<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, 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 NOVEMBER 5, 1999:
Common Stock, $1.00 par value 9,288,762
----------------------------- ------------------------
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 --
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of
Income -- Quarters Ended September 30, 1999
and September 30, 1998 and Nine Months Ended
September 30, 1999 and September 30, 1998 4
Consolidated Statements of Changes in
Shareholders' Equity -- Nine Months
Ended September 30, 1999 and September 30, 1998 5
Condensed Consolidated Statements of
Cash Flows -- Nine Months Ended
September 30, 1999 and September 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 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
- ---------
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
- --------------------------------
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<CAPTION>
September 30, 1999 December 31, 1998
(Derived from
(Unaudited) Audited Statements)
----------- -------------------
(dollars in thousands)
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 29,232 $ 27,017
Federal funds sold 53,130
Held to maturity securities
(fair value of $46,234 and
$40,283, respectively) 45,818 38,815
Available for sale securities 293,770 400,087
Trading account securities 582 302
Loans, net of
unearned income 1,067,765 925,961
Allowance for possible loan losses 20,927 18,144
---------- ----------
Net loans 1,046,838 907,817
Premises and equipment 33,817 20,755
Other assets 30,216 35,264
---------- ----------
TOTAL ASSETS $1,533,403 $1,430,057
========== ==========
LIABILITIES
- -----------
Deposits:
Non-interest bearing $ 131,022 $ 125,235
Interest bearing 1,167,648 1,086,570
---------- ----------
Total deposits 1,298,670 1,211,805
Securities sold under agreements
to repurchase 37,560 41,605
Other short-term borrowings 64,392 36,853
Guaranteed preferred beneficial interests
in subordinated debentures 14,950 14,950
Other liabilities 7,578 15,066
---------- ----------
TOTAL LIABILITIES 1,423,150 1,320,279
---------- ----------
SHAREHOLDERS' EQUITY
- --------------------
Common stock-par value $1
Authorized 20,000,000 shares,
issued and 9,653,662 in 1999
and 9,631,312 in 1998 9,653 9,631
Capital surplus 20,117 19,627
Retained earnings 92,895 79,003
Accumulated other comprehensive income (loss) (416) 6,265
Treasury stock, at cost, 364,900 shares
at September 30, 1999 and 139,400 shares
at December 31, 1998 (11,996) (4,748)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 110,253 109,778
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,533,403 $1,430,057
========== ==========
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,
---------------------- -----------------
- -----
1999 1998 1999
1998
------- ------- ------- --
- -----
(dollars in thousands, except per share
data)
<S> <C> <C> <C>
<C>
Interest income:
Interest and fees on loans $22,516 $20,172 $64,258
$58,791
Held to maturity securities:
Taxable 523 572 1,474
1,975
Tax-exempt 127 144 414
447
Available for sale securities 4,272 4,767 13,692
14,297
Other 989 512 1,363
1,280
------- ------- ------- --
- -----
TOTAL INTEREST INCOME 28,427 26,167 81,201
76,790
------- ------- ------- --
- -----
Interest expense:
Deposits 12,835 12,551 36,300
37,078
Short-term borrowings 1,228 728 2,855
2,504
Long-term borrowings 267 271 775
838
------- ------- ------- --
- -----
TOTAL INTEREST EXPENSE 14,330 13,550 39,930
40,420
------- ------- ------- --
- -----
NET INTEREST INCOME 14,097 12,617 41,271
36,370
Provision for possible loan losses 803 900 3,808
2,800
------- ------- ------- --
- -----
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 13,294 11,717 37,463
33,570
------- ------- ------- --
- -----
Other income:
Service charges 543 478 1,658
1,424
Securities gains/(losses), net on:
Sales of held to maturity securities
Sales of available for sale securities (660) (1,075)
681
Trading profits and commissions 1,284 527 5,921
1,135
Other 954 788 2,777
2,253
------- ------- ------- --
- -----
2,121 1,793 9,281
5,493
------- ------- ------- --
- -----
Other expenses:
Employee compensation and
other benefits 3,418 2,864 10,201
8,760
Net occupancy 407 311 1,159
987
Equipment 433 333 1,196
983
Advertising 311 274 903
760
Other 2,342 1,970 7,012
5,621
------- ------- ------- --
- -----
6,911 5,752 20,471
17,111
------- ------- ------- --
- -----
INCOME BEFORE INCOME TAXES 8,504 7,758 26,273
21,952
Income taxes 3,123 2,823 9,756
7,927
------- ------- ------- --
- -----
NET INCOME $ 5,381 $ 4,935 $16,517
$14,025
======= ======= =======
=======
Earnings per common share:
Basic $ .58 $ .52 $ 1.76 $
1.47
Diluted $ .57 $. 50 $ 1.73 $
1.42
See accompanying notes.
