<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d ) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal period from ---------- to ---------
Commission file number 0-22008
MISSISSIPPI VALLEY BANCSHARES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1336298
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Corporate Park Drive, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-268-2580
Securities registered pursuant to Section 12 (b) of the Act:
Title of each Class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
---- ----
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $1 par value
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
--------
As of February 18, 1997, 4,517,156 shares of common stock of the
registrant were outstanding; the aggregate market value of the shares of
common stock of the registrant held by non-affiliates was approximately
$136,507,000 based upon the closing price of the common stock on the NASDAQ/NMS
on February 18, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
1. Certain portions of Registrant's Annual Report to Shareholders for the
year ended December 31, 1996 are incorporated by reference in Parts I and II
hereof.
<PAGE> 2
PART I
Item 1. Business
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General
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The Company is a one-bank holding company headquartered in St. Louis
County, Missouri engaged primarily in commercial lending through Southwest
Bank of St. Louis (the "Bank"), which is the Company's sole active
subsidiary. The Bank has been nationally recognized for its frequent
practice of reducing its prime rate in advance of industry wide prime rate
cuts. The Bank has five banking offices, all of which are located in the St.
Louis metropolitan statistical area ("St. Louis MSA"), the seventeenth
largest metropolitan statistical area in the United States, with a population
of approximately 2.5 million. Since acquiring the Bank in 1984, the Company
has expanded the Bank's loan portfolio from $57 million to $731 million at
December 31, 1996, or approximately $56 million per year. The Company has
earned an average return on equity of 17.21% over the past five years.
The Company's strategy is to act primarily as a lender to middle market
companies located within 200 miles of St. Louis. These companies tend to be
privately-held and owner-operated, with annual sales of less than $100
million and with typical borrowing requirements of $500,000 to $3 million.
Management believes that the Company is able to compete effectively in its
market because: (i) the Bank's lending officers and senior management
maintain close working relationships with their commercial customers and
their businesses; (ii) the Bank is able to react more quickly to loan
requests than the Company's large competitors yet is able to fund loan
amounts which smaller St. Louis area commercial lenders are unable to fund;
(iii) the Bank's management and loan officers have significant experience
within the St. Louis community; and (iv) industry consolidation has resulted
in fewer independent banks and fewer banks addressing the Bank's target
market niche.
The Bank's historical growth strategy has been asset driven, as the Bank
has increased its loan portfolio based on lending opportunities which meet
the Bank's underwriting standards. The Bank has expanded its retail deposit
base to meet lending growth demands through opening new locations and
offering promotional deposit rates, often concurrently. These deposit
promotional activities are usually implemented as the Bank's loan to deposit
ratio increases significantly past the 85% level which management targets.
The Bank opened one new location in each of 1990, 1992 and 1995. For a
discussion of two additional planned facilities, see "Item 2. Properties."
The Company's operating strategy has resulted in a higher cost of funds
(and, consequently, a lower net interest margin) than other institutions
within its market, due to its rate driven retail deposit gathering
activities. For 1996 and 1995, the Company reported net interest margins of
4.01% and 3.80%, respectively.
On the other hand, this operating strategy has also permitted the Company
to achieve consistently lower overhead ratios than other comparable
institutions by (i) operating a small number of offices with a per-office
deposit base averaging $184 million as of December 31,
<PAGE> 3
1996, (ii) emphasizing commercial loans, which tend to be larger in size than
retail loans, (iii) employing an experienced staff, (iv) improving data
processing and operational systems in order to increase productivity, and (v)
outsourcing services where possible. For 1996 and 1995, the Company reported
efficiency ratios (non interest expense divided by the sum of tax-equivalent net
interest income plus noninterest income) of 41.25% and 45.06%, respectively.
These ratios are significantly better than those of the Company's peers. The
Company's average assets per employee, which was $4.74 million for 1996, has
also been consistently better than the industry average.
The Bank
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For a description of the Bank and its operations, reference is made to
"Financial Review" on pages 9 through 22 of the Company's Annual Report to
Shareholders for the year ended December 31, 1996, which is incorporated
herein by reference.
Competition
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The Bank encounters competition primarily in seeking deposits and in
obtaining loan customers. The level of competition for deposits is quite
high. The Bank's principal competitors for deposits are other financial
institutions within a few miles of its offices, including other banks,
savings and loan institutions, and credit unions. Competition among these
institutions is based primarily on interest rates offered, service charges
imposed on deposit accounts, the quality of services rendered, and the
convenience of banking facilities. The Bank's competitors are generally
permitted, subject to regulatory approval, to establish branches throughout
the Bank's market area. Additional competition for depositors' funds comes
from United States Government securities, private issuers of debt obligations
and suppliers of other investment alternatives for depositors, such as
securities firms.
While the Bank also encounters a great deal of competition in its lending
activities, management believes that there is less competition in the Bank's
specialty-the middle market niche-than there was up to a few years ago. The
Bank's competitive position has been strengthened by the advent of branch
banking in Missouri, which has resulted in consolidations of bank
subsidiaries of several large bank holding companies. The Bank's strategy,
by contrast, is to maintain close, long-term contacts between its customers
and the Bank's loan officers.
The Bank also competes in its lending activities with other financial
institutions such as savings and loan institutions, credit unions, securities
firms, insurance companies, small loan companies, finance companies, mortgage
companies and other sources of funds. Many of the Bank's non-bank
competitors are not subject to the same extensive Federal regulations that
govern bank holding companies and Federally insured banks and state
regulations governing state chartered banks. As a result, such non-bank
competitors have advantages over the Bank in providing certain services.
Many of the financial institutions with which the Bank competes in both
lending and deposit activities are larger than the Bank.
3
<PAGE> 4
Employees
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As of December 31, 1996, the Company had no employees and the Bank had
approximately 210 full-time equivalent employees. None of the employees of
the Bank are subject to a collective bargaining agreement. The Company
considers relationships with employees of the Bank to be good.
Forward-Looking Statements
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This Report contains forward-looking statements. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of the factors described below. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. In light
of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Report will in fact transpire.
Regulatory Risk. The banking industry is heavily regulated. These
regulations are intended to protect depositors, not shareholders. The Bank
is subject to regulation and supervision by the Federal Deposit Insurance
Corporation (the "FDIC") and the Missouri Division of Finance (the "Division
of Finance"), while the Company is subject to regulation and supervision by
the Board of Governors of the Federal Reserve System (the "FRB"). The burden
imposed by Federal and state regulations puts banks at a competitive
disadvantage compared to less regulated competitors such as finance
companies, mortgage banking companies and leasing companies. The banking
industry continues to lose market share to competitors. In addition,
legislative reactions to the problems of the thrift industry have increased
the regulatory and supervisory requirements for financial institution, which
have resulted and will continue to result in increased operating expenses.
Legislation. Because of concerns relating to the competitiveness and the
safety and soundness of the industry, Congress continues to consider a number
of wide-ranging proposals for altering the structure, regulation, and
competitive relationships of the nation's financial institutions. Among such
bills are proposals to combine banks and thrifts into a unified charter, to
combine regulatory agencies, to alter the statutory separation of commercial
and investment banking, and to further expand the powers of depository
institutions, bank holding companies, and competitors of depository
institutions. It cannot be predicted whether or in what form any of these
proposals will be adopted or the extent to which the business of the Company
or the Bank may be affected thereby.
Credit Risk. The greatest risk facing lenders is generally credit risk,
that is, the risk of losing principal and interest due to a borrower's
failure to perform according to the terms of the loan agreements. Although
the Bank's net percentage of charge-offs have historically been
4
<PAGE> 5
lower than industry norms, it has a relatively high proportion of
commercial loans. As of December 31, 1996, the Bank had 23 customers who
had outstanding loans exceeding $5 million.
Exposure to Local Economic Conditions. The Bank's concentration of loans
in the St. Louis MSA exposes it to risks resulting from changes in the local
economy. While the Bank's market area for loans extends throughout most of
eastern Missouri and southern Illinois, its lending operations are
concentrated in the St. Louis MSA.
As of December 31, 1996, 37% of the Bank's loans were secured by
commercial real estate and 15% of the Bank's loans were secured by
residential real estate. The percentage of loans secured by St. Louis MSA
real estate is significant. A dramatic drop in St. Louis area real estate
values would adversely affect the quality of the loan portfolio.
Interest Rate Risk. The Bank's earnings depend to a great extent upon the
level of net interest income, which is the difference between interest income
earned on loans and investments and the interest expense paid on deposits and
other borrowings. Although the maturities of the Bank's assets are well
balanced in relation to maturities of liabilities (gap management), gap
management is not an exact science. Rather, it involves estimates as to how
changes in the general level of interest rates will impact the yields earned
on assets and the rates paid on liabilities. Moreover, rate changes can vary
depending upon the level of rates and competitive factors. From time to
time, maturities of assets and liabilities are not balanced, and a rapid
increase or decrease in interest rates could have an adverse effect on net
interest margins and results of operations of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Sensitivity to Changes in Interest Rates" in the Company's Annual Report to
Shareholders, incorporated by reference herein.
Competition. The activities of the Company and the Bank in the geographic
market served involve competition with other banks as well as with other
financial institutions and enterprises, many of which have been substantially
greater resources than those available to the Company. In addition, non-bank
competitors are generally not subject to the extensive regulation applicable
to the Company and the Bank.
Item 2. Properties
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The Bank's principal office occupies approximately 2.7 acres of ground on
the corner of Kingshighway and Southwest, in the City of St. Louis. The
building was totally renovated in 1987 and has one ATM. It has approximately
36,000 square feet and room for expansion. The Bank's drive-ins are modern
and parking is adequate. The premises are owned by the Company and leased to
the Bank. The lease expires in 2006 and provides the Bank with an option to
renew for an additional ten years.
The Bank's Clayton office, which opened in 1990, is located in one-half of
the first floor (approximately 12,000 square feet) of a five-story office
building in the Clayton Corporate Park,
5
<PAGE> 6
and includes two ATM's. The space is leased for ten years with options to renew
for up to 35 years. Adequate parking is available and drive-up facilities are
provided in the Clayton Corporate Park near the Clayton banking office.
The Bank's Concord Village office occupies a building of approximately
10,000 square feet built in 1995 on approximately one acre of land purchased
in 1994. The office has an ATM, and adjoining drive-up lanes and equipment;
adequate parking is available.
The Bank's Crestwood office occupies a building of approximately 5,200
square feet, which was purchased by the Bank in December, 1991 and was
totally remodeled before the opening of the office. The land was purchased
by the Bank in February, 1992. The facility has a nearby ATM, and adjoining
drive-up lanes and equipment; adequate parking is available.
The Bank's office on the corner of Kingshighway and Chippewa,
approximately two miles from the main office, occupies approximately 1,865
square feet of leased premises, plus adequate parking. This facility was
entirely renovated in 1986 and has one ATM. The lease on these premises
expires in 2003.
In January, 1996 the Company purchased approximately 1.7 acres of land in
Belleville, Illinois. The Company is currently seeking regulatory approval
to establish a new banking office on this site, which is located in the St.
Louis MSA; the Belleville office would be the Bank's first location outside
Missouri. In 1996 the Bank also purchased two adjoining parcels of land of
approximately 6.3 acres and 2.3 acres, respectively, in St. Louis County,
Missouri. It is the Bank's intention to establish a new banking office at
this location. It is also expected that the location will become the
Company's new headquarters facility.
Item 3. Legal Proceedings
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The Bank is from time to time a party to various legal actions arising in
the normal course of business. Management believes that there is no
proceeding threatened or pending against the Company or Bank, which, if
determined adversely, would have a material effect on the business or
financial position of the Company or the Bank.
Item 4. Submission of Matters to a Vote of Security Holders
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There were no matters submitted to a vote of the security holders in the
quarter ended December 31, 1996.
PART II
Item 5. Market for the Registrant's Common Equity and Related
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Stockholder Matters
-------------------
Reference is made to the information contained in the section entitled
"Common Share Data" on page 8 and investor information on page 49 of the
Company's Annual Report to Shareholders for the year ended December 31, 1996,
which is incorporated herein by reference.
6
<PAGE> 7
Item 6. Selected Financial Data
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Reference is made to the information contained in the section entitled
"Financial Review - Selected Consolidated Financial Data" on page 9 of the
Company's Annual Report to Shareholders for the year ended December 31, 1996,
which is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
Reference is made to information contained in the section entitled
"Financial Review" on pages 9 through 22 of the Company's Annual Report to
Shareholders for the year ended December 31, 1996, which is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data
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Reference is made to the Consolidated Financial Statements and independent
auditors report thereon contained on pages 23 through 45 of the Company's
Annual Report to Shareholders for the year ended December 31, 1996, which are
incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
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Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
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The members of the Company's Board of Directors, their ages at December
31, 1996 and their principal occupations for the past five years, are listed
below. All of the directors were first elected in 1984, except Mr. Levy, who
was first elected in 1987, Mrs. Behan, who was first elected in 1989, and Mr.
Bush, who was first elected in 1991.
<TABLE>
<CAPTION>
Term Principal Occupation
Director Age Expires During Past 5 Years
-------- --- ------- -------------------
<S> <C> <C> <C>
John T. Baumstark ............ 52 1998 President, Archway Sales, Inc. (Chemical distributor).
Andrew N. Baur ................ 52 1999 Chairman and Chief Executive Officer of the Company and the
Company's Subsidiary, Southwest Bank of St. Louis (the "Bank");
Director, Rawlings Sporting Goods, Co., Inc.
7
<PAGE> 8
Linn H. Bealke ................. 52 1998 President of the Company and Vice Chairman of the Bank;
Director, Zoltek Companies, Inc.
Alice C. Behan ................. 51 1997 Private Investor.
William H.T. Bush ............ 58 1997 Chairman, Bush-O'Donnell & Co., Inc. (Investment Advisor and
merchant banking firm); Director, Right Choice Managed Care,
Inc.; Director, Intrav. Inc.; Director, D T Industries, Inc.;
Director, Search Capital Holdings, Inc.
Franklin J. Cornwell, Jr. ...... 54 1997 Private Investor. Vice President, Ralston Purina Co. and CEO of
Ralston Purina International (diversified consumer products
company) through May, 1995.
Theodore P. Desloge, Jr. ..... 57 1998 President, Bloom & Desloge Enterprises, Inc. (investments);
Vice Chairman and Director, Valley Forge Corp. (holding company).
Louis N. Goldring .............. 55 1999 Vice Chairman and Chief Executive Officer, Franklin Equity
Leasing Co. (automobile and equipment leasing).
Richard T. Grote ............... 51 1999 President, Grote Financial Futures, Ltd. (financial advisory
services); Chairman, American Medical Claims, Inc. (claims filing
service).
Frederick O. Hanser ........... 54 1997 Chairman, St. Louis Cardinals, L.P.; Of counsel and Partner -
Armstrong, Teasdale, Schlafly & Davis.
Donna D. Lambert ............. 57 1998 Private Investor.
Michael D. Latta ............... 55 1998 Private Investor; Chairman and CEO of Dunmon, Inc. from
8
<PAGE> 9
Term Principal Occupation
Director Age Expires During Past 5 Years
-------- --- ------- -------------------
December, 1996 (fabricator of aluminum composite panels); President of Code
3 Holdings, Inc. through December, 1995 and President and CEO of
Public Safety Equipment, Inc. through April, 1995 (holding company
and manufacturer of emergency warning systems, respectively).
Mont S. Levy ................. 45 1999 Registered Investment Advisor, Principal of Buckingham Asset
Management; President, MSL Investments; Vice President, Grand
Center, Inc. (not-for-profit development company), 1988-1993.
Lewis B. Shepley ............... 57 1999 Executive Vice President and Chief Financial Officer, The
Reliable Life Insurance Company.
</TABLE>
EXECUTIVE OFFICERS
The executive officers of the Company and a key executive officer of the
Bank, their ages as of December 31, 1996, and their positions with the
Company and the Bank are set forth below. All officers serve at the pleasure
of the Company's Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Andrew N. Baur .......................... 52 Chairman and Chief Executive Officer of the Company and the
Bank.
Linn H. Bealke .......................... 52 President of the Company and Vice Chairman of the Bank.
Paul M. Strieker ........................ 45 Executive Vice President, Controller and Chief Financial
Officer, and Assistant Secretary of the Company; Executive
Vice President of the Bank.
Carol B. Dolenz ......................... 44 Secretary and Treasurer of the Company; Secretary and Vice
President of the Bank.
9
<PAGE> 10
Name Age Positions
---- --- ---------
Stephen P. Marsh ........................ 41 Executive Vice President and Senior Loan Officer of the Bank
since 1992; Senior Vice President of the Bank, 1989-1992.
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
To the Company's knowledge, based solely on review of copies of such
reports furnished to the Company and written representations that no other
reports were required, during 1996 all Section 16(a) filing requirements were
complied with except that Mr. Baumstark reported on Form 5 four purchase
transactions which should have been reported on Form 4.
Item 11. Executive Compensation
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EXECUTIVE COMPENSATION
The following table summarizes compensation earned or awarded to the
Company's Chief Executive Officer and all other executive officers whose
aggregate annual salary and bonuses exceeded $100,000 during 1996.
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation
------------------- ------------ ------------
Securities
Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($)<F1>
- --------------------------- ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Andrew N. Baur 1996 269,375 225,000 7,000 26,828
Chairman and Chief 1995 258,689 200,000 15,000 25,128
Executive Officer of the 1994 252,450 150,000 -- 22,395
Company and the Bank
Linn H. Bealke 1996 183,406 160,000 5,700 27,548
President of the Company 1995 167,989 125,000 10,000 25,772
and Vice Chairman of the 1994 160,213 90,000 -- 23,442
Bank
Stephen P. Marsh 1996 134,998 60,000 4,000 4,518
Executive Vice President 1995 127,426 40,000 3,500 4,470
and Senior Loan Officer of 1994 118,924 40,000 -- 4,320
the Bank
Paul M. Strieker 1996 94,502 20,000 1,000 3,597
Executive Vice President, 1995 89,416 13,000 3,000 3,221
Controller and Chief 1994 85,451 12,000 -- 3,110
Financial Officer and
Assistant Secretary of the
Company and Executive
Vice President of the Bank
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<FN>
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<F1> Consists of Company matching contributions to its 401(k) Plan, imputed
value of life insurance benefit, and director's fees; amounts paid in
1996 are as follows:
</TABLE>
<TABLE>
<CAPTION>
401(k) Plan Life Ins. Director's
Contributions Benefits Fees
------------- -------- ----
<S> <C> <C> <C>
Mr. Baur $3,750 $1,728 $21,350
Mr. Bealke 3,750 2,298 21,500
Mr. Marsh 3,750 768 --
Mr. Strieker 2,710 887 --
</TABLE>
OPTION GRANTS IN 1996
The following table summarizes options granted during 1996 to the
executive officers named above, together with estimates of the value of such
options at the end of their five-year terms assuming the market value of the
Common Stock appreciates at an annual rate of 5% or 10%.
