<PAGE>
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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
Date of Report (Date of earliest event reported): OCTOBER 7, 1998
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) 418-2525
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ITEM 5. OTHER EVENTS
Effective July 1, 1998, Mercantile Bancorporation Inc. ("Corporation") acquired
Firstbank of Illinois Co. and CBT Corporation in transactions accounted for as
poolings-of-interests. Audited Supplemental Consolidated Financial Statements
restating the Corporation's historical consolidated financial statements as of
and for the years ended December 31, 1997, 1996 and 1995 to reflect both
transactions are included herein. In addition, Supplemental Interim Unaudited
Consolidated Financial Statements restating the Corporation's historical
consolidated financial statements as of and for the three-month and six-month
periods ended March 31 and June 30, 1998 and 1997 to reflect both transactions
are included herein.
<PAGE>
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[ MERCANTILE LOGO ]
MERCANTILE
BANCORPORATION INC.
SUPPLEMENTAL
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
<PAGE>
<PAGE>
MERCANTILE BANCORPORATION INC.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
Effective July 1, 1998, Mercantile Bancorporation Inc.
("Corporation") acquired Firstbank of Illinois Co. and CBT
Corporation in transactions accounted for as
poolings-of-interests. The following Supplemental
Consolidated Financial Statements restate the Corporation's
historical consolidated financial statements as of and for
the years ended December 31, 1997, 1996 and 1995 to reflect
these transactions.
1
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<PAGE> 3
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME
(Thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $1,651,816 $1,404,809 $1,371,083
Investments in debt and equity securities
Trading 7,077 3,630 3,457
Taxable 406,663 315,120 296,425
Tax-exempt 25,797 28,255 31,202
---------- ---------- ----------
Total Investments in Debt and Equity Securities 439,537 347,005 331,084
Due from banks--interest bearing 10,379 4,128 2,508
Federal funds sold and repurchase agreements 16,946 15,178 21,644
---------- ---------- ----------
Total Interest Income 2,118,678 1,771,120 1,726,319
INTEREST EXPENSE
Interest bearing deposits 816,771 681,637 651,886
Foreign deposits 26,178 10,501 13,088
Short-term borrowings 159,013 89,676 101,958
Bank notes 10,537 15,333 13,674
Long-term debt and mandatorily redeemable preferred securities 58,441 25,010 27,934
---------- ---------- ----------
Total Interest Expense 1,070,940 822,157 808,540
---------- ---------- ----------
NET INTEREST INCOME 1,047,738 948,963 917,779
PROVISION FOR POSSIBLE LOAN LOSSES<F*> 86,355 78,766 44,952
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 961,383 870,197 872,827
OTHER INCOME
Trust 103,928 93,704 84,066
Service charges 109,058 98,908 91,951
Investment banking and brokerage 38,181 35,351 30,543
Credit card fees 21,169 28,415 20,634
Securitization revenue 18,404 16,008 23,005
Mortgage banking 26,625 13,518 13,624
Securities gains<F*> 7,649 292 4,634
Miscellaneous 89,179 81,814 71,532
---------- ---------- ----------
Total Other Income 414,193 368,010 339,989
OTHER EXPENSE
Salaries 381,942 335,803 320,687
Employee benefits 85,048 77,437 72,149
Net occupancy 61,697 55,489 53,044
Equipment 70,272 60,605 54,745
Intangible asset amortization 40,170 13,237 11,630
Loss on the sale of credit card loans<F*> 50,000 -- --
Miscellaneous<F*> 297,249 262,616 213,660
---------- ---------- ----------
Total Other Expense 986,378 805,187 725,915
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 389,198 433,020 486,901
INCOME TAXES<F*> 142,376 148,567 168,746
---------- ---------- ----------
NET INCOME $ 246,822 $ 284,453 $ 318,155
========== ========== ==========
PER SHARE DATA
Basic earnings per share $1.76 $2.12 $2.37
Diluted earnings per share 1.73 2.09 2.33
Dividends declared 1.148 1.092 .88
<FN>
<F*>Includes the following nonrecurring amounts:
<S> <C> <C> <C>
Provision for possible loan losses $ 20,340 $ 13,666 $--
Other income (securities losses) -- (3,114) --
Loss on the sale of credit card loans 50,000 -- --
Miscellaneous expense 121,393 63,456 --
Income tax benefit (59,356) (23,697) --
--------- -------- ---
Impact on Net Income $(132,377) $(56,539) $--
========= ======== ===
</TABLE>
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
2
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MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,330,512 $ 1,448,637 $ 1,385,695
Due from banks--interest bearing 251,909 96,714 51,980
Federal funds sold and repurchase agreements 303,859 310,963 292,933
Investments in debt and equity securities
Trading 70,536 31,361 67,283
Available-for-sale (Amortized cost of $8,023,157, $4,731,005 and
$5,182,540, respectively) 8,059,066 4,741,677 5,223,660
Held-to-maturity (Estimated fair value of $341,954, $661,632 and
$340,130, respectively) 335,279 656,721 335,141
----------- ----------- -----------
Total Investments in Debt and Equity Securities 8,464,881 5,429,759 5,626,084
Loans held-for-sale 96,955 75,377 105,893
Loans and leases, net of unearned income 21,265,000 16,861,877 15,478,392
----------- ----------- -----------
Total Loans and Leases 21,361,955 16,937,254 15,584,285
Reserve for possible loan losses (284,165) (257,718) (261,339)
----------- ----------- -----------
Net Loans and Leases 21,077,790 16,679,536 15,322,946
Bank premises and equipment 531,650 428,972 390,163
Intangible assets 839,285 202,071 133,845
Other assets 532,304 399,083 447,788
----------- ----------- -----------
Total Assets $33,332,190 $24,995,735 $23,651,434
=========== =========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 3,956,138 $ 3,389,776 $ 2,925,272
Interest bearing 20,267,878 16,143,182 15,329,213
Foreign 585,439 251,887 209,170
----------- ----------- -----------
Total Deposits 24,809,455 19,784,845 18,463,655
Federal funds purchased and repurchase agreements 2,127,443 1,861,994 1,790,937
Other short-term borrowings 1,551,097 270,680 262,972
Bank notes 175,000 175,000 250,000
Long-term Federal Home Loan Bank advances 578,484 37,085 63,379
Other long-term debt 789,687 290,590 307,230
Company-obligated mandatorily redeemable preferred securities of Mercantile
Capital Trust I 150,000 -- --
Other liabilities 388,722 312,298 302,416
----------- ----------- -----------
Total Liabilities 30,569,888 22,732,492 21,440,589
Commitments and contingent liabilities -- -- --
<CAPTION>
SHAREHOLDERS' EQUITY 1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Preferred stock--no par value
Shares authorized 5,000 5,000 5,000
Shares issued and outstanding -- -- 15 -- -- 12,153
Common stock--$.01 par value
at December 31, 1997, and $5.00
par value at December 31, 1996
and 1995
Shares authorized 200,000 200,000 200,000
Shares issued 148,874 136,766 136,916 1,489 683,832 684,581
Capital surplus 1,016,844 16,091 72,528
Retained earnings 1,724,752 1,638,610 1,476,841
Valuation on available-for-sale securities 25,222 8,911 25,299
Treasury stock, at cost 162 2,591 2,070 (6,005) (84,201) (60,557)
----------- ----------- -----------
Total Shareholders' Equity 2,762,302 2,263,243 2,210,845
----------- ----------- -----------
Total Liabilities and $33,332,190 $24,995,735 $23,651,434
Shareholders' Equity =========== =========== ===========
</TABLE>
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
3
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MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
($ in Thousands)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- TOTAL
OUTSTANDING PREFERRED CAPITAL RETAINED TREASURY SHAREHOLDERS'
SHARES DOLLARS STOCK SURPLUS EARNINGS<F*> STOCK EQUITY
----------- ------- --------- ------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 130,669,191 $654,048 $ 12,153 $ 31,732 $1,202,408 $ (2,954) $1,897,387
Net income 318,155 318,155
Common dividends declared:
Mercantile Bancorporation Inc., $.88
per share (68,542) (68,542)
Pooled companies prior to acquisition (44,645) (44,645)
Preferred dividends declared (1,020) (1,020)
Issuance of common stock in acquisitions
of:
Southwest Bancshares, Inc. 1,012,463 5,062 (1,062) 9,797 13,797
AmeriFirst Bancorporation, Inc. 992,034 4,960 3,714 3,781 12,455
Plains Spirit Financial Corporation 1,951,770 3,959 21,610 27,701 53,270
Wedge Bank 1,454,931 7,275 (776) 7,314 13,813
Issuance of common stock for:
Employee incentive plans 997,123 4,951 9,281 170 14,402
Convertible notes 664,357 3,322 7,134 10,456
Net fair value adjustment on
available-for-sale securities 74,892 74,892
Purchase of treasury stock (3,096,900) (85,474) (85,474)
Pre-merger transactions of pooled
companies and other 200,840 1,004 895 1,899
----------- -------- -------- ---------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1995 134,845,809 684,581 12,153 72,528 1,502,140 (60,557) 2,210,845
Net income 284,453 284,453
Common dividends declared:
Mercantile Bancorporation Inc., $1.092
per share (101,499) (101,499)
Pooled companies prior to acquisition (33,938) (33,938)
Preferred dividends declared (408) (408)
Redemption of preferred stock (12,153) (531) (12,684)
Issuance of common stock in acquisitions
of:
Today's Bancorp, Inc. 1,690,587 (2,195) 52,321 50,126
First Financial Corporation of America 388,113 (1,226) 12,954 11,728
Peoples State Bank 488,756 849 14,791 15,640
Metro Savings Bank, F.S.B. 296,853 57 14 8,983 9,054
Security Bank of Conway, F.S.B. 482,946 75 14,614 14,689
First Sterling Bancorp, Inc. 782,126 3,911 572 13,772 18,255
Issuance of common stock for:
Employee incentive plans 411,775 1,638 (4,318) 2,397 (283)
Convertible notes 438,002 2,190 2,681 4,871
Net fair value adjustment on
available-for-sale securities (16,841) (16,841)
Purchase of treasury stock (5,890,426) (186,811) (186,811)
Reissuance and retirement of treasury
stock (9,688) (47,478) 57,166 --
Pre-merger transactions of pooled
companies and other 240,056 1,200 (5,454) 359 (59) (3,954)
----------- -------- -------- ---------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1996 134,174,597 683,832 -- 16,091 1,647,521 (84,201) 2,263,243
NET INCOME 246,822 246,822
COMMON DIVIDENDS DECLARED:
MERCANTILE BANCORPORATION INC., $1.148
PER SHARE (132,535) (132,535)
POOLED COMPANIES PRIOR TO ACQUISITION (28,134) (28,134)
ISSUANCE OF COMMON STOCK IN ACQUISITIONS
OF:
ROOSEVELT FINANCIAL GROUP, INC. 18,948,884 123 353,128 6,872 280,981 641,104
REGIONAL BANCSHARES, INC. 900,625 (474) 361 28,813 28,700
CHANGE IN PAR VALUE OF COMMON STOCK FROM
$5.00 PER SHARE
TO $.01 PER SHARE (676,575) 676,575 --
ISSUANCE OF COMMON STOCK FOR:
EMPLOYEE INCENTIVE PLANS 899,716 322 5,846 5,512 11,680
CONVERTIBLE NOTES 79,335 80 802 882
NET FAIR VALUE ADJUSTMENT ON
AVAILABLE-FOR-SALE SECURITIES 8,805 8,805
PURCHASE OF TREASURY STOCK (6,778,324) (287,288) (287,288)
REISSUANCE AND RETIREMENT OF TREASURY
STOCK (7,396) (42,950) 50,346 --
PRE-MERGER TRANSACTIONS OF POOLED
COMPANIES AND OTHER 487,474 1,103 7,826 262 (168) 9,023
----------- --------- --------- ---------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1997 148,712,307 $ 1,489 $ -- $1,016,844 $1,749,974 $ (6,005) $2,762,302
=========== ========= ========= ========== ========== ========= ==========
<FN>
<F*>Includes valuation on available-for-sale securities.
</TABLE>
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
4
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MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS
($ in Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 246,822 $ 284,453 $ 318,155
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for possible loan losses 86,355 78,766 44,952
Depreciation and amortization 62,637 52,566 49,887
Provision for deferred income tax credits (9,995) (23,318) (13,937)
Net change in loans held-for-sale (21,578) 30,516 (78,469)
Net change in trading securities (53,020) 32,745 (28,619)
Net change in accrued interest receivable (2,780) 11,366 (11,701)
Net change in accrued interest payable 36,254 (12,348) 33,395
Other, net 55,194 85,651 23,019
----------- ----------- -----------
Net Cash Provided by Operating Activities 399,889 540,397 336,682
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading
securities
Purchases (4,509,883) (2,455,696) (1,640,700)
Proceeds from maturities 3,608,721 2,366,128 1,589,272
Proceeds from sales of available-for-sale securities 802,007 506,636 386,969
Net change in loans and leases (642,617) (898,355) (1,100,947)
Purchases of loans and leases (442,154) (141,600) (128,361)
Proceeds from sales of loans and leases 696,454 255,043 759,626
Purchases of premises and equipment (122,785) (76,386) (70,228)
Proceeds from sales of premises and equipment 19,679 4,997 8,432
Proceeds from sales of foreclosed property 45,905 32,353 27,265
Cash and cash equivalents from acquisitions, net of cash paid
(received) (231,537) 57,152 45,935
Sale of banking offices, net of cash paid (193,058) (12,154) 1,191
Other, net 19,118 18,391 9,249
----------- ----------- -----------
Net Cash Used by Investing Activities (950,150) (343,491) (112,297)
FINANCING ACTIVITIES
Net change in consumer certificates under $100,000 (726,907) (406,202) 370,012
Net change in time certificates $100,000 and over (68,418) 74,010 226,978
Net change in other time deposits (42,798) 190,437 5,264
Net change in foreign deposits 333,552 42,717 (9,965)
Net change in other deposits 156,414 460,853 (181,964)
Net change in short-term borrowings 259,830 23,670 (207,163)
Issuance of bank notes -- 25,000 150,000
Principal payments on bank notes -- (100,000) --
Issuance of long-term debt 980,175 2,607 20,642
Issuance of company-obligated mandatorily redeemable preferred
securities 150,000 -- --
Principal payments on long-term debt (16,195) (41,081) (41,873)
Cash dividends paid (160,347) (135,578) (113,819)
Net proceeds from issuance of common stock from employee incentive
plans and pre-merger transactions of pooled companies 13,220 (22,089) (1,926)
Purchase of treasury stock (299,063) (175,036) (85,474)
Redemption of preferred stock -- (12,684) --
Other, net 764 2,176 4,011
----------- ----------- -----------
Net Cash Provided (Used) by Financing Activities 580,227 (71,200) 134,723
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 29,966 125,706 359,108
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,856,314 1,730,608 1,371,500
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,886,280 $ 1,856,314 $ 1,730,608
=========== =========== ===========
</TABLE>
The accompanying notes to supplemental consolidated financial
statements are an integral part of these statements.
5
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<PAGE> 7
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
NOTE A
ACCOUNTING POLICIES
Mercantile Bancorporation Inc. ("Corporation" or "Mercantile") and its
subsidiaries follow generally accepted accounting principles and reporting
practices applicable to the banking industry. The significant accounting
policies are summarized below.
Basis of Presentation:
Consolidation: The Supplemental Consolidated Financial Statements include the
accounts of Mercantile Bancorporation Inc. and its subsidiaries. Material
intercompany transactions are eliminated.
Restatement: Effective July 1, 1998, the Corporation acquired Firstbank of
Illinois Co. ("Firstbank") and CBT Corporation ("CBT"), in transactions
accounted for as poolings-of-interests.
