<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, 1997
----------------------------------------------
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 1, 1997:
Common Stock, $1.00 par value 4,756,356
- ----------------------------- -------------------
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 --
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Income -- Quarters Ended June 30, 1997
and June 30, 1996 and Six Months Ended
June 30, 1997 and June 30, 1996 4
Consolidated Statements of Changes in
Shareholders' Equity -- Six Months
Ended June 30, 1997 and June 30, 1996 5
Condensed Consolidated Statements of
Cash Flows -- Six Months Ended
June 30, 1997 and June 30, 1996 6
Notes to Condensed Consolidated
Financial Statements 7-8
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9-16
PART II. OTHER INFORMATION
-----------------
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
- ---------
EXHIBIT INDEX 19
- -------------
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1.
- --------------
<TABLE>
FINANCIAL STATEMENTS
--------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
June 30, December 31,
1997 1996
(Derived from
(Unaudited) Audited Statements)
-------------- -------------------
(dollars in thousands)
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 41,149 $ 30,951
Federal funds sold 28,975
Held to maturity securities
(fair value of $48,480 and
$59,649, respectively) 47,423 58,198
Available for sale securities 251,173 229,453
Trading account securities 1,259 20
Loans, net of
unearned income 841,840 731,019
Allowance for possible loan losses 13,662 12,624
-------------- --------------
Net loans 828,178 718,395
Premises and equipment 11,975 11,700
Other assets 22,560 17,060
-------------- --------------
TOTAL ASSETS $ 1,232,692 $ 1,065,777
============== ==============
Liabilities
- -----------
Deposits:
Non-interest bearing $ 100,792 $ 98,726
Interest bearing 993,269 819,286
-------------- --------------
Total deposits 1,094,061 918,012
Securities sold under agreements
to repurchase 24,057 41,591
Other short-term borrowings 8,152 21,023
8% Convertible debentures 2,700
Guaranteed preferred beneficial interests
in subordinated debentures 14,950
Other liabilities 7,781 6,502
-------------- --------------
TOTAL LIABILITIES 1,149,001 989,828
-------------- --------------
Shareholders' Equity
- --------------------
Common stock-par value $1
Authorized 15,000,000 shares,
issued 4,756,356 in 1997
and 4,516,956 in 1996 4,756 4,517
Capital surplus 22,251 19,752
Retained earnings 56,701 51,159
Unrealized gain, (loss) on available
for sale securities, net of tax (17) 521
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 83,691 75,949
-------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,232,692 $ 1,065,777
============== ==============
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
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $18,625 $15,020 $34,545 $29,173
Held to maturity securities:
Taxable 738 1,126 1,582 2,202
Tax-exempt 140 140 281 281
Available for sale securities 3,192 2,919 6,618 6,517
Other 406 289 575 386
------- ------- ------- -------
TOTAL INTEREST INCOME 23,101 19,494 43,601 38,559
------- ------- ------- -------
Interest expense:
Deposits 11,387 9,407 21,200 18,599
Short-term borrowings 827 390 1,625 796
Long-term borrowings 276 54 416 108
------- ------- ------- -------
TOTAL INTEREST EXPENSE 12,490 9,851 23,241 19,503
------- ------- ------- -------
NET INTEREST INCOME 10,611 9,643 20,360 19,056
Provision for possible loan losses 1,200 850 2,100 1,950
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 9,411 8,793 18,260 17,106
------- ------- ------- -------
Other income:
Service charges 470 381 911 745
Securities gains/(losses), net on:
Sales of held to maturity securities (3)
Sales of available for sale securities (20) 132 88 444
Trading profits and commissions 159 307 365 665
Other 674 394 1,183 696
------- ------- ------- -------
1,283 1,214 2,547 2,547
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 2,494 2,311 4,921 4,539
Net occupancy 321 262 609 563
Equipment 302 326 596 616
Advertising 211 168 378 320
Other 1,910 1,528 3,616 3,005
------- ------- ------- -------
5,238 4,595 10,120 9,043
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 5,456 5,412 10,687 10,610
Income taxes 1,959 1,878 3,847 3,813
------- ------- ------- -------
NET INCOME $ 3,497 $ 3,534 $ 6,840 $ 6,797
======= ======= ======= =======
Earnings per common share:
Primary $ .72 $ .76 $ 1.45 $ 1.47
Fully diluted $ .72 $ .73 $ 1.42 $ 1.41
See accompanying notes.