<TABLE>
INDIVIDUAL GRANTS
<CAPTION>
Percent of
Numbers of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Annual Rates of
Options Employees Exercise Stock Price
Granted in Fiscal Base Price Expiration Appreciation for
(#)<F1> Year ($/SH) Date Option Term
------- ---- ------ ---------- ----------------------------
5% ($) 10% ($)
------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Baur 7,000 8.24% $31.125 May 2001 $60,165 $133,035
Mr. Bealke 5,700 6.71% $31.125 May 2001 $48,992 $108,329
Mr. Marsh 4,000 4.71% $31.125 May 2001 $34,380 $ 76,020
Mr. Strieker 1,000 1.18% $31.125 May 2001 $ 8,595 $ 19,005
<FN>
- ------------------
<F1> The options granted in 1996 are exercisable 25% after the first year
from the grant date, 50% after the second year, 75% after the third
year, and 100% after the fourth year.
</TABLE>
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<PAGE> 12
The following table summarizes options exercised during 1996, and the
values of options outstanding on December 31, 1996, for the executive
officers named above.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise # Realized $ Unexercisable # Unexercisable $
---- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Mr. Baur -- -- 3,750/18,250 $72,000/$295,625
Mr. Bealke -- -- 2,500/13,200 $50,000/$214,838
Mr. Marsh -- -- 2,750/ 7,250 $68,594/$115,031
Mr. Strieker 500 $8,625 1,250/ 3,500 $28,625/$ 63,188
</TABLE>
CONSULTING AGREEMENTS
The Company and the Bank have entered into Consulting Agreements
("Consulting Agreements") with Messrs. Baur and Bealke providing for certain
benefits in the event of termination of employment for any reason after a
"Change in Control" (as defined in the Consulting Agreements), or for any
reason other than voluntarily by the executive or by the Bank or the Company
for "Cause" (as defined in the Consulting Agreements) prior to a Change in
Control. Benefits, provided until the executive attains the age of 65 or
dies, would include (i) a monthly consulting fee of $2,000; (ii) specified
levels of medical insurance for the executive and his dependents;
(iii) disability insurance coverage; and (iv) to the extent medical insurance
or disability insurance benefits are taxable to the executive, additional
compensation equal to the taxes on such benefits and on the additional
compensation provided to cover such taxes. Such benefits would be subject to
reduction or termination under certain circumstances. Prior to the
executive's 60th birthday, he would be required to provide certain consulting
services to the Company or the Bank if requested.
EMPLOYMENT AGREEMENTS
The Company and the Bank have entered into Management Retention Agreements
("Retention Agreements") with nine of their respective officers, including
Mr. Marsh and Mr. Strieker but excluding Mr. Baur and Mr. Bealke, pursuant
to the terms of which, if the employment with the Company or the Bank of an
officer party to such a Retention Agreement is terminated for any reason
other than for "Cause" (as defined in the Retention Agreements) within one
year after a "Change in Control" (as defined in the Retention Agreements),
the officer or his or her personal or legal representative will continue to
receive compensation for one year after the date of such termination at a
rate equal to the officer's base compensation in effect on either the
effective date of such Change of Control or the date of termination of the
officer's employment, whichever rate is greater. Current base compensation
is $132,500 per annum for Mr. Marsh and $93,600 per annum for Mr. Strieker.
In addition, the Company agrees to pay all costs and expenses, including
reasonable attorney's fees, incurred by the officer in enforcing his or her
rights under the Retention Agreement.
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<PAGE> 13
PENSION AND SUPPLEMENTAL PENSION PLANS
The Bank sponsors the Southwest Bank of St. Louis Employees Retirement
Plan (the "Retirement Plan"), a qualified defined benefit plan, and the
Southwest Bank of St. Louis Supplemental Retirement Plan (the "Supplemental
Plan"), a non-qualified defined benefit plan. The Retirement Plan credits
benefits to participants based upon years of service and compensation at the
time of retirement. For purposes of the Retirement Plan, compensation means
the average salary over the highest five consecutive years in the most recent
ten year period prior to retirement. Benefits are reduced by the amount of
Social Security benefits required to be recognized (offset) under the pension
formula, and are payable as life annuities at age 65, with no death benefit.
Benefits under the Retirement Plan are restricted by certain statutory limits
on the amount of compensation which may be considered in calculating benefits
and other statutory limitations.
A participant's benefit under the Supplemental Plan equals his or her
benefit as calculated under the Retirement Plan, without regard to statutory
limitations contained in the Retirement Plan, reduced by his or her actual
benefit under the Retirement Plan. Benefits are payable commencing at age
65, with no death benefit.
The following table sets forth the estimated annual benefits under both
the Retirement and Supplemental Plans based upon various assumed levels of
compensation and years of service:
<TABLE>
RETIREMENT AND SUPPLEMENTAL PLANS TABLE
<CAPTION>
COMPENSATION 10 15 20 25 30 35
- ------------ ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 75,000 ............. $10,000 $ 16,000 $ 21,000 $ 27,000 $ 33,000 $ 38,000
100,000 ............. 14,000 21,000 29,000 36,000 44,000 51,000
125,000 ............. 18,000 27,000 36,000 46,000 55,000 64,000
150,000 ............. 21,000 33,000 44,000 55,000 66,000 78,000
250,000 ............. 36,000 56,000 74,000 92,000 111,000 131,000
350,000 ............. 51,000 78,000 104,000 130,000 156,000 183,000
450,000 ............. 66,000 101,000 134,000 167,000 201,000 236,000
550,000 ............. 81,000 123,000 164,000 205,000 246,000 288,000
</TABLE>
For purposes of determining Retirement and Supplemental Plan benefits, the
current compensation for the above-named executive officers is as shown under
"Annual Compensation" in the executive compensation table above. Mr. Baur
and Mr. Bealke currently have 12 years of service and would have 25 years of
service at age 65. Mr. Marsh currently has 12 years of service and would
have 36 years of service at age 65. Mr. Strieker currently has 9 years of
service and would have 29 years of service at age 65.
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<PAGE> 14
Item 12. Security Ownership of Certain Beneficial Owners and
- -------- ---------------------------------------------------
Management
----------
The following tables set forth as of December 31, 1996, certain
information concerning the ownership of Common Stock by each person who is
known by the Company to own beneficially more than 5% of such stock, by each
director of the Company, by each of the executive officers named in the
Summary Compensation Table, and by all directors and officers of the Company
as a group:
COMMON STOCK
<TABLE>
<CAPTION>
Shares
of Common Percent
Name of Beneficial Owner Stock <F1> of Class
- ------------------------ ---------- --------
<S> <C> <C>
John T. Baumstark 79,230 1.7%
Andrew N. Baur <F2><F3> 562,903 11.7%
Linn H. Bealke <F3><F4><F12> 175,465 3.7%
Alice C. Behan 59,282 1.2%
William H.T. Bush <F5> 16,000 <F*>
Franklin J. Cornwell, Jr. 63,900 1.3%
Theodore P. Desloge, Jr. <F6> 45,940 1.0%
Louis N. Goldring 162,760 3.4%
Richard T. Grote <F7> 38,816 <F*>
Frederick O. Hanser <F8> 34,280 <F*>
Michael D. Latta 86,940 1.8%
Mont S. Levy <F9><F13> 101,420 2.1%
Stephen P. Marsh <F3><F14> 33,838 <F*>
Donna D. Lambert <F15> 58,680 1.2%
Lewis B. Shepley <F10> 60,855 1.3%
Paul M. Strieker <F3><F11> 26,240 <F*>
All Directors and Executive Officers as
a Group (17 individuals) <F4> 1,620,646 33.8%
<FN>
- -------------------------
<F*> Less than one percent.
<F1> Assumes the exercise of debenture conversion rights and Options
outstanding and exercisable as of December 31, 1996 or within 60 days
thereafter, including those beneficially owned by the named person,
as follows: Mr. Baumstark, 4,840 Shares; Mr. Baur, 38,950 Shares;
Mr. Bealke, 13,500 Shares; Mrs. Behan, 3,960 Shares; Mr. Cornwell,
3,520 Shares; Mr. Desloge, 3,960 Shares; Mr. Goldring, 10,120
Shares; Mr. Latta, 8,800 Shares; Mr. Levy, 4,400 Shares; Mr. Marsh,
4,510 Shares; Mr. Shepley, 3,080 Shares; and Mr. Strieker, 2,130
Shares; all directors and executive officers as a group, 103,650
Shares.
14
<PAGE> 15
<F2> Includes 8,360 Shares held in a trust of which Mr. Baur is one
of two co-trustees and as to which he has shared voting and
dispositive power.
<F3> Includes Shares held in the Company's 401(k) Retirement Savings Plan
for the benefit of the named person, as to which the named person has
sole dispositive power, but no voting power, as follows: Mr. Baur,
11,993 Shares; Mr. Bealke, 12,181 Shares; Mr. Marsh, 6,168 Shares; Mr.
Strieker, 5,282 Shares; and all directors and executive officers as a
group, 39,996 Shares.
<F4> Excludes 11,380 Shares held by Mr. Bealke's spouse, of which 4,820
shares are in spouse's IRA Plan in which Mr. Bealke has investment
power.
<F5> Excludes Debentures convertible into 4,400 Shares held by Mr. Bush's
spouse.
<F6> Shares held by Bloom & Desloge Enterprises, Inc., a corporation
controlled by Mr. Desloge.
<F7> Includes 4,000 Shares held by Mr. Grote's minor children.
<F8> Excludes 13,200 Shares held by Mr. Hanser's spouse.
<F9> Includes 75,200 Shares, and Debentures convertible into 4,400 Shares,
held in two trusts as to which Mr. Levy serves as a co-trustee and has
shared voting and dispositive power.
<F10> Includes 17,475 Shares held by The Reliable Life Insurance Company, of
which Mr. Shepley is Executive Vice president and Chief Financial
Officer, a director, and a member of the Investment Committee, and as
to which Shares he has shared voting and dispositive power.
<F11> Excludes 1,000 Shares held by Mr. Strieker's spouse.
<F12> Includes Debentures convertible into 2,200 shares held by the Bealke
Family Trust of which Mr. Bealke is one of two Trustees and as to
which he has shared voting and investment power.
<F13> Excludes 100 shares held by Mr. Levy's spouse.
<F14> Includes Debentures convertible into 880 shares held as Custodian for
minor children.
<F15> Excludes 8,700 shares held by Mrs. Lambert's spouse.
</TABLE>
For purposes of the table, a person is deemed to be a beneficial owner
of Shares if the person has or shares the power to vote or to dispose of
them. Unless otherwise indicated in the footnotes, each person had sole
voting and dispositive power over the Shares listed in the beneficial
ownership table. The shareholders disclaim beneficial ownership in the
Shares
15
<PAGE> 16
described in the footnotes as being "held by" or "held for the benefit of"
other persons. The address of Mr. Baur is 700 Corporate Park Drive, St.
Louis, Missouri 63105.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
CERTAIN TRANSACTIONS
Some of the directors and officers of the Company and of the Bank, and
members of their immediate families and firms and corporations with which
they are associated, have had transactions with the Bank, including
borrowings and investments in certificates of deposit and repurchase
agreements. All such loans and investments have been made in the ordinary
course of business, have been made on substantially the same terms, including
interest rates paid or charged and collateral required, as those prevailing
at the time for comparable transactions with unaffiliated persons, and did
not involve more than the normal risk of collectibility or present other
unfavorable features. As of December 1996, the aggregate outstanding amount
of all loans to officers and directors of the Company and to firms and
corporations in which they have at least a 10% beneficial interest was
approximately $38 million, which represented approximately 50% of the
Company's consolidated shareholders' equity at that date.
Frederick O. Hanser, a director and shareholder of the Company, is of
counsel to the law firm of Armstrong, Teasdale, Schlafly & Davis, counsel to
the Company and the Bank.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
- -------- ------------------------------------------------------
Form 10-K
---------
(a) 1. Financial Statements.
<TABLE>
<CAPTION>
Pages in 1996 Annual
Report to Shareholders
incorporated by reference
-------------------------
<S> <C>
Report of Independent Auditors 23
Consolidated Balance Sheets 24
Consolidated Statements of Income 25
Consolidated Statements of Changes
in Shareholders' Equity 26
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 28 through 45
</TABLE>
2. Financial Statement Schedules.
None.
16
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) 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.
Dated: February 13, 1997
-----------------
MISSISSIPPI VALLEY BANCSHARES, INC.
By /s/ Paul M. Strieker
---------------------
Paul M. Strieker
Executive Vice President, Controller,
Assistant Secretary and Chief Financial Officer
17
<PAGE> 18
POWER OF ATTORNEY
-----------------
Each person whose signature appears below constitutes and appoints Andrew
N. Baur and Linn H. Bealke his true and lawful attorneys-in-fact and agents,
each acting alone, with full powers of substitution and re-substitution, for
him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments to this Report, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John T. Baumstark Director February 12, 1997
- -----------------------------
John T. Baumstark
/s/ Andrew N. Baur Chairman and Chief Executive February 12, 1997
- ----------------------------- Officer of the Registrant and
Andrew N. Baur the Bank; Director
/s/ Linn H. Bealke President and Director of the February 12, 1997
- ----------------------------- Registrant; Vice Chairman of
Linn H. Bealke the Bank
/s/ Alice C. Behan Director February 11, 1997
- -----------------------------
Alice C. Behan
/s/ William H.T. Bush Director February 12, 1997
- -----------------------------
William H. T. Bush
/s/ Franklin J. Cornwell, Jr. Director February 12, 1997
- -----------------------------
Franklin J. Cornwell Jr.
/s/ Theodore P. Desloge, Jr. Director February 12, 1997
- -----------------------------
Theodore P. Desloge, Jr.
/s/ Louis N. Goldring Director February 12, 1997
- -----------------------------
Louis N. Goldring
/s/ Richard T. Grote Director February 12, 1997
- -----------------------------
Richard T. Grote
18
<PAGE> 19
/s/ Frederick O. Hanser Director February 12, 1997
- -----------------------------
Frederick O. Hanser
/s/ Donna D. Lambert Director February 12, 1997
- -----------------------------
Donna D. Lambert
/s/ Michael D. Latta Director February 12, 1997
- -----------------------------
Michael D. Latta
/s/ Mont S. Levy Director February 12, 1997
- -----------------------------
Mont S. Levy
/s/ Lewis B. Shepley Director February 12, 1997
- -----------------------------
Lewis B. Shepley
/s/ Paul M. Strieker Executive Vice President, Controller, February 13, 1997
- ----------------------------- Assistant Secretary and Chief Financial
Paul M. Strieker Officer of the Registrant; Executive
Vice President of the Bank
</TABLE>
19
<PAGE> 20
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
Exhibit Index
Form 10-K
1996
<CAPTION>
Exhibit
Number Description of Exhibit Page
- ------- ---------------------- ----
<C> <S> <C>
3.1 Restated Articles of Incorporation of Registrant and all
amendments thereto, incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1993.
3.2 By-Laws of Registrant, incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 1993.
4.1 Certificate of Designations for Perpetual Preferred Stock, Series
1993, incorporated by reference to Exhibit 4.1 to Registration
Statement No. 33-61692.
4.2 Form of 8% Subordinated Convertible Debenture Due 1997,
incorporated by reference to Exhibit 4.2 to Registration
Statement No. 33-61692.
4.3.1 Mississippi Valley Bancshares, Inc. 1988 Stock Option Plan (Five-
Year Options), incorporated by reference to Exhibit 4.6.1 to
Registration Statement No. 33-61692.
4.3.2 Mississippi Valley Bancshares, Inc. 1991 Stock Option Plan (Five-
Year Options), incorporated by reference to Exhibit 4.6.2 to
Registration Statement No. 33-71760.
4.3.2a Amendment dated January 18, 1995 to the Mississippi Valley
Bancshares, Inc. 1991 Stock Option Plan (Five-Year Options),
incorporated by reference to Exhibit 4.4.2a to the Company's
Annual Report on Form 10-K for its fiscal year ended December 31,
1994.
4.3.3 Form of Five-Year Option Agreement, incorporated by reference to
Exhibit 4.6.3 to Registration Statement No. 33-71760.
10.1.1 Management Retention Agreement between the Bank and Stephen P.
Marsh, incorporated by reference to Exhibit 10.2.1 to
Registration Statement No. 33-61692.
20
<PAGE> 21
Exhibit
Number Description of Exhibit Page
- ------- ---------------------- ----
10.1.2 Management Retention Agreement between the Bank and Paul M.
Strieker, incorporated by reference to Exhibit 10.2.2 to the
Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1993.
10.1.3 Consulting Agreement between the Bank, Company and Andrew N. Baur,
incorporated by reference to Exhibit 10.2.3 to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1995.
10.1.4 Consulting Agreement between the Bank, Company and Linn H. Bealke,
incorporated by reference to Exhibit 10.2.4 to the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1995.
10.1.5 Southwest Bank of St. Louis Supplemental Retirement Plan, incorporated
by reference to Exhibit 10.2.5 to the Company's Annual Report on
Form 10-K for its fiscal year ended December 31, 1995.
10.2.1 Clayton Corporate Park Standard Office Lease dated December 23,
1988, between the Forsythe Group, Inc. and the Bank,
incorporated by reference to Exhibit 10.3.1 to Registration
Statement No. 33-61692.
10.2.2 First Amendment to Clayton Corporate Park Standard Office Lease
dated August 31, 1989, between The Forsythe Group, Inc. and the
Bank, incorporated by reference to Exhibit 10.3.2 to Registration
Statement No. 33-61692.
10.2.3 Second Amendment to Clayton Corporate Park Standard Office Lease
dated December 23, 1996, between Clayton Corporate Park Management Co.
and the Bank.
10.3 Promissory Note dated January 9, 1996, in the principal amount of
$3,000,000, by Registrant in favor of the Boatmen's National Bank
of St. Louis, incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1995.
11 Computation of Earnings per Common Share.
13 Registrant's Annual Report to Shareholders for the year ended
December 31, 1996 (only those portions of such Annual Report as
are incorporated by reference in Parts I and II hereof shall be
deemed a part of this Report).
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP, Independent Auditors.
24 Power of Attorney is contained on pages 18 and 19 hereof.
</TABLE>
21
<PAGE> 1
Second Amendment
This Second Amendment is made and entered into this 23rd day of December,
----
1996, by and between Clayton Corporate Park Management Co. ("Landlord") and
Southwest Bank of St. Louis ("Tenant").
