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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 25, 1997
MERCANTILE BANCORPORATION INC.
(Exact name of registrant as specified in its charter)
MISSOURI 1-11792 43-0951744
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
organization) Number)
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
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ITEM 5. OTHER EVENTS
Effective July 1, 1997, Mercantile Bancorporation Inc. ("MBI" or the
"Corporation") acquired Roosevelt Financial Group, Inc. ("Roosevelt") in a
transaction accounted for as a purchase.
The following unaudited pro forma combined consolidated balance sheet
gives effect to the acquisition of Roosevelt as if the acquisition was
consummated on June 30, 1997. The following pro forma combined consolidated
income statements for the six months ended June 30, 1997 and for the year ended
December 31, 1996 set forth the results of operations of the Corporation
combined with the results of operations of Roosevelt as if the acquisition of
Roosevelt had occurred as of the first day of each period presented.
The Unaudited Pro Forma Combined Consolidated Financial Statements
should be read in conjunction with the accompanying Notes to the Pro Forma
Combined Consolidated Financial Statements and with the historical financial
statements of the Corporation and Roosevelt, which were filed in the
Corporation's Current Reports on Form 8-K dated May 13, 1997 and July 1, 1997,
respectively. These Unaudited Pro Forma Combined Consolidated Financial
Statements may not be indicative of the results of operations that actually
would have occurred if the acquisition of Roosevelt had been consummated on the
dates assumed above or of the results of operations that may be achieved in the
future.
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<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(THOUSANDS)
(UNAUDITED)
<CAPTION>
Pro Forma
Roosevelt Combined
MBI<F1> Roosevelt Adjustments<F2> Consolidated
----------- ---------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,053,338 $ 100,169 $ 374,477)<F3> $ 733,008
12,478 <F4>
(2,700)<F3>
(55,800)<F6><F10>
Due from banks-interest bearing 180,445 12,460 192,905
Federal funds sold and repurchase
agreements 420,988 -- 420,988
Investments in debt and equity securities
Trading 73,429 -- 73,429
Available-for-sale 4,336,067 2,670,293 (14,500)<F6><F10> 6,991,860
Held to maturity 303,214 -- 303,214
----------- ---------- --------- -----------
Total 4,712,710 2,670,293 (14,500) 7,368,503
Loans and leases 15,421,311 4,240,478 19,661,789
Reserve for possible loan losses (234,684) (20,139) (13,800)<F6><F10> (268,623)
----------- ---------- --------- -----------
Net loans and leases 15,186,627 4,220,339 (13,800) 19,393,166
Goodwill 166,786 6,175 607,253 <F3> 774,039
(6,175)<F4>
Other assets 858,715 242,549 411,027 <F3> 1,068,172
(33,092)<F4>
(411,027)<F5>
----------- ---------- --------- -----------
Total Assets $22,579,609 $7,251,985 $ 119,187 $29,950,781
=========== ========== ========= ===========
LIABILITIES
Deposits
Non-interest bearing $ 3,105,751 $ 217,066 $ $ 3,322,817
Interest bearing 13,577,786 5,100,448 18,678,234
Foreign 270,908 -- 270,908
----------- ---------- --------- -----------
Total Deposits 16,954,445 5,317,514 -- 22,271,959
Short-term borrowings 2,449,526 1,210,851 3,660,377
Bank notes 175,000 -- 175,000
Long-term debt 796,049 121,000 917,049
Company-obligated mandatorily
redeemable preferred securities
of Mercantile Capital Trust I 150,000 150,000
Other liabilities 294,337 160,739 4,065 <F4> 432,741
(26,400)<F6><F10>
----------- ---------- --------- -----------
Total Liabilities 20,819,357 6,810,104 (22,335) 27,607,126
SHAREHOLDERS' EQUITY
Common stock 1,179 469 123 <F3> 1,302
(469)<F5>
Capital surplus 582,567 265,240 374,343 <F3> 956,910
138,459 <F4>
(403,699)<F5>