</TABLE>
4
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCHSHARES, INC.
------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
(Unaudited)
<CAPTION>
Unrealized Gain, Total
Preferred Stock Common Stock (Loss) on Share-
----------------- ----------------- Capital Retained 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, 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
====== ====== ========= ====== ======= ======= ======= =======
Balance at January 1, 1997 4,516,956 $4,517 $19,752 $51,159 $ 521 $75,949
Net income 6,840 6,840
Issuance of common
stock 1,800 2 36 38
1992 Debentures converted
to common stock 237,600 237 2,463 2,700
Cash dividends on:
common stock (1,298) (1,298)
Unrealized (loss), net
of tax, on available
for sale securities (538) (538)
--------- ------ ------- ------- ------- -------
Balance at June 30, 1997 4,756,356 $4,756 $22,251 $56,701 $ (17) $83,691
========= ====== ======= ======= ======= =======
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,
------------------------------
1997 1996
--------- --------
(dollars in thousands)
<S> <C> <C>
Operating activities
- --------------------
Net income $ 6,840 $ 6,797
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 2,100 1,950
Provision for depreciation and amortization 734 471
Accretion of discounts and amortization of
premiums on securities (600) (68)
Realized securities (gains) and losses, net (88) (441)
Net (increase) decrease in trading account securities (1,239) 92
Net (increase) decrease in interest receivable (1,093) 466
Increase in interest payable 439 15
Other, net (3,278) 776
--------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,815 10,058
--------- --------
Investing activities
- --------------------
Proceeds from maturities of held to maturity securities 13,000
Proceeds from sales and paydowns of held to maturity securities -- 2,011
Purchases of held to maturity securities (2,033) (19,299)
Purchases of available for sale securities (123,411) (19,740)
Proceeds from maturities of available for sale securities 74,000 5,000
Proceeds from sales and paydowns of
available for sale securities 27,358 64,501
Purchases of premises and equipment (1,007) (2,815)
Increase in loans outstanding, net (111,883) (61,945)
--------- --------
NET CASH USED IN
INVESTING ACTIVITIES (123,976) (32,287)
--------- --------
Financing activities
- --------------------
Net increase in deposits 176,049 15,118
Net increase (decrease) in repurchase agreements
and other short-term borrowings (30,405) 15,095
Proceeds from sale of subordinated debentures 14,950
Proceeds from sale of common stock 38 36
Cash dividends (1,298) (1,108)
--------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 159,334 29,141
--------- --------
INCREASE IN CASH AND CASH
EQUIVALENTS 39,173 6,912
Cash and cash equivalents at beginning of period 30,951 27,574
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 70,124 $ 34,486
========= ========
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'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. 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.
During the fourth quarter of 1996 the Bank purchased a two-year
interest-rate floor contract as part of its asset-liability management
strategy to manage interest rate risk. For the fixed premium payment of
$345,000 the interest-rate floor contract requires the seller to pay the Bank
at specified future dates the amount, if any, by which a specified market
interest rate falls below the fixed floor rate, applied to a notional amount
of $50 million. The instrument is being held for trading purposes, and
therefore, all market value adjustments and income or expense on the
instrument is recognized on a current basis.
During the first quarter of 1997 the Bank purchased a three-year
interest-rate floor agreement as a hedge against reduced yields on its
floating rate loan portfolio in anticipation of a declining interest rate
environment. For the fixed premium payment of $215,000 the interest-rate
floor contract requires the seller to pay the Bank at specified future dates
the amount, if any, by which a specified market interest rate falls below the
fixed floor rate, applied to a notional amount of $25 million. Income or
expense on the instrument is recorded on an accrual basis as an adjustment to
the yield of the related interest-earning assets over the period covered by
the contract.
