<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------------- to ----------------------
Commission file number 0-22008
---------
MISSISSIPPI VALLEY BANCSHARES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1336298
- --------------------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Corporate Park Drive, St. Louis, Missouri 63105
- --------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 268-2580
--------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No .
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF AUGUST 2, 1996:
Common Stock, $1.00 par value 4,512,006
- ----------------------------- ----------------------
Class Number of Shares
<PAGE> 2
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Income -- Quarters Ended June 30, 1996
and June 30, 1995 and Six Months Ended
June 30, 1996 and June 30, 1995 4
Consolidated Statements of Changes in
Shareholders' Equity -- Six Months
Ended June 30, 1996 and June 30, 1995 5
Condensed Consolidated Statements of
Cash Flows -- Six Months Ended
June 30, 1996 and June 30, 1995 6
Notes to Condensed Consolidated
Financial Statements 7
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8-15
PART II. OTHER INFORMATION
-----------------
ITEM 4. Submission of Matters to a Vote of
Security Holders 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
- ---------
EXHIBIT INDEX 18
- -------------
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
- ------------------------------
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
- --------------- --------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
June 30, December 31,
1996 1995
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 23,646 $ 24,374
Federal funds sold 10,840 3,200
Held to maturity securities
(fair value of $93,079 and
$76,882, respectively) 91,383 73,919
Available for sale securities 197,934 253,733
Trading account securities 7 99
Loans, net of
unearned income 684,959 623,777
Allowance for possible loan losses 11,976 10,789
------------ ------------
Net loans 672,983 612,988
Premises and equipment 11,168 8,822
Other assets 16,476 17,913
------------ ------------
TOTAL ASSETS $ 1,024,437 $ 995,048
============ ============
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 80,464 $ 85,748
Interest bearing 821,219 800,817
------------ ------------
Total deposits 901,683 886,565
Securities sold under agreements
to repurchase 14,834 11,254
Other short-term borrowings 27,000 15,485
Long-term borrowings 2,700 2,700
Other liabilities 6,401 8,937
------------ ------------
TOTAL LIABILITIES 952,618 924,941
------------ ------------
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock-par value $1
Authorized 100,000 shares,
issued 25,000 shares 2,500 2,500
Common stock-par value $1
Authorized 15,000,000 shares,
issued 4,512,006 in 1996
and 4,508,006 in 1995 4,512 4,508
Capital surplus 19,834 19,802
Retained earnings 45,104 39,415
Unrealized gain, (loss) on available
for sale securities (131) 3,882
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 71,819 70,107
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,024,437 $ 995,048
============ ============
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $15,020 $13,509 $29,173 $26,508
Held to maturity securities:
Taxable 1,126 2,098 2,202 4,060
Tax-exempt 140 141 281 284
Available for sale securities 2,919 1,005 6,517 1,782
Other 289 41 386 114
------- ------- ------- -------
TOTAL INTEREST INCOME 19,494 16,794 38,559 32,748
------- ------- ------- -------
Interest expense:
Deposits 9,407 7,463 18,599 14,404
Short-term borrowings 390 1,210 796 2,026
Long-term borrowings 54 67 108 135
------- ------- ------- -------
TOTAL INTEREST EXPENSE 9,851 8,740 19,503 16,565
------- ------- ------- -------
NET INTEREST INCOME 9,643 8,054 19,056 16,183
Provision for possible loan losses 850 650 1,950 1,450
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 8,793 7,404 17,106 14,733
------- ------- ------- -------
Other income:
Service charges 381 352 745 685
Securities gains/(losses), net on:
Sales of held to maturity securities (25) (3) (59)
Sales of available for sale securities 132 172 444 (32)
Trading profits and commissions 307 206 665 356
Other 394 265 696 581
------- ------- ------- -------
1,214 970 2,547 1,531
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 2,311 2,026 4,539 3,950
Net occupancy 262 251 563 477
Equipment 326 234 616 455
Advertising 168 171 320 347
FDIC insurance expense 368 1 736
Other 1,528 1,198 3,004 2,277
------- ------- ------- -------
4,595 4,248 9,043 8,242
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 5,412 4,126 10,610 8,022
Income taxes 1,878 1,504 3,813 2,957
------- ------- ------- -------
NET INCOME $ 3,534 $ 2,622 $ 6,797 $ 5,065
======= ======= ======= =======
Earnings per common share:
Primary $ .76 $ .59 $ 1.47 $ 1.13
Fully diluted $ .73 $ .55 $ 1.41 $ 1.06
See accompanying notes.
