investments are
primarily used for short-term excess liquidity or balancing the
interest rate sensitivity of the Corporation, and on average decreased
by $42,923,000 or 15.3% during the first nine months of 1995.
A decline in core deposits was offset by an increase in short-term
borrowings and bank notes. Mercantile remained substantially core
funded at 91.56% of total deposits and 76.29% of earning assets for
the first nine months of 1995. Changes in average core deposits for
the past seven quarters are shown in the Condensed Quarterly Average
Balance Sheet on Pages 19 and 20 of this report.
Average non-interest bearing deposits declined by $92,394,000 or 4.3%
through the first nine months of 1995. A reclassification of
$100,000,000 to other time deposits during the first quarter of 1995
accounted for the decline as well as higher interest rates and thus,
larger earnings credits for compensatory balances to pay for services.
The $511,253,000 or 50.0% increase in average short-term borrowings
and outstanding bank notes of $250,000,000 made up for the loss of
core deposits and funded loan growth. All borrowings are in accordance
with current liquidity guidelines.
Also funding asset growth was average shareholders' equity, which grew
by $138,749,000 or 11.7%, due largely to net earnings retained, the
conversion of capital notes to equity, a favorable change in the FAS
115 adjustment, and stock issued in the Wedge, Southwest, AmeriFirst
and Plains Spirit transactions and under various employee benefit
plans.
The factors discussed above are consistent with Mercantile's overall
corporate policy relative to rate sensitivity and liquidity, which is
to produce the optimal yield and maturity mix consistent with interest
rate expectations and projected liquidity needs. The Condensed
Quarterly Average Balance Sheet, with rates earned and paid, is
summarized by quarter on Pages 19 and 20.
OTHER INCOME
Non-interest income increased 26.0% during the third quarter of 1995
to $65,690,000, and for the nine month period was $181,480,000
compared with $159,425,000 a year ago, an improvement of 13.8%. Year-
to-date trust fees and other miscellaneous income improved from last
year while investment banking revenue, mortgage banking income,
service charges, credit card and letters of credit fees declined.
Excess servicing fees on the securitized credit card loans were
$12,920,000 this year. Net securities gains were $3,672,000 in 1995
compared with $2,168,000 last year.
12
<PAGE> 13
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 5
OTHER INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 CHANGE 1995 1994 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Trust (Exhibit 6) $16,548 $14,517 14.0% $ 48,252 $ 46,560 3.6%
Service charges 16,852 17,737 (5.0) 50,062 52,089 (3.9)
Credit card fees (Exhibit 7) 3,361 6,378 (47.3) 14,169 18,087 (21.7)
Securitization revenue 8,397 - - 12,920 - -
Mortgage banking 2,343 2,297 2.0 6,763 8,581 (21.2)
Investment banking and brokerage 2,196 1,882 16.7 5,582 6,597 (15.4)
Letters of credit fees 1,863 2,024 (8.0) 4,707 5,052 (6.8)
Securities gains 1,653 341 - 3,672 2,168 69.4
Other 12,477 6,970 79.0 35,353 20,291 74.2
------- ------- -------- --------
Total Other Income $65,690 $52,146 26.0 $181,480 $159,425 13.8
======= ======= ======== ========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Trust fees were $16,548,000 for the third quarter of 1995, up 14.0%,
due primarily to favorable investment results and strength in the bond
and equity markets, successful marketing efforts and selective fee
increases. On a year-to-date basis, trust fees totaled $48,252,000, an
increase of 3.6%. Exhibit 6 further details comparative trust revenue
by line of business for the third quarter and first nine months of
1995 and 1994.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 6
TRUST INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 CHANGE 1995 1994 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Personal trust-St. Louis Area banks $ 5,385 $ 4,820 11.7% $16,121 $14,898 8.2%
Mississippi Valley Advisors Inc. 3,492 3,037 15.0 9,928 9,483 4.7
Corporate and institutional services 3,016 2,607 15.7 8,348 8,729 (4.4)
Kansas City Area and Community Banks 4,655 4,053 14.9 13,855 13,450 3.0
------- ------- ------- -------
Total Trust Income $16,548 $14,517 14.0 $48,252 $46,560 3.6
======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Service charge income of $16,852,000 was down 5.0% for the third
quarter and declined 3.9% for the first nine months of 1995. Declining
average deposit volumes, as well as corporate customers who opted to
use compensating deposit balances to offset analysis charges,
accounted for the drop in service charges.
Credit card fee income was $3,361,000 for the third quarter of 1995,
47.3% less than the 1994 level. For the first nine months of 1995,
credit card income was $14,169,000 or 21.7% less than the comparable
1994 period. The decline in income was due primarily to the netting of
the transaction-based rebates paid to the new co-branded cardholders
against fee income and the reclassification of fees relating to the
securitized loans to securitization revenue. A breakout of credit card
fees is shown in Exhibit 7. Securitization revenue represents the
excess servicing fees accruing to Mercantile on the $400,000,000 in
credit card loans securitized in the Mercantile Credit Card Master
Trust.