</TABLE>
-4-
<PAGE> 5
<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
-----------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------
YEAR TO DATE SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
Accumulated
Other Total
Common Stock Compre- Share-
Compre-
------------------ Capital Retained hensive Treasury holders'
hensive
Shares Amount Surplus Earnings Income Stock Equity
Income
--------- ------ ------- -------- ------- --------- --------
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
1998
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 (2,622)
(2,622)
Cash dividends on:
common stock (2,295)
(2,295)
Other comprehensive
income
Unrealized gain on
available for sale
securities, net of tax 8,082 8,082
8,082
--------- ------ ------- ------- ------- -------- --------
- -------
BALANCE AT SEPTEMBER 30, 1998 9,627,512 $9,627 $18,829 $75,271 $10,568 $ (2,622) $111,673
========= ====== ======= ======= ======= ======== ========
Comprehensive Income
$22,107
=======
1999
BALANCE AT JANUARY 1, 1999 9,631,312 $9,631 $19,627 $79,003 $ 6,265 $ (4,748) $109,778
Net income 16,517 16,517
$16,517
Issuance of common stock 22,350 22 490 512
Treasury stock purchased (7,248)
(7,248)
Cash dividends on:
common stock (2,625)
(2,625)
Other comprehensive
income
Unrealized loss, on
available for sale
securities, net of tax (6,681)
(6,681) (6,681)
--------- ------ ------- ------- ------- -------- --------
- -------
BALANCE AT SEPTEMBER 30, 1999 9,653,662 $9,653 $20,117 $92,895 $ (416) $(11,996) $110,253
========= ====== ======= ======= ======= ======== ========
Comprehensive Income
$ 9,836
=======
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,
---------------------------------
1999 1998
--------- ---------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net income $ 16,517 $ 14,025
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,808 2,800
Provision for depreciation and amortization 1,863 1,326
Accretion of discounts and amortization of
premiums on securities (1,164) 51
Realized securities (gains) and losses, net 1,075 (681)
Net (increase) decrease in trading account securities (280) 1,251
Net (increase) decrease in interest receivable 1,413 (11)
Increase (decrease) in interest payable 328 (84)
Other, net (1,275) (907)
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 22,285 17,770
--------- ---------
INVESTING ACTIVITIES
- --------------------
Proceeds from maturities of held to maturity securities 2,995 15,525
Purchases of held to maturity securities (9,909)
Purchases of available for sale securities (295,966) (166,633)
Proceeds from sales, paydowns and maturities of
available for sale securities 392,006 148,121
Purchases of premises and equipment (14,124) (4,136)
Increase in loans outstanding, net (142,830) (49,877)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (67,828) (57,000)
--------- ---------
FINANCING ACTIVITIES
- --------------------
Net increase in deposits 86,865 26,256
Net increase in repurchase agreements
and other short-term borrowings 23,494 2,777
Proceeds from sale of common stock 402 1,376
Purchase of treasury stock (7,248) (2,622)
Cash dividends (2,625) (2,295)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 100,888 25,492
--------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 55,345 (13,738)
Cash and cash equivalents at beginning of period 27,017 47,442
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 82,362 $ 33,704
========= =========
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
Following is a summary of other comprehensive income components and
related income tax effects:
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1999
--------------------------------------------
Before-Tax Tax Net-of-Tax
Amount (Benefit) Amount
---------- ------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Unrealized losses on available
for sale securities $(11,353) $(3,973) $(7,380)
Less: reclassification adjustment
for losses realized in net
income (1,075) (376) (699)
-------- ------- -------
Net unrealized losses (10,278) (3,597) (6,681)
-------- ------- -------
Other comprehensive income $(10,278) $(3,597) $(6,681)
======== ======= =======
<CAPTION>
For the Nine Months Ended September 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 $ 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
======== ======= =======
</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 Nine Months
Ended
September 30, September
30,
------------------------- ----------------
- ---------
1999 1998 1999
1998
---------- ---------- ---------- -
- ---------
(dollars in thousands, except per share
data)
<S> <C> <C> <C>
<C>
BASIC:
Average common shares outstanding 9,313,980 9,573,398 9,391,598
9,563,346
========== ========== ==========
==========
Net income $ 5,381 $ 4,935 $ 16,517 $
14,025
========== ========== ==========
==========
Basic earnings per common share $ .58 $ .52 $ 1.76 $
1.47
========== ========== ==========
==========
</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 Nine Months
Ended
September 30, September
30,
------------------------- ----------------
- ---------
1999 1998 1999
1998
---------- ---------- ---------- -
- ---------
(dollars in thousands, except per share
data)
<S> <C> <C> <C>
<C>
DILUTED:
Average common shares outstanding 9,313,980 9,573,398 9,391,598
9,563,346
Average common stock equivalents of
options outstanding-based on the
treasury stock method using market price 142,267 299,367 148,177
322,364
---------- ---------- ---------- -
- ---------
9,456,247 9,872,765 9,539,775
9,885,710
========== ========== ==========
==========
Net income $ 5,381 $ 4,935 $ 16,517 $
14,025
========== ========== ==========
==========
Diluted earnings per common share $ .57 $ .50 $ 1.73 $
1.42
========== ========== ==========
==========
</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 third quarter of 1999 was $5,381,000, up
$446,000 or 9.0% from the $4,935,000 earned during the third quarter of 1998.
