<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission file number 0-22008
------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1336298
- ------------------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Corporate Park Drive, St. Louis, Missouri 63105
- ------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 268-2580
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
INDICATE THE NUMBER OF SHARES ISSUED AND OUTSTANDING OF EACH OF THE
ISSUER'S CLASSES OF COMMON STOCK, AS OF NOVEMBER 6, 1998:
Common Stock, $1.00 par value 9,488,112
----------------------------- ----------------------
Class Number of Shares
<PAGE> 2
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
----------------------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of
Income -- Quarters Ended September 30, 1998
and September 30, 1997 and Nine Months Ended
September 30, 1998 and September 30, 1997 4
Consolidated Statements of Changes in
Shareholders' Equity -- Nine Months Ended
September 30, 1998 and September 30, 1997 5
Condensed Consolidated Statements of
Cash Flows -- Nine Months Ended
September 30, 1998 and September 30, 1997 6
Notes to Condensed Consolidated
Financial Statements 7
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8-17
PART II. OTHER INFORMATION
----------------------------------
ITEM 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
- ---------
EXHIBIT INDEX 20
- -------------
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
- -----------------------------
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
September 30, December 31,
1998 1997
(Derived from
(Unaudited) Audited Statements)
------------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 22,704 $ 28,532
Federal funds sold 11,000 18,910
Held to maturity securities
(fair value of $44,778 and
$59,748, respectively) 42,777 58,148
Available for sale securities 349,190 317,768
Trading account securities 1,251
Loans, net of
unearned income 895,732 847,091
Allowance for possible loan losses 16,455 14,892
---------- ----------
Net loans 879,277 832,199
Premises and equipment 16,834 13,482
Other assets 24,160 29,628
---------- ----------
TOTAL ASSETS $1,345,942 $1,299,918
========== ==========
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 102,214 $ 109,949
Interest bearing 1,050,604 1,016,613
---------- ----------
Total deposits 1,152,818 1,126,562
Securities sold under agreements
to repurchase 33,222 32,700
Other short-term borrowings 23,750 21,495
Guaranteed preferred beneficial interests
in subordinated debentures 14,950 14,950
Other liabilities 9,529 11,104
---------- ----------
TOTAL LIABILITIES 1,234,269 1,206,811
---------- ----------
SHAREHOLDERS' EQUITY
- --------------------
Common stock-par value $1
Authorized 15,000,000 shares,
issued and outstanding 9,551,212
in 1998 and 9,519,212 in 1997 9,551 9,519
Capital surplus 16,283 17,561
Retained earnings 75,271 63,541
Unrealized gain on available
for sale securities, net of tax 10,568 2,486
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 111,673 93,107
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,345,942 $1,299,918
========== ==========
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(UNAUDITED)
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $20,172 $19,329 $58,791 $53,874
Held to maturity securities:
Taxable 572 631 1,975 2,213
Tax-exempt 144 136 447 417
Available for sale securities 4,767 4,911 14,297 11,529
Other 512 592 1,280 1,167
------- ------- ------- -------
TOTAL INTEREST INCOME 26,167 25,599 76,790 69,200
------- ------- ------- -------
Interest expense:
Deposits 12,551 14,196 37,078 35,395
Short-term borrowings 728 505 2,504 2,130
Long-term borrowings 271 277 838 694
------- ------- ------- -------
TOTAL INTEREST EXPENSE 13,550 14,978 40,420 38,219
------- ------- ------- -------
NET INTEREST INCOME 12,617 10,621 36,370 30,981
Provision for possible loan losses 900 1,100 2,800 3,200
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 11,717 9,521 33,570 27,781
------- ------- ------- -------
Other income:
Service charges 478 477 1,424 1,388
Securities gains/(losses), net on:
Sales of held to maturity securities
Sales of available for sale securities 681 88
Trading profits and commissions 527 416 1,135 781
Other 788 578 2,253 1,761
------- ------- ------- -------
1,793 1,471 5,493 4,018
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 2,864 2,712 8,760 7,633
Net occupancy 311 331 987 940
Equipment 333 307 983 903
Advertising 274 240 760 618
Other 1,970 1,512 5,621 5,128
------- ------- ------- -------
5,752 5,102 17,111 15,222
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 7,758 5,890 21,952 16,577
Income taxes 2,823 2,113 7,927 5,960
------- ------- ------- -------
NET INCOME $ 4,935 $ 3,777 $14,025 $10,617
======= ======= ======= =======
Earnings per common share:
Basic $ .52 $ .40 $ 1.47 $ 1.14
Diluted $ .50 $ .39 $ 1.42 $ 1.10
See accompanying notes.
