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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal period from to
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Commission file number 0-22008
MISSISSIPPI VALLEY BANCSHARES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Missouri 43-1336298
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13205 Manchester Road, St. Louis, Missouri 63131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-543-3512
Securities registered pursuant to Section 12 (b) of the Act:
Title of each Class Name of each exchange on which registered
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None None
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $1 par value
Floating Rate Cumulative Trust Preferred Securities
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
---
As of February 25, 2000, 9,339,062 shares of common stock of the
registrant were outstanding; the aggregate market value of the shares of
common stock of the registrant held by non-affiliates was approximately
$128,004,000 based upon the closing price of the common stock on the
NASDAQ/NMS on February 25, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Certain portions of Registrant's Annual Report to Shareholders
for the year ended December 31, 1999 are incorporated by reference
in Parts I and II hereof.
2. Certain portions of Registrant's Proxy Statement for its Annual
Meeting of Shareholders to be held April 19, 2000 are incorporated
by reference in Part III hereof.
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PART I
ITEM 1. BUSINESS
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GENERAL
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Mississippi Valley Bancshares, Inc. (the "Company") is a multi-
bank holding company headquartered in St. Louis County, Missouri. The
Company and its wholly owned subsidiaries, Southwest Bank of St. Louis
(the "Missouri Bank") and Southwest Bank, Belleville, (the "Illinois
Bank") are engaged primarily in commercial lending. Southwest Bank of
St. Louis has been nationally recognized for its frequent practice of
reducing its prime interest rate in advance of industry wide prime rate
cuts. The Missouri and Illinois banks (collectively, the "Banks") have
seven banking offices, all of which are located in the St. Louis
metropolitan area ("St. Louis MSA"), the seventeenth largest
metropolitan statistical area in the United States, with a population of
approximately 2.5 million. Since acquiring the Missouri Bank in 1984,
the Company has expanded its loan portfolio from $57 million to $1.104
billion at December 31, 1999, or approximately $70 million on average
per year. In 1999 the Company formed Mississippi Valley Capital
Company, a venture capital subsidiary and natural extension of our
strong commercial lending activities. Over the past five years the
Company has earned an average return on equity of 18.31%.
The Company's strategy is to act primarily as a lender to middle
market companies located within 200 miles of St. Louis. These companies
tend to be privately-held and owner-operated, with annual sales of less
than $100 million and with typical borrowing requirements of $500,000 to
$3 million.
Management believes that the Company is able to compete
effectively in its market because: (i) the Banks' lending officers and
senior management maintain close working relationships with their
commercial customers and their businesses; (ii) the Banks are able to
react more quickly to loan requests than the Company's large competitors
yet are able to fund loan amounts which smaller St. Louis area
commercial lenders are unable to fund; (iii) the Banks' management and
loan officers have significant experience within the St. Louis
metropolitan area; and (iv) industry consolidation has resulted in fewer
independent banks and fewer banks addressing the Banks' target market
niche.
The Company's historical growth strategy has been asset driven, as
the Company has increased its loan portfolio based on lending
opportunities which meet the Company's underwriting standards. The
Company has expanded its retail deposit base to meet lending growth
demands through opening new locations and offering promotional deposit
rates, often concurrently. These deposit promotional activities are
usually implemented as the Company's loan to deposit ratio increases
significantly past the 85% level which management targets. The Company
opened one new location in each of 1990, 1992, 1995, 1998 and 1999.
The Company's operating strategy has resulted in a higher cost of
funds (and, consequently, a lower net interest margin) than other
institutions within its market, due to its rate
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driven retail deposit gathering activities. For 1999 and 1998, the
Company reported net interest margins of 3.96% and 3.86%, respectively.
On the other hand, this operating strategy has also permitted the
Company to achieve consistently lower overhead ratios than other
comparable institutions by (i) operating a small number of offices with
a per-office deposit base averaging $188 million as of December 31,
1999, (ii) emphasizing commercial loans, which tend to be larger in size
than retail loans, (iii) employing an experienced staff, (iv) improving
data processing and operational systems in order to increase
productivity, and (v) outsourcing services where possible. For 1999 and
1998, the Company reported efficiency ratios (non interest expense
divided by the sum of tax-equivalent net interest income plus
noninterest income) of 41.94% and 40.78%, respectively. These ratios
are significantly better than those of the Company's peers. The
Company's ratio of average assets per employee, which was $5.62 million
for 1999, has also been consistently better than the industry average.
THE COMPANY
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For a description of the Company and its operations, reference is
made to "Financial Review" on pages 9 through 23 of the Company's Annual
Report to Shareholders for the year ended December 31, 1999, which is
incorporated herein by reference.
COMPETITION
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The Company encounters competition primarily in seeking deposits
and in obtaining loan customers. The level of competition for deposits
is quite high. The Company's principal competitors for deposits are
other financial institutions within a few miles of its offices,
including other banks, savings and loan institutions, and credit unions.
Competition among these institutions is based primarily on interest
rates offered, service charges imposed on deposit accounts, the quality
of services rendered, and the convenience of banking facilities. The
Company's competitors are generally permitted, subject to regulatory
approval, to establish branches throughout the Company's market area.
Additional competition for depositors' funds comes from United States
Government securities, private issuers of debt obligations and suppliers
of other investment alternatives for depositors, such as securities
firms.
While the Company also encounters a great deal of competition in
its lending activities, management believes that there is less
competition in the Company's specialty-the middle market niche-than
there was a few years ago. The Company's competitive position has been
strengthened by the advent of branch banking in Missouri, which has
resulted in consolidations of bank subsidiaries of several large bank
holding companies. The Company's strategy, by contrast, is to maintain
close, long-term contacts between its customers and the Company's loan
officers.
The Company also competes in its lending activities with other
financial institutions such as savings and loan institutions, credit
unions, securities firms, insurance companies, small loan
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companies, finance companies, mortgage companies and other sources of
funds. Many of the Company's non-bank competitors are not subject to
the same extensive Federal regulations that govern bank holding
companies and Federally insured banks and state regulations governing
state chartered banks. As a result, such non-bank competitors have
advantages over the Company in providing certain services. Many of the
financial institutions with which the Company competes in both lending
and deposit activities are larger than the Company.
EMPLOYEES
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As of December 31, 1999, the Company had no employees and the
Banks had approximately 286 full-time equivalent employees. None of the
employees of the Banks are subject to a collective bargaining agreement.
The Company considers relationships with employees of the Banks to be
good.
FORWARD-LOOKING STATEMENTS
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This Report contains forward-looking statements. These forward-
looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. Actual results could differ materially
from these forward-looking statements as a result of the factors
described below. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this Report will in fact transpire.
Regulatory Risk. The banking industry is heavily regulated.
These regulations are intended to protect depositors, not shareholders.
The Banks are subject to regulation and supervision by the Federal
Deposit Insurance Corporation (the "FDIC"), the Missouri Division of
Finance, and the Illinois Office of Banks and Real Estate, while the
Company is subject to regulation and supervision by the Board of
Governors of the Federal Reserve System (the "FRB"). The burden imposed
by Federal and state regulations puts banks at a competitive
disadvantage compared to less regulated competitors such as finance
companies, mortgage banking companies and leasing companies. The
banking industry continues to lose market share to competitors. In
addition, legislative reactions to the problems of the thrift industry
have increased the regulatory and supervisory requirements for financial
institutions, which have resulted and will continue to result in
increased operating expenses.
Legislation. Because of concerns relating to the competitiveness
and the safety and soundness of the industry, Congress continues to
consider a number of wide-ranging proposals for altering the structure,
regulation, and competitive relationships of the nation's financial
institutions. Among such bills are proposals to combine banks and
thrifts into a unified charter, to combine regulatory agencies, to alter
the statutory separation of commercial and investment banking, and to
further expand the powers of depository institutions, bank holding
companies, and competitors of depository institutions. It cannot be
predicted whether or in what form any of
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these proposals will be adopted or the extent to which the business of
the Company or the Banks may be affected thereby.
Credit Risk. The greatest risk facing lenders is generally
credit risk, that is, the risk of losing principal and interest due to a
borrower's failure to perform according to the terms of the loan
agreements. Although the Company's percentage of net charge-offs has
historically been lower than industry norms, it has a relatively high
proportion of commercial loans. As of December 31, 1999 the Banks had
20 customers who had outstanding loans and unfunded commitments
exceeding $5 million.
Exposure to Local Economic Conditions. The Company's
concentration of loans in the St. Louis MSA exposes it to risks
resulting from changes in the local economy. While the Company's market
area for loans extends throughout most of eastern Missouri and southern
Illinois, its lending operations are concentrated in the St. Louis MSA.
As of December 31, 1999, 39.3% of the Company's loans were secured
by commercial real estate and 10.2% of the Company's loans were secured
by residential real estate. The percentage of loans secured by St.
Louis MSA real estate is significant. A dramatic drop in St. Louis area
real estate values would adversely affect the quality of loan portfolio.
Interest Rate Risk. The Company's earnings depend to a great
extent upon the level of net interest income, which is the difference
between interest income earned on loans and investments and the interest
expense paid on deposits and other borrowings. Sometimes the maturities
of the Company's assets are well balanced in relation to maturities of
liabilities (gap management). Gap management is not an exact science.
It involves estimates as to how changes in the general level of interest
rates will impact the yields earned on assets and the rates paid on
liabilities. Rate changes can vary depending upon the level of rates
and competitive factors. From time to time, maturities of assets and
liabilities are not balanced, and a rapid increase or decrease in
interest rates could have an adverse or positive effect on net interest
margins and results of operations of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- --Sensitivity to Changes in Interest Rates" in the Company's Annual
Report to Shareholders, incorporated by reference herein.
Competition. The activities of the Company and the Banks in the
geographic market served involve competition with other banks as well as
with other financial institutions and enterprises, many of which have
substantially greater resources than those available to the Company. In
addition, non-bank competitors are generally not subject to the
extensive regulation applicable to the Company and the Banks.
ITEM 2. PROPERTIES
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Southwest Bank of St. Louis' principal office occupies
approximately 2.7 acres of ground on the corner of Kingshighway and
Southwest, in the City of St. Louis. The building was totally renovated
in 1987 and has one ATM. It has approximately 36,000 square feet and
room for
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expansion. The banking drive-ups are modern and parking is adequate.
The premises are owned by the Company and leased to Southwest Bank of
St. Louis. The lease expires in 2006 and provides an option to renew
for an additional ten years.
The Clayton office, which opened in 1990, is located in one-half
of the first floor (approximately 10,000 square feet) of a five-story
office building in the Clayton Corporate Park, and includes two ATM's.
The space is leased for five years with options to renew for up to 30
years. Adequate parking is available and drive-up facilities are
provided in the Clayton Corporate Park near the Clayton banking office.
The Concord Village office occupies a building of approximately
10,000 square feet built in 1995 on approximately one acre of land
purchased in 1994. The office has an ATM, and adjoining drive-up lanes
and equipment; adequate parking is available.
The Crestwood office occupies a building of approximately 5,200
square feet, which was purchased in December, 1991 and was totally
remodeled before the opening of the office. The land was purchased by
Southwest Bank of St. Louis in February, 1992. The facility has a
nearby ATM, and adjoining drive-up lanes and equipment; adequate parking
is available.
The Southtown office on the corner of Kingshighway and Chippewa,
approximately two miles from the main office, occupies an 1,865 square
foot building on 1.58 acres of land purchased in 1997. This location
has one ATM. An expansion and renovation of the facility was begun in
1999 and will be completed by mid-year in 2000.
Southwest Bank, Belleville owns 1.7 acres of land in Belleville,
Illinois. In 1998 the bank building construction was completed and
Southwest Bank, Belleville opened in September. The building is
approximately 10,000 square feet. The office has one ATM, adjoining
drive-up lanes and equipment; adequate parking is available.
In 1996, Southwest Bank of St. Louis purchased two adjoining
parcels of land of approximately 6.3 acres and 2.3 acres, respectively,
in Des Peres, Missouri. The Company sold 1.3 acres to the Missouri
Department of Transportation and retained approximately 7.3 acres of the
total. Construction of its 73,000 square foot four-story bank branch
and office building was completed on the site in 1999. Approximately
half of the first floor is occupied by the Southwest Bank of St. Louis
retail branch which opened in November, 1999. The bank office has one
ATM, adjoining drive-up lanes and equipment; adequate parking is
available. The remaining portion of the first floor not occupied by
Southwest Bank is available for lease. All of the second and third
floors is occupied by the Company's Commercial Lending Division and
various operations and administrative support functions for the Banks.
Approximately half of the fourth floor houses the Company's headquarters
with the remaining space leased to an unaffiliated tenant.
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ITEM 3. LEGAL PROCEEDINGS
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The Company and Banks are from time to time parties to various
legal actions arising in the normal course of business. Management
believes that there is no proceeding threatened or pending against the
Company or Banks, which, if determined adversely, would have a material
effect on the business or financial position of the Company or the
Banks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of the security holders
in the quarter ended December 31, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
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STOCKHOLDER MATTERS
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Reference is made to the information contained in the section
entitled "Common Share Data" on page 8 and investor information on page
48 of the Company's Annual Report to Shareholders for the year ended
December 31, 1999, which is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
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Reference is made to the information contained in the section
entitled "Financial Review - Selected Consolidated Financial Data" on
page 9 of the Company's Annual Report to Shareholders for the year ended
December 31, 1999, which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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Reference is made to information contained in the section entitled
"Financial Review" on pages 9 through 23 of the Company's Annual Report
to Shareholders for the year ended December 31, 1999, which is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Reference is made to information contained in the section entitled
"Sensitivity to Changes in Interest Rates" on pages 19 and 20 of the
Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Reference is made to the Consolidated Financial Statements and
independent auditors' report thereon contained on pages 24 through 46 of
the Company's Annual Report to Shareholders for the year ended December
31, 1999, which are incorporated herein by reference.
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ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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Reference is made to "Election of Directors" on pages 3 through 5
of the Company's definitive Proxy Statement dated March 17, 2000, which
is incorporated herein by reference.
Reference is made to "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" on page 12 of the Company's definitive
Proxy Statement dated March 17, 2000, which is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
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Reference is made to "Executive Compensation" on pages 6 through
10 of the Company's definitive Proxy Statement dated March 17, 2000,
which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Reference is made to "Principal Shareholders" on pages 11 and 12
of the Company's definitive Proxy Statement dated March 17, 2000, which
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Reference is made to "Certain Transactions" on page 10 of the
Company's definitive Proxy Statement dated March 17, 2000, which is
incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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(a) 1. Financial Statements.
<TABLE>
<CAPTION>
Pages in 1999 Annual
Report to Shareholders
incorporated by reference
-------------------------
<S> <C>
Report of Independent Auditors 24
Consolidated Balance Sheets 25
Consolidated Statements of Income 26
Consolidated Statements of Changes
in Shareholders' Equity 27
Consolidated Statements of Cash Flows 28
Notes to Consolidated Financial Statements 29 through 46
</TABLE>
2. Financial Statement Schedules.
None.
3. Exhibits.
References made to "Exhibit Index," which is
attached hereto and incorporated herein by
reference.
(b) Registrant did not file any reports on Form 8-K during the
quarter ended December 31, 1999.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: MARCH 14, 2000
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MISSISSIPPI VALLEY BANCSHARES, INC.
By /s/ Paul M. Strieker
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Paul M. Strieker
Executive Vice President, Controller and
Chief Financial Officer
(on behalf of the Registrant and as
Principal Financial and Accounting
Officer)
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<TABLE>
MISSISSIPPI VALLEY BANCSHARES, INC.
Exhibit Index
Form 10-K
1999
<CAPTION>
Exhibit
Number Description of Exhibit Page
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<S> <C> <C>
3.1 Restated Articles of Incorporation of Registrant and all amendments
thereto, incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1993.
3.2 By-Laws of Registrant, incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1993
4.1 Certificate of Designations for Perpetual Preferred Stock, Series 1993,
incorporated by reference to Exhibit 4.1 to Registration Statement
No. 33-61692 on Form S-1
4.3.1 Mississippi Valley Bancshares, Inc. 1988 Stock Option Plan (Five-Year
Options), incorporated by reference to Exhibit 4.6.1 to Registration
Statement No. 33-61692 on Form S-1
4.3.2 Mississippi Valley Bancshares, Inc. 1991 Stock Option Plan (Five-Year
Options), incorporated by reference to Exhibit 4.6.2 to Registration
Statement No. 33-71760 on Form S-8
4.3.2a Amendment dated January 18, 1995 to the Mississippi Valley Bancshares,
Inc. 1991 Stock Option Plan (Five-Year Options), incorporated by
reference to Exhibit 4.4.2a to the Company's Annual Report on
Form 10-K for its fiscal year ended December 31, 1994
4.3.3 Form of Five-Year Option Agreement, incorporated by reference to
Exhibit 4.6.3 to Registration Statement No. 33-71760 on Form S-8
4.4.1 Indenture dated March 5, 1997 between the Company and State Street
Bank and Trust Company relating to Floating Rate Debentures due 2027;
incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement No. 333-22055 on Form S-3.
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<CAPTION>
Exhibit
Number Description of Exhibit Page
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<S> <C> <C>
4.4.2 Form of Subordinated Debenture (included as an Exhibit to Exhibit
4.4.1), incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement No. 333-22055 on Form S-3.
4.4.3 Certificate of Trust of MVBI Capital Trust dated February 14, 1997,
incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement No. 333-22055 on Form S-3.
4.4.4 Trust Agreement of MVBI Capital Trust dated February 14, 1997, incorporated
by reference to Exhibit 4.4 to the Company's Registration Statement
No. 333-22055 on Form S-3.
4.4.5 MVBI Capital Trust Amended and Restated Trust Agreement, incorporated by
reference to Exhibit 4.5 to the Company's Registration Statement
No. 333-22055 on Form S-3.
4.4.6 Preferred Securities Guarantee Agreement between the Company and State Street
Bank and Trust Company, incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement No. 333-22055 on Form S-3.
10.1 Purchase Agreement Dated March 31, 1993 for Series 1993 Preferred
Stock, incorporated by reference to Exhibit 10.1 to Registration Statement
No. 33-61692 on Form S-1
10.2.1 Management Retention Agreement between the Southwest Bank of St. Louis (the
"Missouri Bank") and Stephen P. Marsh, incorporated by reference to Exhibit
10.2.1 to Registration Statement No. 33-61692 on Form S-1
10.2.2 Management Retention Agreement between the Missouri Bank and Paul M.
Strieker, incorporated by reference to Exhibit 10.2.2 to the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1993.
10.2.3 Consulting Agreement between the Missouri Bank, Company and Andrew N. Baur,
incorporated by reference to Exhibit 10.2.3 to the Company's Annual Report
on Form 10-K for its fiscal year ended December 31, 1995.
10.2.4 Consulting Agreement between the Missouri Bank, Company and Linn H. Bealke,
incorporated by reference to Exhibit 10.2.4 to the Company's Annual Report
on Form 10-K for its fiscal year ended December 31, 1995.
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<CAPTION>
Exhibit
Number Description of Exhibit Page
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<S> <C> <C>
10.2.5 Southwest Bank of St. Louis Supplemental Retirement Plan, incorporated by
reference to Exhibit 10.2.5 to the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1995.
