<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 September 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 November 12, 1996:
Common Stock, $1.00 par value 4,513,556
- ----------------------------- ----------------------------
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.
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
<TABLE>
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Income -- Quarters Ended September 30, 1996
and September 30, 1995 and Nine Months Ended
September 30, 1996 and September 30, 1995 4
Consolidated Statements of Changes in
Shareholders' Equity -- Nine Months
Ended September 30, 1996 and September 30, 1995 5
Condensed Consolidated Statements of
Cash Flows -- Nine Months Ended
September 30, 1996 and September 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 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
- ---------
EXHIBIT INDEX 18
- -------------
2
<PAGE> 3
</TABLE>
<TABLE>
I. FINANCIAL INFORMATION
- ------------------------
ITEM 1. FINANCIAL STATEMENTS
- ---------------- --------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
September 30, December 31,
1996 1995
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S>
Assets <C> <C>
- ------
Cash and due from banks $ 29,826 $ 24,374
Federal funds sold 9,300 3,200
Held to maturity securities
(fair value of $63,700 and
$76,882, respectively) 62,103 73,919
Available for sale securities 219,770 253,733
Trading account securities 571 99
Loans, net of
unearned income 708,209 623,777
Allowance for possible loan losses 12,076 10,789
-------------- ---------------
Net loans 696,133 612,988
Premises and equipment 11,179 8,822
Other assets 15,784 17,913
-------------- ---------------
TOTAL ASSETS $ 1,044,666 $ 995,048
============== ===============
Liabilities
- -----------
Deposits:
Non-interest bearing $ 89,611 $ 85,748
Interest bearing 815,278 800,817
-------------- ---------------
Total deposits 904,889 886,565
Securities sold under agreements
to repurchase 25,579 11,254
Other short-term borrowings 29,232 15,485
Long-term borrowings 2,700 2,700
Other liabilities 7,192 8,937
-------------- ---------------
TOTAL LIABILITIES 969,592 924,941
-------------- ---------------
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 4,512,356 in 1996
and 4,508,006 in 1995 4,512 4,508
Capital surplus 19,840 19,802
Retained earnings 48,149 39,415
Unrealized gain on available
for sale securities, net of tax 73 3,882
-------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 75,074 70,107
-------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,044,666 $ 995,048
============== ===============
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1996 1995 1996 1995
------ ------ ------ ------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $15,695 $13,382 $44,868 $39,890
Held to maturity securities:
Taxable 1,218 2,233 3,420 6,293
Tax-exempt 141 141 422 425
Available for sale securities 3,282 1,966 9,799 3,748
Other 198 432 584 546
------- ------- ------- -------
TOTAL INTEREST INCOME 20,534 18,154 59,093 50,902
------- ------- ------- -------
Interest expense:
Deposits 9,870 10,099 28,469 24,503
Short-term borrowings 675 436 1,471 2,462
Long-term borrowings 54 54 162 189
------- ------- ------- -------
TOTAL INTEREST EXPENSE 10,599 10,589 30,102 27,154
------- ------- ------- -------
NET INTEREST INCOME 9,935 7,565 28,991 23,748
Provision for possible loan losses 950 560 2,900 2,010
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 8,985 7,005 26,091 21,738
------- ------- ------- -------
Other income:
Service charges 382 328 1,127 1,013
Securities gains/<losses>, net on:
Sales of securities classified held to maturity (7) (3) (66)
Sales of securities classified available for sale 851 444 819
Trading profits and commissions 325 269 990 625
Other 424 279 1,120 860
------- ------- ------- -------
1,131 1,720 3,678 3,251
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 2,341 2,034 6,880 5,984
Net occupancy 282 301 845 778
Equipment 286 275 902 730
Advertising 119 173 439 520
FDIC insurance expense 1 (35) 2 701
Other 1,462 1,226 4,466 3,503
------- ------- ------- -------
4,491 3,974 13,534 12,216
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 5,625 4,751 16,235 12,773
Income taxes 1,958 1,817 5,771 4,774
------- ------- ------- -------
NET INCOME $ 3,667 $ 2,934 $10,464 $ 7,999
======= ======= ======= =======
Earnings per common share:
Primary $ .79 $ .63 $ 2.26 $ 1.76
Fully diluted $ .76 $ .61 $ 2.17 $ 1.67
See accompanying notes.