WITNESSETH THAT:
WHEREAS, Tenant and Landlord's predecessor in interest, The Forsythe
Group, Inc. entered into that certain Clayton Corporate Park Office Lease
dated December 23, 1988, (the "Lease") demising unto Tenant certain premises
at 700 Corporate Park Drive, Clayton, Missouri 63105.
WHEREAS, said Lease was previously modified by: First Amendment to
Clayton Corporate Park Office Lease dated August 31, 1989; letter agreements
dated January 12, 1990, and July 23, 1990, and by Ground Lease dated February
1, 1992; and
WHEREAS, Tenant desires to waive its right of first refusal on the Option
Premises and the parties desire to instead incorporate approximately 2,330
rentable square feet on the first floor of the Building into Tenant's Premises.
NOW, THEREFORE, in consideration of Tenant waiving its right of first
refusal on the Option Premises (which Tenant hereby acknowledges) and other
good and valuable consideration, the parties agree, as follows:
1) Effective December 18, 1996, Section 1.9 and Exhibit A-2 of the
Lease are amended to provide that instead of 9,885 rentable square feet, the
Premise shall consist of a total of 12,215 (Twelve Thousand Two Hundred
Fifteen) rentable square feet by incorporating the additional 2,330 rentable
square feet as shown on the revised Exhibit A-2 attached hereto.
2) Effective December 18, 1996, Section 1.12 of the Lease is amended
to provide that instead of $20,593.75, the Monthly Base Rent Installment shall
be $25,448.00 (Twenty-Five Thousand Four Hundred Forty-Eight Dollars), before
adjustment pursuant to Article 4. Said increase in Monthly Base Rent
Installment, and all adjustments thereto, to be prorated for the partial month
of December 18-31, 1996.
3) All costs of improving the additional 2,330 rentable square feet of
space shall be Tenant's responsibility, without contribution from Landlord.
4) Effective January 1, 1997, Tenant shall be entitled to one (1)
additional undesignated and unreserved parking space in the Building's
underground Executive Garage, bringing the total number of such spaces in
the Executive Garage to which Tenant is entitled to four (4). As with its
other spaces in the Executive Garage, Tenant shall pay a monthly fee for the
additional space as provided in Section 1.18 of the Lease.
<PAGE> 2
5) Except as expressly provided herein all other covenants and conditions
of said Lease, as previously modified, shall remain in full force and effect.
IN WITNESS WHEREOF, The undersigned have executed this Second Amendment
as of the day and year first set forth the above.
LANDLORD TENANT
Clayton Corporate Park Management Co. Southwest Bank of St. Louis
By: /s/ William C. Intz By: /s/ Anne L. Gagen
------------------------------- --------------------------
Its: Vice President Its: Sr. Vice President
<PAGE> 3
EXHIBIT A-2 TO SECOND AMENDMENT
-------------------------------
Clayton Corporate Park
Building 1
First Floor
Southwest Bank
--------------
[DIAGRAM]
<PAGE> 1
Exhibits
(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 Twelve Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary
Average common shares outstanding 4,513,643 4,507,671 4,511,819 4,446,076
Average common stock equivalents of warrants and
options outstanding - based on the
treasury stock method using market price 71,447 32,356 49,286 22,910
---------- ---------- ---------- ----------
4,585,090 4,540,027 4,561,105 4,468,986
========== ========== ========== ==========
Net income $ 3,632 $ 2,748 $ 14,096 $ 10,747
Less: Dividends on preferred stock (57) (57) (231) (231)
---------- ---------- ---------- ----------
$ 3,575 $ 2,691 $ 13,865 $ 10,516
========== ========== ========== ==========
Primary earnings per common share $ .78 $ .59 $ 3.04 $ 2.35
========== ========== ========== ==========
</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 Twelve Months Ended
December 31, December 31,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Fully diluted:
Average common shares outstanding 4,513,643 4,507,671 4,511,819 4,446,076
Average common stock equivalents of warrants and
options outstanding - based on the
treasury stock method using market price 71,447 32,356 49,286 22,910
Convertible debenture common stock equivalents 237,600 237,600 237,600 296,512
---------- ---------- ---------- ----------
4,822,690 4,777,627 4,798,705 4,765,498
========== ========== ========== ==========
Net income $ 3,632 $ 2,748 $ 14,096 $ 10,747
Less: Dividends on preferred stock (57) (57) (231) (231)
Plus: Convertible debenture interest,
net of federal income tax effect 35 36 140 160
---------- ---------- ---------- ----------
$ 3,610 $ 2,727 $ 14,005 $ 10,676
========== ========== ========== ==========
Fully diluted earnings per common share $ .75 $ .57 $ 2.92 $ 2.24
========== ========== ========== ==========
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
Book
Value At
End Of Market Price Dividends
1996 High Low Close Period To Book Value Declared
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4th Quarter $ 43 $ 36 1/4 $ 42 1/2 $ 16.90 251.48% $ .125
3rd Quarter 36 1/2 32 36 1/2 16.15 226.01 .125
2nd Quarter 32 1/2 27 1/2 32 15.49 206.58 .11
1st Quarter 28 1/2 22 1/4 28 1/2 14.83 192.18 .11
1995
- --------------------------------------------------------------------------------------------------------------------------
4th Quarter $ 27 $ 24 $ 26 3/4 $ 14.93 179.17% $ .09
3rd Quarter 26 1/2 21 26 1/2 13.84 191.47 .09
2nd Quarter 22 1/2 17 3/4 22 13.16 167.17 .08
1st Quarter 18 1/2 17 17 3/4 10.77 164.81 .08
1994
- --------------------------------------------------------------------------------------------------------------------------
4th Quarter $ 19 $ 17 $ 17 $ 11.73 144.93% $ .07
3rd Quarter 19 14 1/2 18 15/16 11.36 166.70 .07
2nd Quarter 16 1/4 14 15 1/4 10.95 139.27 .07
1st Quarter 15 1/4 13 3/4 14 3/4 10.77 136.95 .0625
</TABLE>
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Average shares outstanding 4,511,819 4,446,076 4,378,850
Year-end shares outstanding 4,516,956 4,508,006 4,381,106
Shareholders of record 471 492 514
Average daily volume <F1> 1,961 1,891 3,299
<FN>
<F1>-Per NASDAQ National Market System
</TABLE>
8
<PAGE> 2
FINANCIAL REVIEW
- ------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial information for
Mississippi Valley Bancshares, Inc. (the "Company"), parent company of
Southwest Bank of St. Louis (the "Bank") for each of the five years ended
December 31, 1996. The selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of the Company,
including the accompanying Notes, presented elsewhere herein.
<TABLE>
<CAPTION>
----------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 79,719 $ 70,402 $ 53,036 $ 42,756 $ 41,244
Interest expense 40,811 38,295 23,883 19,428 20,714
----------------------------------------------------------
Net interest income 38,908 32,107 29,153 23,328 20,530
Provision for possible loan losses 3,875 2,560 2,680 2,570 3,155
----------------------------------------------------------
Net interest income after provision
for possible loan losses 35,033 29,547 26,473 20,758 17,375
Noninterest income 5,061 4,095 2,736 2,735 2,824
Noninterest expense 18,242 16,438 14,993 13,502 12,844
----------------------------------------------------------
Income before income taxes 21,852 17,204 14,216 9,991 7,355
Income taxes 7,756 6,457 5,584 3,644 2,636
----------------------------------------------------------
Net income $ 14,096 $ 10,747 $ 8,632 $ 6,347 $ 4,719
==========================================================
DIVIDENDS
Preferred stock $ 231 $ 231 $ 231 $ 173 $
Common stock 2,121 1,514 1,192 885 558
Ratio of total dividends declared to
net income 16.69% 16.24% 16.49% 16.67% 11.82%
PER SHARE DATA <F1>
Earnings per common share:
Primary $ 3.04 $ 2.35 $ 1.91 $ 1.63 $ 1.42
Fully diluted 2.92 2.24 1.81 1.53 1.38
Common stock cash dividends .47 .34 .2725 .2325 .17
Average common shares and common
share equivalents outstanding 4,561,105 4,468,986 4,389,324 3,797,360 3,333,148
Fully-diluted book value (period end) $ 16.90 $ 14.93 $ 11.73 $ 10.55 $ 8.95
BALANCE SHEET DATA (AT PERIOD END)
Securities $ 287,651 $ 327,652 $ 176,674 $ 130,362 $ 110,367
Loans, net of unearned discount 731,019 623,777 563,477 498,650 441,018
Total assets 1,065,777 995,048 772,015 653,518 578,687
Total deposits 918,012 886,565 658,956 546,445 518,855
Total long-term debt 2,700 2,700 3,240 3,240 12,932
Common shareholders' equity 75,949 67,607 52,250 46,537 30,138
Total shareholders' equity 75,949 70,107 54,750 49,037 30,138
SELECTED RATIOS
Return on average total assets 1.40% 1.22% 1.21% 1.05% .88%
Return on average total shareholders' equity 19.07 17.34 16.61 16.18 16.85
Net interest margin 4.01 3.80 4.26 4.06 4.03
Efficiency ratio <F2> 41.25 45.06 46.59 51.16 54.19
Average assets per employee $ 4,740 $ 4,426 $ 3,938 $ 3,486 $ 3,315
ASSET QUALITY RATIOS
Allowance for possible loan losses to loans 1.73% 1.73% 1.70% 1.56% 1.48%
Nonperforming loans to loans <F3> .92 .75 .39 .88 1.34
Allowance for possible loan losses
to nonperforming loans <F3> 188.14 230.14 440.64 176.67 111.09
Nonperforming assets to loans and
foreclosed assets <F4> .99 .75 .40 .92 1.51
Net loan charge-offs to average loans .30 .23 .16 .29 .38
CAPITAL RATIOS
Average shareholders' equity to
average assets 7.32% 7.03% 7.29% 6.50% 5.22%
Total risk-based capital ratio 11.45 11.64 11.45 11.21 8.77
Leverage ratio 7.20 6.70 7.33 7.40 5.07
<FN>
- ------------------------------------------------------------------------------------------------------------
<F1> All Share and per Share information has been restated to reflect the
1993 four-for-one stock split in the form of a stock dividend.
<F2> The efficiency ratio = noninterest expense divided by (tax-equivalent net
interest income + noninterest income)
<F3> Nonperforming loans consist of nonaccrual loans, loans contractually
past due 90 days or more and loans with restructured terms.
<F4> Nonperforming assets consist of nonperforming loans and foreclosed
assets.
</TABLE>
9
<PAGE> 3
FINANCIAL REVIEW (continued)
- ------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following presents management's discussion and analysis of the Company's
consolidated financial condition and results of operations as of the dates
and for the periods indicated. This discussion should be read in conjunction
with "Selected Consolidated Financial Data," the Company's Consolidated
Financial Statements and the accompanying Notes, and other financial data
appearing elsewhere in this Report.
SUMMARY OF EARNINGS
Consolidated net income for 1996 was $14,096,000, an increase of $3,349,000
or 31.2% above 1995 earnings. On a per share basis, net income for 1996 was
$2.92, up 30.4% from $2.24 in the prior year. Greater net earnings were
primarily attributable to the 21.2% increase in net interest income generated
by increased loans outstanding and additional investment securities. The
Company's loan loss provision was $3,875,000, up from $2,560,000 the prior
year because of the 17% loan growth and higher loan net charge-offs in 1996
than in 1995. Total noninterest income rose from the previous year due to
increased service charges, additional trading profits and commissions and
greater income on most other fee generating bank activities. Comparative
noninterest expenses were up $1,804,000, or 11.0% from 1995 due in large part
to increased salaries and benefits. Even considering higher overhead costs,
operating efficiencies improved from the previous year as the Company
expanded its gross operating earnings performance.
Net income for 1995 was $10,747,000, a 24.5% increase over the $8,632,000
earned in 1994. On a per share basis, net income for 1995 was $2.24 compared
to $1.81 in 1994, an increase of $.43 per share or 23.8%. Greater net
interest income, the principal contributor to the improved earnings
performance, was generated by increased loans outstanding and investment
securities. The Company's loan loss provision was slightly lower than the
previous year. Noninterest income for 1995 was up sharply from the previous
year due to gains realized on the sale of investment securities and increased
trading profits. Comparative noninterest expenses were $16,438,000 up
$1,445,000 or 9.6% from the earlier year.
NET INTEREST INCOME
The following discussion and table sets 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 assuming a marginal statutory Federal income tax rate of 35% in 1996
and 1995 and 34% in previous years. The tax-equivalent adjustments were
approximately $249,000, $279,000, $289,000, $329,000, and $348,000 for each
of the five years ended December 31, 1996, respectively.
Net interest income is the difference between income earned on assets and
interest expense paid on deposits and borrowings used to fund them. Net
interest income, the primary component of net income, has increased in each
of the last five years. Continued growth in earning assets has been
responsible for the consistent increases in net interest income. Net interest
income on a tax-equivalent basis, divided by average interest-earning assets,
represents the Company's net interest margin.
During the years presented, the Company's net interest margins have been
below comparable ratios for its peers. Consumer loans generally provide
higher total yields than do commercial loans. With only five branch
locations, the Company cannot effectively compete for consumer loans against
other area financial institutions having dozens of locations each. The
Company also does not have a credit card lending operation. Deposit growth
has been partially attained through rate promotional activities. Such actions
have generally placed the Company's total funding costs above those of its
peers. The combination of slightly lower overall loan yields, and higher
deposit rates, has generally resulted in the Company's net interest margins
being below those of its peers.
10
<PAGE> 4
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total tax equivalent interest income for 1996 was $79,968,000, up $9,287,000
or 13.1% above $70,681,000 in 1995. The increase in interest income was
generated from the growth of the Company's earning asset base. Average loans
outstanding grew $88 million and total securities increased $41 million above
prior year levels. Offsetting a portion of the benefits of asset growth were
the lower yields earned on most assets. Total loan yields declined to 9.00%
in 1996, down from 9.16% in 1995 as loan yields dropped with an average prime
rate of 8.27% in 1996, compared with 8.67% in 1995. Total earning asset
yields fell to 8.19%, down 11 basis points from 8.30% in 1995.
Funding of the 1996 asset growth was done primarily with funds originally
raised in connection with the money market deposit account promotion begun in
the last half of 1995. Also supporting 1996 asset expansion were increased
certificates of deposit of less than $100,000. These "core" deposits were
raised in 1996 through a combination of promotional rates and various focused
marketing techniques employed at all our five bank locations.
Total interest expense increased to $40,811,000 in 1996, up from $38,295,000
in the prior year. The increase was primarily a result of the increased money
market deposit accounts and increased time deposits. Offsetting a large
portion of the increased interest expense generated by the higher volume of
deposits were the lower rates paid on money market deposit accounts.
Following the conclusion of the 1995 money market account promotion and
during 1996 the Bank lowered its average rates paid on total money market
accounts to 4.19% in 1996 from 5.08% in 1995. Overall rates paid on total
interest bearing liabilities fell to 4.80%, down 38 basis points from 5.18%
paid in 1995.
Total net interest income increased to $39,157,000, up $6,771,000 from 1995
as greater interest income exceeded the higher interest expense costs. The
Company's net interest margin improved to 4.01% from 3.80% the previous year
as the decline in interest bearing liability rates, primarily money market
accounts, exceeded the drop in earning asset yields.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total tax equivalent interest income for 1995 was $70,681,000, up $17,356,000
or 32.5% above $53,325,000 in 1994. Nearly two-thirds of the increase was
generated from the growth of the Company's earning asset base. Average loans
outstanding grew $49 million and total securities increased $98 million above
prior year levels. Combined with the benefits of asset growth were the higher
yields earned on substantially all assets. Total loan yields increased to
9.16% in 1995, up from 8.28% in 1994 as loan yields rose with an average
prime rate of 8.67% in 1995, compared with 7.14% in 1994. Substantial
purchases of U.S. Treasury securities in 1995 also pushed up overall yields
on securities. Total earning asset yields increased to 8.30%, up 58 basis
points from 7.72% in 1994.
Funding the 1995 asset growth was accomplished in two separate phases. During
the first half of 1995 loan growth and security purchases were funded
primarily with additional short-term borrowings and increased time deposits.
In June 1995, the Bank launched an aggressive money market deposit account
promotion at all its locations to coincide with the opening of its new office
in Concord Village. The account offering provided an attractive guaranteed
rate and successfully raised over $200 million during the promotion period.
As "core" deposits grew in the second half of 1995 the Company sharply
reduced its short-term borrowings and time deposits of $100,000 or more. The
Company then invested a large portion of the new deposits by purchasing U.S.
Treasury securities.
Total interest expense increased to $38,295,000 in 1995, up from $23,883,000
in the prior year. Approximately one-half of the $14,412,000 increase was a
result of the increased money market deposit accounts and the higher rates
paid thereon. The remainder of the increased interest expense was generated
primarily by the higher average volume of certificates of deposit, short-term
borrowings and higher rates paid on nearly all interest bearing liabilities
in 1995. Overall rates paid on total interest bearing liabilities rose to
5.18%, up 114 basis points from 4.04% paid in 1994.
Total net interest income increased to $32,386,000, up $2,944,000 from 1994
as greater interest income exceeded the higher interest expense costs. The
Company's net interest margin dropped to 3.80% from 4.26% the previous year
as the money market deposit promotional rate pushed up interest bearing
liability rates more than earning asset yields advanced in 1995.