3. MVBI Capital Trust - During the first quarter of 1997 the Company formed
MVBI Capital Trust ("MVBI Capital"), a statutory business trust. The Company
purchased all the common stock of MVBI Capital for $462,375. MVBI Capital
sold to the public 598,000 preferred shares, having a liquidation value of $25
per share, for a total of $14,950,000. The sole assets of MVBI Capital are
subordinated debentures of the Company for $15,412,375 which are
7
<PAGE> 8
due in the year 2027. The distributions payable on the preferred securities
will float with the 3-Month Treasury plus 2.25%. All accounts of MVBI Capital
are included in the consolidated financial statements of the Company. The
preferred securities are considered long-term borrowings of the Company and
entitled "Guaranteed preferred beneficial interests in subordinated
debentures" for financial reporting purposes.
4. New accounting standard - SFAS No. 128 - In March, 1997, the FASB issued
SFAS No. 128, Earnings per Share. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Earlier application is not permitted. Under the standard, primary EPS is
replaced with a calculation called basic EPS. Basic EPS would be calculated
by dividing income available to common shareholders by the weighted average
number of common shares outstanding. Options would be excluded from the
calculation for the Company. Fully diluted EPS would not change significantly
but would be renamed diluted EPS. SFAS No. 128 is not expected to have a
material effect on the Company's reported earnings per share.
8
<PAGE> 9
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, 1996.
SUMMARY OF EARNINGS
- -------------------
Consolidated net income for the second quarter of 1997 was $3,497,000,
down $37,000 or 1.0% from the $3,534,000 earned during the second quarter of
1996. On a per share basis, net income was $.72, down from $.73 in the same
period of the prior year. Greater net interest income was offset by a larger
provision for loan losses and increased noninterest expenses. Total
noninterest income was up only slightly from the prior year level.
Net income for the first half of 1997 was $6,840,000, up $43,000 or .6%
from $6,797,000 earned for the first half of 1996. On a per share basis, net
income was $1.42, up from $1.41 in the first half of 1996. Increased net
interest income was offset by a slightly higher provision for loan losses and
greater noninterest expenses. Much of the increase in overhead costs was
anticipated and was incurred to assist in the loan and deposit growth
experienced thus far in 1997. Total noninterest income for the first half of
1997 was $2,547,000, the same as for the first six months of 1996.
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, $63,000,
$124,000 and $125,000 for the three months ended June 30, 1997 and 1996, and
for the six months ended June 30, 1997 and 1996, 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, 1997 and 1996
- -----------------------------------------
Total tax-equivalent interest income for the three months ended June 30,
1997 was $23,163,000, up $3,606,000 as compared to the same period in 1996.
The $140 million increase in the volume of average loans outstanding was
primarily responsible for the increase in interest earnings for the second
quarter of 1997. Overall asset yields were 8.53% in the second quarter of
1997, up 29 basis points from the 8.24% earned in the same period in 1996.
Most of the increase in overall asset yields resulted from increased loan
yields that advanced largely from the higher average prime loan rate in 1997.
9
<PAGE> 10
Funding the Company's loan growth was a combination of increased short-term
borrowings, additional time deposits and increased money market accounts.
These increased borrowings and deposits were largely responsible for the
increased interest expense in 1997.
Total interest expense for the second quarter of 1997 was $12,489,000,
up $2,638,000 from $9,851,000 in the second three months of 1996. Adding to
the effects of the increased volume of deposits and short-term borrowings were
the increased rates paid on nearly all fund sources in 1997.
Overall tax-equivalent net interest income increased $968,000 as
interest income rose $3.6 million and interest expense was up $2.6 million.
The Company's net interest margin declined to 3.93% in the second quarter of
1997 from 4.08% in the same period in 1996 as the current 6.02% annual
percentage yield money market deposit promotion, which began in the second
quarter of 1997, advanced overall deposit rates more than total asset yields
improved during the same period.
Six months ended June 30, 1997 and 1996
- ---------------------------------------
Total tax-equivalent interest income for the first six months of 1997
was $43,725,000, up $5,041,000 from $38,684,000 in the same period in 1996.
The $119 million increase in average loans was primarily responsible for
generating the increase in interest earnings from 1996 to 1997. Slightly
higher asset yields also supplemented the overall increase in interest income.
Overall earning asset yields were 8.37% for the first six months of 1997, up
from 8.22% for the same period of 1996.
