<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, 1999
----------------------------------------------
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 JULY 30, 1999:
Common Stock, $1.00 par value 9,330,612
----------------------------- ------------------------
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, 1999 and December 31, 1998 3
Condensed Consolidated Statements of
Income -- Quarters Ended June 30, 1999
and June 30, 1998 and Six Months Ended
June 30, 1999 and June 30, 1998 4
Consolidated Statements of Changes in
Shareholders' Equity -- Six Months
Ended June 30, 1999 and June 30, 1998 5
Condensed Consolidated Statements of
Cash Flows -- Six Months Ended
June 30, 1999 and June 30, 1998 6
Notes to Condensed Consolidated
Financial Statements 7-8
ITEM 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9-18
PART II. OTHER INFORMATION
-----------------
ITEM 4. Submission of Matters to a Vote of Security Holders 19
ITEM 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
- ---------
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1.
- -------
<TABLE>
FINANCIAL STATEMENTS
--------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
June 30, 1999 December 31, 1998
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 30,656 $ 27,017
Federal funds sold 72,050
Held to maturity securities
(fair value of $37,502 and
$40,283, respectively) 36,870 38,815
Available for sale securities 265,192 400,087
Trading account securities 1,127 302
Loans, net of
unearned income 1,039,937 925,961
Allowance for possible loan losses 20,378 18,144
---------- ----------
Net loans 1,019,559 907,817
Premises and equipment 28,588 20,755
Other assets 45,421 35,264
---------- ----------
TOTAL ASSETS $1,499,463 $1,430,057
========== ==========
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 128,835 $ 125,235
Interest bearing 1,130,188 1,086,570
---------- ----------
Total deposits 1,259,023 1,211,805
Securities sold under agreements
to repurchase 32,619 41,605
Other short-term borrowings 62,919 36,853
Guaranteed preferred beneficial interests
in subordinated debentures 14,950 14,950
Other liabilities 22,158 15,066
---------- ----------
TOTAL LIABILITIES 1,391,669 1,320,279
---------- ----------
SHAREHOLDERS' EQUITY
- --------------------
Common stock-par value $1
Authorized 20,000,000 shares,
issued 9,642,812 in 1999
and 9,631,312 in 1998 9,643 9,631
Capital surplus 19,839 19,627
Retained earnings 88,443 79,003
Accumulated other comprehensive income (loss) (360) 6,265
Treasury stock, at cost, 294,900 shares
at June 30, 1999 and 139,400 shares
at December 31, 1998 (9,771) (4,748)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 107,794 109,778
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,499,463 $1,430,057
========== ==========
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
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $21,616 $19,777 $41,742 $38,619
Held to maturity securities:
Taxable 471 653 951 1,403
Tax-exempt 143 151 287 303
Available for sale securities 4,146 4,299 9,420 9,530
Other 292 591 374 768
------- ------- ------- -------
TOTAL INTEREST INCOME 26,668 25,471 52,774 50,623
------- ------- ------- -------
Interest expense:
Deposits 11,719 12,325 23,465 24,527
Short-term borrowings 877 771 1,627 1,776
Long-term borrowings 252 279 508 567
------- ------- ------- -------
TOTAL INTEREST EXPENSE 12,848 13,375 25,600 26,870
------- ------- ------- -------
NET INTEREST INCOME 13,820 12,096 27,174 23,753
Provision for possible loan losses 1,256 1,000 3,005 1,900
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 12,564 11,096 24,169 21,853
------- ------- ------- -------
Other income:
Service charges 573 476 1,115 946
Securities gains/(losses), net on:
Sales of held to maturity securities
Sales of available for sale securities 415 509 (415) 681
Trading profits and commissions 1,587 186 4,637 608
Other 1,024 810 1,823 1,465
------- ------- ------- -------
3,599 1,981 7,160 3,700
------- ------- ------- -------
Other expenses:
Employee compensation and
other benefits 3,541 2,894 6,783 5,896
Net occupancy 396 364 752 676
Equipment 411 340 763 650
Advertising 312 249 592 486
Other 2,482 1,955 4,670 3,651
------- ------- ------- -------
7,142 5,802 13,560 11,359
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 9,021 7,275 17,769 14,194
Income taxes 3,374 2,625 6,633 5,104
------- ------- ------- -------
NET INCOME $ 5,647 $ 4,650 $11,136 $ 9,090
======= ======= ======= =======
Earnings per common share:
Basic $ .60 $ .48 $ 1.18 $ .95
Diluted $ .59 $ .47 $ 1.16 $ .92
See accompanying notes.