11
<PAGE> 5
FINANCIAL REVIEW (continued)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
FIVE YEAR COMPARISON OF CONSOLIDATED AVERAGE BALANCE SHEETS, INTEREST,
YIELDS AND RATES (DOLLARS IN THOUSANDS)
<CAPTION>
Twelve Months Ended December 31
------------------------------------------------------------
1996
------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 674,176 $ 60,678 9.00%
Tax exempt<F3> 17 1 5.59
Held to maturity securities
Taxable 65,391 4,356 6.66
Tax-exempt<F3> 7,477 811 10.85
Available for sale securities 214,417 13,301 6.20
Trading account securities 771 47 6.17
Federal funds sold and other
short-term investments 14,278 774 5.42
Interest-bearing bank deposits
------------------------------------------------------------
Total interest-earning assets 976,527 79,968 8.19
------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 22,696
Bank premises and equipment 10,579
Other assets 11,491
Allowance for possible
loan losses (11,633)
------------------------------------------------------------
Total assets $ 1,009,660
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 20,323 $ 348 1.71%
Money market accounts 336,586 14,104 4.19
Savings deposits 22,588 671 2.97
Time deposits of $100,000
or more 34,518 1,820 5.27
Other time deposits 389,427 21,388 5.49
------------------------------------------------------------
Total interest-bearing deposits 803,442 38,331 4.77
Federal funds purchased,
repurchase agreements and
other short-term borrowings 44,744 2,264 5.06
Convertible debentures 2,700 216 8.00
Subordinated notes
Capital notes
Mortgage note
------------------------------------------------------------
Total interest-bearing liabilities 850,886 40,811 4.80
------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits 82,258
Other liabilities 2,602
Shareholders' equity 73,914
------------------------------------------------------------
Total liabilities and
shareholders' equity $ 1,009,660
============================================================
Net interest income $ 39,157
============================================================
Net interest margin 4.01%
============================================================
<CAPTION>
Twelve Months Ended December 31
------------------------------------------------------------
1995
------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 584,790 $ 53,553 9.16%
Tax exempt<F3> 959 84 8.77
Held to maturity securities
Taxable 135,317 8,342 6.16
Tax-exempt<F3> 7,478 816 10.91
Available for sale securities 103,646 6,725 6.49
Trading account securities 743 49 6.65
Federal funds sold and other
short-term investments 19,017 1,112 5.85
Interest-bearing bank deposits
------------------------------------------------------------
Total interest-earning assets 851,950 70,681 8.30
------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 20,818
Bank premises and equipment 8,019
Other assets 10,329
Allowance for possible
loan losses (10,304)
------------------------------------------------------------
Total assets $ 880,812
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 19,213 $ 419 2.18%
Money market accounts 246,558 12,528 5.08
Savings deposits 22,466 662 2.94
Time deposits of $100,000
or more 38,102 2,098 5.51
Other time deposits 359,896 19,427 5.40
------------------------------------------------------------
Total interest-bearing deposits 686,235 35,134 5.12
Federal funds purchased,
repurchase agreements and
other short-term borrowings 50,028 2,918 5.83
Convertible debentures 2,968 243 8.19
Subordinated notes
Capital notes
Mortgage note
------------------------------------------------------------
Total interest-bearing liabilities 739,231 38,295 5.18
------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits 77,439
Other liabilities 2,179
Shareholders' equity 61,963
------------------------------------------------------------
Total liabilities and
shareholders' equity $ 880,812
============================================================
Net interest income $ 32,386
============================================================
Net interest margin 3.80%
============================================================
12
<PAGE> 6
<CAPTION>
Twelve Months Ended December 31
------------------------------------------------------------
1994
------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 535,422 $ 44,315 8.28%
Tax exempt<F3> 1,474 134 9.10
Held to maturity securities
Taxable 95,941 5,079 5.29
Tax-exempt<F3> 7,626 817 10.71
Available for sale securities 44,433 2,706 6.09
Trading account securities 1,410 76 5.38
Federal funds sold and other
short-term investments 4,548 198 4.35
Interest-bearing bank deposits
------------------------------------------------------------
Total interest-earning assets 690,854 53,325 7.72
------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 17,384
Bank premises and equipment 5,949
Other assets 7,234
Allowance for possible
loan losses (8,578)
------------------------------------------------------------
Total assets $ 712,843
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 17,992 $ 328 1.83%
Money market accounts 163,488 4,993 3.05
Savings deposits 24,679 729 2.95
Time deposits of $100,000
or more 26,921 1,187 4.41
Other time deposits 315,659 14,828 4.70
------------------------------------------------------------
Total interest-bearing deposits 548,739 22,065 4.02
Federal funds purchased,
repurchase agreements and
other short-term borrowings 38,591 1,548 4.01
Convertible debentures 3,240 270 8.33
Subordinated notes
Capital notes
Mortgage note
------------------------------------------------------------
Total interest-bearing liabilities 590,570 23,883 4.04
------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits 69,438
Other liabilities 853
Shareholders' equity 51,982
------------------------------------------------------------
Total liabilities and
shareholders' equity $ 712,843
============================================================
Net interest income $ 29,442
============================================================
Net interest margin 4.26%
============================================================
<CAPTION>
Twelve Months Ended December 31
------------------------------------------------------------
1993
------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 473,415 $ 37,347 7.89%
Tax exempt<F3> 2,169 242 11.16
Held to maturity securities
Taxable 68,669 3,261 4.75
Tax-exempt<F3> 7,670 824 10.74
Available for sale securities 24,307 1,195 4.92
Trading account securities 678 38 5.60
Federal funds sold and other
short-term investments 5,605 169 3.02
Interest-bearing bank deposits 329 9 2.74
------------------------------------------------------------
Total interest-earning assets 582,842 43,085 7.39
------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 14,396
Bank premises and equipment 5,567
Other assets 7,441
Allowance for possible
loan losses (7,159)
------------------------------------------------------------
Total assets $ 603,087
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 17,635 $ 350 1.98%
Money market accounts 175,580 4,919 2.80
Savings deposits 18,028 536 2.97
Time deposits of $100,000
or more 18,078 618 3.42
Other time deposits 240,865 11,718 4.86
------------------------------------------------------------
Total interest-bearing deposits 470,186 18,141 3.86
Federal funds purchased,
repurchase agreements and
other short-term borrowings 27,633 834 3.02
Convertible debentures 3,240 270 8.33
Subordinated notes 1,473 97 6.59
Capital notes
Mortgage note 801 86 10.74
------------------------------------------------------------
Total interest-bearing liabilities 503,333 19,428 3.86
------------------------------------------------------------
Noninterest-bearing liabilities: 58,095
Demand deposits 2,440
Other liabilities 39,219
------------------------------------------------------------
Shareholders' equity
Total liabilities and
shareholders' equity $603,087
============================================================
Net interest income $ 23,657
============================================================
Net interest margin 4.06%
============================================================
<CAPTION>
Twelve Months Ended December 31
------------------------------------------------------------
1992
------------------------------------------------------------
Interest
Average Income/ Yield/
Balance Expense Rate
------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 418,564 $ 34,985 8.36%
Tax exempt<F3> 2,022 209 10.34
Held to maturity securities
Taxable 78,522 5,155 6.57
Tax-exempt<F3> 7,956 815 10.24
Available for sale securities 1,097 80 7.29
Trading account securities 719 49 6.82
Federal funds sold and other
short-term investments 8,455 288 3.41
Interest-bearing bank deposits 350 11 3.14
------------------------------------------------------------
Total interest-earning assets 517,685 41,592 8.03
------------------------------------------------------------
Noninterest-earning assets:
Cash and due from banks 11,864
Bank premises and equipment 5,449
Other assets 7,966
Allowance for possible
loan losses (5,986)
------------------------------------------------------------
Total assets $ 536,978
============================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 15,994 $ 455 2.84%
Money market accounts 183,257 6,396 3.49
Savings deposits 12,613 375 2.97
Time deposits of $100,000
or more 19,561 790 4.04
Other time deposits 196,370 11,016 5.61
------------------------------------------------------------
Total interest-bearing deposits 427,795 19,032 4.45
Federal funds purchased,
repurchase agreements and
other short-term borrowings 16,989 501 2.95
Convertible debentures 2,605 216 8.29
Subordinated notes 7,353 505 6.87
Capital notes 651 113 17.36
Mortgage note 3,304 347 10.50
------------------------------------------------------------
Total interest-bearing liabilities 458,697 20,714 4.52
------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits 47,332
Other liabilities 2,939
Shareholders' equity 28,010
------------------------------------------------------------
Total liabilities and
shareholders' equity $ 536,978
============================================================
Net interest income $ 20,878
============================================================
Net interest margin 4.03%
============================================================
<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% in 1996 and 1995 and 34% in previous years. The tax-equivalent
adjustments were approximately $249,000, $279,000, $289,000, $329,000, and
$348,000 for the years ended December 31, 1996, 1995, 1994, 1993, and 1992,
respectively.
</TABLE>
13
<PAGE> 7
FINANCIAL REVIEW (continued)
- ------------------------------------------------------------------------------
CHANGES IN INTEREST INCOME AND EXPENSE/VOLUME AND RATE VARIANCES
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 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>
-------------------------- -------------------------- ---------------------------
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
Compared to Compared to Compared to
December 31, 1995 December 31, 1994 December 31, 1993
-------------------------- -------------------------- ---------------------------
Increase (decrease) attributable to change in:
Yield/ Net Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change Volume Rate Change
-------------------------- -------------------------- ---------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans<F1><F2> $ 7,997 $ (955) $ 7,042 $ 4,238 $ 4,950 $ 9,188 $ 4,990 $ 1,870 $ 6,860
Held to maturity securities
Taxable (4,617) 631 (3,986) 2,329 934 3,263 1,413 405 1,818
Tax-exempt<F1> (5) (5) (16) 15 (1) (5) (2) (7)
Available for sale
securities 6,890 (314) 6,576 3,830 189 4,019 1,174 337 1,511
Trading account
securities 2 (4) (2) (42) 15 (27) 39 (1) 38
Federal funds sold
and other short-
term investments (261) (77) (338) 825 89 914 (36) 65 29
Interest-bearing
bank deposits (5) (4) (9)
-------------------------- -------------------------- ---------------------------
TOTAL
INTEREST INCOME 10,011 (724) 9,287 11,164 6,192 17,356 7,570 2,670 10,240
-------------------------- -------------------------- ---------------------------
INTEREST PAID ON:
NOW accounts 24 (95) (71) 24 67 91 6 (28) (22)
Money market
accounts 4,039 (2,463) 1,576 3,262 4,273 7,535 (350) 424 74
Savings 3 6 9 (65) (2) (67) 197 (4) 193
Time deposits of
$100,000 or more (190) (88) (278) 569 342 911 357 212 569
Other time deposits 1,630 331 1,961 2,229 2,370 4,599 3,508 (398) 3,110
Federal funds purchased,
repurchase agreements
and other short-term
borrowings (453) (201) (654) 503 867 1,370 538 176 714
Long-term
borrowings (14) (13) (27) (14) (13) (27) (92) (91) (183)
-------------------------- -------------------------- ---------------------------
TOTAL INTEREST
EXPENSE 5,039 (2,523) 2,516 6,508 7,904 14,412 4,164 291 4,455
-------------------------- -------------------------- ---------------------------
NET INTEREST
INCOME $ 4,972 $ 1,799 $ 6,771 $ 4,656 $(1,712) $ 2,944 $ 3,406 $ 2,379 $ 5,785
========================== ========================== ===========================
<FN>
- ------------------------------------------------------------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate of
35% in 1996 and 1995 and 34% in previous years. The approximate tax
equivalent adjustments were $249,000, $279,000, $289,000, and $329,000 for
the years ended December 31, 1996, 1995, 1994, and 1993, respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
LENDING AND CREDIT MANAGEMENT
Interest earned on the loan portfolio is the primary source of income for the
Company. The loan portfolio represents 69% of the Company's total assets and
for the year ending December 31, 1996, total loans were up approximately $107
million. Loan growth occurred in all major categories: commercial and
industrial, commercial real estate and residential real estate. The table on
the following page shows the composition of the loan portfolio at the end of
each of the periods indicated.
14
<PAGE> 8
LENDING AND CREDIT MANAGEMENT-CONTINUED
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------------ ------------------ ------------------ ----------------- ----------------
Amount % Amount % Amount % Amount % Amount %
------------------ ------------------ ------------------ ----------------- ----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal
and industrial development $ 342,664 46.8% $ 289,259 46.4% $ 260,509 46.2% $ 223,554 44.8% $ 189,018 42.9%
Real estate construction 17,149 2.3 14,312 2.3 13,010 2.3 13,032 2.6 16,517 3.7
Real estate mortgage:
One to four family
residential loans 113,035 15.5 107,386 17.2 97,922 17.4 87,753 17.6 96,098 21.8
Other real estate loans 251,618 34.4 206,105 33.0 185,805 33.0 167,986 33.7 132,789 30.1
Installment and consumer 6,962 1.0 6,798 1.1 6,352 1.1 6,326 1.3 6,626 1.5
------------------ ------------------ ------------------ ----------------- ----------------
TOTAL LOANS $ 731,428 100.0% $ 623,860 100.0% $ 563,598 100.0% $ 498,651 100.0% $ 441,048 100.0%
================== ================== ================== ================= ================
</TABLE>
The following table sets forth the remaining maturities for loans as of
December 31, 1996.
<TABLE>
<CAPTION>
Over one year
through five years Over five years
------------------------ ------------------------
One year Fixed Floating Fixed Floating
or less rate rate rate rate Total
--------- ------------------------ ------------------------ ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal
and industrial development $ 297,687 $ 39,821 $ 5,156 $ 342,664
Real estate construction 16,679 470 17,149
Real estate mortgage 134,255 172,876 393 57,129 364,653
Installment and consumer 5,523 1,439 6,962
--------- ----------------------- ------------------------ ---------
Total loans $ 454,144 $ 214,606 393 $ 62,285 $ 731,428
========= ======================= ======================== =========
</TABLE>
The Company makes substantially all of its loans to customers located within
the St. Louis metropolitan area. The Company has no foreign loans nor any
loans regarded by the Federal Reserve Board as highly leveraged transactions.
The Company has no significant agricultural loans. The Company has
traditionally emphasized commercial lending and at December 31, 1996, 84% of
the loan portfolio was in commercial, industrial and commercial real estate
loans.
An economic downturn and management's ability to deal with changing economic
conditions would affect the quality of the portfolio. The Company strives to
mitigate these risks by following written loan policies and procedures. These
loan policies and procedures are designed to ensure prudent loan underwriting
standards. The loan policy provides that each lending officer has a defined
lending authority. New loans in excess of $250,000 are reviewed by the Senior
Loan Committee.
The existing loan portfolio is monitored via the Company's loan rating
system. Generally, all existing loans in excess of $150,000, other than
residential mortgages, are reviewed on an annual basis. The Company assigns a
reserve amount consistent with each loan rating category. The loan rating
system is used to determine the adequacy of the allowance for possible loan
losses. Each month the allowance for possible loan losses is reviewed
relative to the loan rating system and results are reported to the Board of
Directors. Management believes that the level of allowance for possible loan
losses is appropriate given the Company's loan portfolio.
The loan review process is designed to identify problem credits. Potential
problem loans are monitored by the lending staff and by senior management. It
is the policy of the Company to discontinue the accrual of interest on any
loan where the payment of principal or interest on a timely basis in the
normal course of business is in doubt. The discontinuance of interest accrual
on a loan occurs at any time that a significant problem is detected in the
normal payment process. The Company's policy is to automatically place a loan
on nonaccrual status when it becomes 90 days past due, unless it is well
secured and in the process of collection.
As a part of their examination process various regulatory agencies review the
Company's allowance for possible loan losses. These agencies have the
authority to require the Company to recognize additions to the allowance
based upon their judgment. Management believes that the allowance for
possible loan losses at December 31, 1996 was adequate. The table on the next
page summarizes for the periods indicated activity in the Company's allowance
for possible loan losses, including loans charged off, loan recoveries and
additions to the allowance charged to operating expenses.
15
<PAGE> 9
Financial Review (continued)
- --------------------------------------------------------------------------------
LENDING AND CREDIT MANAGEMENT-CONTINUED
Gross interest income on nonaccrual and restructured loans, which would have
been recorded under the original terms of the loans, was approximately
$298,000 in 1996, $390,000 in 1995, and $125,000 in 1994. Of this amount,
approximately $157,000, $293,000, and $95,000 was actually recorded as
interest income on such loans in 1996, 1995 and 1994, respectively.
As of December 31, 1996, the Company had approximately $2 million in loans
which were not included in nonaccrual, past due 90 days or more or
restructured categories, but where the borrowers were currently experiencing
potential credit problems that raised doubts as to the ability of the
borrowers to comply with the present loan repayment terms.
<TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE AND RELATED INFORMATION
<CAPTION>
----------------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
(BEGINNING OF PERIOD) $ 10,789 $ 9,575 $ 7,756 $ 6,542 $ 5,001
----------------------------------------------------------------
Loans charged off:
Commercial and industrial (2,371) (676) (105) (1,562) (1,234)
Real estate mortgage (471) (1,022) (1,248) (39) (342)
Installment (16) (10) (66) (52) (13)
Other<F1> (387)
----------------------------------------------------------------
TOTAL LOANS CHARGED OFF (2,858) (1,708) (1,419) (1,653) (1,976)
----------------------------------------------------------------
RECOVERIES OF LOANS PREVIOUSLY
CHARGED OFF:
Commercial and industrial 662 303 371 260 204
Real estate mortgage 142 30 162 17 124
Installment 14 29 9 16 10
Other 16 4 24
----------------------------------------------------------------
TOTAL RECOVERIES 818 362 558 297 362
----------------------------------------------------------------
Net loans charged off (2,040) (1,346) (861) (1,356) (1,614)
----------------------------------------------------------------
Provision for possible loan losses 3,875 2,560 2,680 2,570 3,155
----------------------------------------------------------------
Allowance for possible loan losses
(end of period) $ 12,624 $ 10,789 $ 9,575 $ 7,756 $ 6,542
================================================================
LOANS OUTSTANDING:
Average $ 674,193 $ 585,749 $ 536,896 $ 475,585 $ 420,586
End of period 731,019 623,777 563,477 498,650 441,018
Ratio of allowance for possible
loan losses to loans outstanding
Average 1.87% 1.84% 1.78% 1.63% 1.56%
End of period 1.73 1.73 1.70 1.56 1.48
Ratio of net charge-offs to average
loans outstanding .30 .23 .16 .29 .38
PERCENT OF CATEGORIES TO TOTAL LOANS:
Commercial, industrial and
marketable security loans 46.82% 46.37% 46.22% 44.83% 42.86%
Commercial loans secured by
real estate 34.42 33.04 32.97 33.69 30.11
Construction and land
development loans 2.35 2.29 2.31 2.61 3.74
Real estate mortgage 15.46 17.21 17.37 17.60 21.79
Consumer loans .95 1.09 1.13 1.27 1.50
----------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
================================================================
Allocation of allowance for possible
loan losses at end of period
Commercial and industrial $ 4,189 $ 3,443 $ 3,047 $ 2,476 $ 3,327
Real estate mortgage 4,097 3,164 2,772 3,502 3,114
Installment 51 49 47 46 48
Unallocated 4,287 4,133 3,709 1,732 53
----------------------------------------------------------------
TOTAL $ 12,624 $ 10,789 $ 9,575 $ 7,756 $ 6,542
================================================================
<FN>
<F1> All of these loans were secured by margin securities.
</TABLE>
16
<PAGE> 10
NONPERFORMING ASSETS
The following table summarizes nonperforming assets by category.