Mortgage banking income decreased by $1,818,000 or 21.2% from the
first nine months of 1994, when significant gains were recognized on
the sales of loans. At September 30, 1995, servicing volume was
approximately $5.1 billion. During the second quarter of 1995,
Mercantile adopted FAS 122, "Accounting for Mortgage Servicing Rights,
an amendment of FASB Statement No. 65," for which the financial impact
was immaterial.
Investment banking and brokerage fees, which consists of transaction
fees for services performed on behalf of both individual and corporate
customers, primarily sales of annuities and mutual funds as well as
foreign exchange revenues,
13
<PAGE> 14
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 7
CREDIT CARD INCOME
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 CHANGE 1995 1994 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Interchange fees $ 3,199 $2,430 31.6% $ 8,357 $ 6,728 24.2%
Late payment fees 1,228 1,012 21.3 3,233 2,998 7.8
Merchant revenue, net of related expense 1,277 865 47.6 2,642 2,190 20.6
Annual fees 224 1,141 (80.4) 1,719 3,586 (52.1)
Other cardholder income 2,062 930 - 4,690 2,585 81.4
Co-branded card rebate (4,629) - - (6,472) - -
------- ------ ------- -------
Total Credit Card Income $ 3,361 $6,378 (47.3) $14,169 $18,087 (21.7)
======= ====== ======= =======
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
were $2,196,000 for the third quarter of 1995, an improvement of 16.7%
from 1994. For the first nine months, revenues were down $1,015,000 or
15.4% from the 1994 results. These revenues can vary with movements in
interest rates and overall market conditions.
Securities gains increased by $1,504,000 from the first nine months of
1994, due largely to gains on the sale of equity securities. All other
non-interest income was up 58.1% for the quarter and 59.4% year-to-
date as during the third quarter the Corporation realized gains of
$5,300,000 on the sale of leased equipment; also, in the first quarter
of 1995 a gain of $5,155,000 was recorded on the sale of its equity
interest in a joint venture.
OTHER EXPENSE
Expenses other than interest expense and the provision for possible
loan losses for the third quarter of 1995 were $119,535,000, a decline
of .5% from the third quarter of 1994. For the first nine months of
1995, total other expenses were $356,944,000, a .9% decrease from the
1994 level. Total operating expenses were 3.09% of average assets
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 8
OTHER EXPENSE
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 CHANGE 1995 1994 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 55,168 $ 51,008 8.2% $157,503 $153,247 2.8%
Employee benefits 12,655 12,276 3.1 38,322 37,554 2.0
-------- -------- -------- --------
Total Personnel Expense 67,823 63,284 7.2 195,825 190,801 2.6
Net occupancy 8,959 8,135 10.1 24,275 23,664 2.6
Equipment 9,937 9,129 8.9 29,272 28,173 3.9
Marketing/business development 2,424 3,585 (32.4) 7,312 10,209 (28.4)
Postage and freight 4,493 3,933 14.2 13,540 12,104 11.9
Office supplies 2,838 2,593 9.4 8,259 7,339 12.5
Communications 2,754 1,973 39.6 7,144 5,895 21.2
Legal and professional 2,080 2,464 (15.6) 6,181 8,121 (23.9)
Credit card 3,980 2,876 38.4 8,440 7,994 5.6
FDIC insurance 866 6,290 (86.2) 13,402 19,139 (30.0)
Foreclosed property expense 13 (926) - 578 (104) -
Intangible asset amortization 2,249 1,947 15.5 5,891 5,967 (1.3)
Other 11,119 14,842 (25.1) 36,825 40,838 (9.8)
-------- -------- -------- --------
Total Other Expense $119,535 $120,125 (.5) $356,944 $360,140 (.9)
======== ======== ======== ========
RATIOS
Overhead ratio 55.69% 58.03% 56.11% 58.58%
Other expense to average assets 3.01 3.30 3.09 3.32
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
compared with 3.32% for the first nine months of 1994. The overhead
ratio, defined as operating expenses as a percentage of taxable-
equivalent net interest income and other income, improved to 55.69% in
the current quarter from 56.71% last quarter, while the overhead ratio
was 56.11% for the first nine months of 1995 compared with 58.58% last
year.
Salary expense increased 8.2% and 2.8%, respectively, during the third
quarter and first nine months of 1995, largely reflecting the costs
associated with staffing product expansion, merit increases and new
banking operations added during the quarter. Year-to-date benefit
costs were up by 2.0%, in line with the growth in salaries. Occupancy
and equipment costs grew by 3.3% during the first nine months of 1995,
reflecting productivity gains and the closing of overlapping United
Postal offices, offset by the costs of maintaining additional offices
and a consistent program of upgrading systems and equipment to further
enhance productivity.