10.2.6 Management Retention Agreement between the Missouri Bank and Mary P. Sherrill,
incorporated by reference to Exhibit 10.2.6 to the Company's Annual Report on
Form 10-K for its fiscal year ended December 31, 1998
10.3.1 Clayton Corporate Park Standard Office Lease dated December 23, 1988, between
the Forsythe Group, Inc. and the Missouri Bank, incorporated by reference to
Exhibit 10.3.1 to Registration Statement No. 33-61692 on Form S-1
10.3.2 First Amendment to Clayton Corporate Park Standard Office Lease dated August
31, 1989, between The Forsythe Group, Inc. and the Missouri Bank,
incorporated by reference to Exhibit 10.3.2 to Registration Statement
No. 33-61692 on Form S-1
10.4 Promissory Note dated June 5, 1997, in the principal amount of $10,000,000, by
Registrant in favor of Norwest Bank Minnesota, N.A. incorporated by reference
to Exhibit 10.4 to the Company's Annual Report on Form 10-K for its fiscal
year ended December 31,1997
10.4.1<F*>Promissory Note dated August 11, 1999, in the principal amount of $20,000,000,
by Registrant in favor of Mercantile-Safe Deposit & Trust Company
13.<F*> Registrant's Annual Report to Shareholders for the year ended December
31, 1999 (only those portions of such Annual Report as are incorporated
by reference in Parts I and II hereof shall be deemed a part of this Report)
21.<F*> Subsidiaries of the Registrant.
23.<F*> Consent of Independent Auditors
24.<F*> Power of Attorney is contained on page 11 and 12 hereof
<FN>
- -----------------
<F*> Filed herewith
</TABLE>
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POWER OF ATTORNEY
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Each person whose signature appears below constitutes and appoints
Andrew N. Baur and Linn H. Bealke his true and lawful attorneys-in-fact
and agents, each acting alone, with full powers of substitution and re-
substitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments to this Report,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ John T. Baumstark Director March 20, 2000
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John T. Baumstark
/s/ Andrew N. Baur Chairman and Chief Executive March 14, 2000
- --------------------------- Officer of the Registrant and
Andrew N. Baur Southwest Bank of St. Louis;
Director
/s/ Andrew S. Baur Director of the Registrant; and March 24, 2000
- --------------------------- Senior Vice President of
Andrew S. Baur Southwest Bank of St. Louis
/s/ Linn H. Bealke President and Director of the March 14, 2000
- --------------------------- Registrant; Vice Chairman of
Linn H. Bealke Southwest Bank of St. Louis
Director
- ---------------------------
Alice C. Behan
/s/ William H. T. Bush Director March 14, 2000
- ---------------------------
William H. T. Bush
Director
- ---------------------------
Franklin J. Cornwell Jr.
Director
- ---------------------------
Theodore P. Desloge, Jr.
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Director
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Louis N. Goldring
/s/ Richard T. Grote Director March 21, 2000
- ---------------------------
Richard T. Grote
Director
- ---------------------------
Frederick O. Hanser
Director
- ---------------------------
Donna D. Lambert
/s/ Michael D. Latta Director March 13, 2000
- ---------------------------
Michael D. Latta
/s/ Mont S. Levy Director March 14, 2000
- ---------------------------
Mont S. Levy
/s/ Lewis B. Shepley Director March 21, 2000
- ---------------------------
Lewis B. Shepley
/s/ Paul M. Strieker Executive Vice President, March 14, 2000
- --------------------------- Controller, and Chief Financial
Paul M. Strieker Officer of the Registrant,
Executive Vice President of
Southwest Bank of St. Louis
</TABLE>
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SIC CODE / /
R/E CODE / /
[logo] MERCANTILE-SAFE DEPOSIT & TRUST COMPANY
REVOLVING NOTE
(Commercial)
$20,000,000.00 Date: August 11, 1999
- ---------------------- ------------------
In this Note, the Bank named above is hereinafter referred to as
"Bank." The Maker means each and all parties who sign below, whether one or
more than one, and their obligations hereunder are joint and several.
On or before August 11, 2001 , the Maker promises to pay to the
----------------------
order of Bank $ 20,000,000.00*********************************************
-------------------------------------------------------------
(Twenty Million 00/100****************** U.S. Dollars), or so much thereof
- -----------------------------------------
as Bank in its discretion has advanced or readvanced and is outstanding
hereunder (being herein called "Principal Sum"), with interest as stated
below on the Principal Sum. Bank has established a revolving line of
credit for Maker from which Maker, subject to Bank's consent, may obtain one
or more loans from time to time, with the aggregate unpaid Principal Sum of
such loans actually advanced and remaining unpaid not to exceed the face
amount of this Note. Advances and readvances hereunder remaining unpaid
from time to time shall bear interest each day until paid at a daily
periodic rate, calculated on the basis of a 360-day year, corresponding to
an annual percentage rate equal to N/A 50 basis points above the 90-day
-----------------------------------------
Libor
- ---------------------------------------------------------------------------
(being herein called the "Index"). The daily periodic interest rate will
increase or decrease as the Index increases or decreases. Where Bank's
Prime Rate is used as the Index, the "Prime Rate" is one of several rates
set by Bank from time to time as an interest rate base for borrowings.
Bank may lend at rates above and below the Prime Rate. Interest shall be
due and payable quarterly
-----------------------------------------------------------
- ---------------------------------------------------------------------------.
If Maker fails to pay any amount within 15 days after the date on
which it is due, Maker agrees to pay a late charge of the greater of $2.00
or 5% of the delinquent amount. Additionally, any payment required to be
made hereunder (including any payment of interest and/or principal) which is
not made on the date that the same becomes due and payable shall continue
as an obligation of the Maker until it is fully paid, and the Maker agrees
in addition to pay, to the extent permitted by law, late interest thereon
at a fluctuating rate, adjusted daily, equal to the interest rate otherwise
applicable hereunder plus two and one-half percent (2-1/2%) per annum, such
late interest to accrue from the date such overdue payment became due and
payable until paid. All payments will be applied in any manner we choose
except as otherwise required by applicable law. Generally, payments are
applied first to interest due; second to principal due; third to late
charges; fourth to any remaining interest and finally to the remaining
principal.
It is expressly stipulated and agreed that the loan evidenced by this
Note is a "commercial loan" as defined in the Commercial Law Article of the
Annotate Code of Maryland.
Maker covenants to provide Bank such financial information as Bank
may request from time to time and authorizes Bank to make all inquiries it
deems necessary to verify the accuracy of the information provided, to
protect and maintain its assets in good condition and repair, free of all
liens and encumbrances, to keep its assets insured against loss by fire,
theft and other casualties as required by Bank in such amounts and by
carriers satisfactory to Bank, not to dispose of any assets except in the
ordinary course of business, and to pay all taxes and assessments when due.
Advances and readvances hereunder may be prepaid in whole or in part.
The fact that the balance hereunder may be reduced to zero from time to
time will not affect the continuing validity of this Note, and the balance
may be increased to the face amount of the Note after such reductions to
zero. Bank in its discretion may make an advance which causes the
principal balance to exceed the face amount of the Note and such excess
shall be paid by the Undersigned upon demand with interest as provided
above.
<PAGE>
The Maker represents and warrants to the Bank that (a) the Maker is
duly organized and existing and is in good standing under the laws of the
State of Missouri and is duly licensed or qualified to do business in all
--------
jurisdictions wherein the nature of its business or the character of its
properties requires such licensing or qualification; (b) the Maker has all
requisite power and authority to execute this Note and to make the
borrowings contemplated hereunder; (c) this Note is a legal, valid and
binding obligation of the Maker, enforceable in accordance with its terms;
(d) there are no actions, suits or proceedings pending or, to the knowledge
of the Maker, threatened against or affecting it which would prevent the
Maker from executing this Note and performing its obligations hereunder;
(e) the Maker's performance under this Note shall not violate its
organizational documents or any other material contract or material
instrument to which the Maker is a party or by which the Maker is bound;
and (f) since the date of any financial statements of the Maker provided to
the Bank, except as specifically disclosed to the Bank in writing, there
have been no material adverse changes in the condition, financial or
otherwise, of the Maker nor any changes in the operations of the Maker
except those occurring in the ordinary course of business.
Each of the following events shall constitute a default hereunder:
(a) the breach of any representation in or the failure of any Obligor
(which term shall include each Maker, endorser, surety and guarantor of any
of the Liabilities) to perform any covenant or agreement under any of the
documents evidencing the Liabilities (which term shall include all obligations
under this Note, and any renewals, extensions or modifications thereof, and all
other obligations of any kind of Maker to Bank and to any other party to the
extent of Bank's interest therein, now or hereafter existing, including
liabilities to Bank of Maker as a member of any partnership or other group
and whether incurred by Maker as principal or otherwise); (b) the death,
default or incapacity of any Obligor; (c) the filing of any petition under
the Federal Bankruptcy Code or any similar Federal or state statute, by or
against any Obligor; (d) an application or the appointment of a receiver
for, the making of a general assignment for the benefit of creditors by, or
the insolvency of any Obligor; (e) commencement of any proceeding under any
Federal or state statute or rule providing for the relief of debtors,
composition of creditors, arrangement, reorganization, receivership
liquidation or any similar event by or against any Obligor; (f) the entry
of a judgment against any Obligor; (g) the issuing of any attachment or
garnishment, or the filing of any lien, against any property of any Obligor;
(h) the suspension by any Obligor of the transaction of such Obligor's
usual business; (i) the merger or consolidation of any corporate Obligor
with any other corporation or the transfer, disposition or encumbrance of
all or a substantial part of the assets of any Obligor; (j) if any Obligor
misinformed or failed to inform Bank as to any matter which the Bank deems
material to a Liability; or (k) the determination by an officer of Bank
that an adverse change has occurred in the financial condition of any
Obligor from the condition of such Obligor as heretofore most recently
disclosed to Bank by a financial statement or in any other manner. If this
Note is payable upon demand, demand may be made whether or not an event of
default has occurred.
To secure payment of the Liabilities, Bank is hereby granted a lien
and security interest in all property of any Obligor held now or hereafter
by Bank in any capacity and upon the occurrence of any default hereunder
Bank shall have the right, immediately and without further action by it to
set-off against any of the Liabilities, all such property, and Bank shall
be deemed to have exercised such right of set-off and to have made a charge
against such property immediately upon the occurrence of such default even
though such charge is made or entered subsequently on the books of Bank.
A delay by Bank in exercising any right or remedy shall not
constitute a waiver. A waiver of a default, right or remedy shall not
constitute a waiver of a subsequent default, right or remedy. A single or
partial exercise of a right or remedy shall not preclude or constitute a
waiver of any unexercised right or remedy. Bank will not waive a default
by accepting partial payment of any amount due. All rights and remedies
hereunder and under applicable laws shall be cumulative. Every obligation
of each Obligor is joint and several. Bank may exercise its rights against
any collateral or Obligor without first having recourse against any other
collateral or Obligor.
Whenever any Obligor shall be in default hereunder, Bank at its
option (1) may cure the default at Maker's expense; (2) may refuse to make
further advances; (3) may declare any of the Liabilities immediately due
and payable; and (4) may exercise any or all rights and remedies available
to it under the documents evidencing the Liabilities and applicable law.
Maker covenants to pay on demand, with interest until paid in full at
the rate imposed upon principal therein, all expenses incurred by Bank,
including legal fees, to cure any default herein, to enforce any provision
of the Liabilities or to exercise any right or remedy.
Each Obligor waives presentment, notice of dishonor, protest and all
other demands and notices in connection with any of the Liabilities and
with respect to any collateral and waives any right to trial by jury and
further agrees that the courts of the State of Maryland shall have personal
jurisdiction over it in any legal proceedings with respect to any of the
Liabilities. Each Obligor without further notice assents to all
extensions of the time of payment of any Liability or any other indulgence
or modification of a Liability, to any substitution, exchange or release of
collateral and to the addition or release of any Obligor, whether or not
done for consideration, all without in any way affecting its obligation.
Bank may unjustifiably and without reservation of rights impair any
Obligor's recourse against another Obligor or collateral. Except when
invalid or unenforceable by statute or otherwise, each and every Obligor
authorizes any attorney designated by Bank to confess judgment in any Court
of Record and authorizes Bank to instruct the clerk of any Court of Record
to confess judgment against such Obligor at any time after this Note is due
by its terms or upon default, for the unpaid balance of this Note and
interest payable thereon, together with court costs and all other
<PAGE>
<PAGE>
amounts payable to Bank pursuant hereto, including attorneys' fees of 20%
of the total sum due, provided, however, that any lien arising from such
confession of judgment shall not without further proceedings, apply or
attach to any real property as described in section 12-401 (i) of the
Maryland Commercial Law Article as the same may be amended from time to
time unless this is a loan to a corporation or a commercial loan in excess
of $75,000.00.
The Undersigned hereby authorizes the Bank to accept instructions by
telephone from any Maker or a duly authorized representative of any Maker
to make advances or receive a repayment hereunder. All advances made
hereunder shall be credited to the Maker's deposit account with the Bank.
The Maker agrees that the actual crediting of the sum of money so borrowed
to the Maker's deposit account shall constitute conclusive evidence that
the advance was made, and the failure of the Bank to forward to the Maker
an advice of credit shall not affect the obligation of the Maker to repay
such advance.
This Note contains the full agreement of the parties and may be
modified only by a writing executed by the party to be charged.
This Note is executed and delivered the date above written as an
instrument under Seal, specifically intending it to be a specialty and shall
be governed by the Laws of the State of Maryland, including without
limitation Title 12, Subtitle 1 of the Maryland Commercial Law Article.
Notwithstanding anything in this Note to the contrary, if the Maker is
an individual and the original principal amount of the loan evidenced hereby
is not more than $15,000 ($75,000 if secured by owner-occupied, 1-4 family
residential real estate), then such loan shall be governed by Title 12,
Subtitle 9 of the Maryland Commercial Law Article. In such event; (a) the
index shall be a rate or index external to the Bank as the Bank selects;
(b) interest shall be computed on the basis of a 365- rather than a 360-day
year; (c) the default rate of interest provided for herein shall not apply;
and (d) the confession of judgment provision contained herein shall not
apply.
CORPORATIONS OR PARTNERSHIPS SIGN BELOW INDIVIDUALS SIGN BELOW
Mississippi Valley Bancshares, Inc. (SEAL)
- --------------------------------------- ------------------------------
Name of Corporation or Partnership
By /s/ Andrew N. Baur (SEAL) (SEAL)
------------------------------------- ------------------------------
Chairman
By (SEAL) (SEAL)
------------------------------------- ------------------------------
GUARANTY
In consideration of the loan or forebearance evidenced by the
foregoing Note, the undersigned (jointly and severally) absolutely and
unconditionally guarantees to Bank and every subsequent holder of the Note
(irrespective of its genuineness, validity, regularity or enforceability or
any other circumstance) the prompt payment (not merely the collection) of
the Note when due, according to its terms, which are incorporated herein,
and as they may be modified subsequently by any extension or renewal, in
whole or in part, any change in the interest rate or other term, or the
exchange, assignment, extension, waiver, modification or surrender of any
related right or security; and Bank and every subsequent holder of the
Note at its option may proceed in the first instance against the
undersigned to collect any obligation covered by this Guaranty, without
first proceeding against any collateral or other Obligor.
Any debt of any Maker to the undersigned, now or hereafter existing,
is and shall be subordinated to the indebtedness and liability herein
guaranteed. The undersigned agrees not to assert any right, directly or by
subrogation, against any Maker or any assets securing payment of the
indebtedness or liability herein guaranteed, so long as the debt evidenced
by the foregoing Note is outstanding.
This Guaranty is Executed and delivered on the date of the foregoing
Note under Seal and specifically intending this to be a specialty, governed
by the laws of the State of Maryland.
CORPORATIONS OR PARTNERSHIPS SIGN BELOW INDIVIDUALS SIGN BELOW
(SEAL)
- --------------------------------------- -------------------------------
Name of Corporation or Partnership
By (SEAL) (SEAL)
------------------------------------- -------------------------------
By (SEAL) (SEAL)
------------------------------------- -------------------------------
<PAGE>
COMMON SHARE DATA
Mississippi Valley Bancshares, Inc. (MVBI) is traded on the National
Association of Securities Dealers, Inc. ("NASD") National Market. The
following bar graph and table sets forth the high, low and closing trade
prices of the common stock, cash dividends and certain other information
for the last three years, as reported by the NASD:
[GRAPH}
<TABLE>
<CAPTION>
Book
Value At
End Of Market Price Dividends
1999 High Low Close Period To Book Value Declared
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
4th Quarter $32 5/16 $26 $27 $12.64 213.61% $.10
3rd Quarter 34 1/2 28 1/16 31 9/16 12.51 252.30 .10
2nd Quarter 36 1/8 31 1/2 33 1/8 12.60 262.90 .09
1st Quarter 35 3/8 30 1/2 32 1/8 12.31 260.97 .09
1998
========================================================================================================================
4th Quarter $37 3/8 $30 $33 3/4 $12.43 271.52% $.09
3rd Quarter 38 34 3/8 36 1/8 12.26 294.66 .08
2nd Quarter 42 1/2 38 39 1/2 11.19 352.99 .08
1st Quarter 45 30 1/4 41 3/4 10.80 386.57 .08
1997
========================================================================================================================
4th Quarter $34 1/4 $24 7/8 $32 1/4 $10.31 312.80% $.07
3rd Quarter 25 3/8 23 1/2 24 1/2 9.80 250.00 .07
2nd Quarter 24 1/4 20 7/8 24 1/4 9.10 266.48 .07
1st Quarter 23 1/2 20 7/8 21 1/4 8.55 248.54 .07
<CAPTION>
December 31
1999 1998 1997
=============================================
<S> <C> <C> <C>
Average shares outstanding 9,366,028 9,548,127 9,396,320
Year-end shares outstanding 9,296,362 9,491,912 9,519,212
Shareholders of record 499 534 526
Average daily volume <F1> 10,242 8,165 5,730
<FN>
<F1> Per NASDAQ National Market System
</TABLE>
- ---
8
<PAGE>
<PAGE>
FINANCIAL REVIEW
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial
information for 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 for each of the five years ended December 31,
1999. The selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of the Company,
including the accompanying Notes, presented elsewhere herein.