</TABLE>
4
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
(Unaudited)
<CAPTION>
Unrealized Total
Preferred Stock Common Stock Gain, <Loss> Share-
----------------- ------------------ Capital Retained On Available for holders'
Shares Amount Shares Amount Surplus Earnings Sale 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 7,999 7,999
Issuance of common
stock 126,200 126 481 607
Cash dividends on:
common stock (1,108) (1,108)
preferred stock (173) (173)
Unrealized gain, <loss> net
of tax, on available
for sale securities 2,701 2,701
------ ------ --------- ------ ------- ------- ------- -------
Balance at September 30, 1995 25,000 $2,500 4,507,306 $4,507 $19,796 $37,131 $ 842 $64,776
====== ====== ========= ====== ======= ======= ======= =======
Balance at January 1, 1996 25,000 $2,500 4,508,006 $4,508 $19,802 $39,415 $ 3,882 $70,107
Net income 10,464 10,464
Issuance of common
stock 4,350 4 38 42
Cash dividends on:
common stock (1,557) (1,557)
preferred stock (173) (173)
Unrealized gain, <loss> net
of tax, on available
for sale securities (3,809) (3,809)
------ ------ --------- ------ ------- ------- ------- -------
Balance at September 30, 1996 25,000 $2,500 4,512,356 $4,512 $19,840 $48,149 $ 73 $75,074
====== ====== ========= ====== ======= ======= ======= =======
See accompanying notes.
</TABLE>
5
<PAGE> 6
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1996 1995
-------- ---------
(dollars in thousands)
<S> <C> <C>
Operating activities
- --------------------
Net income $ 10,464 $ 7,999
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 2,900 2,010
Provision for depreciation and amortization 717 598
Accretion of discounts and amortization of
premiums on securities (748) 37
Realized securities (gains) and losses, net (441) (753)
Net increase in trading account securities (472) (1,006)
Decrease, (increase) in interest receivable 927 (2,991)
Increase in interest payable 224 1,080
Other, net 1,434 (136)
-------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 15,005 6,838
-------- ---------
Investing activities
- --------------------
Proceeds from maturities of held to maturity securities 29,545 250
Proceeds from sales and paydowns of held to
maturity securities 2,011 19,635
Purchases of held to maturity securities (19,299) (31,420)
Purchases of available for sale securities (69,493) (176,955)
Proceeds from sales, paydowns and maturities of
available for sale securities 98,192 33,797
Purchases of premises and equipment (3,071) (3,109)
Increase in loans outstanding, net (86,046) (22,743)
-------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (48,161) (180,545)
-------- ---------
Financing activities
- --------------------
Net increase in deposits 18,324 232,111
Net increase, (decrease) in repurchase agreements
and other short-term borrowings 28,072 (26,803)
Proceeds from sales of common stock 42 67
Cash dividends (1,730) (1,281)
-------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 44,708 204,094
-------- ---------
INCREASE IN CASH
AND CASH EQUIVALENTS 11,552 30,387
Cash and cash equivalents at beginning of period 27,574 19,998
-------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 39,126 $ 50,385
======== =========
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 third quarter of 1996 was $3,667,000,
up $733,000 or 25.0% from the $2,934,000 earned during the third quarter of
1995. On a per share basis, net income was $.76, up 24.6% from $.61 in the
same period of the prior year. The improved performance resulted from higher
net interest income. Offsetting a large portion of the net interest income
increase was a higher provision for possible loan losses, reduced noninterest
income and higher overhead expenses.
Net income for the first nine months of 1996 was $10,464,000, up
$2,465,000 or 30.8% from $7,999,000 earned for the first nine months of 1995.
On a per share basis, net income was $2.17, up 29.9% from $1.67 in the first
nine months of 1995. Increased net interest income was principally
responsible for the improved earnings. The provision for possible loan
losses and total noninterest expenses were also up from the prior year and
offset a portion of the net interest income increase.