In September 1995, Mercantile received a $5,500,000 rebate from the
FDIC relating to overpaid insurance premiums for the months of June
through September 1995. That refund was classified as a reduction in
FDIC insurance expense. Exhibit 8 details the composition of all other
operating expenses.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses was $187,872,000 or 1.76% of
loans outstanding at September 30, 1995. This compared with
$194,515,000 or 2.01% at year's end and $189,954,000 or 2.03% at
September 30, 1994. The reserve for possible loan losses as a
percentage of non-performing loans was 352.34% compared with 579.62%
at year-end and 469.36% last year.
The year-to-date 1995 provision for possible loan losses was
$28,928,000 compared with $26,374,000 last year, an increase of 9.7%.
The annualized ratio of net charge-offs to average loans for the first
nine months of 1995 was .49% compared with .33% last year, while the
corresponding net charge-off figures were $37,320,000 and $21,703,000,
respectively. In 1994 significant recoveries were received on several
commercial real estate loans, thereby lowering the net charge-off
figures.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 9
RESERVE FOR POSSIBLE LOAN LOSSES
($ IN THOUSANDS)
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING BALANCE $179,434 $190,251 $194,515 $184,836
PROVISION 8,312 8,951 28,928 26,374
Charge-offs (16,188) (15,109) (49,515) (48,336)
Recoveries 4,611 5,414 12,195 26,633
-------- -------- -------- --------
NET CHARGE-OFFS (11,577) (9,695) (37,320) (21,703)
Acquired Reserves 11,703 447 13,749 447
Transfer to Mercantile Credit Card Master Trust - - (12,000) -
-------- -------- -------- --------
ENDING BALANCE $187,872 $189,954 $187,872 $189,954
======== ======== ======== ========
LOANS AND LEASES
September 30 balance $10,648,008 $9,360,476 $10,648,008 $9,360,476
=========== ========== =========== ==========
Average balance $10,530,841 $9,148,008 $10,136,331 $8,876,826
=========== ========== =========== ==========
RATIOS
Reserve balance to outstanding loans 1.76% 2.03% 1.76% 2.03%
Reserve balance to non-performing loans 352.34 469.36 352.34 469.36
Net charge-offs to average loans .44 .42 .49 .33
Earnings coverage of net charge-offs 7.93X 8.62x 7.20X 11.27x
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
Credit card losses were 4.95% of average credit card loans in the
first nine months of 1995 compared with 4.98% in 1994, as net credit
card charge-offs were $28,075,000 versus $27,275,000 last year. The
securitization of credit card loans on May 17, 1995 reduced the amount
of credit card charge-offs reported by the Corporation; however,
losses on securitized loans negatively impacted the level of excess
servicing fees reported in other income. In conjunction with the
securitization, $12,000,000 of the Corporation's loan loss reserve was
transferred with the loans to the Mercantile Credit Card Master Trust.
Mercantile evaluates the reserves of all banks on a quarterly basis
to ensure the timely charge-off of loans and to determine the
adequacy of each bank's reserve for possible loan losses. At
September 30, 1995, the level of the individual Community Bank
reserves as a percentage of total loans outstanding ranged from
1.24% to 6.28% with a combined ratio of 1.87%. The coverage of non-
performing loans was 419.62% on a combined basis. The St. Louis
Area combined reserve was 1.57% of loans with a resulting coverage
ratio of 290.70%, while the Kansas City Area banks combined reserve
was 2.00%, with a 345.51% coverage ratio. Management believes the
consolidated reserve of 1.76% of total loans and 352.34% of non-
performing loans as of September 30, 1995 was adequate based on the
risks identified at such date in the portfolios.