</TABLE>
4
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCHSHARES, INC.
------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
(UNAUDITED)
<CAPTION>
Unrealized Gain, Total
Common Stock (Loss) on Share-
------------ Capital Retained Available for holders' Comprehensive
Shares Amount Surplus Earnings Sale Securities Equity Income
--------- -------- --------- ---------- ----------------- -------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 9,033,912 $9,034 $15,235 $51,159 $ 521 $ 75,949
Net income 10,617 10,617 $10,617
Issuance of common
stock 6,600 7 65 72
1992 Debentures converted
to common stock 475,200 475 2,225 2,700
Cash dividends on:
common stock (1,964) (1,964)
Other comprehensive income
(loss), net of tax
Unrealized gain,
on available
for sale securities 504 504 504
--------- ------ ------- ------- ------- -------- -------
BALANCE AT SEPTEMBER 30, 1997 9,515,712 $9,516 $17,525 $59,812 $ 1,025 $ 87,878
========= ====== ======= ======= ======= ========
Comprehensive Income $11,121
=======
BALANCE AT JANUARY 1, 1998 9,519,212 $9,519 $17,561 $63,541 $ 2,486 $ 93,107
Net income 14,025 14,025 $14,025
Issuance of common
stock 108,300 108 1,268 1,376
Treasury stock purchased (76,300) (76) (2,546) (2,622)
Cash dividends on:
common stock (2,295) (2,295)
Other comprehensive income,
net of tax
Unrealized gain,
on available
for sale securities 8,082 8,082 8,082
--------- ------ ------- ------- ------- -------- -------
BALANCE AT SEPTEMBER 30, 1998 9,551,212 $9,551 $16,283 $75,271 $10,568 $111,673
========= ====== ======= ======= ======= ========
Comprehensive Income $22,107
=======
See accompanying notes.
</TABLE>
5
<PAGE> 6
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1998 1997
--------- ---------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 14,025 $ 10,617
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 2,800 3,200
Provision for depreciation and amortization 1,326 774
Accretion of discounts and amortization of
premiums on securities 51 (2,594)
Realized securities (gains) and losses, net (681) (88)
Net (increase) decrease in trading account securities 1,251 (480)
Net increase in interest receivable (11) (1,364)
Increase (decrease) in interest payable (84) 782
Other, net (907) (3,623)
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 17,770 7,224
--------- ---------
INVESTING ACTIVITIES
- --------------------
Proceeds from maturities of held to maturity securities 15,525 20,000
Purchases of held to maturity securities (2,033)
Purchases of available for sale securities (166,633) (361,414)
Proceeds from sales, paydowns and maturities of
available for sale securities 148,121 273,741
Purchases of premises and equipment (4,136) (932)
Increase in loans outstanding, net (49,877) (136,204)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (57,000) (206,842)
--------- ---------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 26,256 256,659
Net increase (decrease) in repurchase agreements
and other short-term borrowings 2,777 (16,803)
Proceeds from sale of common stock 1,376 72
Purchase of treasury stock (2,622)
Proceeds from sale of subordinated debentures 14,950
Cash dividends (2,295) (1,964)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 25,492 252,914
--------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (13,738) 53,296
Cash and cash equivalents at beginning of period 47,442 30,951
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 33,704 $ 84,247
========= =========
See accompanying notes.