Total interest expense for the first half of 1997 was $23,241,000, up
$3,738,000 from $19,503,000 in the same period in 1996. Greater time deposits
and short-term borrowings were primarily responsible for the increased
expense. Higher rates paid on nearly all fund sources, but most notably on
money market accounts, also increased interest expense for the first half of
1997. Overall rates paid on total interest bearing liabilities increased to
5.08% from 4.77% in the first six months of 1996.
In summary, total tax-equivalent net interest income increased
$1,303,000 as interest income improved by $5.0 million and interest expense
grew $3.7 million. The Company's net interest margin for the first six months
was 3.92%, down from 4.07% in the same period in 1996.
10
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Three Months Ended June 30,
------------------------------------------------------------------------
1997 1996
------------------------------------- -------------------------------
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 $ 809,670 $18,625 9.22% $669,427 $15,020 9.02%
Tax-exempt<F3>
Held to maturity securities
Taxable 43,722 738 6.77 68,783 1,126 6.58
Tax-exempt<F3> 7,567 203 10.72 7,464 203 10.86
Available for sale securities 198,336 3,192 6.45 186,566 2,919 6.28
Trading account securities 713 12 6.88 1,200 18 5.99
Federal Funds sold and other short-
term investments 28,631 393 5.49 20,350 271 5.36
---------- ------- -------- -------
Total interest-earning assets 1,088,639 23,163 8.53 953,790 19,557 8.24
------- -------
Noninterest-earning assets:
Cash and due from banks 28,085 23,075
Bank premises and equipment 11,948 10,247
Other assets 15,500 10,888
Allowance for possible loan losses (13,142) (11,535)
---------- --------
Total assets $1,131,030 $986,465
========== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 22,124 $ 94 1.71% $ 20,392 $ 87 1.71%
Money market accounts 373,969 4,798 5.15 339,460 3,531 4.18
Savings deposits 23,021 169 2.95 22,516 165 2.95
Time deposits of $100,000 or more 39,256 525 5.36 32,890 427 5.22
Other time deposits 419,795 5,800 5.54 381,631 5,197 5.48
---------- ------- -------- -------
Total interest-bearing deposits 878,165 11,386 5.20 796,889 9,407 4.75
Federal funds purchased, repurchase
agreements and other short-term
borrowings 63,036 827 5.23 32,226 390 4.87
Convertible debentures 2,700 54 8.00
Guaranteed Preferred Beneficial
Interests in Subordinated Debentures 14,950 276 7.39
---------- ------- -------- -------
Total interest-bearing liabilities 956,151 12,489 5.24 831,815 9,851 4.76
------- -------
Noninterest-bearing liabilities:
Demand deposits 90,385 81,399
Other liabilities 2,109 1,885
Shareholders' equity 82,385 71,366
---------- --------
Total liabilities and
shareholders' equity $1,131,030 $986,465
========== ========
Net interest income $10,674 $ 9,706
======= =======
Net interest margin 3.93% 4.08%
===== =====
<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
$63,000 for the three months ended June 30, 1997 and 1996, respectively.
</TABLE>
11
<PAGE> 12
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------------------
1997 1996
------------------------------------- -------------------------------
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 $ 767,523 $34,545 9.07% $648,205 $29,172 9.04%
Tax-exempt<F3> 35 1 8.60
Held to maturity securities
Taxable 46,911 1,582 6.80 66,673 2,202 6.64
Tax-exempt<F3> 7,554 405 10.74 7,451 406 10.88
Available for sale securities 209,126 6,618 6.36 208,707 6,517 6.27
Trading account securities 712 25 7.03 938 29 6.24
Federal Funds sold and other short-
term investments 20,330 550 5.43 13,206 357 5.44
---------- ------- -------- -------
Total interest-earning assets 1,052,156 43,725 8.37 945,215 38,684 8.22
------- -------
Noninterest-earning assets:
Cash and due from banks 26,295 22,170
Bank premises and equipment 11,896 9,851
Other assets 14,756 10,942
Allowance for possible loan losses (12,894) (11,262)
---------- --------
Total assets $1,092,209 $976,916
========== ========
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 22,316 $ 189 1.71% $ 20,095 $ 171 1.71%
Money market accounts 339,955 7,949 4.72 353,641 7,413 4.22
Savings deposits 23,106 339 2.96 22,324 329 2.97
Time deposits of $100,000 or more 39,303 1,055 5.41 32,069 841 5.27
Other time deposits 423,769 11,667 5.55 359,570 9,845 5.51
---------- ------- -------- -------
Total interest-bearing deposits 848,449 21,199 5.04 787,699 18,599 4.75
Federal funds purchased, repurchase
agreements and other short-term
borrowings 63,013 1,625 5.17 32,431 796 4.94
Convertible debentures 1,343 54 8.00 2,700 108 8.00
Guaranteed Preferred Beneficial
Interests in Subordinated debentures 9,746 363 7.44
---------- ------- -------- -------
Total interest-bearing
liabilities 922,551 23,241 5.08 822,830 19,503 4.77
------- -------
Noninterest-bearing liabilities:
Demand deposits 87,066 79,786
Other liabilities 2,502 2,692
Shareholders' equity 80,090 71,608
---------- --------
Total liabilities and
shareholders' equity $1,092,209 $976,916
========== ========
Net interest income $20,484 $19,181
======= =======
Net interest margin 3.92% 4.07%
===== =====
<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 $124,000 and
$125,000 for the six months ended June 30, 1997 and 1996, respectively.