Retained earnings 1,436,641 176,172 6,859 <F3> 1,385,800
(169,313)<F4>
(6,859)<F5>
(57,700)<F6><F10>
Treasury stock (260,135) -- 259,778 <F3> (357)
----------- ---------- --------- -----------
Total Shareholders' Equity 1,760,252 441,881 141,522 2,343,655
----------- ---------- --------- -----------
Total Liabilities and
Shareholders' Equity $22,579,609 $7,251,985 $ 119,187 $29,950,781
=========== ========== ========= ===========
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
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<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Pro Forma
Roosevelt Combined
MBI<F1> Roosevelt Adjustments<F2> Consolidated
------------ --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest Income $ 809,625 $272,169 $ $ 1,081,794
Interest Expense 382,101 178,306 858 <F8> 577,477
16,212 <F9>
------------ -------- -------- ------------
Net Interest Income 427,524 93,863 (17,070) 504,317
Provision for Possible Loan Losses 46,138 3,474 -- 49,612
------------ -------- -------- ------------
Net Interest Income after Provision
for Possible Loan Losses 381,386 90,389 (17,070) 454,705
Other Income
Trust 46,823 -- 46,823
Service charges 45,389 13,018 58,407
Credit card fees 10,772 -- 10,772
Net loss from financial instruments -- (35,630) (35,630)
Securities gains 2,867 -- 2,867
Other 70,176 10,038 80,214
------------ -------- -------- ------------
Total Other Income 176,027 (12,574) -- 163,453
Other Expense
Salaries and employee benefits 195,974 23,717 219,691
Net occupancy and equipment 53,967 9,291 63,258
Other 136,129 36,555 20,242 <F7> 192,926
------------ -------- -------- ------------
Total Other Expense 386,070 69,563 20,242 475,875
------------ -------- -------- ------------
Income Before Income Taxes 171,343 8,252 (37,312) 142,283
Income Taxes 64,169 7,630 (6,145)<F2> 65,654
------------ -------- -------- ------------
Net Income $ 107,174 $ 622 $(31,167) $ 76,629
============ ======== ======== ============
Per Share Data
Average Common Shares Outstanding 113,450,600 <F11> 128,699,484 <F11>
Net Income $0.94 $0.60
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
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<TABLE>
MERCANTILE BANCORPORATION INC.
PRO FORMA COMBINED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Pro Forma
Roosevelt Combined
MBI<F1> Roosevelt Adjustments<F2> Consolidated
------------ --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest Income $ 1,552,863 $640,311 $ $ 2,193,174
Interest Expense 724,910 462,724 10,290 <F8> 1,233,299
35,375 <F9>
------------ -------- -------- ------------
Net Interest Income 827,953 177,587 (45,665) 959,875
Provision for Possible Loan Losses 73,015 1,262 74,277
------------ -------- -------- ------------
Net Interest Income after Provision
for Possible Loan Losses 754,938 176,325 (45,665) 885,598
Other Income
Trust 86,616 -- 86,616
Service charges 88,916 17,157 106,073
Credit card fees 27,962 -- 27,962
Net loss from financial instruments -- (76,634) (76,634)
Securities losses (83) -- (83)
Other 134,069 23,510 157,579
------------ -------- -------- ------------
Total Other Income 337,480 (35,967) -- 301,513
Other Expense
Salaries and employee benefits 365,729 42,304 408,033
Net occupancy and equipment 103,715 18,081 121,796
Other 249,224 63,024 40,484 <F7> 352,732
------------ -------- -------- ------------
Total Other Expense 718,668 123,409 40,484 882,561
------------ -------- -------- ------------
Income Before Income Taxes 373,750 16,949 (86,149) 304,550
Income Taxes 128,535 5,835 (16,439)<F2> 117,931
------------ -------- -------- ------------
Income Before Extraordinary Items $ 245,215 $ 11,114 $(69,710) $ 186,619
============ ======== ======== ============
Per Share Data
Average Common Shares
Outstanding 115,938,311 <F11> 134,887,195 <F11>
Income Before
Extraordinary Items $2.11 $1.38
See Notes to Pro Forma Combined Consolidated Financial Statements.