</TABLE>
4
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
(Unaudited)
<CAPTION>
Unrealized
Gain,
(Loss) on Total
Preferred Stock Common Stock Available Share-
---------------------- ----------------------- Capital Retained for Sales holders'
Shares Amount Shares Amount Surplus Earnings Securities Equity
-------- -------- -------- -------- -------- ---------- ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 25,000 $2,500 4,381,106 $4,381 $19,315 $30,413 $(1,859) $54,750
Net income 5,065 5,065
Issuance of common
stock 7,400 7 60 67
Cash dividends on:
common stock (703) (703)
preferred stock (116) (116)
Unrealized gain, net
of tax, on available
for sale securities 2,579 2,579
-------- -------- ----------- -------- --------- --------- --------- ---------
Balance at June 30, 1995 25,000 $2,500 4,388,506 $4,388 $19,375 $34,659 $ 720 $61,642
======== ======== =========== ======== ========= ========= ========= =========
Balance at January 1, 1996 25,000 $2,500 4,508,006 $4,508 $19,802 $39,415 $ 3,882 $70,107
Net income 6,797 6,797
Issuance of common
stock 4,000 4 32 36
Cash dividends on:
common stock (992) (992)
preferred stock (116) (116)
Unrealized (loss) net
of tax, on available
for sale securities (4,013) (4,013)
-------- -------- ----------- -------- --------- --------- --------- ---------
Balance at June 30, 1996 25,000 $2,500 4,512,006 $4,512 $19,834 $45,104 $ (131) $71,819
======== ======== =========== ======== ========= ========= ========= =========
See accompanying notes.
</TABLE>
5
<PAGE> 6
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1996 1995
----------- -----------
(dollars in thousands)
<S> <C> <C>
Operating activities
- --------------------
Net income $ 6,797 $ 5,065
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 1,950 1,450
Provision for depreciation and amortization 471 372
Accretion of discounts and amortization of
premiums on securities (68) 90
Realized securities (gains) and losses, net (441) 91
Net decrease in trading account securities 92 728
Net (increase) decrease in interest receivable 466 (889)
Increase in interest payable 15 584
Other, net 776 (3,474)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 10,058 4,017
----------- -----------
Investing activities
- --------------------
Proceeds from maturities of held to maturity securities 250
Proceeds from sales and paydowns of held to maturity securities 2,011 17,209
Purchases of held to maturity securities (19,299) (31,420)
Purchases of available for sale securities (19,740) (45,274)
Proceeds from maturities of available for sale securities 5,000
Proceeds from sales and paydowns of
available for sale securities 64,501 17,316
Purchases of premises and equipment (2,815) (2,451)
Increase in loans outstanding, net (61,945) (37,599)
----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (32,287) (81,969)
----------- -----------
Financing activities
- --------------------
Net increase in deposits 15,118 50,162
Net increase in repurchase agreements
and other short-term borrowings 15,095 38,355
Proceeds from sale of common stock 36 67
Cash dividends (1,108) (819)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 29,141 87,765
----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,912 9,813
Cash and cash equivalents at beginning of period 27,574 19,998
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 34,486 $ 29,811
=========== ===========
See accompanying notes.
</TABLE>
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. The condensed consolidated financial statements include the accounts
of Mississippi Valley Bancshares, Inc. (the "Company") and its wholly-owned
subsidiary, Southwest Bank of St. Louis (the "Bank"). Significant
intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the interim periods shown in
this report are not necessarily indicative of results to be expected for the
entire year. In the opinion of management, the information contained herein
reflects all adjustments necessary to make the results of operations for the
interim periods a fair statement of such operations. All such adjustments
are of a normal recurring nature.