</TABLE>
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. The condensed consolidated financial statements include the accounts of
Mississippi Valley Bancshares, Inc. (the "Company") and its wholly-owned
subsidiaries, Southwest Bank of St. Louis, Southwest Bank of Belleville (the
"Banks") and MVBI Capital Trust. Significant intercompany accounts and
transactions have been eliminated in consolidation. The results of operations
for the interim periods shown in this report are not necessarily indicative
of results to be expected for the entire year. In the opinion of management,
the information contained herein reflects all adjustments necessary to make
the results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
2. In 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income, that established standards for the
------------------------------
reporting and display of comprehensive income and its components. This
Statement requires that an enterprise (a) classify items of other comprehensive
income by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately in the equity section of the
balance sheet. This Statement is effective for 1998 and requires
reclassification of financial statements for prior periods as well. Following is
a summary of other comprehensive income components and related income tax
effects:
<TABLE>
For the Nine Months Ended September 30, 1998
--------------------------------------------
<CAPTION>
Before-Tax Tax Net-of-Tax
Amount Expense Amount
---------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized gains on available
for sale securities $13,115 $4,590 $8,525
Less: reclassification adjustment
for gains realized in net
income 681 238 443
------- ------ ------
Net unrealized gains 12,434 4,352 8,082
------- ------ ------
Other comprehensive income $12,434 $4,352 $8,082
======= ====== ======
For the Nine Months Ended September 30, 1997
--------------------------------------------
<CAPTION>
Tax
Before-Tax Expense Net-of-Tax
Amount (Benefit) Amount
---------- --------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized gains (losses) on
available for sale securities $863 $302 $561
Less: reclassification adjustment
for gains realized in net
income 88 31 57
---- ---- ----
Net unrealized loss 775 271 504
---- ---- ----
Other comprehensive
income (loss) $775 $271 $504
==== ==== ====
</TABLE>
7
<PAGE> 8
ITEM 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
-----------------------------------------------
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1997.
SUMMARY OF EARNINGS
- -------------------
Consolidated net income for the third quarter of 1998 was $4,935,000,
up $1,158,000 or 30.7% from the $3,777,000 earned during the third quarter of
1997. On a per share basis, net income was $.50, up from $.39 in the same
period of the prior year. Greater net income was primarily a result of the
increased net interest income. Increased noninterest income was offset by
greater levels of noninterest expenses.
Net income for the first nine months of 1998 was $14,025,000, up
$3,408,000 or 32.1% from $10,617,000 earned for the first nine months of
1997. On a per share basis, net income was $1.42, up from $1.10 in the first
nine months of 1997. 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
$2,800,000, down from $3,200,000 for the first nine months of 1997 because
overall loan growth for 1998 was down from the level of growth in the same
period of 1997. Net loan charge-offs for the period have also been below 1997
levels. Noninterest income for the first nine months of 1998 was $5,493,000,
up from $4,018,000 in the same period in 1997. Increased gains on sales of
available for sale securities and greater net trading profits and commissions
were primarily responsible for the increased noninterest income. Total
noninterest expenses were $17,111,000 for the first nine months of 1998, up
from $15,222,000 for the same period in 1997 due primarily to increased
salaries and benefits. Overall company growth and the associated increase in
general overhead costs also contributed to increased noninterest expenses.
For the quarter and nine months ended September 30, 1998, the Company's
return on average assets was 1.49% and 1.43%, up from 1.16% and 1.22% in the
same periods in 1997, respectively. At September 30, 1998, total equity
capital was $111.7 million, up from $87.9 million at September 30, 1997 and
$93.1 million at December 31, 1997. The Company's return on average equity
was 18.90% and 18.66% for the quarter and nine months ended September 30,
1998, up from 17.47% and 17.21% for the same periods in 1997, respectively.
8
<PAGE> 9
NET INTEREST INCOME
- -------------------
The following discussion and tables set forth the composition of
average interest earning assets and interest bearing liabilities along with
accompanying interest income, expense, yields and rates, on a tax equivalent
basis. The tax equivalent adjustments were approximately $63,000, $60,000,
$199,000 and $185,000 for the three months and nine months ended September
30, 1998 and 1997, respectively. Net interest income on a tax equivalent
basis, divided by average interest earning assets, represents the Company's
net interest margin.
Three months ended September 30, 1998 and 1997
- ----------------------------------------------
Total tax equivalent interest income for the three months ended
September 30, 1998 was $26,230,000, up $571,000 as compared to the same
period in 1997. The $43 million increase in the volume of average loans
outstanding was primarily responsible for the increase in interest earnings
for the third quarter of 1998. Overall asset yields were 8.14% in the three
months ended September 30, 1998, up only 5 basis points from the 8.09% earned
in the same period in 1997. Funding the Company's asset growth were increased
demand deposits and shareholders' equity. Total interest bearing liability
volume was approximately the same in each period.