</TABLE>
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MERCANTILE BANCORPORATION INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
[FN]
<F1> Represents the Corporation's restated historical consolidated financial
statements reflecting the acquisition of Hawkeye Bancorporation,
effective January 2, 1996, and Mark Twain Bancshares, Inc. ("Mark
Twain"), effective April 25, 1997. Such acquisitions were accounted
for as poolings-of-interests. The acquisition of First Sterling
Bancorp, Inc. ("Sterling") by the Corporation and the acquisition of
Northland Bancshares, Inc. by Mark Twain were also accounted for as
poolings-of-interests; however, due to the immateriality of the
financial condition and results of operations of Sterling and
Northland Bancshares, Inc. to that of the Corporation and Mark Twain,
the historical financial statements were not restated. Therefore,
Sterling and Northland Bancshares, Inc. are included in these pro
forma financial statements only from their respective acquisition
dates forward. Each of Security Bank of Conway, F.S.B., Metro
Savings Bank, F.S.B., Peoples State Bank, First Financial Corporation
of America, TODAY'S Bancorp, Inc., Regional Bancshares, Inc. and
First City Bancshares, Incorporated, each of which was accounted for
as a purchase, is included in these pro forma financial statements
only from its respective acquisition date forward. The full impact
of these acquisitions is immaterial to the Unaudited Pro Forma
Combined Consolidated Financial Statements.
All per share data reflects the 3-for-2 stock split declared by the
Corporation on July 16, 1997, which is payable on October 1, 1997.
<F2> The acquisition of Roosevelt will be accounted for as a purchase
transaction. Included herein is the amortization of goodwill over a
15-year period (see footnote 7 below) and interest expense related to
the issuance of subordinated debt securities and notes as described
in footnotes 8 and 9 below. The impact of interest income lost on
the cash consideration and stock buybacks is immaterial to the Pro
Forma Combined Consolidated Financial Statements through June 30,
1997. Goodwill is considered nondeductible. The income tax benefit
associated with taxable income statement adjustments is computed at
an effective tax rate of 36%.
<F3> Purchase entry of Roosevelt, which was calculated as follows:
<TABLE>
<S> <C> <C>
Total share consideration, including 6,668,451 treasury
shares purchased at an average cost of $38.956 per share 18,948,884<F*>
Closing price of MBI Common Stock on December 20, 1996,
the business date preceding the public announcement of the
merger with Roosevelt $ 33.833
------------
$ 641,103,000
Cash consideration 374,477,000
--------------
Total consideration of acquisition 1,015,580,000(A)
Shareholders' equity of Roosevelt at
June 30, 1997 441,881,000
July 1, 1997 impact of transaction-related adjustments,
including the sale of Missouri State Bank (see footnote 4 below) (30,854,000)
------------
Adjusted Roosevelt equity 411,027,000(B)
Investment banking fees paid by MBI after June 30, 1997 2,700,000(C)
--------------
Goodwill (A) minus (B) (see footnote 7 below) plus (C) $ 607,253,000
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<F*> Of the 10,500,000 shares authorized to be repurchased in conjunction with
the Roosevelt acquisition, only 6,668,451 shares were repurchased. The
Corporation currently does not plan to repurchase additional shares
relative to the Roosevelt acquisition prior to the expiration on September
30, 1997 of the authorization by the Board of Directors of the Corporation
of the repurchase.
</TABLE>
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Roosevelt completed three acquisitions in the fourth quarter of 1996.