The Supplemental Consolidated Financial Statements give retroactive effect to
the transactions and, as a result, the Supplemental Consolidated Statement of
Income, Balance Sheet, and Statement of Cash Flows are presented as if the
combining companies had been consolidated for all periods presented. (As
required by generally accepted accounting principles, the Supplemental
Consolidated Financial Statements become the historical consolidated financial
statements upon issuance of the financial statements for the period that
includes the date of the transaction.) The Supplemental Consolidated Statement
of Changes in Shareholders' Equity reflects the accounts of Mercantile
Bancorporation Inc. as if the common stock issued in the Firstbank and CBT
acquisitions had been outstanding during all periods presented. The
Supplemental Consolidated Financial Statements, including the notes thereto,
should be read in conjunction with the historical consolidated financial
statements of the Corporation included in its 1997 Annual Report on Form 10-K.
Reclassification: Certain reclassifications have been made to the 1996 and
1995 historical financial statements to conform with the 1997 presentation.
New Accounting Standards:
Financial Accounting Standard ("FAS") 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," requires an
entity to recognize the financial and servicing assets it controls and the
liabilities it has incurred and to derecognize financial assets when control
has been surrendered in accordance with the criteria provided in the Statement.
The Corporation has applied the new rules prospectively to transactions
beginning in the first quarter of 1997.
FAS 128, "Earnings per Share," was issued in February 1997. This statement
was effective in the fourth quarter of 1997 and requires additional reporting
of earnings per share that gives effect to dilutive common share equivalents
such as stock options or convertible notes. The Corporation's disclosure under
FAS 128 is included in Note B to the Supplemental Consolidated Financial
Statements.
FAS 130, "Reporting Comprehensive Income," was issued in June 1997.
Comprehensive income is defined as net income plus certain items that are
recorded directly to shareholders' equity, such as unrealized gains and losses
on available-for-sale securities. Mercantile started reporting comprehensive
income in the first quarter of 1998 as prescribed by FAS 130.
FAS 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997, but interim period reporting is not required in 1998. An
operating segment is defined under FAS 131 as a component of an enterprise that
engages in business activities that generate revenue and expense for which
operating results are reviewed by the chief operating decision maker in the
determination of resource allocation and performance. Mercantile is currently
evaluating the impact of FAS 131 on future financial statement disclosures.
FAS 132, "Employers" Disclosures about Pensions and Other Postretirement
Benefits," addresses disclosure of such benefit plans and is effective for
fiscal years beginning after December 31, 1997. The Corporation does not
anticipate a significant impact when making these new disclosures.
FAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
which was issued in June 1998, establishes accounting and reporting standards
for derivative instruments and hedging activities. Under FAS 133, derivatives
are recognized on the balance sheet at fair value as an asset or liability.
Changes in the fair value of derivatives are reported as a component of other
comprehensive income or recognized as earnings through the income statement
depending on the nature of the instrument. FAS 133 is effective for all
quarters of fiscal years beginning after June 15, 1999 with earlier adoption
permitted. The Corporation is currently evaluating FAS 133's effect.
Use of Estimates:
Management of the Corporation has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare the Supplemental Consolidated
Financial Statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Investments in Debt and Equity Securities:
Trading securities, which include any security held primarily for near-term
sale, are valued at fair value. Gains and losses on trading securities, both
realized and unrealized, are recorded in investment banking and brokerage
income.
6
<PAGE>
<PAGE> 8
Available-for-sale securities, which include any security for which the
Corporation has no immediate plan to sell but which may be sold in the future,
are valued at fair value. Realized gains and losses, based on the amortized
cost of the specific security, are included in other income as securities gains
(losses). Unrealized gains and losses are recorded, net of related income tax
effects, in retained earnings.
Held-to-maturity securities, which include any security for which the
Corporation has the positive intent and ability to hold until maturity, are
valued at historical cost adjusted for amortization of premiums and accretion
of discounts computed by the level-yield method. Unrealized losses on
held-to-maturity and available-for-sale securities are recognized in the
Supplemental Consolidated Statement of Income only if market valuation
differences are deemed to be other than temporary impairments in value.
Loans Held-for-Sale:
In its lending activities, the Corporation originates residential mortgage
loans and student loans intended for sale in the secondary market. Loans
held-for-sale are carried at the lower of cost or fair value, which is
determined on an aggregate basis. Gains or losses on the sale of loans
held-for-sale are determined on a specific identification method.
Loans and Leases:
Interest income on loans is generally accrued on a simple interest basis.
Loan fees and direct costs of loan originations are deferred and amortized over
the estimated life of the loans under methods approximating the interest
method.
The finance method is used to account for direct and leveraged equipment
lease contracts. Income is recorded over the lease periods in proportion to the
unrecovered investment in the leases after consideration of investment tax
credits and other related income tax effects.
When, in management's opinion, the collection of interest on a loan
(exclusive of certain consumer and credit card loans) is unlikely, or when
either principal or interest is past due over 90 days, that loan is generally
placed on non-accrual status. When a loan is placed on non-accrual status,
accrued interest for the current year is reversed and charged against current
earnings, and accrued interest from prior years is charged against the reserve
for possible loan losses. Interest payments received on non-accrual loans are
applied to principal if there is doubt as to the collectibility of such
principal; otherwise, these receipts are recorded as interest income. A loan
remains on non-accrual status until the loan is current as to payment of both
principal and interest, and/or the borrower demonstrates the ability to pay and
remain current.
All non-accrual and renegotiated commercial-related loans are considered
impaired. Impaired loans are measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate, or at the
loan's observable market price, or the fair value of the collateral, if the
loan is collateral dependent.
Reserve for Possible Loan Losses:
The reserve for possible loan losses is increased by provisions charged to
expense and reduced by loans charged off, net of recoveries. The reserve is
maintained at a level considered adequate to provide for potential loan losses
based on management's evaluation of current economic conditions, changes in the
character and size of the portfolio, past experience, expected future losses
and other pertinent factors. Mercantile charges off credit card loans after six
cycles of nonpayment, or within 15 days of receipt of personal bankruptcy
notice, if earlier.
Foreclosed Assets:
Foreclosed assets include real estate and other assets acquired through
foreclosure or other proceedings and are included in other assets in the
Supplemental Consolidated Balance Sheet.
Foreclosed assets are valued at the lower of cost or fair value less
estimated costs to sell. Losses arising at the time of transfer from loans are
charged to the reserve for possible loan losses. Subsequent reductions in
valuation based upon periodic appraisals are charged against current earnings.
Bank Premises and Equipment:
Bank premises and equipment are stated at cost less accumulated depreciation.
Provisions for depreciation are computed principally by the straight-line
method and are based on estimated useful lives of the assets. The carrying
values of assets sold or retired and the related accumulated depreciation are
eliminated from the accounts, and the resulting gains or losses are reflected
in net income.
Expenditures for maintenance and repairs are expensed, while expenditures for
major renewals are capitalized.
Intangible Assets:
Intangible assets consist primarily of goodwill and mortgage servicing
assets. Goodwill, the excess of cost over the net assets acquired in business
combinations accounted for as purchases, is amortized using the straight-line
method over the estimated period to be benefited, most recently 15 years, but
not exceeding 40 years.
Mortgage servicing assets represent recorded value associated with the
contractual right to service loans in return for a fee. These assets may be
purchased and recorded at fair value or result from the sale of loans, where
servicing is retained and recorded at an allocated carrying amount based on the
relative fair value of the assets sold. This intangible is amortized using the
level-yield method over the estimated lives of the
7
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<PAGE> 9
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
related loans. The carrying value of mortgage servicing assets is subject to
periodic adjustment based upon changing market conditions.
Income Taxes:
Deferred income taxes, computed using the liability method, are provided on
temporary differences between the financial reporting basis and the tax basis
of the assets and liabilities of the Corporation.
Treasury Stock:
The purchase of the Corporation's common stock is recorded at cost. Upon
subsequent reissuance, the treasury stock account is reduced by the average
cost basis of such stock.
Cash Equivalents:
Cash and due from banks, due from banks--interest bearing, and federal funds
sold and repurchase agreements are considered cash equivalents for purposes of
the Supplemental Consolidated Statement of Cash Flows.
Financial Instruments:
Financial instruments include cash, evidence of an ownership interest in an
entity or a contract that both a) imposes on the Corporation a contractual
obligation, 1) to deliver a financial instrument to another party or 2) to
exchange other financial instruments on potentially unfavorable terms with
another party; and b) conveys to another party a contractual right, 1) to
receive a financial instrument from the Corporation or 2) to exchange other
financial instruments on potentially favorable terms with the Corporation.
Derivative Financial Instruments:
The Corporation is a party to certain financial instruments, primarily to
stabilize interest rate margins and to hedge against interest rate movements.
An instrument designated as a hedge of an asset or liability carried at cost is
accounted for on an accrual basis, in which the interest income or interest
expense of the related asset or liability is adjusted for the net amount of any
interest receivable or payable generated by the hedging instrument. There is no
market valuation on these interest rate contracts. If the underlying assets or
liabilities hedged are no longer recorded on the Supplemental Consolidated
Balance Sheet (e.g., due to sale), the remaining gain or loss related to the
interest rate contract is recognized through earnings immediately.
In the normal course of business, the Corporation does not maintain trading
positions in interest rate derivative financial instruments. The Corporation's
non-hedging transactions are entered into on behalf of customers and are
simultaneously hedged by the Corporation. As a consequence, these transactions
do not represent exposure to market risk. The Corporation manages the potential
credit exposure through established credit approvals, risk control limits and
other monitoring procedures. These contracts are recorded at their fair value
with gains or losses included in the Supplemental Consolidated Statement of
Income.
Mercantile has entered into foreign exchange forward contracts, primarily to
facilitate customers' foreign exchange requirements. The Corporation maintains
a generally matched position; therefore, exchange rate and market risks are
minimal. Credit risk to the Corporation could result from non-performance by a
counterparty to a contract. Credit risk is managed as indicated in the previous
paragraph. Unrealized gains and losses on these foreign exchange forward
contracts are reflected in the Supplemental Consolidated Statement of Income.
NOTE B
EARNINGS PER SHARE
Basic earnings per share data is calculated by dividing net income, after
deducting dividends on preferred stock, by the weighted average number of
common shares outstanding during the period.
8<PAGE>
<PAGE> 10
Diluted earnings per share gives effect to both the increase in the average
shares outstanding that would have resulted from both the exercise of dilutive
stock options and the conversion of the entire balance of outstanding
convertible notes. Net income attributable to common shareholders' equity in
the diluted earnings per share computation is increased by interest expense
that would not be incurred on notes if they converted, net of taxes. The
components of basic and diluted earnings per share are as follows:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands except per share data)
<S> <C> <C> <C>
BASIC
Net income $246,822 $284,453 $318,155
Preferred stock dividends -- (408) (1,020)
-------- -------- --------
Net Income Attributable to Common
Shareholders' Equity $246,822 $284,045 $317,135
======== ======== ========
Weighted Average Common Shares
Outstanding 140,009,105 133,925,697 133,797,998
Basic Earnings per Share $1.76 $2.12 $2.37
===== ===== =====
DILUTED
Net income attributable to common
shareholders' equity $246,822 $284,045 $317,135
Interest on convertible notes, net of
taxes 83 120 398
-------- -------- --------
Diluted Net Income $246,905 $284,165 $317,533
======== ======== ========
Weighted average common shares
outstanding 140,009,105 133,925,697 133,797,998
Employee incentive plans 2,493,277 1,775,913 1,660,300
Convertible notes 136,605 294,419 856,356
----------- ----------- -----------
Diluted Weighted Average Common Shares
Outstanding 142,638,987 135,996,029 136,314,654
=========== =========== ===========
Diluted Earnings per Share $1.73 $2.09 $2.33
===== ===== =====
- -------------------------------------------------------------------------------
</TABLE>
All per share amounts and average shares outstanding have been restated to
give effect to a three-for-two stock split distributed on October 1, 1997.
NOTE C
ACQUISITIONS
As described in Note A, effective July 1, 1998, the Corporation acquired
Firstbank, a $2.3 billion-asset bank holding company headquartered in
Springfield, Illinois. The consideration for this acquisition was 13,352,641
shares of Mercantile common stock. Also on July 1, 1998, Mercantile acquired
$1.1 billion-asset CBT, headquartered in Paducah, Kentucky. A total of
5,123,214 shares of Mercantile common stock was exchanged in conjunction with
this acquisition. The Firstbank and CBT acquisitions were accounted for as
poolings-of-interests. Net income and basic earnings per share for the
Corporation, Firstbank and CBT prior to this restatement were as follows:
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands except
per share data)
<S> <C> <C> <C>
Corporation
Net income $204,593 $245,215 $280,389
Basic earnings per share 1.68 2.11 2.41
Firstbank
Net income 29,644 27,873 25,742
Basic earnings per share 1.90 1.80 1.66
CBT
Net income 12,585 11,365 12,024
Basic earnings per share 1.60 1.44 1.52
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Corporation recorded a one-time pre-tax expense of $73,500,000
in the third quarter of 1998 related to the mergers with Firstbank and
CBT. These charges include accruals to substantially conform the accounting
policies of Firstbank and CBT as well as to account for one-time expenses
associated with the transactions.
As a result of the acquisition by Mercantile, Firstbank's two Missouri banks
were sold in September 1998 due to state restrictions on deposit concentration.
An after-tax gain of $29,400,000 was recorded in connection with these
divestitures.
Firstbank acquired BankCentral Corporation and its wholly-owned subsidiary,
Central National Bank of Mattoon on June 10, 1997. The acquisition involved an
exchange of cash and Firstbank common stock totaling approximately $13,000,000,
and was recorded using the purchase method of accounting.
9<PAGE>
<PAGE> 11
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
Listed below are the acquisitions completed by Mercantile during the years
ended December 31, 1997, 1996 and 1995:
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
($ in Thousands)
<CAPTION>
CONSIDERATION
ORIGINAL -------------------
INTANGIBLE ACCOUNTING
DATE ASSETS ASSET CASH GROSS SHARES METHOD
---- ------ --------- ---- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
ACQUISITIONS COMPLETED
Roosevelt Financial Group, Inc.
("Roosevelt") July 1, 1997 $7,251,985 $ 608,076 $ 374,477 18,948,884 Purchase
Mark Twain Bancshares, Inc.
("Mark Twain") April 25, 1997 3,227,972 -- 73 24,088,713 Pooling
Regional Bancshares, Inc. March 5, 1997 171,979 16,217 12,300 900,625 Purchase
Today's Bancorp, Inc. Nov. 7, 1996 501,418 46,854 34,912 1,690,587 Purchase
First Financial Corporation of America Nov. 1, 1996 87,649 5,137 3,253 388,113 Purchase
Peoples State Bank Aug. 22, 1996 95,657 7,552 -- 488,756 Purchase
Metro Savings Bank, F.S.B. March 7, 1996 80,857 3,016 5 296,853 Purchase
Security Bank of Conway, F.S.B. Feb. 9, 1996 102,502 6,000 1 482,946 Purchase
Hawkeye Bancorporation ("Hawkeye") Jan. 2, 1996 1,978,540 -- 80 11,838,294 Pooling
First Sterling Bancorp, Inc. Jan. 2, 1996 167,610 -- 1 782,126 Pooling<F1>
Southwest Bancshares, Inc. Aug. 1, 1995 187,701 -- 1 1,012,463 Pooling<F1>
AmeriFirst Bancorporation, Inc. Aug. 1, 1995 155,521 -- 1 992,034 Pooling<F1>
Plains Spirit Financial Corporation July 7, 1995 400,754 17,820 6,697 1,951,770 Purchase
TCBankshares, Inc. May 1, 1995 1,422,798 -- -- 7,124,999<F2> Pooling
Central Mortgage Bancshares, Inc. May 1, 1995 654,584 -- 8 3,806,585 Pooling
UNSL Financial Corp Jan. 3, 1995 508,346 -- 11 2,367,161 Pooling
Wedge Bank Jan. 3, 1995 195,716 -- 1 1,454,931 Pooling<F1>
<FN>
<F1> The historical financial statements of the Corporation were not restated
for the acquisition due to the immateriality of the acquiree's financial
condition and results of operations to that of Mercantile.