NON-PERFORMING ASSETS
Non-performing loans (non-accrual and renegotiated loans) were
$53,321,000 or .50% of total loans outstanding at September 30,
1995 compared with $42,689,000 or .42% at June 30, 1995 and
$33,559,000 or .35% at December 31, 1994. Foreclosed assets at
September 30, 1995 were $15,079,000 compared with $14,523,000 at
June 30, 1995 and $14,157,000 at year's end. The ratio of non-
performing assets to outstanding loans and foreclosed assets was
.64% at September 30, 1995 compared with .57% at June 30, 1995 and
.49% at December 31, 1994.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
EXHIBIT 10
NON-PERFORMING ASSETS
($ IN THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1995 1994 1994
-------- ------- --------
<S> <C> <C> <C>
NON-ACCRUAL LOANS
Commercial $18,817 $ 4,752 $ 5,798
Real estate-commercial 16,534 13,182 17,293
Real estate-construction 325 129 128
Real estate-residential 11,732 7,491 7,884
Consumer 3,367 2,133 2,356
------- ------- -------
Total Non-accrual Loans 50,775 27,687 33,459
RENEGOTIATED LOANS 2,546 5,872 7,012
------- ------- -------
TOTAL NON-PERFORMING LOANS $53,321 $33,559 $40,471
======= ======= =======
FORECLOSED ASSETS
Foreclosed real estate $12,306 $ 9,161 $27,960
In-substance foreclosures - 2,683 2,609
Other foreclosed assets 2,773 2,313 1,630
------- ------- -------
TOTAL FORECLOSED ASSETS $15,079 $14,157 $32,199
======= ======= =======
TOTAL NON-PERFORMING ASSETS $68,400 $47,716 $72,670
======= ======= =======
PAST-DUE LOANS
(90 DAYS OR MORE) $20,205 $21,814 $19,728
======= ======= =======
RATIOS
Non-performing loans to outstanding loans .50% .35% .43%
Non-performing assets to outstanding loans and
foreclosed assets .64 .49 .77
Non-performing assets to total assets .43 .32 .49
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Non-accrual loans increased by $10,710,000 from the June 30, 1995
level, primarily due to the downgrading of loans acquired in the
Central transaction and the designation of two commercial credits at
Mercantile Bank of St. Louis N.A. as non-accrual. All loans classified
as renegotiated were paying in accordance with their modified terms at
September 30, 1995. Loans past due 90 days and still accruing interest
were up slightly from the June 30, 1995 level and consisted largely of
credit card and residential mortgage loans.
Not included in non-performing loans was a $16,700,000 unsecured loan
to a St. Louis-based borrower that was a fully performing credit at
September 30, 1995. On November 3, 1995, the borrower filed for
bankruptcy protection and, as a consequence, the loan will be placed
on non-accrual status in the fourth quarter. An additional $5,500,000
secured industrial revenue bond is expected to continue performing but
is a potential non-accrual credit as well.
16
<PAGE> 17
CAPITAL RESOURCES
Mercantile maintains a strong capital base, which provides a solid
foundation for anticipated future asset growth and promotes
depositor and investor confidence. Capital management is a
continuous process at Mercantile, and ensures that capital is
provided for current needs and anticipated growth. Mercantile's
strong capital position has enabled it to profitably expand both
its asset and deposit bases, while maintaining capital ratios
stronger than those of other quality banking organizations and well
in excess of regulatory standards.
At September 30, 1995, shareholders' equity was $1.4 billion, an
increase of 15.9% from September 30, 1994. Net earnings retained,
the conversion of capital notes to equity, a favorable change in
the FAS 115 adjustment and stock issued in the Wedge, Southwest,
AmeriFirst and Plains Spirit transactions and under various
employee benefit plans accounted for the majority of the increase.
In conjunction with the TCB transaction, the Corporation issued
$12,153,000 of preferred stock to the preferred shareholder of TCB
with the same terms and conditions which existed prior to the
merger. Equity represented 8.86% of assets at September 30, 1995
compared with 8.31% a year ago. Significant capital ratios and
intangible assets are summarized in Exhibit 11, while Exhibit 3
details the equity capital ratios of the St. Louis Area, Kansas
City Area and Community Banks in aggregate. During the first nine
months of 1995, Mercantile repurchased 1,280,700 shares of its
common stock via a designated broker dealer at an average cost of
$39.49 per share.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
EXHIBIT 11
RISK-BASED CAPITAL
($ IN THOUSANDS)
<CAPTION>
SEPT. 30 DEC. 31 SEPT. 30
1995 1994 1994
-------- ------- --------
<S> <C> <C> <C>
Capital
Tier I $ 1,332,606 $ 1,173,137 $1,157,320
Total 1,694,888 1,525,335 1,507,431
Risk-adjusted assets 10,842,689 10,032,372 9,864,852
Tier I capital to risk-adjusted assets 12.29% 11.69% 11.73%
Total capital to risk-adjusted assets 15.63 15.20 15.28
Leverage 8.45 8.02 8.00
Double leverage 107.25 107.54 106.70
Long-term debt to total
capitalization 17.66 19.48 19.71
Intangible assets $89,283 $76,172 $79,217
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
On July 13, 1995, the Board of Directors declared a cash dividend of
$.33 per common share, which was paid October 2, 1995, representing a
32.35% payout of third-quarter 1995 earnings. Book value per common
share was $25.43 at September 30, 1995 compared with $23.26 a year
earlier, an increase of 9.3%. Public debt ratings of the Corporation
and Mercantile Bank of St. Louis N.A. are shown in Exhibit 12.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT 12
DEBT RATINGS
<CAPTION>
THOMSON STANDARD
MOODY'S FITCH BANKWATCH & POOR'S
------- ----- --------- --------
<S> <C> <C> <C> <C>
MERCANTILE BANCORPORATION INC.