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) 1999 1998 1997 1996 1995
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 110,828 $ 102,836 $ 95,254 $ 79,719 $ 70,402
Interest expense 55,090 53,593 52,243 40,811 38,295
----------------------------------------------------------------------
Net interest income 55,738 49,243 43,011 38,908 32,107
Provision for possible loan losses 5,051 4,450 4,100 3,875 2,560
----------------------------------------------------------------------
Net interest income after provision
for possible loan losses 50,687 44,793 38,911 35,033 29,547
Noninterest income 12,003 8,383 5,596 5,061 4,095
Noninterest expense 28,518 23,610 21,024 18,242 16,438
----------------------------------------------------------------------
Income before income taxes 34,172 29,566 23,483 21,852 17,204
Income taxes 12,747 10,955 8,470 7,756 6,457
----------------------------------------------------------------------
Net income $ 21,425 $ 18,611 $ 15,013 $ 14,096 $ 10,747
======================================================================
DIVIDENDS
Preferred stock $ $ $ $ 231 $ 231
Common stock 3,554 3,149 2,631 2,121 1,514
Ratio of total dividends declared to net income 16.59% 16.92% 17.52% 16.69% 16.24%
PER SHARE DATA <F1>
Earnings per common share:
Basic $ 2.29 $ 1.95 $ 1.60 $ 1.54 $ 1.18
Diluted 2.25 1.91 1.55 1.46 1.12
Common stock cash dividends .38 .33 .28 .235 .17
Average common shares and common
share equivalents outstanding 9,507,769 9,747,564 9,700,928 9,582,886 9,517,616
Diluted book value (period end) $ 12.64 $ 12.43 $ 10.31 $ 8.45 $ 7.47
BALANCE SHEET DATA (AT PERIOD END)
Securities $ 317,015 $ 438,902 $ 375,916 $ 287,651 $ 327,652
Loans, net of unearned discount 1,104,498 925,961 847,091 731,019 623,777
Total assets 1,561,149 1,430,057 1,299,918 1,065,777 995,048
Total deposits 1,315,716 1,211,805 1,126,562 918,012 886,565
Total long-term debt 14,950 14,950 14,950 2,700 2,700
Common shareholders' equity 112,566 109,778 93,107 75,949 67,607
Total shareholders' equity 112,566 109,778 93,107 75,949 70,107
SELECTED RATIOS
Return on average total assets 1.45% 1.40% 1.25% 1.40% 1.22%
Return on average total shareholders' equity 19.26 18.09 17.77 19.07 17.34
Net interest margin 3.96 3.86 3.73 4.01 3.80
Efficiency ratio <F2> 41.94 40.78 43.03 41.25 45.06
Average assets per employee $ 5,624 $ 5,504 $ 5,220 $ 4,740 $ 4,426
ASSET QUALITY RATIOS
Allowance for possible loan losses to loans 1.96% 1.96% 1.76% 1.73% 1.73%
Nonperforming loans to loans <F3> .29 .17 .26 .92 .75
Allowance for possible loan losses
to nonperforming loans <F3> 672.96 1,156.41 679.69 188.14 230.14
Nonperforming assets to loans and
foreclosed assets <F4> .29 .19 .43 .99 .75
Net loan charge-offs to average loans .15 .14 .23 .30 .23
CAPITAL RATIOS
Average shareholders' equity to average assets 7.55% 7.76% 7.04% 7.32% 7.03%
Total risk-based capital ratio 12.23 13.22 13.23 11.45 11.64
Leverage ratio 8.40 8.56 8.04 7.20 6.70
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> All Share and per Share information has been restated to reflect the 1998 two-for-one stock split.
<F2> The efficiency ratio = noninterest expense divided by (tax-equivalent net interest income + noninterest income)
<F3> Nonperforming loans consist of nonaccrual loans, loans contractually past due 90 days or more and loans with restructured
terms.
<F4> Nonperforming assets consist of nonperforming loans and foreclosed assets.
</TABLE>
---
9
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following presents management's discussion and analysis of the
Company's consolidated financial condition and results of operations as
of the dates and for the periods indicated. This discussion should be
read in conjunction with "Selected Consolidated Financial Data," the
Company's Consolidated Financial Statements and accompanying Notes, and
other financial data appearing elsewhere in this Report.
SUMMARY OF EARNINGS
Consolidated net income for 1999 was $21,425,000, an increase of
$2,814,000 or 15.1% above 1998 earnings. On a diluted per share basis,
net income for 1999 was $2.25, up 17.8% from $1.91 in the previous year.
Greater net interest income, the principal contributor to the improved
performance, was generated by increased loans outstanding. The Company's
loan loss provision was $5,051,000, up from $4,450,000 in the prior year
as loans increased $179 million during 1999. Securities losses on sales
of available for sale securities were $1,251,000 in 1999, compared to
securities gains of $1,539,000 in 1998. More than offsetting the
securities losses were gains on derivative trading activities of
$5,919,000 in 1999. Gains from derivative trading activities were
$316,000 in 1998. Comparative noninterest expenses were $28,518,000, up
$4,908,000 or 20.8% from prior year levels. Overall Company growth,
operating costs for the Belleville office which opened in September
1998, the new Des Peres office and Company headquarters which opened in
late 1999, and significant computer upgrades combined to increase total
overhead expenses for the year.
Consolidated net income for 1998 was $18,611,000, an increase of
$3,598,000 or 24.0% above 1997 earnings. On a diluted per share basis,
net income for 1998 was $1.91, up 23.2% from $1.55 in the previous year.
Greater net interest income, the principal contributor to the improved
earnings performance, was generated by increased loans and investment
securities outstanding. The Company's loan loss provision was
$4,450,000, up from $4,100,000 in the prior year as loans increased $79
million during 1998. Gains on sales of available for sale securities of
$1,539,000 in 1998 compared to $85,000 in 1997, plus greater net trading
profits and commissions were primarily responsible for the increased
noninterest income in 1998. Comparative noninterest expenses were up
$2,586,000 or 12.3% from 1997 due in part to operating costs for the
Belleville office which opened in September 1998. Overall operating
efficiencies improved in 1998 from 1997 as net interest income and
noninterest income growth outpaced the overhead expense increase.
NET INTEREST INCOME
The following discussion and table sets forth the composition of
average interest-earning assets and interest-bearing liabilities along
with accompanying interest income, expense, yields, and rates, on a tax-
equivalent basis assuming a marginal statutory Federal income tax rate
of 35%. The tax equivalent adjustments were approximately $257,000,
$263,000, $251,000, $249,000, and $279,000 for each of the five years
ended December 31, 1999, respectively.
Net interest income is the difference between income earned on
assets and interest expense paid on deposits and borrowings used to fund
them. Net interest income, the primary component of net income, has
increased in each of the last five years. Continued growth in earning
assets has been responsible for the consistent increases in net interest
income. Net interest income on a tax-equivalent basis, divided by
average interest-earning assets, represents the Company's net interest
margin.
During the years presented, the Company's net interest margins
have been below comparable ratios for its peers. Consumer loans
generally provide higher total yields than do commercial loans. With
only seven branch locations, the Company cannot effectively compete for
consumer loans against other area financial institutions having dozens
of locations each. The Company also does not have a credit card lending
operation. Deposit growth has been partially attained through rate
promotional activities. Such actions have generally placed the Company's
total funding costs above those of its peers. The combination of
slightly lower overall loan yields, and higher deposit rates, has
generally resulted in the Company's net interest margins being below
those of its peers.
- ---
10
<PAGE>
<PAGE>
YEARS ENDED DECEMBER 31, 1999 AND 1998
Total tax-equivalent interest income for 1999 was $111,085,000, up
$7,986,000 or 7.7% from $103,099,000 in 1998. The increase in interest
income was generated almost solely by growth in average loans
outstanding of $147 million. Total other earning assets were down
slightly from previous year levels. Limiting the benefits of the loan
growth were lower yields earned on all assets. Total loan yields
declined to 8.55% in 1999, down from 8.88% in 1998 as loan yields
dropped with an average prime rate of 8.00% in 1999, compared with 8.33%
in 1998. Total earning asset yields fell to 7.86%, down 19 basis points
from 8.05% in 1998.
Funding the 1999 asset growth were increased money market deposits
and to a lesser extent short term borrowings and non-interest bearing
deposits.
Total interest expense increased to $55,090,000 in 1999, up from
$53,593,000 in 1998. The increase was primarily the result of the
increase in money market deposits and short term borrowings. Lower rates
paid on all interest bearing liabilities offset a large portion of the
increased interest expense generated by the greater volume of deposits.
Overall rates paid on total interest bearing liabilities fell to 4.45%
from 4.80% paid in 1998.
Total net interest income increased to $55,995,000, up $6,489,000
from 1998 as the growth in interest income exceeded the higher interest
expense costs. Overall, the Company's net interest margin improved to
3.96%, up from 3.86% the previous year as the decline in interest
bearing liability rates exceeded the drop in earning asset yields.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Total tax-equivalent interest income for 1998 was $103,099,000, up
$7,594,000 or 8.0% above $95,504,000 in 1997. The increase in interest
income was generated by growth in average loans outstanding of $73
million and securities increases of $49 million above prior year levels.
Offsetting a portion of the benefits of asset growth were the lower
yields earned on all assets. Total loan yields declined to 8.88% in
1998, down from 9.07% in 1997 as loan yields dropped with an average
prime rate of 8.33% in 1998, compared with 8.44% in 1997. Total earning
asset yields fell to 8.05%, down 19 basis points from 8.24% in 1997.
Funding of the 1998 asset growth was accomplished primarily with funds
raised in connection with the money market deposit account promotion
during the last half of 1997. A decline in time deposits was partially
offset with increased short-term borrowings, demand deposits and
shareholders' equity.
Total interest expense increased to $53,593,000 in 1998, up from
$52,243,000 in 1997. The increase was primarily a result of the net
increase in interest bearing deposits, specifically money market
accounts. Offsetting a substantial portion of the increased interest
expense generated by the greater volume of deposits were the lower rates
paid on all interest bearing liabilities except long-term debt. Overall
rates paid on total interest bearing liabilities fell to 4.80% from
5.13% paid in 1997.
Total net interest income increased to $49,506,000, up $6,244,000
from 1997 as the growth in interest income exceeded the higher interest
expense costs. The Company's net interest margin improved to 3.86% from
3.73% the previous year as the decline in interest bearing liability
rates, primarily money market accounts, exceeded the drop in earning
asset yields.
---
11
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
<TABLE>
FIVE YEAR COMPARISON OF CONSOLIDATED AVERAGE BALANCE SHEETS,
INTEREST, YIELDS AND RATES
<CAPTION>
Twelve Months Ended December 31
(dollars in thousands) 1999 1998
======================================= =======================================
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
ASSETS Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans<F1><F2>
Taxable $1,029,254 $ 87,920 8.55% $ 882,613 $ 78,402 8.88%
Tax exempt<F3> 520 57 11.03
Held to maturity securities
Taxable 36,968 2,310 6.25 39,310 2,501 6.36
Tax-exempt<F3> 7,654 778 10.17 8,270 853 10.32
Available for sale securities 298,410 17,855 5.98 322,154 19,755 6.13
Trading account securities 858 55 6.38 930 60 6.41
Federal funds sold and other
short-term investments 40,488 2,110 5.21 28,177 1,528 5.42
-------------------------------------- --------------------------------------
TOTAL INTEREST-EARNING ASSETS 1,414,152 111,085 7.86 1,281,454 103,099 8.05
-------------------------------------- --------------------------------------
Noninterest-earning assets:
Cash and due from banks 27,908 24,543
Bank premises and equipment 28,904 15,928
Other assets 22,624 20,425
Allowance for possible
loan losses (20,108) (15,871)
-------------------------------------- --------------------------------------
TOTAL ASSETS $1,473,480 $1,326,479
====================================== ======================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 28,123 $ 339 1.20% $ 25,565 $ 419 1.64%
Money market accounts 723,692 31,178 4.31 631,451 29,311 4.64
Savings deposits 26,951 797 2.96 24,127 713 2.96
Time deposits of $100,000
or more 41,233 1,970 4.78 35,415 1,860 5.25
Other time deposits 314,084 15,548 4.95 317,377 16,935 5.34
-------------------------------------- --------------------------------------
TOTAL INTEREST-BEARING DEPOSITS 1,134,083 49,832 4.39 1,033,935 49,238 4.76
Federal funds purchased,
repurchase agreements and
other short-term borrowings 89,255 4,218 4.73 66,777 3,262 4.88
Convertible debentures
Guaranteed preferred
beneficial interests in
subordinated debentures 14,950 1,040 6.96 14,950 1,093 7.31
-------------------------------------- --------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 1,238,288 55,090 4.45 1,115,662 53,593 4.80
-------------------------------------- --------------------------------------
Noninterest-bearing liabilities:
Demand deposits 122,522 103,969
Other liabilities 1,455 3,968
Shareholders' equity 111,215 102,880
-------------------------------------- --------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,473,480 $1,326,479
====================================== ======================================
NET INTEREST INCOME $ 55,995 $ 49,506
====================================== ======================================
NET INTEREST MARGIN 3.96% 3.86%
====================================== ======================================
- ----------------------------------------------------------------------------------------------------------------------------------
<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 $257,000, $263,000, $251,000, $249,000, and $279,000 for the years ended December 31, 1999, 1998, 1997, 1996,
and 1995, respectively.
- ---
12
<PAGE>
<PAGE>
<CAPTION>
Twelve Months Ended December 31
(dollars in thousands) 1997 1996
======================================= =======================================
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
ASSETS Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans<F1><F2>
Taxable $ 810,038 $73,447 9.07% $ 674,176 $60,678 9.00%
Tax exempt<F3> 17 1 5.59
Held to maturity securities
Taxable 43,172 2,887 6.69 65,391 4,356 6.66
Tax-exempt<F3> 7,784 820 10.54 7,477 811 10.85
Available for sale securities 270,121 16,779 6.21 214,417 13,301 6.20
Trading account securities 914 62 6.80 771 47 6.17
Federal funds sold and other
short-term investments 27,357 1,510 5.52 14,278 774 5.42
-------------------------------------- --------------------------------------
TOTAL INTEREST-EARNING ASSETS 1,159,386 95,505 8.24 976,527 79,968 8.19
-------------------------------------- --------------------------------------
Noninterest-earning assets:
Cash and due from banks 25,539 22,696
Bank premises and equipment 12,264 10,579
Other assets 16,994 11,491
Allowance for possible
loan losses (13,658) (11,633)
-------------------------------------- --------------------------------------
TOTAL ASSETS $1,200,525 $1,009,660
====================================== ======================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 22,438 $ 383 1.71% $ 20,323 $ 348 1.71%
Money market accounts 457,914 22,716 4.96 336,586 14,104 4.19
Savings deposits 22,820 675 2.96 22,588 671 2.97
Time deposits of $100,000
or more 37,244 2,008 5.39 34,518 1,820 5.27
Other time deposits 410,766 22,717 5.53 389,427 21,388 5.49
-------------------------------------- --------------------------------------
TOTAL INTEREST-BEARING DEPOSITS 951,182 48,499 5.10 803,442 38,331 4.77
Federal funds purchased,
repurchase agreements and
other short-term borrowings 54,549 2,780 5.10 44,744 2,264 5.06
Convertible debentures 666 54 8.00 2,700 216 8.00
Guaranteed preferred
beneficial interests in
subordinated debentures 12,369 910 7.36
-------------------------------------- --------------------------------------
TOTAL INTEREST-BEARING LIABILITIES 1,018,766 52,243 5.13 850,886 40,811 4.80
-------------------------------------- --------------------------------------
Noninterest-bearing liabilities:
Demand deposits 93,707 82,258
Other liabilities 3,554 2,602
Shareholders' equity 84,498 73,914
-------------------------------------- --------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,200,525 $1,009,660
====================================== ======================================
NET INTEREST INCOME $43,262 $39,157
====================================== ======================================
NET INTEREST MARGIN 3.73% 4.01%
====================================== ======================================
<PAGE>
<CAPTION>
Twelve Months Ended December 31
(dollars in thousands) 1995
=====================================
Interest
Average Income/ Yield/
ASSETS Balance Expense Rate
<S> <C> <C> <C>
Interest-earning assets:
Loans<F1><F2>
Taxable $584,790 $53,553 9.16%
Tax exempt<F3> 959 84 8.77
Held to maturity securities
Taxable 135,317 8,342 6.16
Tax-exempt<F3> 7,478 816 10.91
Available for sale securities 103,646 6,725 6.49
Trading account securities 743 49 6.65
Federal funds sold and other
short-term investments 19,017 1,112 5.85
-----------------------------------
TOTAL INTEREST-EARNING ASSETS 851,950 70,681 8.30
-----------------------------------
Noninterest-earning assets:
Cash and due from banks 20,818
Bank premises and equipment 8,019
Other assets 10,329
Allowance for possible
loan losses (10,304)
-----------------------------------
TOTAL ASSETS $880,812
===================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts $ 19,213 $ 419 2.18%
Money market accounts 246,558 12,528 5.08
Savings deposits 22,466 662 2.94
Time deposits of $100,000
or more 38,102 2,098 5.51
Other time deposits 359,896 19,427 5.40
-----------------------------------
TOTAL INTEREST-BEARING DEPOSITS 686,235 35,134 5.12
Federal funds purchased,
repurchase agreements and
other short-term borrowings 50,028 2,918 5.83
Convertible debentures 2,968 243 8.19
Guaranteed preferred
beneficial interests in
subordinated debentures
-----------------------------------
TOTAL INTEREST-BEARING LIABILITIES 739,231 38,295 5.18
-----------------------------------
Noninterest-bearing liabilities:
Demand deposits 77,439
Other liabilities 2,179
Shareholders' equity 61,963
-----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $880,812
===================================
NET INTEREST INCOME $32,386
===================================
NET INTEREST MARGIN 3.80%
===================================
</TABLE>
---
13
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
CHANGES IN INTEREST INCOME AND EXPENSE/VOLUME AND RATE VARIANCES
The following table indicates, on a tax-equivalent basis, the
changes in interest income and interest expense which are attributable
to changes in average volume and average rates, in comparison with the
same period in the preceding year. The change in interest due to the
combined rate-volume variance has been allocated to rate and volume
changes in proportion to the absolute dollar amounts of the changes in
each.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
Compared to Compared to
December 31, 1998 December 31, 1997
===================================== =====================================
Increase (decrease) attributable to change in:
Yield/ Net Yield/ Net
(dollars in thousands) Volume Rate Change Volume Rate Change
===================================== =====================================
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans<F1><F2> $12,668 $(3,093) $ 9,575 $ 6,511 $(1,556) $ 4,955
Held to maturity securities
Taxable (148) (43) (191) (249) (137) (386)
Tax-exempt<F1> (63) (12) (75) 50 (17) 33
Available for sale securities (1,427) (473) (1,900) 3,194 (218) 2,976
Trading account
securities (5) (5) 1 (3) (2)
Federal funds sold and other
short-term investments 643 (61) 582 45 (27) 18
------------------------------------- -------------------------------------
TOTAL INTEREST
INCOME 11,668 (3,682) 7,986 9,552 (1,958) 7,594
------------------------------------- -------------------------------------
INTEREST PAID ON:
NOW accounts 39 (119) (80) 52 (16) 36
Money market accounts 4,059 (2,192) 1,867 8,140 (1,545) 6,595
Savings 84 84 38 38
Time deposits of
$100,000 or more 286 (176) 110 (97) (51) (148)
Other time deposits (173) (1,214) (1,387) (5,023) (759) (5,782)
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 1,232 (276) 956 554 (72) 482
Long-term
borrowings (53) (53) 64 65 129
------------------------------------- -------------------------------------
TOTAL INTEREST
EXPENSE 5,527 (4,030) 1,497 3,728 (2,378) 1,350
------------------------------------- -------------------------------------
NET INTEREST
INCOME $ 6,141 $ 348 $ 6,489 $ 5,824 $ 420 $ 6,244
===================================== =====================================
<PAGE>
<CAPTION>
Year Ended
December 31, 1997
Compared to
December 31, 1996
=====================================
Increase (decrease) attributable to change in:
Yield/ Net
(dollars in thousands) Volume Rate Change
=====================================
<S> <C> <C> <C>
INTEREST EARNED ON:
Loans<F1><F2> $12,293 $ 475 $ 12,768
Held to maturity securities
Taxable (1,489) 20 (1,469)
Tax-exempt<F1> 32 (23) 9
Available for sale securities 3,457 21 3,478
Trading account
securities 10 5 15
Federal funds sold and other
short-term investments 722 14 736
-------------------------------------
TOTAL INTEREST
INCOME 15,025 512 15,537
-------------------------------------
INTEREST PAID ON:
NOW accounts 35 35
Money market accounts 5,704 2,908 8,612
Savings 6 (2) 4
Time deposits of
$100,000 or more 146 42 188
Other time deposits 1,173 156 1,329
Federal funds purchased,
repurchase agreements
and other short-term
borrowings 461 55 516
Long-term
borrowings 374 374 748
-------------------------------------
TOTAL INTEREST
EXPENSE 7,899 3,533 11,432
-------------------------------------
NET INTEREST
INCOME $ 7,126 $(3,021) $ 4,105
=====================================
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The approximate tax equivalent adjustments were
$257,000, $263,000, $251,000, and $249,000 for the years ended December 31, 1999, 1998, 1997, and 1996, respectively.