<F2> In addition to Mercantile common stock issued, the Corporation assumed,
through an exchange, the outstanding, non-convertible preferred stock of
TCBankshares, Inc. The preferred stock was redeemed in the first quarter
of 1996.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Roosevelt acquisition was accounted for as a purchase. The following
unaudited pro forma combined consolidated financial data gives effect to the
July 1, 1997 acquisition of Roosevelt as if it had been consummated on January
1, 1995. The unaudited pro forma combined consolidated financial data provided
includes the impact of goodwill amortization and the reduction in net interest
income due to: 1) interest lost on cash paid for share repurchases or paid
directly to Roosevelt shareholders as consideration; and 2) interest on
$650,000,000 of senior debt, subordinated debt and redeemable preferred
securities issued in 1997 largely to finance the Roosevelt acquisition, offset
by interest earned on funds not utilized in the acquisition. There is no
estimate of potential cost savings included in the following table:
<TABLE>
- ---------------------------------------------------------------------
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands except per share data)
<S> <C> <C> <C>
Total assets N/A $33,025,746 $32,898,094
Net interest income $1,125,021 1,080,885 1,053,476
Other income 401,619 332,043 284,849
Net income 216,564 224,351 275,489
Basic earnings per share 1.48 1.53 1.88
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
The Mark Twain acquisition was accounted for as a pooling-of-interests. Net
income and basic earnings per share for the Corporation and Mark Twain prior to
this restatement were as follows:
<TABLE>
- ---------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
(Thousands except
per share data)
<S> <C> <C>
Corporation
Net income $191,947 $232,676
Basic earnings per share 2.07 2.49
Mark Twain
Net income 53,268 47,713
Basic earnings per share 3.23 2.93
- ----------------------------------------------------------------
</TABLE>
During 1997, Mercantile recorded adjustments related to the acquisitions of
Roosevelt, Mark Twain and Regional Bancshares, Inc. The adjustments consisted
of $20,340,000 in provision for loan losses, $121,393,000 other expense,
reduced by a related tax benefit of $41,856,000, for a net income reduction of
$99,877,000. Of the $121,393,000 merger-related liability established,
$67,000,000 had been utilized at December 31, 1997.
During 1996, adjustments were recorded by the Corporation related to
companies acquired that year. These adjustments consisted of a
$13,666,000 increase in provision for loan losses, $3,114,000 in losses on
securities sold in portfolio restructurings, a $51,071,000 charge to other
10
<PAGE>
<PAGE> 12
expense and a related tax benefit of $19,362,000, resulting in an after-tax
reduction to net income of $48,489,000. These accruals have been substantially
exhausted.
For all acquisitions accounted for as purchases, the unamortized excess of
cost over the fair value of assets acquired was $777,693,000, $171,539,000 and
$110,537,000 at December 31, 1997, 1996 and 1995, respectively.
The Hawkeye acquisition was accounted for as a pooling-of-interests. Net
income and basic earnings per share for the Corporation and Hawkeye prior to
restatement were as follows:
<TABLE>
- ---------------------------------------------------------------
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
(Thousands except
per share data)
<S> <C>
Corporation prior to restatement
Net income $216,835
Basic earnings per share 2.67
Hawkeye
Net income 15,841
Basic earnings per share 1.18
- ---------------------------------------------------------------
</TABLE>
Other Pending Bank Acquisitions:
On February 2, 1998, the Corporation completed its acquisition of Horizon
Bancorp, Inc. ("Horizon"), a $537 million-asset bank holding company in
Arkadelphia, Arkansas. On March 2, 1998, Mercantile completed a merger
with HomeCorp, Inc. ("HomeCorp"), a $335 million-asset thrift holding company
based in Rockford, Illinois. In the third quarter of 1998, Mercantile
consummated two acquisitions. Financial Services Corporation of the Midwest
("FSCM") is the holding company for THE Rock Island Bank, N.A., and First
Financial Bancorporation ("First Financial") owns First National Bank Iowa,
which operates in the Iowa City/Cedar Rapids corridor. The Horizon, HomeCorp,
FSCM and First Financial acquisitions met the requirements for treatment as
poolings-of-interests; however, due to the respective and cumulative
immateriality of their financial condition and results of operations to that
of Mercantile, the historical financial statements of the Corporation were not
restated for these transactions.
The Corporation recorded one-time charges related to the Horizon, HomeCorp,
FSCM and First Financial acquisitions in the third quarter of 1998. These
charges included accruals to substantially conform the accounting and credit
policies of the acquirees as well as to account for one-time expenses associated
with the transactions. The pre-tax charge recorded in the third quarter of 1998
totaled $37,000,000.
NOTE D
CASH FLOWS
The Corporation paid interest on deposits, short-term borrowings, bank notes
and long-term debt of $1,033,434,000, $834,516,000 and $771,511,000 in 1997,
1996 and 1995, respectively. The Corporation paid Federal income taxes of
$159,797,000, $162,068,000 and $149,112,000 in 1997, 1996 and 1995,
respectively.
The following details cash and cash equivalents from acquisitions accounted
for as purchases, net of cash paid:
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Fair value of assets purchased $(8,065,744) $(1,260,315) $(977,766)
Fair value of liabilities assumed 7,044,026 1,090,663 874,053
Issuance of common stock 676,433 136,124 95,490
----------- ----------- ---------
Net Cash Paid for Acquisitions (345,285) (33,528) (8,223)
Cash and cash equivalents acquired 113,748 90,680 54,158
----------- ----------- ---------
Cash and Cash Equivalents from Acquisitions, Net
of Cash Paid (Received) $ (231,537) $ 57,152 $ 45,935
=========== =========== =========
- ------------------------------------------------------------------------------------------
</TABLE>
NOTE E
CASH AND DUE FROM BANKS RESTRICTIONS
The Corporation's subsidiary banks are required to maintain average reserve
balances that place withdrawal and/or usage restrictions on cash and due from
banks balances. The average amount of these restricted balances for the year
ended December 31, 1997 was $186,388,000.
11
<PAGE>
<PAGE> 13
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE F
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Available-for-Sale:
The amortized cost, estimated fair values, and unrealized gains and losses of
available-for-sale securities were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
(Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Government $4,998,860 $33,373 $ 7,697 $5,024,536
State and political subdivisions:
Tax-exempt 359,834 8,214 243 367,805
Taxable 61,817 279 82 62,014
---------- ------- ------- ----------
Total State and Political Subdivisions 421,651 8,493 325 429,819
Other 2,602,646 12,070 10,005 2,604,711
---------- ------- ------- ----------
Total $8,023,157 $53,936 $18,027 $8,059,066
========== ======= ======= ==========
DECEMBER 31, 1996
U.S. Government $4,042,304 $21,839 $17,432 $4,046,711
State and political subdivisions:
Tax-exempt 403,803 8,555 936 411,422
Taxable 112,158 490 469 112,179
---------- ------- ------- ----------
Total State and Political Subdivisions 515,961 9,045 1,405 523,601
Other 172,740 460 1,835 171,365
---------- ------- ------- ----------
Total $4,731,005 $31,344 $20,672 $4,741,677
========== ======= ======= ==========
DECEMBER 31, 1995
U.S. Government $4,447,343 $50,293 $19,190 $4,478,446
State and political subdivisions:
Tax-exempt 426,720 12,191 1,089 437,822
Taxable 134,400 1,034 714 134,720
---------- ------- ------- ----------
Total State and Political Subdivisions 561,120 13,225 1,803 572,542
Other 174,077 234 1,639 172,672
---------- ------- ------- ----------
Total $5,182,540 $63,752 $22,632 $5,223,660
========== ======= ======= ==========
- ------------------------------------------------------------------------------------------------------------
</TABLE>
12<PAGE>
<PAGE> 14
Held-to-Maturity:
The amortized cost, estimated fair values, and unrealized gains and losses of
held-to-maturity securities were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ---------
(Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Government $247,705 $ 6,625 $3,938 $250,392
State and political subdivisions:
Tax-exempt 80,330 3,825 8 84,147
Taxable 3,822 132 -- 3,954
-------- ------- ------ --------
Total State and Political Subdivisions 84,152 3,957 8 88,101
Other 3,422 158 119 3,461
-------- ------- ------ --------
Total $335,279 $10,740 $4,065 $341,954
======== ======= ====== ========
DECEMBER 31, 1996
U.S. Government $558,911 $ 9,784 $7,750 $560,945
State and political subdivisions:
Tax-exempt 88,287 3,294 525 91,056
Taxable 4,304 66 3 4,367
-------- ------- ------ --------
Total State and Political Subdivisions 92,591 3,360 528 95,423
Other 5,219 220 175 5,264
-------- ------- ------ --------
Total $656,721 $13,364 $8,453 $661,632
======== ======= ====== ========
DECEMBER 31, 1995
U.S. Government $243,672 $ 1,967 $ 690 $244,949
State and political subdivisions:
Tax-exempt 82,589 3,779 274 86,094
Taxable 8,194 208 1 8,401
-------- ------- ------ --------
Total State and Political Subdivisions 90,783 3,987 275 94,495
Other 686 1 1 686
-------- ------- ------ --------
Total $335,141 $ 5,955 $ 966 $340,130
======== ======= ====== ========
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
In conjunction with the acquisition of Roosevelt, the Corporation acquired
privately issued adjustable-rate mortgage-backed securities that have incurred
an impairment in value which is considered other than temporary. The loan pools
backing these securities have been affected by high delinquency and foreclosure
rates, and higher than anticipated losses on foreclosed property sales. The net
book value of these mortgage-backed securities was $84,706,000 as of December
31, 1997.
In December 1995, the Corporation reclassified approximately $3.1 billion in
held-to-maturity securities to the available-for-sale category. The unrealized
gain on the securities transferred was approximately $31 million. The Financial
Accounting Standards Board issued a Special Report titled, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities, Questions and Answers," which stated that
reclassifications made no later than December 31, 1995 from the
held-to-maturity category will not call into question the intent to hold other
securities to maturity in the future.
During the third quarter of 1996, the Corporation transferred securities from
the available-for-sale classification to the held-to-maturity classification.
The securities transferred had an amortized cost basis of $370,014,000 and an
estimated fair value of $373,557,000 on the transfer date. The unrealized gain
on the date of the transfer remained in shareholders' equity and is being
amortized over the remaining life of the transferred securities. The
unamortized balance as of December 31, 1997 was $1,883,000.
Securities with a carrying value of $3,918,545,000 at December 31, 1997,
$3,348,145,000 at December 31, 1996 and $2,835,433,000 at December 31, 1995
were pledged to secure public and trust deposits, securities sold under
agreements to repurchase and for other purposes required by law.
13
<PAGE>
<PAGE> 15
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The following table presents proceeds from sales of securities and the
components of net securities gains. The only transfer of securities from the
held-to-maturity category to available-for-sale during 1995, 1996 and 1997 was
the December 1995 reclassification discussed above. Held-to-maturity securities
gains and losses resulted from portfolio restructurings in connection with
subsidiary bank acquisitions or calls by the security issuer prior to maturity.
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Proceeds from sales of available-
for-sale securities
$802,007 $506,636 $386,969
======== ======== ========
Securities gains on:
Available-for-sale securities $ 9 $ 18 $ 121
Held-to-maturity securities 8,225 4,295 5,504
-------- -------- --------
Total Securities Gains 8,234 4,313 5,625
Securities losses on:
Available-for-sale securities -- -- 1
Held-to-maturity securities 585 4,021 990
-------- -------- --------
Total Securities Losses 585 4,021 991
-------- -------- --------
Net Securities Gains Before Income Taxes 7,649 292 4,634
Applicable income taxes (2,677) (102) (1,622)
-------- -------- --------
Net Securities Gains $ 4,972 $ 190 $ 3,012
======== ======== ========
- ------------------------------------------------------------------------------------------
</TABLE>
NOTE G
LOANS AND LEASES
Loans and leases consisted of the following:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Commercial $ 4,990,505 $ 4,591,604 $ 4,148,279
Real estate--commercial 3,569,922 3,255,590 3,175,018
Real estate--construction 734,722 643,345 564,185
Real estate--residential mortgage 8,702,879 4,787,012 4,239,629
Real estate--home equity credit loans 588,228 439,806 416,921
Consumer 2,492,150 2,306,184 2,177,998
Credit card 283,549 913,713 862,255
----------- ----------- -----------
Total Loans and Leases $21,361,955 $16,937,254 $15,584,285
=========== =========== ===========
- ---------------------------------------------------------------------------------------------------
</TABLE>
Changes in the reserve for possible loan losses were as follows:
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Beginning balance $ 257,718 $ 261,339 $274,636
Provision 86,355 78,766 44,952
Charge-offs (109,259) (114,127) (79,544)
Recoveries 28,189 21,934 19,459
--------- --------- --------
Net Charge-offs (81,070) (92,193) (60,085)
Acquired reserves 21,162 9,806 13,836
Transfer to Mercantile Credit Card Master Trust -- -- (12,000)
--------- --------- --------
Ending Balance $ 284,165 $ 257,718 $261,339
========= ========= ========
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Non-performing loans consisted of the following:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Non-accrual $113,134 $81,037 $105,188
Renegotiated 4,335 5,413 3,549
-------- ------- --------
Non-performing Loans $117,469 $86,450 $108,737
======== ======= ========
- ---------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1995, the Corporation adopted FAS 114, "Accounting by
Creditors for Impairment of a Loan," as amended by FAS 118, which requires an
impaired loan to be measured based upon the present value of expected future
cash flows discounted at the loan's effective interest rate. By the
Corporation's definition, all non-accrual and renegotiated commercial-related
loans are considered impaired. The following table presents information on
impaired loans:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Ending impaired loans $65,188 $53,294 $81,877
Related reserve for possible loan losses 13,890 11,284 19,265
Average impaired loans 66,785 59,532 86,290
Interest income recognized on impaired loans 374 748 610
- ---------------------------------------------------------------------------------------------
</TABLE>
Certain directors and executive officers of the Corporation were loan
customers of the Corporation's banks during 1997, 1996 and 1995. Such loans
were made in the ordinary course of business at normal terms, including
interest rate and collateralization, and did not represent more than a normal
risk. Loans to those persons, their immediate families and companies in which
they were principal owners were $15,218,000, $26,570,000 and $26,198,000, at
December 31, 1997, 1996 and 1995, respectively. During 1997, $34,273,000 of new
loans were made to these persons, and repayments totaled $45,625,000.
14
<PAGE>
<PAGE> 16
NOTE H
BANK PREMISES AND EQUIPMENT
Bank premises and equipment were as follows:
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Land $ 82,154 $ 70,021 $ 67,428
Bank premises 460,408 392,250 361,594
Leasehold improvements 45,343 50,519 46,766
Furniture and equipment 462,179 366,444 327,135
---------- --------- ---------
Total Cost 1,050,084 879,234 802,923
Accumulated depreciation (518,434) (450,262) (412,760)
---------- --------- ---------
Net Carrying Value $ 531,650 $ 428,972 $ 390,163
========== ========= =========
- ----------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the Corporation had certain long-term leases, none of
which were considered to be capital leases, which were principally related to
the use of land, buildings and equipment. The following table summarizes the
future minimum rental commitments for noncancelable operating leases which had
initial or remaining noncancelable lease terms in excess of one year:
<TABLE>
- ---------------------------------------------
<CAPTION>
MINIMUM
RENTAL
PERIOD (Thousands)
<S> <C>
1998 $15,396
1999 13,552
2000 10,984
2001 8,461
2002 6,572
2003 and later 26,538
-------
Total $81,503
=======
- ---------------------------------------------
</TABLE>
Net rental expense for all operating leases was $19,706,000 in 1997,
$15,232,000 in 1996 and $15,117,000 in 1995.