2. Interest-Rate Risk Management - The Company sometimes uses various
interest rate related contracts, such as futures and options, to manage its
overall interest rate risk exposure for asset-liability management purposes.
When such contracts are not matched against a specifically designated group
of assets or liabilities and are held for trading purposes, the gains or
losses from the change in the market values of such contracts are recognized
in current income and are reported in other income.
The Company's objective in managing interest-rate risk is to maintain
a balanced mix of interest-sensitive assets and interest-sensitive
liabilities over a designated time horizon. The extent of interest rate
sensitivity can vary within intervening time periods, depending on current
business conditions and management's interest rate outlook. The principal
objective of the Bank's asset-liability management activities is to provide
maximum levels of net interest income while maintaining acceptable levels of
interest rate and liquidity risk while facilitating the funding needs of the
Bank. To achieve that objective, the Bank uses various derivative financial
instruments.
During the first quarter of 1996 the Bank purchased $145 million of
interest rate swap contracts as part of its asset-liability management
strategy to manage interest rate risk. The contracts, which require the
Bank to pay a fixed rate of interest and receive a variable rate of interest
from the seller of the contract, are accounted for as modifications of the
interest rate characteristics of certain bank assets. The Bank had been in
a liability sensitive position prior to the affect of these swap contracts.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
- ------- -----------------------------------------------
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
The following discussion should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto, and
with the Company's audited financial statements and notes thereto for the
year ended December 31, 1995.
SUMMARY OF EARNINGS
- -------------------
Consolidated net income for the second quarter of 1996 was $3,534,000,
up $912,000 or 34.8% from the $2,622,000 earned during the second quarter of
1995. On a per share basis, net income was $.73, up 32.7% from $.55 in the
same period of the prior year. The improved performance resulted primarily
from higher net interest income. Noninterest income increased $244,000
from a combination of greater service charges on depository accounts,
increased trading profits and commissions and greater credit card merchant
fees. Offsetting a portion of the higher earnings was an increased
provision for possible loan losses and increased noninterest expenses.
Net income for the first half of 1996 was $6,797,000, up $1,732,000 or
34.2% from $5,065,000 earned for the first half of 1995. On a per share
basis, net income was $1.41, up 33.0% from $1.06 in the first half of 1995.
Increased net interest income was principally responsible for the improved
earnings. Securities gains in 1996 along with greater service charges on
deposit accounts and higher trading profits and commissions also
supplemented this year's earnings. Offsetting a portion of the greater net
interest earnings were increased noninterest expenses, primarily greater
personnel and benefit costs plus other accompanying expenses associated with
the Concord Village office opened in June, 1995.
NET INTEREST INCOME
- -------------------
The following discussion and tables set forth the composition of
average interest-earning assets and interest-bearing liabilities along with
accompanying interest income, expense, yields and rates, on a tax-equivalent
basis. The tax-equivalent adjustments were approximately $63,000, $67,000,
$125,000 and $136,000 for the three months ended June 30, 1996 and 1995, and
for the six months ended June 30, 1996 and 1995, respectively. Net interest
income on a tax equivalent basis, divided by average interest-earning
assets, represents the Company's net interest margin.
Three months ended June 30, 1996 and 1995
- -----------------------------------------
Total tax-equivalent interest income for the three months ended June
30, 1996 was $19,557,000, up $2,696,000 as compared to the same period in
1995. The $84 million increase
8
<PAGE> 9
in the volume of average loans outstanding and the $63 million increase in
securities combined to advance interest income 16.0%. Partially reducing
the effect of the volume driven interest income increase were the lower
yields on total earning assets of 8.24%, down 34 basis points from the
8.58% in the second quarter of 1995. The expanded asset base was funded
primarily with increased money market account funds raised during the
deposit promotion in the last half of 1995.