On a per share basis, net income was $.57, up from $.50 in the same period of
the prior year. Greater net income was primarily a result of increased net
interest income. Increased noninterest income and a reduced loan loss
provision were more than offset by greater noninterest expense.
Net income for the first nine months of 1999 was $16,517,000, up
$2,492,000 or 17.8% from $14,025,000 for the first nine months of 1998. On a
per share basis, net income was $1.73, up from $1.42 in the first nine months
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 $3,808,000, up from $2,800,000 for the first nine
months of 1998 because of significant loan growth. Loans increased $142
million in the first nine months of 1999 compared with $49 million in the
same period in 1998. Total noninterest expenses were $20,471,000 for the
first nine months of 1999, up from $17,111,000 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 nine months ended September 30, 1999, the Company's
return on average assets was 1.42% and 1.52%, compared with 1.49% and 1.43%
in the same periods in 1998, respectively. At September 30, 1999, total
equity capital was $110.3 million, down slightly from $111.7 million at
September 30, 1998. The Company's return on average equity was 19.55% and
19.95% for the quarter and nine months ended September 30, 1999, up from
18.90% and 18.66% for the same period in 1998, respectively. Total assets
reached $1.533 billion with loans up to $1.068 billion at the end of
September, 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 $56,000, $63,000,
$182,000 and $199,000 for the three months and nine
-9-
<PAGE> 10
months ended September 30, 1999 and 1998, 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, 1999 and 1998
- ----------------------------------------------
Total tax equivalent interest income for the three months ended September
30, 1999 was $28,483,000, up $2,253,000 compared to the same period in 1998.
The $156 million increase in the volume of average loans outstanding was
primarily responsible for the increase in interest earnings for the third
quarter of 1999. Overall asset yields were 7.79% in the third quarter of
1999, down 35 basis points from 8.14% earned in the same period in 1998 as
all asset yields declined from prior year levels. Funding the Company's loan
growth were increased deposits, primarily money market deposits.
Total interest expense for the third quarter of 1999 was $14,330,000,
down $780,000 from $13,550,000 in the third quarter of 1998. Reducing the
effects of the increased money market account and short-term borrowing
interest expense were lower rates paid on all fund sources.
Overall tax equivalent net interest income increased $1,473,000 as
interest income rose $2,253,000 and interest expense rose $780,000. The
Company's net interest margin declined slightly to 3.87%, down 7 basis points
from 3.94% in the same period in 1998.
Nine months ended September 30, 1999 and 1998
- ---------------------------------------------
Total tax equivalent interest income for the first nine months of 1999
was $81,384,000, up $4,395,000 compared to the same period in 1998. The $133
million increase in the volume of average loans outstanding 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 7.80% for the first nine months of 1999,
down from 8.14% for the same period in 1998. Funding the asset growth were
greater money market deposits and short term borrowings.
Total interest expense for the nine months ended September 30, 1999 was
$39,931,000, down $489,000 from $40,420,000 in the same period in 1998.
Additional interest expense generated by increased money market deposits and
short term borrowings 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 4.38% from 4.90% in the first nine
months in 1998.