NOTE I
DEPOSITS
Deposits consisted of the following:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Non-interest bearing $ 3,956,138 $ 3,389,776 $ 2,925,272
Interest bearing demand 3,086,259 2,800,964 2,769,944
Money market accounts 3,811,081 3,152,825 2,712,227
Savings 1,559,441 1,323,775 1,353,335
Consumer time certificates under $100,000 9,850,437 7,136,532 6,468,366
Other time 191,199 233,997 656,532
----------- ----------- -----------
Total Core Deposits 22,454,555 18,037,869 16,885,676
Time certificates $100,000 and over 1,769,461 1,495,089 1,368,809
Foreign 585,439 251,887 209,170
----------- ----------- -----------
Total Purchased Deposits 2,354,900 1,746,976 1,577,979
----------- ----------- -----------
Total Deposits $24,809,455 $19,784,845 $18,463,655
=========== =========== ===========
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The scheduled maturities of Mercantile's consumer time certificates under
$100,000, time certificates $100,000 and over and other time deposits were as
follows:
<TABLE>
- --------------------------------------------------
<CAPTION>
SCHEDULED
MATURITY AMOUNT
PERIOD (Thousands)
<S> <C>
1998 $ 7,876,241
1999 2,383,257
2000 850,543
2001 306,084
2002 264,536
2003 and later 130,436
-----------
Total $11,811,097
===========
- --------------------------------------------------
</TABLE>
NOTE J
SHORT-TERM BORROWINGS
Short-term borrowings were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Federal funds purchased and
repurchase agreements $2,127,443 $1,861,994 $1,790,937
Short-term Federal Home Loan
Bank ("FHLB") advances 1,412,701 123,094 119,815
Treasury tax and loan notes 104,535 118,886 118,642
Commercial paper 1,510 19,405 16,950
Other short-term borrowings 32,351 9,295 7,565
---------- ---------- ----------
Total Short-term Borrowings $3,678,540 $2,132,674 $2,053,909
========== ========== ==========
- ------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<PAGE> 17
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The average balance of total short-term borrowings was $2,929,826,000,
$1,671,352,000 and $1,829,383,000 during 1997, 1996 and 1995, respectively. The
average rate on total short-term borrowings was 5.43% in 1997, 5.37% in 1996
and 5.57% in 1995.
The maximum balances at month-end are listed below:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Federal funds purchased and repurchase agreements $2,579,789 $1,886,127 $2,022,777
Short-term FHLB advances 1,412,701 130,239 127,489
Treasury tax and loan notes 260,822 439,181 562,296
Commercial paper 24,800 21,660 31,157
Other short-term borrowings 102,833 45,142 12,699
- ------------------------------------------------------------------------------------------------
</TABLE>
The Corporation had unused lines of credit arrangements with unaffiliated
banks for support of commercial paper and for other uses totaling $100,000,000
at December 31, 1997.
NOTE K
LONG-TERM DEBT AND BANK NOTES
Long-term Debt:
Long-term debt consisted of the following:
<TABLE>
- --------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
MERCANTILE BANCORPORATION INC. (PARENT COMPANY ONLY)
7.300% subordinated notes, due 2007 $ 200,000 $ -- $ --
6.800% senior notes, due 2001 150,000 -- --
7.050% senior notes, due 2004 150,000 -- --
7.625% subordinated notes, due 2002 150,000 150,000 150,000
7.000% convertible subordinated notes, due 1999 1,153 -- --
---------- -------- --------
Total 651,153 150,000 150,000
SECOND-TIER HOLDING COMPANIES -- 2,036 18,490
BANKS AND OTHER SUBSIDIARIES
FHLB advances 578,484 37,085 63,379
6.375% subordinated notes, due 2004 75,000 75,000 75,000
9.000% mortgage-backed notes, due 1999 53,450 53,450 53,450
Other 10,084 10,104 10,290
---------- -------- --------
Total 717,018 175,639 202,119
---------- -------- --------
Total Long-term Debt $1,368,171 $327,675 $370,609
========== ======== ========
- --------------------------------------------------------------------------------------------
</TABLE>
In June 1997, the Corporation issued $200,000,000 of subordinated notes with
a 10-year maturity and a coupon rate of 7.300%, $150,000,000 of senior notes
with a four-year maturity and a coupon rate of 6.800%, and $150,000,000 of
senior notes with a seven-year maturity and a coupon rate of 7.050%. The
subordinated and senior debt was primarily issued to assist in the financing of
the Roosevelt acquisition. For regulatory purposes the subordinated notes
qualify as Tier II capital.
In June 1987, Mark Twain issued 7.000% convertible subordinated capital notes
which are due in 1999. These convertible notes were transferred to Mercantile
Bancorporation Inc. (Parent Company Only) during 1997. The balance of the
convertible notes was $2,036,000 at December 31, 1996 and $6,911,000 at
December 31, 1995. The notes are convertible into common stock at a conversion
price equivalent to $11.127 per Mercantile share.
Included in other long-term debt was a $10,000,000 term note to Fidelity
Credit Corporation, a subsidiary of CBT. This term note was paid off and
refinanced with loans from Mercantile subsidiary banks in the third quarter of
1998.
FHLB advances at December 31, 1997 consisted of various debt instruments with
rates varying from 5.200% to 6.850%. This debt was collateralized by certain
loans and securities.
During 1996, Roosevelt defeased mortgage-backed bonds totaling $19,700,000 by
delivering treasury securities to the bond trustee for the periodic payment of
interest and the ultimate payment of the bonds to the bondholders on the
maturity date of April 15, 2018. Mercantile exercised the bonds' call provision
during the second quarter of 1998.
<PAGE>
A summary of annual principal reductions of long-term debt is presented
below:
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD FHLB ADVANCES OTHER TOTAL
(Thousands)
<S> <C> <C> <C>
1998 $100,000 $ 45 $ 100,045
1999 256,211 54,622 310,833
2000 95,610 10,020 105,630
2001 652 150,000 150,652
2002 114,152 150,000 264,152
2003 and later 11,859 425,000 436,859
-------- -------- ----------
Total $578,484 $789,687 $1,368,171
======== ======== ==========
- --------------------------------------------------------------------------------------------------
</TABLE>
Bank Notes:
Beginning in 1994, certain subsidiary banks could offer unsecured bank notes.
Note maturities can range from 30 days to 15 years from the date of issue and
may be issued with fixed or floating interest rates. Each bank note issued will
be an obligation solely of that issuing bank and will not be an obligation of,
or otherwise guaranteed by, the other issuing banks or the Corporation. The
bank notes are being offered and sold only to institutional investors, and are
not insured by the Federal Deposit Insurance Corporation or any other
governmental agency. The bank note program was restructured in 1998.
16
<PAGE>
<PAGE> 18
Bank notes are presented below with December 31, 1997 coupon rates:
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
MERCANTILE BANK N.A.
6.056% floating-rate bank notes, due 1998 $150,000 $150,000 $150,000
6.000% floating-rate bank notes, due 1996 -- -- 100,000
5.900% floating-rate bank notes, due 1999 25,000 25,000 --
-------- -------- --------
Total Bank Notes $175,000 $175,000 $250,000
======== ======== ========
- -------------------------------------------------------------------------------------------
</TABLE>
NOTE L
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF MERCANTILE
CAPITAL TRUST I
In January 1997, the Corporation formed Mercantile Capital Trust I. Through
this trust, the Corporation obtained $150,000,000 of floating-rate debt
maturing in 2027 that, for regulatory purposes, is part of Tier I capital.
Mercantile Capital Trust I is a subsidiary of which the Corporation owns all
the outstanding common securities; its sole assets are the $150,000,000 in
mandatorily redeemable preferred securities, and considered together, the
back-up undertakings constitute a full and unconditional guarantee by
Mercantile Bancorporation Inc. of the trust's obligations under the preferred
securities.
NOTE M
INCOME TAXES
The Corporation's results include income tax expense as follows:
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
CURRENT DEFERRED TOTAL
(Thousands)
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
U.S. FEDERAL $141,435 $ (9,593) $131,842
STATE AND LOCAL 10,936 (402) 10,534
-------- -------- --------
TOTAL $152,371 $ (9,995) $142,376
======== ======== ========
YEAR ENDED DECEMBER 31, 1996
U.S. Federal $155,218 $(22,306) $132,912
State and local 16,667 (1,012) 15,655
-------- -------- --------
Total $171,885 $(23,318) $148,567
======== ======== ========
YEAR ENDED DECEMBER 31, 1995
U.S. Federal $162,848 $(10,638) $152,210
State and local 19,835 (3,299) 16,536
-------- -------- --------
Total $182,683 $(13,937) $168,746
======== ======== ========
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The tax effects of temporary differences that gave rise to the deferred tax
assets and deferred tax liabilities are presented below:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Deferred tax assets
Reserve for possible loan losses $ 91,027 $ 82,964 $ 88,042
Foreclosed property 839 1,448 720
Deferred compensation 5,290 5,869 5,451
Expenses not currently allowable for
tax purposes 20,977 23,386 13,625
State tax liabilities -- 1,595 2,554
Retirement expenses in excess of
tax deduction 15,403 11,209 8,930
Other 13,775 7,780 4,326
-------- -------- --------
Total Gross Deferred Tax Assets 147,311 134,251 123,648
Deferred tax liabilities
Leasing (26,938) (29,956) (39,828)
Pension settlement gain (6,079) (6,079) (6,079)
Intangible assets -- (5,637) (6,466)
Depreciation (6,000) (6,698) (7,010)
Investments in debt and equity securities--FAS 115 (13,583) (3,413) (14,450)
FHLB stock dividends (9,672) -- --
Other (10,330) (12,132) (13,834)
-------- -------- --------
Total Gross Deferred Tax Liabilities (72,602) (63,915) (87,667)
-------- -------- --------
Net Deferred Tax Assets $ 74,709 $ 70,336 $ 35,981
======== ======== ========
- ---------------------------------------------------------------------------------------------
</TABLE>
Income tax expense as reported differs from the amounts computed by applying
the statutory U.S. Federal income tax rate to pretax income as follows:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Computed "expected" tax expense $136,219 $151,557 $170,415
Increase (reduction) in income taxes resulting from:
Tax-exempt income (10,839) (11,833) (12,917)
State and local income taxes, net of federal income tax
benefit 6,847 10,176 10,754
Amortization of goodwill 12,216 403 403
Other, net (2,067) (1,736) 91
-------- -------- --------
Total Tax Expense $142,376 $148,567 $168,746
======== ======== ========
- ---------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<PAGE> 19
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
NOTE N
RETIREMENT PLANS
Pension Plans:
The Corporation maintains both qualified and nonqualified noncontributory
pension plans that cover all employees meeting certain age and service
requirements.
The qualified plan provides pension benefits based on the employee's length
of service and the five highest consecutive years of compensation. The
Corporation's funding policy is to contribute annually at least the minimum
amount required by government funding standards but not more than is tax
deductible. No contribution was required during 1997, 1996 or 1995.
Roosevelt was a member of the Financial Institutions Retirement Fund
("Fund"). This trust provides retirement and death benefits to multiple
employers. All contributions to the Fund are commingled, and all assets of the
Fund are invested on a pooled basis, without allocation to the individual
employers. Therefore, Roosevelt's pension plan assets and actuarial liabilities
are not included in the qualified plan tables listed below. The contribution
policy of Roosevelt was to fund the pension cost accrued in each year. The
contribution by Roosevelt for the last half of 1997 was $159,000.
The net periodic pension expense related to the qualified plan included in
the Supplemental Consolidated Statement of Income is summarized as follows:
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the
period
$ 11,359 $ 10,816 $ 7,584
Interest cost on projected benefit obligation 14,191 12,735 11,218
Actual (return) loss on plan assets (34,441) (17,481) (31,133)
Net amortization and deferral 16,475 1,673 16,925
-------- -------- --------
Net Periodic Pension Expense $ 7,584 $ 7,743 $ 4,594
======== ======== ========
- ------------------------------------------------------------------------------------------------
</TABLE>
The table below sets forth the funded status and amounts recognized in the
Supplemental Consolidated Balance Sheet for the qualified plan:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Actuarial present value of vested benefit obligation $158,411 $136,317 $121,520
======== ======== ========
Accumulated benefit obligation $174,739 $149,422 $133,423
======== ======== ========
Projected benefit obligation $210,027 $183,757 $166,949
Plan assets at fair value 218,155 188,853 170,446
-------- -------- --------
Projected benefit obligation in excess of
plan assets (8,128) (5,096) (3,497)
Unrecognized net gain (loss) (3,266) (9,038) (15,118)
Unrecognized prior service cost 5,434 722 851
Unrecognized transition asset 1,054 1,885 2,715
-------- -------- --------
Accrued (Prepaid) Pension Expense $ (4,906) $(11,527) $(15,049)
======== ======== ========
- ------------------------------------------------------------------------------------------------
</TABLE>
Assumptions used were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Discount rate in determining benefit obligations 7.25% 7.50% 7.50%
Rate of increase in compensation levels 5.00 5.00 5.00
Expected long-term rate on assets 9.50 9.50 9.50
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
At December 31, 1997, approximately 65% of the plan's assets was invested in
listed common stocks, 34% was invested in government and corporate bonds rated
A or better, and the remaining 1% was invested in short-term cash equivalents.
A nominal amount of common stock of the Corporation was held by the plan.
The nonqualified plans provide pension benefits that would have been provided
under the qualified plan in the absence of limits placed on qualified plan
benefits by the Internal Revenue Service. The Corporation's funding policy is
to fund benefits as they are paid. Contributions under the nonqualified plans
were not material for the years ended December 31, 1997, 1996 and 1995. The
expense related to these plans was $2,715,000 in 1997, $2,517,000 in 1996 and
$2,228,000 in 1995.
Other Postretirement Benefits:
In addition to the pension plans described above, the Corporation provides
other postretirement benefits, largely medical benefits and life insurance, to
its retirees.
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," requires the recording of the unrecognized transition obligation for
postretirement benefits other than pensions. That liability is being amortized
over a 20-year period. The net periodic postretirement benefit expense included
in the Supplemental Consolidated Statement of Income is summarized as follows:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 793 $ 820 $ 610
Interest cost on accumulated postretirement benefit
obligation ("APBO") 2,790 2,748 2,716
Net amortization and deferral 1,608 1,713 1,475
------ ------ ------
Net Periodic Postretirement Benefit Cost $5,191 $5,281 $4,801
====== ====== ======
- ---------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<PAGE> 20
The table below sets forth the funded status and the amount recognized in the
Supplemental Consolidated Balance Sheet regarding other postretirement
benefits:
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
APBO
Retirees $ 27,348 $ 26,736 $ 27,041
Active employees fully eligible for benefits 1,297 1,446 1,301
Other active employees 10,969 10,028 7,862
-------- -------- --------
Total 39,614 38,210 36,204
Assets at fair value -- -- --
-------- -------- --------
APBO in excess of assets 39,614 38,210 36,204
Unrecognized net gain (loss) (2,298) (1,988) (1,241)
Unrecognized prior service cost (132) (140) (147)
Unrecognized transition obligation (23,727) (25,308) (26,889)
-------- -------- --------
Accrued Postretirement Benefit Obligation $ 13,457 $ 10,774 $ 7,927
======== ======== ========
- -----------------------------------------------------------------------------------------------
</TABLE>
Assumptions used were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Discount rate in determining benefit obligations 7.25% 7.50% 7.50%
Health care cost trend
First year 8.50 9.50 10.50
Ultimate (2001 and after) 5.50 5.50 5.50
- ------------------------------------------------------------------------------------------------
</TABLE>
An increase in the health care cost trend of 1 percent would increase the
aggregate of service and interest cost components of net periodic
postretirement benefit costs by $100,000 in 1997, $112,000 in 1996 and $120,000
in 1995. The APBO would increase by $1,407,000 as of December 31, 1997,
$1,542,000 as of December 31, 1996 and $1,448,000 as of December 31, 1995.
NOTE O
SHAREHOLDERS' EQUITY
Common Stock:
At Mercantile's Annual Meeting on April 24, 1997, the Corporation's
shareholders approved an amendment to its Restated Articles of Incorporation
that reduced the par value of the Corporation's common stock from $5.00 per
share to $.01 per share. The authorized common stock of the Corporation
consisted of 200,000,000 shares, of which 148,712,307, 134,174,597 and
134,845,809 shares were outstanding at December 31, 1997, 1996 and 1995,
respectively.
The Corporation's Shareholder Investment Plan ("Plan") allows new
shareholders a means to make an initial investment in Mercantile common stock
or for shareholders of record to purchase additional shares. Under the Plan,
participants have the option of reinvesting dividends.
