<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, 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 NOVEMBER 6, 1997:
Common Stock, $1.00 par value 4,758,856
------------------------------ ---------------------
Class Number of Shares
<PAGE> 2
<TABLE>
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Income -- Quarters Ended September 30, 1997
and September 30, 1996 and Nine Months Ended
September 30, 1997 and September 30, 1996 4
Consolidated Statements of Changes in
Shareholders' Equity -- Nine Months Ended
September 30, 1997 and September 30, 1996 5
Condensed Consolidated Statements of
Cash Flows -- Nine Months Ended
September 30, 1997 and September 30, 1996 6
Notes to Condensed Consolidated
Financial Statements 7
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9-16
PART II. OTHER INFORMATION
-----------------
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
- ---------
EXHIBIT INDEX 19
- -------------
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1.
- -------
<TABLE>
FINANCIAL STATEMENTS
--------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
September 30, December 31,
1997 1996
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 26,447 $ 30,951
Federal funds sold 57,800
Held to maturity securities
(fair value of $41,914 and
$59,649, respectively) 40,502 58,198
Available for sale securities 320,312 229,453
Trading account securities 500 20
Loans, net of
unearned income 865,640 731,019
Allowance for possible loan losses $ 14,241 $ 12,624
---------- ----------
Net loans 851,399 718,395
Premises and equipment 11,861 11,700
Other assets 24,187 17,060
---------- ----------
TOTAL ASSETS $1,333,008 $1,065,777
========== ==========
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 104,076 $ 98,726
Interest bearing 1,070,596 819,286
---------- ----------
Total deposits 1,174,672 918,012
Securities sold under agreements
to repurchase 26,751 24,391
Other short-term borrowings 19,060 38,223
8% Convertible debentures 2,700
Guaranteed preferred beneficial interests
in subordinated debentures 14,950
Other liabilities 9,697 6,502
---------- ----------
TOTAL LIABILITIES 1,245,130 989,828
---------- ----------
SHAREHOLDERS' EQUITY
- --------------------
Common stock-par value $1
Authorized 15,000,000 shares,
issued 4,757,856 in 1997
and 4,516,956 in 1996 4,757 4,517
Capital surplus 22,284 19,752
Retained earnings 59,812 51,159
Unrealized gain, (loss) on available
for sale securities, net of tax 1,025 521
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 87,878 75,949
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,333,008 $1,065,777
========== ==========
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,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 19,329 $ 15,695 $ 53,874 $ 44,868
Held to maturity securities:
Taxable 631 1,218 2,213 3,420
Tax-exempt 136 141 417 422
Available for sale securities 4,911 3,282 11,529 9,799
Other 592 198 1,167 584
--------- --------- --------- ---------
TOTAL INTEREST INCOME 25,599 20,534 69,200 59,093
--------- --------- --------- ---------
Interest expense:
Deposits 14,196 9,870 35,395 28,469
Short-term borrowings 505 675 2,130 1,471
Long-term borrowings 277 54 694 162
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 14,978 10,599 38,219 30,102
--------- --------- --------- ---------
NET INTEREST INCOME 10,621 9,935 30,981 28,991
Provision for possible loan losses 1,100 950 3,200 2,900
--------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 9,521 8,985 27,781 26,091
--------- --------- --------- ---------
Other income:
Service charges 477 382 1,388 1,127
Securities gains/(losses), net on:
Sales of held to maturity securities (3)
Sales of available for sale securities 88 444
Trading profits and commissions 416 325 781 990
Other 578 424 1,761 1,120
--------- --------- --------- ---------
1,471 1,131 4,018 3,678
--------- --------- --------- ---------
Other expenses:
Employee compensation and
other benefits 2,712 2,341 7,633 6,880
Net occupancy 331 282 940 845
Equipment 307 286 903 902
Advertising 240 119 618 439
Other 1,512 1,463 5,128 4,468
--------- --------- --------- ---------
5,102 4,491 15,222 13,534
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 5,890 5,625 16,577 16,235
Income taxes 2,113 1,958 5,960 5,771
--------- --------- --------- ---------
NET INCOME $ 3,777 $ 3,667 $ 10,617 $ 10,464
========= ========= ========= =========
Earnings per common share:
Primary $ .78 $ .79 $ 2.23 $ 2.26
Fully diluted $ .78 $ .76 $ 2.20 $ 2.17