<F2> Average balances included nonaccrual loans.
</TABLE>
LENDING AND CREDIT MANAGEMENT
Interest earned on the loan portfolio is the primary source of
income for the Company. The loan portfolio represents 71% of the
Company's total assets and for the year ended December 31, 1999, total
loans were up approximately $179 million. Loan growth occurred in all major
categories. The table on the following page shows the composition of the
loan portfolio at the end of each of the periods indicated.
- ---
14
<PAGE>
<PAGE>
LENDING AND CREDIT MANAGEMENT continued
<TABLE>
<CAPTION>
1999 1998 1997
(dollars in thousands) Amount % Amount % Amount %
========================= ======================= =======================
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal
and industrial development $ 527,382 47.6% $434,467 46.9% $369,559 43.6%
Real estate construction 60,432 5.5 40,019 4.3 37,536 4.4
Real estate mortgage:
One to four family
residential loans 112,405 10.2 103,140 11.1 117,105 13.8
Other real estate loans 374,710 33.8 328,493 35.4 307,624 36.3
Lease financing 19,676 1.8 10,175 1.1 7,199 .8
Installment and consumer 12,734 1.1 10,748 1.2 8,912 1.1
------------------------- ----------------------- -----------------------
TOTAL LOANS $1,107,339 100.0% $927,042 100.0% $847,935 100.0%
========================= ======================= =======================
<CAPTION>
1996 1995
(dollars in thousands) Amount % Amount %
======================= =======================
<S> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal
and industrial development $339,460 46.4% $288,318 46.2%
Real estate construction 17,149 2.3 14,312 2.3
Real estate mortgage:
One to four family
residential loans 113,035 15.5 107,386 17.2
Other real estate loans 251,618 34.4 206,105 33.0
Lease financing 3,204 .4 941 .2
Installment and consumer 6,962 1.0 6,798 1.1
----------------------- -----------------------
TOTAL LOANS $731,428 100.0% $623,860 100.0%
======================= =======================
</TABLE>
The following table sets forth the remaining maturities for loans as of
December 31, 1999.
<TABLE>
<CAPTION>
Over one year
through five years Over five years
-------------------- --------------------
One year Fixed Floating Fixed Floating
(dollars in thousands) or less rate rate rate rate Total
======== ==================== ==================== ==========
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
agricultural, municipal
and industrial development $346,207 $ 99,112 $ 67,122 $14,110 $ 831 $ 527,382
Real estate construction 24,419 21,525 14,141 347 60,432
Real estate mortgage 123,410 261,301 31,018 67,476 3,910 487,115
Lease financing 845 12,183 6,648 19,676
Installment and consumer 9,125 1,548 1,653 408 12,734
-------- -------------------- -------------------- ----------
TOTAL LOANS $504,006 $395,669 $113,934 $88,989 $4,741 $1,107,339
======== ======== ======== ======= ====== ==========
</TABLE>
The Company makes the majority of its loans to customers located
within the St. Louis metropolitan area. The Company has no foreign loans
and no significant agricultural loans. The Company has traditionally
emphasized commercial lending and at December 31, 1999, 89% of the loan
portfolio was in commercial, industrial and commercial real estate
loans.
An economic downturn and management's ability to deal with
changing economic conditions would affect the quality of the portfolio.
The Company strives to mitigate these risks by following written loan
policies and procedures. These loan policies and procedures are designed
to ensure prudent loan underwriting standards. The loan policy provides
that each lending officer has a defined lending authority. New loans in
excess of $250,000 are reviewed by the Senior Loan Committee.
<PAGE>
The existing loan portfolio is monitored via the Company's loan
rating system. Generally, all existing loans in excess of $150,000,
other than residential mortgages, are reviewed on an annual basis. The
Company assigns a reserve amount consistent with each loan rating
category. The loan rating system is used to determine the adequacy of
the allowance for possible loan losses. Management continuously
evaluates the allowance for possible loan losses to ensure its adequacy
to absorb loan losses inherent in the loan portfolio. General reserves
are established based on the loan rating system which focuses on
historical loss experience and trends in delinquencies and nonperforming
loans. The unallocated reserve serves to compensate for the uncertainty
in estimating loan losses, including the possibility of changes in risk
ratings of loans, the overall level of non-performing loans, and current
economic conditions. In 1999, commercial and industrial and commercial
real estate loans increased over $169 million, or nearly 21% above 1998
levels. As a result the allocation of the allowance for possible loan
losses increased sharply for these commercial loan categories. The
unallocated portion of the reserve declined to approximately 37% of the
total reserve at the end of 1999, down from 41% at the end of the prior
year.
Quarterly the allowance for possible loan losses is reviewed
relative to the loan rating system and results are reported to the Board
of Directors. This review considers items such as a review of
specifically identified loans, current economic conditions, loan growth
and the overall characteristics of the loan portfolio.
Loan growth in 1999 was concentrated in commercial loans which are
generally higher risk than residential real estate loans. Commercial
loans as a percentage of the total loan portfolio continued to increase
in 1999 to 89%, while residential real estate loans decreased to 10% of
the portfolio. Unfunded loan commitments have also increased as the
commercial loan portfolio has grown. Management believes that there are
still significant risks in the economy as the Asian economies remain
volatile and some segments of the stock market appear artificially
inflated. Management believes that the level of allowance for possible
loan losses is adequate given the Company's loan portfolio.
The loan review process is designed to identify problem credits.
Potential problem loans are monitored by the lending staff and by senior
management. It is the policy of the Company to discontinue the accrual
of interest on any loan where the payment of principal or interest on a
timely basis in the normal course of business is in doubt. The
discontinuance of interest accrual on a loan occurs at any time that a
significant problem is detected in the normal
---
15
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
LENDING AND CREDIT MANAGEMENT continued
payment process. The Company's policy is to automatically place
a loan on nonaccrual status when it becomes 90 days past due, unless it
is well secured and in the process of collection.
As a part of their examination process, various regulatory
agencies review the Company's allowance for possible loan losses. These
agencies have the authority to require the Company to recognize
additions to the allowance based upon their judgment. Management
believes that the allowance for possible loan losses at December 31,
1999 was adequate. The table below summarizes for the periods indicated
activity in the Company's allowance for possible loan losses, including
loans charged off, loan recoveries and additions to the allowance
charged to operating expenses.
Gross interest income on nonaccrual and restructured loans, which
would have been recorded under the original terms of the loans, was
approximately $278,000 in 1999, $278,000 in 1998, and $270,000 in 1997.
Of this amount, approximately $292,000, $159,000, and $195,000 was
actually recorded as interest income on such loans in 1999, 1998, and
1997, respectively.
As of December 31, 1999, the Company had approximately
$1 million in loans which were not included in nonaccrual, past due 90
days or more or restructured categories, but where the borrowers were
currently experiencing potential credit problems that raised doubts as
to the ability of the borrowers to comply with the present loan
repayment terms.
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
AND RELATED INFORMATION (dollars in thousands) 1999 1998 1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR POSSIBLE LOAN LOSSES (BEGINNING OF PERIOD) $ 18,144 $ 14,892 $ 12,624 $ 10,789 $ 9,575
----------------------------------------------------------------------
Loans charged off:
Commercial and industrial (2,054) (1,958) (2,071) (2,371) (676)
Real estate mortgage (254) (200) (726) (471) (1,022)
Installment (45) (74) (34) (16) (10)
----------------------------------------------------------------------
TOTAL LOANS CHARGED OFF (2,353) (2,232) (2,831) (2,858) (1,708)
----------------------------------------------------------------------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF:
Commercial and industrial 530 925 705 662 303
Real estate mortgage 246 104 290 142 30
Installment 31 5 4 14 29
Other
----------------------------------------------------------------------
TOTAL RECOVERIES 807 1,034 999 818 362
----------------------------------------------------------------------
Net loans charged off (1,546) (1,198) (1,832) (2,040) (1,346)
----------------------------------------------------------------------
Provision for possible loan losses 5,051 4,450 4,100 3,875 2,560
----------------------------------------------------------------------
ALLOWANCE FOR POSSIBLE LOAN LOSSES (END OF PERIOD) $ 21,649 $ 18,144 $ 14,892 $ 12,624 $ 10,789
======================================================================
LOANS OUTSTANDING:
Average $1,029,774 $882,613 $810,038 $674,193 $585,749
End of period 1,104,498 925,961 847,091 731,019 623,777
Ratio of allowance for possible loan losses to loans
outstanding:
Average 2.10% 2.06% 1.84% 1.87% 1.84%
End of period 1.96 1.96 1.76 1.73 1.73
Ratio of net charge-offs to average loans outstanding .15 .14 .23 .30 .23
PERCENT OF CATEGORIES TO TOTAL LOANS:
Commercial, industrial and marketable security loans 47.62% 46.86% 43.58% 46.41% 46.22%
Commercial loans secured by real estate 33.84 35.43 36.28 34.42 33.04
Construction and land development loans 5.46 4.32 4.43 2.35 2.29
Real estate mortgage 10.15 11.13 13.81 15.46 17.21
Lease financing 1.78 1.10 .85 .41 .15
Consumer loans 1.15 1.16 1.05 .95 1.09
----------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
======================================================================
Allocation of allowance for possible loan losses
(end of period):
Commercial and industrial $ 8,438 $ 6,431 $ 4,706 $ 4,162 $ 3,435
Real estate mortgage 4,982 4,165 4,502 4,097 3,164
Installment 125 90 76 51 49
Lease financing 143 77 54 27 8
Unallocated 7,961 7,381 5,554 4,287 4,133
----------------------------------------------------------------------
TOTAL $ 21,649 $ 18,144 $ 14,892 $ 12,624 $ 10,789
======================================================================
</TABLE>
- ---
16
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
NONPERFORMING ASSETS BY CATEGORY (dollars in thousands) 1999 1998 1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial, industrial and marketable security loans:
Nonaccrual $ 2,440 $ 1,118 $ 638 $ 2,251 $ 1,551
Past due 90 days or more 92 11
Restructured terms 79 101 93 250 212
Commercial loans secured by real estate:
Nonaccrual 254 522 1,698
Past due 90 days or more 13
Restructured terms
Construction and land development loans:
Nonaccrual 2,320
Past due 90 days or more
Restructured terms
Real estate mortgage:
Nonaccrual 311 336 1,122 623 523
Past due 90 days or more 279 131 179
Restructured terms 500 500
Consumer loans:
Nonaccrual 5 3 65 29 6
Past due 90 days or more 22
Restructured terms 11 11 19 38 19
----------------------------------------------------------------------
TOTAL NONPERFORMING LOANS 3,217 1,569 2,191 6,710 4,688
Other real estate 10 160 1,421 569
----------------------------------------------------------------------
TOTAL NONPERFORMING ASSETS $ 3,227 $ 1,729 $ 3,612 $ 7,279 $ 4,688
======================================================================
Loans, net of unearned discount $1,104,498 $ 925,961 $847,091 $731,019 $623,777
Allowance for possible loan losses to loans 1.96% 1.96% 1.76% 1.73% 1.73%
Nonperforming loans to loans .29 .17 .26 .92 .75
Allowance for possible loan losses to nonperforming loans 672.96 1,156.41 679.69 188.14 230.14
Nonperforming assets to loans and foreclosed assets .29 .19 .43 .99 .75
</TABLE>
INVESTMENT PORTFOLIO
The securities portfolio of the Company meets a number of
objectives that includes providing a stable source of income with little
credit risk, providing a source of liquidity as securities mature,
providing collateral for pledging, and helping balance the Company's
asset-liability position. Securities in the Available for Sale category
meet the above needs and additionally provide a source of liquidity
through their ability to be sold to fund loan growth. Securities might
be purchased for the Available for Sale account when the level of
interest rates or the shape of the yield curve favors investing in
longer-term securities, even though the Company does not expect to hold
such securities to maturity. In addition, securities may need to be
purchased and, at a later date, sold in order to help balance the asset-
liability position. Finally, the Company attempts to fully utilize its
equity at all times. When the level of equity is adequate to support
greater assets than can be achieved by the Company's efforts to attract
quality loans, the Company will invest in securities provided such
investment is consistent with the asset sensitivity objective of the
Company and adds to the Company's earnings. This is consistent with the
Company's objective of maximizing return on equity to a larger extent
than return on assets.
As of December 31, 1999 and 1998, securities held in the Trading
Account were $0 and $302,000, respectively. Available for Sale
securities were $258 million at the end of 1999 and $400 million at the
end of 1998. Held to maturity securities were $59 million at the end of
1999 and $39 million at the end of 1998.
The Company regularly reviews its asset-liability position based
upon its internal rate sensitivity analysis, which includes adjustments
to reflect management's best estimates of probable maturities and
pricing of various deposit accounts in response to changes in the level
of interest rates.
The Company repositioned the investment portfolio during 1999 in
anticipation of a rising interest rate environment. Also, given the
strong loan growth in 1999, the Company sold some investment securities
to meet loan funding needs. U.S. Treasury and Agency securities with
maturities of five to ten years were sold. As a result the duration of
the overall portfolio was shortened from approximately 5 years to
approximately 2 years. These sales transactions resulted in net
securities losses of $1,251,000 in 1999.
Because the Company has historically maintained high loan to
deposit ratios and a great percentage of those loans are in commercial
loans, the Company's policy has been to minimize credit risk in the
securities portfolio. As of December 31, 1999, 96% of Held to Maturity
securities were U.S. Government or obligations guaranteed by the U.S.
Government and U.S. Agencies. As of December 31, 1999, 90% of the
Company's Available for Sale securities were U.S. Government and U.S.
Agency obligations. Four percent of securities in the Available for Sale
account consisted of Collateralized Mortgage Obligation (CMOs)
collateralized by mortgage obligations issued by the Federal Home Loan
Mortgage Corporation or the Federal
---
17
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
INVESTMENT PORTFOLIO continued
National Mortgage Association. The remaining balance in the Available
for Sale account was invested in Federal Home Loan Bank stock and other
debt and equity securities.
As of December 31, 1999, the Company owned $4.7 million in Public
Housing Authority bonds (PHAs). These PHAs were purchased prior to the
Tax Reform Act of 1986 and are therefore 100% exempt from Federal income
taxes. PHAs are backed by the "full faith and credit" of the U.S.
Government.
In addition, the Company has a small amount of "bank qualified"
tax exempt securities. The total amount of these issues as of December
31, 1999, was $2.5 million. Southwest Bank of St. Louis became a member
of the Federal Home Loan Bank in 1993, which required an initial equity
investment of $1.8 million. Since that time, Southwest Bank of St.
Louis' borrowings from the Federal Home Loan Bank have required an
increase in that investment and as of December 31, 1999, the Bank's
investment was $6.6 million.
As of December 31, 1999, the contractual maturities of securities
and their weighted average yield in the held to maturity and available
for sale portfolios were as follows:
<TABLE>
<CAPTION>
Over One Over Five
Through Through Over Weighted
One Year Five Ten Ten Average
(dollars in thousands) or Less Years Years Years Yields
====================================================================
<S> <C> <C> <C> <C> <C>
United States Treasury securities $ 38,089 $ 33,019 $ 5,205 $ 6.47%
Obligations of United States
Government agencies 61,431 67,960 87,560 4,360 6.07
PHA bonds guaranteed by the
United States Government<F1> 1,772 2,223 676 10.62
States and political subdivisions<F1> 1,025 617 899 9.02
Federal Home Loan Bank stock and other 6,642 8,517 5.04
--------------------------------------------------------------------
Total securities<F2> $106,162 $103,776 $95,605 $14,452 6.24%
====================================================================
Weighted average yield<F1> 5.60% 6.27% 6.66% 7.98%
====================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Rates on PHA bonds and states and political subdivisions have been adjusted to tax equivalent yields using the marginal
statutory Federal income tax rate of 35%.
<F2> Available for sale securities are stated at amortized cost.
</TABLE>
DEPOSITS
Deposits are the principal source of funds for the Company. At
December 31, 1999, the Company's total deposits were $1.316 billion.
Deposits consist primarily of core deposits from the local market areas
surrounding each of the Company's offices. The Company has not used
brokered deposits as a source of funds, although its capitalization
would permit such activity on an unrestricted basis under current
regulations. The following table sets forth the distribution of the
Company's deposit accounts at the dates indicated and the weighted
average nominal interest rates for each category of deposit.
<TABLE>
<CAPTION>
December 31
1999 1998
Percent of Percent of
(dollars in thousands) Amount Deposits Rate Amount Deposits Rate
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 129,818 9.87% $ 125,235 10.33%
NOW accounts 28,289 2.15 1.20% 28,162 2.32 1.64%
Money market accounts 697,980 53.05 4.31 700,314 57.79 4.64
Savings deposits 28,215 2.14 2.96 25,125 2.07 2.96
Time deposits of
$100,000 or more 52,106 3.96 4.78 35,744 2.96 5.25
Other time deposits 379,308 28.83 4.95 297,225 24.53 5.34
---------------------------------------- ----------------------------------------
TOTAL DEPOSITS $1,315,716 100.00% $1,211,805 100.00%
======================================== ========================================
<PAGE>
<CAPTION>
December 31
1997
Percent of
(dollars in thousands) Amount Deposits Rate
----------------------------------------
<S> <C> <C> <C>
Demand deposits $ 109,949 9.76%
NOW accounts 25,067 2.23 1.71%
Money market accounts 581,117 51.58 4.96
Savings deposits 22,999 2.04 2.96
Time deposits of
$100,000 or more 32,898 2.92 5.39
Other time deposits 354,532 31.47 5.53
----------------------------------------
TOTAL DEPOSITS $1,126,562 100.00%
========================================
</TABLE>
The aggregate amount of maturities for time deposits for the four years
beginning in 2001 are $79,474,000, $11,163,000, $10,071,000, and
$5,254,000.
- ---
18
<PAGE>
<PAGE>
DEPOSITS continued
AMOUNTS AND MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
The following table sets forth the amount and maturities of time
deposits of $100,000 or more at December 31, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
======= =======
<S> <C> <C>
Three months or less $14,787 $17,627
Over three months through six months 9,786 9,206
Over six months through twelve months 18,827 4,874
Over twelve months 8,706 4,037
------- -------
TOTAL $52,106 $35,744
======= =======
</TABLE>
SENSITIVITY TO CHANGES IN INTEREST RATES
The Company monitors its interest rate sensitivity position and
attempts to limit the exposure to interest rate risk but not always
eliminate it. Subject to management's best estimates of probable
maturities the Company's policy is that the ratio of maturing assets to
maturing liabilities repricing in the one year or less time period shall
be no less than 75% or no greater than 125%. The Company also uses
various interest rate related contracts to manage its overall interest
rate risk exposure for asset-liability management purposes.