Total interest expense for the third quarter of 1998 was $13,550,000,
down $1,428,000 from $14,978,000 in the third quarter of 1997. Offsetting the
increased money market deposit accounts were lower levels of time deposits.
Reduced rates paid on nearly all interest bearing liabilities, from 5.34%
in 1997 to 4.83% in the third quarter of 1998 were primarily responsible for
the reduced interest expense.
Overall tax equivalent net interest income increased $1,999,000 as
interest income grew $571,000 and interest expense declined $1,428,000. The
Company's net interest margin also rose to 3.94% in the third quarter of 1998
from 3.37% in the same period in 1997.
Nine months ended September 30, 1998 and 1997
- ---------------------------------------------
Total tax equivalent interest income for the first nine months of 1998
was $76,989,000, up $7,604,000 from $69,385,000 in the same period in 1997.
The $82 million increase in average loans and $56 million increase in
investment securities were responsible for generating the increase in
interest earnings from 1997 to 1998. Lower overall asset yields limited the
increase in interest earnings. Overall asset yields were 8.14% for the first
nine months of 1998, down from 8.26% for the same period in 1997. Funding the
Company's asset growth were the money market deposits raised during the
promotion in the last half of 1997 and additional money market deposit growth
in 1998.
9
<PAGE> 10
Total interest expense for the first nine months of 1998 was
$40,420,000, up $2,201,000 from $38,219,000 in the same period in 1997.
Greater money market deposits were primarily responsible for the increased
interest expense. Lower overall total interest bearing liability rates and
reduced time deposits outstanding offset a large portion of the increased
interest expense arising from greater money market accounts. Overall rates
paid on total interest bearing liabilities declined to 4.90% from 5.18% in
the first nine months of 1997.
In summary, total tax equivalent net interest income increased
$5,403,000 as interest income improved $7.6 million and interest expense grew
$2.2 million. The Company's net interest margin for the first nine months was
3.87%, up from 3.71% in the same period in 1997.
10
<PAGE> 11
<TABLE>
AVERAGE, BALANCES, INTEREST AND RATES
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------
1998 1997
------------------------------------- -------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- --------- -------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 891,483 $20,172 8.98% $ 848,674 $19,329 9.04%
Tax-exempt<F3>
Held to maturity securities
Taxable 35,669 572 6.40 37,495 631 6.67
Tax-exempt<F3> 8,066 207 10.27 7,589 196 10.35
Available for sale securities 308,294 4,767 6.16 324,676 4,911 6.01
Trading account securities 841 13 6.12 1,591 26 6.60
Federal Funds sold and other short-
term investments 35,814 499 5.53 40,400 566 5.56
---------- ------- ---------- -------
Total interest-earning assets 1,280,167 26,230 8.14 1,260,425 25,659 8.09
------- -------
Noninterest-earning assets:
Cash and due from banks 24,182 26,414
Bank premises and equipment 16,195 11,692
Other assets 19,996 16,925
Allowance for possible loan losses (16,003) (13,933)
---------- ----------
Total assets $1,324,537 $1,301,523
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 25,802 $ 112 1.72% $ 21,370 $ 92 1.71%
Money market accounts 647,968 7,716 4.72 569,964 7,791 5.42
Savings deposits 24,309 183 2.98 22,395 168 2.97
Time deposits of $100,000 or more 35,785 470 5.21 36,037 487 5.37
Other time deposits 306,009 4,070 5.28 407,505 5,658 5.51
---------- ------- ---------- -------
Total interest-bearing deposits 1,039,873 12,551 4.79 1,057,271 14,196 5.33
Federal funds purchased, repurchase
agreements and other short-term
borrowings 58,146 728 4.97 41,486 505 4.83
Guaranteed Preferred Beneficial
Interests in Subordinated Debentures 14,950 271 7.26 14,950 277 7.42
---------- ------- ---------- -------
Total interest-bearing liabilities 1,112,969 13,550 4.83 1,113,707 14,978 5.34
------- -------
Noninterest-bearing liabilities:
Demand deposits 104,127 97,847
Other liabilities 3,009 3,509
Shareholders' equity 104,432 86,460
---------- ----------
Total liabilities and
shareholders' equity $1,324,537 $1,301,523
========== ==========
Net interest income $12,680 $10,681
======= =======
Net interest margin 3.94% 3.37%
===== =====
<FN>
- --------------------------
<F1> For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
<F2> Interest income on loans includes loan fees, which were not material to
any period presented.