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 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 (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
====== ====== ========= ====== ======= ======= ======= =======
BALANCE AT JANUARY 1, 1997 4,516,956 $4,517 $19,752 $51,159 $ 521 $75,949
Net income 10,617 10,617
Issuance of common
stock 3,300 3 69 72
1992 Debentures converted
to common stock 237,600 237 2,463 2,700
Cash dividends on:
common stock (1,964) (1,964)
Unrealized gain, net
of tax, on available
for sale securities 504 504
--------- ------ ------- ------- ------- -------
BALANCE AT SEPTEMBER 30, 1997 4,757,856 $4,757 $22,284 $59,812 $ 1,025 $87,878
========= ====== ======= ======= ======= =======
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,
---------------------------
1997 1996
--------- --------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 10,617 $ 10,464
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,200 2,900
Provision for depreciation and amortization 774 717
Accretion of discounts and amortization of
premiums on securities (2,594) (748)
Realized securities gains, net (88) (441)
Net increase in trading account securities (480) (472)
Net (increase) decrease in interest receivable (1,364) 927
Increase in interest payable 782 224
Other, net (3,623) 1,434
--------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,224 15,005
--------- --------
INVESTING ACTIVITIES
- --------------------
Proceeds from maturities of held to maturity securities 20,000 29,545
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 (361,414) (69,493)
Proceeds from sales, paydowns and maturities of
available for sale securities 273,741 98,192
Purchases of premises and equipment (932) (3,071)
Increase in loans outstanding, net (136,204) (86,046)
--------- --------
NET CASH USED IN
INVESTING ACTIVITIES (206,842) (48,161)
--------- --------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 256,659 18,324
Net increase (decrease) in repurchase agreements
and other short-term borrowings (16,803) 28,072
Proceeds from sale of common stock 72 42
Proceeds from sale of subordinated debentures 14,950
Cash dividends (1,964) (1,730)
--------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 252,914 44,708
--------- --------
INCREASE IN CASH
AND CASH EQUIVALENTS 53,296 11,552
Cash and cash equivalents at beginning of period 30,951 27,574
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 84,247 $ 39,126
========= ========
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 third quarter of 1997 was $3,777,000, up
$110,000 or 3.0% from the $3,667,000 earned during the third quarter of 1996.
On a per share basis, net income was $.78, up from $.76 in the same period of
the prior year. Greater net interest income and additional noninterest
income were offset to a large extent by increased noninterest expenses. A
larger provision for possible loan losses also reduced the benefits of the
greater net interest earnings for the period.
Net income for the first nine months of 1997 was $10,617,000, up
$153,000 or 1.5% from $10,464,000 earned in the same period in 1996. On a
per share basis, net income was $2.20, up from $2.17 earned in the first nine
months of 1996. Increased net interest income and higher noninterest income
was largely offset by greater noninterest expenses and a slightly higher
provision for possible loan losses. 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.
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 $60,000, $62,000,
$185,000 and $186,000 for the three months ended September 30, 1997 and 1996,
and for the nine months ended September 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 September 30, 1997 and 1996
- ----------------------------------------------
Total tax-equivalent interest income for the three months ended
September 30, 1997 was $25,659,000, up $5,063,000 as compared to the same
period in 1996. The $153 million increase in the volume of average loans
outstanding was primarily responsible for the increase in interest earnings
for the third quarter of 1997. Overall asset yields were 8.09% in the third
quarter of 1997, down 9 basis points from the 8.18% earned in the same period
in 1996. Most of the reduced overall asset yields resulted from the lower
9
<PAGE> 10
yields earned on additional available for sale securities. Funding the
Company's loan growth and security acquisitions were the increased money
market accounts generated from the mid-1997 money market deposit promotion.