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 $62,000, $68,000,
$186,000 and $208,000 for the three months ended September 30, 1996 and 1995,
and for the nine months ended September 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 September 30, 1996 and 1995
- ----------------------------------------------
Total tax-equivalent interest income for the three months ended
September 30, 1996 was $20,596,000, up $2,373,000 as compared to the same
period in 1995. The $107 million increase in the volume of average loans
outstanding was primarily responsible for the increased interest income.
Most assets showed small declines in yields compared to the prior year except
for an increase related to taxable held to maturity securities. Overall
asset yields improved slightly to 8.18% in the third quarter of 1996 from
8.12% in the same period last year. The expanded asset
8
<PAGE> 9
base was funded with increased money market deposit accounts and time deposits
of less than $100,000.
Total interest expense for the third quarter of 1996 was $10,599,000,
up only $9,000 from the same period in 1995. The impact of the volume
increase in total interest bearing liabilities of $99 million was almost
totally offset by the lower rates paid on total interest bearing liabilities.
Overall rates paid on interest bearing liabilities were 4.81% in the third
quarter of 1996, down markedly from 5.40% in the same period in 1995. During
the last half of 1995 the Bank paid premium rates on money market accounts as
a part of its deposit promotion activity coinciding with the opening of its
newest branch. No such activities took place this year, and therefore, the
Bank lowered its rates paid on total money market accounts from 5.61% in 1995
to 4.15% in 1996.
Overall tax-equivalent net interest income increased $2,364,000 as
interest income rose $2.4 million and interest expense experienced almost no
change. The Company's net interest margin rose to 3.97% in the third quarter
of 1996 from 3.41% in the same period in 1995 primarily as a result of the
decline in rates paid on interest bearing liabilities discussed above.
Nine months ended September 30, 1996 and 1995
- ---------------------------------------------
Total tax-equivalent interest income for the first nine months of 1996
was $59,279,000, up $8,169,000 from $51,110,000 in the same period in 1995.
The $84 million increase in average loans and $67 million increase in
securities volume were primarily responsible for generating the increase in
interest earnings from 1995 to 1996. Offsetting a portion of the increased
earnings were the reduced yields earned on loans in 1996. Overall earning
asset yields were 8.21% for the first nine months of 1996, down from 8.41%
for the same period in 1995.
Total interest expense for the first nine months of 1996 was
$30,102,000, up $2,948,000 from $27,154,000 in the same period in 1995. An
increase of $147 million in money market deposit accounts was primarily
responsible for the increased interest expense. Offsetting some of the
effects of additional money market deposits 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 4.78% from 5.17% in the first nine months of 1995.
In summary, total tax-equivalent net interest income increased
$5,221,000 as interest income improved by $8.2 million and interest expense
rose $2.9 million. The Company's net interest margin for the first nine
months was 4.04%, up slightly from 3.94% in the same period in 1995.
9
<PAGE> 10
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Three Months Ended September 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 $ 696,023 $15,695 8.98% $587,656 $13,370 9.04%
Tax-exempt<F3> 900 19 8.58
Held to maturity securities
Taxable 74,329 1,218 6.52 143,357 2,233 6.20
Tax-exempt<F3> 7,490 203 10.83 7,387 203 10.98
Available for sale securities 210,616 3,282 6.21 122,873 1,966 6.35
Trading account securities 617 9 5.62 866 15 6.64
Federal Funds sold and other short-
term investments 13,816 189 5.43 28,424 417 5.82
---------- ------- -------- -------
Total interest-earning assets 1,002,891 20,596 8.18 891,463 18,223 8.12
------- -------
Noninterest-earning assets:
Cash and due from banks 22,375 22,958
Bank premises and equipment 11,154 8,740
Other assets 11,659 10,573
Allowance for possible loan losses (11,949) (10,484)
---------- --------
Total assets $1,036,130 $923,250
========== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 20,525 $ 89 1.71% $ 19,007 $ 96 2.01%
Money market accounts 326,658 3,411 4.15 309,147 4,369 5.61
Savings deposits 22,829 171 2.98 21,588 161 2.96
Time deposits of $100,000 or more 35,802 472 5.25 37,062 520 5.57
Other time deposits 416,529 5,727 5.47 357,836 4,953 5.49
---------- ------- -------- -------
Total interest-bearing deposits 822,343 9,870 4.77 744,640 10,099 5.38
Federal funds purchased, repurchase
agreements and other short-term
borrowings 52,182 675 5.15 30,952 437 5.60
Convertible debentures 2,700 54 8.00 2,700 54 8.00
---------- ------- -------- -------
Total interest-bearing liabilities 877,225 10,599 4.81 778,292 10,590 5.40
------- -------
Noninterest-bearing liabilities:
Demand deposits 82,779 78,997
Other liabilities 2,062 1,997
Shareholders' equity 74,064 63,964
---------- --------
Total liabilities and
shareholders' equity $1,036,130 $923,250
========== ========
Net interest income $ 9,997 $ 7,633
======= =======
Net interest margin 3.97% 3.41%
====== ======
<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 $62,000 and
$68,000 for the three months ended September 30, 1996 and 1995, respectively.