<F3> Information is presented on a tax-equivalent basis assuming a tax rate of
35%. The tax-equivalent adjustments were approximately $63,000 and $60,000
for the three months ended September 30, 1998 and 1997, respectively.
</TABLE>
11
<PAGE> 12
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1998 1997
------------------------------------ -------------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- ---------- -------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans<F1><F2>
Taxable $ 876,920 $58,791 8.96% $ 794,870 $53,874 9.06%
Tax-exempt<F3>
Held to maturity securities
Taxable 41,440 1,975 6.36 43,738 2,213 6.76
Tax-exempt<F3> 8,330 646 10.34 7,566 602 10.61
Available for sale securities 305,985 14,297 6.24 248,066 11,529 6.21
Trading account securities 778 39 6.66 1,008 51 6.80
Federal Funds sold and other short-
term investments 29,957 1,241 5.54 27,094 1,116 5.51
---------- ------- ---------- -------
Total interest-earning assets 1,263,410 76,989 8.14 1,122,342 69,385 8.26
------- -------
Noninterest-earning assets:
Cash and due from banks 24,044 26,335
Bank premises and equipment 14,988 11,827
Other assets 20,212 15,487
Allowance for possible loan losses (15,498) (13,244)
---------- ----------
Total assets $1,307,156 $1,162,747
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 25,039 $ 322 1.72% $ 21,997 $ 281 1.71%
Money market accounts 613,709 21,815 4.75 417,467 15,740 5.04
Savings deposits 24,008 532 2.96 22,866 507 2.96
Time deposits of $100,000 or more 34,949 1,384 5.30 38,203 1,542 5.40
Other time deposits 323,127 13,025 5.39 418,288 17,325 5.54
---------- ------- ---------- -------
Total interest-bearing deposits 1,020,832 37,078 4.86 918,821 35,395 5.15
Federal funds purchased, repurchase
agreements and other short-term
borrowings 66,618 2,504 5.02 55,759 2,130 5.11
1992 debentures 890 54 8.09
Guaranteed Preferred Interests in
Subordinated Debentures 14,950 838 7.47 11,500 640 7.44
---------- ------- ---------- -------
Total interest-bearing liabilities 1,102,400 40,420 4.90 986,970 38,219 5.18
------- -------
Noninterest-bearing liabilities:
Demand deposits 101,150 90,699
Other liabilities 3,372 2,841
Shareholders' equity 100,234 82,237
---------- ----------
Total liabilities and
shareholders' equity $1,307,156 $1,162,747
========== ==========
Net interest income $36,569 $31,166
======= =======
Net interest margin 3.87% 3.71%
===== =====
<FN>
- ----------------------------
<F1> For purposes of these computations, nonaccrual loans are included in the
average loan amounts outstanding. Interest on nonaccrual loans is recorded
when received.
<F2> Interest income on loans includes loan fees, which were not material to
any period presented.
<F3> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The tax-equivalent adjustments were approximately $199,000 and
$185,000 for the nine months ended September 30, 1998 and 1997,
respectively.
</TABLE>
12
<PAGE> 13
The following table indicates, on a tax-equivalent basis, the changes in
interest income and interest expense which are attributable to changes in
average volume and changes in average rates, in comparison with the same
period in the preceding year. The change in interest due to the combined
rate-volume variance has been allocated to rate and volume changes in
proportion to the absolute dollar amounts of the changes in each.