Total interest expense for the third quarter of 1997 was $14,978,000, up
$4,379,000 from $10,599,000 in the third quarter of 1996. Adding to the
effects of the increased volume of money market deposits were the increased
rates paid on those deposits in 1997.
Overall tax equivalent net interest income increased $684,000 as
interest income rose $5.1 million and interest expense was up $4.4 million.
The Company's net interest margin declined to 3.37% in the third quarter of
1997 from 3.97% in the same period in 1996 as the money market deposit
promotion advanced deposit rates sharply ahead of prior year rates thereby
reducing comparative overall net interest margins.
Nine months ended September 30, 1997 and 1996
- ---------------------------------------------
Total tax-equivalent interest income for the first nine months of 1997
was $69,385,000, up $10,106,000 from $59,279,000 in the same period in 1996.
The $131 million increase in average loans was primarily responsible for
generating the increase in interest earnings from 1996 to 1997. Further
supplementing interest earnings were increased securities and short-term
investment volumes. Overall earning asset yields were 8.26% for the first
nine months of 1997, up slightly from 8.21% for the same period in 1996.
Funding the Company's loan and total asset growth were increased
deposits, primarily money market deposits and to a lesser extent certificates
of deposits. Total interest expense for the first nine months of 1997 was
$38,219,000, up $8,117,000 from $30,102,000 in the same period in 1996.
Greater money market and time deposits were largely responsible for the
increased interest expense. In addition, the higher rates paid on nearly all
fund sources, but most notably on money market accounts, also increased
interest expense for the first nine months of 1997. Overall rates paid on
total interest bearing liabilities increased to 5.18% from 4.78% in the first
nine months of 1996.
In summary, total tax-equivalent net interest income increased
$1,989,000 as interest income improved by $10.1 million and interest expense
grew $8.1 million. The Company's net interest margin for the first nine
months of 1997 was 3.71%, down from 4.04% in the same period in 1996
primarily because of the increased rates paid on money market deposits during
the 1997 promotion.
10
<PAGE> 11
<TABLE>
AVERAGE, BALANCES, INTEREST AND RATES
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 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 $ 848,674 $19,329 9.04% $ 696,023 $15,695 8.98%
Tax-exempt<F3>
Held to maturity securities
Taxable 37,495 631 6.67 74,329 1,218 6.52
Tax-exempt(3) 7,589 196 10.35 7,490 203 10.83
Available for sale securities 324,676 4,911 6.01 210,616 3,282 6.21
Trading account securities 1,591 26 6.60 617 9 5.62
Federal Funds sold and other short-
term investments 40,400 566 5.56 13,816 189 5.43
---------- ------- ---------- -------
Total interest-earning assets 1,260,425 25,659 8.09 1,002,891 20,596 8.18
------- -------
Noninterest-earning assets:
Cash and due from banks 26,414 22,375
Bank premises and equipment 11,692 11,154
Other assets 16,925 11,659
Allowance for possible loan losses (13,933) (11,949)
---------- ----------
Total assets $1,301,523 $1,036,130
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 21,370 $ 92 1.71% $ 20,525 $ 89 1.71%
Money market accounts 569,964 7,791 5.42 326,658 3,411 4.15
Savings deposits 22,395 168 2.97 22,829 171 2.98
Time deposits of $100,000 or more 36,037 487 5.37 35,802 472 5.25
Other time deposits 407,505 5,658 5.51 416,529 5,727 5.47
---------- ------- ---------- -------
Total interest-bearing deposits. 1,057,271 14,196 5.33 822,343 9,870 4.77
Federal funds purchased, repurchase
agreements and other short-term
borrowings 41,486 505 4.83 52,182 675 5.15
Capital Trust debentures 14,950 277 7.42 2,700 54 8.00
---------- ------- ---------- -------
Total interest-bearing liabilities 1,113,707 14,978 5.34 877,225 10,599 4.81
------- -------
Noninterest-bearing liabilities:
Demand deposits 97,847 82,779
Other liabilities 3,509 2,062
Shareholders' equity 86,460 74,064
---------- ----------
Total liabilities and
shareholders' equity $1,301,523 $1,036,130
========== ==========
Net interest income $10,681 $ 9,997
======= =======
Net interest margin 3.37% 3.97%
===== =====
<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 $60,000 and
$62,000 for the three months ended September 30, 1997 and 1996,
respectively.
