<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF AUGUST 3, 1998:
Common Stock, $1.00 par value 9,584,412
- ----------------------------- -----------------------------
Class Number of Shares
<PAGE> 2
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
<TABLE>
INDEX
-----
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of
Income -- Quarters Ended June 30, 1998
and June 30, 1997 and Six Months Ended
June 30, 1998 and June 30, 1997 4
Consolidated Statements of Changes in
Shareholders' Equity -- Six Months
Ended June 30, 1998 and June 30, 1997 5
Condensed Consolidated Statements of
Cash Flows -- Six Months Ended
June 30, 1998 and June 30, 1997 6
Notes to Condensed Consolidated
Financial Statements 7
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8-16
PART II. OTHER INFORMATION
-----------------
ITEM 4. Submission of Matters to a Vote of Security Holders 17
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
- ---------
EXHIBIT INDEX 19
- -------------
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1.
- -------
<TABLE>
FINANCIAL STATEMENTS
--------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
June 30, December 31,
1998 1997
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 28,568 $ 28,532
Federal funds sold 25,700 18,910
Held to maturity securities
(fair value of $47,245 and
$59,748, respectively) 45,734 58,148
Available for sale securities 292,872 317,768
Trading account securities 354 1,251
Loans, net of unearned income 891,799 847,091
Allowance for possible loan losses 15,663 14,892
---------- ----------
Net loans 876,136 832,199
Premises and equipment 15,920 13,482
Other assets 26,799 29,628
---------- ----------
TOTAL ASSETS $1,312,083 $1,299,918
========== ==========
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 115,526 $ 109,949
Interest bearing 1,018,927 1,016,613
---------- ----------
Total deposits 1,134,453 1,126,562
Securities sold under agreements
to repurchase 30,700 32,700
Other short-term borrowings 22,625 21,495
Guaranteed preferred beneficial interests
in subordinated debentures 14,950 14,950
Other liabilities 8,220 11,104
---------- ----------
TOTAL LIABILITIES 1,210,948 1,206,811
---------- ----------
SHAREHOLDERS' EQUITY
- --------------------
Common stock-par value $1
Authorized 20,000,000 shares,
issued 9,582,412 in 1998
and 9,519,212 in 1997 9,582 9,519
Capital surplus 17,536 17,561
Retained earnings 71,101 63,541
Unrealized gain on available
for sale securities, net of tax 2,916 2,486
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 101,135 93,107
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,312,083 $1,299,918
========== ==========
See accompanying notes.
</TABLE>
3
<PAGE> 4
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(UNAUDITED)
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
------------------------- ------------------------
1998 1997 1998 1997
------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $19,777 $18,625 $38,619 $34,545
Held to maturity securities:
Taxable 653 738 1,403 1,582
Tax-exempt 151 140 303 281
Available for sale securities 4,299 3,192 9,530 6,618
Other 591 406 768 575
------- ------- ------- -------
TOTAL INTEREST INCOME 25,471 23,101 50,623 43,601
------- ------- ------- -------
Interest expense:
Deposits 12,325 11,387 24,527 21,200
Short-term borrowings 771 827 1,776 1,625
Long-term borrowings 279 276 567 416
------- ------- ------- -------
TOTAL INTEREST EXPENSE 13,375 12,490 26,870 23,241
------- ------- ------- -------
NET INTEREST INCOME 12,096 10,611 23,753 20,360
Provision for possible loan losses 1,000 1,200 1,900 2,100
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 11,096 9,411 21,853 18,260
------- ------- ------- -------
Other income:
Service charges 476 470 946 911
Securities gains/(losses), net on:
Sales of held to maturity securities
Sales of available for sale securities 509 (20) 681 88
Trading profits and commissions 186 159 608 365
Other 810 674 1,465 1,183
------- ------- ------- -------
1,981 1,283 3,700 2,547
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 2,894 2,494 5,896 4,921
Net occupancy 364 321 676 609
Equipment 340 302 650 596
Advertising 249 211 486 378
Other 1,955 1,910 3,651 3,616
------- ------- ------- -------
5,802 5,238 11,359 10,120
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 7,275 5,456 14,194 10,687
Income taxes 2,625 1,959 5,104 3,847
------- ------- ------- -------
NET INCOME $ 4,650 $ 3,497 $ 9,090 $ 6,840
======= ======= ======= =======
Earnings per common share:
Basic $ .48 $ .37 $ .95 $ .74
Diluted $ .47 $ .36 $ .92 $ .71
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 6,840 6,840 $6,840
Issuance of common
stock 3,600 4 34 38
1992 Debentures converted
to common stock 475,200 474 2,226 2,700
Cash dividends on:
common stock (1,298) (1,298)
Other comprehensive income
(loss), net of tax
Unrealized loss,
on available
for sale securities (538) (538) (538)
--------- ------ ------- ------- ------ -------- ------
BALANCE AT JUNE 30, 1997 9,512,712 $9,512 $17,495 $56,701 $ (17) $ 83,691
========= ====== ======= ======= ====== ========
Comprehensive Income $6,302
======
BALANCE AT JANUARY 1, 1998 9,519,212 $9,519 $17,561 $63,541 $2,486 $ 93,107
Net income 9,090 9,090 $9,090
Issuance of common
stock 90,200 90 787 877
Treasury stock purchased (27,000) (27) (812) (839)
Cash dividends on:
common stock (1,530) (1,530)
Other comprehensive income,
net of tax
Unrealized gain,
on available
for sale securities 430 430 430
--------- ------ ------- ------- ------ -------- ------
BALANCE AT JUNE 30, 1998 9,582,412 $9,582 $17,536 $71,101 $2,916 $101,135
========= ====== ======= ======= ====== ========
Comprehensive Income $9,520
======
See accompanying notes.
</TABLE>
5
<PAGE> 6
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
-------- ---------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 9,090 $ 6,840
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 1,900 2,100
Provision for depreciation and amortization 859 734
Accretion of discounts and amortization of
premiums on securities (15) (600)
Realized securities (gains) and losses, net (681) (88)
Net (increase) decrease in trading account securities 897 (1,239)
Net (increase) decrease in interest receivable 456 (1,093)
Increase (decrease) in interest payable (229) 439
Other, net (849) (3,278)
-------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 11,428 3,815
-------- ---------
INVESTING ACTIVITIES
- --------------------
Proceeds from maturities of held to maturity securities 12,525 13,000
Purchases of held to maturity securities (2,033)
Purchases of available for sale securities (96,104) (123,411)
Proceeds from maturities of available for sale securities 30,000 74,000
Proceeds from sales and paydowns of
available for sale securities 92,246 27,358
Purchases of premises and equipment (2,961) (1,007)
Increase in loans outstanding, net (45,837) (111,883)
-------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (10,131) (123,976)
-------- ---------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 7,891 176,049
Net increase (decrease) in repurchase agreements
and other short-term borrowings (870) (30,405)
Proceeds from sale of subordinated debentures 14,950
Proceeds from sale of common stock 877 38
Purchase of treasury stock (839)
Cash dividends (1,530) (1,298)
-------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 5,529 159,334
-------- ---------
INCREASE IN CASH
AND CASH EQUIVALENTS 6,826 39,173
Cash and cash equivalents at beginning of period 47,442 30,951
-------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 54,268 $ 70,124
======== =========
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 (the "Bank") 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>
<CAPTION>
For the Six Months Ended June 30, 1998
--------------------------------------
Before-Tax Tax Net-of-Tax
Amount Expense Amount
---------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized gains on available
for sale securities $1,171 $410 $761
Less: reclassification adjustment
for gains realized in net
income 509 178 331
------ ---- ----
Net unrealized gains 662 232 430
------ ---- ----
Other comprehensive income $ 662 $232 $430
====== ==== ====
<CAPTION>
For the Six Months Ended June 30, 1997
--------------------------------------
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 $(147) $ (52) $ (95)
Less: reclassification adjustment
for gains realized in net
income 681 238 443
----- ----- -----
Net unrealized loss (828) (290) (538)
----- ----- -----
Other comprehensive
income (loss) $(828) $(290) $(538)
===== ===== =====
</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 second quarter of 1998 was $4,650,000,
up $1,153,000 or 33.0% from the $3,497,000 earned during the second quarter
of 1997. On a per share basis, net income was $.47, up from $.36 in the same
period of the prior year. Greater net income was primarily a result of the
increased net interest income. Increased non-interest income was largely
offset by greater levels of non-interest expenses.