Preferred Stock:
The authorized preferred stock of the Corporation consists of 5,000,000
shares, no par value, of which 14,806 shares were issued and outstanding at
December 31, 1995. As of December 31, 1995, there were two series of non-voting
preferred stock issued. Series B-1 consisted of 5,306 shares that had
non-cumulative dividends as declared by Mercantile's Board of Directors. Series
B-2 represented 9,500 shares with a cumulative annual dividend of $85 per
share. The Series B-1 and B-2 preferred shares were redeemed by the Corporation
in March 1996. At December 31, 1997, 2,000,000 shares were reserved for
issuance pursuant to the Preferred Share Purchase Rights Plan.
<PAGE>
Preferred Share Purchase Rights Plan:
One Preferred Share Purchase Right ("Right") was attached to each share of
common stock and trades automatically with such shares. The Rights, which could
have been redeemed by the Board of Directors in certain circumstances, expired
by their terms on June 3, 1998, and had no voting rights. Mercantile adopted a
new Shareholder Rights Plan on June 4, 1998 which has preferred share purchase
rights that are substantially similar to those that expired on June 3, 1998.
Under the Preferred Share Purchase Rights Plan that expired on June 3, 1998,
the Rights would have become exercisable and traded separately from the common
stock 10 days after a person or a group became the beneficial owner or
announced an intention to commence a tender offer for 20% or more of the
Corporation's outstanding common stock. When exercisable, each Right entitled
the registered holder to purchase from the Corporation 1/100 of a share of
Series A Junior Participating Preferred Stock for $100 per 1/100 of a preferred
share.
In the event a person acquired beneficial ownership of 20% or more of the
Corporation's common stock, holders of Rights (other than the acquiring person
or group) could have purchased, at the Rights' then current exercise price,
common stock of the Corporation having a value at that time equal to twice the
exercise price. In the event the Corporation merged into or otherwise
transferred 50% or more of its assets or earnings power to any person after the
Rights became exercisable, holders of Rights may have purchased, at the then
current exercise price, common stock of the acquiring entity having a value at
that time equal to twice the exercise price.
Stock Options:
The Corporation had stock options outstanding under various plans at December
31, 1997, including plans assumed in acquisitions. The original Mercantile
plans provide for the granting to employees of the Corporation and its
subsidiaries of options to purchase shares of common stock of the Corporation
over periods of up to 10 years at a price not less than the market value of the
shares at the date the options are granted. The plans provide for the granting
of options that either qualify
19
<PAGE>
<PAGE> 21
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
or do not qualify as Incentive Stock Options as defined by Section 422 of the
Internal Revenue Code of 1986, as amended. During 1997, the Corporation
increased the number of shares available for issuance under stock incentive
plans by 5,625,000 shares. As of December 31, 1997, there were 6,334,409
options available for grant. The per share price range for options exercisable
was $3.61 to $45.21 as of December 31, 1997.
The following table summarizes stock options outstanding as of December 31,
1997:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------------
RANGE OF WEIGHTED AVERAGE
EXERCISE REMAINING WEIGHTED AVERAGE
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
- ------------ ------------ ------------------- ---------------------
<S> <C> <C> <C>
$ 3.61-21.57 2,437,352 3.08 yrs. $14.07
21.58-26.74 2,359,633 5.62 22.99
26.75-34.25 1,044,413 6.75 30.94
34.26-34.92 1,287,486 9.05 34.92
34.93-58.31 309,949 7.20 38.69
---------
3.61-58.31 7,438,833 5.60 23.90
=========
- ---------------------------------------------------------------------------------------------
</TABLE>
Changes in options outstanding were as follows:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- -----------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 6,060,565 $14.89
Granted 1,275,306 23.85
Exercised (1,039,531) 9.18
Canceled (148,834) 21.02
Assumed 147,537 10.53
----------
BALANCE AT DECEMBER 31, 1995 6,295,043 17.36
Granted 1,066,576 28.90
Exercised (826,963) 10.74
Canceled (156,318) 24.79
Assumed 76,488 15.27
----------
BALANCE AT DECEMBER 31, 1996 6,454,826 19.91
GRANTED 1,889,201 34.72
EXERCISED (1,407,609) 17.20
CANCELED (108,121) 27.19
ASSUMED 610,536 17.72
----------
BALANCE AT DECEMBER 31, 1997 7,438,833 23.90
==========
- ---------------------------------------------------------------------------------------------
</TABLE>
The numbers of shares exercisable under stock options as of December 31,
1997, 1996 and 1995 were 4,936,522, 3,436,204 and 3,229,199, respectively, with
a weighted average exercise price of $19.47, $15.71 and $13.11, respectively.
<PAGE>
The fair value of the option grants, excluding options from Mark Twain for
prior years, was estimated on the date of grant using an option-pricing model
based upon the following assumptions:
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Dividend yield 2.85% 3.30% 3.30%
Expected volatility 29.80 31.70 31.70
Average risk-free interest rate 6.13 5.15 7.28
Expected option life from vesting date 1.40 YRS. 1.26 yrs. 1.26 yrs.
Weighted per share average fair value of stock options
granted $8.26 $7.15 $6.32
- ----------------------------------------------------------------------------------------------
</TABLE>
The fair value of Mark Twain's stock options for prior years was estimated on
the date of grant using an option-pricing model based upon the following
assumptions: dividend yield of 3.28%; expected volatility of 17%; average
risk-free interest rate of 6%; and expected option life of 4.5 years from the
vesting date. The weighted average fair value of stock options granted in 1995
and 1996 was $3.43 and $4.89, respectively.
The Corporation applies Accounting Principles Board Opinion 25 in accounting
for its stock option plans. The compensation cost that has been charged against
income for stock-based compensation plans was $5,984,000, $4,081,000 and
$3,628,000 for 1997, 1996 and 1995, respectively. Had the Corporation adopted
FAS 123's optional accounting method, the Corporation's net income and earnings
per share would have been reduced to the pro forma amounts noted below:
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
AS REPORTED PRO FORMA
(Thousands except per share data)
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
NET INCOME $246,822 $240,132
BASIC EARNINGS PER SHARE 1.76 1.72
DILUTED EARNINGS PER SHARE 1.73 1.68
YEAR ENDED DECEMBER 31, 1996
Net income $284,453 $280,514
Basic earnings per share 2.12 2.09
Diluted earnings per share 2.09 2.06
YEAR ENDED DECEMBER 31, 1995
Net income $318,155 $315,626
Basic earnings per share 2.37 2.35
Diluted earnings per share 2.33 2.31
- ---------------------------------------------------------------------------------------------
</TABLE>
The effect of applying FAS 123 as presented above is not representative of
the effects on pro forma net income for future years.
Debt and Dividend Restrictions:
Consolidated retained earnings at December 31, 1997 were not restricted under
any agreement as to payment of dividends or reacquisition of common stock.
20
<PAGE>
<PAGE> 22
The primary source of funds for dividends paid by the Corporation to its
shareholders is dividends received from bank subsidiaries. At December 31,
1997, approximately $230,019,000 of the equity of bank subsidiaries was
available for distribution as dividends to the Parent Company without prior
regulatory approval or without reducing the capital of the respective
subsidiary banks below present minimum standards. An additional $263,899,000
would be available for loans to the Parent Company under Federal Reserve
regulations. The remaining equity of bank subsidiaries approximating
$2,090,925,000 was restricted as to transfers to the Parent Company.
NOTE P
REGULATORY MATTERS
The Corporation and its subsidiary banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Corporation's Supplemental Consolidated
Financial Statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Mercantile and its subsidiary banks
must meet specific capital guidelines that involve quantitative measures of the
Corporation and its subsidiary banks' assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
Mercantile and subsidiary banks' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulations to ensure capital adequacy
require the Corporation and its subsidiary banks to maintain minimum amounts
and ratios, as set forth in the table below, of Tier I and total capital to
risk-weighted assets, and of Tier I capital to average assets, the leverage
ratio. Management believes, as of December 31, 1997, the Corporation and its
subsidiary banks met all their capital adequacy requirements.
As of November 30, 1997, the date of the most recent notification from
regulatory agencies, the subsidiary banks were categorized as well capitalized
under the regulatory framework. There are no conditions or events since that
notification that management believes have changed the subsidiary banks'
category.
The actual and required capital amounts and ratios as of December 31, 1997
and 1996 for the Corporation and Mercantile Bank N.A. are listed in the
following table:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------------- ---------------------------------------------
MINIMUM CAPITAL MINIMUM CAPITAL
ACTUAL REQUIREMENTS ACTUAL REQUIREMENTS
--------------------- ---------------------- --------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------- --------- ---------- ---------- ---------- --------- ---------- ----------
($ in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tier I Capital (to
risk-weighted assets)
Corporation $2,104,078 9.40% $ 894,913 4.00% $2,049,795 11.50% $ 713,258 4.00%
Mercantile Bank N.A. 1,210,872 10.86 446,178 4.00 499,602 9.51 210,225 4.00
Total Capital (to
risk-weighted assets)
Corporation $2,778,794 12.42 1,789,826 8.00 $2,500,154 14.02 1,426,516 8.00%
Mercantile Bank N.A. 1,406,983 12.61 892,356 8.00 620,308 11.80 420,450 8.00
Leverage (to average
assets)
Corporation $2,104,078 6.52 1,291,055 4.00 $2,049,795 8.52 962,265 4.00%
Mercantile Bank N.A. 1,210,872 7.33 660,542 4.00 499,602 6.97 286,873 4.00
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE Q
CONCENTRATIONS OF CREDIT
The Corporation's primary market area is the state of Missouri and the lower
Midwest. At December 31, 1997, approximately 81% of the total loan portfolio,
and 88% of the commercial and commercial real estate loan portfolio, were to
borrowers within this region. The diversity of the region's economic base tends
to provide a stable lending environment.
Real estate constituted the only other area of significant concentration of
credit risk. Real estate-related financial instruments (loans, commitments and
standby letters of credit) composed 53% of all such instruments of the
Corporation. However, of this total, approximately 68% was consumer-related in
the form of residential real estate mortgages and home equity lines of credit.
21
<PAGE>
<PAGE> 23
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
The Corporation is, in general, a secured lender. At December 31, 1997,
approximately 94% of the loan portfolio was secured. Collateral is required in
accordance with the normal credit evaluation process based upon the
creditworthiness of the customer and the credit risk associated with the
particular transaction.
NOTE R
FINANCIAL INSTRUMENTS
Fair Values:
Fair values for financial instruments are management's estimates of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, certain
financial instruments and all non-financial instruments are excluded from the
fair value disclosure requirements of FAS 107, "Disclosures about Fair Value of
Financial Instruments." Therefore, the fair values presented below should not
be construed as the underlying value of the Corporation.
The following methods and assumptions were used in estimating fair values for
financial instruments.
Cash and Due from Banks, Short-term Investments and Short-term Borrowings:
The carrying values reported in the Supplemental Consolidated Balance Sheet
approximated fair values.
Investments in Debt and Equity Securities: Fair values for held-to-maturity
securities were based upon quoted market prices where available. Fair values
for trading and available-for-sale securities, which also were the amounts
reported in the Supplemental Consolidated Balance Sheet, were based on quoted
market prices where available. If quoted market prices were not available, fair
values were based upon quoted market prices of comparable instruments.
Loans and Leases: The fair values for most fixed-rate loans were estimated by
utilizing discounted cash flow analysis, applying interest rates currently
being offered for similar loans to borrowers with similar risk profiles. The
discount rates used, therefore, include a credit risk premium. The fair values
of variable-rate loans and all residential mortgages were estimated by
utilizing the same type of discounted cash flows, but over a range of interest
rate scenarios, in order to incorporate the value of the options imbedded in
these assets. Loans with similar characteristics were aggregated for purposes
of these calculations.
Deposits: The fair values disclosed for deposits generally payable on demand
(i.e., interest bearing and non-interest bearing demand, savings and money
market accounts) were considered equal to their respective carrying amounts as
reported in the Supplemental Consolidated Balance Sheet. Fair values for
certificates of deposit and foreign deposits were estimated using a discounted
cash flow calculation that applied interest rates generally offered on similar
certificates to a schedule of aggregated expected monthly maturities of time
deposits. The fair value estimate of the deposit portfolio has not been
adjusted for any value derived from the retention of those deposits for an
expected future period of time. That component, commonly referred to as core
deposit premium, was estimated to be approximately $340,000,000 to $720,000,000
at December 31, 1997 and was neither considered in the fair value amounts below
nor recorded as an intangible asset on the Supplemental Consolidated Balance
Sheet.
Bank Notes and Long-term Debt: The fair value of publicly traded debt was
based upon quoted market prices, where available, or upon quoted market prices
of comparable instruments. The fair values of bank notes and long-term debt
were estimated using discounted cash flow analysis, based on the Corporation's
current incremental borrowing rates for similar types of borrowing
arrangements.
Off-Balance-Sheet Instruments: Fair values of foreign exchange contracts,
interest rate contracts and when-issued securities were determined from quoted
market prices. Fair values of commitments to extend credit, standby letters of
credit and commercial letters of credit were based on fees currently charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standings.
22
<PAGE>
<PAGE> 24
The estimated fair values of the Corporation's financial instruments were as
follows:
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
----------------------- ----------------------- -----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
(Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and due from banks and short-term
investments $ 1,886,280 $ 1,886,280 $ 1,856,314 $ 1,856,314 $ 1,730,608 $ 1,730,608
Trading securities 70,536 70,536 31,361 31,361 67,283 67,283
Held-to-maturity securities 335,279 341,954 656,721 661,632 335,141 340,130
Available-for-sale securities 8,059,066 8,059,066 4,741,677 4,741,677 5,223,660 5,223,660
Net loans and leases 21,077,790 21,525,593 16,679,536 17,129,917 15,322,946 15,860,339
FINANCIAL LIABILITIES
Deposits 24,809,455 25,112,466 19,784,845 19,999,832 18,463,655 18,722,448
Short-term borrowings 3,678,540 3,678,540 2,132,674 2,132,674 2,053,909 2,053,909
Bank notes and long-term debt 1,693,171 1,709,813 502,675 506,954 620,609 639,823
OFF-BALANCE-SHEET
Foreign exchange contracts purchased (5,880) (428) 2,389
Foreign exchange contracts sold 4,367 39 (2,022)
Interest rate contracts 17,244 (143) 2,009
When-issued securities purchased (2,578) -- --
When-issued securities sold 2,509 -- --
Commitments to extend credit (37,790) (17,779) (12,729)
Standby letters of credit (3,862) (2,879) (2,955)
Commercial letters of credit (1,998) (5,406) (4,480)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Off-Balance-Sheet Risk:
The Corporation is, in the normal course of business, a party to certain
off-balance-sheet financial instruments. These instruments, which include
commitments to extend credit, standby letters of credit, interest rate options
written, interest rate swaps and foreign exchange contracts, are used by the
Corporation to meet the financing needs of its customers and to reduce its own
exposure to interest rate fluctuations. They involve varying degrees of credit,
interest rate and liquidity risk, but do not represent unusual risks for the
Corporation. Management does not anticipate any significant losses as a result
of these transactions.
The notional or contract amounts of financial instruments with off-
balance-sheet credit risk were as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Commitments to extend credit
Commercial $4,175,423 $3,325,464 $2,593,784
Consumer 2,270,781 6,176,412 5,658,722
---------- ---------- ----------
Total $6,446,204 $9,501,876 $8,252,506
========== ========== ==========
Standby letters of credit $ 442,245 $ 462,082 $ 426,575
========== ========== ==========
Interest rate contracts $1,021,563 $ 391,000 $ 192,000
========== ========== ==========
When-issued securities:
Commitments to purchase $ 178,475 -- --
Commitments to sell 230,981 -- --
- ------------------------------------------------------------------------------------------------
</TABLE>
The Corporation's maximum exposure to credit loss under commitments to extend
credit and standby letters of credit is the equivalent of the contractual
amount of those instruments. The same credit policies are used by the
Corporation in granting commitments and conditional obligations as are used in
the extension of credit.