In summary, total tax equivalent net interest income increased $4,884,000
as interest income improved $4.4 million and interest expense declined $.5
million. The Company's net interest margin for the first nine months of 1999
was 3.97%, up from 3.87% in the same period in 1998.
-10-
<PAGE> 11
<TABLE>
AVERAGE, BALANCES, INTEREST AND RATES
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 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 $1,047,643 $22,514 8.53% $ 891,483 $20,172
8.98%
Tax-exempt<F3> 65 2 14.56
Held to maturity securities
Taxable 33,457 524 6.25 35,669 572
6.40
Tax-exempt<F3> 7,173 182 10.15 8,066 207
10.27
Available for sale securities 287,540 4,272 5.91 308,294 4,767
6.16
Trading account securities 725 11 6.06 841 13
6.12
Federal Funds sold and other short-
term investments 75,814 978 5.12 35,814 499
5.53
---------- ------- ---------- -------
Total interest-earning assets 1,452,417 28,483 7.79 1,280,167 26,230
8.14
------- -------
Noninterest-earning assets:
Cash and due from banks 29,440 24,182
Bank premises and equipment 31,062 16,195
Other assets 21,633 19,996
Allowance for possible loan losses (20,684) (16,003)
---------- ----------
Total assets $1,513,868 $1,324,537
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 27,418 $ 79 1.15% $ 25,802 $ 112
1.72%
Money market accounts 734,327 7,975 4.31 647,968 7,716
4.72
Savings deposits 27,758 208 2.97 24,309 183
2.98
Time deposits of $100,000 or more 44,239 522 4.68 35,785 470
5.21
Other time deposits 332,481 4,051 4.83 306,009 4,070
5.28
---------- ------- ---------- -------
Total interest-bearing deposits 1,166,223 12,835 4.37 1,039,873 12,551
4.79
Federal funds purchased, repurchase
agreements and other short-term
borrowings 98,702 1,229 4.94 58,146 728
4.97
Guaranteed Preferred Beneficial
Interests in Subordinated Debentures 14,950 266 7.13 14,950 271
7.26
---------- ------- ---------- -------
Total interest-bearing liabilities 1,279,875 14,330 4.44 1,112,969 13,550
4.83
------- -------
Noninterest-bearing liabilities:
Demand deposits 124,210 104,127
Other liabilities (312) 3,009
Shareholders' equity 110,095 104,432
---------- ----------
Total liabilities and
shareholders' equity $1,513,868 $1,324,537
========== ==========
Net interest income $14,153 $12,680
======= =======
Net interest margin 3.87%
3.94%
=====
=====
<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 $56,000 and
$63,000 for the three months ended September 30, 1999 and 1998,
respectively.
</TABLE>
-11-
<PAGE> 12
<TABLE>
AVERAGE BALANCES, INTEREST AND RATES
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 $1,009,745 $64,257 8.51% $ 876,920 $58,791
8.96%
Tax-exempt<F3> 22 2 14.56
Held to maturity securities
Taxable 31,388 1,474 6.27 41,440 1,975
6.36
Tax-exempt<F3> 7,807 596 10.18 8,330 646
10.34
Available for sale securities 309,051 13,692 5.91 305,985 14,297
6.24
Trading account securities 870 42 6.46 778 39
6.66
Federal Funds sold and other short-
term investments 35,125 1,321 5.03 29,957 1,241
5.54
---------- ------- ---------- -------
Total interest-earning assets 1,394,008 81,384 7.80 1,263,410 76,989
8.14
------- -------
Noninterest-earning assets:
Cash and due from banks 26,648 24,044
Bank premises and equipment 26,593 14,988
Other assets 22,126 20,212
Allowance for possible loan losses (19,749) (15,498)
---------- ----------
Total assets $1,449,626 $1,307,156
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 27,905 $ 259 1.24% $ 25,039 $ 322
1.72%