The following table represents the Company's interest rate
position based upon contractual maturities only for various time
periods, as of December 31, 1999.
<TABLE>
<CAPTION>
0 to 3 4 to 12 1 to 5 Over 5
(dollars in thousands) months months years years Total
======================================================================
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans $ 530,763 $ 91,062 $ 399,624 $ 83,049 $1,104,498
Securities 52,775 53,413 103,270 107,557 317,015
Other short-term investments 55,100 55,100
----------------------------------------------------------------------
TOTAL EARNING ASSETS $ 638,638 $ 144,475 $ 502,894 $190,606 $1,476,613
======================================================================
Funding Sources
Demand accounts $ 129,818 $ $ $ $ 129,818
Money market accounts 697,980 697,980
Time deposits 66,457 258,674 106,283 431,414
Savings accounts 28,215 28,215
NOW accounts 28,289 28,289
Guaranteed preferred beneficial interests
in subordinated debentures 14,950 14,950
Other borrowed funds 105,639 105,639
----------------------------------------------------------------------
TOTAL FUNDING SOURCES $1,071,348 $ 258,674 $ 106,283 $1,436,305
======================================================================
Interest sensitivity gap $ (432,710) $(114,199) $ 396,611 $190,606
Cumulative gap $ (432,710) $(546,909) $(150,298) $ 40,308
Gap as a percentage of total earning assets (29.3%) (37.0%) (10.2%) 2.7%
</TABLE>
<PAGE>
The Company enters into off-balance sheet transactions primarily
as part of its asset-liability management strategy to manage interest
rate risk. These transactions involve the exchange of interest payments
based on a notional amount. The notional amounts of these transactions
express the volume of transactions and are not an appropriate indicator
of the off-balance sheet market risk or credit risk. The credit risk
associated with these transactions arises from the counterparties'
failure to meet the terms of the agreements and is limited to the fair
value of contracts in a gain position. The Company manages this risk by
maintaining positions with highly rated counterparties. The credit risk
exposure of the Company at December 31, 1998 was approximately
$2,181,000. There was no credit risk exposure at December 31, 1999.
The operations of the Company are subject to risk resulting from
interest rate fluctuations to the extent that there is a difference
between the amount of the Company's interest-earning assets and the
amount of interest-bearing liabilities that are prepaid or withdrawn,
mature or reprice in specified periods. The principal objective of the
Company's asset-liability management activities is to provide maximum
levels of net interest income while
---
19
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
SENSITIVITY TO CHANGES IN INTEREST RATES continued
maintaining acceptable levels of interest rate and liquidity risk and
facilitating the funding needs of the Company. The Company utilizes gap
analysis as the primary quantitative tool in measuring the amount of
interest rate risk that is present at the end of each quarter. This tool
quantifies the effects of various interest rate scenarios on the
projected net interest margin over each of the ensuing five years. The
Company uses derivative financial instruments, including interest rate
swaps, futures, and options, with indices that correlate to on-balance
sheet instruments to modify its indicated net interest sensitivity to
levels deemed to be appropriate based on the Company's current economic
outlook.
The following table provides information about the Company's
financial instruments used for purposes other than trading that are
sensitive to changes in interest rates. For loans, securities, and
liabilities with contractual maturities, the table presents principal
cash flow and related weighted-average interest rates by contractual
maturities. For core deposits (e.g., DDA, interest checking, savings and
money market deposits) that have no contractual maturity, the table
presents principal cash flows and, as applicable, related weighted-
average interest rates based on the Company's historical experience and
management's judgment concerning their most likely withdrawal behaviors.
No table is presented for the Company's use of derivative financial
instruments and other financial instruments used for trading purposes as
these activities were immaterial for the periods presented.
For interest rate floors, the table presents notional amounts and
weighted-average interest rates by contractual maturity date. Notional
amounts are used to calculate the contractual payments
to be exchanged under the contracts.
<TABLE>
<CAPTION>
Fair
YEAR OF CONTRACTUAL MATURITY There- Value
(dollars in millions) 2000 2001 2002 2003 2004 after Total 12/31/99
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS:
Fixed interest rate loans $ 169 $ 109 $ 124 $ 78 $ 83 $ 81 $ 644 $ 638
Average interest rate 8.39% 8.34% 8.25% 8.19% 8.16% 7.88% 8.24%
Variable interest rate loans $ 336 $ 61 $ 38 $ 10 $ 8 $ 7 $ 460 $ 456
Average interest rate<F1> 9.07% 9.05% 8.98% 8.87% 9.20% 5.76% 9.01%
Fixed interest rate securities $ 110 $ 38 $ 17 $ 27 $ 23 $ 107 $ 322 $ 316
Average interest rate 5.69% 6.42% 6.08% 6.40% 6.32% 6.76% 6.26%
Variable interest rate securities $ $ $ $ $ $ 1 $ 1 $ 1
Average interest rate 7.10% 7.10%
Other interest-bearing assets $ 55 $ $ $ $ $ $ 55 $ 55
Average interest rate 5.50% 5.50%
RATE SENSITIVE LIABILITIES:
Noninterest-bearing checking $ 90 $ $ $ $ $ 40 $ 130 $ 130
Average interest rate
Savings & interest-bearing checking $ 546 $ 1 $ 1 $ 1 $ 1 $ 204 $ 754 $ 754
Average interest rate<F2> 4.54% 3.00% 3.00% 3.00% 3.00% 4.15% 4.43%
Time-deposits $ 326 $ 80 $ 11 $ 10 $ 5 $ $ 432 $ 432
Average interest rate 4.99% 5.70% 5.38% 5.28% 4.84% 5.14%
Fixed interest rate borrowings $ 106 $ $ $ $ $ $ 106 $ 106
Average interest rate 5.14% 5.14%
Variable interest rate borrowings $ $ $ $ $ $ 15 $ 15 $ 15
Average interest rate 7.10% 7.10%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> The average interest rate for variable interest rate loans should approximate the Company's internal prime rate plus
60 basis points.
<F2> The average interest rate for savings and interest-bearing checking deposits may change as market rates change;
however, there is no correlation between these rates and any market rate index. These rates are more competitive
driven than market driven.
</TABLE>
- ---
20
<PAGE>
<PAGE>
NONINTEREST INCOME
The following table sets forth the Company's noninterest income for the
periods indicated.
<TABLE>
<CAPTION>
Year ended December 31
(dollars in thousands) 1999 1998 1997
=====================================
<S> <C> <C> <C>
Service charges on deposit accounts $ 2,226 $1,937 $1,867
Security gains/(losses), net (1,251) 1,539 85
Trading profits and commissions 7,225 1,865 1,211
Merchant credit card fees 1,619 1,568 1,419
Other 2,184 1,474 1,014
-------------------------------------
TOTAL NONINTEREST INCOME $12,003 $8,383 $5,596
=====================================
</TABLE>
Total noninterest income for 1999 was $12,003,000, up $3,620,000
or 43.2% from $8,383,000 in 1998 and $5,596,000 in 1997. Trading profits
and commissions for 1999 were $7,225,000, up sharply from $1,865,000 and
$1,211,000 in 1998 and 1997, respectively. During 1999 the Company
entered into short positions in various futures contracts in
anticipation of higher interest rates. Gains on these interest rate
derivative trading activities generated trading profits of $5,919,000 in
1999. Comparative derivative trading activities generated gains in 1998
of $316,000 and losses of $287,000 in 1997. Commissions and fees from
customer transactions were down slightly from those of 1998 and 1997.
Increased service charges on deposit accounts and greater operating
lease income accounted for the majority of the remaining increase in
other noninterest income in 1999.
Net losses of $1,251,000 were realized on securities sales in
1999, compared with gains of $1,539,000 and $85,000 in 1998 and 1997,
respectively. During 1999 the Company reduced the duration of the
overall portfolio in anticipation of higher interest rates. The
portfolio repositioning generated securities losses that partially
offset the gains on trading activities. Only available for sale
securities were sold during the three years ended December 31, 1999.
Held to maturity securities sometimes are sold, but only within 90 days
of each security's maturity date.
NONINTEREST EXPENSE
The following table sets forth the Company's noninterest expense
for the periods indicated.
<TABLE>
<CAPTION>
Year ended December 31
(dollars in thousands) 1999 1998 1997
=====================================
<S> <C> <C> <C>
Employee compensation and benefits $13,515 $11,725 $10,587
Net occupancy 1,738 1,369 1,283
Equipment 1,819 1,373 1,186
Advertising 1,179 1,139 840
Merchant credit card expense 1,525 1,419 1,217
Other 8,742 6,585 5,911
-------------------------------------
TOTAL NONINTEREST EXPENSE $28,518 $23,610 $21,024
=====================================
</TABLE>
Noninterest expenses increased to $28,518,000 in 1999, up from
$23,610,000 in 1998 and $21,024,000 in 1997. Overall Company growth,
merit increases and higher benefits costs have been primarily
responsible for the increased total overhead costs in most years.
Operating costs for the Belleville office which opened in September
1998, the new Des Peres office and Company headquarters which opened in
late 1999, and significant computer upgrades also combined to increase
total overhead expenses. Increases were also experienced in other
categories of noninterest costs including operating lease depreciation,
contributions, recording fees and other miscellaneous losses.
Overhead costs have grown considerably over the years as a result
of the overall Company growth, however the Company's operating
efficiency ratios have continued to compare favorably against peer group
standards. In 1999, the Company's efficiency ratio was 41.94% compared
to 40.78% and 43.03% in 1998 and 1997, respectively.
INCOME TAXES
Income taxes for 1999 increased to $12,747,000 from $10,955,000 in
1998 and $8,470,000 in 1997. Annual increases in income and a declining
percentage of tax-exempt income to total income have contributed to
greater income tax expense.
---
21
<PAGE>
<PAGE>
FINANCIAL REVIEW (CONTINUED)
CAPITAL MANAGEMENT AND RESOURCES
At the end of 1999, the Company's shareholders' equity had grown
to $112,566,000, up $2,788,000 from the end of 1998. Earnings of
$21,425,000 provided the largest portion of the Company's capital
accumulation in 1999. At December 31, 1999, retained earnings were
$96,874,000, or 86% of total shareholders' equity. During 1999, 29,950
shares of common stock were issued as various employee stock options to
purchase common stock were exercised. Limiting 1999's shareholders'
equity growth were unrealized losses, net of tax, on available for sale
securities of $8,510,000. In addition, a portion of the Company's
capital accumulation was offset by cash dividends on common stock of
$3,554,000 and the purchase of treasury stock.
During 1999, the Company's Board of Directors authorized the
extension of the 1996 Common Stock Repurchase Plan. The maximum number
of shares which may be purchased under this Plan is 800,000, or 8.4% of
the Company's outstanding shares on the date of the Plan extension. In
1999, the Company repurchased 225,500 shares of common stock at an
average price of $32.14. These 1999 repurchases reduced total
shareholders' equity by $7,248,000.
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%. 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. Capital adequacy guidelines adopted
by the Federal Reserve Board provide two primary criteria for examining
capital. The measurements include the risk-based capital guidelines and
the capital to total assets or leverage ratio minimum requirements.
The risk-based capital guidelines require the assignment of a
risk-weighting factor to all Company assets and various off-balance
sheet exposures. The risk-based capital ratio is calculated by dividing
qualifying capital by the sum of risk-weighted assets and risk-weighted
off-balance sheet items. Qualifying capital is classified into two
tiers. For the Company, Tier 1 capital equals total shareholders' equity
and the Guaranteed preferred beneficial interest in subordinated
debentures. Tier 2 capital is comprised mostly of the allowance for
possible loan losses. As required by the risk-based capital guidelines,
no asset or equity adjustments related to Statement of Financial
Accounting Standard No. 115 are recognized for these equity analysis
purposes.
The Federal Reserve guidelines required that Tier 1 capital equal
or exceed 4.00% of risk-weighted assets, and that the risk-based total
capital ratio equal or exceed 8.00%. As of December 31, 1999 and 1998
the Company's Tier 1 capital was 10.97% and 11.96% of risk-weighted
assets, and total risk-based capital was 12.23% and 13.22%,
respectively. Identical capital standards apply to the Banks. As of
December 31, 1999 and 1998, the Southwest Bank of St. Louis' Tier 1 and
total risk-weighted capital ratios were 9.52% and 10.50%, and 10.78% and
11.75%, respectively. As of December 31, 1999 and 1998, Southwest Bank,
Belleville's Tier 1 and total risk-weighted capital ratios were 20.35%
and 36.64%, and 21.31% and 37.04%, respectively.
The minimum acceptable ratio of Tier 1 capital to total assets, or
leverage ratio, has been established by the Federal Reserve Board at
3.00%. As of December 31, 1999 and 1998, the Company's and Southwest
Bank of St. Louis' leverage ratios were 8.40% and 8.56%, and 7.44% and
7.54%, respectively. As of December 31, 1999 and 1998, Southwest Bank,
Belleville's leverage ratio was 7.91 and 23.39%.
Management believes that a strong capital position provided by a
mix of equity and qualifying long-term debt is essential. Changing
economic conditions and the regulatory environment also continue to
emphasize the importance of capital strength and depth. Capital provides
safety and security for depositors, and it enhances Company value for
shareholders by providing opportunities for growth with the selective
use of leverage. Various leverage options are also available to the
Company including negotiated long-term bank borrowings, short-term
revolving lines of credit or other qualifying long-term debt.
- ---
22
<PAGE>
<PAGE>
LIQUIDITY
The Company needs to maintain a level of liquidity which will
provide a readily available source of funds for new loans and to meet
loan commitments and other obligations on a timely basis. Historically,
the Company has been loan driven, which means that as loans have
increased above 85% of deposits, the Company has taken action to
increase the level of core deposits. This action generally involves the
use of deposit promotions, paying premium rates coupled with advertising
to attract new customers to the Company. Where possible, the Company has
timed a deposit promotion to coincide with the opening of a new office
so as to achieve maximum growth in deposits. It has been the Company's
experience that the majority of deposits raised through these promotions
have remained at the Company after the promotion is over and have
provided a steadily growing base of core deposits at the Company. In
addition, the steady flow of maturing securities provides a source of
liquidity.
In 1993 Southwest Bank of St. Louis became a shareholder and
member of the Federal Home Loan Bank. One of the benefits of this
membership is access to funds as a source of liquidity. Other sources of
liquidity include bank Federal funds lines, securities repurchase
agreements, Treasury tax and loan options and negotiated bank lines of
credit.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of
its plans to become Year 2000 ready. In late 1999, the Company completed
its remediation and testing of systems. As a result of those planning
and implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-
information technology systems and believes those systems successfully
responded to the Year 2000 date change. The Company expensed
approximately $70,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting
from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue
to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.
FORWARD-LOOKING STATEMENTS
Certain statements in this annual report that relate to the plans,
objectives or future performances 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.
---
23
<PAGE>
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
MISSISSIPPI VALLEY BANCSHARES, INC.
We have audited the accompanying consolidated balance sheets of
Mississippi Valley Bancshares, Inc. and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Mississippi Valley Bancshares, Inc. and subsidiaries at December 31,
1999 and 1998, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/Ernst & Young LLP
St. Louis, Missouri
January 14, 2000
- ---
24
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
December 31
(dollars in thousands) 1999 1998
==================================
<S> <C> <C>
ASSETS
Cash and due from banks $ 29,551 $ 27,017
Federal funds sold 55,100
Held to maturity securities
(fair value of $59,115 and $40,283,
respectively) 59,116 38,815
Available for sale securities 257,899 400,087
Trading account securities) 302
Loans 1,107,339 927,042
Less:
Unearned income 2,841 1,081
Allowance for possible loan losses 21,649 18,144
---------- ----------
Net loans 1,082,849 907,817
Premises and equipment 37,658 20,755
Other assets 38,976 35,264
---------- ----------
TOTAL ASSETS $1,561,149 $1,430,057
========== ==========
LIABILITIES
Deposits:
Non-interest bearing $ 129,818 $ 125,235
Interest bearing 1,185,898 1,086,570
---------- ----------
Total deposits 1,315,716 1,211,805
---------- ----------
Securities sold under
agreements to repurchase 35,049 41,605
Other short-term borrowings 70,590 36,853
Guaranteed preferred beneficial
interests in subordinated debentures 14,950 14,950
Other liabilities 12,278 15,066
---------- ----------
TOTAL LIABILITIES 1,448,583 1,320,279
========== ==========
SHAREHOLDERS' EQUITY
Preferred stock-par value $1
($100 liquidating value)
Authorized 100,000 shares, none issued
Common stock-par value $1
Authorized 20,000,000 shares, issued
9,661,262 in 1999 and 9,631,312 in 1998 9,661 9,631
Capital surplus 20,272 19,627
Retained earnings 96,874 79,003
Accumulated other comprehensive income (2,245) 6,265
Treasury stock, at cost, 364,900 and 139,400 shares,
respectively (11,996) (4,748)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 112,566 109,778
========== ==========
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,561,149 $1,430,057
========== ==========
See accompanying notes.
</TABLE>
---
25
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
Year Ended December 31
(dollars in thousands, except per share data) 1999 1998 1997
===================================================
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 87,957 $ 78,402 $ 73,447
Held to maturity securities:
Taxable 2,310 2,501 2,887
Tax-exempt 541 590 569
Available for sale securities 17,855 19,755 16,779
---------------------------------------------------
20,706 22,846 20,235
Other 2,165 1,588 1,572
---------------------------------------------------
TOTAL INTEREST INCOME 110,828 102,836 95,254
---------------------------------------------------
Interest expense:
Deposits 49,831 49,238 48,499
Short-term borrowings 4,219 3,262 2,780
Long-term borrowings 1,040 1,093 964
---------------------------------------------------
TOTAL INTEREST EXPENSE 55,090 53,593 52,243
---------------------------------------------------
NET INTEREST INCOME 55,738 49,243 43,011
Provision for possible loan losses 5,051 4,450 4,100
---------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 50,687 44,793 38,911
---------------------------------------------------
Other income:
Service charges 2,226 1,937 1,867
Security gains/(losses), net on:
Sales of available for sale securities (1,251) 1,539 85
Trading profits and commissions 7,225 1,865 1,211
Merchant credit card fees 1,619 1,568 1,419
Other 2,184 1,474 1,014
---------------------------------------------------
12,003 8,383 5,596
---------------------------------------------------
Other expenses:
Employee compensation and
other benefits 13,515 11,725 10,587
Net occupancy 1,738 1,369 1,283
Equipment 1,819 1,373 1,186
Advertising 1,179 1,139 840
Merchant credit card expense 1,525 1,419 1,217
Other 8,742 6,585 5,911
---------------------------------------------------
28,518 23,610 21,024
---------------------------------------------------
INCOME BEFORE INCOME TAXES 34,172 29,566 23,483
Income taxes 12,747 10,955 8,470
---------------------------------------------------
NET INCOME $ 21,425 $ 18,611 $ 15,013
===================================================
Average common shares and common
share equivalents outstanding 9,507,769 9,747,564 9,700,928
===================================================
Earnings per common share:
Basic $ 2.29 $ 1.95 $ 1.60
Diluted $ 2.25 $ 1.91 $ 1.55
See accompanying notes.