</TABLE>
12
<PAGE> 13
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, 1997 June 30, 1997
Compared to Compared to
June 30, 1996 June 30, 1996
------------------------------ ------------------------------
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> $3,260 $ 345 $3,605 $5,277 $ 95 $5,372
Held to maturity securities:
Taxable (420) 32 (388) (671) 51 (620)
Tax-exempt<F1> 3 (3) 5 (6) (1)
Available for sale securities 191 82 273 12 89 101
Trading account securities (8) 2 (6) (8) 4 (4)
Federal funds sold and other short-
term investments 115 7 122 194 (1) 193
------ ------ ------ ------ ------- ------
Total interest income 3,141 465 3,606 4,809 232 5,041
------ ------ ------ ------ ------- ------
Interest paid on:
NOW accounts 7 7 18 18
Money market accounts 386 881 1,267 (300) 836 536
Savings 4 4 11 (1) 10
Time deposits of $100,000 or more 87 11 98 192 22 214
Other time deposits 544 59 603 1,751 71 1,822
Federal funds purchased, repurchase
agreements and other
short-term borrowings 427 10 437 818 11 829
Long-term borrowings 111 111 222 154 155 309
------ ------ ------ ------ ------- ------
Total interest expense 1,566 1,072 2,638 2,644 1,094 3,738
------ ------ ------ ------ ------- ------
Net interest income $1,575 $ (607) $ 968 $2,165 $ (862) $1,303
====== ====== ====== ====== ======= ======
<FN>
- -------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustments were $63,000,
$63,000, $124,000 and $125,000 for the three months ended June 30,
1997 and 1996, and for the six months ended June 30, 1997 and 1996,
respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
13
<PAGE> 14
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision for possible loan losses for the second quarter of 1997 was
$1,200,000, up from $850,000 last year. For the first half of 1997 the
provision for possible loan losses was $2,100,000, up from $1,950,000 for the
same period last year. Higher net loan charge-offs and strong loan growth
during 1997 resulted in the greater provision expense. The annualized ratio
of net charge-offs to average loans for the first half of 1997 was .28%, up
from .24% last year, while corresponding net loan charge-offs were $1,062,000
and $763,000, respectively.