</TABLE>
11
<PAGE> 12
<TABLE>
AVERAGE, BALANCES, INTEREST AND RATES
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 $ 794,870 $53,874 9.06% $664,261 $44,867 9.02%
Tax-exempt<F3> 23 1 8.60
Held to maturity securities
Taxable 43,738 2,213 6.76 69,244 3,420 6.60
Tax-exempt(3) 7,566 602 10.61 7,464 608 10.86
Available for sale securities 248,066 11,529 6.21 209,348 9,799 6.25
Trading account securities 1,008 51 6.80 830 38 6.08
Federal Funds sold and other short-
term investment 27,094 1,116 5.51 13,410 546 5.44
---------- ------- -------- -------
Total interest-earning assets 1,122,342 69,385 8.26 964,580 59,279 8.21
------- -------
Noninterest-earning assets:
Cash and due from banks 26,335 22,239
Bank premises and equipment 11,827 10,289
Other assets 15,487 11,183
Allowance for possible loan losses (13,244) (11,493)
---------- --------
Total assets $1,162,747 $996,798
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 21,997 $ 281 1.71% $ 20,239 $ 259 1.71%
Money market accounts 417,467 15,740 5.04 344,581 10,824 4.20
Savings deposits 22,866 507 2.96 22,494 501 2.97
Time deposits of $100,000 or more 38,203 1,542 5.40 33,322 1,313 5.26
Other time deposits 418,288 17,325 5.54 378,695 15,572 5.49
---------- ------- -------- -------
Total interest-bearing deposits 918,821 35,395 5.14 799,331 28,469 4.76
Federal funds purchased, repurchase
agreements and other short-term
borrowings 55,759 2,130 5.11 39,063 1,471 5.03
1992 debentures 890 54 8.09
Capital trust debentures 11,500 640 7.44 2,700 162 8.00
---------- ------- -------- -------
Total interest-bearing liabilities 986,970 38,219 5.18 841,094 30,102 4.78
------- -------
Noninterest-bearing liabilities:
Demand deposits 90,699 80,791
Other liabilities 2,841 2,480
Shareholders' equity 82,237 72,433
---------- --------
Total liabilities and
shareholders' equity $1,162,747 $996,798
========== ========
Net interest income $31,166 $29,177
======= =======
Net interest margin 3.71% 4.04%
===== =====
<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 $185,000
and $186,000 for the nine months ended September 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>
<CAPTION>
CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
COMPARED TO COMPARED TO
SEPTEMBER 30, 1996 SEPTEMBER 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> $3,527 $ 107 $3,634 $ 8,807 $ 199 $ 9,006
Held to maturity securities:
Taxable (615) 28 (587) (1,288) 81 (1,207)
Tax-exempt<F1> 3 (10) (7) 8 (14) (6)
Available for sale securities 1,738 (109) 1,629 1,794 (64) 1,730
Trading account securities 15 2 17 9 4 13
Federal funds sold and other short-
term investments 372 5 377 563 7 570
------ ------- ------ ------- ------- -------
Total interest income 5,040 23 5,063 9,893 213 10,106
------ ------- ------ ------- ------- -------
Interest paid on:
NOW accounts 3 3 22 22
Money market accounts 3,104 1,276 4,380 2,527 2,389 4,916
Savings (2) (1) (3) 8 (2) 6
Time deposits of $100,000 or more 3 12 15 194 35 229
Other time deposits (114) 45 (69) 1,612 141 1,753
Federal funds purchased, repurchase
agreements and other short-term
borrowings (40) (130) (170) 633 26 659
Long-term borrowings 112 111 223 266 266 532
------ ------- ------ ------- ------- -------
Total interest expense 3,066 1,313 4,379 5,262 2,855 8,117
------ ------- ------ ------- ------- -------
Net interest income $1,974 $(1,290) $ 684 $ 4,631 $(2,642) $ 1,989
====== ======= ====== ======= ======= =======
<FN>
- -----------------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustments were $60,000,
$62,000, $185,000 and $186,000 for the three months ended
September 30, 1997 and 1996, and for the nine months ended
September 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 third quarter of 1997 was
$1,100,000, up from $950,000 last year. For the first nine months of 1997 the
provision for possible loan losses was $3,200,000, up from $2,900,000 for the
same period last year. Strong loan growth during 1997 resulted in the need
for a greater provision expense. The annualized ratio of net charge-offs to
average loans for the first nine months of 1997 was .27%, down from .32%
last year, while corresponding net loan charge-offs were $1,583,000 and
$1,613,000, respectively.