Net income for the first half of 1998 was $9,090,000, up $2,250,000 or
32.9% from $6,840,000 earned for the first half of 1997. On a per share
basis, net income was $.92, up from $.71 in the first half 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 $1,900,000, down from
$2,100,000 for the first six months of 1997 because overall loan growth for
the first six months of 1998 was down from the level of growth in the same
period of 1997. Non-interest income for the first six months of 1998 was
$3,700,000, up from $2,547,000 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 non-interest income.
Total non-interest expenses were $11,359,000 for the first six months of
1998, up from $10,120,000 for the same period in 1997 due primarily to
increased salaries and benefits.
For the quarter and six months ended June 30, 1998, the Company's
return on average assets was 1.44% and 1.40%, up from 1.24% and 1.25% in the
same periods in 1997, respectively. At June 30, 1998, total equity capital
was $101.1 million, up from $83.7 million at June 30, 1997 and $93.1 million
at December 31, 1997. The Company's return on average equity was 18.67% and
18.53% for the quarter and six months ended June 30, 1998, up from 16.98% and
17.08% for the same periods in 1997, respectively.
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 $68,000, $63,000,
$136,000 and $124,000 for the three months ended June
8
<PAGE> 9
30, 1998 and 1997, and for the six months ended June 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 June 30, 1998 and 1997
- -----------------------------------------
Total tax-equivalent interest income for the three months ended June
30, 1998 was $25,539,000, up $2,376,000 as compared to the same period in
1997. The $79 million increase in the volume of average loans outstanding
and $73 million increase in investment securities were primarily responsible
for the increase in interest earnings for the second quarter of 1998.
Overall asset yields were 8.17% in the second three months of 1998, down 36
basis points from the 8.53% earned in the same period in 1997. Reduced
overall asset yields resulted from both lower loan and security yields in
1998. Funding the Company's loan and security growth were increased money
market deposits which were raised primarily during the promotion in the last
half of 1997.
Total interest expense for the second quarter of 1998 was $13,375,000,
up $886,000 from $12,489,000 in the second three months of 1997. Reducing
the effects of the increased money market account interest expense were lower
levels of time deposits and reduced rates paid on nearly all fund sources.
Overall tax-equivalent net interest income increased $1,490,000 as
interest income rose $2,376,000 and interest expense was up $886,000. The
Company's net interest margin declined only slightly to 3.89% in the second
quarter of 1998 from 3.93% in the same period in 1997.
Six months ended June 30, 1998 and 1997
- ---------------------------------------
Total tax equivalent interest income for the first six months of 1998
was $50,759,000, up $7,034,000 from $43,725,000 in the same period in 1997.
The $102 million increase in average loans and $94 million increase in
investment securities were responsible for generating the increase in
interest earnings from 1997 to 1998. Slightly lower overall asset yields
limited the increase in interest earnings. Overall asset yields were 8.14%
for the first six months of 1998, down from 8.37% for the same period in
1997. Funding the asset growth in the first half of 1998 were the money
market deposits raised during the promotion in the last half of 1997.
Total interest expense for the first half of 1998 was $26,870,000, up
$3,629,000 from $23,241,000 in the same period in 1997. Greater money market
deposits were primarily responsible for the increased interest expense.
Slightly lower overall total interest bearing liability rates and reduced
time deposits outstanding offset a portion of the increased interest expense
arising from greater money market accounts. Overall rates paid on total
interest bearing liabilities declined to 4.94% from 5.08% in the first six
months of 1997.