Issuer Rating B
Commercial Paper P-2 TBW-1 A-2
7.625% Subordinated Notes, due 2002 Baa1 BBB + BBB
MERCANTILE BANK OF ST. LOUIS N.A.
Bank Notes A1/P-1 A
6.375% Subordinated Notes, due 2004 A3 A A- BBB +
9.000% Mortgage-backed Notes, due 1999 AAA
Certificates of Deposit TBW-1 A-/A-2
Letters of Credit TBW-1 A-/A-2
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED QUARTERLY STATEMENT OF INCOME
($ IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
1994 1995
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. 1ST QTR. 2ND QTR. 3RD QTR.
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $175,223 $182,359 $193,848 $206,141 $220,430 $223,505 $229,824
Investments in debt and equity securities 56,971 57,645 56,008 55,464 56,205 56,176 57,708
Short-term investments 3,912 2,058 2,246 3,021 3,154 3,167 4,235
-------- -------- -------- -------- -------- -------- --------
Total Interest Income 236,106 242,062 252,102 264,626 279,789 282,848 291,767
Tax-equivalent adjustment 3,288 3,402 3,345 3,361 3,594 3,420 3,334
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INTEREST INCOME 239,394 245,464 255,447 267,987 283,383 286,268 295,101
INTEREST EXPENSE
Deposits 78,157 79,032 81,382 86,536 96,226 105,917 114,617
Borrowed funds 12,634 14,521 19,213 27,874 30,820 30,984 31,533
-------- -------- -------- -------- -------- -------- --------
Total Interest Expense 90,791 93,553 100,595 114,410 127,046 136,901 146,150
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT NET INTEREST INCOME 148,603 151,911 154,852 153,577 156,337 149,367 148,951
PROVISION FOR POSSIBLE LOAN LOSSES 8,879 8,544 8,951 16,827 13,975 6,641 8,312
OTHER INCOME
Trust 15,877 16,166 14,517 14,209 15,398 16,306 16,548
Service charges 17,034 17,318 17,737 16,694 16,500 16,710 16,852
Credit card fees 5,858 5,851 6,378 6,808 6,576 4,232 3,361
Securitization revenue - - - - - 4,523 8,397
Mortgage banking 3,647 2,637 2,297 2,336 2,078 2,342 2,343
Investment banking and brokerage 2,399 2,316 1,882 1,704 1,416 1,970 2,196
Securities gains (losses) 1,418 409 341 9 (43) 2,062 1,653
Other 8,861 7,488 8,994 8,573 14,878 10,842 14,340
-------- -------- -------- -------- -------- -------- --------
Total Other Income 55,094 52,185 52,146 50,333 56,803 58,987 65,690
OTHER EXPENSE
Salaries and benefits 63,777 63,740 63,284 67,745 64,758 63,244 67,823
Net occupancy and equipment 17,526 17,047 17,264 17,947 17,129 17,522 18,896
Other 38,581 39,344 39,577 46,238 37,356 37,400 32,816
-------- -------- -------- -------- -------- -------- --------
Total Other Expense 119,884 120,131 120,125 131,930 119,243 118,166 119,535
-------- -------- -------- -------- -------- -------- --------
TAXABLE-EQUIVALENT INCOME BEFORE INCOME TAXES 74,934 75,421 77,922 55,153 79,922 83,547 86,794
INCOME TAXES
Income taxes 26,051 25,565 26,417 23,672 26,625 27,768 26,763
Tax-equivalent adjustment 3,288 3,402 3,345 3,361 3,594 3,420 3,334
-------- -------- -------- -------- -------- -------- --------
Adjusted Income Taxes 29,339 28,967 29,762 27,033 30,219 31,188 30,097
-------- -------- -------- -------- -------- -------- --------
NET INCOME $ 45,595 $ 46,454 $ 48,160 $ 28,120 $ 49,703 $ 52,359 $ 56,697
======== ======== ======== ======== ======== ======== ========
NET INCOME PER COMMON SHARE $.88 $.89 $.92 $.53 $.93 $.99 $1.02
SIGNIFICANT RATIOS
Return on assets 1.26% 1.29% 1.32% .76% 1.32% 1.37% 1.43%
Return on equity 15.81 15.73 15.87 9.09 15.71 16.19 16.14
</TABLE>
18
<PAGE> 19
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONDENSED QUARTERLY AVERAGE BALANCE SHEET
($ IN THOUSANDS)
<CAPTION>
1994