Total interest expense for the second quarter of 1996 was $9,851,000,
up $1,111,000 from $8,740,000 in the second three months of 1995. The
effects of the $198 million increase in average money market deposits was
partially offset by a decline in short-term borrowings and the lower rates
paid on all fund sources in the second quarter of 1996 compared with the
same period in 1995.
Overall tax-equivalent net interest income increased $1,585,000 as
interest income rose $2.7 million and interest expense was up $1.1 million.
The Company's net interest margin declined slightly to 4.08% in the second
quarter of 1996 from 4.13% in the same period in 1995.
Six months ended June 30, 1996 and 1995
- ---------------------------------------
Total tax-equivalent interest income for the first six months of 1996
was $38,684,000, up $5,800,000 from $32,884,000 in the same period in 1995.
The $72 million increase in average loans and $92 million increase in
securities volume were responsible for generating the increase in interest
earnings from 1995 to 1996. However, reduced yields on loans offset a
portion of the increased earnings. Overall earning asset yields were 8.22%
for the first six months of 1996, down from 8.58% for the same period in
1995.
Total interest expense for the first half of 1996 was $19,503,000, up
$2,938,000 from $16,565,000 in the same period of 1995. An increase of $212
million in money market deposit accounts was responsible for the increased
interest expense. Offsetting some of the effects of additional money market
accounts were reduced short-term borrowings and the lower rates paid on most
fund sources except certificates of deposit. Overall rates paid on total
interest bearing liabilities declined to 4.77% from 5.03% in the first half
of 1995.
In summary, total tax-equivalent net interest income increased
$2,862,000 as interest income improved by $5.8 million and interest expense
grew $2.9 million. The Company's net interest margin for the first six
months was 4.07%, down slightly from 4.26% in the same period in 1995.
9
<PAGE> 10
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------
1996 1995
----------------------------------- ----------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- -------- ------ ------- -------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans<F1><F2>
Taxable............................... $669,427 $15,020 9.02% $584,648 $13,496 9.25%
Tax-exempt<F3>........................ 900 19 8.45
Held to maturity securities
Taxable............................... 68,783 1,126 6.58 135,656 2,098 6.20
Tax-exempt<F3>........................ 7,464 203 10.86 7,529 202 10.73
Available for sale securities................. 186,566 2,919 6.28 56,441 1,005 7.13
Trading account securities.................... 1,200 18 5.99 377 7 6.94
Federal Funds sold and other short-
term investments.......................... 20,350 271 5.36 2,169 34 6.43
-------- ------- -------- -------
Total interest-earning assets 953,790 19,557 8.24 787,720 16,861 8.58
------- -------
Noninterest-earning assets:
Cash and due from banks....................... 23,075 19,750
Bank premises and equipment................... 10,247 7,715
Other assets.................................. 10,888 9,913
Allowance for possible loan losses............ (11,535) (10,230)
-------- --------
Total assets.................. $986,465 $814,868
======== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts.................................. $ 20,392 $ 87 1.71% $ 19,752 $ 114 2.30%
Money market accounts......................... 339,460 3,531 4.18 141,677 1,662 4.71
Savings deposits.............................. 22,516 165 2.95 23,258 170 2.94
Time deposits of $100,000 or more............. 32,890 427 5.22 41,372 577 5.60
Other time deposits........................... 381,631 5,197 5.48 368,299 4,940 5.38
-------- ------- -------- -------
Total interest-bearing deposits....... 796,889 9,407 4.75 594,358 7,463 5.04
Federal funds purchased, repurchase
agreements and other short-term
borrowings................................ 32,226 390 4.87 80,582 1,210 6.00
Convertible debentures........................ 2,700 54 8.00 3,240 67 8.33
-------- ------- -------- -------
Total interest-bearing liabilities.... 831,815 9,851 4.76 678,180 8,740 5.17
------- -------
Noninterest-bearing liabilities:
Demand deposits............................... 81,399 75,060
Other liabilities............................. 1,885 1,766
Shareholders' equity................................ 71,366 59,862
-------- --------
Total liabilities and
shareholders' equity............... $986,465 $814,868
======== ========
Net interest income................... $ 9,706 $ 8,121
======= =======
Net interest margin................... 4.08% 4.13%
===== =====
<FN>
- --------------------------------
<F1> For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
<F2> Interest income on loans includes loan fees, which were not material to
any period presented.