</TABLE>
10
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Nine Months Ended September 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 $664,261 $44,867 9.02% $579,635 $39,848 9.19%
Tax-exempt<F3> 23 1 8.60 979 65 8.83
Held to maturity securities
Taxable 69,244 3,420 6.60 136,957 6,293 6.14
Tax-exempt<F3> 7,464 608 10.86 7,500 613 10.90
Available for sale securities 209,348 9,799 6.25 74,408 3,748 6.73
Trading account securities 830 38 6.08 807 40 6.66
Federal Funds sold and other short-term investments 13,410 546 5.44 11,478 503 5.86
-------- ------- -------- -------
Total interest-earning assets 964,580 59,279 8.21 811,764 51,110 8.41
------- -------
Noninterest-earning assets:
Cash and due from banks 22,239 20,568
Bank premises and equipment 10,289 7,736
Other assets 11,183 9,830
Allowance for possible loan losses (11,493) (10,169)
-------- --------
Total assets $996,798 $839,729
======== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 20,239 $ 259 1.71% $ 19,193 $ 324 2.26%
Money market accounts 344,581 10,824 4.20 197,841 7,478 5.05
Savings deposits 22,494 501 2.97 22,864 505 2.95
Time deposits of $100,000 or more 33,322 1,313 5.26 39,998 1,644 5.50
Other time deposits 378,695 15,572 5.49 363,391 14,551 5.35
-------- ------- -------- -------
Total interest-bearing deposits 799,331 28,469 4.76 643,287 24,502 5.09
Federal funds purchased, repurchase
agreements and other short-term borrowings 39,063 1,471 5.03 55,749 2,463 5.91
Convertible debentures 2,700 162 8.00 3,058 189 8.24
-------- ------- -------- -------
Total interest-bearing liabilities 841,094 30,102 4.78 702,094 27,154 5.17
------- -------
Noninterest-bearing liabilities:
Demand deposits 80,791 75,798
Other liabilities 2,480 1,676
Shareholders' equity 72,433 60,161
-------- --------
Total liabilities and shareholders' equity $996,798 $839,729
======== ========
Net interest income $29,177 $23,956
======= =======
Net interest margin 4.04% 3.94%
===== =====
<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 $186,000 and
$208,000 for the nine months ended September 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 Nine Months Ended
September 30, 1996 September 30, 1996
Compared to Compared to
September 30, 1995 September 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> $2,397 $ (91) $2,306 $5,705 $ (750) $4,955
Held to maturity securities:
Taxable (1,126) 111 (1,015) (3,316) 443 (2,873)
Tax-exempt<F1> 3 (3) (3) (2) (5)
Available for sale securities 1,360 (44) 1,316 6,338 (287) 6,051
Trading account securities (4) (2) (6) 1 (3) (2)
Federal funds sold and other short-term
investments (202) (26) (228) 81 (38) 43
--------- --------- --------- --------- -------- --------
Total interest income 2,428 (55) 2,373 8,806 (637) 8,169
--------- --------- --------- --------- -------- --------
Interest paid on:
NOW accounts 8 (15) (7) 17 (82) (65)
Money market accounts 236 (1,194) (958) 4,785 (1,439) 3,346
Savings 9 1 10 (7) 3 (4)
Time deposits of $100,000 or more (18) (30) (48) (263) (68) (331)
Other time deposits 792 (18) 774 630 391 1,021
Federal funds purchased, repurchase
agreements and other short-term
borrowings 275 (37) 238 (811) (181) (992)
Long-term borrowings (13) (14) (27)
--------- --------- --------- --------- -------- --------
Total interest expense 1,302 (1,293) 9 4,338 (1,390) 2,948
--------- --------- --------- --------- -------- --------
Net interest income $1,126 $1,238 $2,364 $4,468 $ 753 $5,221
========= ========= ========= ========= ======== ========
<FN>
- --------------------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustments were $62,000, $68,000,
$186,000 and $208,000 for the three months ended September 30, 1996 and
1995, and for the nine months ended September 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 third quarter of 1996 was
$950,000, up from $560,000 last year. Increased loans and net charge-offs
necessitated a greater provision expense for the period. For the first nine
months of 1996 the provision for possible loan losses was $2,900,000, also up
from the same period last year. The annualized ratio of net charge-offs to
average loans for the first nine months of 1996 rose to .32% from .18% last
year, as corresponding net charge-offs were $1,613,000 and $796,000,
respectively.