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, industrial and marketable
security loans:
Nonaccrual $ 2,251 $ 1,551 $ 877 $ 883 $ 916
Past due 90 days or more 11 6 9
Restructured terms 250 212 738 3,669
Commercial loans secured by real estate:
Nonaccrual 522 1,698 35 28
Past due 90 days or more 13
Restructured terms 2,374
Construction and land development loans:
Nonaccrual 2,320 700 1,006
Past due 90 days or more
Restructured terms
Real estate mortgage:
Nonaccrual 623 523 500 193 265
Past due 90 days or more 131 179
Restructured terms 500 500 130
Consumer loans:
Nonaccrual 29 6 22 51
Past due 90 days or more 22 1 4 24
Restructured terms 38 19 21
---------------------------------------------------------
TOTAL NONPERFORMING LOANS 6,710 4,688 2,173 4,390 5,889
Other real estate 569 72 223 790
---------------------------------------------------------
TOTAL NONPERFORMING ASSETS $ 7,279 $ 4,688 $ 2,245 $ 4,613 $ 6,679
=========================================================
Loans, net of unearned discount $ 731,019 $ 623,777 $ 563,477 $ 498,650 $ 441,018
Allowance for possible loan losses to loans 1.73% 1.73% 1.70% 1.56% 1.48%
Nonperforming loans to loans .92 .75 .39 .88 1.34
Allowance for possible loan losses to
nonperforming loans 188.14 230.14 440.64 176.67 111.09
Nonperforming assets to loans and
foreclosed assets .99 .75 .40 .92 1.51
</TABLE>
At December 31, 1996 the Company had $6,534,000 of impaired loans of which
$3,934,000 had an associated specific allowance for possible loan losses of
$367,000. At December 31, 1995 the company had $4,509,000 of impaired loans
of which $1,313,000 had an associated specific allowance for possible loan
losses of $443,000. The average recorded investment in impaired loans during
the year ended December 31, 1996 and 1995, was approximately $3,703,000 and
$2,593,000, respectively. For the year ended December 31, 1996 and 1995,
gross interest income on impaired loans, which would have been recorded under
the original terms of the loans, was approximately $298,000 and $390,000,
respectively. The Company actually recorded cash basis interest income on
impaired loans of $157,000 in 1996 and $293,000 in 1995. The effect of
impaired loans was immaterial to the financial statements at December 31,
1996.
INVESTMENT PORTFOLIO
The securities portfolio of the Company meets a number of objectives
including providing a stable source of income with little credit risk,
providing a source of liquidity as securities mature, providing collateral
for pledging, and helping balance the Company's asset-liability position.
Securities in the Available for Sale category meet the above needs and
additionally provide a source of liquidity through their ability to be sold
to fund loan growth. Securities might be purchased for the Available for Sale
account when the level of interest rates or the shape of the yield curve
favors investing in longer term securities, even though the Company does not
expect to hold such securities to maturity. In addition, securities may need
to be purchased and, at a later date, sold in order to help balance the
asset-liability position. Finally, the Bank attempts to fully utilize its
equity at all times. When the level of equity is adequate to support greater
assets than can be achieved by the Bank's efforts to attract quality loans,
the Bank will invest in securities provided such investment is consistent
with the asset sensitivity objective of the Bank and adds to the Bank's
earnings. This is consistent with the Bank's objective of maximizing return
on equity to a larger extent than return on assets.
As of December 31, 1996 and 1995, securities held in the Trading Account were
$20,000 and $99,000, respectively. Available for Sale securities were
$229,453,000 at the end of 1996 and $253,733,000 at the end of 1995.
17
<PAGE> 11
Financial Review (continued)
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO-CONTINUED
The Bank regularly reviews its asset-liability position based upon its
internal rate sensitivity analysis, which includes adjustments to reflect
management's best estimates of probable maturities and pricing of various
deposit accounts in response to changes in the level of interest rates.
During the first quarter of 1996, based on management's judgement that
interest rates would fall no further, the Bank took a number of steps to move
from a liability sensitive position to an asset sensitive position. The Bank
sold a $50 million notional amount interest rate "floor" that had been
previously purchased to protect against the prospect of falling rates. This
sale resulted in a pre-tax gain of $821,000 to be realized over the remaining
1 1/2 years of the contract. The Bank also initiated interest rate swaps with
a notional amount of $145 million, to change the interest rate
characteristics of various fixed rate assets, which provided for the Bank to
pay fixed rates and receive Libor floating. Finally, $74,845,000 proceeds
from sales of portfolio securities resulted in net pre-tax gains of $440,000.
In the fourth quarter of the year, management took steps to reposition the
asset-liability sensitivity by moving to a somewhat liability sensitive
position. The interest rate swaps purchased in the first quarter of 1996 were
liquidated resulting in gains of $1,354,000 which will be taken into income
over the remaining one to three years of the contracts. During the fourth
quarter of 1996 the Bank also purchased $25 million in securities and an
interest rate "floor" contract for the notional amount of $50 million to
protect against the possibility of a drop in interest rates.
Because the Company has historically maintained high loan to deposit ratios
and a great percentage of those loans are in commercial loans, the Company's
policy has been to minimize credit risk in the securities portfolio. As of
December 31, 1996, 95% of Held to Maturity securities were U.S. Government
or obligations guaranteed by the U.S. Government. As of December 31, 1996,
67% of the Company's Available for Sale securities were U.S. Government
obligations. Twenty-nine percent of securities in the Available for Sale
account consisted of Collateralized Mortgage Obligation (CMOs) collateralized
by mortgage obligations issued by the Federal Home Loan Mortgage Corporation
or the Federal National Mortgage Association. The balance of 4% in the
Available for Sale account was invested in Federal Home Loan Bank stock and
other debt and equity securities.
As of December 31, 1996 the Company owned $4.4 million in Public Housing
Authority bonds (PHAs). These PHAs were purchased prior to the Tax Reform Act
of 1986 and are therefore 100% exempt from Federal income taxes. PHAs are
backed by the "full faith and credit" of the U.S. Government.
In addition, the Bank has a small amount of "bank qualified" tax exempt
securities. The total amount of these issues as of December 31, 1996 was $3.2
million. The Bank became a member of the Federal Home Loan Bank in 1993,
which required an initial equity investment of $1.8 million. Since that time,
the Bank's borrowings from the Federal Home Loan Bank have required an
increase in that investment and as of December 31, 1996 the Bank's investment
was $9.7 million.
As of December 31, 1996, the contractual maturities of securities and their
average weighted yield in the held to maturity and available for sale
portfolios were as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------
Over One Over Five
Through Through Over Weighted
One Year Five Ten 10 Average
or Less Years Years Years Yields
----------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
United States Treasury securities $ 39,912 $ 100,594 $ 15,078 $ 6.44%
Obligations of United States
Government agencies 38,886 9,934 36,590 28,979 6.14
PHA bonds guaranteed by the United
States Government<F1> 3,079 1,291 11.36
States and political subdivisions<F1> 400 2,366 392 9.89
Federal Home Loan Bank stock and other 10,150 7.68
----------------------------------------------------------
TOTAL SECURITIES $ 88,948 $ 110,928 $ 57,113 $ 30,662 6.36%
==========================================================
Weighted average yields<F1> 5.98% 6.55% 6.66% 6.19%
==========================================================
<FN>
- -----------------------------------------------------------------------------
<F1> Rates on PHA bonds and states and political subdivisions have been
adjusted to tax equivalent yields using themarginal statutory Federal income
tax rate of 35%.
</TABLE>
18
<PAGE> 12
DEPOSITS
Deposits are the principal source of funds for the Bank. At December 31,
1996, the Company's total deposits were $918 million. Deposits consist
primarily of core deposits from the local market areas surrounding each of
the Bank's offices. The Bank has not used brokered deposits as a source of
funds, although its capitalization would permit such activity on an
unrestricted basis under current regulations. The following table sets forth
the distribution of the Company's deposit accounts at the dates indicated and
the weighted average nominal interest rates for each category of deposit.
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------------------------------------------------------------------------
Percent Percent Percent
of of of
Amount Deposits Rate Amount Deposits Rate Amount Deposits Rate
----------------------------- ----------------------------- ---------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits $ 98,726 10.75% $ 85,748 9.67% $ 78,765 11.95%
NOW accounts 22,823 2.49 1.69% 21,315 2.40 1.70% 19,914 3.02 2.44%
Money market accounts 308,256 33.58 4.19 382,629 43.17 4.49 146,056 22.17 3.93
Savings deposits 22,954 2.50 2.99 21,461 2.42 2.99 24,848 3.77 2.99
Time deposits of
$100,000 or more 39,228 4.27 5.25 30,765 3.47 5.51 42,460 6.44 5.08
Other time deposits 426,025 46.41 5.53 344,647 38.87 5.60 346,913 52.65 4.95
----------------------------- ----------------------------- ---------------------------
TOTAL DEPOSITS $ 918,012 100.00% $ 886,565 100.00% $ 658,956 100.00%
============================= ============================= ===========================
</TABLE>
The aggregate amount of maturities for time deposits for the four years
beginning in 1998 are $111,958,000, $27,222,000, $4,945,000, and $2,887,000.
AMOUNTS AND MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
The following table sets forth the amount and maturities of time deposits of
$100,000 or more at December 31, 1996 and December 31, 1995.
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Three months or less $ 15,092 $ 15,125
Over three months through six months 8,348 7,163
Over six months through twelve months 10,296 3,055
Over twelve months 5,492 5,422
-------- --------
Total $ 39,228 $ 30,765
======== ========
</TABLE>
SENSITIVITY TO CHANGES IN INTEREST RATES
The Company monitors its interest rate sensitivity position and attempts to
limit the exposure to interest rate risk but not always eliminate it. Subject
to management's best estimates of probable maturities the Company's policy is
that the ratio of maturing assets to maturing liabilities repricing in the
one year or less time period shall be no less than 80% or no greater than
120%. The Company also uses various interest rate related contracts to manage
its overall interest rate risk exposure for asset-liability management
purposes.
19
<PAGE> 13
Financial Review (continued)
- -------------------------------------------------------------------------------
SENSITIVITY TO CHANGES IN INTEREST RATES-CONTINUED
The following table represents the Company's interest rate position based
upon contractual maturities only for various time periods, as of December 31,
1996.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
0 to 3 4 to 12 1 to 5 Over 5
months months years years Total
----------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans $ 389,620 $ 64,524 $ 214,999 $ 62,285 $ 731,428
Securities 44,885 44,063 110,928 87,775 287,651
Other short-term investments 20 20
Effect of interest rate floor contract 50,000 (50,000)
----------------------------------------------------------------------
TOTAL EARNING ASSETS $ 484,525 $ 108,587 $ 275,927 $ 150,060 $ 1,019,099
======================================================================
Funding Sources
Demand accounts $ 98,726 $ $ $ 127,593 $ 98,726
Money market accounts 308,256 308,256
Time deposits 77,991 240,250 147,012 465,253
Savings accounts 22,954 22,954
NOW accounts 22,823 22,823
Other borrowed funds 62,614 2,700 65,314
----------------------------------------------------------------------
TOTAL FUNDING SOURCES $ 593,364 $ 240,250 $ 149,712 $ $ 983,326
======================================================================
Interest sensitivity gap $ (108,839) $ (131,663) $ 126,215 $ 150,060
Cumulative gap $ (108,839) $ (240,502) $ (114,287) $ 35,773
Gap as a percentage of total earning assets (10.1%) (23.6%) (11.2%) 3.5%
</TABLE>
The Company enters into off-balance sheet transactions primarily as part of
its asset-liability management strategy to manage interest-rate risk. These
transactions involve the exchange of interest payments based on a notional
amount. The notional amounts of these transactions express the volume of
transactions and are not an appropriate indicator of the off-balance sheet
market risk or credit risk. The credit risk associated with these
transactions arises from the counterparties' failure to meet the terms of the
agreements and is limited to the fair value of contracts in a gain position.
The Company manages this risk by maintaining positions with highly rated
counterparties. The credit risk exposure of the Company at December 31, 1996
was approximately $330,000.
NONINTEREST INCOME
The following table sets forth the Company's noninterest income for the
periods indicated.
<TABLE>
<CAPTION>
December 31
----------------------------------
1996 1995 1994
----------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Service charges on deposit accounts $ 1,561 $ 1,339 $ 1,399
Security gains/(losses), net 440 734 (242
Trading profits and commissions 1,378 905 573
Other 1,682 1,117 1,006
----------------------------------
TOTAL NONINTEREST INCOME $ 5,061 $ 4,095 $ 2,736
==================================
</TABLE>
Total noninterest income for 1996 was $5,061,000, up nearly 24% from
$4,095,000 in 1995 and $2,736,000 in 1994. In 1995, a reduction in the FDIC
assessment was passed through to deposit customers in the form of lower
service charges. An increase in average deposit balances resulted in a
corresponding increase in service charge income in 1996. Total trading
profits and commissions increased significantly over 1995 levels.
Commissions, which increased sharply, were partially offset by trading losses
in 1996, compared to trading gains in 1995. An increase in credit card
merchant fees accounted for the majority of the increase in other noninterest
income.
Net realized gains on available for sale securities were $443,000 in 1996,
compared with gains of $819,000 in 1995 and losses of $198,000 in 1994. Sales
of securities classified as held to maturity generated losses of $3,000 in
1996 compared with losses of $85,000 and $44,000 in 1995 and 1994
respectively. These sales are sometimes effected to fund the purchase of
other securities to meet various other liquidity needs, but in all cases
sales of held to maturity securities are done only within 90 days of each
security's maturity date.
20
<PAGE> 14
NONINTEREST EXPENSE
The following table sets forth the Company's noninterest expense for the
periods indicated.
<TABLE>
<CAPTION>
December 31
----------------------------------
1996 1995 1994
----------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Employee compensation and benefits $ 9,313 $ 8,130 $ 6,919
Net occupancy 1,128 1,069 911
Equipment 1,227 1,009 930
Advertising 604 720 473
FDIC insurance expense 2 770 1,301
Amortization of goodwill 669
Other 5,968 4,740 3,790
-----------------------------------
TOTAL NONINTEREST EXPENSE $ 18,242 $ 16,438 $ 14,993
===================================
</TABLE>
Noninterest expenses increased to $18,242,000 in 1996, up from $16,438,000 in
1995 and $14,993,000 in 1994. Overall Company growth, merit increases and
greater benefit costs were primarily responsible for the increased total
overhead costs during 1996. In addition, twelve months of expenses associated
with the Concord Village office were incurred in 1996 compared with six
months in 1995. Legal costs, the costs associated with merchant credit card
processing as well as equipment costs increased over 1995 levels. FDIC
insurance costs decreased dramatically from 1995 and 1994. In the last half
of 1995, the Bank received a rebate from the FDIC for overpayment of
insurance premiums for the months of June through September. FDIC insurance
costs were insignificant in 1996 because FDIC insurance reserves continued to
be adequately funded.
Overall Company growth, merit increases and greater benefit costs were also
primarily responsible for the increased total overhead costs during 1995. The
opening of the Concord Village office contributed to increased expenses in
the last half of 1995. Expenses associated with the money market promotion in
1995 resulted in increased advertising costs in 1995 over 1994.
Even though overhead costs have grown considerably over the years, the
Company's operating efficiency ratios have compared very favorably against
peer group standards. In 1996, the Company's efficiency ratio improved to
41.25% from 45.06% in 1995 and 46.59% in 1994.
INCOME TAXES
Income taxes for 1996 increased to $7,756,000 from $6,457,000 in 1995 and
$5,584,000 in 1994. Annual increases in income and a declining percentage of
tax-exempt income to total income have contributed to greater income tax
expense.
CAPITAL MANAGEMENT AND RESOURCES
At the end of 1996, the Company's shareholders' equity had grown to
$75,949,000, up $5.8 million from the end of 1995. Earnings of $14,096,000
provided the largest portion of the Company's capital accumulation in 1996.
At December 31, 1996, retained earnings were $51,159,000, or 67% of total
shareholders' equity. During 1996, 8,950 shares of common stock were issued
as various employee options to purchase common stock were exercised. The
amount of unrealized gain on available for sale securities, net of tax,
decreased by $3,361,000 from 1995 to 1996.
During 1996, the Company's Board of Directors authorized the 1996 Common
Stock Repurchase Plan. The maximum number of shares which may be purchased
under this Plan is 225,545, or 5% of the Company's outstanding shares on the
date of Plan adoption. The Plan will expire, unless extended, on April 17,
1997. At December 31, 1996 no stock had been purchased in connection with the
Repurchase Plan.
During 1995, the Company's equity base grew $15.4 million. The Company's
1985, 10% convertible debentures matured in 1995. Prior to maturity, all
debenture holders elected to convert their debentures into 118,800 shares of
the Company's common stock. In addition, 8,100 shares of common stock were
issued as various employee options to purchase stock were exercised.
The analysis of capital is dependent upon a number of factors including asset
quality, earnings strength, liquidity, economic conditions and combinations
thereof. Capital adequacy guidelines adopted by the Federal Reserve Board
provide two primary criteria for examining capital. The measurements include
the risk-based capital guidelines and the capital to total assets or leverage
ratio minimum requirement.
21
<PAGE> 15
Financial Review (continued)
- -------------------------------------------------------------------------------
CAPITAL MANAGEMENT AND RESOURCES-CONTINUED
The risk-based capital guidelines require the assignment of a risk-weighting
factor to all Company assets and various off-balance sheet exposures. The
risk-based capital ratio is calculated by dividing qualifying capital by the
sum of risk-weighted assets and risk-weighted off-balance sheet items.
Qualifying capital is classified into two tiers. For the Company, Tier 1
capital equals total shareholders' equity. Tier 2 capital is comprised of a
portion of the Debentures and most of the allowance for possible loan losses.
As required by the risk-based capital guidelines no asset or equity
adjustments related to Statement of Financial Accounting Standard No. 115 are
recognized for these equity analysis purposes.
The Federal Reserve 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 December 31, 1996 and 1995, the Company's Tier 1
capital was 10.20% and 10.30% of risk-weighted assets, and total risk-based
capital was 11.45% and 11.64%, respectively. Identical capital standards
apply to the Bank. As of December 31, 1996 and 1995, the Bank's Tier 1 and
total risk-weighted capital ratios were 10.29% and 11.01%, and 11.54% and
12.26%, respectively.
The minimum acceptable ratio of Tier 1 capital to total assets, or leverage
ratio, has been established by the Federal Reserve Board at 3.00%. As of
December 31, 1996 and 1995, the Company's and the Bank's leverage ratios were
7.20% and 6.70%, and 7.25% and 7.14%, respectively.
Management believes that a strong capital position provided by a mix of
equity and qualifying long-term debt is essential. Changing economic
conditions and the regulatory environment also continue to emphasize the
importance of capital strength and depth. Capital provides safety and
security for depositors, and it enhances Company value for shareholders by
providing opportunities for growth with the selective use of leverage. In a
move to enhance its capital position, the Company raised additional equity
capital through its initial public offering in 1993. Various leverage options
are also available to the Company including negotiated long-term bank
borrowings, short-term revolving lines of credit or other qualifying
long-term debt. At the end of 1996 the Company's only long-term debt
outstanding was $2,700,000 of convertible debentures.