<F3> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The tax-equivalent adjustments were approximately $63,000 and
$67,000 for the three months ended June 30, 1996 and 1995, respectively.
</TABLE>
10
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------
1996 1995
----------------------------------- ----------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- -------- ------ ------- -------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans<F1><F2>
Taxable............................. $648,205 $29,172 9.05% $575,558 $26,478 9.26%
Tax-exempt<F3>...................... 35 1 8.60 1,019 45 8.81
Held to maturity securities
Taxable............................. 66,673 2,202 6.64 133,704 4,060 6.10
Tax-exempt<F3>...................... 7,451 406 10.88 7,557 405 10.72
Available for sale securities............... 208,707 6,517 6.27 49,774 1,782 7.21
Trading account securities.................. 938 29 6.24 777 26 6.67
Federal Funds sold and other short-
term investments....................... 13,206 357 5.44 2,865 88 6.22
-------- ------- -------- -------
Total interest-earning assets 945,215 38,684 8.22 771,254 32,884 8.58
------- -------
Noninterest-earning assets:
Cash and due from banks..................... 22,170 19,353
Bank premises and equipment................. 9,851 7,225
Other assets................................ 10,942 9,452
Allowance for possible loan losses.......... (11,262) (10,008)
-------- --------
Total assets................. $976,916 $797,276
======== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts................................ $ 20,095 $ 171 1.71% $ 19,287 $ 228 2.38%
Money market accounts....................... 353,641 7,413 4.22 141,266 3,110 4.44
Savings deposits............................ 22,324 329 2.97 23,514 344 2.95
Time deposits of $100,000 or more........... 32,069 841 5.27 41,490 1,124 5.47
Other time deposits......................... 359,570 9,845 5.51 366,214 9,598 5.29
-------- ------- -------- -------
Total interest-bearing deposits..... 787,699 18,599 4.75 591,771 14,404 4.91
Federal funds purchased, repurchase
agreements and other short-term
borrowings............................. 32,431 796 4.94 68,353 2,026 5.93
Convertible debentures...................... 2,700 108 8.00 3,240 135 8.33
-------- ------- -------- -------
Total interest-bearing liabilities.. 822,830 19,503 4.77 663,364 16,565 5.03
------- -------
Noninterest-bearing liabilities:
Demand deposits............................. 79,786 74,173
Other liabilities........................... 2,692 1,512
Shareholders' equity.............................. 71,608 58,227
-------- --------
Total liabilities and
shareholders' equity............. $976,916 $797,276
======== ========
Net interest income................. $19,181 $16,319
======= =======
Net interest margin................. 4.07% 4.26%
===== =====
<FN>
- -----------------------------------
<F1> For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
<F2> Interest income on loans includes loan fees, which were not material to
any period presented.
<F3> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The tax-equivalent adjustments were approximately $125,000 and
$136,000 for the six months ended June 30, 1996 and 1995, respectively.
</TABLE>
11
<PAGE> 12
The following table indicates, on a tax-equivalent basis, the changes in
interest income and interest expense which are attributable to changes in
average volume and changes in average rates, in comparison with the same
period in the preceding year. The change in interest due to the combined
rate-volume variance has been allocated to rate and volume changes in
proportion to the absolute dollar amounts of the changes in each.