The allowance for possible loan losses was $13.7 million or 1.62% of loans
outstanding at June 30, 1997. This compares to $12.6 million or 1.73% at the
end of 1996 and $12.0 million or 1.75% at June 30, 1996. 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,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 12,992 $ 11,435 $ 12,624 $ 10,789
Loans charged off (689) (671) (1,344) (1,206)
Recoveries of loans previously
charged off 159 362 282 443
-------- -------- -------- --------
Net loans charged off (530) (309) (1,062) (763)
-------- -------- -------- --------
Provision for possible loan losses 1,200 850 2,100 1,950
-------- -------- -------- --------
Allowance for possible loan losses
(end of period) $ 13,662 $ 11,976 $ 13,662 $ 11,976
======== ======== ======== ========
Loans outstanding:
Average $809,670 $669,427 $767,523 $648,240
End of period 841,840 684,959 841,840 684,959
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.69% 1.79% 1.78% 1.85%
End of period 1.62 1.75 1.62 1.75
Ratio of net charge-offs to
average loans outstanding, annualized: .26 .18 .28 .24
</TABLE>
14
<PAGE> 15
The following table summarizes nonperforming assets at the dates
indicated:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
-------- ------------ --------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 6,161 $ 5,745 $ 868
Loans past due 90 days or more 451 177 90
Restructured loans 174 788 816
-------- -------- --------
Total nonperforming loans 6,786 6,710 1,774
Other real estate 569 569 1,269
-------- -------- --------
Total nonperforming assets $ 7,355 $ 7,279 $ 3,043
======== ======== ========
Loans, net of unearned discount $841,840 $731,019 $684,959
Allowance for possible loan
losses to loans 1.62% 1.73% 1.75%
Nonperforming loans to loans .81 .92 .26
Allowance for possible loan losses
to nonperforming loans 201.33 188.14 675.08
Nonperforming assets to loans
and foreclosed assets .87 .99 .44
</TABLE>
NONINTEREST INCOME
- ------------------
For the second quarter of 1997, total noninterest income was $1,283,000, up
$69,000 from $1,214,000 in the same period in 1996. Increased service
charges on depository accounts, higher merchant credit card fees and
operating lease income were primarily responsible for the increased total
noninterest income in 1997.
For the first six months of 1997 total noninterest income was $2,547,000, the
same as in the first half of 1996. Net gains of $88,000 were realized on
securities sales in the first half of 1997, down from gains on securities
sales of $441,000 in the first half of 1996. Included were sales of
securities classified as held to maturity which generated losses of $3,000 in
1996. 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. Other portions of 1997 noninterest income including service charges,
merchant credit card fees and leasing income were up from prior year levels.
Limiting overall noninterest income increases were lower trading profits and
commissions of $365,000, down from $665,000 in the first half of 1996. Most
of the downturn was comprised of losses on the Bank's trading activities as
overall commissions from customer activities were similar to the first half
of 1996.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the second quarter of 1997 was $5,238,000, up
$643,000 from $4,595,000 in the first three months of 1996. For the first
half of 1997 total noninterest expenses were $10,120,000, up $1,077,000 from
the same period in 1996. Greater personnel and benefit costs and increased
advertising costs associated with the money market deposit promotion which
began May 5 were partially responsible for the 1997 increase in total
overhead costs. Additional expenses related to the leasing and credit card
merchant activities combined to further increase noninterest expense costs in
the first half of 1997.
15
<PAGE> 16
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of June 30, 1997, the Company's total shareholders' equity was $83.7
million. New capital was provided by the Company's net earnings and minimally
by the exercise of stock options. On April 1, 1997 the Company's 1992, 8%
convertible debentures matured. Prior to maturity, all debenture holders
elected to convert their debentures into 237,600 shares of the Company's
common stock. Offsetting the Company's capital accumulation were the payments
of cash dividends on common stock and the recording of unrealized losses, net
of tax, on available for sale securities. During the first half of 1997 the
fair market values of the Company's available for sale securities declined
from their level at the end of 1996.
During the first quarter of 1997 the Company formed MVBI Capital Trust
("MVBI Capital"), a statutory business trust. The Company owns all the common
stock of MVBI Capital. MVBI Capital sold 598,000 preferred securities, having
a liquidation amount of $25 per security, for a total of $14,950,000. The
distributions payable on the preferred securities will float with the 3-Month
Treasury plus 2.25%. All accounts of MVBI Capital are included in the
consolidated financial statements of the Company. The preferred securities
are considered long-term borrowings and entitled "Guaranteed preferred
beneficial interests in subordinated debentures" for financial report
purposes. For risk-based capital guidelines the amount is considered to be
Tier I capital.
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 I 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, 1997 and December 31, 1996 the
Company's Tier I capital was 11.38% and 10.20% of risk-weighted assets, and
total risk-based capital was 12.63% and 11.45% of risk-weighted assets,
respectively.
The minimum acceptable ratio of Tier I capital to total assets, or
leverage ratio, has been established at 3.00%. As of June 30, 1997 and
December 31, 1996, the Company's leverage ratio was 8.72% and 7.20%,
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.