Money market accounts 726,360 22,992 4.23 613,709 21,815
4.75
Savings deposits 26,761 593 2.96 24,008 532
2.96
Time deposits of $100,000 or more 38,762 1,370 4.73 34,949 1,384
5.30
Other time deposits 300,673 11,087 4.93 323,127 13,025
5.39
---------- ------- ---------- -------
Total interest-bearing deposits 1,120,461 36,301 4.33 1,020,832 37,078
4.86
Federal funds purchased, repurchase
agreements and other short-term
borrowings 83,122 2,855 4.59 66,618 2,504
5.02
Guaranteed Preferred Interests in
Subordinated Debentures 14,950 775 6.91 14,950 838
7.47
---------- ------- ---------- -------
Total interest-bearing liabilities 1,218,533 39,931 4.38 1,102,400 40,420
4.90
------- -------
Noninterest-bearing liabilities:
Demand deposits 118,995 101,150
Other liabilities 1,687 3,372
Shareholders' equity 110,411 100,234
---------- ----------
Total liabilities and
shareholders' equity $1,449,626 $1,307,156
========== ==========
Net interest income $41,453 $36,569
======= =======
Net interest margin 3.97%
3.87%
=====
=====
<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 $182,000 and
$199,000 for the nine months ended September 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>
CHANGES IN INTEREST INCOME AND EXPENSE VOLUME AND RATE VARIANCES
<CAPTION>
THREE MONTHS ENDED NINE MONTHS
ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30,
1999
COMPARED TO COMPARED TO
SEPTEMBER 30, 1998 SEPTEMBER 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> $3,395 $(1,051) $2,344 $8,539 $(3,071)
$5,468
Held to maturity securities:
Taxable (35) (13) (48) (473) (28)
(501)
Tax-exempt<F1> (23) (2) (25) (40) (10)
(50)
Available for sale securities (309) (186) (495) 144 (749)
(605)
Trading account securities (2) (2) 4 (1)
3
Federal funds sold and other short-
term investments 519 (40) 479 201 (121)
80
------ ------- ------ ------ -------
- ------
Total interest income 3,545 (1,292) 2,253 8,375 (3,980)
4,395
------ ------- ------ ------ -------
- ------
INTEREST PAID ON:
NOW accounts 7 (40) (33) 34 (97)
(63)
Money market accounts 968 (709) 259 3,728 (2,551)
1,177
Savings 26 (1) 25 61
61
Time deposits of $100,000 or more 103 (51) 52 143 (157)
(14)
Other time deposits 340 (359) (19) (870) (1,068)
(1,938)
Federal funds purchased, repurchase
agreements and other short-term
borrowings 505 (4) 501 579 (228)
351
Long-term borrowings (5) (5) (63)
(63)
------ ------- ------ ------ -------
- ------
Total interest expense 1,949 (1,169) 780 3,675 (4,164)
(489)
------ ------- ------ ------ -------
- ------
Net interest income $1,596 $ (123) $1,473 $4,700 $ 184
$4,884
====== ======= ====== ====== =======
======
<FN>
- ---------
<F1> Information is presented on a tax-equivalent basis assuming a tax rate
of 35%. The approximate tax equivalent adjustments were $56,000,
$63,000, $182,000 and $199,000 for the three months ended September 30,
1999 and 1998, and for the nine months ended September 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 third quarter of 1999 was
$803,000, down from $900,000 last year. For the first nine months of 1999
the provision for possible loan losses was $3,808,000, up from $2,800,000 for
the same period last year. Greater loan growth and some net loan charge-offs
during 1999 resulted in the higher provision expense. The annualized ratio
of net charge-offs to average loans for the first nine months of 1999 was
.14%, down from .19% last year, while corresponding net loan charge-offs were
$1,025,000 and $1,237,000, respectively.