</TABLE>
-4-
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
YEAR TO DATE JUNE 30, 1999 AND 1998
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
Accumulated Total
Common Stock Other Share-
------------ Capital Retained Comprehensive Treasury holders' Comprehensive
Shares Amount Surplus Earnings Income Stock Equity Income
--------- ------ ------- -------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
Balance at Jan. 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 (839) (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 9,609,412 $9,609 $18,348 $71,101 $ 2,916 $ (839) $101,135
========= ====== ======= ======= ======= ======= ========
Comprehensive Income $ 9,520
=======
1999
Balance at Jan. 1, 1999 9,631,312 $9,631 $19,627 $79,003 $ 6,265 $(4,748) $109,778 $
Net Income 11,136 11,136 11,136
Issuance of common stock 11,500 12 212 224
Treasury stock purchased (5,023) (5,023)
Cash dividends on:
common stock (1,696) (1,696)
Other comprehensive
income, net of tax
Unrealized loss, on
available for sale
securities (6,625) (6,625) (6,625)
--------- ------ ------- ------- ------- ------- -------- -------
Balance at June 30,
1999 9,642,812 $9,643 $19,839 $88,443 $ (360) $(9,771) $107,794
========= ====== ======= ======= ======= ======= ========
Comprehensive Income $ 4,511
=======
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,
---------------------------------
1999 1998
--------- --------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 11,136 $ 9,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,005 1,900
Provision for depreciation and amortization 1,190 859
Accretion of discounts and amortization of
premiums on securities (206) (15)
Realized securities (gains) and losses, net 415 (681)
Net (increase) decrease in trading account securities (825) 897
Net decrease in interest receivable 765 456
Decrease in interest payable (253) (229)
Other, net (512) (849)
--------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 14,715 11,428
--------- --------
INVESTING ACTIVITIES
- --------------------
Proceeds from maturities of held to maturity securities 2,000 12,525
Purchases of available for sale securities (90,357) (96,104)
Proceeds from maturities of available for sale securities 40,000 30,000
Proceeds from sales and paydowns of
available for sale securities 174,797 92,246
Purchases of premises and equipment (8,522) (2,961)
Increase in loans outstanding, net (114,747) (45,837)
--------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 3,171 (10,131)
--------- --------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 47,218 7,891
Net increase (decrease) in repurchase agreements
and other short-term borrowings 17,080 (870)
Proceeds from sale of common stock 224 877
Purchase of treasury stock (5,023) (839)
Cash dividends (1,696) (1,530)
--------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 57,803 5,529
--------- --------
INCREASE IN CASH
AND CASH EQUIVALENTS 75,689 6,826
Cash and cash equivalents at beginning of period 27,017 47,442
--------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 102,706 $ 54,268
========= ========
See accompanying notes.
</TABLE>
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. Basis of Presentation
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, Belleville (the
"Banks"), MVBI Capital Trust and Mississippi Valley Capital Company, a
venture capital subsidiary. 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.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1998.