<TABLE>
CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
COMPARED TO COMPARED TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
----------------------------------- --------------------------------------
INCREASE (DECREASE) ATTRIBUTABLE TO CHANGE IN:
--------------------------------------------------------------------------------
YIELD/ NET YIELD/ NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
-------- --------- -------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans<F1><F2> $ 971 $ (128) $ 843 $ 5,517 $ (600) $ 4,917
Held to maturity securities:
Taxable (32) (27) (59) (112) (126) (238)
Tax(exempt<F1> 13 (2) 11 59 (15) 44
Available for sale securities (261) 117 (144) 2,712 56 2,768
Trading account securities (11) (2) (13) (11) (1) (12)
Federal funds sold and other short-
term investments (64) (3) (67) 119 6 125
------- ------- ------- ------- ------- -------
Total interest income 616 (45) 571 8,284 (680) 7,604
------- ------- ------- ------- ------- -------
INTEREST PAID ON:
NOW accounts 19 1 20 39 2 41
Money market accounts 997 (1,072) (75) 7,026 (951) 6,075
Savings 14 1 15 25 25
Time deposits of $100,000 or more (3) (14) (17) (129) (29) (158)
Other time deposits (1,360) (228) (1,588) (3,843) (457) (4,300)
Federal funds purchased, repurchase
agreements and other short-term
borrowings 217 6 223 362 12 374
Long-term borrowings (3) (3) (6) 72 72 144
------- ------- ------- ------- ------- -------
Total interest expense (119) (1,309) (1,428) 3,552 (1,351) 2,201
------- ------- ------- ------- ------- -------
Net interest income $ 735 $ 1,264 $ 1,999 $ 4,732 $ 671 $ 5,403
======= ======= ======= ======= ======= =======
<FN>
- -----------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate of
35%. The approximate tax equivalent adjustments were $63,000, $60,000,
$199,000 and $185,000 for the three months ended September 30, 1998 and
1997, and for the nine months ended September 30, 1997 and 1996,
respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
13
<PAGE> 14
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision for possible loan losses for the third quarter of 1998 was
$900,000, down from $1,100,000 last year. For the first nine months of 1998
the provision for possible loan losses was $2,800,000, down from $3,200,000
for the same period last year. Lower net loan charge-offs and reduced loan
growth during 1998 as compared to 1997 resulted in the lower provision expense.
The annualized ratio of net charge-offs to average loans for the first nine
months of 1998 was .19%, down from .27% last year, while corresponding net
loan charge-offs were $1,237,000 and $1,583,000, respectively.
The allowance for possible loan losses was $16.5 million or 1.84% of loans
outstanding at September 30, 1998. This compared to $14.9 million or 1.76% at
the end of 1997, and $14.2 million or 1.65% at September 30, 1997. In
management's judgement, the allowance for possible loan losses is considered
adequate to absorb potential losses in the loan portfolio.
The following table summarizes, for the periods indicated, activity in the
allowance for possible loan losses:
<TABLE>
Summary of Loan Loss Experience and Related Information
-------------------------------------------------------
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -----------------------
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 15,663 $ 13,662 $ 14,892 $ 12,624
Loans charged off (819) (707) (2,232) (2,051)
Recoveries of loans previously
charged off 711 186 995 468
-------- -------- -------- --------
Net loans charged off (108) (521) (1,237) (1,583)
-------- -------- -------- --------
Provision for possible loan losses 900 1,100 2,800 3,200
-------- -------- -------- --------
Allowance for possible loan losses
(end of period) $ 16,455 $ 14,241 $ 16,455 $ 14,241
======== ======== ======== ========
Loans outstanding:
Average $891,483 $848,674 $876,920 $794,870
End of period 895,732 865,640 895,732 865,640
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.85% 1.68% 1.88% 1.79%
End of Period 1.84% 1.65% 1.84% 1.65%
Ratio of net charge-offs to
average loans outstanding, annualized: .05 .25 .19 .27
</TABLE>
14
<PAGE> 15
The following table summarizes nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 1,194 $ 2,079 $ 3,393
Loans past due 90 days or more 534 145
Restructured loans 118 112 175
-------- -------- --------
Total nonperforming loans 1,846 2,191 3,713
Other real estate 250 1,421 1,095
-------- -------- --------
Total nonperforming assets $ 2,096 $ 3,612 $ 4,808
======== ======== ========
Loans, net of unearned discount $895,732 $847,091 $865,640
Allowance for possible loan
losses to loans 1.84% 1.76% 1.65%
Nonperforming loans to loans .21 .26 .43
Allowance for possible loan losses
to nonperforming loans 891.39 679.69 383.54
Nonperforming assets to loans
and foreclosed assets .23 .43 .55
</TABLE>
NONINTEREST INCOME
- ------------------
For the third quarter of 1998 total noninterest income was $1,793,000, up
from $1,471,000 in the same period in 1997. Increased trading profits and
commissions, merchant credit card fees and operating lease income were
responsible for the increased noninterest income in 1998.