The allowance for possible loan losses was $12.1 million or 1.71% of loans
outstanding at September 30, 1996. This compares to $10.8 million or 1.73%
at the end of 1995 and $10.8 million or 1.84% at September 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 Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 11,976 $ 10,518 $ 10,789 $ 9,575
Loans charged off (1,126) (394) (2,332) (1,033)
Recoveries of loans previously
charged off 276 105 719 237
----------- ------------ ----------- -----------
Net loans charged off (850) (289) (1,613) (796)
----------- ------------ ----------- -----------
Provision for possible loan losses 950 560 2,900 2,010
----------- ------------ ----------- -----------
Allowance for possible loan losses
(end of period) $ 12,076 $ 10,789 $ 12,076 $ 10,789
=========== =========== =========== ===========
Loans outstanding:
Average $696,023 $588,556 $664,284 $580,614
End of period 708,209 585,425 708,209 585,425
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.74% 1.83% 1.82% 1.86%
End of period 1.71 1.84 1.71 1.84
Ratio of net charge-offs to
average loans outstanding, annualized: .48 .20 .32 .18
</TABLE>
13
<PAGE> 14
<TABLE>
The following table summarizes nonperforming assets at the dates indicated:
<CAPTION>
September 30, December 31, September 30,
1996 1995 1995
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 1,934 $ 3,778 $ 2,399
Loans past due 90 days or more 418 179 91
Restructured loans 798 731 837
------------- ------------- -------------
Total nonperforming loans 3,150 4,688 3,327
Other real estate 569
------------- ------------- -------------
Total nonperforming assets $ 3,719 $ 4,688 $ 3,327
============= ============= =============
Loans, net of unearned discount $ 708,209 $ 623,777 $ 585,425
Allowance for possible loan
losses to loans 1.71% 1.73% 1.84%
Nonperforming loans to loans .44 .75 .57
Allowance for possible loan losses
to nonperforming loans 383.37 230.14 324.29
Nonperforming assets to loans
and foreclosed assets .52 .75 .57
</TABLE>
NONINTEREST INCOME
- ------------------
For the third quarter of 1996 total noninterest income was $1,131,000,
down sharply from $1,720,000 in the same period in 1995. Net gains of
$844,000 were realized on securities sales in the third quarter of 1995
while the same quarter this year had no securities sales. Included in 1995
were losses of $7,000 on the sale of $2 million of Held to Maturity U.S.
Government securities sold within three months of the securities'
scheduled maturities. Gains of $851,000 were realized on the sale of
$15 million of U.S. Government securities classified Available for Sale.
Offsetting a portion of the lack of securities gains in the third
quarter of 1996 were higher trading profits and commissions and greater
credit card merchant fees.
For the first nine months of 1996 total noninterest income was $3,678,000,
up $427,000 from $3,251,000 in the first nine months of 1995. Net gains of
$441,000 were realized on securities sales in the first nine months of
1996 compared with securities gains of $753,000 in the same period of 1995.