2. Comprehensive Income
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. Following
is a summary of other comprehensive income components and related income tax
effects:
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1999
--------------------------------------
Before-Tax Tax Net-of-Tax
Amount Expense Amount
---------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized losses on available
for sale securities $(10,607) $(3,712) $(6,895)
Less: reclassification adjustment
for losses realized in net
income (415) (145) (270)
-------- ------- -------
Net unrealized losses (10,192) (3,567) (6,625)
-------- ------- -------
Other comprehensive income (loss) $(10,192) $(3,567) $(6,625)
======== ======= =======
<CAPTION>
For the Six Months Ended June 30, 1998
--------------------------------------
Tax
Before-Tax Expense Net-of-Tax
Amount (Benefit) Amount
---------- --------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized gains on
available for sale securities $1,343 $470 $873
Less: reclassification adjustment
for gains realized in net
income 681 238 443
------ ---- ----
Net unrealized gains 662 232 430
------ ---- ----
Other comprehensive
income $ 662 $232 $430
====== ==== ====
</TABLE>
-7-
<PAGE> 8
3. Earnings per 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,
----------------------------- -------------------------
1999 1998 1999 1998
---------- ----------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
BASIC:
Average common shares outstanding 9,367,253 9,574,347 9,431,050 9,558,237
========== ========== ========== ==========
Net income $ 5,647 $ 4,650 $ 11,136 $ 9,090
========== ========== ========== ==========
Basic earnings per common share $ .60 $ .48 $ 1.18 $ .95
========== ========== ========== ==========
</TABLE>
Diluted earnings per share gives effect to the weighted average shares
outstanding and average dilutive common share equivalents outstanding.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
DILUTED:
Average common shares outstanding 9,367,253 9,574,347 9,431,050 9,558,237
Average common stock equivalents of
options outstanding-based on the
treasury stock method using market price 150,348 329,083 151,181 334,053
---------- ---------- ---------- ----------
9,517,601 9,903,430 9,582,231 9,892,290
========== ========== ========== ==========
Net income $ 5,647 $ 4,650 $ 11,136 $ 9,090
========== ========== ========== ==========
Diluted earnings per common share $ .59 $ .47 $ 1.16 $ .92
========== ========== ========== ==========
</TABLE>
-8-
<PAGE> 9
ITEM 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
-----------------------------------------------
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
The following discussion should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto, and
with the Company's audited financial statements and notes thereto for the year
ended December 31, 1998.
SUMMARY OF EARNINGS
- -------------------
Consolidated net income for the second quarter of 1999 was $5,647,000,
up $997,000 or 21.4% from the $4,650,000 earned during the second quarter of
1998. On a per share basis, net income was $.59, up from $.47 in the same
period of the prior year. Greater net income was primarily a result of
increased net interest income. Increased noninterest income was largely
offset by greater noninterest expense and an increased provision for possible
loan losses.
Net income for the first half of 1999 was $11,136,000, up $2,046,000 or
22.5% from $9,090,000 for the first half of 1998. On a per share basis, net
income was $1.16, up from $.92 in the first half of 1998. Greater net
interest income and higher noninterest income were the primary contributors
to the improved earnings performance. The Company's loan loss provision was
$3,005,000, up from $1,900,000 for the first six months of 1998 because of
significant loan growth. Loans increased $114 million in the first half of
1999 compared with $45 million in the same period in 1998. Total noninterest
expenses were $13,560,000 for the first six months of 1999, up from
$11,359,000 for the same period in 1998 due to Company growth and operating
costs for the Belleville office which opened in September 1998.
For the quarter and six months ended June 30, 1999, the Company's
return on average assets was 1.58% and 1.57%, up from 1.44% and 1.40% in the
same periods in 1998, respectively. At June 30, 1999, total equity capital was
$107.8 million, up from $101.1 million at June 30, 1998. The Company's
return on average equity was 20.67% and 20.14% for the quarter and six months
ended June 30, 1999, up from 18.67% and 18.53% for the same periods in 1998,
respectively. Total assets reached $1.50 billion with loans up to $1.04
billion at the end of June, 1999.
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 $64,000, $68,000,
$127,000 and $136,000 for the three months ended June 30, 1999 and 1998, and
for the six months ended June 30, 1999 and 1998,
-9-
<PAGE> 10
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, 1999 AND 1998
- -----------------------------------------
Total tax-equivalent interest income for the three months ended June
30, 1999 was $26,732,000, up $1,193,000 compared to the same period in 1998.
The $146 million increase in the volume of average loans outstanding was
primarily responsible for the increase in interest earnings for the second
quarter of 1999. Overall asset yields were 7.81% in the second quarter of
1999, down 36 basis points from 8.17% earned in the same period in 1998 as
all asset yields declined from prior year levels. Funding the Company's loan
growth were increased money market deposits.