The allowance for possible loan losses was $14.2 million or 1.65% of loans
outstanding at September 30, 1997. This compares to $12.6 million or 1.73% at
the end of 1996 and $12.1 million or 1.71% at September 30, 1997. 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 Nine Months Ended
----------------------- -----------------------
September 30, September 30,
----------------------- -----------------------
1997 1996 1997 1996
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 13,662 $ 11,976 $ 12,624 $ 10,789
Loans charged off (707) (1,127) (2,051) (2,332)
Recoveries of loans previously
charged off 186 277 468 719
-------- -------- -------- --------
Net loans charged off (521) (850) (1,583) (1,613)
-------- -------- -------- --------
Provision for possible loan losses 1,100 950 3,200 2,900
-------- -------- -------- --------
Allowance for possible loan losses
(end of period) $ 14,241 $ 12,076 $ 14,241 $ 12,076
======== ======== ======== ========
Loans outstanding:
Average $848,674 $696,023 $794,870 $664,284
End of period 865,640 708,209 865,640 708,209
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.68% 1.74% 1.79% 1.82%
End of period 1.65% 1.71% 1.65% 1.71%
Ratio of net charge-offs to
average loans outstanding, annualized: .25 .48 .27 .32
</TABLE>
14
<PAGE> 15
The following table summarizes nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 3,393 $ 5,745 $ 1,934
Loans past due 90 days or more 145 177 418
Restructured loans 175 788 798
-------- -------- --------
Total nonperforming loans 3,713 6,710 3,150
Other real estate 1,095 569 569
-------- -------- --------
Total nonperforming assets $ 4,808 $ 7,279 $ 3,719
======== ======== ========
Loans, net of unearned discount $865,640 $731,019 $708,209
Allowance for possible loan
losses to loans 1.65% 1.73% 1.71%
Nonperforming loans to loans .43 .92 .44
Allowance for possible loan losses
to nonperforming loans 383.54 188.14 383.37
Nonperforming assets to loans
and foreclosed assets .55 .99 .52
</TABLE>
NONINTEREST INCOME
- ------------------
For the third quarter of 1997, total noninterest income was $1,471,000, up
$340,000 from $1,131,000 in the same period in 1996. Increased service
charges on depository accounts, greater trading profits and commissions,
higher merchant credit card fees and operating lease income all contributed
to the increased total noninterest income in 1997.
For the first nine months of 1997 total noninterest income was $4,018,000, up
$340,000 from $3,678,000 in the first nine months of 1996. Net gains of $88,000
were realized on securities sales in the first nine months of 1997, down from
gains on securities sales of $441,000 in the same period in 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 all up from prior year levels.
Limiting overall noninterest income increases were lower trading profits and
commissions of $781,000, down from $990,000 in the first nine months of 1996.
Most of the downturn was comprised of losses on the Bank's trading activities as
overall commissions from customer activities were up from those of 1996.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the third quarter of 1997 was $5,102,000, up
$611,000 from $4,491,000 in the third quarter of 1996. For the first nine
months of 1997 total noninterest expenses were $15,222,000, up $1,688,000 from
the same period in 1996. Greater personnel and related benefit costs and
increased advertising costs associated with the money market deposit promotion
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 for the
first nine months of 1997.