For the first nine months of 1998 total noninterest income was $5,493,000, up
sharply from $4,018,000 in the first nine months of 1997. Net gains of $681,000
were realized on securities sales in the first nine months of 1998, up from
gains on securities sales of $88,000 in the same period in 1997. Other portions
of 1998 noninterest income including service charges, merchant credit card fees
and leasing income were also up from prior year levels. Trading profits and
commissions were $1,135,000 in the nine months ended September 30, 1998, up
substantially from $781,000 in the same period in 1997. Limiting 1997's
trading earnings were losses on derivative trading activities. Overall
commissions from customer activities were approximately the same for the nine
months ended September 30, 1998 and 1997.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the third quarter of 1998 was $5,752,000, up
$650,000 from $5,102,000 in the third quarter of 1997. For the nine months ended
September 30, 1998 total noninterest expenses were $17,111,000, up $1,889,000
from the same period in 1997. Greater personnel and benefit costs were primarily
responsible for the increased overhead costs. Increases were also experienced in
most other categories of noninterest costs, however the Company still improved
its efficiency ratio to 40.68% for the nine months ended September 30, 1998 from
43.26% in the same period in 1997.
15
<PAGE> 16
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of September 30, 1998, the Company's total shareholders' equity was
$111.7 million. New capital was provided by the Company's first nine months
of net earnings and by the exercise of stock options. Also contributing
significantly to the increase in capital was the recording of unrealized
gains, net of tax, on available for sale securities. During the nine months
ended September 30, 1998 the fair market values of the Company's available
for sale securities rose sharply from their level at the end of 1997.
Offsetting the Company's capital accumulation were the payments of cash
dividends on common stock and the repurchase of 76,300 shares of common stock
in connection with the Company's stock repurchase plan.
During the first quarter of 1997 the Company formed MVBI Capital Trust
("MVBI Capital"), a statutory business trust. The Company owns all the common
stock of MVBI Capital. MVBI Capital sold 598,000 preferred securities, having
a liquidation amount of $25 per security, for a total of $14,950,000. The
distributions payable on the preferred securities will float with the 3-month
Treasury plus 2.25%. All accounts of MVBI Capital are included in the
consolidated financial statements of the Company. The preferred securities
are considered long-term borrowings and entitled "Guaranteed preferred
beneficial interests in subordinated debentures" for financial reporting
purposes. For risk-based capital guidelines the amount is considered to be
Tier 1 capital.
The analysis of capital is dependent upon a number of factors including
asset quality, earnings strength, liquidity, economic conditions and
combinations thereof. The two primary criteria currently in effect are the
risk-based capital guidelines and the minimum capital to total assets or
leverage ratio requirement.
These regulatory guidelines require that Tier 1 capital equal or exceed
4.00% of risk-weighted assets, and that the risk-based capital ratio equal or
exceed 8.00%. As of September 30, 1998 and December 31, 1997 the Company's
Tier 1 capital was 12.36% and 11.98% of risk-weighted assets, and total
risk-based capital was 13.62% and 13.23% of risk-weighted assets,
respectively.
The minimum acceptable ratio of Tier 1 capital to total assets, or
leverage ratio, has been established at 3.00%. As of September 30, 1998 and
December 31, 1997, the Company's leverage ratio was 8.76% and 8.04%,
respectively.
Management believes that a strong capital position provided by a mix of
equity and long-term debt is essential. It provides safety and security for
depositors, and enhances Company value for shareholders by providing
opportunities for growth with the selective use of leverage.
16
<PAGE> 17
IMPACT OF YEAR 2000
- -------------------
Like many financial institutions, the Company relies upon computers for
the daily conduct of its business and for data processing generally. There is
concern among industry experts that commencing on January 1, 2000, computers
will be unable to read the new year and that there may be widespread computer
malfunctions. Management of the Company has assessed the electronic systems,
programs, applications, and other electronic components used in the operations
of the Company and believes that the Company hardware and software has been
programmed to be able to accurately recognize the year 2000, although there
can be no assurances in this regard. The Company utilizes third party vendor
application software for all computer systems. Critical systems are on
schedule to be tested by the end of 1998. Continued testing of systems not
deemed mission critical will continue into 1999.
The Company is enhancing its existing business resumption plans to
reflect Year 2000 issues and has developed a contingency plan designed to
coordinate the efforts of its personnel and resources in addressing any Year
2000 problems that become evident after December 31, 1999. There can be no
assurance that such plans will fully mitigate all failures or problems.