Total interest expense for the second quarter of 1999 was $12,848,000,
down $527,000 from $13,375,000 in the second three months of 1998. Reducing
the effects of the increased money market account interest expense were
lower rates paid on all fund sources.
Overall tax-equivalent net interest income increased $1,720,000 as
interest income rose $1,193,000 and interest expense declined $527,000. The
Company's net interest margin improved to 4.05%, up 16 basis points from
3.89% in the same period in 1998.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
- ---------------------------------------
Total tax equivalent interest income for the first six months of 1999
was $52,901,000, up $2,142,000 from $50,759,000 in the same period in 1998.
The $121 million increase in average loans was primarily responsible for
generating the increase in interest earnings from 1998 to 1999.
Across-the-board lower asset yields limited the increase in interest
earnings. Overall asset yields were 7.81% for the first six months of 1999,
down from 8.14% for the same period in 1998. Funding the asset growth in the
first half of 1999 were greater money market deposits.
Total interest expense for the first half of 1999 was $25,600,000, down
$1,270,000 from $26,870,000 in the same period in 1998. Additional interest
expense generated by increased money market deposits was more than offset by
reduced time deposits and the lower rates paid on all fund sources in 1999.
Overall rates paid on total interest bearing liabilities declined to 4.35%
from 4.94% in the first six months of 1998.
In summary, total tax-equivalent net interest income increased
$3,412,000 as interest income improved $2.1 million and interest expense grew
$1.3 million. The Company's net interest margin for the first six months of
1999 was 4.02%, up from 3.83% in the same period in 1998.
-10-
<PAGE> 11
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------------------------
1999 1998
------------------------------------- ------------------------------------
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 $1,033,976 $21,617 8.38% $ 888,423 $19,777 8.93%
Tax-exempt<F3>
Held to maturity securities
Taxable 29,966 471 6.29 41,252 653 6.34
Tax-exempt<F3> 8,143 207 10.17 8,391 219 10.43
Available for sale securities 276,724 4,145 6.00 272,936 4,300 6.31
Trading account securities 1,307 21 6.44 625 10 6.61
Federal Funds sold and other short-
term investments 22,653 271 4.79 42,071 580 5.53
---------- ------- ---------- -------
Total interest-earning assets 1,372,769 26,732 7.81 1,253,698 25,539 8.17
------- -------
Noninterest-earning assets:
Cash and due from banks 26,643 24,045
Bank premises and equipment 26,171 14,897
Other assets 21,241 18,935
Allowance for possible loan losses (20,101) (15,460)
---------- ----------
Total assets $1,426,723 $1,296,115
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 29,027 $ 88 1.21% $ 25,409 $ 109 1.72%
Money market accounts 729,014 7,617 4.19 605,435 7,192 4.76
Savings deposits 26,833 196 2.93 24,204 177 2.93
Time deposits of $100,000 or more 35,642 408 4.60 35,221 465 5.29
Other time deposits 280,091 3,410 4.88 325,709 4,382 5.40
---------- ------- ---------- -------
Total interest-bearing
deposits 1,100,607 11,719 4.27 1,015,978 12,325 4.87
Federal funds purchased, repurchase
agreements and other short-term
borrowings 80,033 876 4.38 62,019 771 4.99
Guaranteed Preferred Beneficial
Interests in Subordinated
Debentures 14,950 253 6.76 14,950 279 7.46
---------- ------- ---------- -------
Total interest-bearing
liabilities 1,195,590 12,848 4.31 1,092,947 13,375 4.91
------- -------
Noninterest-bearing liabilities:
Demand deposits 120,275 101,209
Other liabilities 1,589 2,332
Shareholders' equity 109,269 99,627
---------- ----------
Total liabilities and
shareholders' equity $1,426,723 $1,296,115
========== ==========
Net interest income $13,884 $12,164
======= =======
Net interest margin 4.05% 3.89%
===== =====
<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 $64,000 and
$68,000 for the three months ended June 30, 1999 and 1998, respectively.