Increased noninterest income was generated from a combination of greater
service charges on deposits, higher trading profits and commissions and
other customer fees and charges.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the third quarter of 1996 was $4,491,000,
up $517,000 from $3,974,000 in the same period in 1995. For the first nine
months of 1996 total noninterest expenses were $13,534,000, up
$1,318,000, from $12,216,000 in the 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 September 30, 1996, the Company's total shareholders' equity was
$75.1 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 September 30, 1996 and December 31, 1995 the
Company's Tier 1 capital was 10.51% and 10.30% of risk-weighted assets, and
total risk-based capital was 11.76% 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 September 30, 1996 and
December 31, 1995, the Company's leverage ratio was 7.23% 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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For a list of Exhibits, see "Exhibits Index" appearing elsewhere here.
(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: November 12, 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 September 30, 1996
Exhibit
Number Description of Exhibit
------ ----------------------
11 Computation of Earnings
per Common Share
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 Nine Months Ended
September 30, September 30,
------------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average common shares outstanding 4,512,162 4,507,306 4,511,206 4,425,318
Average common stock equivalents of warrants and
options outstanding--based on the
treasury stock method using market price 51,470 30,728 41,846 19,726
------------- ------------- ------------- -------------
4,563,632 4,538,034 4,553,052 4,445,044
============= ============= ============= =============
Net income $ 3,667 $ 2,934 $ 10,464 $ 7,999
Less: Dividends on preferred stock (58) (58) (173) (173)
------------- ------------- ------------- -------------
$ 3,609 $ 2,876 $ 10,291 $ 7,826
============= ============= ============= =============
Primary earnings per common share $ .79 $ .63 $ 2.26 $ 1.76
============= ============= ============= =============
</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 Nine Months Ended
September 30, September 30,
------------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Fully diluted:
Average common shares outstanding 4,512,162 4,507,306 4,511,206 4,425,318
Average common stock equivalents of warrants and
options outstanding--based on the
treasury stock method using market price 51,470 30,728 41,846 19,726
Convertible debenture common stock equivalents 237,600 237,600 237,600 316,365
------------- ------------- ------------- -------------
4,801,232 4,775,634 4,790,652 4,761,409
============= ============= ============= =============
Net income $ 3,667 $ 2,934 $ 10,464 $ 7,999
Less: Dividends on preferred stock (58) (58) (173) (173)
Plus: Convertible debenture interest,
net of federal income tax effect 35 36 105 125
------------- ------------- ------------- -------------
$ 3,644 $ 2,912 $ 10,396 $ 7,951
============= ============= ============= =============
Fully diluted earnings per common share $ .76 $ .61 $ 2.17 $ 1.67
============= ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 29,826
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,300
<TRADING-ASSETS> 571
<INVESTMENTS-HELD-FOR-SALE> 219,770
<INVESTMENTS-CARRYING> 62,103
<INVESTMENTS-MARKET> 63,700
<LOANS> 708,209
<ALLOWANCE> 12,076
<TOTAL-ASSETS> 1,044,666
<DEPOSITS> 904,889
<SHORT-TERM> 54,811
<LIABILITIES-OTHER> 7,192
<LONG-TERM> 2,700
0
2,500
<COMMON> 4,512
<OTHER-SE> 68,062
<TOTAL-LIABILITIES-AND-EQUITY> 1,044,666
<INTEREST-LOAN> 44,868
<INTEREST-INVEST> 13,641
<INTEREST-OTHER> 584
<INTEREST-TOTAL> 59,093
<INTEREST-DEPOSIT> 28,469
<INTEREST-EXPENSE> 30,102
<INTEREST-INCOME-NET> 28,991
<LOAN-LOSSES> 2,900
<SECURITIES-GAINS> 441
<EXPENSE-OTHER> 13,534
<INCOME-PRETAX> 16,235
<INCOME-PRE-EXTRAORDINARY> 10,464
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,464
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.17
<YIELD-ACTUAL> 4.04
<LOANS-NON> 1,934
<LOANS-PAST> 418
<LOANS-TROUBLED> 798
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,789
<CHARGE-OFFS> 2,332
<RECOVERIES> 719
<ALLOWANCE-CLOSE> 12,076
<ALLOWANCE-DOMESTIC> 8,078
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,998
</TABLE>