16
<PAGE> 17
PART II. OTHER INFORMATION
- ----------------------------
ITEM 4. Submission of Matters to a Vote
-------------------------------
of Security Holders
-------------------
On April 16, 1997, 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:
Votes Votes
In Favor Abstaining
-------- ----------
Alice C. Behan 3,927,157 1,900
William H.T. Bush 3,927,257 1,800
Franklin J. Cornwell,Jr. 3,927,357 1,700
Frederick O. Hanser 3,926,957 2,100
b. Approved certain amendment to the 1991 Stock Option
Plan with 3,741,692 shares voted in favor, 65,140
shares voted against and 19,288 shares abstained.
b. Ratified the selection of Ernst & Young LLP as
independent accountants for 1997 with 3,880,465 shares
voted in favor, 3,261 shares voted against and 45,332
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
17
<PAGE> 18
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 1, 1997 /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)
18
<PAGE> 19
MISSISSIPPI VALLEY BANCSHARES, INC.
EXHIBIT INDEX
FORM 10-Q
For the quarterly period ended June 30, 1997
Exhibit
Number Description of Exhibit
------- ----------------------
11 Computation of Earnings
per Common Share
19
<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
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Average common shares outstanding 4,755,988 4,511,414 4,637,322 4,510,723
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 82,287 42,035 82,291 36,980
---------- ---------- ---------- ----------
4,838,275 4,553,449 4,719,613 4,547,703
========== ========== ========== ==========
Net income $ 3,497 $ 3,534 $ 6,840 $ 6,797
Less: Dividends on preferred stock (58) (116)
---------- ---------- ---------- ----------
$ 3,497 $ 3,476 $ 6,840 $ 6,681
========== ========== ========== ==========
Primary earnings per common share $ .72 $ .76 $ 1.45 $ 1.47
========== ========== ========== ==========
</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,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Fully diluted:
Average common shares outstanding 4,755,988 4,511,414 4,637,322 4,510,723
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 82,287 42,035 82,291 36,980
Convertible debenture common stock equivalents 237,600 118,144 237,600
---------- ---------- ---------- ----------
4,838,275 4,791,049 4,837,757 4,785,303
========== ========== ========== ==========
Net income $ 3,497 $ 3,534 $ 6,840 $ 6,797
Less: Dividends on preferred stock (58) (116)
Plus: Convertible debenture interest,
net of federal income tax effect 35 35 70
---------- ---------- ---------- ----------
$ 3,497 $ 3,511 $ 6,875 $ 6,751
========== ========== ========== ==========
Fully diluted earnings per common share $ .72 $ .73 $ 1.42 $ 1.41
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<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> 41,149
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 28,975
<TRADING-ASSETS> 1,259
<INVESTMENTS-HELD-FOR-SALE> 251,173
<INVESTMENTS-CARRYING> 47,423
<INVESTMENTS-MARKET> 48,480
<LOANS> 841,840
<ALLOWANCE> 13,662
<TOTAL-ASSETS> 1,232,692
<DEPOSITS> 1,094,061
<SHORT-TERM> 32,209
<LIABILITIES-OTHER> 7,781
<LONG-TERM> 14,950
0
0
<COMMON> 4,756
<OTHER-SE> 78,935
<TOTAL-LIABILITIES-AND-EQUITY> 1,232,692
<INTEREST-LOAN> 34,545
<INTEREST-INVEST> 8,481
<INTEREST-OTHER> 575
<INTEREST-TOTAL> 43,601
<INTEREST-DEPOSIT> 21,200
<INTEREST-EXPENSE> 23,241
<INTEREST-INCOME-NET> 20,360
<LOAN-LOSSES> 2,100
<SECURITIES-GAINS> 88
<EXPENSE-OTHER> 10,120
<INCOME-PRETAX> 10,687
<INCOME-PRE-EXTRAORDINARY> 6,840
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,840
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.42
<YIELD-ACTUAL> 3.92
<LOANS-NON> 6,161
<LOANS-PAST> 451
<LOANS-TROUBLED> 174
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,624
<CHARGE-OFFS> 1,344
<RECOVERIES> 282
<ALLOWANCE-CLOSE> 13,662
<ALLOWANCE-DOMESTIC> 10,019
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,643
</TABLE>