</TABLE>
-11-
<PAGE> 12
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------------------------
1999 1998
------------------------------------- ------------------------------------
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 $ 990,482 $41,743 8.49% $ 869,518 $38,619 8.95%
Tax-exempt<F3>
Held to maturity securities
Taxable 30,337 950 6.28 44,374 1,403 6.35
Tax-exempt<F3> 8,130 414 10.19 8,464 439 10.37
Available for sale securities 319,984 9,420 5.91 304,812 9,530 6.28
Trading account securities 943 31 6.61 745 26 6.97
Federal Funds sold and other short-
term investments 14,443 343 4.79 26,980 742 5.50
---------- ------- ---------- -------
Total interest-earning assets 1,364,319 52,901 7.81 1,254,893 50,759 8.14
------- -------
Noninterest-earning assets:
Cash and due from banks 25,229 23,973
Bank premises and equipment 24,321 14,375
Other assets 22,377 20,322
Allowance for possible
loan losses (19,273) (15,241)
---------- ----------
Total assets $1,416,973 $1,298,322
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 28,153 $ 180 1.29% $ 24,652 $ 210 1.72%
Money market accounts 722,311 15,017 4.19 596,295 14,099 4.77
Savings deposits 26,254 384 2.95 23,855 349 2.95
Time deposits of $100,000 or more 35,978 849 4.76 34,524 914 5.34
Other time deposits 284,506 7,036 4.99 331,828 8,955 5.44
---------- ------- ---------- -------
Total interest-bearing
deposits 1,097,202 23,466 4.31 1,011,154 24,527 4.89
Federal funds purchased, repurchase
agreements and other short-term
borrowings 75,201 1,626 4.35 70,924 1,776 5.04
Convertible debentures
Guaranteed Preferred Beneficial
Interests in Subordinated
debentures 14,950 508 6.80 14,950 567 7.58
---------- ------- ---------- -------
Total interest-bearing
liabilities 1,187,353 25,600 4.35 1,097,028 26,870 4.94
------- -------
Noninterest-bearing liabilities:
Demand deposits 116,344 99,638
Other liabilities 2,704 3,557
Shareholders' Equity 110,572 98,099
---------- ----------
Total liabilities and
shareholders' equity $1,416,973 $1,298,322
========== ==========
Net interest income $27,301 $23,889
======= =======
Net interest margin 4.02% 3.83%
===== =====
<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 $127,000 and
$136,000 for the six months ended June 30, 1999 and 1998, respectively.
</TABLE>
-12-
<PAGE> 13
The following table indicates, on a tax-equivalent basis, the changes in
interest income and interest expense which are attributable to changes in
average volume and changes in average rates, in comparison with the same
period in the preceding year. The change in interest due to the combined
rate-volume variance has been allocated to rate and volume changes in
proportion to the absolute dollar amounts of the changes in each.
<TABLE>
<CAPTION>
CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
COMPARED TO COMPARED TO
JUNE 30, 1998 JUNE 30, 1998
------------------------------------- -----------------------------------
INCREASE (DECREASE) ATTRIBUTABLE TO CHANGE IN:
--------------------------------------------------------------------------------
YIELD/ NET YIELD/ NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
-------- -------- ------ ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans<F1><F2> $3,108 $(1,268) $1,840 $ 5,178 $(2,054) $ 3,124
Held to maturity securities:
Taxable (177) (5) (182) (438) (15) (453)
Tax-exempt<F1> (7) (5) (12) (17) (8) (25)
Available for sale securities 59 (214) (155) 461 (571) (110)
Trading account securities 11 11 6 (1) 5
Federal funds sold and other
short-term investments (239) (70) (309) (312) (87) (399)
------ ------- ------ ------- ------- -------
Total interest income 2,755 (1,562) 1,193 4,878 (2,736) 2,142
------ ------- ------ ------- ------- -------
INTEREST PAID ON:
NOW accounts 14 (35) (21) 27 (57) (30)
Money market accounts 1,352 (927) 425 2,760 (1,842) 918
Savings 19 19 35 35
Time deposits of $100,000 or more 6 (63) (57) 38 (103) (65)
Other time deposits (576) (396) (972) (1,215) (704) (1,919)
Federal funds purchased,
repurchase agreements and
other short-term
borrowings. 224 (119) 105 106 (256) (150)
Long-term borrowings (26) (26) (59) (59)
------ ------- ------ ------- ------- -------
Total interest expense 1,039 (1,566) (527) 1,751 (3,021) (1,270)
------ ------- ------ ------- ------- -------
Net interest income $1,716 $ 4 $1,720 $ 3,127 $ 285 $ 3,412
====== ======= ====== ======= ======= =======
<FN>
- --------------------------------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustments were $64,000,
$68,000, $127,000 and $136,000 for the three months ended June 30,
1999 and 1998, and for the six months ended June 30, 1999 and 1998,
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 1999 was
$1,256,000, up from $1,000,000 last year. For the first half of 1999 the
provision for possible loan losses was $3,005,000, up from $1,900,000 for the
same period last year. Greater loan growth and some net loan charge-offs
during 1999 as compared to 1998 resulted in the higher provision expense.