9
<PAGE> 10
In summary, total tax-equivalent net interest income increased
$3,405,000 as interest income improved $7.0 million and interest expense grew
$3.6 million. The Company's net interest margin for the first six months was
3.83%, down from 3.92% in the same period in 1997.
10
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
THREE MONTHS ENDED JUN3 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 $ 888,423 $19,777 8.93% $ 809,670 $18,625 9.22%
Tax-exempt<F3>
Held to maturity securities
Taxable 41,252 653 6.34 43,722 738 6.77
Tax-exempt<F3> 8,391 219 10.43 7,567 203 10.72
Available for sale securities 272,936 4,300 6.31 198,336 3,192 6.45
Trading account securities 625 10 6.61 713 12 6.88
Federal Funds sold and other short-
term investments 42,071 580 5.53 28,631 393 5.49
---------- ------- ---------- -------
Total interest-earning assets 1,253,698 25,539 8.17 1,088,639 23,163 8.53
------- -------
Noninterest-earning assets:
Cash and due from banks 24,045 28,085
Bank premises and equipment 14,897 11,948
Other assets 18,935 15,500
Allowance for possible loan losses (15,460) (13,142)
---------- ----------
Total assets $1,296,115 $1,131,030
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 25,409 $ 109 1.72% $ 22,124 $ 94 1.71%
Money market accounts 605,435 7,192 4.76 373,969 4,798 5.15
Savings deposits 24,204 177 2.93 23,021 169 2.95
Time deposits of $100,000 or more 35,221 465 5.29 39,256 525 5.36
Other time deposits 325,709 4,382 5.40 419,795 5,800 5.54
---------- ------- ---------- -------
Total interest-bearing deposits 1,015,978 12,325 4.87 878,165 11,386 5.20
Federal funds purchased, repurchase
agreements and other short-term
borrowings 62,019 771 4.99 63,036 827 5.23
Guaranteed Preferred Beneficial
Interests in Subordinated Debentures 14,950 279 7.46 14,950 276 7.39
---------- ------- ---------- -------
Total interest-bearing liabilities 1,092,947 13,375 4.91 956,151 12,489 5.24
------- -------
Noninterest-bearing liabilities:
Demand deposits 101,209 90,385
Other liabilities 2,332 2,109
Shareholders' equity 99,627 82,385
---------- ----------
Total liabilities and
shareholders' equity $1,296,115 $1,131,030
========== ==========
Net interest income $12,164 $10,674
======= =======
Net interest margin 3.89% 3.93%
===== =====
<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 $68,000 and $63,000
for the three months ended June 30, 1998 and 1997, respectively.
</TABLE>
11
<PAGE> 12
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
SIX MONTHS ENDED JUNE 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 $ 869,518 $38,619 8.95% $ 767,523 $34,545 9.07%
Tax-exempt<F3>
Held to maturity securities
Taxable 44,374 1,403 6.35 46,911 1,582 6.80
Tax-exempt<F3> 8,464 439 10.37 7,554 405 10.74
Available for sale securities 304,812 9,530 6.28 209,126 6,618 6.36
Trading account securities 745 26 6.97 712 25 7.03
Federal Funds sold and other short-
term investments 26,980 742 5.50 20,330 550 5.43
---------- ------- ---------- -------
Total interest-earning assets 1,254,893 50,759 8.14 1,052,156 43,725 8.37
------- -------
Noninterest-earning assets:
Cash and due from banks 23,973 26,295
Bank premises and equipment 14,375 11,896
Other assets 20,322 14,756
Allowance for possible loan losses (15,241) (12,894)
---------- ----------
Total assets $1,298,322 $1,092,209
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 24,652 $ 210 1.72% $ 22,316 $ 189 1.71%