Furthermore, there may be certain mission critical third parties, such as
utilities or telecommunications companies, where alternative arrangements or
sources are limited or unavailable.
The Company does not currently expect that the cost of its Year 2000
compliance program will be material to its financial condition.
17
<PAGE> 18
PART II.OTHER INFORMATION
- -------------------------
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For a list of Exhibits, see "EXHIBIT INDEX"
appearing elsewhere herein.
(b) Reports on Form 8-K: NONE
18
<PAGE> 19
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI VALLEY BANCSHARES, INC.
---------------------------------------------
(Registrant)
Date: November 9, 1998 /s/ Paul M. Strieker
---------------- ------------------------------------
Paul M. Strieker, Executive Vice
President, Controller and Chief
Financial Officer and Assistant
Secretary (on behalf of the
Registrant and as Principal
Financial and Accounting Officer)
19
<PAGE> 20
MISSISSIPPI VALLEY BANCSHARES, INC.
EXHIBIT INDEX
FORM 10-Q
For the quarterly period ended September 30, 1998
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
11 Computation of Earnings
per Common Share
</TABLE>
20
<PAGE> 1
EXHIBIT NO. 11
--------------
<TABLE>
COMPUTATION OF EARNINGS PER
---------------------------
COMMON SHARE
------------
<CAPTION>
Basic earnings per share is computed by dividing net income by the weighted
average common shares outstanding.
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
BASIC:
Average common shares outstanding 9,573,398 9,514,256 9,563,346 9,355,392
========== ========== ========== ==========
Net Income $ 4,935 $ 3,777 $ 14,025 $ 10,617
========== ========== ========== ==========
Basic earnings per common share $ .52 $ .40 $ 1.47 $ 1.14
========== ========== ========== ==========
<CAPTION>
Diluted earnings per share gives effect to the weighted average shares
outstanding, average dilutive common share equivalents and shares which would
have resulted from conversion of outstanding convertible debentures and to the
related reduction in interest expense on an after-tax basis.
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
DILUTED:
Average common shares outstanding 9,573,398 9,514,256 9,563,346 9,355,392
Average common stock equivalents of warrants and
options outstanding-based on the
treasury stock method using market price 299,367 189,710 322,364 169,474
Convertible debenture common stock equivalents 156,660
---------- ---------- ---------- ----------
9,872,765 9,703,966 9,885,710 9,681,526
========== ========== ========== ==========
Net income $ 4,935 $ 3,777 $ 14,025 $ 10,617
Plus: Convertible debenture interest,
net of federal income tax effect 35
---------- ---------- ---------- ----------
$ 4,935 $ 3,777 $ 14,025 $ 10,652
========== ========== ========== ==========
Diluted earnings per common share $ .50 $ .39 $ 1.42 $ 1.10
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 22,704
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 349,190
<INVESTMENTS-CARRYING> 42,777
<INVESTMENTS-MARKET> 44,778
<LOANS> 895,732
<ALLOWANCE> 16,455
<TOTAL-ASSETS> 1,345,942
<DEPOSITS> 1,152,818
<SHORT-TERM> 56,972
<LIABILITIES-OTHER> 9,529
<LONG-TERM> 14,950
0
0
<COMMON> 9,551
<OTHER-SE> 102,122
<TOTAL-LIABILITIES-AND-EQUITY> 1,345,942
<INTEREST-LOAN> 58,791
<INTEREST-INVEST> 16,719
<INTEREST-OTHER> 1,280
<INTEREST-TOTAL> 76,790
<INTEREST-DEPOSIT> 37,078
<INTEREST-EXPENSE> 40,420
<INTEREST-INCOME-NET> 36,370
<LOAN-LOSSES> 2,800
<SECURITIES-GAINS> 681
<EXPENSE-OTHER> 17,111
<INCOME-PRETAX> 21,952
<INCOME-PRE-EXTRAORDINARY> 14,025
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,025
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.42
<YIELD-ACTUAL> 3.87
<LOANS-NON> 1,194
<LOANS-PAST> 534
<LOANS-TROUBLED> 118
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,892
<CHARGE-OFFS> 2,232
<RECOVERIES> 995
<ALLOWANCE-CLOSE> 16,455
<ALLOWANCE-DOMESTIC> 9,968
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,487
</TABLE>