Roosevelt acquired Community Charter Corporation, a commercial bank
holding company, Mutual Bancompany, Inc., parent company of Mutual
Savings Bank, and Sentinel Financial Corporation, a thrift holding
company. The impact of these acquisitions is immaterial to the
Unaudited Pro Forma Combined Consolidated Financial Statements.
<F4> Impact of transaction-related adjustment entries, including the sale
of Missouri State Bank. Individual line items on the pro forma
combined consolidated balance sheet are not adjusted for the sale of
Missouri State Bank. The net impact is reflected in other assets and
shareholders' equity; the impact on individual balance sheet line
items is not material. These entries reduced Roosevelt's
shareholders' equity by $30,854,000 from the June 30, 1997 level;
such reduction increased MBI's goodwill related to the Roosevelt
purchase acquisition.
<F5> Elimination of the Corporation's investment in Roosevelt. This entry
reflects the impact of purchase accounting adjustments and the sale
of Missouri State Bank (see footnote 4 above).
<F6> Balance sheet impact of conforming adjustments related to the merger
with Roosevelt (see footnote 10 below). These adjustments, excluding
the reserve for possible loan losses and investment securities
entries, will be initially recorded as a credit to accrued
liabilities. Because they will be paid out in cash within an
estimated 18-month period following the merger with Roosevelt, the
Unaudited Pro Forma Combined Consolidated Financial Statements
reflect the cash outlay. An income tax benefit at an effective tax
rate of 31% is included in this adjustment.
<F7> The pro forma excess of cost over fair value of net assets acquired was
$607,253,000 for Roosevelt as of June 30, 1997. The annual amount of
goodwill amortization, given a 15-year amortization period, is
$40,484,000.
<F8> On January 29, 1997, the Corporation issued $150,000,000 of
subordinated debt securities, which were issued at a floating rate
equal to the three-month LIBOR plus 85 basis points. The rate
assumed in calculating the expense for the Unaudited Pro Forma
Combined Consolidated Financial Statements is 6.86%.
<F9> On June 11, 1997, the Corporation issued $200,000,000 of subordinated
notes due 2007 at 7.3%, $150,000,000 of senior notes due 2001 at 6.8%
and $150,000,000 of senior notes due 2004 at 7.05%.
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<F10> Upon consummation of the acquisition of Roosevelt, the Corporation
recorded certain transaction-related entries to conform accounting
and credit policies to those of the Corporation. The pre-tax
adjustments are approximated as follows:
<TABLE>
<CAPTION>
$(000's)
--------
<S> <C>
-- Adjustment of lives over which investment
securities are amortized to conform with MBI's
policies $14,500
-- Adjustment to reserve for possible loan losses
to conform to MBI's reserving policies
13,800
-- Write-downs to fair value of branches and
equipment to be disposed of 13,500
-- Transition and duplicative costs related to
system standardization and signage 12,000
-- Accruals for severance and change of
control payments 8,600
-- Contract cancellation penalties 8,500
-- Loss incurred on the sale of interest rate floors 8,500
-- Environmental exposure and other 4,700
-------
Total $84,100
=======
</TABLE>
<F11> The computation of year-to-date average shares as restated for the
pooling-of-interests with Mark Twain and the 3-for-2 stock split
payable on October 1, 1997 is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
------------------ ------------------------
<S> <C> <C>
Shares of MBI Common Stock issued
and outstanding 115,938,311 113,450,600
Shares of MBI Common Stock to be issued
in the Roosevelt acquisition 18,948,884 18,948,884
Less effect of treasury share purchases from
January 1, 1997 through June 30, 1997 -- (3,700,000)
----------- -----------
Pro Forma Combined 134,887,195 128,699,484
=========== ===========
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 24, 1997
MERCANTILE BANCORPORATION INC.
By: /s/ John Q. Arnold
----------------------------------------------
John Q. Arnold
Senior Executive Vice President and
Chief Financial Officer
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