</TABLE>
- ---
26
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
Preferred Stock Common Stock Capital
(dollars in thousands) Shares Amount Shares Amount Surplus
=======================================================================================================
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1997 9,033,912 $9,034 $15,235
Net income
Issuance of
common stock 10,100 10 101
1992 debentures
converted to
common stock 475,200 475 2,225
Cash dividends on:
common stock
Unrealized gain
on available for
sale securities net of tax
- -------------------------------------------------------------------------------------------------------
Comprehensive Income
BALANCE AT
DECEMBER 31, 1997 9,519,212 9,519 17,561
Net income
Issuance of
common stock 112,100 112 2,066
Purchase of
treasury stock
Cash dividends on:
common stock
Unrealized gain
on available for
sale securities net of tax
- -------------------------------------------------------------------------------------------------------
Comprehensive Income
BALANCE AT
DECEMBER 31, 1998 9,631,312 9,631 19,627
Net income
Issuance of
common stock 29,950 30 645
Purchase of
treasury stock
Cash dividends on:
common stock
Unrealized loss
on available for
sale securities net of tax
- -------------------------------------------------------------------------------------------------------
Comprehensive Income
BALANCE AT
DECEMBER 31, 1999 9,661,262 $9,661 $20,272
=======================================================================================================
<PAGE>
<CAPTION>
Accumulated Total
Other Share- Compre-
Retained Comprehensive Treasury holders' hensive
(dollars in thousands) Earnings Income (Loss) Stock Equity Income
=======================================================================================================
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1997 $51,159 $ 521 $ $ 75,949
Net income 15,013 15,013 $15,013
Issuance of
common stock 111
1992 debentures
converted to
common stock 2,700
Cash dividends on:
common stock (2,631) (2,631)
Unrealized gain
on available for
sale securities net of tax 1,965 1,965 1,965
- -------------------------------------------------------------------------------------------------------
Comprehensive Income $16,978
=======
BALANCE AT
DECEMBER 31, 1997 63,541 2,486 93,107
Net income 18,611 18,611 $18,611
Issuance of
common stock 2,178
Purchase of
treasury stock (4,748) (4,748)
Cash dividends on:
common stock (3,149) (3,149)
Unrealized gain
on available for
sale securities net of tax 3,779 3,779 3,779
- -------------------------------------------------------------------------------------------------------
Comprehensive Income $22,390
=======
BALANCE AT
DECEMBER 31, 1998 79,003 6,265 (4,748) 109,778
Net income 21,425 21,425 $21,425
Issuance of
common stock 675
Purchase of
treasury stock (7,248) (7,248)
Cash dividends on:
common stock (3,554) (3,554)
Unrealized loss
on available for
sale securities net of tax (8,510) (8,510) (8,510)
- -------------------------------------------------------------------------------------------------------
Comprehensive Income $12,915
=======
BALANCE AT
DECEMBER 31, 1999 $96,874 $(2,245) $(11,996) $112,566
=======================================================================================================
See accompanying notes.
</TABLE>
---
27
<PAGE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARIES
<CAPTION>
Year Ended December 31
(dollars in thousands, except per share data) 1999 1998 1997
=======================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 21,425 $ 18,611 $ 15,013
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 5,051 4,450 4,100
Provision for depreciation and amortization 2,684 1,867 1,033
Accretion of discounts and amortization
of premiums on investment securities (1,715) 197 (3,185)
Realized investment securities (gains) losses, net 1,251 (1,539) (85)
Net decrease (increase) in trading account securities 302 949 (1,231)
Decrease (increase) in interest receivable 362 (913) (3,377)
Increase (decrease) in interest payable 405 (504) 202
Other, net (3,610) (2,040) (5,853)
---------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 26,155 21,078 6,617
---------------------------------------
INVESTING ACTIVITIES
Proceeds from maturities of held to maturity securities 11,995 19,525 26,000
Purchases of held to maturity securities (32,133) (25,613)
Purchases of available for sale securities (413,171) (272,174) (573,610)
Proceeds from maturities of available for sale securities 251,000 54,000 414,000
Proceeds from sales and paydowns of
available for sale securities 291,567 142,818 77,251
Purchases of premises and equipment (18,521) (8,370) (2,811)
Net increase in loans outstanding (180,083) (80,068) (117,904)
---------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES (89,346) (144,269) (202,687)
---------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 103,911 85,243 208,550
Net increase (decrease) in repurchase agreements
and other short-term borrowings 27,181 24,263 (8,419)
Proceeds from sale of common stock 535 1,157 111
Purchase of treasury stock (7,248) (4,748)
Proceeds from sale of guaranteed preferred
beneficial interests in subordinated debentures 14,950
Cash dividends (3,554) (3,149) (2,631)
---------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 120,825 102,766 212,561
---------------------------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 57,634 (20,425) 16,491
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 27,017 47,442 30,951
---------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 84,651 $ 27,017 $ 47,442
=======================================
See accompanying notes.
</TABLE>
- ---
28
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MISSISSIPPI VALLEY BANCSHARES, INC. AND SUBSIDIARIES
DECEMBER 31, 1999
NOTE A-ACCOUNTING POLICIES
Business-Mississippi Valley Bancshares, Inc. ("Company"), is a
bank holding company, headquartered in St. Louis, Missouri. The Company
owns all of the capital stock of Southwest Bank of St. Louis and
Southwest Bank, Belleville which provide commercial, retail and
correspondent banking services from seven banking offices in Missouri
and Illinois. At December 31, 1999, the Company had consolidated assets
of $1.6 billion. The Company, through its bank subsidiaries, has
traditionally emphasized commercial lending and at December 31, 1999,
89% of the loan portfolio was in commercial, industrial and commercial
real estate loans. The Company makes substantially all of its loans to
customers located within the St. Louis metropolitan area.
Basis of Presentation-The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
Southwest Bank of St. Louis, Southwest Bank, Belleville, Mississippi
Valley Capital Company and MVBI Capital Trust. Significant intercompany
accounts and transactions have been eliminated in consolidation.
The accounting and reporting policies of the Company and its
subsidiaries conform to generally accepted accounting principles.
Substantially all revenue is recognized on an accrual basis. The
preparation of financial statements require management of the Company to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. While the financial
statements reflect management's best estimates and judgement, actual
results could differ from estimates. The following is a description of
the Company's more significant policies.
Held to maturity securities-Held to maturity securities are stated
at cost, adjusted for amortization of premiums and accretion of
discounts. Premium amortization and discount accretion are computed by a
method which approximates the interest method. The adjusted cost of the
specific security is used to compute gains or losses on sales or
redemptions. Held to maturity securities are used for the investment of
available funds in order to provide stable earnings, to provide
collateral for public funds and as a means of diversifying risks. The
Company has the intent and ability to hold these securities to maturity.
Securities that are neither held to maturity or trading are designated
as available for sale.
Trading account securities-The trading account consists of
securities valued at estimated current market prices. When investment
transactions are entered into in anticipation of taking gains on short-
term price movements, they are accounted for in the trading account.
Obligations resulting from trade receivables and payables that have not
yet settled are included in other assets and other liabilities,
respectively. Trading account interest income is included in other
interest income in the consolidated statements of income. Included
within other income are gains and losses on the sales of trading account
securities along with any adjustments to the market value of such
securities.
Available for sale securities-Available for sale securities are
valued at estimated market prices and consist of securities that might
not be held to maturity. Unrealized holding gains and losses are
excluded from the determination of earnings and are reported as an
amount, net of tax, in accumulated other comprehensive income until the
holding gains or losses are realized. These securities can be held for
indefinite periods of time and may be sold in response to changes in
interest rates, prepayment risks, the need to raise funds, or as a part
of the Company's overall asset-liability strategy. Gains and losses on
sales are included in other income when realized.
Interest Rate Risk Management-The Company sometimes uses various
interest rate related contracts, such as futures, swaps, and options, to
manage its overall interest rate risk exposure for asset-liability
management purposes. Although the notional amounts of contracts which
are used as hedges are not reflected in the financial statements, the
interest differentials are recognized on an accrual basis over the terms
of the agreements as an adjustment to interest income or interest
expense of the related asset or liability. Contracts which are not
matched against a specifically designated group of assets or liabilities
are held for trading purposes and are accounted for on a mark to market
basis. Accordingly, realized and unrealized gains and losses associated
with this activity are reflected as trading profits and commissions, a
component of other income.
The Company's objective in managing interest rate exposure is to
maintain a balanced mix of assets and liabilities that will mature or
reprice over a designated time horizon. The extent of rate sensitivity
can vary within intervening time periods, depending on current business
conditions and management's interest rate outlook. The principal
objective of the Company's asset-liability management activities is to
provide maximum levels of net interest income while maintaining
acceptable levels of interest rate and liquidity risk while facilitating
the funding needs of the Company. To achieve that objective, the Company
may use a combination of various derivative financial instruments.
<PAGE>
Derivative Financial Instruments-The Company uses interest rate
swap, cap, and floor agreements to synthetically manage the interest
rate characteristics of its interest rate sensitive assets to a more
desirable fixed or variable rate basis or to limit the Company's
exposure to changing interest rates. Interest rate differentials to be
paid or received as a result of interest rate swap or floor agreements
are accrued and recognized as an adjustment of interest income related
to the asset. Interest rate floor premiums paid are amortized to
interest income ratably over the life of the agreement. Recorded amounts
related to these derivative contracts are included in other assets or
liabilities. The fair values of interest rate swap and floor agreements,
entered into for purposes other than trading, are not recognized in the
financial statements. These instruments are recorded using the accrual
method of accounting. If it is determined that the accrual method of
accounting is no longer appropriate for these instruments, they are
recorded using the fair value method of accounting. Changes in the
instruments fair value are then reflected as trading profits and
commissions, a component of other income.
Realized and unrealized gains or losses at the time of maturity,
termination, sale or repayment of a derivative contract or designated
item are recorded in a manner consistent with the original designation
of the derivative in view of the nature of the termination, sale, or
repayment transaction. Amounts related to interest rate swaps and the
intrinsic value of terminated floor agreements are deferred and
amortized as an adjustment to interest
---
29
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A-ACCOUNTING POLICIES continued
income over the original period of interest exposure, provided the
designated asset continues to exist. Realized and unrealized changes in
fair value of derivatives designated with items that no longer exist are
recorded as a component of the gain or loss arising from the disposition
of the designated item.
Loans and Loan Impairment-Interest income on loans is accrued and
credited to income based on the principal amount outstanding. The
recognition of interest income is discontinued when, in management's
judgment, the interest will not be collectible in the normal course of
business. The Company's policy is to automatically place a loan on
nonaccrual status when it becomes 90 days past due unless it is well
secured and in process of collection. As such, income on impaired loans
is normally recognized only on a cash basis. Generally, loans are
restored to accrual status when the obligation is brought current, has
performed in accordance with the contractual terms for a reasonable
period of time and the ultimate collectibility of the contractual
principal and interest is no longer in doubt.
The allowance for credit losses related to loans that are
identified for valuation in accordance with FAS 114 is based on
discounted cash flows using the loans initial effective interest rate or
the fair value of the collateral for certain collateral dependent loans.
In its lending activities, the Company originates residential
mortgage loans intended for sale in the secondary market. Loans held-
for-sale are carried at the lower of cost or market, which is determined
on an aggregate basis. Gains or losses on the sale of loans held-for-
sale are determined on a specific identification method.
Allowance for possible loan losses-The allowance for possible loan
losses is increased by provisions charged to expense and reduced by
loans charged off, net of recoveries. The allowance is maintained at a
level considered adequate to provide for potential loan losses based on
management's evaluation of the anticipated impact on the loan portfolio
of current economic conditions, changes in the character and size of the
portfolio, past loan loss experience, and other pertinent factors.
The allocation of the total allowance for possible loans losses to
individual loans is based upon an annual review of all existing loans in
excess of $150,000, other than residential mortgage loans. The Company
assigns an allowance amount consistent with each loan rating category.
Premises and equipment-Premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed over the
estimated useful lives of the assets using principally the straight-line
method for buildings and a combination of straight-line and accelerated
methods for furniture and equipment.
Income taxes-The Company accounts for income taxes under the asset
and liability method. Income tax expense is reported as the total of
current income taxes payable and the net change in deferred income taxes
provided for temporary differences. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying values of
assets and liabilities for financial reporting purposes and the values
used for income tax purposes. Deferred income taxes are recorded at the
statutory federal tax rate expected to be in effect at the time that the
temporary differences are expected to reverse.
Earnings per share- Basic earnings per share is computed by
dividing net income, less dividends on preferred stock, by the weighted
average number of common shares outstanding. Diluted earnings per share
gives effect to the increase in the weighted average number of dilutive
common share equivalents and weighted average shares outstanding which
would have resulted from conversion of outstanding convertible
debentures and to the related reduction in interest expense on an after-
tax basis.
Statement of Cash Flows-Included in the statements of cash flows
are cash equivalents which include amounts due from banks and Federal
funds sold. Generally, Federal funds are purchased and sold for one-day
periods. The Company paid interest on deposits and other borrowings of
$54,763,000 in 1999, $54,097,000 in 1998, and $52,042,000 in 1997 and
made income tax payments of $11,967,000, $10,441,000, and $9,426,000 in
1999, 1998 and 1997, respectively.
Reclassifications-Certain amounts presented in prior years have
been reclassified to conform to the current year presentation.
Impact of Recently Issued Accounting Standards - In June 1998, the
FASB issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
Company expects to adopt the new Statement effective January 1, 2001.
The Statement will require the Company to recognize all derivatives on
the balance sheet at fair value. The Company does not anticipate that
the adoption of this Statement will have a material effect on its
results of operations or financial position.
- ---
30
<PAGE>
<PAGE>
NOTE B-RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
Southwest Bank of St. Louis is required to maintain average
reserve balances with the Federal Reserve Bank or in the form of vault
cash. The average amount of those reserve balances for the years ended
December 31, 1999 and 1998 was approximately $25,000.
NOTE C-HELD TO MATURITY SECURITIES
The amortized cost and estimated fair values of held to maturity
securities at the end of 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(dollars in thousands) Cost Gains (Losses) Value
======================================================
<S> <C> <C> <C> <C>
United States Treasury securities $ $ $ $
PHA bonds guaranteed by the
United States Government 4,672 471 5,143
U.S. Agency Securities 51,904 (480) 51,424
Other debt securities 2,540 24 (16) 2,548
------------------------------------------------------
$59,116 $ 495 $ (496) $59,115
======================================================
<CAPTION>
December 31, 1998
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(dollars in thousands) Cost Gains (Losses) Value
======================================================
<S> <C> <C> <C> <C>
United States Treasury securities $ 8,007 $ 172 $ $ 8,179
PHA bonds guaranteed by the
United States Government 4,570 773 5,343
U.S. Agency Securities 22,704 403 23,107
Other debt securities 3,534 120 3,654
------------------------------------------------------
$38,815 $1,468 $ $40,283
======================================================
</TABLE>
The amortized cost and estimated fair value of held to maturity
securities at December 31, 1999 and 1998, by contractual maturity are as
follows. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31
1999 1998
Estimated Estimated
Amortized Fair Amortized Fair
(dollars in thousands) Cost Value Cost Value
======================================================
<S> <C> <C> <C> <C>
Due in one year or less $12,000 $11,968 $11,008 $11,204
Due after one year through
five years 40,765 40,563 22,280 22,773
Due after five years through
ten years 4,776 4,951 4,069 4,491
Due after ten years 1,575 1,633 1,458 1,815
------------------------------------------------------
$59,116 $59,115 $38,815 $40,283
======================================================
</TABLE>
---
31
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D-AVAILABLE FOR SALE SECURITIES
The amortized cost and estimated fair values of available for sale
securities at the end of 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(dollars in thousands) Cost Gains (Losses) Value
=====================================================
<S> <C> <C> <C> <C>
United States Treasury Securities $ 76,313 $ 207 $ (210) $ 76,310
U.S. Agency Securities 158,470 13 (2,805) 155,678
Collateralized mortgage obligations 10,937 (88) 10,849
Federal Home Loan Bank stock 6,642 6,642
Other equity securities 8,991 50 (621) 8,420
-----------------------------------------------------
$261,353 $ 270 $(3,724) $257,899
=====================================================
<CAPTION>
December 31, 1998
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(dollars in thousands) Cost Gains (Losses) Value
=====================================================
<S> <C> <C> <C> <C>
United States Treasury Securities $124,329 $ 3,838 $ (29) $128,138
U.S. Agency Securities 216,220 5,535 (234) 221,521
Collateralized mortgage obligations 37,049 (131) 36,918
Federal Home Loan Bank stock 3,861 3,861
Other equity securities 9,006 643 9,649
-----------------------------------------------------
$390,465 $ 10,016 $ (394) $400,087
=====================================================
</TABLE>
The amortized cost and estimated fair value of available for sale
securities at December 31, 1999 and 1998, by contractual maturity, are
shown below. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
<TABLE>
<CAPTION>
December 31
1999 1998
Estimated Estimated
Amortized Fair Amortized Fair
(dollars in thousands) Cost Value Cost Value
=====================================================
<S> <C> <C> <C> <C>
Due in one year or less $ 87,520 $ 87,546 $ 26,995 $ 27,425
Due after one year through
five years 63,012 62,505 170,048 172,595
Due after five years through
ten years 84,251 81,937 122,817 128,159
Due after ten years 20,689 21,480
Collateralized mortgage obligations 10,937 10,849 37,049 36,918
-----------------------------------------------------
Total debt securities 245,720 242,837 377,598 386,577
Equity securities 15,633 15,062 12,867 13,510
-----------------------------------------------------
Total available for sale securities $261,353 $257,899 $390,465 $400,087
=====================================================
</TABLE>
In 1999, proceeds from sales of available for sale securities were
$265,518,000 which resulted in net losses of $1,251,000. In 1998,
proceeds from sales of available for sale securities were $116,347,000
which resulted in net gains of $1,539,000. In 1997, proceeds from sales
of available for sale securities were $69,039,000 which resulted in net
gains of $85,000.
Held to maturity and available for sale securities with a carrying value
of $138,383,000 and $132,183,000 at December 31, 1999 and 1998,
respectively, were pledged to secure public deposits, short-term
borrowings and for other purposes required by law.
- ---
32
<PAGE>
<PAGE>
NOTE E-LOANS
Loans were comprised of the following:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
=========================
<S> <C> <C>
Commercial, industrial and
marketable security loans $ 527,382 $434,467
Commercial loans secured
by real estate 435,142 368,512
Real estate--1-4 family 112,405 103,140
Lease financing 19,676 10,175
Consumer loans 12,734 10,748
-------------------------
$1,107,339 $927,042
=========================
</TABLE>
Certain directors, officers and employees of the Company, the
Banks and their associates are loan customers of the Banks. Such loans
are made in the ordinary course of business at normal credit terms,
including interest rates and collateral, prevailing at the time for
comparable transactions with unrelated parties, and do not involve more
than normal risk of collection. These loans aggregated $50,119,000 and
$37,319,000 at December 31, 1999 and 1998, respectively. During 1999,
$17,972,000 of new loans were made to these persons; repayments totalled
$5,172,000. Included in the aggregate balance at December 31, 1999 are
loans to three directors and their associates amounting to $25,671,000
($12,966,000 at December 31, 1998 for two directors and their
associates).