Commitments to extend credit are legally binding agreements to lend to a
borrower as long as the borrower performs in accordance with the terms of the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. As
23
<PAGE>
<PAGE> 25
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
many of the commitments are expected to expire without being drawn upon, the
total commitment amount does not necessarily represent future cash
requirements. Included in consumer commitments are the unused portions of lines
of credit for credit card and home equity credit line loans.
Standby letters of credit are commitments issued by the Corporation to
guarantee specific performance of a customer to a third party.
Collateral is required for both commitments and standby letters of credit in
accordance with the normal credit evaluation process based upon the
creditworthiness of the customer and the credit risk associated with the
particular transaction. Collateral held varies but may include commercial real
estate, accounts receivable, inventory or equipment.
Included in interest rate contracts are interest rate swaps and floors.
Derivative Financial Instruments:
Held or Issued for Trading Purposes:
In the normal course of business, the Corporation maintains minimal trading
positions in a variety of derivative financial instruments. Most of the
Corporation's trading activities are customer oriented, with trading positions
established to meet the financing and foreign exchange transaction needs of
customers. This activity complements the Corporation's traditional money and
capital markets trading business, which also exists to meet customers' demands.
Net revenue recognized on interest rate contracts and foreign exchange
contracts totaled $4,615,000, $3,916,000 and $3,084,000 in 1997, 1996 and 1995,
respectively. The notional amounts of interest rate options written, foreign
exchange contracts purchased and foreign exchange contracts sold were as
follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
Interest rate options written $ 13,533 $ 16,456 $ 25,225
Foreign exchange contracts purchased 328,127 243,800 219,526
Foreign exchange contracts sold 291,995 193,179 172,073
- ------------------------------------------------------------------------------------------------
</TABLE>
These transactions are generally entered into on behalf of customers and are
simultaneously hedged by the Corporation. As a consequence, these matched
transactions do not represent exposure to market risk. The Corporation manages
the potential credit exposure through established credit approvals, risk
control limits and other monitoring procedures. Credit risk to the Corporation
could result from non-performance by a counterparty to a contract; however,
currently that credit risk is minimal.
Held or Issued for Purposes Other Than Trading:
The Corporation uses off-balance-sheet derivative financial instruments such
as interest rate swaps and floors to manage interest rate risk. The
Corporation's exposure to interest rate risk stems from the mismatch between
the sensitivity to movements in interest rates of the Corporation's assets and
liabilities. The use of derivatives to manage interest rate risk is primarily
for interest sensitivity adjustments. Interest rate swaps are generally used to
lengthen the interest rate sensitivity of short-term assets and to shorten the
repricing characteristics of longer term liabilities. Gains or losses are used
to adjust the basis of the related asset or liability, and interest
differentials are adjustments of the related interest income or expense.
Of the commitments to extend credit discussed in the preceding paragraphs,
$554,396,000, $346,850,000 and $197,186,000 were entered into with fixed rates
for commercial loan customers at December 31, 1997, 1996 and 1995,
respectively. Fixed-rate commitments for consumer (residential mortgage) loan
customers totaled $231,204,000 at December 31, 1997, $77,727,000 at December
31, 1996 and $64,583,000 at December 31, 1995. Fixed-rate commitments to extend
credit are defined as fixed-rate commercial loan commitments with remaining
maturities greater than one year, fixed-rate residential mortgage loan
commitments, and adjustable-rate residential mortgage loan commitments for
loans with adjustment periods greater than one year.
Fixed-rate mortgage loans held for resale are partially hedged with contracts
for forward delivery in the secondary mortgage market. This hedging activity is
designed to protect the Corporation from changes in interest rates. Gains and
losses from the hedging transactions on mortgage loans held for resale are
deferred and included in the cost of the loans for determining the gain or loss
when the loans are sold. Forward delivery contracts outstanding totaled
$85,585,000 as of December 31, 1997, $62,823,000 as of December 31, 1996 and
$68,000,000 as of December 31, 1995.
<PAGE>
NOTE S
CONTINGENT LIABILITIES
In the ordinary course of business, there are various legal proceedings
pending against the Corporation and its subsidiaries. Management, after
consultation with legal counsel, is of the opinion that the ultimate resolution
of these proceedings will have no material adverse effect on the consolidated
financial condition or results of operations of the Corporation.
NOTE T
PARENT COMPANY FINANCIAL INFORMATION
Following are the condensed financial statements of Mercantile Bancorporation
Inc. (Parent Company Only) for the periods indicated.
For the Statement of Cash Flows (Parent Company Only), cash and short-term
investments were considered cash equivalents. Interest paid on commercial paper
and long-term debt was $35,494,000, $12,420,000 and $12,828,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
24
<PAGE>
<PAGE> 26
STATEMENT OF INCOME
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries $324,884 $444,136 $215,580
Other interest and dividends 11,386 4,359 4,355
Management fees 21,404 16,987 13,637
Other 6,602 5,159 11,702
-------- -------- --------
Total Income 364,276 470,641 245,274
EXPENSE
Interest on commercial paper 951 987 1,249
Interest on long-term debt and mandatorily redeemable
preferred securities 38,243 11,681 11,697
Personnel expense 32,889 18,503 16,869
Intangible asset amortization 30,615 6,046 4,284
Other operating expenses 115,534 40,326 8,126
-------- -------- --------
Total Expense 218,232 77,543 42,225
-------- -------- --------
INCOME BEFORE INCOME TAX BENEFIT AND EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES 146,044 393,098 203,049
Income tax benefit 48,458 16,514 2,926
-------- -------- --------
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES 194,502 409,612 205,975
Equity in undistributed income of subsidiaries 52,320 (125,159) 112,180
-------- -------- --------
NET INCOME $246,822 $284,453 $318,155
======== ======== ========
- ---------------------------------------------------------------------------------------------
</TABLE>
BALANCE SHEET
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
ASSETS
Cash $ 15 $ 33 $ 21
Short-term investments 224,230 128,480 40,358
Available-for-sale securities 28,578 30,167 22,669
Investment in subsidiaries 2,685,587 2,194,274 2,250,784
Intangible assets 723,785 126,239 67,480
Loans and advances to subsidiaries 1,510 19,405 16,950
Other assets 36,929 9,316 12,203
---------- ---------- ----------
Total Assets $3,700,634 $2,507,914 $2,410,465
========== ========== ==========
LIABILITIES
Commercial paper $ 1,510 $ 19,405 $ 16,950
Long-term debt 651,153 150,000 150,000
Company-obligated mandatorily redeemable preferred
securities 150,000 -- --
Other liabilities 135,669 75,266 32,670
---------- ---------- ----------
Total Liabilities 938,332 244,671 199,620
SHAREHOLDERS' EQUITY 2,762,302 2,263,243 2,210,845
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $3,700,634 $2,507,914 $2,410,465
========== ========== ==========
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
- ---------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
(Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 246,822 $ 284,453 $ 318,155
Adjustments to reconcile net income to net cash provided
by operating activities
Net income of subsidiaries (377,204) (318,977) (327,760)
Dividends from subsidiaries 312,072 421,299 211,485
Other, net 79,097 33,386 363
--------- --------- ---------
Net Cash Provided by Operating Activities 260,787 420,161 202,243
INVESTING ACTIVITIES
Investments in debt and equity securities
Purchases (4,554) (8,339) (9,914)
Proceeds from maturities 4,100 -- 4,501
Contributions of capital to subsidiaries -- -- (70,352)
Acquisitions (386,850) (33,082) (6,700)
Other, net 8,846 (2,943) (3,601)
--------- --------- ---------
Net Cash Used by Investing Activities (378,458) (44,364) (86,066)
FINANCING ACTIVITIES
Cash dividends paid (132,535) (101,907) (69,562)
Net issuance of common stock for employee incentive plans 11,762 (327) 6,839
Purchase of treasury stock (299,063) (175,036) (85,474)
Redemption of preferred stock -- (12,684) --
Issuance of long-term debt 501,859 -- --
Issuance of mandatorily redeemable preferred securities 150,000 -- --
Principal payments on long-term debt -- -- (156)
Net change in commercial paper (17,895) 2,455 (9,850)
Other, net (725) (164) --
--------- --------- ---------
Net Cash Provided (Used) by Financing Activities 213,403 (287,663) (158,203)
--------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents 95,732 88,134 (42,026)
Cash and Cash Equivalents at Beginning
of Year 128,513 40,379 82,405
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 224,245 $ 128,513 $ 40,379
========= ========= =========
- ---------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick LLP [logo]
10 South Broadway
Suite 900
St. Louis, MO 63102-1761
Shareholders and Board of Directors
Mercantile Bancorporation Inc.:
We have audited the accompanying supplemental consolidated
balance sheets of Mercantile Bancorporation Inc. and
subsidiaries as of December 31, 1997, 1996, and 1995, and
the related supplemental consolidated statements of income,
changes in shareholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1997.
These supplemental consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these
supplemental consolidated 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.
The supplemental consolidated financial statements give
retroactive effect to the mergers of Firstbank of Illinois
Co. and CBT Corporation on July 1, 1998, which have been
accounted for as poolings of interests as described in the
notes to the supplemental consolidated financial
statements. Generally accepted accounting principles
proscribe giving effect to a consummated business
combination accounted for by the pooling of interests
method in financial statements that do not include the date
of consummation. These financial statements do not extend
through the date of consummation. However, they will become
the historical consolidated financial statements of
Mercantile Bancorporation Inc. and subsidiaries after
financial statements covering the date of consummation of
the business combination are issued.
In our opinion, the supplemental consolidated financial
statements referred to above present fairly, in all
material respects, the financial position of Mercantile
Bancorporation Inc. and subsidiaries as of December 31,
1997, 1996, and 1995, and the results of their operations
and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity
with generally accepted accounting principles applicable
after financial statements are issued for a period which
includes the date of consummation of the business
combination.
/s/ KPMG Peat Marwick LLP
October 7, 1998
<PAGE>
<PAGE> 28
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note A to Supplemental Interim Unaudited Consolidated Financial Statements --
Basis of Presentation
Effective July 1, 1998, Mercantile Bancorporation Inc. ("Corporation")
acquired Firstbank of Illinois Co. ("Firstbank") and CBT Corporation ("CBT"),
in transactions accounted for as poolings-of-interests. These Supplemental
Interim Unaudited Consolidated Financial Statements restate the Corporation's
historical interim consolidated financial statements to reflect the Firstbank
and CBT transactions for the following dates:
- As of or for the three months and six months ended June 30, 1998
and 1997
- As of or for the three months ended March 31, 1998 and 1997
The Supplemental Unaudited Interim Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
<PAGE>
<PAGE> 29
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $442,332 $365,300
Investments in debt and equity securities
Trading 2,065 1,165
Taxable 135,941 76,716
Tax-exempt 6,111 6,685
-------- --------
Total Investments in Debt and Equity
Securities 144,117 84,566
Due from banks--interest bearing 3,093 1,400
Federal funds sold and repurchase agreements 3,638 3,367
-------- --------
Total Interest Income 593,180 454,633
INTEREST EXPENSE
Interest bearing deposits 229,803 172,591
Foreign deposits 7,617 4,717
Short-term borrowings 52,329 25,037
Bank notes 2,323 2,540
Long-term debt and mandatorily redeemable
preferred securities 28,387 7,707
-------- --------
Total Interest Expense 320,459 212,592
-------- --------
NET INTEREST INCOME 272,721 242,041
PROVISION FOR POSSIBLE LOAN LOSSES 8,537 20,090
-------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 264,184 221,951
OTHER INCOME
Trust 28,128 24,716
Service charges 28,244 25,178
Investment banking and brokerage 11,066 8,721
Mortgage banking 5,943 3,515
Gain on sale of mortgage servicing rights 23,155 --
Credit card fees 3,525 5,563
Securitization revenue 4,523 7,292
Securities gains 4,453 1,046
Miscellaneous 27,914 20,327
-------- --------
Total Other Income 136,951 96,358
OTHER EXPENSE
Salaries 102,631 88,077
Employee benefits 22,547 21,896
Net occupancy 16,184 14,324
Equipment 20,858 15,409
Intangible asset amortization 14,596 4,810
Miscellaneous 43,722 42,210
-------- --------
Total Other Expense 220,538 186,726
-------- --------
INCOME BEFORE INCOME TAXES 180,597 131,583
INCOME TAXES 65,738 46,270
-------- --------
NET INCOME $114,859 $ 85,313
======== ========
PER SHARE DATA
Basic earnings per share $.76 $.64
Diluted earnings per share .75 .63
Dividends declared .31 .287
</TABLE>
<PAGE>
<PAGE> 30
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED BALANCE SHEET (UNAUDITED)
(THOUSANDS)
<CAPTION>
MARCH 31 MARCH 31
1998 1997
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,316,663 $ 1,043,305
Due from banks--interest bearing 280,676 123,209
Federal funds sold and repurchase agreements 336,417 261,622
Investments in debt and equity securities
Trading 125,680 65,997
Available-for-sale (Amortized cost of $8,784,082 and
$4,952,756, respectively) 8,829,585 4,942,895
Held-to-maturity (Estimated fair value of $314,356 and
$621,950, respectively) 307,234 619,386
----------- -----------
Total Investments in Debt and Equity Securities 9,262,499 5,628,278
Loans held-for-sale 249,407 70,547
Loans and leases, net of unearned income 21,513,860 17,108,201
----------- -----------
Total Loans and Leases 21,763,267 17,178,748
Reserve for possible loan losses (293,565) (259,142)
----------- -----------
Net Loans and Leases 21,469,702 16,919,606
Bank premises and equipment 542,774 435,059
Intangible assets 823,955 219,028
Other assets 1,116,631 468,366
----------- -----------
Total Assets $35,149,317 $25,098,473
=========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 3,834,599 $ 3,227,581
Interest bearing 20,935,126 16,319,535
Foreign 463,426 277,560
----------- -----------
Total Deposits 25,233,151 19,824,676
Federal funds purchased and repurchase agreements 2,142,440 1,777,950
Other short-term borrowings 1,656,666 277,411
Bank notes 25,000 175,000
Long-term Federal Home Loan Bank advances 1,447,362 31,800
Other long-term debt 789,588 290,546
Company-obligated mandatorily redeemable preferred
securities of Mercantile Capital Trust I 150,000 150,000
Other liabilities 861,944 368,158
----------- -----------
Total Liabilities 32,306,151 22,895,541
Commitments and contingent liabilities -- --
<CAPTION>
MARCH 31 MARCH 31
1998 1997
-------- --------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock--no par value
Shares authorized 5,000 5,000
Shares issued and outstanding -- -- -- --
Common stock--$.01 par value at March 31, 1998
and $5.00 at March 31, 1997
Shares authorized 200,000 200,000
Shares issued 153,326 137,037 1,535 685,183
Capital surplus 1,065,295 15,107
Retained earnings 1,840,855 1,688,324
Accumulated other comprehensive income 32,740 (4,431)
Treasury stock, at cost 1,845 5,066 (97,259) (181,251)
----------- -----------
Total Shareholders' Equity 2,843,166 2,202,932
----------- -----------
Total Liabilities and Shareholders'
Equity $35,149,317 $25,098,473
=========== ===========
</TABLE>
<PAGE>
<PAGE> 31
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
($ IN THOUSANDS)
<CAPTION>
COMMON STOCK
---------------------- TOTAL
OUTSTANDING CAPITAL RETAINED TREASURY SHAREHOLDERS'
SHARES DOLLARS SURPLUS EARNINGS<F*> STOCK EQUITY
----------- ------- ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 134,174,597 $ 683,832 $ 16,091 $1,647,521 $ (84,201) $2,263,243
Net income 128,067 128,067
Common dividends declared:
Mercantile Bancorporation Inc.