15
<PAGE> 16
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of September 30, 1997, the Company's total shareholders' equity was
$87.9 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. Also supplementing 1997's shareholders' equity
growth was the increase in the unrealized gains, net of tax, on available for
sale securities. During the first nine months of 1997 the fair market values
of the Company's available for sale securities increased from their
acquisition values or their fair values at the end of 1996. Offsetting a
portion of the Company's capital accumulation were the payments of cash
dividends on common stock.
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 reporting 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 September 30, 1997 and December 31, 1996 the
Company's Tier I capital was 11.20% and 10.20% of risk-weighted assets, and
total risk-based capital was 12.45% 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 September 30, 1997 and
December 31, 1996, the Company's leverage ratio was 7.82% 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 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: November 6, 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 September 30, 1997
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
11 Computation of Earnings
per Common Share
27 Financial Data Schedule
</TABLE>
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 Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
PRIMARY:
Average common shares outstanding 4,757,128 4,512,162 4,677,696 4,511,206
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 95,839 51,470 86,857 41,846
---------- ---------- ---------- ----------
4,852,967 4,563,632 4,764,553 4,553,052
========== ========== ========== ==========
Net income $ 3,777 $ 3,667 $ 10,617 $ 10,464
Less: Dividends on preferred stock (58) (173)
---------- ---------- ---------- ----------
$ 3,777 $ 3,609 $ 10,617 $ 10,291
========== ========== ========== ==========
Primary earnings per common share $ .78 $ .79 $ 2.23 $ 2.26
========== ========== ========== ==========
</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,
---------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
FULLY DILUTED:
Average common shares outstanding 4,757,128 4,512,162 4,677,696 4,511,206
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 95,839 51,470 86,857 41,846
Convertible debenture common stock equivalents 237,600 78,330 237,600
---------- ---------- ---------- ----------
4,852,967 4,801,232 4,842,883 4,790,652
========== ========== ========== ==========
Net income $ 3,777 $ 3,667 $ 10,617 $ 10,464
Less: Dividends on preferred stock (58) (173)
Plus: Convertible debenture interest,
net of federal income tax effect 35 35 105
---------- ---------- ---------- ----------
$ 3,777 $ 3,644 $ 10,652 $ 10,396
========== ========== ========== ==========
Fully diluted earnings per common share $ .78 $ .76 $ 2.20 $ 2.17
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 26,447
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 57,800
<TRADING-ASSETS> 500
<INVESTMENTS-HELD-FOR-SALE> 320,312
<INVESTMENTS-CARRYING> 40,502
<INVESTMENTS-MARKET> 41,914
<LOANS> 865,640
<ALLOWANCE> 14,241
<TOTAL-ASSETS> 1,333,008
<DEPOSITS> 1,174,672
<SHORT-TERM> 45,811
<LIABILITIES-OTHER> 9,697
<LONG-TERM> 14,950
0
0
<COMMON> 4,757
<OTHER-SE> 83,121
<TOTAL-LIABILITIES-AND-EQUITY> 1,333,008
<INTEREST-LOAN> 53,874
<INTEREST-INVEST> 14,159
<INTEREST-OTHER> 1,167
<INTEREST-TOTAL> 69,200
<INTEREST-DEPOSIT> 35,395
<INTEREST-EXPENSE> 38,219
<INTEREST-INCOME-NET> 30,981
<LOAN-LOSSES> 3,200
<SECURITIES-GAINS> 88
<EXPENSE-OTHER> 15,222
<INCOME-PRETAX> 16,577
<INCOME-PRE-EXTRAORDINARY> 10,617
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,617
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.20
<YIELD-ACTUAL> 3.71
<LOANS-NON> 3,393
<LOANS-PAST> 145
<LOANS-TROUBLED> 175
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,624
<CHARGE-OFFS> 2,051
<RECOVERIES> 468
<ALLOWANCE-CLOSE> 14,241
<ALLOWANCE-DOMESTIC> 9,775
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,466
</TABLE>