At December 31, 1999 the Company had $2,938,000 of impaired loans
which had an associated specific allowance for possible loan losses of
$653,000. At December 31, 1998 the Company had $1,734,000 of impaired
loans which had an associated specific allowance for possible loan
losses of $216,000. The average recorded investment in impaired loans
during the year ended December 31, 1999 and 1998, was approximately
$1,563,000 and $2,470,000, respectively. For each of the the years ended
December 31, 1999 and 1998, gross interest income on impaired loans,
which would have been recorded under the original terms of the loans,
was approximately $278,000. The Company actually recorded cash basis
interest income on impaired loans of $292,000 in 1999 and $159,000 in
1998. The effect of impaired loans was immaterial to the financial
statements at December 31, 1999 and 1998.
Loans with a carrying value of $320 million were pledged to secure
a short-term borrowing facility at the Federal Reserve Bank of St. Louis
at December 31, 1999.
---
33
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F-ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(dollars in thousands) 1999 1998
======================
<S> <C> <C>
Balance at beginning of year $18,144 $14,892
Loans charged off (2,353) (2,232)
Recoveries 807 1,034
----------------------
Net loans charged off (1,546) (1,198)
Provision 5,051 4,450
----------------------
Balance at end of year $21,649 $18,144
======================
</TABLE>
NOTE G-PREMISES AND EQUIPMENT
Premises and equipment were as follows:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
======================
<S> <C> <C>
Land $ 3,628 $ 3,718
Buildings and improvements 27,599 6,505
Furniture and equipment 7,958 5,418
Construction in progress 3,534 9,536
----------------------
42,719 25,177
Less accumulated depreciation 5,061 4,422
----------------------
$37,658 $20,755
======================
</TABLE>
The Company and its subsidiaries lease certain premises and
equipment under agreements which expire at various dates through 2005.
As of December 31, 1999 the aggregate amount of minimum rental
commitments under all noncancelable leases, all of which are considered
to be operating leases, was $1,412,000. Minimum rental commitments under
these leases for each of the next five years beginning in 2000 are
$314,000, $269,000, $269,000, $269,000, and $269,000. Rent expense for
1999, 1998 and 1997 amounted to $501,000, $510,000, and $515,000,
respectively.
- ---
34
<PAGE>
<PAGE>
NOTE H-DEPOSITS
Interest-bearing deposits were comprised of the following:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
=========================
<S> <C> <C>
Interest-bearing demand
NOW accounts $ 28,289 $ 28,162
Money market accounts 697,980 700,314
Savings 28,215 25,125
Certificates of deposit,
less than $100,000 379,308 297,225
Certificates of deposit,
$100,000 or more 52,106 35,744
-------------------------
$1,185,898 $1,086,570
=========================
</TABLE>
Certain directors, officers, and employees of the Company and the
Banks are deposit customers of the Banks. Such deposits are made in the
ordinary course of business with normal terms and interest rates
prevailing at the time for comparable transactions with unrelated
parties. These deposits aggregated $9,909,000 and $9,815,000 at
December 31, 1999 and 1998, respectively.
NOTE I-SHORT-TERM BORROWINGS
Short-term borrowings were comprised of the following:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
=======================
<S> <C> <C>
Securities sold under agreements
to repurchase $ 35,049 $41,605
Federal Home Loan Bank advances 50,000
Federal funds purchased 17,550 35,550
Treasury tax and loan notes 3,040 1,303
-----------------------
$105,639 $78,458
=======================
</TABLE>
Securities sold under agreements to repurchase generally mature in
less than 30 days. The securities underlying these agreements are held
in safekeeping at a third party. Information relating to these
agreements is summarized as follows:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998 1997
=====================================
<S> <C> <C> <C>
Amount outstanding at year-end $35,049 $41,605 $32,700
Weighted average interest rate at
year-end 4.50% 4.13% 4.40%
Average balance outstanding
for the year $39,462 $39,646 $28,743
Average interest rate for the year 4.08% 4.58% 4.56%
Maximum amount outstanding
at any month-end during the year $58,361 $79,378 $62,344
</TABLE>
During 1999, the Company borrowed $50 million from the Federal
Home Loan Bank. The interest rate on this advance is fixed at 5.45% and
the maturity date is June 2000. The collateral for this advance is
Federal Home Loan Bank stock and all performing real estate 1-4 family
first mortgages.
---
35
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J-LONG-TERM BORROWINGS
During 1997 the Company formed MVBI Capital Trust ("MVBI
Capital"), a statutory business trust. The Company purchased all the
common stock of MVBI Capital for $462,000. MVBI Capital sold 598,000
preferred securities, having a liquidation amount of $25 per security,
for a total of $14,950,000. The sole assets of MVBI Capital are
subordinated debentures of the Company for $15,412,000 which are due in
the year 2027. 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 I capital.
NOTE K-RESTRICTED NET ASSETS
Certain restrictions exist regarding the ability of the Banks to
transfer funds to the Company in the form of cash dividends, loans or
advances. At December 31, 1999, under the most restrictive covenants and
regulations, approximately $22,807,000 was the maximum available as
dividends to the Company from Southwest Bank of St. Louis without prior
approval. At December 31, 1999, the maximum amount available for
transfer to the Company in the form of loans and advances was
approximately $11,785,000.
NOTE L-SHAREHOLDERS' EQUITY
On October 15, 1997, the Company's Board of Directors approved a
two-for-one stock split effected in the form of a 100 percent stock
dividend, effective January 1, 1998. All applicable share and per share
data have been adjusted for the stock split.
During 1996, the Company's Board of Directors authorized the 1996
Common Stock Repurchase Plan which provided for the reacquisition of up
to 451,090 shares of the Company's common stock. The maximum number of
shares which may be purchased under this Plan was increased to 800,000,
or 8.4% of the Company's outstanding shares on the date of Plan
extension. The Plan will expire, unless extended, on April 19, 2000.
During 1999 and 1998, 225,500 and 139,400 shares of common stock were
repurchased at a total cost of $7,248,000 and $4,748,000 respectively.
No stock was repurchased in 1997.
<PAGE>
The following table sets forth the computation of basic and
diluted earnings per share for the years ended December 31:
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) 1999 1998 1997
========================================
<S> <C> <C> <C>
Numerator:
Net Income $ 21,425 $ 18,611 $ 15,013
Preferred stock dividends
----------------------------------------
Numerator for basic earnings per share-
income available to common stockholders 21,425 18,611 15,013
----------------------------------------
Effect of dilutive securities:
8% Convertible debentures 35
----------------------------------------
35
----------------------------------------
Numerator for diluted earnings per
share-income available to common
shareholders after assumed conversions $ 21,425 $ 18,611 $ 15,048
----------------------------------------
Denominator:
Weighted average shares outstanding 9,366,028 9,548,127 9,396,320
----------------------------------------
Effect of dilutive securities:
Employee stock options 141,741 199,437 187,436
8% Convertible debentures 117,172
----------------------------------------
Dilutive potential common shares 141,741 199,437 304,608
----------------------------------------
Denominator for diluted earnings per
share-adjusted weighted average
shares and assumed conversions 9,507,769 9,747,564 9,700,928
========================================
Basic earnings per share $ 2.29 $ 1.95 $ 1.60
========================================
Diluted earnings per share $ 2.25 $ 1.91 $ 1.55
========================================
</TABLE>
- ---
36
<PAGE>
<PAGE>
NOTE L-SHAREHOLDERS' EQUITY continued
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25) and
related Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock. Under APB 25, because the
exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation
expense is recognized.
The Company's 1991 Stock Option Plan (Five-Year Options) has
authorized the grant of options to management personnel for up to
1,340,000 shares of the Company's common stock. All options granted have
5 year terms and vest ratably over their respective terms.
The effect of applying FASB Statement No. 123 to the results of
operations for the Company result in net earnings and earnings per share
that are not materially different than reported at December 31, 1999 and
1998.
A summary of the Company's stock option activity, and related
information for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
============================================================
<S> <C> <C> <C> <C>
Options outstanding at
beginning of year 745,000 $23.39 766,500 $19.05
Granted 185,000 32.05 99,600 41.50
Exercised 29,950 17.88 112,100 10.32
Forfeited 20,300 29.74 9,000 17.33
------- -------
Options outstanding at
end of year 879,750 $25.25 745,000 $23.39
======= =======
Options exercisable at
end of year 397,550 $20.26 255,351 $17.94
Weighted average fair
value of options
granted during the year $ 7.79 $ 9.86
Exercise prices for options outstanding as of December 31, 1999
ranged from $11.25 to $41.50. The weighted average remaining contractual
life of those options was 2 1/2 years.
</TABLE>
NOTE M-REGULATORY CAPITAL
The Company and Banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's and
Banks' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and Banks
must meet specific capital guidelines that involve quantitative measures
of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Banks' capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulations to ensure capital
adequacy require the Company and Banks to maintain minimum amounts and
ratios (set forth in the following table) of total and Tier 1 capital to
risk-weighted assets, and of Tier 1 capital to average assets (as
defined in the regulations). Management believes, as of December 31,
1999 and 1998, that the Company and Banks meet all capital adequacy
requirements to which it is subject.
As of December 31, 1999 and 1998, the Company and the Banks were
all categorized as "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as "well capitalized" the
Company and Banks must maintain minimum total risk-based, Tier 1 risk-
based, and Tier 1 leverage ratios as set forth in the table. There are
no conditions or events that management believes have changed the
institutions' categories.
---
37
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M-REGULATORY CAPITAL continued
The Company's and Banks' actual capital amounts and ratios are presented
in the table.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ----------------------- -----------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
-------- ------ -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999:
Total Capital to Risk
Weighted Assets:
Mississippi Valley Bancshares, Inc. $144,629 12.23% $ 94,620 8.00% $ N/A N/A%
Southwest Bank of St. Louis 123,186 10.78 91,420 8.00 114,275 10.00
Southwest Bank, Belleville 7,824 21.31 2,938 8.00 3,672 10.00
Tier 1 Capital to Risk
Weighted Assets:
Mississippi Valley Bancshares, Inc. 129,761 10.97 47,310 4.00 N/A N/A
Southwest Bank of St. Louis 108,815 9.52 45,710 4.00 68,565 6.00
Southwest Bank, Belleville 8,645 20.35 1,469 4.00 2,203 6.00
Tier 1 Capital to
Average Assets:
Mississippi Valley Bancshares, Inc. 129,761 8.40 61,795 4.00 N/A N/A
Southwest Bank of St. Louis 108,815 7.44 58,497 4.00 73,121 5.00
Southwest Bank, Belleville 7,473 7.91 3,781 4.00 4,726 5.00
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------- ----------------------- -----------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
-------- ------ -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1998:
Total Capital to Risk
Weighted Assets:
Mississippi Valley Bancshares, Inc. $130,917 13.22% $ 79,250 8.00% $ N/A N/A%
Southwest Bank of St. Louis 113,706 11.75 77,393 8.00 96,741 10.00
Southwest Bank, Belleville 4,662 37.04 1,007 8.00 1,259 10.00
Tier 1 Capital to Risk
Weighted Assets:
Mississippi Valley Bancshares, Inc. 118,463 11.96 39,625 4.00 N/A N/A
Southwest Bank of St. Louis 101,539 10.50 38,696 4.00 58,045 6.00
Southwest Bank, Belleville 4,612 36.64 503 4.00 755 6.00
Tier 1 Capital to
Average Assets:
Mississippi Valley Bancshares, Inc. 118,463 8.56 55,353 4.00 N/A N/A
Southwest Bank of St. Louis 101,539 7.54 53,897 4.00 67,372 5.00
Southwest Bank, Belleville 4,612 23.39 789 4.00 986 5.00
</TABLE>
- ---
38
<PAGE>
<PAGE>
NOTE N-PENSION PLANS
The Company maintains two non-contributory defined benefit pension
plans covering substantially all employees. Benefits under the Plans are
based upon the final average monthly compensation reduced by primary
Social Security benefits. The Company's funding policy is to contribute
annually within the limits prescribed for deduction for Federal income
tax purposes.
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
======================
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 4,222 $ 3,721
Service cost 353 293
Interest cost 298 257
Actuarial loss (361) (2)
Benefits paid (31) (47)
----------------------
Benefit obligation at end of year $ 4,481 $ 4,222
======================
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year $ 2,953 $ 2,316
Actual return on plan assets 39 210
Employer contribution 598 474
Benefits paid (31) (47)
----------------------
Fair value of plan assets at
end of year $ 3,559 $ 2,953
======================
Funded status $ (922) $(1,269)
Unrecognized net actuarial loss 640 840
Unrecognized prior service cost 177 202
Unrecognized transition obligation 20 30
----------------------
Accrued benefit liability $ (85) $ (197)
======================
<CAPTION>
1999 1998 1997
===================================
<S> <C> <C> <C>
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.75% 7.00% 7.50%
Expected return on plan assets 8.00 8.00 8.00
Rate of compensation increase 5.00 4.50 4.50
<CAPTION>
Year ended December 31
1998 1997 1996
===================================
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 353 $ 293 $ 251
Interest cost 298 257 224
Expected return on plan assets (242) (197) (171)
Amortization of prior service cost 26 25 25
Recognized net actuarial loss 41 43 42
Amortization of transition obligation 10 10 10
-----------------------------------
Net periodic benefit cost $ 486 $ 431 $ 381
===================================
</TABLE>
The prepaid benefit cost of the qualified non-contributory defined
pension plan was $414,000 and $170,000 at December 31, 1999 and 1998,
respectively. The accrued benefit liability of the non-qualified non-
contributory defined benefit pension plan was $499,000 and $241,000 at
December 31, 1999 and 1998, respectively. At December 31, 1999, 100% of
the Plan's assets were invested in a guaranteed fixed income account
with General American Life Insurance Company. The Company does not
provide any post-retirement benefits other than these pension plans.
---
39
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O-INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
(dollars in thousands) 1999 1998 1997
=====================================
<S> <C> <C> <C>
Current:
Federal $11,893 $10,942 $7,619
State and Local 703 29 251
-------------------------------------
Total current 12,596 10,971 7,870
-------------------------------------
Deferred:
Provision for possible loan losses (1,332) (1,138) (771)
Mark-to-market security loss 281 141 272
Other, net 1,202 981 1,099
-------------------------------------
Total deferred 151 (16) 600
-------------------------------------
Income tax expense $12,747 $10,955 $8,470
=====================================
</TABLE>
The reconciliation between income taxes and the amount computed
by applying the statutory Federal tax rates to income before income
taxes follows:
<TABLE>
<CAPTION>
Year ended December 31
(dollars in thousands) 1998 1997 1996
=====================================
<S> <C> <C> <C>
Statutory rate applied to income
before taxes $11,543 $10,348 $8,219
Increase (decrease) in income taxes
resulting from:
Tax-exempt income (173) (174) (174)
State and local income taxes,
net of federal income tax benefit 857 224 228
Other, net 520 557 197
-------------------------------------
Total tax expense $12,747 $10,955 $8,470
=====================================
</TABLE>
As of December 31, 1999 and 1998, the Company's deferred tax
asset account was comprised of the following:
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
======================
<S> <C> <C>
Deferred tax liabilities:
Pension expense $ 61 $ 56
Fixed and other asset depreciation 984 481
Unrealized net gains (losses) on
available for sale securities (1,043) 3,279
Accretion of security discounts 356 120
----------------------
Total deferred tax liabilities 358 3,936
----------------------
Deferred tax assets:
Provision for possible loan losses (7,915) (6,622)
Other, net (131) 221
----------------------
Total deferred tax assets (8,046) (6,401)
----------------------
Net deferred tax assets $(7,688) $(2,465)
======================
</TABLE>
Included in income taxes were $(438,000), $539,000, and $30,000 for the
years ended December 31, 1999, 1998 and 1997, respectively, related to
realized net gains (losses) on available for sale securities.
- ---
40
<PAGE>
<PAGE>
NOTE P-FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based upon a
variety of methods and assumptions used by the Company in estimating its
fair value disclosures. The carrying value of cash, due from banks,
Federal funds sold, available for sale securities and trading account
securities approximate those assets' fair values. Fair values for held
to maturity securities are based on quoted market prices. For variable
rate loans that reprice with market rates of interest, fair values are
based on carrying values. The fair values for all other loans (i.e.
fixed rate loans) are estimated using discounted cash flow analyses and
using interest rates currently offered for loans with similar terms to
borrowers of similar credit quality. The fair value of accrued interest
approximates its carrying amount. The fair values of non-performing
loans are based on estimates of collectibility in conjunction with the
Company's historical loss experience.
The fair values disclosed for demand deposits (e.g., interest and
noninterest bearing checking, passbook savings and money market
accounts) are, by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on
time deposits. The carrying amounts of Federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values. The fair value of long-term borrowings
are estimated using discounted cash flow analyses, based on the
Company's borrowing rates for similar types of borrowing arrangements.
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1999
Carrying
(dollars in thousands) amount Fair value
=========================
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 84,651 $ 84,651
Held to maturity securities 59,116 59,115
Available for sale securities 257,899 257,899
Loans, net of unearned income 1,104,498 1,093,990
Financial liabilities:
Deposits 1,315,716 1,316,070
Short-term borrowings 105,639 105,639
Long-term borrowings 14,950 14,950
<CAPTION>
December 31, 1998
Carrying
(dollars in thousands) amount Fair value
=========================
<S> <C> <C>
Financial assets:
Cash and due from banks and
short-term investments $ 27,017 $ 27,017
Held to maturity securities 38,815 40,283
Available for sale securities 400,087 400,087
Trading account securities 302 302
Loans, net of unearned income 925,961 938,146
Financial liabilities:
Deposits 1,211,805 1,214,138
Short-term borrowings 78,458 78,458
Long-term borrowings 14,950 14,950
</TABLE>
---
41
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE Q-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company utilizes various
financial instruments to meet the needs of customers and to manage the
Company's exposure to interest rate and other market risks. These
financial instruments, which consist of derivatives contracts and
credit-related arrangements, involve, to varying degrees, elements of
credit and market risk in excess of the amount recorded on the balance
sheet in accordance with generally accepted accounting principles.
Credit risk represents the potential loss that may occur because a
party to a transaction fails to perform according to the terms of the
contract. Market risk is the possibility that a change in interest rates
will cause the value of a financial instrument to decrease. The contract
or notional amounts of financial instruments, which are not included in
the consolidated balance sheet, do not necessarily represent credit or
market risk. However, they can be used to measure the extent of
involvement in various types of financial instruments. These instruments
and activities include commitments to extend lines of credit and standby
and commercial letters of credit. The following table provides a summary
of the Company's off-balance sheet financial instruments at December 31,
1999 and 1998.
<TABLE>
<CAPTION>
December 31
(dollars in thousands) 1999 1998
=======================
<S> <C> <C>
Commitments to extend credit $427,200 $306,613
Standby letters of credit 7,004 10,875
Commercial letters of credit 1,849 1,163
-----------------------
$436,053 $318,651
=======================
</TABLE>
A loan commitment is a binding contract to lend up to a maximum
amount for a specified period of time provided there is no violation of
any financial, economic or other terms of the contract. A standby letter
of credit obligates the Company to honor a financial commitment by
issuing a guarantee to a third party should the Company's customer fail
to perform. Many loan commitments and most standby letters of credit
expire unfunded and therefore total commitments do not represent future
funding obligations of the Company. Loan commitments and letters of
credit are made under normal credit terms, including interest rates and
collateral prevailing at the time, and usually require the payment of a
fee by the customer. Commercial letters of credit are commitments issued
to finance the movement of goods between buyers and sellers normally
transacting business in international markets.