Money market accounts 596,295 14,099 4.77 339,955 7,949 4.72
Savings deposits 23,855 349 2.95 23,106 339 2.96
Time deposits of $100,000 or more 34,524 914 5.34 39,303 1,055 5.41
Other time deposits 331,828 8,955 5.44 423,769 11,667 5.55
---------- ------- ---------- -------
Total interest-bearing deposits 1,011,154 24,527 4.89 848,449 21,199 5.04
Federal funds purchased, repurchase
agreements and other short-term
borrowings 70,924 1,776 5.04 63,013 1,625 5.17
Convertible debentures 1,343 54 8.00
Guaranteed Preferred Beneficial
Interests in Subordinated debentures 14,950 567 7.58 9,746 363 7.44
---------- ------- ---------- -------
Total interest-bearing liabilities 1,097,028 26,870 4.94 922,551 23,241 5.08
------- -------
Noninterest-bearing liabilities:
Demand deposits 99,638 87,066
Other liabilities 3,557 2,502
Shareholders' Equity 98,099 80,090
---------- ----------
Total liabilities and
shareholders' equity $1,298,322 $1,092,209
========== ==========
Net interest income $23,889 $20,484
======= =======
Net interest margin 3.83% 3.92%
===== =====
<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 $136,000 and
$124,000 for the six months ended June 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 SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
COMPARED TO COMPARED TO
JUNE 30, 1997 JUNE 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> $ 1,755 $(603) $ 1,152 $ 4,536 $(462) $ 4,074
Held to maturity securities:
Taxable (40) (45) (85) (81) (98) (179)
Tax-exempt<F1> 21 (5) 16 48 (14) 34
Available for sale securities 1,178 (70) 1,108 2,996 (84) 2,912
Trading account securities (2) (2) 1 1
Federal funds sold and other short-
term investments 184 3 187 185 7 192
------- ----- ------- ------- ----- -------
Total interest income 3,096 (720) 2,376 7,685 (651) 7,034
------- ----- ------- ------- ----- -------
INTEREST PAID ON:
NOW accounts 14 1 15 20 1 21
Money market accounts 2,781 (387) 2,394 6,065 85 6,150
Savings 9 (1) 8 11 (1) 10
Time deposits of $100,000 or more (53) (7) (60) (127) (14) (141)
Other time deposits (1,274) (144) (1,418) (2,485) (227) (2,712)
Federal funds purchased, repurchase
agreements and other short-term
borrowings (60) 4 (56) 144 7 151
Long-term borrowings 1 2 3 75 75 150
------- ----- ------- ------- ----- -------
Total interest expense 1,418 (532) 886 3,703 (74) 3,629
------- ----- ------- ------- ----- -------
Net interest income $ 1,678 $(188) $ 1,490 $ 3,982 $(577) $ 3,405
======= ===== ======= ======= ===== =======
<FN>
- -----------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate of
35%. The approximate tax equivalent adjustments were $68,000, $63,000,
$136,000 and $124,000 for the three months ended June 30, 1998 and 1997,
and for the six months ended June 30, 1998 and 1997, respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
13
<PAGE> 14
PROVISION FOR POSSIBLE LOAN LOSSES
- ----------------------------------
The provision for possible loan losses for the second quarter of 1998 was
$1,000,000, down from $1,200,000 last year. For the first half of 1998 the
provision for possible loan losses was $1,900,000, down from $2,100,000 for
the same period last year. Slightly higher 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 half of 1998 was .26%, down from .28% last year, while corresponding
net loan charge-offs were $1,129,000 and $1,062,000, respectively.