<TABLE>
CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
Compared to Compared to
June 30, 1995 June 30, 1995
--------------------------------- -----------------------------------
Increase (decrease) attributable to change in:
---------------------------------------------------------------------------
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
------- ------ ------ ------ ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans<F1><F2>.................................. $1,855 $(350) $1,505 $3,286 $(636) $2,650
Held to maturity securities:
Taxable................................ (1,094) 122 (972) (2,191) 333 (1,858)
Tax-exempt<F1>......................... (2) 3 1 (5) 6 1
Available for sale securities.................. 2,048 (134) 1,914 4,997 (262) 4,735
Trading account securities..................... 12 (1) 11 5 (2) 3
Federal funds sold and other short-
term investments.......................... 244 (7) 237 281 (12) 269
------- ------ ------- ------- ----- -------
Total interest income......... 3,063 (367) 2,696 6,373 (573) 5,800
------- ------ ------- ------- ----- -------
Interest paid on:
NOW accounts................................... 4 (31) (27) 10 (67) (57)
Money market accounts.......................... 2,076 (207) 1,869 4,466 (163) 4,303
Savings........................................ (6) 1 (5) (17) 2 (15)
Time deposits of $100,000 or more............ (113) (37) (150) (244) (39) (283)
Other time deposits............................ 170 87 257 (169) 416 247
Federal funds purchased, repurchase
agreements and other short-term
borrowings................................ (727) (93) (820) (1,041) (189) (1,230)
Long-term borrowings........................... (7) (6) (13) (13) (14) (27)
------- ------ ------- ------- ------ -------
Total interest expense......... 1,397 (286) 1,111 2,992 (54) 2,938
------- ------ ------- ------- ------ -------
Net interest income............ $1,666 $ (81) $1,585 $3,381 $(519) $2,862
======= ====== ======= ======= ====== =======
<FN>
- ------------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustment were $63,000, $67,000,
$125,000 and $136,000 for the three months ended June 30, 1996 and 1995,
and for the six months ended June 30, 1996 and 1995, respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
12
<PAGE> 13
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision for possible loan losses for the second quarter of 1996
was $850,000, up from $650,000 last year. For the first half of 1996 the
provision for possible loan losses was $1,950,000, up from $1,450,000 for the
same period last year. Slightly higher net loan charge-offs and good loan
growth during 1996 resulted in the higher provision expense. The annualized
ratio of net charge-offs to average loans for the first half of 1996 was
.24%, up from .18% last year, while corresponding net loan charge-offs
were $763,000 and $507,000, respectively.
The allowance for possible loan losses was $12.0 million or 1.75% of loans
outstanding at June 30, 1996. This compares to $10.8 million or 1.73% at the
end of 1995 and $10.5 million or 1.75% at June 30, 1995. In management's
judgement, the allowance for possible loan losses is considered adequate to
absorb potential losses in the loan portfolio.
The following table summarizes, for the periods indicated, activity in the
allowance for possible loan losses:
<TABLE>
Summary of Loan Loss Experience and Related Information
-------------------------------------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 11,435 $ 10,064 $ 10,789 $ 9,575
Loans charged off (671) (269) (1,206) (639)
Recoveries of loans previously
charged off 362 73 443 132
-------- -------- -------- --------
Net loans charged off (309) (196) (763) (507)
-------- -------- -------- --------
Provision for possible loan losses 850 650 1,950 1,450
-------- -------- -------- --------
Allowance for possible loan losses
(end of period) $ 11,976 $ 10,518 $ 11,976 $ 10,518
======== ======== ======== ========
Loans outstanding:
Average $669,427 $585,548 $648,240 $576,577
End of period 684,959 600,570 684,959 600,570
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.79% 1.80% 1.85% 1.82%
End of period 1.75 1.75 1.75 1.75
Ratio of net charge-offs to
average loans outstanding, annualized: .18 .13 .24 .18
</TABLE>
13
<PAGE> 14
<TABLE>
The following table summarizes nonperforming assets at the dates
indicated:
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
----------- ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 868 $ 3,778 $ 1,084
Loans past due 90 days or more 90 179 291
Restructured loans 816 731 226
----------- ----------- ------------
Total nonperforming loans 1,774 4,688 1,601
Other real estate 1,269 670
----------- ----------- ------------
Total nonperforming assets $ 3,043 $ 4,688 $ 2,271
=========== =========== ============
Loans, net of unearned discount $ 684,959 $ 623,777 $ 600,570
Allowance for possible loan
losses to loans 1.75% 1.73% 1.75%
Nonperforming loans to loans .26 .75 .27
Allowance for possible loan losses
to nonperforming loans 675.08 230.14 656.90
Nonperforming assets to loans
and foreclosed assets .44 .75 .38
</TABLE>
NONINTEREST INCOME
- ------------------
For the second quarter of 1996 total noninterest income was $1,214,000, up
from $970,000 in the same period in 1995. Higher trading profits and
commissions and additional other customer fees and charges increased total
noninterest income in 1996.