The annualized ratio of net charge-offs to average loans for the first half
of 1999 was .16%, down from .26% last year, while corresponding net loan
charge-offs were $771,000 and $1,129,000, respectively.
The allowance for possible loan losses was $20.4 million or 1.96% of loans
outstanding at June 30, 1999. This compared to $18.1 million or 1.96% at the
end of 1998, and $15.7 million or 1.76% at June 30, 1998. 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>
<CAPTION>
Summary of Loan Loss Experience and Related Information
-------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- --------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 19,677 $ 15,302 $ 18,144 $ 14,892
Loans charged off (888) (695) (1,355) (1,413)
Recoveries of loans previously
charged off 333 56 584 284
---------- -------- ---------- --------
Net loans charged off (555) (639) (771) (1,129)
---------- -------- ---------- --------
Provision for possible loan losses 1,256 1,000 3,005 1,900
---------- -------- ---------- --------
Allowance for possible loan losses
(end of period) $ 20,378 $ 15,663 $ 20,378 $ 15,663
========== ======== ========== ========
Loans outstanding:
Average $1,033,976 $888,423 $ 990,482 $869,518
End of period 1,039,937 891,799 1,039,937 891,799
Ratio of allowance for possible
loan losses to loans outstanding:
Average 1.97% 1.76% 2.06% 1.80%
End of period 1.96 1.76 1.96 1.76
Ratio of net charge-offs to
average loans outstanding, annualized: .21 .29 .16 .26
</TABLE>
-14-
<PAGE> 15
The following table summarizes nonperforming assets at the dates
indicated:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1999 1998 1998
---------- ------------ --------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Nonaccrual loans $ 972 $ 1,457 $ 3,226
Loans past due 90 days or more 13
Restructured loans 104 112 124
---------- -------- --------
Total nonperforming loans 1,089 1,569 3,350
Other real estate 10 160 240
---------- -------- --------
Total nonperforming assets $ 1,099 $ 1,729 $ 3,590
========== ======== ========
Loans, net of unearned discount $1,039,937 $925,961 $891,799
Allowance for possible loan
losses to loans 1.96% 1.96% 1.76%
Nonperforming loans to loans .10 .17 .38
Allowance for possible loan losses
to nonperforming loans 1,871.26 1,156.41 467.55
Nonperforming assets to loans
and foreclosed assets .11 .19 .40
</TABLE>
NONINTEREST INCOME
- ------------------
For the second quarter of 1999 total noninterest income was $3,599,000, up
sharply from $1,981,000 in the same period in 1998. Net realized securities
gains of $415,000 were down $94,000 from $509,000 in gains for the second
quarter of 1998. Trading profits and commissions for the second quarter of
1999 were $1,587,000, up from $186,000 in the same period in 1998. Hedging
activities begun in the first quarter of 1999 provided $1.2 million of
trading profits and were primarily responsible for the overall increase in
noninterest income for the second quarter.
For the first six months of 1999 total noninterest income was $7,160,000, up
significantly from $3,700,000 in the first half of 1998. Net losses of
$415,000 were realized on securities sales in 1999 versus net gains of
$681,000 on sales of available for sale securities in the first half of 1998.