The allowance for possible loan losses was $15.7 million or 1.76% of loans
outstanding at June 30, 1998. This compared to $14.9 million or 1.76% at the
end of 1997, and $13.7 million or 1.62% at June 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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 15,302 $ 12,992 $ 14,892 $ 12,624
Loans charged off (695) (689) (1,413) (1,344)
Recoveries of loans previously
charged off 56 159 284 282
-------- -------- -------- --------
Net loans charged off (639) (530) (1,129) (1,062)
-------- -------- -------- --------
Provision for possible loan losses 1,000 1,200 1,900 2,100
-------- -------- -------- --------
Allowance for possible loan losses
(end of period) $ 15,663 $ 13,662 $ 15,663 $ 13,662
======== ======== ======== ========
Loans outstanding:
Average $888,423 $809,670 $869,518 $767,523
End of period 891,799 841,840 891,799 841,840
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.76% 1.69% 1.80% 1.78%
End of period 1.76 1.62 1.76 1.62
Ratio of net charge-offs to
average loans outstanding, annualized: .29 .26 .26 .28
</TABLE>
14
<PAGE> 15
The following table summarizes nonperforming assets at the dates
indicated:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
-------- ------------ --------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Nonaccrual loans $ 3,226 $ 2,079 $ 6,161
Loans past due 90 days or more 451
Restructured loans 124 112 174
-------- -------- --------
Total nonperforming loans 3,350 2,191 6,786
Other real estate 240 1,421 569
-------- -------- --------
Total nonperforming assets $ 3,590 $ 3,612 $ 7,355
======== ======== ========
Loans, net of unearned discount $891,799 $847,091 $841,840
Allowance for possible loan
losses to loans 1.76% 1.76% 1.62%
Nonperforming loans to loans .38 .26 .81
Allowance for possible loan losses
to nonperforming loans 467.55 679.69 201.33
Nonperforming assets to loans
and foreclosed assets .40 .43 .87
</TABLE>
NONINTEREST INCOME
- ------------------
For the second quarter of 1998 total noninterest income was $1,981,000, up
from $1,283,000 in the same period in 1997. Net realized securities gains of
$509,000 in 1998 compared to net securities losses of $20,000 in the second
quarter of 1997 accounted for a large portion of the increase. Most other
noninterest income categories were also up, though not as dramatically, in
the second quarter of 1998.
For the first six months of 1998 total noninterest income was $3,700,000, up
sharply from $2,547,000 in the first half of 1997. Net gains of $681,000 were
realized on securities sales in the first half of 1998, up from gains on
securities sales of $88,000 in the first half of 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 $608,000 in the first half of 1997, up substantially from
$365,000 in the same period in 1997. Overall commissions from customer
activities were up in 1998 compared to 1997. Limiting 1997's trading earnings
were losses on the Bank's trading activities of approximately $294,000.
Mark-to-market adjustments on interest rate derivative trading activities
reduced 1998 earnings by approximately $143,000.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the second quarter of 1998 was $5,802,000, up
$564,000 from $5,238,000 in the second three months of 1997. For the first
half of 1997 total noninterest expenses were $11,359,000, up $1,239,000 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 41.17% in the first half of 1998 from 43.94%
in the same period of 1997.
15
<PAGE> 16
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of June 30, 1998, the Company's total shareholders' equity was
$101.1 million. New capital was provided by the Company's first half net
earnings and by the exercise of stock options. Offsetting the Company's
capital accumulation were the payments of cash dividends on common stock and
the repurchase of 27,000 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 June 30, 1998 and December 31, 1997 the Company's Tier 1
capital was 12.12% and 11.98% of risk-weighted assets, and total risk-based
capital was 13.37% 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 June 30, 1998 and
December 31, 1997, the Company's leverage ratio was 8.73% 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
PART II. OTHER INFORMATION
- ----------------------------
ITEM 4. Submission of Matters to a Vote
-------------------------------
of Security Holders
-------------------
On April 15, 1998, at the Company's Annual Meeting of Stockholders,
stockholders took the following actions:
a. Re-elected all Management nominees to the Board of Directors.
Vote tallies were as follows:
<TABLE>
<CAPTION>
Votes Votes
In Favor Abstaining
--------- ----------
<S> <C> <C>
John T. Baumstark 8,502,866 25,312
Linn H. Bealke 8,523,417 4,761
Theodore P. Desloge, Jr. 8,460,969 67,209
Donna D. Lambert 8,452,627 75,551
Michael D. Latta 8,473,369 54,809
</TABLE>
b. Approved an amendment to the Articles of Incorporation to increase
the Company's authorized common shares from 15,000,000 to
20,000,000 with 8,457,167 shares voted in favor, 36,350 shares
voted against and 34,661 shares abstained.
c. Ratified the selection of Ernst & Young LLP as independent
accountants for 1998 with 8,519,119 shares voted in favor, 6,146
shares voted against and 2,913 shares abstained.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For a list of Exhibits, see "EXHIBIT INDEX"
appearing elsewhere herein.