The allowance for possible loan losses was $20.9 million or 1.96% of loans
outstanding at September 30, 1999. This compared to $18.1 million or 1.96%
at the end of 1998, and $16.5 million or 1.84% at September 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>
Summary of Loan Loss Experience and Related Information
-------------------------------------------------------
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -------------------------
September 30, September 30,
---------------------------- -------------------------
1999 1998 1999 1998
---------- -------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses
(beginning of period) $ 20,378 $ 15,663 $ 18,144 $ 14,892
Loans charged off (324) (819) (1,679) (2,232)
Recoveries of loans previously
charged off 70 711 654 995
---------- -------- ---------- --------
Net loans charged off (254) (108) (1,025) (1,237)
---------- -------- ---------- --------
Provision for possible loan losses 803 900 3,808 2,800
---------- -------- ---------- --------
Allowance for possible loan losses
(end of period) $ 20,927 $ 16,455 $ 20,927 $ 16,455
========== ======== ========== ========
Loans outstanding:
Average $1,047,708 $891,483 $1,009,767 $876,920
End of period 1,067,765 895,732 1,067,765 895,732
Ratio of allowance for possible
loan losses to loans outstanding:
Average 2.00% 1.85% 2.07% 1.88%
End of period 1.96% 1.84% 1.96% 1.84%
Ratio of net charge-offs to
average loans outstanding, annualized: .10 .05 .14 .19
</TABLE>
-14-
<PAGE> 15
The following table summarizes nonperforming assets at the dates
indicated:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1999 1998 1998
------------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 959 $ 1,457 $ 1,194
Loans past due 90 days or more 534
Restructured loans 103 112 118
---------- --------- --------
Total nonperforming loans 1,062 1,569 1,846
Other real estate 10 160 250
---------- --------- --------
Total nonperforming assets $ 1,072 $ 1,729 $ 2,096
========== ========= ========
Loans, net of unearned discount $1,067,765 $ 925,961 $895,732
Allowance for possible loan
losses to loans 1.96% 1.96% 1.84%
Nonperforming loans to loans .10 .17 .21
Allowance for possible loan losses
to nonperforming loans 1,970.53 1,156.41 891.39
Nonperforming assets to loans
and foreclosed assets .10 .19 .23
</TABLE>
NONINTEREST INCOME
- ------------------
For the third quarter of 1999 total noninterest income was $2,121,000, up
from $1,793,000 in the same period in 1998. Net realized securities losses
of $660,000 compared to no securities gains or losses in the third quarter of
1998. Trading profits and commissions for the third quarter of 1999 were
$1,284,000, up from $527,000 in the same period in 1998. Hedging activities
begun in the first quarter of 1999 provided $910,000 of trading profits and
were primarily responsible for the overall increase in noninterest income for
the third quarter.
For the first nine months of 1999, total noninterest income was $9,281,000,
up sharply from $5,493,000 in the first nine months of 1998. Net losses of
$1,075,000 were realized on securities sales in 1999 versus net gains of
$681,000 on sales of available for sale securities in the nine months ended
September 1998. During 1999 the Company has 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 and
unrealized gains on these interest rate derivative trading activities
generated trading profits of approximately $4.8 million for the first nine
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 third quarter of 1999 was $6,911,000, up
$1,159,000 from $5,752,000 in the third quarter of 1998. For the first nine
months of 1999 total noninterest expenses were $20,471,000, up $3,360,000
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 September 30, 1999, the Company's total shareholders' equity was
$110.3 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 225,500 shares of common stock in connection with the Company's
stock repurchase plan.
The preferred securities entitled "Guaranteed preferred beneficial
interests in subordinated debentures" are considered long-term borrowings 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, 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 12.33% 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 September 30, 1999 and
December 31, 1998, the Company's leverage ratio was 8.29% 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. These plans have been tested and have been
revised as a result of the test analysis. 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 $190,000 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 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: November 12, 1999
----------------- /s/ Paul M. Strieker
---------------------------------
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 29,232
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 53,130
<TRADING-ASSETS> 582
<INVESTMENTS-HELD-FOR-SALE> 293,770
<INVESTMENTS-CARRYING> 45,818
<INVESTMENTS-MARKET> 46,234
<LOANS> 1,067,765
<ALLOWANCE> 20,927
<TOTAL-ASSETS> 1,533,403
<DEPOSITS> 1,298,670
<SHORT-TERM> 101,952
<LIABILITIES-OTHER> 7,578
<LONG-TERM> 14,950
0
0
<COMMON> 9,653
<OTHER-SE> 100,600
<TOTAL-LIABILITIES-AND-EQUITY> 1,533,403
<INTEREST-LOAN> 64,258
<INTEREST-INVEST> 15,580
<INTEREST-OTHER> 1,363
<INTEREST-TOTAL> 81,201
<INTEREST-DEPOSIT> 36,300
<INTEREST-EXPENSE> 39,930
<INTEREST-INCOME-NET> 41,271
<LOAN-LOSSES> 3,808
<SECURITIES-GAINS> (1,075)
<EXPENSE-OTHER> 20,471
<INCOME-PRETAX> 26,273
<INCOME-PRE-EXTRAORDINARY> 16,517
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,517
<EPS-BASIC> 1.76
<EPS-DILUTED> 1.73
<YIELD-ACTUAL> 3.97
<LOANS-NON> 959
<LOANS-PAST> 0
<LOANS-TROUBLED> 103
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,144
<CHARGE-OFFS> 1,679
<RECOVERIES> 654
<ALLOWANCE-CLOSE> 20,927
<ALLOWANCE-DOMESTIC> 12,267
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 8,660
</TABLE>