--$.574 per share (57,738) (57,738)
Pooled companies prior to acquisition (20,415) (20,415)
Issuance of common stock in acquisition
of Regional Bancshares, Inc. 900,625 (474) 361 28,813 28,700
Change in par value of common stock
from $5.00 per share to $.01 per share (676,575) 676,575 --
Issuance of common stock for:
Employee incentive plans 369,993 388 2,157 3,387 5,932
Convertible notes 73,408 22 794 816
Other comprehensive income (1,219) (1,219)
Purchase of treasury stock (6,724,699) (259,050) (259,050)
Reissuance and retirement of treasury
stock (7,396) (42,950) 50,346 --
Pre-merger transactions of pooled
companies and other 440,485 1,089 6,671 275 570 8,605
----------- --------- ---------- ---------- --------- ----------
BALANCE AT JUNE 30, 1997 129,234,409 $ 1,360 $ 658,864 $1,696,852 $(260,135) $2,096,941
=========== ========= ========== ========== ========= ==========
BALANCE AT DECEMBER 31, 1997 148,712,307 $ 1,489 $1,016,844 $1,749,974 $ (6,005) $2,762,302
Net income 222,006 222,006
Common dividends declared:
Mercantile Bancorporation Inc.
--$.62 per share (83,094) (83,094)
Pooled companies prior to acquisition (10,464) (10,464)
Issuance of common stock in
acquisition of:
HomeCorp, Inc. 854,760 9 6,727 13,792 20,528
Horizon Bancorp, Inc. 2,549,970 25 10,755 35,615 357 46,752
Issuance of common stock for:
Employee incentive plans 1,281,512 10 35,808 5,746 41,564
Convertible notes 13,380 1 148 149
Other comprehensive income 4,738 4,738
Purchase of treasury stock (1,778,125) (98,452) (98,452)
Pre-merger transactions of pooled
companies 274,551 3 4,112 4,115
----------- --------- ---------- ---------- --------- ----------
BALANCE AT JUNE 30, 1998 151,908,355 $ 1,537 $1,074,394 $1,932,567 $ (98,354) $2,910,144
=========== ========= ========== ========== ========= ==========
<FN>
<F*>Includes accumulated other comprehensive income.
</TABLE>
<PAGE>
<PAGE> 32
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(THOUSANDS)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 114,859 $ 85,313
Adjustments to reconcile net income to net cash provided by operating activities
Provision for possible loan losses 8,537 20,090
Depreciation and amortization 18,287 13,743
Provision for deferred income taxes (credits) (2,305) 719
Net change in loans held-for-sale (146,378) 4,830
Net change in trading securities 13,575 (34,383)
Net change in accrued interest receivable 14,722 4,523
Net change in accrued interest payable 8,449 1,961
Other, net (41,856) 15,089
----------- ----------
Net Cash Provided by Operating Activities (12,110) 111,885
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading securities
Purchases (2,474,948) (887,648)
Proceeds from maturities 1,332,649 640,207
Proceeds from sales of available-for-sale securities 606,143 177,770
Net change in loans and leases 243,072 (240,487)
Purchases of loans and leases (127,651) (33,686)
Proceeds from sale of mortgage servicing rights 26,330 --
Proceeds from sales of loans and leases 205,855 39,991
Purchases of premises and equipment (20,392) (16,750)
Proceeds from sales of premises and equipment 3,830 1,527
Proceeds from sales of foreclosed property 9,975 7,484
Cash and cash equivalents from acquisitions, net of cash paid 34,448 (13,832)
Sale of banking offices, net of cash paid (3,524) --
Other, net 5,588 (4,574)
----------- ----------
Net Cash Used by Investing Activities (158,625) (329,998)
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing
demand and money market deposit accounts (92,349) (85,790)
Net change in time certificates of deposit under $100,000 (308,440) (74,167)
Net change in time certificates of deposit $100,000 and over 95,093 65,185
Net change in other time deposits 14,787 (27,024)
Net change in foreign deposits (122,013) 25,673
Net change in short-term borrowings 62,724 (86,768)
Issuance of bank notes -- --
Principal payments on bank notes (150,000) --
Issuance of long-term FHLB advances and other long-term debt 851,500 --
Issuance of company-obligated mandatorily redeemable
preferred securities -- 150,000
Principal payments on long-term debt (5,275) (5,282)
Cash dividends paid (44,580) (35,281)
Proceeds from issuance of common stock from employee
incentive plans 10,568 1,019
Purchase of treasury stock (93,804) (140,804)
Other, net -- 3,174
----------- ----------
Net Cash Provided by Financing Activities 218,211 (210,065)
----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,476 (428,178)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,886,280 1,856,314
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,933,756 $1,428,136
=========== ==========
</TABLE>
<PAGE>
<PAGE> 33
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Thousands)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
---- ----
<S> <C> <C>
NET INCOME $114,859 $ 85,313
Other comprehensive income, before tax
Holding gains (losses) on available-for-sale
securities 14,208 (20,474)
Less: Reclassification adjustment for securities
gains included in net income above (4,453) (1,046)
-------- --------
Other Comprehensive Income, Before Tax 9,755 (21,520)
Income Taxes Related to Other Comprehensive Income 3,414 (7,532)
-------- --------
OTHER COMPREHENSIVE INCOME, NET OF TAX 6,341 (13,988)
-------- --------
COMPREHENSIVE INCOME $121,200 $ 71,325
======== ========
</TABLE>
<PAGE>
<PAGE> 34
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $445,880 $376,819 $ 888,212 $742,119
Investments in debt and equity securities
Trading 2,846 1,637 4,911 2,802
Taxable 141,066 78,538 277,007 155,254
Tax-exempt 5,944 6,460 12,055 13,145
-------- -------- ---------- --------
Total Investments in Debt and Equity
Securities 149,856 86,635 293,973 171,201
Due from banks--interest bearing 3,483 1,969 6,576 3,369
Federal funds sold and repurchase agreements 4,868 4,134 8,506 7,501
-------- -------- ---------- --------
Total Interest Income 604,087 469,557 1,197,267 924,190
INTEREST EXPENSE
Interest bearing deposits 231,026 173,344 460,829 345,935
Foreign deposits 6,241 6,722 13,858 11,439
Short-term borrowings 47,924 30,190 100,253 55,227
Bank notes 368 2,633 2,691 5,173
Long-term debt and mandatorily redeemable
preferred securities 43,226 9,901 71,613 17,608
-------- -------- ---------- --------
Total Interest Expense 328,785 222,790 649,244 435,382
-------- -------- ---------- --------
NET INTEREST INCOME 275,302 246,767 548,023 488,808
PROVISION FOR POSSIBLE LOAN LOSSES<F*> 7,344 29,429 15,881 49,519
-------- -------- ---------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 267,958 217,338 532,142 439,289
OTHER INCOME
Trust 28,816 25,931 56,944 50,647
Service charges 29,073 24,993 57,317 50,171
Investment banking and brokerage 9,826 8,463 20,892 17,184
Mortgage banking 8,959 3,357 14,902 6,812
Gain on sale of mortgage servicing rights -- -- 23,155 --
Credit card fees 2,558 5,528 6,083 11,091
Securitization revenue 4,520 4,725 9,043 12,017
Securities gains 2,834 2,071 7,287 3,117
Miscellaneous 28,165 21,353 56,079 41,680
-------- -------- ---------- --------
Total Other Income 114,751 96,421 251,702 192,779
OTHER EXPENSE
Salaries 103,747 90,808 206,378 178,885
Employee benefits 18,032 19,899 40,579 41,795
Net occupancy 16,015 14,031 32,199 28,355
Equipment 21,255 16,602 42,113 32,011
Intangible asset amortization 14,462 5,094 29,058 9,904
Miscellaneous<F*> 51,215 95,930 94,937 138,140
-------- -------- ---------- --------
Total Other Expense 224,726 242,364 445,264 429,090
-------- -------- ---------- --------
INCOME BEFORE INCOME TAXES 157,983 71,395 338,580 202,978
INCOME TAXES<F*> 50,836 28,641 116,574 74,911
-------- -------- ---------- --------
NET INCOME $107,147 $ 42,754 $ 222,006 $128,067
======== ======== ========== ========
PER SHARE DATA
Basic earnings per share $.71 $.33 $1.47 $.97
Diluted earnings per share .69 .32 1.44 .96
Dividends declared .31 .287 .62 .574
<FN>
<F*>Includes the following nonrecurring amounts:
Provision for possible loan losses $ -- $ 6,540 $ -- $ 6,540
Miscellaneous expense -- 51,863 -- 51,863
Income tax benefit -- (15,977) -- (15,977)
-------- -------- ---------- --------
Impact on Net Income $ -- $(42,426) $ -- $ 42,426
======== ======== ========== ========
</TABLE>
<PAGE>
<PAGE> 35
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED BALANCE SHEET (UNAUDITED)
(THOUSANDS)
<CAPTION>
JUNE 30 JUNE 30
1998 1997
------- -------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,446,296 $ 1,169,001
Due from banks--interest bearing 233,686 190,749
Federal funds sold and repurchase agreements 261,442 412,971
Investments in debt and equity securities
Trading 124,839 73,493
Available-for-sale (Amortized cost of $8,915,489 and
$5,073,169, respectively) 8,959,632 5,051,225
Held-to-maturity (Estimated fair value of $256,849 and
$399,092, respectively) 251,040 391,165
----------- -----------
Total Investments in Debt and Equity Securities 9,335,511 5,515,883
Loans held-for-sale 205,236 64,183
Loans and leases, net of unearned income 21,569,778 17,366,893
----------- -----------
Total Loans and Leases 21,775,014 17,431,076
Reserve for possible loan losses (292,795) (263,237)
----------- -----------
Net Loans and Leases 21,482,219 17,167,839
Bank premises and equipment 538,287 452,616
Intangible assets 811,070 223,886
Other assets 636,399 493,862
----------- -----------
Total Assets $34,744,910 $25,626,807
=========== ===========
LIABILITIES
Deposits
Non-interest bearing $ 3,900,600 $ 3,445,793
Interest bearing 20,316,577 15,731,439
Foreign 328,641 270,908
----------- -----------
Total Deposits 24,545,818 19,448,140
Federal funds purchased and repurchase agreements 1,849,787 2,162,567
Other short-term borrowings 1,561,572 455,899
Bank notes 25,000 175,000
Long-term Federal Home Loan Bank advances 2,510,845 27,687
Other long-term debt 789,525 789,776
Company-obligated mandatorily redeemable preferred
securities of Mercantile Capital Trust I 150,000 150,000
Other liabilities 402,219 320,797
----------- -----------
Total Liabilities 31,834,766 23,529,866
Commitments and contingent liabilities -- --
<CAPTION>
JUNE 30 JUNE 30
1998 1997
------- -------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock--no par value
Shares authorized 5,000 5,000
Shares issued and outstanding -- -- -- --
Common stock--$.01 par value
Shares authorized 400,000 200,000
Shares issued 153,699 136,055 1,537 1,360
Capital surplus 1,074,394 658,864
Retained earnings 1,901,396 1,688,524
Accumulated other comprehensive income 31,171 8,328
Treasury stock, at cost 1,791 6,821 (98,354) (260,135)
----------- -----------
Total Shareholders' Equity 2,910,144 2,096,941
----------- -----------
Total Liabilities and Shareholders'
Equity $34,744,910 $25,626,807
=========== ===========
</TABLE>
<PAGE>
<PAGE> 36
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
($ IN THOUSANDS)
<CAPTION>
COMMON STOCK
---------------------- TOTAL
OUTSTANDING CAPITAL RETAINED TREASURY SHAREHOLDERS'
SHARES DOLLARS SURPLUS EARNINGS<F*> STOCK EQUITY
----------- ------- ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 134,174,597 $ 683,832 $ 16,091 $1,647,521 $ (84,201) $2,263,243
Net income 85,313 85,313
Common dividends declared:
Mercantile Bancorporation Inc.
--$.287 per share (25,892) (25,892)
Pooled companies prior to acquisition (9,695) (9,695)
Issuance of common stock in acquisition
of Regional Bancshares, Inc. 900,625 (474) 361 28,813 28,700
Change in par value of common stock
from $5.00 per share to $.01 per share
Issuance of common stock for:
Employee incentive plans 148,870 300 (632) 2,596 2,264
Convertible notes 4,216 21 26 47
Other comprehensive income (13,988) (13,988)
Purchase of treasury stock (3,463,549) (129,029) (129,029)
Pre-merger transactions of pooled
companies and other 206,166 1,030 96 273 570 1,969
----------- --------- ---------- ---------- --------- ----------
BALANCE AT MARCH 31, 1997 131,970,975 $ 685,183 $ 15,107 $1,683,893 $(181,251) $2,202,932
=========== ========= ========== ========== ========= ==========
BALANCE AT DECEMBER 31, 1997 148,712,307 $ 1,489 $1,016,844 $1,749,974 $ (6,005) $2,762,302
Net income 114,859 114,859
Common dividends declared:
Mercantile Bancorporation Inc.
--$.31 per share (41,747) (41,747)
Pooled companies prior to acquisition (5,239) (5,239)
Issuance of common stock in
acquisition of:
HomeCorp, Inc. 854,760 9 6,727 13,792 20,528
Horizon Bancorp, Inc. 2,549,970 25 10,755 35,615 357 46,752
Issuance of common stock for:
Employee incentive plans 944,685 9 28,628 2,193 30,830
Convertible notes 7,722 1 86 87
Other comprehensive income 6,341 6,341
Purchase of treasury stock (1,750,000) (93,804) (93,804)
Pre-merger transactions of pooled
companies and other 161,545 2 2,255 2,257
----------- --------- ---------- ---------- --------- ----------
BALANCE AT MARCH 31, 1998 151,480,989 $ 1,535 $1,065,295 $1,873,595 $ (97,259) $2,843,166
=========== ========= ========== ========== ========= ==========
<FN>
<F*>Includes accumulated other comprehensive income.
</TABLE>
<PAGE>
<PAGE> 37
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 222,006 $ 128,067
Adjustments to reconcile net income to net cash provided by operating activities
Provision for possible loan losses 15,881 49,519
Depreciation and amortization 36,629 28,321
Provision for deferred income taxes (credits) (4,295) (4,157)
Net change in loans held-for-sale (102,207) 11,194
Net change in trading securities 4,326 (42,132)
Net change in accrued interest receivable 2,786 (6,527)
Net change in accrued interest payable (85) 2,242
Other, net (76,174) (53,930)
----------- -----------
Net Cash Provided by Operating Activities 98,867 112,597
INVESTING ACTIVITIES
Investments in debt and equity securities, other than trading securities
Purchases (4,319,287) (1,480,424)
Proceeds from maturities 2,582,417 1,175,989
Proceeds from sales of available-for-sale securities 1,122,789 405,278
Net change in loans and leases 13,408 (562,620)
Purchases of loans and leases (175,230) (98,135)
Proceeds from sale of mortgage servicing rights 26,330 --
Proceeds from sales of loans and leases 405,896 101,578
Purchases of premises and equipment (45,330) (47,980)
Proceeds from sales of premises and equipment 13,668 2,531
Proceeds from sales of foreclosed property 21,710 21,732
Cash and cash equivalents from acquisitions, net of cash paid 34,448 17,524
Sale of banking offices, net of cash paid (3,524) --
Other, net 11,799 (11,302)
----------- -----------
Net Cash Used by Investing Activities (310,906) (475,829)
FINANCING ACTIVITIES
Net change in non-interest bearing, savings, interest bearing
demand and money market deposit accounts (111,883) (152,393)
Net change in time certificates of deposit under $100,000 (587,014) (216,787)
Net change in time certificates of deposit $100,000 and over (52,152) (121,205)
Net change in other time deposits (4,472) (32,785)
Net change in foreign deposits (256,798) 19,021
Net change in short-term borrowings (308,528) 476,337
Issuance of bank notes -- --
Principal payments on bank notes (150,000) --
Issuance of long-term FHLB advances and other long-term debt 1,916,500 500,000
Issuance of company-obligated mandatorily redeemable
preferred securities -- 150,000
Principal payments on long-term debt (6,779) (9,396)
Cash dividends paid (91,212) (76,822)
Proceeds from issuance of common stock from employee
incentive plans 17,973 14,556
Purchase of treasury stock (98,452) (270,086)
Other, net -- (801)
----------- -----------
Net Cash Provided by Financing Activities 267,183 279,639
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 55,144 (83,593)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,886,280 1,856,314
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,941,424 $ 1,772,721
=========== ===========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
MERCANTILE BANCORPORATION INC. AND SUBSIDIARIES
SUPPLEMENTAL INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(Thousands)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME $107,147 $42,754 $222,006 $128,067
Other comprehensive income, before tax
Holding gains (losses) on available-for-sale
securities 368 21,716 14,576 1,242
Less: Reclassification adjustment for securities
gains included in net income above (2,834) (2,071) (7,287) (3,117)
-------- ------- -------- --------
Other Comprehensive Income, Before Tax (2,466) 19,645 7,289 (1,875)
Income Taxes Related to Other Comprehensive Income (863) 6,876 2,551 (656)
-------- ------- -------- --------
OTHER COMPREHENSIVE INCOME, NET OF TAX (1,603) 12,769 4,738 (1,219)
-------- ------- -------- --------
COMPREHENSIVE INCOME $105,544 $55,523 $226,744 $126,848
======== ======= ======== ========
</TABLE>
<PAGE>
<PAGE> 39
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Not Applicable
(b) PRO FORMA FINANCIAL INFORMATION:
Not Applicable
(c) EXHIBITS:
23 Consent of KPMG Peat Marwick LLP
27.1 Restated Financial Data Schedule (December 31, 1997)
27.2 Restated Financial Data Schedule (December 31, 1996)
27.3 Restated Financial Data Schedule (December 31, 1995)
27.4 Restated Financial Data Schedule (June 30, 1998)
27.5 Restated Financial Data Schedule (March 31, 1998)
27.6 Restated Financial Data Schedule (June 30, 1997)
27.7 Restated Financial Data Schedule (March 31, 1997)
* * *
<PAGE>
<PAGE> 40
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: October 7, 1998
MERCANTILE BANCORPORATION INC.