For the first six months of 1996 total noninterest income was $2,547,000,
up sharply from $1,531,000 in the first half of 1995. Net gains of $441,000
were realized on securities sales in the first half of 1996. In the first
half of 1995 the Company had losses on securities sales of $91,000. Included
were sales of securities classified as held to maturity which generated
losses of $3,000 in 1996 compared with losses of $59,000 in 1995. These sales
were sometimes done to fund the purchase of other securities or to meet
various other needs, but sales of held to maturity securities were only done
within 90 days of each specific security's maturity date. Noninterest income
levels were also supplemented by increased service charges on deposits and
higher trading profits and commissions and other customer fees and charges.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the second quarter of 1996 was $4.6 million,
up $347,000 from $4.2 million in the first three months of 1995. For the
first half of 1996 total noninterest expenses were $9.0 million, up $801,000
from $8.2 million in same period in 1995. Greater personnel and benefit
costs, and some accompanying expenses such as occupancy and equipment costs
associated with the Concord Village office opened in June, 1995, were
responsible for the increase in total overhead costs.
14
<PAGE> 15
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of June 30, 1996, the Company's total shareholders' equity was
$71.8 million. New capital was provided by the Company's net earnings and
the exercise of stock options. Offsetting the Company's capital
accumulation were the payments of cash dividends on preferred and common
stock and unrealized losses, net of tax, on available for sale securities.
The analysis of capital is dependent upon a number of factors
including asset quality, earnings strength, liquidity, economic conditions
and combinations thereof. The two primary criteria currently in effect are
the risk-based capital guidelines and the minimum capital to total assets or
leverage ratio requirement.
These regulatory guidelines require that Tier 1 capital equal or
exceed 4.00% of risk-weighted assets, and that the risk-based total capital
ratio equal or exceed 8.00%. As of June 30, 1996 and December 31, 1995 the
Company's Tier 1 capital was 10.64% and 10.30% of risk-weighted assets, and
total risk-based capital was 11.90% and 11.64% of risk-weighted assets,
respectively.
The minimum acceptable ratio of Tier 1 capital to total assets, or
leverage ratio, has been established at 3.00%. As of June 30, 1996 and
December 31, 1995, the Company's leverage ratio was 7.02% and 6.70%,
respectively.
Management believes that a strong capital position provided by a mix
of equity and long-term debt is essential. It provides safety and security
for depositors, and enhances Company value for shareholders by providing
opportunities for growth with the selective use of leverage.
15
<PAGE> 16
PART II. OTHER INFORMATION
- ----------------------------
ITEM 4. Submission of Matters to a Vote
-------------------------------
of Security Holders
-------------------
On April 17, 1996, at the Company's Annual Meeting of Stockholders,
stockholders took the following actions:
a. Re-elected all Management nominees to the Board of Directors.
Vote tallies were as follows:
<TABLE>
<CAPTION>
Votes Votes
In Favor Abstaining
-------- ----------
<S> <C> <C>
Andrew N. Baur 3,627,397 1,302
Louis N. Goldring 3,549,357 79,342
Richard T. Grote 3,627,097 1,602
Mont S. Levy 3,627,097 1,602
Louis B. Shepley 3,627,097 1,602
</TABLE>
b. Ratified the selection of Ernst & Young LLP as
independent accountants for 1996 with
3,624,149 shares voted in favor, 500 shares
voted against and 4,050 shares abstained.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For a list of Exhibits, see "EXHIBIT INDEX"
appearing elsewhere herein.