LIQUIDITY
The Bank needs to maintain a level of liquidity which will provide a readily
available source of funds for new loans and to meet loan commitments and
other obligations on a timely basis. Historically, the Bank has been loan
driven, which means that as loans have increased above 85% of deposits, the
Bank has taken action to increase the level of core deposits. This action
generally involves the use of deposit promotions, paying premium rates
coupled with advertising to attract new customers to the Bank. Where
possible, the Bank has timed a deposit promotion to coincide with the opening
of a new office so as to achieve maximum growth in deposits. It has been the
Bank's experience that the majority of deposits raised through these
promotions have remained at the Bank after the promotion is over and so have
provided a steadily growing base of core deposits at the Bank. In addition,
the steady flow of maturing securities provides a source of liquidity.
In 1993 the Bank became a shareholder and member of the Federal Home Loan
Bank. One of the benefits of this membership is access to funds as a source
of liquidity. Other sources of liquidity include bank Federal funds lines,
securities repurchase agreements, Treasury tax and loan options and
negotiated bank lines of credit.
22
<PAGE> 16
Report of Ernst & Young LLP
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
MISSISSIPPI VALLEY BANCSHARES, INC.
We have audited the accompanying consolidated balance sheets of Mississippi
Valley Bancshares, Inc. and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholders'
equity and cash flows, for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mississippi
Valley Bancshares, Inc. and subsidiary at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
St. Louis, Missouri
January 16, 1997 /s/ Ernst & Young LLP
23
<PAGE> 17
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
December 31
--------------------------------------
1996 1995
--------------------------------------
ASSETS (dollars in thousands)
<S> <C> <C>
Cash and due from banks $ 30,951 $ 24,374
Federal funds sold 3,200
Held to maturity securities
(fair value of $59,649 and $76,882,
respectively) 58,198 73,919
Available for sale securities 229,453 253,733
Trading account securities 20 99
Loans 731,428 623,860
Less:
Unearned income 409 83
Allowance for possible loan losses 12,624 10,789
----------- ---------
Net loans 718,395 612,988
Premises and equipment 11,700 8,822
Other assets 17,060 17,913
----------- ---------
TOTAL ASSETS $ 1,065,777 $ 995,048
=========== =========
LIABILITIES
Deposits:
Non-interest bearing $ 98,726 $ 85,748
Interest bearing 819,286 800,817
----------- ---------
Total deposits 918,012 886,565
=========== =========
Securities sold under
agreements to repurchase 24,391 11,254
Other short-term borrowings 38,223 15,485
Long-term borrowings 2,700 2,700
Other liabilities 6,502 8,937
----------- ---------
TOTAL LIABILITIES 989,828 924,941
----------- ---------
SHAREHOLDERS' EQUITY
Preferred stock-par value $1
($100 liquidating value)
Authorized 100,000 shares,
issued 25,000 shares in 1995 2,500
Common stock-par value $1
Authorized 15,000,000 shares,
issued 4,516,956 in 1996 and
4,508,006 in 1995 4,517 4,508
Capital surplus 19,752 19,802
Retained earnings 51,159 39,415
Unrealized gain, net of tax, on available
for sale securities 521 3,882
----------- ---------
TOTAL SHAREHOLDERS' EQUITY 75,949 70,107
----------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,065,777 $ 995,048
=========== =========
See accompanying notes.
</TABLE>
24
<PAGE> 18
Consolidated Statements Of Income
- -------------------------------------------------------------------------------
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
1996 1995 1994
--------------------------------------------
Interest income: (dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest and fees on loans $ 60,679 $ 53,608 $ 44,404
Held to maturity securities:
Taxable 4,356 8,342 5,079
Tax-exempt 562 566 573
Available for sale securities 13,301 6,724 2,706
--------------------------------------------
18,219 15,632 8,358
Other 821 1,162 274
--------------------------------------------
TOTAL INTEREST INCOME 79,719 70,402 53,036
--------------------------------------------
Interest expense:
Deposits 38,331 35,134 22,065
Short-term borrowings 2,264 2,918 1,548
Long-term borrowings 216 243 270
--------------------------------------------
TOTAL INTEREST EXPENSE 40,811 38,295 23,883
--------------------------------------------
NET INTEREST INCOME 38,908 32,107 29,153
Provision for possible loan losses 3,875 2,560 2,680
--------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 35,033 29,547 26,473
--------------------------------------------
Other income:
Service charges 1,561 1,339 1,399
Security gains/(losses), net on:
Sales of held to maturity securities (3) (85) (44)
Sales of available for sale securities 443 819 (198)
Trading profits and commissions 1,378 905 573
Other 1,682 1,117 1,006
--------------------------------------------
5,061 4,095 2,736
--------------------------------------------
Other expenses:
Employee compensation and
other benefits 9,313 8,130 6,919
Net occupancy 1,128 1,069 911
Equipment 1,227 1,009 930
Advertising 604 720 473
FDIC insurance expense 2 770 1,301
Other 5,968 4,740 4,459
--------------------------------------------
18,242 16,438 14,993
--------------------------------------------
INCOME BEFORE INCOME TAXES 21,852 17,204 14,216
Income taxes 7,756 6,457 5,584
--------------------------------------------
NET INCOME $ 14,096 $ 10,747 $ 8,632
============================================
Average common shares and common
share equivalents outstanding 4,561,105 4,468,986 4,389,324
============================================
Earnings per common share:
Primary $ 3.04 $ 2.35 $ 1.91
Fully diluted $ 2.92 $ 2.24 $ 1.81
See accompanying notes.
</TABLE>
25
<PAGE> 19
Consolidated Statements Of Changes
In Shareholders' Equity
- -------------------------------------------------------------------------------
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Unrealized Total
Gain (Loss) Share-
Preferred Stock Common Stock 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, 1994 25,000 $ 2,500 4,358,212 $ 4,358 $ 19,119 $ 23,204 $ (144) $ 49,037
Net income 8,632 8,632
Issuance of
common stock 22,894 23 196 219
Cash dividends on:
common stock (1,192) (1,192)
preferred stock (231) (231)
Change in the
Unrealized loss,
net of tax, on
available for sale
securities (1,715) (1,715)
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 25,000 2,500 4,381,106 4,381 19,315 30,413 (1,859) 54,750
Net income 10,747 10,747
Issuance of
common stock 8,100 8 66 74
1985 debentures
converted to
common stock 118,800 119 421 540
Cash dividends on:
common stock (1,514) (1,514)
preferred stock (231) (231)
Change in the
Unrealized gain,
net of tax, on
available for sale
securities 5,741 5,741
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1995 25,000 2,500 4,508,006 4,508 19,802 39,415 3,882 70,107
Net income 14,096 14,096
Issuance of
common stock 8,950 9 75 84
Redemption of
preferred stock (25,000) (2,500) (125) (2,625)
Cash dividends on:
common stock (2,121) (2,121)
preferred stock (231) (231)
Change in the
Unrealized loss,
net of tax, on
available for sale
securities (3,361) (3,361)
---------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31,1996 4,516,956 $ 4,517 $ 19,752 $ 51,159 $ 521 $ 75,949
See accompanying notes.
</TABLE>
26
<PAGE> 20
Consolidated Statements Of Cash Flows
- -------------------------------------------------------------------------------
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------
1996 1995 1994
-------------------------------------------------
OPERATING ACTIVITIES (dollars in thousands)
<S> <C> <C> <C>
Net income $ 14,096 $ 10,747 $ 8,632
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,875 2,560 2,680
Provision for depreciation and amortization 1,069 825 1,428
Accretion of discounts and amortization
of premiums on investment securities (1,576) (226) 825
Realized investment securities (gains) and losses, net (440) (734) 242
Net decrease (increase) in trading account securities 79 651 (513)
Decrease (increase) in interest receivable 1,120 (3,180) (1,922)
Increase (decrease) in interest payable 95 738 825)
Other, net (972) (1,097) (2,025)
-------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 17,346 10,284 10,172
-------------------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of held to maturity securities 33,545 5,250 10,250
Proceeds from sales of held to maturity securities 2,011 27,995 15,007
Purchases of held to maturity securities (19,299) (31,420) (49,038)
Purchases of available for sale securities (216,971) (187,146) (39,878)
Proceeds from maturities of available for sale securities 162,000 10,000
Proceeds from sales and paydowns of
available for sale securities 75,541 34,056 13,683
Purchases of premises and equipment (3,943) (3,309) (1,613)
Net increase in loans outstanding (109,282) (61,645) (65,689)
-------------------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES (76,398) (206,219) (117,278)
-------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 31,448 227,609 112,511
Net increase (decrease) in repurchase agreements
and other short-term borrowings 35,874 (22,427) 646
Proceeds from sale of common stock 84 74 219
Redemption of preferred stock (2,625)
Cash dividends (2,352) (1,745) (1,423)
-------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 62,429 203,511 111,953
-------------------------------------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 3,377 7,576 4,847
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 27,574 19,998 15,151
-------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 30,951 $ 27,574 $ 19,998
=================================================
See accompanying notes.
</TABLE>
27
<PAGE> 21
Notes To Consolidated
Financial Statements
- -------------------------------------------------------------------------------
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARY-DECEMBER 31, 1996
NOTE A-ACCOUNTING POLICIES
Business-Mississippi Valley Bancshares, Inc. ("Company"), is a one-bank
holding company, headquartered in St. Louis, Missouri. The Company owns all
of the capital stock of Southwest Bank of St. Louis which provides
commercial, retail and correspondent banking services from five banking
offices in Missouri. At December 31, 1996, the Company had consolidated
assets of $1.1 billion. The Company, through its subsidiary, Southwest Bank,
has traditionally emphasized commercial lending and at December 31, 1996, 84%
of the loan portfolio was in commercial, industrial and commercial real
estate loans. The Company makes substantially all of its loans to customers
located within the St. Louis metropolitan area.
Basis of Presentation-The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Southwest Bank.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
The accounting and reporting policies of the Company and its subsidiary
conform to generally accepted accounting principles. The preparation of
financial statements requires management of the Company to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. While the financial statements reflect management's best
estimates and judgement, actual results could differ from estimates. The
following is a description of the Company's more significant policies.
Held to maturity securities-Held to maturity securities are stated at cost,
adjusted for amortization of premiums and accretion of discounts. Premium
amortization and discount accretion are computed by a method which
approximates the interest method. The adjusted cost of the specific security
is used to compute gains or losses on sales or redemptions. Held to maturity
securities are used for the investment of available funds in order to provide
stable earnings, to provide collateral for public funds and as a means of
diversifying risks. The Company has the intent and ability to hold these
securities to maturity. Securities holdings that are neither held to maturity
or trading are designated as available for sale.
Trading account securities-The trading account consists of securities valued
at estimated current market prices. When investment transactions are entered
into in anticipation of taking gains on short-term price movements, they are
accounted for in the trading account. Obligations resulting from trade
receivables and payables that have not yet settled are included in other
assets and other liabilities, respectively. Trading account interest income
is included in other interest income in the consolidated statements of
income. Included within other income are gains and losses on the sales of
trading account securities along with any adjustments to the market value of
such securities.
Available for sale securities-Available for sale securities are valued at
estimated market prices and consist of securities that might not be held to
maturity. Unrealized holding gains and losses are excluded from the
determination of earnings and are reported as an amount, net of tax, in a
separate component of shareholders' equity until the holding gains or losses
are realized. These securities can be held for indefinite periods of time and
may be sold in response to changes in interest rates, prepayment risks, the
need to raise funds, or as a part of the Company's overall asset-liability
strategy. Gains and losses on sales are included in other income.
Interest-Rate Risk Management-The Company sometimes uses various interest
rate related contracts, such as futures, swaps, and options, to manage its
overall interest rate risk exposure for asset-liability management purposes.
Although the notional amounts of contracts which are used as hedges are not
reflected in the financial statements, the interest differentials are
recognized on an accrual basis over the terms of the agreements as an
adjustment to interest income or interest expense of the related asset or
liability. Contracts which are not matched against a specifically designated
group of assets or liabilities are held for trading purposes and are
accounted for on a mark to market basis. Accordingly, realized and unrealized
gains and losses associated with this activity are reflected as trading
profits and commissions, a component of other income.
28
<PAGE> 22
NOTE A-ACCOUNTING POLICIES-CONTINUED
The Company's objective in managing interest-rate exposure is to maintain a
balanced mix of assets and liabilities that will mature or reprice over a
designated time horizon. The extent of 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 Company. To
achieve that objective, the Company may use a combination of various
derivative financial instruments.
Loans and Loan Impairment-Interest income on loans is accrued and credited to
income based on the principal amount outstanding. The recognition of interest
income is discontinued when, in management's judgment, the interest will not
be collectible in the normal course of business. The Company's policy is to
automatically place a loan on nonaccrual status when it becomes 90 days past
due unless it is well secured and in process of collection. As such, income
on impaired loans is normally recognized only on a cash basis. Generally,
loans are restored to accrual status when the obligation is brought current,
has performed in accordance with the contractual terms for a reasonable
period of time and the ultimate collectibility of the contractual principal
and interest is no longer in doubt.
Effective January 1, 1995, the Company adopted the accounting principles of
Financial Accounting Standards No. 114, "Accounting by Creditors For
Impairment of a Loan" and No. 118, "Accounting by Creditors For Impairment of
a Loan Income Recognition and Disclosures--an amendment of FAS 114" which
define loan impairment and set forth various methods for estimating the
portion of the allowance for possible loan losses attributable to impaired
loans. This evaluation is subjective as it requires estimates including the
fair market value amounts on impaired loans that may be susceptible to
significant change.
Allowance for possible loan losses-The allowance for possible loan losses is
increased by provisions charged to expense and reduced by loans charged off,
net of recoveries. The allowance is maintained at a level considered adequate
to provide for potential loan losses based on management's evaluation of the
anticipated impact on the loan portfolio of current economic conditions,
changes in the character and size of the portfolio, past loan loss
experience, and other pertinent factors.
Premises and equipment-Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed over the estimated useful
lives of the assets using principally the straight-line method for buildings
and a combination of straight-line and accelerated methods for furniture and
equipment.
Income taxes-The Company accounts for income taxes under the asset and
liability method. Income tax expense is reported as the total of current
income taxes payable and the net change in deferred income taxes provided for
temporary differences. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying values of assets and liabilities
for financial reporting purposes and the values used for income tax purposes.
Deferred income taxes are recorded at the statutory federal tax rate expected
to be in effect at the time that the temporary differences are expected to
reverse.
Earnings per share-Primary earnings per share is computed by dividing net
income, less dividends on preferred stock, by the weighted average number of
common shares and dilutive common share equivalents outstanding. 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.
Statement of Cash Flows-Included in the statements of cash flows are cash
equivalents which include amounts due from banks and federal funds sold.
Generally, federal funds are purchased and sold for one-day periods. The
Company paid interest on deposits and other borrowings of $40,715,000 in
1996, $37,575,000 in 1995 and $23,109,000 in 1994 and made income tax
payments of $8,288,000, $6,967,000 and $6,554,000 in 1996, 1995 and 1994,
respectively.
Reclassifications-Certain amounts presented in prior years have been
reclassified to conform to the current year presentation.
29
<PAGE> 23
Notes To Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
NOTE B-RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank or in the form of vault cash. The average amount of those
reserve balances for the years ended December 31, 1996 and 1995 were
approximately $3,342,000 and $2,758,000, respectively.
NOTE C-HELD TO MATURITY SECURITIES
The amortized cost and estimated fair values of held to maturity securities
at the end of 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
United States Treasury securities $ 50,670 $ 514 $ 51,184
PHA bonds guaranteed by the
United States Government 4,369 663 5,032
Other debt securities 3,159 274 3,433
--------------------------------------------
$ 58,198 $ 1,451 $ 59,649
============================================
<CAPTION>
December 31, 1995
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
United States Treasury securities $ 66,493 $ 1,726 $ 68,219
PHA bonds guaranteed by the
United States Government 4,268 883 5,151
Other debt securities 3,158 354 3,512
--------------------------------------------
$ 73,919 $ 2,963 $ 76,882
============================================
</TABLE>
The amortized cost and estimated fair value of held to maturity securities at
December 31, 1996 and 1995, by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1996 1995
--------------------------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 25,896 $ 26,023 $ 16,092 $ 16,211
Due after one year through
five years 25,174 25,601 50,401 52,008
Due after five years through
ten years 5,586 6,101 4,865 5,587
Due after ten years 1,542 1,924 2,561 3,076
--------------------------------------------
$ 58,198 $ 59,649 $ 73,919 $ 76,882
============================================
</TABLE>
30
<PAGE> 24
NOTE C-HELD TO MATURITY SECURITIES-CONTINUED
In 1996, proceeds from sales of held to maturity securities were $2,011,000,
which resulted in gross losses of $3,000. In 1995 and 1994, proceeds from
sales of held to maturity securities were $27,995,000 and $15,007,000
respectively. Gross losses of $85,000 and $44,000 were realized in 1995 and
1994, respectively. In all cases, sales of held to maturity securities were
within 90 days of each specific security's maturity date.
During November 1995, the Financial Accounting Standards Board issued a
Special Report which provided additional guidance on the Statement of
Financial Accounting Standard No. 115. The Report provided the Company an
opportunity to reassess the classifications of all securities held. On
December 26, 1995, the Company reclassified $63 million of CMOs and $2
million of United States Treasury securities from Held to Maturity Securities
to Available for Sale Securities. On the date of transfer the CMOs had an
unrealized loss of $591,000 and the United States Treasury securities had an
unrealized gain of $209,000. These securities were reclassified to provide
greater flexibility in asset-liability management.
NOTE D-AVAILABLE FOR SALE SECURITIES
The amortized cost and estimated fair values of available for sale securities
at the end of 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
United States Treasury
and agency securities $ 152,448 $ 1,353 $ (66) $ 153,735
Collateralized mortgage obligations 66,169 (600) 65,569
Federal Home Loan Bank stock 9,681 9,681
Other equity securities 351 117 468
--------------------------------------------
$ 228,649 $ 1,470 $ (666) $ 229,453
============================================
<CAPTION>
December 31, 1995
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
United States Treasury
and agency securities $ 168,822 $ 6,306 $ $ 175,128
Collateralized mortgage obligations 68,989 (357) 68,632
Federal Home Loan Bank stock 9,681 9,681
Other equity securities 246 46 292
--------------------------------------------
$ 247,738 $ 6,352 $ (357) $ 253,733
============================================
</TABLE>
31
<PAGE> 25
Notes To Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
NOTE D-AVAILABLE FOR SALE SECURITIES-CONTINUED
The amortized cost and estimated fair value of available for sale securities
at December 31, 1996 and 1995, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------
1996 1995
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 52,864 $ 52,902 $ 37,959 $ 38,033
Due after one year through
five years 84,389 85,755 78,179 80,902
Due after five years through
ten years 15,195 15,078 52,685 56,192
Due after ten years
Collateralized mortgage obligations 66,169 65,569 68,988 68,633
--------------------------------------------
Total debt securities 218,617 219,304 237,811 243,760
Equity securities 10,032 10,149 9,927 9,973
--------------------------------------------
Total available for sale securities $ 228,649 $ 229,453 $ 247,738 $ 253,733
============================================
</TABLE>
In 1996, proceeds from sales of available for sale securities were
$72,835,000 which resulted in gross gains of $443,000. In 1995, proceeds from
sales of available for sale securities were $32,566,000 and net gains of
$819,000 were realized thereon. In 1994, proceeds from sales of available for
sale securities were $10,295,000 which resulted in gross losses of $198,000.