During the first quarter of 1999 the Company entered into short positions in
various futures contracts to hedge against anticipated higher interest rates
and the resulting potential impact on the securities portfolio. Realized
gains on these interest-rate derivative trading activities generated trading
profits and commissions of approximately $3.9 million for the first six
months of 1999. Other portions of 1999 noninterest income including service
charges, merchant credit card fees and leasing income were also up from prior
year levels.
NONINTEREST EXPENSE
- -------------------
Total noninterest expense for the second quarter of 1999 was $7,142,000, up
$1,340,000 from $5,802,000 in the second three months of 1998. For the first
half of 1999 total noninterest expenses were $13,560,000, up $2,201,000 from
the same period in 1998. Greater personnel and benefit costs were primarily
responsible for the increased overhead costs. Increases were also
experienced in most other categories of noninterest costs. Overall Company
growth and operating costs for the Belleville office which opened in
September 1998 combined to increase total overhead expenses.
-15-
<PAGE> 16
CAPITAL MANAGEMENT AND RESOURCES
- --------------------------------
As of June 30 1999, the Company's total shareholders' equity was $107.8
million. New capital was provided by the Company's 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
155,500 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, 1999 and December 31, 1998 the Company's Tier 1
capital was 11.07% and 11.96% of risk-weighted assets, and total risk-based
capital was 12.32% and 13.22% 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, 1999 and December 31,
1998, the Company's leverage ratio was 8.64% and 8.56%, 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 and its subsidiaries rely upon
computers for the daily conduct of their 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. In order for computer systems to
function properly, systems must be Year 2000 compliant or able to accurately
identify date information in the 20th and 21st centuries. The Company has
defined Year 2000 compliant as the ability of software and hardware systems
to correctly receive, process and provide date data within and between the
20th and 21st centuries. The inability to accurately process data related
information would have a material impact on the Company's operation and
financial condition. To mitigate the risks of a Year 2000 failure, a Year
2000 action plan has been developed and implemented.
Company Readiness - A comprehensive plan for addressing Year 2000 issues was
formulated, including allocating sufficient human and financial resources to
insure successful implementation. A detailed inventory was conducted of all
hardware and software products that are utilized by the Company. An
inventory of equipment that uses embedded computer chips (i.e. facilities)
has been completed. Hardware and software systems that possess date
sensitive applications were identified and prioritized based on their level
of importance in maintaining financial integrity and in delivery of services
to the Company's customers. The renovation phase of the plan included
upgrading necessary systems to Year 2000 compliant status, which is 100%
complete. The Company does not possess any internally developed or
programmed software or hardware. All hardware and software has been provided
by third parties under licensing agreements. Upgraded systems that are
certified by the vendor as Year 2000 compliant have and will be installed as
needed. The testing phase of the plan includes testing all critical hardware
and software systems to validate the compliant and upgraded systems. In
addition, systems have and will continue to be tested for compatibility with
other system interfaces.
Year 2000 Status - To date, all critical systems have been tested. Although
most of the Company's significant systems, including general ledger, deposits
and loans would be materially impacted by a year 2000 failure, this risk is
mitigated by vendor Year 2000 certifications and comprehensive internal
testing. Testing will continue during 1999 on less significant systems and
interfaces with outside parties.
Third Party Exposure - The Company has gathered information about the Year
2000 compliance status of customers with significant credit relationships and
with providers of certain third party services. To date, the Company is not
aware of any third party service providers or loan customers that would
materially impact the Company's results of operations, liquidity or capital
resources. However, the Company has no means of ensuring that these entities
will be Year 2000 ready. The inability of third parties to complete their
Year 2000 programs in a timely manner could materially impact the Company.
Contingency Planning - The Company has existing business continuity plans
that address its response to disruption to business due to natural disasters,
utility outages or other occurrences. The Company has developed business
continuity plans specific to Year 2000 issues that are based on these
existing plans. The plans involve, among other actions, manual workarounds
and adjusting staffing strategies. Testing these plans is scheduled to take
place in the third quarter of 1999. In addition, funding plans have been
developed to insure that adequate levels of liquid assets are available for
customers.