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
---------------- ----------------- ------------------- ------------------
VOLUME RATE<F*> VOLUME RATE<F*> VOLUME RATE<F*> VOLUME RATE<F*>
------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,229,957 6.52% $ 2,316,374 7.04% $ 2,320,860 7.58% $ 2,347,324 8.12%
Real estate-commercial 1,519,927 7.73 1,540,688 8.13 1,549,421 8.33 1,570,255 8.79
Real estate-construction 215,113 6.91 238,358 7.42 265,607 7.97 292,584 8.27
Real estate-residential 2,755,696 7.46 2,759,102 7.47 2,904,565 7.62 3,031,618 7.76
Consumer 1,181,026 8.14 1,244,165 8.24 1,363,704 8.21 1,452,334 8.17
Credit card 745,830 16.64 730,259 16.10 743,515 15.98 785,721 15.37
Foreign 289 5.54 184 6.52 336 7.14 387 7.24
----------- ----------- ----------- -----------
Total Loans and Leases 8,647,838 8.14 8,829,130 8.29 9,148,008 8.51 9,480,223 8.73
Investments in debt and equity securities
Trading 10,516 5.44 6,028 6.57 12,736 4.24 14,443 5.10
Taxable 3,738,603 5.53 3,780,115 5.50 3,659,536 5.52 3,528,652 5.66
Tax-exempt 383,942 8.12 392,067 8.40 391,719 8.22 385,729 8.20
----------- ----------- ----------- -----------
Total Investments in Debt and Equity
Securities 4,133,061 5.77 4,178,210 5.78 4,063,991 5.77 3,928,824 5.91
Short-term investments 458,448 3.41 201,186 4.09 187,389 4.79 224,792 5.38
----------- ----------- ----------- -----------
Total Earning Assets 13,239,347 7.23 13,208,526 7.43 13,399,388 7.61 13,633,839 7.86
Non-earning Assets 1,215,388 1,205,237 1,155,175 1,076,454
----------- ----------- ----------- -----------
Total Assets $14,454,735 $14,413,763 $14,554,563 $14,710,293
=========== =========== =========== ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 2,212,411 $ 2,097,064 $ 2,066,474 $ 1,815,288
Interest bearing demand 1,991,760 1.82 1,986,560 1.84 1,948,431 1.86 1,915,387 1.98
Money market accounts 1,795,869 2.79 1,798,281 2.97 1,777,751 3.13 1,679,736 3.32
Savings 1,015,114 2.33 1,036,466 2.33 1,017,426 2.36 971,211 2.41
Consumer time certificates under $100,000 4,096,735 4.26 4,030,312 4.24 3,965,616 4.36 3,988,880 4.62
Other time 39,538 2.81 39,274 3.35 39,922 3.29 40,553 3.58
----------- ----------- ----------- -----------
Total Core Deposits 11,151,427 3.20 10,987,957 3.22 10,815,620 3.32 10,411,055 3.52
Time certificates $100,000 and over 695,565 3.61 687,141 3.85 667,744 4.31 696,118 4.83
Foreign 41,399 4.52 80,465 4.14 136,111 4.81 176,189 5.59
----------- ----------- ----------- -----------
Total Purchased Deposits 736,964 3.66 767,606 3.88 803,855 4.40 872,307 4.98
----------- ----------- ----------- -----------
Total Deposits 11,888,391 3.23 11,755,563 3.27 11,619,475 3.41 11,283,362 3.66
Short-term borrowings 895,437 2.99 951,617 3.70 1,217,980 4.44 1,656,950 5.17
Bank notes - - - - - - 50,000 6.24
Long-term debt 313,250 7.58 305,812 7.47 301,650 7.56 299,546 7.58
----------- ----------- ----------- -----------
Total Acquired Funds 13,097,078 3.34 13,012,992 3.43 13,139,105 3.62 13,289,858 3.99
Other liabilities 203,948 219,325 201,898 183,386
SHAREHOLDERS' EQUITY 1,153,709 1,181,446 1,213,560 1,237,049
----------- ----------- ----------- -----------
Total Liabilities and Shareholders' Equity $14,454,735 $14,413,763 $14,554,563 $14,710,293
=========== =========== =========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 3.89% 4.00% 3.99% 3.87%
Net interest rate margin 4.49 4.60 4.62 4.51
<FN>
<F*>Taxable-equivalent basis.
</TABLE>
19
<PAGE> 20
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONDENSED QUARTERLY AVERAGE BALANCE SHEET (cont'd)
($ IN THOUSANDS)
<CAPTION>
1995
1ST QTR. 2ND QTR. 3RD QTR.