Held to maturity and available for sale securities with a carrying value of
$91,517,000 and $70,810,000 at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits, short-term borrowings and for other
purposes required by law.
NOTE E-LOANS
Loans were comprised of the following:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Commercial, industrial and
marketable security loans $ 342,664 $ 289,259
Commercial loans secured
by real estate 268,767 220,417
Real estate-1-4 family 113,035 107,386
Consumer loans 6,962 6,798
----------------------
$ 731,428 $ 623,860
======================
</TABLE>
Certain directors, officers and employees of the Company and the Bank and
their associates are loan customers of the Bank. Such loans are made in the
ordinary course of business at normal credit terms, including interest rates
and collateral, prevailing at the time for comparable transactions with
unrelated parties, and do not involve more than normal risk of collection.
These loans aggregated $29,761,000 and $24,569,000 at December 31, 1996 and
1995, respectively. During 1996, $8,826,000 of new loans were made to these
persons; repayments totalled $3,634,000. Included in the aggregate balance at
December 31, 1996 are loans to two directors and their associates amounting
to $8,184,000 ($8,937,000 at December 31, 1995 for two directors and their
associates).
32
<PAGE> 26
NOTE E-LOANS-CONTINUED
At December 31, 1996 the Company had $6,534,000 of impaired loans of which
$3,934,000 had an associated specific allowance for possible loan losses of
$367,000. At December 31, 1995 the company had $4,509,000 of impaired loans
of which $1,313,000 had an associated specific allowance for possible loan
losses of $443,000. The average recorded investment in impaired loans during
the year ended December 31, 1996 and 1995, was approximately $3,703,000 and
$2,593,000, respectively. For the year ended December 31, 1996 and 1995,
gross interest income on impaired loans, which would have been recorded under
the original terms of the loans, was approximately $298,000 and $390,000,
respectively. The Company actually recorded cash basis interest income on
impaired loans of $157,000 in 1996 and $293,000 in 1995. The effect of
impaired loans was immaterial to the financial statements at December 31,
1996.
NOTE F-ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Balance at beginning of year $ 10,789 $ 9,575
Loans charged off (2,858) (1,708)
Recoveries 818 362
----------------------
Net loans charged off (2,040) (1,346)
Provision 3,875 2,560
----------------------
Balance at end of year $ 12,624 $ 10,789
----------------------
</TABLE>
NOTE G-PREMISES AND EQUIPMENT
Premises and equipment were as follows:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Land $ 3,967 $ 1,146
Buildings and improvements 6,476 6,477
Furniture and equipment 4,496 3,755
Construction in progress 326 100
----------------------
15,265 11,478
Less accumulated depreciation 3,565 2,656
----------------------
$ 11,700 $ 8,822
----------------------
</TABLE>
The Company and its subsidiary lease certain premises and equipment under
agreements which expire at various dates through 2003. The aggregate amount
of minimum rental commitments under all noncancelable leases, all of which
are considered to be operating leases, as of December 31, 1996 was
$1,179,000. Minimum rental commitments under these leases for each of the
next five years beginning in 1997 are $373,000, $354,000, $341,000, $45,000,
and $65,000. Rent expense for 1996, 1995 and 1994 amounted to $388,000,
$394,000 and $365,000, respectively.
NOTE H-DEPOSITS
Interest-bearing deposits were comprised of the following:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Interest-bearing demand
NOW accounts $ 22,823 $ 21,315
Money market accounts 308,256 382,629
Savings 22,954 21,461
Certificates of deposit,
less than $100,000 426,025 344,647
Certificates of deposit,
$100,000 or more 39,228 30,765
----------------------
$ 819,286 $ 800,817
======================
</TABLE>
33
<PAGE> 27
Notes To Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
NOTE H-DEPOSITS-CONTINUED
Certain directors, officers, and employees of the Company and the Bank are
deposit customers of the Bank. Such deposits are made in the ordinary course
of business with normal terms and interest rates prevailing at the time for
comparable transactions with unrelated parties. These deposits aggregated
$8,692,000 at December 31, 1996.
NOTE I-SHORT-TERM BORROWINGS
Short-term borrowings were comprised of the following:
<TABLE>
<CAPTION>
December 31
----------------------
1996 1995
----------------------
(dollars in thousands)
<S> <C> <C>
Securities sold under agreements
to repurchase $ 24,391 $ 11,254
Federal funds purchased 17,200 10,735
Treasury tax and loan notes 1,023 1,750
Short-term notes payable 20,000 3,000
----------------------
$ 62,614 $ 26,739
======================
</TABLE>
Securities sold under agreements to repurchase generally mature in less than
30 days. The securities underlying these agreements are held in safekeeping
at a third party. Information relating to these agreements is summarized as
follows:
<TABLE>
<CAPTION>
December 31
--------------------------------
1996 1995 1994
--------------------------------
(dollars in thousands)
--------------------------------
<S> <C> <C> <C>
Amount outstanding at year-end $ 24,391 $ 11,254 $ 40,767
Weighted average interest rate at
year-end 4.75% 4.65% 5.81%
Average balance outstanding
for the year $ 20,673 $ 39,469 $ 30,755
Average interest rate for the year 4.15% 5.74% 4.01%
Maximum amount outstanding
at any month-end during the year $ 31,793 $ 85,956 $ 55,789
</TABLE>
NOTE J-LONG-TERM BORROWINGS
In 1992, the Company issued $2,700,000 of 8% subordinated convertible
debentures due April 1, 1997. Officers, directors and significant
shareholders of the Company as a group purchased and continue to hold
approximately $1,850,000 of these debentures. Interest is payable
semi-annually. The debentures are convertible at any time prior to maturity
into shares of the Company's common stock, at a conversion rate of 440 shares
of common stock for each $5,000 of principal amount. At December 31, 1996,
237,600 shares are reserved for future issuance upon conversion of these
debentures.
NOTE K-RESTRICTED NET ASSETS
Certain restrictions exist regarding the ability of the Bank to transfer
funds to the Company in the form of cash dividends, loans or advances. At
December 31, 1996, under the most restrictive covenants and regulations,
approximately $1,777,000 was the maximum available as dividends to the
Company from the Bank without prior approval. At December 31, 1996, the
maximum amount available for transfer to the Company in the form of loans and
advances was approximately $8,253,000.
34
<PAGE> 28
NOTE L-SHAREHOLDERS' EQUITY
On December 31, 1996, the Company redeemed 25,000 shares of perpetual
preferred stock, Series 1993 at a cost of $2,625,000. The stock had a $100
liquidation preference per share and cumulative dividends at the rate of
9.25% until March 31, 2000. The stock was not convertible and had limited
voting rights except under various conditions of default with respect to
preferred dividends.
The Bank's 401(k) Retirement Savings Plan provides participating employees
the option to invest in Company common stock. As a result of employee
elections to invest all or a portion of their Plan account balances in
company stock, the Company issued 2,119 shares of common stock for $38,000 in
1994.
During 1996, the Company's Board of Directors authorized the 1996 Common
Stock Repurchase Plan. The maximum number of shares which may be purchased
under this Plan is 225,545, or 5% of the Company's outstanding shares on the
date of Plan adoption. The Plan will expire, unless extended, on April 17,
1997. At December 31, 1996 no stock had been purchased in connection with the
Repurchase Plan.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires
use of option valuation models that were not developed for use in valuing
employee stock. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
The Company's 1991 Stock Option Plan (Five-Year Options) has authorized the
grant of options to management personnel for up to 370,000 shares of the
Company's common stock. All options granted have 5 year terms and vest
ratably over their respective terms.
The effect of applying FASB Statement No. 123 to the results of operations
for the Company results in net earning and earnings per share that are not
materially different than reported.
A summary of the Company's stock option activity, and related information for
the years ended December 31 as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------- -----------------------------------
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of year 121,250 $ 19.38 55,750 $ 13.31
Granted 85,000 32.74 82,900 22.56
Exercised 8,950 9.37 8,100 9.00
Forfeited 5,000 22.50 9,300 20.25
--------- ---------
Options outstanding at
end of year 192,300 $ 25.72 121,250 $ 19.38
========= =========
Options exercisable at
end of year 44,025 $ 18.17 25,900 $ 13.13
Weighted average fair
value of options
granted during the year $ 7.96 $ 5.88
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$14.25 to $40.25. The weighted average remaining contractual life of those
options was 3.6 years.
35
<PAGE> 29
Notes To Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
NOTE M-REGULATORY CAPITAL
The Company and Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's and Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and Bank must meet specific capital guidelines
that involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital to risk-weighted
assets, and of Tier 1 capital to average assets (as defined in the
regulations). Management believes, as of December 31, 1996, that the Company and
Bank meet all capital adequacy requirements to which it is subject.
As of December 31, 1996, the Company and the Bank were both categorized as
"well capitalized" under the regulatory framework for prompt corrective
action. To be categorized as "well capitalized" the Company and Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the table. There are no conditions or events that
management believes have changed the institutions' categories.
The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------- -------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital to Risk
Weighted Assets:
Mississippi Valley
Bancshares, Inc. $ 84,716 11.45 % $ 59,180 8.00 % $ N/A N/A %
Southwest Bank
of St. Louis 85,015 11.54 58,921 8.00 73,652 10.00
Tier 1 Capital to Risk
Weighted Assets:
Mississippi Valley
Bancshares, Inc. 75,427 10.20 29,590 4.00 N/A N/A
Southwest Bank
of St. Louis 75,766 10.29 29,461 4.00 44,191 6.00
Tier 1 Capital to
Average Assets:
Mississippi Valley
Bancshares, Inc. 75,427 7.20 41,879 4.00 N/A N/A
Southwest Bank
of St. Louis 75,766 7.25 41,790 4.00 52,238 5.00
</TABLE>
36
<PAGE> 30
NOTE M-REGULATORY CAPITAL-CONTINUED
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------- -------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1995:
Total Capital to Risk
Weighted Assets:
Mississippi Valley
Bancshares, Inc. $ 74,833 11.64 % $ 51,416 8.00 % $ N/A N/A %
Southwest Bank
of St. Louis 78,565 12.26 51,255 8.00 64,069 10.00
Tier 1 Capital to Risk
Weighted Assets:
Mississippi Valley
Bancshares, Inc. 66,225 10.30 25,708 4.00 N/A N/A
Southwest Bank
of St. Louis 70,522 11.01 25,627 4.00 38,441 6.00
Tier 1 Capital to
Average Assets:
Mississippi Valley
Bancshares, Inc. 66,225 6.70 39,562 4.00 N/A N/A
Southwest Bank
of St. Louis 70,522 7.14 39,509 4.00 49,387 5.00
</TABLE>
NOTE N-PENSION PLAN
The Bank maintains a non-contributory defined benefit pension plan covering
substantially all employees. Benefits under the Plan are based upon the final
average monthly compensation reduced by primary social security benefits. The
Bank's funding policy is to contribute annually within the limits prescribed
for deduction for federal income tax purposes.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1996 1995 1994
-------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 177 $ 136 $ 158
Interest cost on projected
benefit obligations 173 150 134
Actual return on plan assets (96) (210) (20)
Net amortization and deferral (43) 82 (113)
-------------------------------
$ 211 $ 158 $ 159
===============================
</TABLE>
37
<PAGE> 31
Notes To Consolidated
Financial Statements (continued)
- --------------------------------------------------------------------------------
NOTE N-PENSION PLAN-CONTINUED
The following table sets forth the Plan's funded status and amounts
recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1995 1994
-------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Actuarial present value of:
Accumulated benefit obligation,
including vested benefits of $1,665,
$1,572 and $1,344, respectively $ 1,833 $ 1,806 $ 1,389
=====================================
Projected benefit obligation $ 2,401 $ 2,130 $ 1,906
Plan assets at fair value 1,829 2,025 1,766
-------------------------------------
Projected benefit obligation
in excess of plan assets (572) (105) (140)
Unrecognized net loss 254 90 114
Unrecognized prior service cost 100 8 9
Unrecognized net obligation
at December 31 51 61 71
-------------------------------------
Net pension asset (liability) recognized
in the balance sheet $ (167) $ 54 $ 54
=====================================
</TABLE>
Assumptions used in the above determinations were as follows:
<TABLE>
<CAPTION>
-----------------------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Discount rate in determining benefit
obligation and pension expense 7.50% 7.50% 8.00%
Rate of increase in compensation levels 4.50% 4.50% 5.00%
Expected long-term rate on assets 8.00% 8.00% 8.00%
</TABLE>
At December 31, 1996, approximately 94% of the Plan's assets were invested in
a guaranteed fixed income account with General American Life Insurance
Company. During 1995 the Bank established a non-qualified non-contributory
defined benefit pension plan covering executives with compensation in excess
of $150,000. The plan was immaterial at December 31, 1996. The Company does
not provide any post-retirement benefits other than these pension plans.
38
<PAGE> 32
NOTE O-INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1996 1995 1994
--------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Current:
Federal $ 7,443 $ 6,638 $ 5,593
State and Local 242 950 840
--------------------------------------
Total current 7,685 7,588 6,433
--------------------------------------
Deferred:
Provision for possible loan losses (642) (773) (872)
Mark-to-market security (gain), loss 596 (375)
Other, net 117 17 23
--------------------------------------
Total deferred 71 (1,131) (849)
--------------------------------------
Income tax expense $ 7,756 $ 6,457 $ 5,584
======================================
</TABLE>
The reconciliation between income taxes and the amount computed by applying
the statutory federal tax rates to income before income taxes follows:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1996 1995 1994
--------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Statutory rate applied to income
before taxes $ 7,648 $ 6,021 $ 4,976
Increase (decrease) in income taxes
resulting from
Tax-exempt income (162) (182) (196)
Amortization and write-off of
purchase accounting adjustments 235
State and local income taxes,
net of federal income tax benefit 157 481 546
Other, net 113 137 23
--------------------------------------
Total tax expense $ 7,756 $ 6,457 $ 5,584
======================================
</TABLE>
As of December 31, 1996 and 1995, the Company's deferred tax asset account
was comprised of the following:
<TABLE>
<CAPTION>
December 31
-----------------------
1996 1995
-----------------------
(dollars in thousands)
<S> <C> <C>
Deferred tax liabilities:
Pension expense $ (53) $ 14
Unrealized net gains on
available for sale securities 3 1,261
Accretion of security discounts 349 169
-----------------------
Total deferred tax liabilities 299 1,444
-----------------------
Deferred tax assets:
Provision for possible loan losses (4,429) (3,787)
Unrealized net losses on available for
sale securities
Other, net (49) (53)
-----------------------
Total deferred tax assets (4,478) (3,840)
-----------------------
Net deferred tax assets $ (4,179) $ (2,396)
=======================
</TABLE>
39
<PAGE> 33
Notes To Consolidated
Financial Statements (continued)
- --------------------------------------------------------------------------------
NOTE O-INCOME TAXES-CONTINUED
Included in income taxes were $154,000, $257,000 and $(85,000) for the years
ended December 31, 1996, 1995 and 1994, respectively, related to realized net
gains and (losses) on held to maturity securities and available for sale
securities.
NOTE P-FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based upon a variety of
methods and assumptions used by the Company in estimating its fair value
disclosures. The carrying value of cash, due from banks, Federal funds sold,
available for sale securities and trading account securities approximate
those assets' fair values. Fair values for held to maturity securities are
based on quoted market prices. For variable rate loans that reprice with
market rates of interest, fair values are based on carrying values. The fair
values for all other loans (i.e. fixed rate loans) are estimated using
discounted cash flow analyses and using interest rates currently offered for
loans with similar terms to borrowers of similar credit quality. The fair
value of accrued interest approximates its carrying amount. The fair values
of non-performing loans are based on estimates of collectibility in
conjunction with the Bank's historical loss experience.
The fair values disclosed for demand deposits (e.g., interest and noninterest
bearing checking, passbook savings and money market accounts) are, by
definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amounts). Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits. The carrying amounts
of Federal funds purchased, borrowings under repurchase agreements and other
short-term borrowings approximate their fair values. The fair value of
long-term borrowings are estimated using discounted cash flow analyses, based
on the Company's borrowing rates for similar types of borrowing arrangements.
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
-------------------------
Carrying
amount Fair value
-------------------------
(dollars in thousands)
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 30,951 $ 30,951
Held to maturity securities 58,198 59,649
Available for sale securities 229,453 229,453
Trading account securities 20 20
Loans 731,019 730,332
Financial liabilities:
Deposits 918,012 919,654
Short-term borrowings 62,614 62,614
Long-term borrowings 2,700 2,700
</TABLE>
40
<PAGE> 34
NOTE P-FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS-CONTINUED
<TABLE>
<CAPTION>
December 31, 1995
-------------------------
Carrying
amount Fair value
-------------------------
(dollars in thousands)
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 27,574 $ 27,574
Held to maturity securities 73,919 76,882
Available for sale securities 253,733 253,733
Trading account securities 99 99
Loans 623,777 624,838
Financial liabilities:
Deposits 886,565 887,918
Short-term borrowings 26,739 26,739
Long-term borrowings 2,700 2,700
</TABLE>
NOTE Q-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company makes use of a number of
different financial instruments to help meet the financial needs of its
customers. Certain of these transactions, in accordance with generally
accepted accounting principles, are not reflected on the balance sheet and
are referred to as off-balance sheet instruments. These transactions and
activities include commitments to extend lines of credit and standby and
commercial letters of credit. The following table provides a summary of the
Company's off-balance sheet financial instruments at December 31, 1996 and
1995.
<TABLE>
<CAPTION>
December 31
-------------------------
1996 1995
-------------------------
(dollars in thousands)
<S> <C> <C>
Commitments to extend credit $ 232,608 $ 170,976
Standby letters of credit 9,728 12,204
Commercial letters of credit 1,568 1,177
-------------------------
$ 243,904 $ 184,357
=========================
</TABLE>
A loan commitment is a binding contract to lend up to a maximum amount for a
specified period of time provided there is no violation of any financial,
economic or other terms of the contract. A standby letter of credit obligates
the Company to honor a financial commitment by issuing a guarantee to a third
party should the Company's customer fail to perform. Many loan commitments
and most standby letters of credit expire unfunded, and therefore total
commitments do not represent future funding obligations of the Company. Loan
commitments and letters of credit are made under normal credit terms,
including interest rates and collateral prevailing at the time, and usually
require the payment of a fee by the customer. Commercial letters of credit
are commitments issued to finance the movement of goods between buyers and
sellers normally transacting business in international markets.