(b) Reports on Form 8-K: NONE
17
<PAGE> 18
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------------------
(Registrant)
Date: August 10, 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)
18
<PAGE> 19
MISSISSIPPI VALLEY BANCSHARES, INC.
<TABLE>
EXHIBIT INDEX
FORM 10-Q
<CAPTION>
For the quarterly period ended June 30, 1998
Exhibit
Number Description of Exhibit
------- -----------------------
<C> <S>
11 Computation of Earnings
per Common Share
</TABLE>
19
<PAGE> 1
EXHIBIT NO. 11
--------------
COMPUTATION OF EARNINGS PER
---------------------------
COMMON SHARE
------------
Basic earnings per share is computed by dividing net income by
the weighted average common shares outstanding.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
BASIC:
Average common shares outstanding 9,574,347 9,511,976 9,558,237 9,274,645
========== ========== ========== ==========
Net income $ 4,650 $ 3,497 $ 9,090 $ 6,840
========== ========== ========== ==========
Basic earnings per common share $ .48 $ .37 $ .95 $ .74
========== ========== ========== ==========
</TABLE>
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.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
DILUTED:
Average common shares outstanding 9,574,347 9,511,976 9,558,237 9,274,645
Average common stock equivalents of
options outstanding-based on the
treasury stock method using market price 329,083 154,812 334,053 159,189
Convertible debenture common stock equivalents 236,286
---------- ---------- ---------- ----------
9,903,430 9,666,788 9,892,290 9,670,120
========== ========== ========== ==========
Net income $ 4,650 $ 3,497 $ 9,090 $ 6,840
Plus: Convertible debenture interest,
net of federal income tax effect 35
---------- ---------- ---------- ----------
$ 4,650 $ 3,497 $ 9,090 $ 6,875
========== ========== ========== ==========
Diluted earnings per common share $ .47 $ .36 $ .92 $ .71
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 28,568
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 25,700
<TRADING-ASSETS> 354
<INVESTMENTS-HELD-FOR-SALE> 292,872
<INVESTMENTS-CARRYING> 45,734
<INVESTMENTS-MARKET> 47,245
<LOANS> 891,799
<ALLOWANCE> 15,663
<TOTAL-ASSETS> 1,312,083
<DEPOSITS> 1,134,453
<SHORT-TERM> 53,325
<LIABILITIES-OTHER> 8,220
<LONG-TERM> 14,950
0
0
<COMMON> 9,582
<OTHER-SE> 91,553
<TOTAL-LIABILITIES-AND-EQUITY> 1,312,083
<INTEREST-LOAN> 38,619
<INTEREST-INVEST> 11,236
<INTEREST-OTHER> 768
<INTEREST-TOTAL> 50,623
<INTEREST-DEPOSIT> 24,527
<INTEREST-EXPENSE> 26,870
<INTEREST-INCOME-NET> 23,753
<LOAN-LOSSES> 1,900
<SECURITIES-GAINS> 681
<EXPENSE-OTHER> 11,359
<INCOME-PRETAX> 14,194
<INCOME-PRE-EXTRAORDINARY> 9,090
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,090
<EPS-PRIMARY> .95
<EPS-DILUTED> .92
<YIELD-ACTUAL> 3.83
<LOANS-NON> 3,226
<LOANS-PAST> 0
<LOANS-TROUBLED> 124
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,892
<CHARGE-OFFS> 1,413
<RECOVERIES> 284
<ALLOWANCE-CLOSE> 15,663
<ALLOWANCE-DOMESTIC> 10,248
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,235
</TABLE>