(b) Reports on Form 8-K: NONE
16
<PAGE> 17
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
(Registrant)
Date: August 2, 1996 /s/ Paul M. Strieker
-------------- -----------------------------------
Paul M. Strieker, Executive Vice
President, Controller and Chief
Financial Officer and Assistant
Secretary (on behalf of the
Registrant and as Principal
Financial and Accounting Officer)
17
<PAGE> 18
MISSISSIPPI VALLEY BANCSHARES, INC.
EXHIBIT INDEX
FORM 10-Q
For the quarterly period ended June 30, 1996
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
11 Computation of Earnings
per Common Share
</TABLE>
18
<PAGE> 1
EXHIBIT NO. 11
--------------
COMPUTATION OF EARNINGS PER
---------------------------------
COMMON SHARE
--------------
Primary earnings per share is computed by dividing net income, less
dividends on preferred stock, by the weighted average common shares and
average dilutive common share equivalents outstanding.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average common shares outstanding 4,511,414 4,384,858 4,510,723 4,383,644
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 42,035 15,032 36,980 14,134
---------- ---------- ---------- ----------
4,553,449 4,399,890 4,547,703 4,397,778
========== ========== ========== ==========
Net income $ 3,534 $ 2,622 $ 6,797 $ 5,065
Less: Dividends on preferred stock (58) (58) (116) (116)
---------- ---------- ---------- ----------
$ 3,476 $ 2,564 $ 6,681 $ 4,949
========== ========== ========== ==========
Primary earnings per common share $ .76 $ .59 $ 1.47 $ 1.13
========== ========== ========== ==========
</TABLE>
Fully diluted earnings per share gives effect to the increase in the
weighted average shares outstanding which would have resulted from conversion
of the outstanding convertible debentures and to the related reduction in
interest expense on an after-tax basis.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Fully diluted:
Average common shares outstanding 4,511,414 4,384,858 4,510,723 4,383,644
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 42,035 15,032 36,980 14,134
Convertible debenture common stock equivalents 237,600 356,400 237,600 356,400
---------- ---------- ---------- ----------
4,791,049 4,756,290 4,785,303 4,754,178
========== ========== ========== ==========
Net income $ 3,534 $ 2,622 $ 6,797 $ 5,065
Less: Dividends on preferred stock (58) (58) (116) (116)
Plus: Convertible debenture interest,
net of federal income tax effect 35 44 70 89
---------- ---------- ---------- ----------
$ 3,511 $ 2,608 $ 6,751 $ 5,038
========== ========== ========== ==========
Fully diluted earnings per common share $ .73 $ .55 $ 1.41 $ 1.06
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 23,646
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,840
<TRADING-ASSETS> 7
<INVESTMENTS-HELD-FOR-SALE> 197,934
<INVESTMENTS-CARRYING> 91,383
<INVESTMENTS-MARKET> 93,079
<LOANS> 684,959
<ALLOWANCE> 11,976
<TOTAL-ASSETS> 1,024,437
<DEPOSITS> 901,683
<SHORT-TERM> 41,834
<LIABILITIES-OTHER> 6,401
<LONG-TERM> 2,700
0
2,500
<COMMON> 4,512
<OTHER-SE> 64,807
<TOTAL-LIABILITIES-AND-EQUITY> 1,024,437
<INTEREST-LOAN> 29,173
<INTEREST-INVEST> 9,000
<INTEREST-OTHER> 386
<INTEREST-TOTAL> 38,559
<INTEREST-DEPOSIT> 18,599
<INTEREST-EXPENSE> 19,503
<INTEREST-INCOME-NET> 19,056
<LOAN-LOSSES> 1,950
<SECURITIES-GAINS> 441
<EXPENSE-OTHER> 9,043
<INCOME-PRETAX> 10,610
<INCOME-PRE-EXTRAORDINARY> 6,797
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,797
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 4.07
<LOANS-NON> 868
<LOANS-PAST> 90
<LOANS-TROUBLED> 816
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,789
<CHARGE-OFFS> 1,206
<RECOVERIES> 443
<ALLOWANCE-CLOSE> 11,976
<ALLOWANCE-DOMESTIC> 7,182
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,794
</TABLE>