The Company enters into off-balance sheet derivative contracts
primarily as a part of its asset-liability management strategy to manage
interest rate risk. The notional amounts of these contracts express the
volume of transactions and are not an appropriate indicator of the off-
balance sheet market risk or credit risk. The credit risk associated
with these transactions arises from the counterparties' failure to meet
the terms of the agreements and is limited to the fair value of
contracts in a gain position and any interest receivable under the
contract. The Company manages this risk by maintaining positions with
highly rated counterparties. The credit risk exposure of the Company for
these interest rate contracts at December 31, 1998 was approximately
$2,181,000. The Company had no derivative contracts at December 31,
1999.
Interest rate swaps are contracts in which a series of interest
rate flows, based on a specific notional amount and fixed and floating
interest rates, are exchanged over a prescribed period. Interest rate
options, which include caps and floors, are contracts which transfer,
modify or reduce interest rate risk in exchange for the payment of a
premium when the contract is issued. The true measure of credit risk is
the replacement cost of contracts which have become favorable to the
Company.
The Company monitors its sensitivity to changes in interest rates
and uses interest rate swap contracts to limit the volatility of net
interest income. At December 31, 1999 and 1998, deferred gains were
$19,000 and $270,000, respectively, relating to terminated interest rate
swap contracts. Net interest income was increased by $251,000 in 1999
and $469,000 in 1998 as a result of interest rate swap contracts.
Futures and forwards are contracts for the delayed delivery of
securities or money market instruments in which the seller agrees to
deliver on a specified date, a specified instrument, at a specified
price or yield. Futures contracts settle in cash daily, therefore, there
is minimal credit risk to the Company. The credit risk inherent in
forwards arises from the potential inability of counterparties to meet
the terms of their contracts. Both futures and forwards are also subject
to the risk of movements in interest rates or the value of the
underlying securities or instruments.
Held or Issued for Trading Purposes: At December 31, 1999, there
were no derivative financial instruments held or issued for trading
purposes. During 1999, the Company held various interest rate futures
contracts which had an average fair value of $576,000. At December 31,
1998, the Company held interest rate floors in the amount of $100
million which had a fair value of $192,000. The average strike rate and
average fair value of these floors during 1998 was 5.63% and $145,000,
respectively. The Company also held futures contracts at December 31,
1998 in the amount of $15 million which had a fair value of $328,000.
The average strike rate and average fair value of these futures
contracts during 1998 was $129.97 and $150,000, respectively. Interest
rate contracts held or issued for trading purposes resulted in trading
gains of $5,919,000 in 1999 and trading gains of $441,000 in 1998.
Held or Issued For Purposes Other Than Trading: At December 31,
1999, there were no derivative financial instruments held or issued for
purposes other than trading. At December 31, 1998, the Company held
interest rate floors in the amount of $125 million which had a fair
value of $1,661,000. The average strike rate of these floors was 5.73%.
- ---
42
<PAGE>
<PAGE>
NOTE R-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. 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 was 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>
Twelve Months Ended December 31, 1999
Before Tax Tax Net of Tax
(dollars in thousands) Amount Expense Amount
=======================================
<S> <C> <C> <C>
Unrealized losses on available
for sale securities $(14,343) $(5,020) $(9,323)
Less: reclassification adjustment
for losses realized in net income (1,251) (438) (813)
---------------------------------------
Net unrealized losses (13,092) (4,582) (8,510)
---------------------------------------
Other comprehensive loss $(13,092) $(4,582) $(8,510)
=======================================
<CAPTION>
Twelve Months Ended December 31, 1998
Before Tax Tax Net of Tax
(dollars in thousands) Amount Expense Amount
=======================================
<S> <C> <C> <C>
Unrealized gains on available
for sale securities $ 7,352 $2,573 $ 4,779
Less: reclassification adjustment
for gains realized in net income 1,539 539 1,000
---------------------------------------
Net unrealized gains 5,813 2,034 3,779
---------------------------------------
Other comprehensive income $ 5,813 $2,034 $ 3,779
=======================================
<CAPTION>
Twelve Months Ended December 31, 1997
Before Tax Tax Net of Tax
(dollars in thousands) Amount Expense Amount
=======================================
<S> <C> <C> <C>
Unrealized gains on available
for sale securities $ 3,108 $1,088 $ 2,020
Less: reclassification adjustment
for gains realized in net income 85 30 55
---------------------------------------
Net unrealized gains 3,023 1,058 1,965
---------------------------------------
Other comprehensive income $ 3,023 $1,058 $ 1,965
=======================================
</TABLE>
===
43
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE S-PARENT COMPANY CONDENSED FINANCIAL INFORMATION
Following are the condensed financial statements of Mississippi
Valley Bancshares, Inc. (Parent Company) for the periods indicated.
<TABLE>
<CAPTION>
BALANCE SHEETS December 31
(dollars in thousands) 1999 1998
=======================
<S> <C> <C>
ASSETS
Cash and due from subsidiary $ 4,392 $ 4,015
Available for sale securities 5,404
Investment in subsidiaries 119,042 112,050
Bank premises 1,302 1,372
Other assets 3,252 2,359
-----------------------
TOTAL ASSETS $127,988 $125,200
=======================
LIABILITIES
Long-term debt $ 15,412 $ 15,412
Other liabilities 10 10
-----------------------
TOTAL LIABILITIES 15,422 15,422
SHAREHOLDERS' EQUITY 112,566 109,778
-----------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $127,988 $125,200
=======================
<CAPTION>
STATEMENTS OF INCOME Year Ended December 31
(dollars in thousands) 1999 1998 1997
=====================================
<S> <C> <C> <C>
INCOME
Dividends from subsidiary $16,039 $10,102 $ 5,949
Rent income 408 408 408
Other 578 947 831
-------------------------------------
TOTAL INCOME 17,025 11,457 7,188
EXPENSE
Interest 1,072 1,126 1,017
Other 558 575 461
-------------------------------------
TOTAL EXPENSE 1,630 1,701 1,478
Income before tax benefit and
equity in undistributed income
of subsidiary 15,395 9,756 5,710
Income tax benefit (222) (117) (70)
-------------------------------------
Income before equity in
undistributed income of subsidiary 15,617 9,873 5,780
Equity in undistributed income
of subsidiary 5,808 8,738 9,233
-------------------------------------
NET INCOME $21,425 $18,611 $15,013
=====================================
</TABLE>
- ---
44
<PAGE>
<PAGE>
NOTE S-PARENT COMPANY CONDENSED FINANCIAL INFORMATION continued
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS Year Ended December 31
(dollars in thousands) 1999 1998 1997
======================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 21,425 $18,611 $ 15,013
Equity in undistributed
income of subsidiary (5,808) (8,738) (9,233)
Realized securities gains, net (107) (108)
Other, net (602) (13) (1,196)
--------------------------------------
Net cash provided by
operating activities 15,015 9,753 4,476
--------------------------------------
INVESTING ACTIVITIES
Payments for investment in subsidiary (9,010) (5,000) (7,413)
Purchase of available for sale securities (9,041)
Proceeds from sales of held
to maturity and available
for sale securities 4,500 4,282 355
Other, net 1,318 (498)
--------------------------------------
Net cash provided by
(used in) investing activities (4,510) 600 (16,597)
--------------------------------------
FINANCING ACTIVITIES
Proceeds from short-term borrowings 4,400
Repayments of short-term borrowings (4,400)
Proceeds from issuance of long-term debt 14,950
Proceeds from sale of common stock 674 1,157 111
Purchase of treasury stock (7,248) (4,748)
Cash dividends paid (3,554) (3,150) (2,631)
--------------------------------------
Net cash provided by (used in)
financing activities (10,128) (6,741) 12,430
--------------------------------------
Increase in cash 377 3,612 309
Cash at beginning of year 4,015 403 94
--------------------------------------
Cash at end of year $ 4,392 $ 4,015 $ 403
======================================
</TABLE>
---
45
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE T-SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of quarterly operating results for the
years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999
First Second Third Fourth
(dollars in thousands, except per share data) Quarter Quarter Quarter Quarter
====================================================
<S> <C> <C> <C> <C>
Interest income $26,106 $26,668 $28,427 $29,627
Interest expense 12,752 12,848 14,330 15,160
----------------------------------------------------
Net interest income 13,354 13,820 14,097 14,467
Provision for possible loan losses 1,749 1,256 803 1,243
Security gains (losses) (830) 415 (660) (176)
Other income 4,391 3,184 2,781 2,898
Other expense 6,418 7,142 6,911 8,047
Income taxes 3,259 3,374 3,123 2,991
----------------------------------------------------
Net income $ 5,489 $ 5,647 $ 5,381 $ 4,908
====================================================
Net income per share:
Basic $.58 $.60 $.58 $.53
Diluted .57 .59 .57 .52
<CAPTION>
1998
First Second Third Fourth
(dollars in thousands, except per share data) Quarter Quarter Quarter Quarter
====================================================
<S> <C> <C> <C> <C>
Interest income $25,152 $25,471 $26,167 $26,046
Interest expense 13,495 13,375 13,550 13,173
----------------------------------------------------
Net interest income 11,657 12,096 12,617 12,873
Provision for possible loan losses 900 1,000 900 1,650
Security gains 172 509 858
Other income 1,547 1,472 1,793 2,032
Other expense 5,557 5,802 5,752 6,499
Income taxes 2,479 2,625 2,823 3,028
----------------------------------------------------
Net income $ 4,440 $ 4,650 $ 4,935 $ 4,586
====================================================
Net income per share:
Basic $.47 $.48 $.52 $.48
Diluted .45 .47 .50 .49
</TABLE>
- ---
46
<PAGE>
<PAGE>
SOUTHWEST BANK OF ST. LOUIS
BOARD OF DIRECTORS
HALVOR B. ANDERSON
Chief Executive Officer - Seigel-Robert, Inc.
JOHN T. BAUMSTARK
President - Archway Sales Inc.
ANDREW N. BAUR
Chairman - Mississippi Valley
Bancshares, Inc.
Chairman - Southwest Bank of St. Louis
LINN H. BEALKE
President - Mississippi Valley
Bancshares, Inc.
Vice Chairman-Southwest Bank
of St. Louis
Chairman - Southwest Bank, Belleville
DONALD L. BOLAZINA
Private Investor
WILLIAM H. T. BUSH
Chairman - Bush-O'Donnell & Co., Inc.
FRANCIS C. CUNETTO
President - Cunetto House of Pasta
ROBERT E. FLYNN, III
President - Berry Grant Company
WILLIAM F. HOLEKAMP
Corporate Executive Vice President -
Enterprise Rent-A Car/Leasing Co.
CHARLES W. HREBEC, JR.
President - Colt Industries, Inc.
HENRY O. JOHNSTON
President-Sante Travel Agency, Inc.
STEPHEN P. MARSH
President and Senior Loan Officer -
Southwest Bank of St. Louis
Executive Vice President and Senior Loan
Officer - Southwest Bank, Belleville
RICHARD G. MILLMAN
President - Millman Lumber Co.
ZSOLT RUMY
President, Zoltek Corporation
ALMIRA BALDWIN SANT
Private Investor
MARY P. SHERRILL
Vice Chairman and Chief of Bank
Operations - Southwest Bank
of St. Louis
CHARLES A. ZONE
President - C.J. Zone Manufacturing Co., Inc.
ADVISORY DIRECTORS
- ------------------
EDWARD C. BERRA
President Emeritus - Southwest Bank
of St. Louis
WILLIAM J. FRESCHI
Retired Food Executive
G. FRED HEIMBURGER
Chairman - Heimburger, Inc.
SOUTHWEST BANK, BELLEVILLE
BOARD OF DIRECTORS
ANDREW S. BAUR
Senior Vice President - Southwest Bank
of St. Louis
LINN H. BEALKE
President - Mississippi Valley
Bancshares, Inc.
Vice Chairman - Southwest Bank
of St. Louis
Chairman - Southwest Bank, Belleville
PAUL J. GALESKI
President and Chief Executive Officer -
Maverick Technologies
KAREN C. HENDRICKSON
President and Chief Executive Officer -
Southwest Bank, Belleville
MARK A. HINRICHS
Executive Vice President -
Pyramid Technology Group
STEPHEN P. MARSH
President and Senior Loan Officer -
Southwest Bank of St. Louis
Executive Vice President and Senior Loan
Officer - Southwest Bank, Belleville
RONALD J. ORTYL, SR.
Chairman - Metro East Industries
PAUL M. STRIEKER
Chief Financial Officer - Mississippi
Valley Bancshares, Inc.
Executive Vice President -
Southwest Bank of St. Louis
---
47
<PAGE>
<PAGE>
MISSISSIPPI VALLEY BANCSHARES, INC.
EXECUTIVE OFFICERS
ANDREW N. BAUR, Chairman
LINN H. BEALKE, President
PAUL M. STRIEKER, Executive Vice President, Controller and Chief
Financial Officer
CAROL B. DOLENZ, Secretary and Treasurer
STOCK LISTING
NASDAQ-NMS symbol: MVBI appears as MissVly or Ms ValyBcsh in newspaper
stock tables.
TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
Stock Transfer Department
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(888) 213-0965 (toll free)
Website Address: www.chasemellon.com
DIVIDEND INFORMATION
Dividends are normally paid the first day of January, April, July and
October.
ANNUAL MEETING
The Annual Meeting of Shareholders will be at 9:00 a.m., Wednesday,
April 19, 2000, at the St. Louis Marriot West, 660 Maryville Centre
Drive, St. Louis, Missouri 63141.
INVESTOR RELATIONS AND FORM 10-K
Analysts, investors and others seeking financial data about Mississippi
Valley Bancshares, Inc. are invited to contact:
Paul M. Strieker
Executive Vice President, Controller and Chief Financial Officer
Mississippi Valley Bancshares, Inc.
13205 Manchester Road
St. Louis, MO 63131
A copy of the Company's Form 10-K (Annual Report, without exhibits)
filed with the Securities and Exchange Commission may be obtained
without charge upon written request.
- ---
48
<PAGE>
<PAGE>
MISSISSIPPI VALLEY BANCSHARES, INC.
BOARD OF DIRECTORS
JOHN T. BAUMSTARK
President - Archway Sales Inc.
Age 55
ANDREW N. BAUR
Chairman - Mississippi Valley
Bancshares, Inc.
Chairman - Southwest Bank of St. Louis
Age 55
ANDREW S. BAUR
Senior Vice President - Southwest Bank
of St. Louis
Age 30
LINN H. BEALKE
President - Mississippi Valley
Bancshares, Inc.
Vice Chairman - Southwest Bank of St. Louis
Age 55
ALICE C. BEHAN
Private Investor
Age 54
WILLIAM H. T. BUSH
Chairman - Bush-O'Donnell & Co., Inc.
Age 61
FRANKLIN J. CORNWELL, JR.
Private Investor
Age 57
THEODORE P. DESLOGE, JR.
Private Investor
Age 60
LOUIS N. GOLDRING
President - AVCORP., inc.
Age 58
RICHARD T. GROTE
Chairman - American Medical Claims, Inc.
Age 54
FREDERICK O. HANSER
Chairman, St. Louis Cardinals, L.P.
Age 57
DONNA D. LAMBERT
Private Investor
Age 60
MICHAEL D. LATTA
Chairman and Chief Executive
Officer - Universe Corporation
Age 58
MONT S. LEVY
Registered Investment Advisor
Principal - Buckingham Asset Management
Age 48
LEWIS B. SHEPLEY
Consultant
Age 60
- ------------------------------------------------------------------------
MVBI AUDIT COMMITTEE
(Representing MVBI) John T. Baumstark, William H.T. Bush, Franklin J.
Cornwell, Jr., Donna D. Lambert, Michael D. Latta, Mont S. Levy
(Representing SWB of St. Louis) G. Fred Heimburger, William F. Holekamp,
Charles W. Hrebec, Jr., Charles A. Zone
(Representing SWB, Belleville) Ronald J. Ortyl, Sr.
MVBI EXECUTIVE COMMITTEE
Andrew N. Baur, Linn H. Bealke, Louis N. Goldring, Richard T. Grote,
Frederick O. Hanser
MVBI COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE
(Representing MVBI) Alice C. Behan, William H.T. Bush, Franklin J.
Cornwell, Jr., Theodore P. Desloge, Jr., Louis N. Goldring,
Lewis B. Shepley. (Representing SWB of St. Louis) Zsolt Rumy
---
49
<PAGE>
<PAGE>
MISSISSIPPI VALLEY BANCSHARES, INC. (MVBI)
is the holding company for Southwest Bank of St. Louis; Southwest Bank,
Belleville; and Mississippi Valley Capital Company. MVBI has
consistently achieved an ROE that outperforms its peers by adhering to
its proven strategy of being a premier lender to privately owned
businesses while maintaining high loan quality and attracting funds
through an exceptionally efficient retail-deposit-gathering operation.
MISSISSIPPI VALLEY BANCSHARES, INC.
13205 Manchester Road
St. Louis, Missouri 63131
(314) 543-3512
<PAGE>
EXHIBIT 21.
- -----------
SUBSIDIARIES OF THE COMPANY
---------------------------
<TABLE>
<CAPTION>
Subsidiaries State of Organization
- ------------ ---------------------
<S> <C>
Southwest Bank of St. Louis Missouri
Louisville Realty Corporation Missouri
RE Holding Company A Missouri
RE Holding Company B Missouri
RE Holding Company C Missouri
SWB Real Estate Investment Trust Missouri
Southwest Bank, Belleville Illinois
MVBI Capital Trust Missouri
Mississippi Valley Capital Company Missouri
</TABLE>
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
listed below of our report dated January 14, 2000, with respect to the
consolidated financial statements of Mississippi Valley Bancshares, Inc.
incorporated by reference in the Annual Report (Form 10-K) for the year
ended December 31, 1999.
FORM NO.
- ---- ---
S-8 33-70208 Mississippi Valley Bancshares, Inc. 1991 Stock
Option Plan and Southwest Bank of St. Louis
401(k) Retirement Savings Plan
S-8 33-88680 Mississippi Valley Bancshares, Inc. 1991 Stock
Option Plan
S-8 333-00898 Southwest Bank of St. Louis 401(k) Retirement
Savings Plan
S-8 333-21083 Mississippi Valley Bancshares, Inc. 1991 Stock
Option Plan
S-8 333-50669 Mississippi Valley Bancshares, Inc. 1991 Stock
Option Plan
S-8 333-73361 Mississippi Valley Bancshares, Inc. 1991 Stock
Option Plan
March 23, 2000 /s/ Ernst & Young LLP
St. Louis, Missouri
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 29,551
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 55,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 257,899
<INVESTMENTS-CARRYING> 59,116
<INVESTMENTS-MARKET> 59,115
<LOANS> 1,104,498
<ALLOWANCE> 21,649
<TOTAL-ASSETS> 1,561,149
<DEPOSITS> 1,315,716
<SHORT-TERM> 105,639
<LIABILITIES-OTHER> 12,278
<LONG-TERM> 14,950
0
0
<COMMON> 9,661
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<INTEREST-TOTAL> 110,828
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<SECURITIES-GAINS> (1,251)
<EXPENSE-OTHER> 28,518
<INCOME-PRETAX> 34,172
<INCOME-PRE-EXTRAORDINARY> 21,425
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<EPS-BASIC> 2.29
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<YIELD-ACTUAL> 3.96
<LOANS-NON> 2,756
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