------------------ ------------------ ------------------
VOLUME RATE<F*> VOLUME RATE<F*> VOLUME RATE<F*>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,385,772 8.54% $ 2,546,320 8.71% $ 2,604,562 8.57%
Real estate-commercial 1,614,612 8.81 1,621,916 9.15 1,699,260 9.10
Real estate-construction 303,620 8.62 324,885 8.73 308,990 8.98
Real estate-residential 3,213,334 7.84 3,309,161 7.96 3,694,605 8.06
Consumer 1,492,632 8.11 1,486,180 8.49 1,524,379 8.89
Credit card 858,686 16.25 713,250 15.32 699,045 11.97
Foreign 322 8.70 190 8.42 - -
----------- ----------- -----------
Total Loans and Leases 9,868,978 8.97 10,001,902 8.97 10,530,841 8.76
Investments in debt and equity securities
Trading 12,375 5.27 6,907 6.25 4,203 5.42
Taxable 3,474,489 5.80 3,445,068 5.90 3,489,293 6.02
Tax-exempt 399,629 8.47 387,326 8.11 374,197 8.17
----------- ----------- -----------
Total Investments in Debt and Equity Securities 3,886,493 6.07 3,839,301 6.12 3,867,693 6.23
Short-term investments 220,163 5.73 217,256 5.83 277,225 6.11
----------- ----------- -----------
Total Earning Assets 13,975,634 8.11 14,058,459 8.15 14,675,759 8.04
Non-earning Assets 1,112,335 1,195,634 1,191,558
----------- ----------- -----------
Total Assets $15,087,969 $15,254,093 $15,867,317
=========== =========== ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 1,924,778 $ 2,089,244 $ 2,081,437
Interest bearing demand 1,914,165 2.10 1,824,665 2.25 1,799,737 2.29
Money market accounts 1,591,716 3.73 1,570,447 3.96 1,673,626 4.05
Savings 959,793 2.42 931,215 2.39 928,284 2.39
Consumer time certificates under $100,000 4,112,714 4.94 4,240,201 5.42 4,532,430 5.65
Other time 135,037 5.51 139,721 5.69 135,658 5.76
----------- ----------- -----------
Total Core Deposits 10,638,203 3.83 10,795,493 4.17 11,151,172 4.36
Time certificates $100,000 and over 728,465 5.33 802,981 5.85 851,370 5.91
Foreign 206,123 6.20 207,590 6.38 206,349 6.21
----------- ----------- -----------
Total Purchased Deposits 934,588 5.52 1,010,571 5.96 1,057,719 5.97
----------- ----------- -----------
Total Deposits 11,572,791 3.99 11,806,064 4.36 12,208,891 4.53
Short-term borrowings 1,654,108 5.70 1,441,738 5.92 1,508,109 5.86
Bank notes 106,667 6.26 250,000 6.54 250,000 6.43
Long-term debt 296,456 7.53 287,926 7.71 302,950 7.15
----------- ----------- -----------
Total Acquired Funds 13,630,022 4.34 13,785,728 4.68 14,269,950 4.80
Other liabilities 192,743 174,738 192,112
SHAREHOLDERS' EQUITY 1,265,204 1,293,627 1,405,255
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $15,087,969 $15,254,093 $15,867,317
=========== =========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 3.77% 3.47% 3.24%
Net interest rate margin 4.47 4.25 4.06
<FN>
<F*>Taxable-equivalent basis.
</TABLE>
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
CONDENSED QUARTERLY AVERAGE BALANCE SHEET (cont'd)
($ IN THOUSANDS)
<CAPTION>
1994 1995
NINE MONTHS NINE MONTHS
------------------ -------------------
VOLUME RATE<F*> VOLUME RATE<F*>
------ -------- ------ --------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Loans and leases, net of unearned income
Commercial $ 2,289,390 7.05% $ 2,513,024 8.61%
Real estate-commercial 1,536,790 8.06 1,645,574 9.02
Real estate-construction 239,878 7.46 312,522 8.78
Real estate-residential 2,806,996 7.52 3,407,460 7.95
Consumer 1,263,642 8.19 1,501,173 8.50
Credit card 739,860 16.24 756,408 14.65
Foreign 270 6.42 170 8.63
----------- -----------
Total Loans and Leases 8,876,826 8.31 10,136,331 8.89
Investments in debt and equity securities
Trading 9,768 5.15 7,798 5.61
Taxable 3,725,794 5.52 3,469,672 5.91
Tax-exempt 389,271 8.25 386,956 8.25
----------- -----------
Total Investments in Debt and Equity Securities 4,124,833 5.77 3,864,426 6.14
Short-term investments 281,346 3.89 238,423 5.90
----------- -----------
Total Earning Assets 13,283,005 7.43 14,239,180 8.10
Non-earning Assets 1,191,715 1,166,799
----------- -----------
Total Assets $14,474,720 $15,405,979
=========== ===========
LIABILITIES
Acquired Funds
Deposits
Non-interest bearing $ 2,124,782 $ 2,032,388
Interest bearing demand 1,975,424 1.84 1,845,771 2.21
Money market accounts 1,790,570 2.96 1,612,232 3.92
Savings 1,023,009 2.34 939,651 2.40
Consumer time certificates under $100,000 4,030,404 4.29 4,296,654 5.35
Other time 39,581 3.15 136,805 5.65
----------- -----------
Total Core Deposits 10,983,770 3.24 10,863,501 4.12
Time certificates $100,000 and over 683,381 3.92 794,723 5.71
Foreign 86,338 4.53 206,688 6.26
----------- -----------
Total Purchased Deposits 769,719 3.99 1,001,411 5.82
----------- -----------
Total Deposits 11,753,489 3.30 11,864,912 4.30
Short-term borrowings 1,022,865 3.78 1,534,118 5.82
Bank notes - - 202,747 6.43
Long-term debt 306,862 7.54 295,354 7.47
----------- -----------
Total Acquired Funds 13,083,216 3.47 13,897,131 4.61
Other liabilities 208,378 186,973
SHAREHOLDERS' EQUITY 1,183,126 1,321,875
----------- -----------
Total Liabilities and Shareholders' Equity $14,474,720 $15,405,979
=========== ===========
SIGNIFICANT RATIOS
Net interest rate spread 3.96% 3.49%
Net interest rate margin 4.57 4.26
<FN>
<F*>Taxable-equivalent basis.