The Company enters into off-balance sheet transactions primarily as part of
its asset-liability management strategy to manage interest-rate risk. These
transactions involve the exchange of interest payments based on a notional
amount. The notional amounts of these transactions express the volume of
transactions and are not an appropriate indicator of the off-balance sheet
market risk or credit risk. The credit risk associated with these
transactions arises from the counterparties' failure to meet the terms of the
agreements and is limited to the fair value of contracts in a gain position.
The Company manages this risk by maintaining positions with highly rated
counterparties. The credit risk exposure of the Company for these interest
rate contracts at December 31, 1996 was approximately $330,000.
41
<PAGE> 35
Notes To Consolidated
Financial Statements (continued)
NOTE Q-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK-CONTINUED
The Bank enters into interest rate swap transactions primarily as part of its
asset-liability management strategy to manage interest-rate risk. These
transactions involve the exchange of interest payments based on a notional
amount. Although the notional amounts of these transactions are not reflected
in the financial statements, the interest differentials are recognized on an
accrual basis over the terms of the agreements as an adjustment to the
interest income of the related asset. The credit risk associated with
interest rate swaps arises from the counterparties' failure to meet the terms
of the agreements. The Bank manages this risk by maintaining positions with
highly rated counterparties.
During the first quarter of 1996, the Bank purchased interest rate swap
contracts with notional amounts totalling $145 million, based on management's
judgment that interest rates would fall no further. 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.
All of these swap contracts were sold at various dates in the fourth quarter
of 1996 resulting in a net pre-tax gain of $1,354,000. This gain is being
amortized over the contractual period remaining for the respective swap
contracts. The last contractual maturity is January 2000. Net interest income
was increased by $248,000 in 1996 as a result of these swap contracts.
During the first quarter of 1995, the Bank purchased a two-year interest-rate
floor contract to change the interest rate characteristics on its floating
rate loan portfolio in anticipation of a declining interest rate environment.
For the fixed premium payment of $285,000 the contract required the seller to
pay the Bank at specified future dates the amount, if any, by which the 90
day LIBOR rate falls below the fixed floor rate, applied to a notional amount
of $50 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 of
the yield over the period covered by the contract. In January 1996, the Bank
sold this floor contract which resulted in a pre-tax gain of $821,000. This
gain was deferred and is being amortized over the remaining life of the
contract. This transaction increased net interest income by $405,000 in 1996
and had in immaterial effect on income in 1995.
In the fourth quarter of 1996, management began to reposition the
asset-liability sensitivity by moving to a somewhat liability sensitive
position in anticipation of a declining interest rate environment. As stated
above, the interest rate swaps purchased in the first quarter were sold. In
addition, on December 30, 1996, a $50 million notional amount interest rate
floor contract was purchased, for a premium of $345,000, to protect against
the possibility of a decrease in interest rates. The contract requires the
seller to pay the Bank at specified future dates the amount, if any, by which
the specified market interest rate falls below the fixed floor rate, applied
to the notional amount of $50 million. This contract is reported at fair
value and changes in its fair value are reflected in trading revenues. It had
an immaterial effect in the income statement for the period ended December
31, 1996.
42
<PAGE> 36
NOTE R-PARENT COMPANY CONDENSED FINANCIAL INFORMATION
Following are the condensed financial statements of Mississippi Valley
Bancshares, Inc. (Parent Company) for the periods indicated.
<TABLE>
<CAPTION>
BALANCE SHEETS December 31
-----------------------
1996 1995
-----------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
Cash and due from subsidiary $ 94 $ 176
Available for sale securities 469 292
Investment in subsidiary 75,472 73,537
Bank premises 2,331 1,579
Other assets 347 325
-----------------------
TOTAL ASSETS $ 78,713 $ 75,909
=======================
LIABILITIES
Long-term debt $ 2,700 $ 2,700
Short-term debt 3,000
Other liabilities 64 102
-----------------------
TOTAL LIABILITIES 2,764 5,802
SHAREHOLDERS' EQUITY 75,949 70,107
-----------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 78,713 $ 75,909
=======================
</TABLE>
43
<PAGE> 37
Notes To Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
Note R-Parent Company Condensed Financial Information-continued
<TABLE>
<CAPTION>
STATEMENTS OF INCOME Year Ended December 31
------------------------------------------
1996 1995 1994
------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
INCOME
Dividends from subsidiary $ 8,929 $ 2,657 $ 477
Rent income 409 409 409
Other 111 120 144
------------------------------------------
TOTAL INCOME 9,449 3,186 1,030
EXPENSE
Interest 224 347 270
Other 411 357 1,018
------------------------------------------
TOTAL EXPENSE 635 704 1,288
Income (loss) before tax benefit and
equity in undistributed income
of subsidiary 8,814 2,482 (258)
Income tax benefit (37) (58) (19)
------------------------------------------
Income (loss) before equity in
undistributed income of subsidiary 8,851 2,540 (239)
Equity in undistributed income
of subsidiary 5,245 8,207 8,871
------------------------------------------
Net income $ 14,096 $ 10,747 $ 8,632
==========================================
<CAPTION>
Year Ended December 31
------------------------------------------
STATEMENTS OF CASH FLOWS 1996 1995 1994
------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 14,096 $ 10,747 $ 8,632
Equity in undistributed
income of subsidiary (5,245) (8,207) (8,871)
Realized securities (gains)
and losses, net 8
Other, net (935) (51) 626
------------------------------------------
Net cash provided by
operating activities 7,916 2,489 395
INVESTING ACTIVITIES
Payments for investment in subsidiary (105) (4,500) (950)
Purchase of available for sale securities (257)
Proceeds from sales of held
to maturity securities 27
------------------------------------------
Net cash used in investing activities (105) (4,500) (1,180)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 5,000
Repayments of short-term borrowings (3,000) (2,000)
Proceeds from sale of common stock 84 74 219
Cash dividends paid (2,352) (1,745) (1,423)
Redemption of preferred stock (2,625)
------------------------------------------
Net cash provided by (used in)
financing activities (7,893) 1,329 (1,204)
------------------------------------------
Decrease in cash (82) (682) (1,989)
Cash at beginning of year 176 858 2,847
------------------------------------------
Cash at end of year $ 94 $ 176 $ 858
==========================================
</TABLE>
44
<PAGE> 38
Note S-Summary Of quarterly Financial Information (Unaudited)
The following is a summary of quarterly operating results for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $19,065 $19,494 $20,534 $20,626
Interest expense 9,652 9,851 10,599 10,709
-----------------------------------------------------------
Net interest income 9,413 9,643 9,935 9,917
Provision for possible loan losses 1,100 850 950 975
Security gains (losses) 309 132 (1)
Other income 1,024 1,082 1,131 1,384
Other expense 4,448 4,595 4,491 4,708
Income taxes 1,935 1,878 1,958 1,985
-----------------------------------------------------------
Net income $ 3,263 $ 3,534 $ 3,667 $ 3,632
===========================================================
Net income per share:
Primary $.71 $.76 $.79 $.78
Fully diluted .68 .73 .76 .75
<CAPTION>
1995
-----------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-----------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $15,954 $16,794 $18,154 $19,500
Interest expense 7,825 8,740 10,589 11,141
-----------------------------------------------------------
Net interest income 8,129 8,054 7,565 8,359
Provision for possible loan losses 800 650 560 550
Security gains (losses) (238) 147 844 (19)
Other income 799 823 876 863
Other expense 3,994 4,248 3,974 4,222
Income taxes 1,453 1,504 1,817 1,683
-----------------------------------------------------------
Net income $ 2,443 $ 2,622 $ 2,934 $ 2,748
===========================================================
Net income per share:
Primary $.54 $.59 $.63 $.59
Fully diluted .51 .55 .61 .57
</TABLE>
45
<PAGE> 39
Consolidating Balance Sheet
- --------------------------------------------------------------------------------
Mississippi Valley Bancshares, Inc. And Subsidiary
December 31,1996
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Mississippi
Valley
Southwest Bancshares, Adjustments
Bank of Inc.-Parent and
St. Louis Company Only Eliminations Consolidated
-----------------------------------------------------------------
ASSETS (dollars in thousands)
<S> <C> <C> <C> <C>
Cash and due from banks $ 30,951 $ 94 $ (94) $ 30,951
Federal funds sold
Held to maturity securities 58,952 (754) 58,198
Available for sale securities 228,984 469 229,453
Trading account securities 20 20
Loans 731,428 731,428
Less:
Unearned income 409 409
Allowance for possible
loan losses 12,624 12,624
-----------------------------------------------------------------
Net loans 718,395 718,395
Premises and equipment 9,369 2,331 11,700
Other assets 16,713 347 17,060
Investment in subsidiary 75,472 (75,472)
-----------------------------------------------------------------
TOTAL ASSETS $ 1,063,384 $ 78,713 $(76,320) $ 1,065,777
=================================================================
LIABILITIES
Deposits:
Noninterest bearing $ 98,766 $ $ (40) $ 98,726
Interest bearing 819,340 (54) 819,286
-----------------------------------------------------------------
Total deposits 918,106 (94) 918,012
Securities sold under
agreements to repurchase 24,391 24,391
Other short-term borrowings 38,223 38,223
Long-term borrowings 2,700 2,700
Other liabilities 6,451 64 (13) 6,502
-----------------------------------------------------------------
TOTAL LIABILITIES 987,171 2,764 (107) 989,828
SHAREHOLDERS' EQUITY 76,213 75,949 (76,213) 75,949
-----------------------------------------------------------------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $ 1,063,384 $ 78,713 $(76,320) $ 1,065,777
-----------------------------------------------------------------
</TABLE>
46
<PAGE> 40
Consolidating Statement Of Income
- -------------------------------------------------------------------------------
Mississippi Valley Bancshares, Inc. And Subsidiary
Year Ended December 31, 1996
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Mississippi
Valley
Southwest Bancshares, Adjustments
Bank of Inc.-Parent and
St. Louis Company Only Eliminations Consolidated
-----------------------------------------------------------------
Interest income: (dollars in thousands)
<S> <C> <C> <C> <C>
Interest and fees on loans $ 60,679 $ $ $ 60,679
Held to maturity securities:
Taxable 4,356 4,356
Tax-exempt 461 101 562
Available for sale securities 13,296 5 13,301
-------------------------------------------------------------
18,113 106 18,219
Other 821 6 (6) 821
-------------------------------------------------------------
TOTAL INTEREST INCOME 79,613 112 (6) 79,719
Interest expense:
Deposits 38,337 (6) 38,331
Short-term borrowings 2,255 8 1 2,264
Long-term borrowings 216 216
-------------------------------------------------------------
TOTAL INTEREST EXPENSE 40,592 224 (5) 40,811
-------------------------------------------------------------
NET INTEREST INCOME 39,021 (112) (1) 38,908
Provision for possible loan losses 3,875 3,875
NET INTEREST INCOME
AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 35,146 (112) (1) 35,033
-------------------------------------------------------------
Other income:
Service charges 1,561 1,561
Security gains/(losses), net 440 440
Trading profits and commissions 1,379 (1) 1,378
Other 1,676 9,337 (9,331) 1,682
-------------------------------------------------------------
5,056 9,337 (9,332) 5,061
Other expenses:
Employee compensation
and other benefits 9,313 9,313
Net occupancy 1,462 74 (408) 1,128
Equipment 1,227 1,227
Advertising 604 604
FDIC insurance expense 2 2
Other 5,627 337 4 5,968
-------------------------------------------------------------
18,235 411 (404) 18,242
INCOME BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED
INCOME OF SUBSIDIARY 21,967 8,814 (8,929) 21,852
Income tax expense (benefit) 7,793 (37) 7,756
-------------------------------------------------------------
INCOME BEFORE EQUITY
IN UNDISTRIBUTED
INCOME OF SUBSIDIARY 14,174 8,851 (8,929) 14,096
Equity in undistributed
income of subsidiary 5,245 (5,245)
-------------------------------------------------------------
NET INCOME $ 14,174 $ 14,096 $(14,174) $ 14,096
-------------------------------------------------------------
</TABLE>
47
<PAGE> 41
Mississippi Valley Bancshares, Inc.
Board Of Directors
- -------------------------------------------------------------------------------
JOHN T. BAUMSTARK
President-Archway Sales Inc.
Age 52
ANDREW N. BAUR
Chairman-Mississippi Valley
Bancshares, Inc.Chairman-Southwest Bank
of St. Louis
Age 52
LINN H. BEALKE
President-Mississippi Valley
Bancshares, Inc.
Vice Chairman-Southwest Bank
of St. Louis
Age 52
ALICE C. BEHAN
Private Investor
Age 51
WILLIAM H. T. BUSH
Chairman-Bush-O'Donnell
& Co., Inc.
Age 58
FRANKLIN J. CORNWELL, JR.
Private Investor
Age 55
THEODORE P. DESLOGE, JR.
President-Bloom & Desloge
Enterprises, Inc.
Age 57
LOUIS N. GOLDRING
Vice Chairman-Franklin Equity
Leasing Company
Age 55
RICHARD T. GROTE
President-Grote Financial Futures
Chairman-American Medical
Claims, Inc.
Age 51
FREDERICK O. HANSER
Chairman, St. Louis Cardinals, L.P.
Age 54
DONNA D. LAMBERT
Private Investor
Age 57
MICHAEL D. LATTA
Chairman and Chief Executive
Officer-Dunmon, Inc.
Age 55
MONT S. LEVY
Registered Investment Advisor
Principal-Buckingham Asset
Management
Age 45
LEWIS B. SHEPLEY
Executive Vice President and Chief
Financial Officer-Reliable Life
Insurance Company
Age 57
- -------------------------------------------------------------------------------
MVBI AUDIT COMMITTEE
(Representing MVBI)
John T. Baumstark
William H.T. Bush
Franklin J. Cornwell, Jr.
Donna D. Lambert
Michael D. Latta
Mont S. Levy
(Representing SWB)
John H. Culling
G. Fred Heimburger
William F. Holekamp
Charles W. Hrebec, Jr.
Charles A. Zone
MVBI EXECUTIVE COMMITTEE
Andrew N. Baur
Linn H. Bealke
Louis N. Goldring
Richard T. Grote
Frederick O. Hanser
MVBI COMPENSATION AND
EMPLOYEE BENEFITS COMMITTEE
(Representing MVBI)
Alice C. Behan
William H.T. Bush
Franklin J. Cornwell, Jr.
Theodore P. Desloge, Jr.
Louis N. Goldring
Lewis B. Shepley
(Representing SWB)
Zolt Rumy
Southwest Bank Of St. Louis
Board Of Directors
- -------------------------------------------------------------------------------
JOHN T. BAUMSTARK
President-Archway Sales Inc.
ANDREW N. BAUR
Chairman-Mississippi Valley
Bancshares, Inc.
Chairman-Southwest Bank
of St. Louis
LINN H. BEALKE
President-Mississippi Valley
Bancshares, Inc.
Vice Chairman-Southwest Bank
of St. Louis
EDWARD C. BERRA
President-Southwest Bank
of St. Louis
DONALD L. BOLAZINA
Partner, Business Matters
WILLIAM H. T. BUSH
Chairman-Bush-O'Donnell
& Co., Inc.
JOHN H. CULLING
Chairman-The Carondelet
Corporation
FRANCIS C. CUNETTO
President-Cunetto House of Pasta
ROBERT E. FLYNN, III
President-Berry Grant Company
G. FRED HEIMBURGER
Chairman-Heimburger, Inc.
WILLIAM F. HOLEKAMP
Corporate Executive Vice
President-Enterprise Rent-A
Car/Leasing Co.
CHARLES W. HREBEC, JR.
President-Colt Industries, Inc.
HENRY O. JOHNSTON
President-Sante Travel Agency, Inc.
ZOLT RUMY
President, Zoltek Corporation
ALMIRA BALDWIN SANT
Private Investor
CHARLES A. ZONE
President-C.J. Zone
Manufacturing Co., Inc.
Advisory Director
- ---------------------------
WILLIAM J. FRESCHI
Retired Food Executive
48
<PAGE> 42
Mississippi Valley Bancshares, Inc.
- ------------------------------------------------------------------------------
Executive Officers
Andrew N. Baur, Chairman
Linn H. Bealke, President
Paul M. Strieker, Executive Vice President, Controller and Chief Financial
Officer
Carol B. Dolenz, Secretary/Treasurer
Stock Listing
NASDAQ-NMS symbol: MVBI Appears as MissVly or Ms ValyBcsh in newspaper stock
tables.
Transfer Agent
Boatmen's Trust Company
510 Locust Street
St. Louis, MO 63101
(314) 466-1357
Dividend Information
Dividends are normally paid the first day of April, July, October and
January.
Annual Meeting
The Annual Meeting of Shareholders will be at 9:00 a.m., Wednesday, April 16,
1997, at the St. Louis Science Center, in the Meeting Room ABC, 5050 Oakland
Avenue, St. Louis, Missouri 63110.
Investor Relations and Form 10-K
Analysts, investors and others seeking financial data about Mississippi
Valley Bancshares, Inc. are invited to contact:
Paul M. Strieker
Executive Vice President, Controller and Chief Financial Officer
Mississippi Valley Bancshares, Inc.
700 Corporate Park Drive
St. Louis, MO 63105
A copy of the Company's Form 10-K (Annual Report, without exhibits) filed
with the Securities and Exchange Commission may be obtained without charge
upon written request.
49
<PAGE> 1
Subsidiaries of the Company
---------------------------
STATE OF
SUBSIDIARIES ORGANIZATION
------------ ------------
Southwest Bank of St. Louis Missouri
Louisville Realty Corporation Missouri
RE Holding Company A Missouri
RE Holding Company B Missouri
RE Holding Company C Missouri
SWB Real Estate Investment Trust Missouri
<PAGE> 1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
listed below of our report dated January 16, 1997, with respect to the
consolidated financial statements of Mississippi Valley Bancshares, Inc.,
incorporated by reference in the Annual Report (Form 10-K) for the year
ended December 31, 1996.
Form No.
- ---- ---
S-8 33-70208 Mississippi Valley Bancshares, Inc. 1988 Stock Option
Plan
S-8 333-21083 Mississippi Valley Bancshares, Inc. 1991 Stock Option
Plan
S-8 333-00898 401(k) Retirement Savings Plan of Mississippi Valley
Bancshares, Inc.
February 18, 1997 /s/ Ernst & Young LLP
St. Louis, Missouri
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<FISCAL-YEAR-END> DEC-31-1996
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