Year 2000 Costs - The total cost of the Year 2000 project is estimated at
$200,000 and is funded through operating cash flows. To date, the Company
has incurred approximately $160,000 related to all phases of the Year 2000
project.
-17-
<PAGE> 18
Overall Year 2000 Risks - Management of the Company believes it has a
reasonably effective program in place to resolve any substantial Year 2000
issues which it has identified. Disruptions in the economy generally
resulting from Year 2000 issues could adversely affect the Company. The
Company could be subject to litigation for computer system failures of its
own or a third party with which it does business. If a major borrower
experiences disruption in its own business, it could have a material impact
on the Company. The amount of potential liability cannot be reasonably
estimated at this time.
This is a Year 2000 Readiness Disclosure pursuant to the Year 2000 Readiness
Disclosure Act. Forward-looking statements contained in this Year 2000
discussion should be read in conjunction with the cautionary statements
included below under the caption "Forward-Looking Statements."
FORWARD-LOOKING STATEMENTS
Certain statements in this report that relate to the plans, objectives or
future performance of Mississippi Valley Bancshares, Inc. may be deemed to be
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Such statements are based on Mississippi
Valley Bancshares, Inc.'s current management expectations. Actual strategies
and results in future periods may differ materially from those currently
expected because of various risks and uncertainties. Additional discussion
of factors affecting Mississippi Valley Bancshares, Inc.'s business and
prospects is contained in the Company's periodic filings with the Securities
and Exchange Commission.
-18-
<PAGE> 19
PART II. OTHER INFORMATION
- ---------------------------
ITEM 4. Submission of Matters to a Vote
-------------------------------
of Security Holders
-------------------
On April 21, 1999, 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>
Andrew N. Baur 7,517,434 79,081
Louis N. Goldring 7,517,234 79,281
Richard T. Grote 7,517,234 79,281
Mont S. Levy 7,517,434 79,081
Lewis B. Shepley 7,517,434 79,081
</TABLE>
b. Approved an amendment to the Corporation's 1991 Stock Option Plan
with 7,342,099 shares voted in favor; 239,344 shares voted against,
and 15,072 shares abstained.
c. Ratified the selection of Ernst & Young LLP as independent
accountants for 1999 with 7,486,210 shares voted in favor, 7,656
shares voted against and 102,649 shares abstained.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: NONE
(b) Reports on Form 8-K: NONE
-19-
<PAGE> 20
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 6, 1999
--------------
---------------------------------
Paul M. Strieker, Executive Vice
President, Controller and Chief
Financial Officer (on behalf of
the Registrant and as Principal
Financial and Accounting Officer)
-20-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 30,656
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 72,050
<TRADING-ASSETS> 1,127
<INVESTMENTS-HELD-FOR-SALE> 265,192
<INVESTMENTS-CARRYING> 36,870
<INVESTMENTS-MARKET> 37,502
<LOANS> 1,039,937
<ALLOWANCE> 20,378
<TOTAL-ASSETS> 1,499,463
<DEPOSITS> 1,259,023
<SHORT-TERM> 95,538
<LIABILITIES-OTHER> 22,158
<LONG-TERM> 14,950
0
0
<COMMON> 9,643
<OTHER-SE> 98,151
<TOTAL-LIABILITIES-AND-EQUITY> 1,499,463
<INTEREST-LOAN> 41,742
<INTEREST-INVEST> 10,658
<INTEREST-OTHER> 374
<INTEREST-TOTAL> 52,774
<INTEREST-DEPOSIT> 23,465
<INTEREST-EXPENSE> 25,600
<INTEREST-INCOME-NET> 27,174
<LOAN-LOSSES> 3,005
<SECURITIES-GAINS> (415)
<EXPENSE-OTHER> 13,560
<INCOME-PRETAX> 17,769
<INCOME-PRE-EXTRAORDINARY> 11,136
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,136
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 4.02
<LOANS-NON> 972
<LOANS-PAST> 13
<LOANS-TROUBLED> 104
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,144
<CHARGE-OFFS> 1,355
<RECOVERIES> 584
<ALLOWANCE-CLOSE> 20,378
<ALLOWANCE-DOMESTIC> 10,757
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 9,621
</TABLE>