</TABLE>
20
<PAGE> 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10. Agreement and Plan of Reorganization dated as of August 4,
1995 by and between Registrant and Hawkeye Bancorporation,
("Hawkeye") filed as Exhibit 2.1 to Registrant's Registration
Statement No. 33-63609, is incorporated herein by reference.
27. Financial Data Schedule
(b) Reports on Form 8-K:
Registrant filed one (1) Current Report on Form 8-K during the
quarter ended September 30, 1995. In that report dated and filed
August 17, 1995, under Item 5, Registrant disclosed that on
August 4, 1995 it had entered into, and briefly described certain
of the terms of, an Agreement and Plan of Reorganization (the
"Merger Agreement") with Hawkeye. Pursuant to that Merger Agreement,
Hawkeye is to be merged with and into a wholly owned subsidiary of
Registrant, with the shareholders of Hawkeye to receive 0.585 of a
share of Registrant common stock, par value $5.00 per share, for each
share of Hawkeye common stock, no par value. An aggregate of
approximately 7,874,903 shares of Registrant's common stock will be
issued to Hawkeye shareholders in the transaction. The Current Report
also briefly described the terms of a Stock Option Agreement between
Registrant and Hawkeye and voting agreements between Registrant
and certain officers and directors of Hawkeye entered into
simultaneously with the execution of the Merger Agreement.
21
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MERCANTILE BANCORPORATION INC.
(Registrant)
Date November 13, 1995 /s/ JOHN Q. ARNOLD
--------------------- ---------------------------------------
John Q. Arnold
Chief Financial Officer
22
<PAGE> 23
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ----------- --------
<C> <S> <C>
10 Agreement and Plan of Reorganization dated as of August 4, 1995 by and Incorporated herein
between Registrant and Hawkeye Bancorporation, filed as Exhibit 2.1 by reference
to Registrant's Registration Statement No. 33-63609.
27 Financial Data Schedule Included herein
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 822,849
<INT-BEARING-DEPOSITS> 97,473
<FED-FUNDS-SOLD> 179,778
<TRADING-ASSETS> 4,696
<INVESTMENTS-HELD-FOR-SALE> 768,422
<INVESTMENTS-CARRYING> 3,074,207
<INVESTMENTS-MARKET> 3,094,938
<LOANS> 10,648,008
<ALLOWANCE> 187,872
<TOTAL-ASSETS> 16,018,653
<DEPOSITS> 11,835,284
<SHORT-TERM> 2,006,298
<LIABILITIES-OTHER> 203,624
<LONG-TERM> 304,280
0
12,153
<COMMON> 253,946
<OTHER-SE> 1,153,068
<TOTAL-LIABILITIES-AND-EQUITY> 16,018,653
<INTEREST-LOAN> 673,759
<INTEREST-INVEST> 170,089
<INTEREST-OTHER> 10,556
<INTEREST-TOTAL> 854,404
<INTEREST-DEPOSIT> 316,760
<INTEREST-EXPENSE> 410,097
<INTEREST-INCOME-NET> 444,307
<LOAN-LOSSES> 28,928
<SECURITIES-GAINS> 3,672
<EXPENSE-OTHER> 356,944
<INCOME-PRETAX> 239,915
<INCOME-PRE-EXTRAORDINARY> 158,759
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,759
<EPS-PRIMARY> 2.95
<EPS-DILUTED> 2.95
<YIELD-ACTUAL> 4.26
<LOANS-NON> 50,775
<LOANS-PAST> 20,205
<LOANS-TROUBLED> 2,546
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 194,515
<CHARGE-OFFS> 49,515
<RECOVERIES> 12,195
<ALLOWANCE-CLOSE> 187,872
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0<F1>
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Information only reported at fiscal year-end date.
</TABLE>