By: /s/ Michael T. Normile
----------------------------------------
Michael T. Normile
Senior Vice President Finance and Control
<PAGE>
<PAGE> 41
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<C> <S> <C>
23 Consent of KPMG Peat Marwick LLP Included herein
27.1 Restated Financial Data Schedule (December 31, 1997) Included herein
27.2 Restated Financial Data Schedule (December 31, 1996) Included herein
27.3 Restated Financial Data Schedule (December 31, 1995) Included herein
27.4 Restated Financial Data Schedule (June 30, 1998) Included herein
27.5 Restated Financial Data Schedule (March 31, 1998) Included herein
27.6 Restated Financial Data Schedule (June 30, 1997) Included herein
27.7 Restated Financial Data Schedule (March 31, 1997) Included herein
</TABLE>
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Mercantile Bancorporation Inc.:
We consent to the incorporation by reference in the Registration Statements
No. 2-78395, No. 33-15265, No. 33-33870, No. 33-35139, No. 33-43694,
No. 33-48952, No. 33-57543, and No. 333-47713, each on Form S-8; and
No. 33-45863, No. 33-52986, No. 33-50981, No. 33-55439, No. 33-58467,
No. 33-63609, No. 333-09803, No. 333-23607, No. 333-27431, No. 333-42557,
No. 333-50203, No. 333-51329, No. 333-56639, and No. 333-57345, each on
Form S-4; and No. 333-37547 on Form S-3, of Mercantile Bancorporation Inc.
of our report dated October 7, 1998, relating to the supplemental consolidated
balance sheets of Mercantile Bancorporation Inc. and subsidiaries as of
December 31, 1997, 1996, and 1995, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1997, which report appears in the
Current Report on Form 8-K of Mercantile Bancorporation Inc. dated October 7,
1998.
By: /s/ KPMG Peat Marwick LLP
----------------------------
KPMG Peat Marwick LLP
St. Louis, Missouri
October 7, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,330,512
<INT-BEARING-DEPOSITS> 251,909
<FED-FUNDS-SOLD> 303,859
<TRADING-ASSETS> 70,536
<INVESTMENTS-HELD-FOR-SALE> 8,059,066
<INVESTMENTS-CARRYING> 335,279
<INVESTMENTS-MARKET> 341,954
<LOANS> 21,361,955
<ALLOWANCE> 284,165
<TOTAL-ASSETS> 33,332,190
<DEPOSITS> 24,809,455
<SHORT-TERM> 3,678,540
<LIABILITIES-OTHER> 388,722
<LONG-TERM> 1,518,171
0
0
<COMMON> 1,489
<OTHER-SE> 2,760,813
<TOTAL-LIABILITIES-AND-EQUITY> 33,332,190
<INTEREST-LOAN> 1,651,816
<INTEREST-INVEST> 439,537
<INTEREST-OTHER> 27,325
<INTEREST-TOTAL> 2,118,678
<INTEREST-DEPOSIT> 842,949
<INTEREST-EXPENSE> 1,070,940
<INTEREST-INCOME-NET> 1,047,738
<LOAN-LOSSES> 86,355
<SECURITIES-GAINS> 7,649
<EXPENSE-OTHER> 986,378
<INCOME-PRETAX> 389,198
<INCOME-PRE-EXTRAORDINARY> 246,822
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,822
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.73
<YIELD-ACTUAL> 4.00
<LOANS-NON> 113,134
<LOANS-PAST> 22,332
<LOANS-TROUBLED> 4,335
<LOANS-PROBLEM> 64,840
<ALLOWANCE-OPEN> 257,718
<CHARGE-OFFS> 109,259
<RECOVERIES> 28,189
<ALLOWANCE-CLOSE> 284,165
<ALLOWANCE-DOMESTIC> 284,165
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 98,707
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,448,637
<INT-BEARING-DEPOSITS> 96,714
<FED-FUNDS-SOLD> 310,963
<TRADING-ASSETS> 31,361
<INVESTMENTS-HELD-FOR-SALE> 4,741,677
<INVESTMENTS-CARRYING> 656,721
<INVESTMENTS-MARKET> 661,632
<LOANS> 16,937,254
<ALLOWANCE> 257,718
<TOTAL-ASSETS> 24,995,735
<DEPOSITS> 19,784,845
<SHORT-TERM> 2,132,674
<LIABILITIES-OTHER> 312,298
<LONG-TERM> 327,675
0
0
<COMMON> 683,832
<OTHER-SE> 1,579,411
<TOTAL-LIABILITIES-AND-EQUITY> 24,995,735
<INTEREST-LOAN> 1,404,809
<INTEREST-INVEST> 347,005
<INTEREST-OTHER> 19,306
<INTEREST-TOTAL> 1,771,120
<INTEREST-DEPOSIT> 692,138
<INTEREST-EXPENSE> 822,157
<INTEREST-INCOME-NET> 948,963
<LOAN-LOSSES> 78,766
<SECURITIES-GAINS> 292
<EXPENSE-OTHER> 805,187
<INCOME-PRETAX> 433,020
<INCOME-PRE-EXTRAORDINARY> 284,453
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 284,453
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.09
<YIELD-ACTUAL> 4.00
<LOANS-NON> 81,037
<LOANS-PAST> 37,898
<LOANS-TROUBLED> 5,413
<LOANS-PROBLEM> 38,757
<ALLOWANCE-OPEN> 261,329
<CHARGE-OFFS> 114,127
<RECOVERIES> 21,934
<ALLOWANCE-CLOSE> 257,718
<ALLOWANCE-DOMESTIC> 257,718
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 65,138
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,385,695
<INT-BEARING-DEPOSITS> 51,980
<FED-FUNDS-SOLD> 292,933
<TRADING-ASSETS> 67,283
<INVESTMENTS-HELD-FOR-SALE> 5,223,660
<INVESTMENTS-CARRYING> 335,141
<INVESTMENTS-MARKET> 340,130
<LOANS> 15,584,285
<ALLOWANCE> 261,339
<TOTAL-ASSETS> 23,651,434
<DEPOSITS> 18,463,655
<SHORT-TERM> 2,053,909
<LIABILITIES-OTHER> 302,416
<LONG-TERM> 370,609
0
12,153
<COMMON> 684,581
<OTHER-SE> 1,514,111
<TOTAL-LIABILITIES-AND-EQUITY> 23,651,434
<INTEREST-LOAN> 1,371,083
<INTEREST-INVEST> 331,084
<INTEREST-OTHER> 24,152
<INTEREST-TOTAL> 1,726,319
<INTEREST-DEPOSIT> 664,974
<INTEREST-EXPENSE> 808,540
<INTEREST-INCOME-NET> 917,779
<LOAN-LOSSES> 44,952
<SECURITIES-GAINS> 4,634
<EXPENSE-OTHER> 725,915
<INCOME-PRETAX> 486,901
<INCOME-PRE-EXTRAORDINARY> 318,155
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 318,155
<EPS-PRIMARY> 2.37
<EPS-DILUTED> 2.33
<YIELD-ACTUAL> 4.42
<LOANS-NON> 105,188
<LOANS-PAST> 30,947
<LOANS-TROUBLED> 3,549
<LOANS-PROBLEM> 31,733
<ALLOWANCE-OPEN> 274,636
<CHARGE-OFFS> 79,544
<RECOVERIES> 19,459
<ALLOWANCE-CLOSE> 261,339
<ALLOWANCE-DOMESTIC> 261,339
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 66,220
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,446,296
<INT-BEARING-DEPOSITS> 233,686
<FED-FUNDS-SOLD> 261,442
<TRADING-ASSETS> 124,839
<INVESTMENTS-HELD-FOR-SALE> 8,959,632
<INVESTMENTS-CARRYING> 251,040
<INVESTMENTS-MARKET> 256,849
<LOANS> 21,775,014
<ALLOWANCE> 292,795
<TOTAL-ASSETS> 34,744,910
<DEPOSITS> 24,545,818
<SHORT-TERM> 3,411,359
<LIABILITIES-OTHER> 402,219
<LONG-TERM> 3,450,370
0
0
<COMMON> 1,537
<OTHER-SE> 2,908,607
<TOTAL-LIABILITIES-AND-EQUITY> 34,744,910
<INTEREST-LOAN> 888,212
<INTEREST-INVEST> 293,973
<INTEREST-OTHER> 15,082
<INTEREST-TOTAL> 1,197,267
<INTEREST-DEPOSIT> 474,687
<INTEREST-EXPENSE> 649,244
<INTEREST-INCOME-NET> 548,023
<LOAN-LOSSES> 15,881
<SECURITIES-GAINS> 7,287
<EXPENSE-OTHER> 445,264
<INCOME-PRETAX> 338,580
<INCOME-PRE-EXTRAORDINARY> 222,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222,006
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 3.58
<LOANS-NON> 116,148
<LOANS-PAST> 23,197
<LOANS-TROUBLED> 4,617
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 284,165
<CHARGE-OFFS> 27,439
<RECOVERIES> 15,010
<ALLOWANCE-CLOSE> 292,795
<ALLOWANCE-DOMESTIC> 292,795
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Only reported at fiscal year-end date.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,316,663
<INT-BEARING-DEPOSITS> 280,676
<FED-FUNDS-SOLD> 336,417
<TRADING-ASSETS> 125,680
<INVESTMENTS-HELD-FOR-SALE> 8,829,585
<INVESTMENTS-CARRYING> 307,234
<INVESTMENTS-MARKET> 314,356
<LOANS> 21,763,267
<ALLOWANCE> 293,565
<TOTAL-ASSETS> 35,149,317
<DEPOSITS> 25,233,151
<SHORT-TERM> 3,799,106
<LIABILITIES-OTHER> 861,944
<LONG-TERM> 2,386,950
0
0
<COMMON> 1,535
<OTHER-SE> 2,841,631
<TOTAL-LIABILITIES-AND-EQUITY> 35,149,317
<INTEREST-LOAN> 442,332
<INTEREST-INVEST> 144,117
<INTEREST-OTHER> 6,731
<INTEREST-TOTAL> 593,180
<INTEREST-DEPOSIT> 237,420
<INTEREST-EXPENSE> 320,459
<INTEREST-INCOME-NET> 272,721
<LOAN-LOSSES> 8,537
<SECURITIES-GAINS> 4,453
<EXPENSE-OTHER> 220,538
<INCOME-PRETAX> 180,597
<INCOME-PRE-EXTRAORDINARY> 114,859
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,859
<EPS-PRIMARY> .76
<EPS-DILUTED> .75
<YIELD-ACTUAL> 3.62
<LOANS-NON> 123,544
<LOANS-PAST> 29,326
<LOANS-TROUBLED> 5,507
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 284,165
<CHARGE-OFFS> 12,772
<RECOVERIES> 5,815
<ALLOWANCE-CLOSE> 293,565
<ALLOWANCE-DOMESTIC> 293,565
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Only reported at fiscal year-end date.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,169,001
<INT-BEARING-DEPOSITS> 190,749
<FED-FUNDS-SOLD> 412,971
<TRADING-ASSETS> 73,493
<INVESTMENTS-HELD-FOR-SALE> 5,051,225
<INVESTMENTS-CARRYING> 391,165
<INVESTMENTS-MARKET> 399,092
<LOANS> 17,431,076
<ALLOWANCE> 263,237
<TOTAL-ASSETS> 25,626,807
<DEPOSITS> 19,448,140
<SHORT-TERM> 2,618,466
<LIABILITIES-OTHER> 320,797
<LONG-TERM> 967,463
0
0
<COMMON> 1,360
<OTHER-SE> 2,095,581
<TOTAL-LIABILITIES-AND-EQUITY> 25,626,807
<INTEREST-LOAN> 742,119
<INTEREST-INVEST> 171,201
<INTEREST-OTHER> 10,870
<INTEREST-TOTAL> 924,190
<INTEREST-DEPOSIT> 357,374
<INTEREST-EXPENSE> 435,382
<INTEREST-INCOME-NET> 488,808
<LOAN-LOSSES> 49,519
<SECURITIES-GAINS> 3,117
<EXPENSE-OTHER> 429,090
<INCOME-PRETAX> 202,978
<INCOME-PRE-EXTRAORDINARY> 128,067
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,067
<EPS-PRIMARY> .97
<EPS-DILUTED> .96
<YIELD-ACTUAL> 4.35
<LOANS-NON> 92,820
<LOANS-PAST> 33,138
<LOANS-TROUBLED> 5,150
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 257,718
<CHARGE-OFFS> 58,263
<RECOVERIES> 12,700
<ALLOWANCE-CLOSE> 263,237
<ALLOWANCE-DOMESTIC> 263,237
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Only reported at fiscal year-end date.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,043,305
<INT-BEARING-DEPOSITS> 123,209
<FED-FUNDS-SOLD> 261,622
<TRADING-ASSETS> 65,997
<INVESTMENTS-HELD-FOR-SALE> 4,942,895
<INVESTMENTS-CARRYING> 619,386
<INVESTMENTS-MARKET> 621,950
<LOANS> 17,178,748
<ALLOWANCE> 259,142
<TOTAL-ASSETS> 25,098,473
<DEPOSITS> 19,824,676
<SHORT-TERM> 2,055,361
<LIABILITIES-OTHER> 368,158
<LONG-TERM> 472,346
0
0
<COMMON> 685,183
<OTHER-SE> 1,517,749
<TOTAL-LIABILITIES-AND-EQUITY> 25,098,473
<INTEREST-LOAN> 365,300
<INTEREST-INVEST> 84,566
<INTEREST-OTHER> 4,767
<INTEREST-TOTAL> 454,633
<INTEREST-DEPOSIT> 177,308
<INTEREST-EXPENSE> 212,592
<INTEREST-INCOME-NET> 242,041
<LOAN-LOSSES> 20,090
<SECURITIES-GAINS> 1,046
<EXPENSE-OTHER> 186,726
<INCOME-PRETAX> 131,583
<INCOME-PRE-EXTRAORDINARY> 85,313
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,313
<EPS-PRIMARY> .64
<EPS-DILUTED> .63
<YIELD-ACTUAL> 4.38
<LOANS-NON> 93,705
<LOANS-PAST> 36,227
<LOANS-TROUBLED> 5,323
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 257,718
<CHARGE-OFFS> 26,439
<RECOVERIES> 6,186
<ALLOWANCE-CLOSE> 259,142
<ALLOWANCE-DOMESTIC> 259,142
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>Only reported at fiscal year-end date.
</TABLE>
