ITEM 1. BUSINESS
Mark Twain Bancshares, Inc. ("Company" or "Registrant") is a Missouri chartered multi-bank holding company which owns or controls substantially all the capital stock of four banks: Mark Twain Bank, which operates 20 separate banking locations in the metropolitan St. Louis areas; Mark Twain Kansas City Bank, which operates fifteen separate locations in the metropolitan Kansas City bi-state area; Mark Twain Illinois Bank, which operates four locations on the Illinois side of the St. Louis metropolitan area; and First City National Bank, which operates three separate locations in the metropolitan Springfield, Missouri area. The Company was organized in 1967.
The Company's subsidiaries encounter substantial competition in all of their banking and related financial service activities from other banking institutions and from an increasing number of non-banking financial institutions in its primary market areas.
On October 27, 1996, the Company and Mercantile Bancorporation Inc. ("Mercantile"), entered into an Agreement and Plan of Reorganization, pursuant to which the Company will be merged with Ameribanc, Inc. a wholly owned subsidiary of Mercantile. See Part III, Item 12c of this Form 10-K for further information.
Non-Banking Subsidiaries
The Company wholly owns the following: Mark Twain Properties, Inc., which owns, holds under lease, or manages properties occupied by present banking centers; Mark Twain Community Development Corporation, which provides services and housing opportunities for low- to moderate-income persons; Tarquad Corporation, which acts as trustee of deeds of trust of which Company subsidiaries are the lenders and beneficiaries; and Mark Twain Asset Recovery, Inc., which acts as purchaser of certain assets acquired by subsidiary banks in the collection of loans.
Mark Twain Bank wholly owns Mark Twain Brokerage Services, Inc., a member of the National Association of Securities Dealers, which provides customers with complete brokerage services on all exchanges and provides the sale of various insurance company products. Mark Twain Bank also wholly owns Mark Twain St. Louis Investment Company which is a holding company for Mark Twain St. Louis Real Estate Investment Trust. Mark Twain St. Louis Real Estate Investment Trust was organized to invest solely in mortgage loans originated by the Company's banking subsidiaries. Mark Twain Bank and Mark Twain Kansas City Bank each wholly own a Mark Twain Real Estate Development Corporation subsidiary and a Mark Twain Community Development Corporation subsidiary.
Supervision and Regulation
The Company is registered with and subject to regulation by the Board of Governors of the Federal Reserve System and is subject to the Bank Holding Company Act of 1956, as amended. All Company-owned non-bank subsidiaries are subject to regulation by the Board of Governors of the Federal Reserve System. The subsidiary state-chartered banks are subject to regulation and supervision by the banking regulators of the states in which the banking units are located and the states in which the bank is chartered. The subsidiary national-chartered bank is subject to regulation and supervision by the Office of the Comptroller of the Currency. All subsidiary banks are subject to regulation by and are members of the Federal Deposit Insurance Corporation.
The earnings of the subsidiary banks are affected not only by competing financial institutions and general economic conditions, but also by the policies of various governmental regulatory authorities, and state and federal laws, particularly as they relate to powers authorized to banks and bank holding companies. The Company and all subsidiary banks are subject to the provisions of the Community Reinvestment Act. Mark Twain Brokerage Services, Inc., is subject to supervision and regulation by the National Association of
Securities Dealers, Securities and Exchange Commission, Missouri Division of Securities, Missouri Division of Insurance, and Missouri Division of Finance, among others. The mortgage department is subject to supervision by Department of Housing and Urban Development, Federal Housing Authority, Veteran's Administration, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, and Government National Mortgage Association, among others, concerning mortgage lending.
Further information called for by this item is contained on pages 2 to 14 and Note 2 "Acquisitions and Pending Affiliation" on page 21 of the Company's 1996 Annual Report to Shareholders and is incorporated by reference herein and in Part III, Item 12c of this Form 10-K.
ITEM 2.
ITEM 2. PROPERTIES
The Company leases its principal executive office which is located at 8820 Ladue Road, Ladue, Missouri. As of December 31, 1996, the Company conducts its business and operations out of 46 locations, which are either owned or leased, in the St. Louis bi-state, Kansas City bi-state, Springfield, Missouri and Chicago, Illinois metropolitan areas. The Company's physical properties are in satisfactory condition and suitable and adequate for present operations.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to a number of lawsuits, most of which are considered routine litigation incidental to doing business. The Company, after consultation with legal counsel, does not expect the outcome of any litigation to have a material effect on its consolidated financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of 1996.
EXECUTIVE OFFICERS OF REGISTRANT
See Part III, Item 10 of this Form 10-K.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
On September 19, 1996, the Common Stock of the Company ($1.25 par value) commenced trading on the New York Stock Exchange (ticker symbol - MTB). Prior to September 19, 1996, the Common Stock of the Company was traded on the Nasdaq Stock Market (symbol - MTWN). The following table presents the range of high and low sales prices, as furnished by the New York Stock Exchange and the Nasdaq Stock Market, Inc., as well as the quarterly dividends declared and paid per share.
Common Stock Share Data High Low Dividends - ----------------------------------------------------------------------
Fourth Quarter $50.25 $41.87 $0.31 Third Quarter $42.63 $35.25 $0.31 Second Quarter $38.50 $36.00 $0.31 First Quarter $39.75 $36.50 $0.31
Fourth Quarter $39.50 $32.75 $0.27 Third Quarter $35.75 $31.50 $0.27 Second Quarter $32.75 $29.63 $0.27 First Quarter $30.00 $26.00 $0.27
At December 31, 1996, there were approximately 2,500 holders of record of Common Stock. The information in Note 11, "Restrictions of Subsidiary Dividends," on page 25 of the Company's 1996 Annual Report to Shareholders is incorporated by reference herein.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Information called for by this item is contained on page 1 of the Company's 1996 Annual Report to Shareholders and is incorporated by reference herein.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information called for by this item is contained on pages 2 to 14 of the Company's 1996 Annual Report to Shareholders and is incorporated by reference herein.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is contained on pages 15 to 32 of the Company's 1996 Annual Report to Shareholders and is incorporated by reference herein.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a summary of information related to Directors and Executive Officers of the Registrant.
No family relationship exists among any of the Executive Officers of Registrant.
Each officer of the Registrant is appointed to serve, at the pleasure of its Board of Directors, for the annual period next following the Annual Meeting of the Shareholders of the Registrant, and until his respective successor shall have been appointed and qualified. Certain officers were offered employment agreements; see Exhibit 10.9 below.
No officer of the Registrant was selected so to serve pursuant to any arrangement or understanding between him and any person other than the directors and one or more officers of Registrant acting solely in that capacity.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by this item is contained in Exhibit 99 to this Form 10-K and which is hereby incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - The only person who is known to be the beneficial owner of more than 5% of its voting securities is Alvin Siteman, who beneficially owns 2,304,234 shares (13.2%) of Common Stock. This amount includes currently exercisable stock options to acquire 21,250 shares of Common Stock. Mr. Siteman is Chairman of Board of the Company and can be contacted through the Company.
(b) Security Ownership of Management - The following table sets forth information concerning the beneficial ownership of the Company's Common Stock as of January 31, 1997, for (a) each director; (b) each of the executive officers named in the Summary Compensation Table not listed as a director; and (c) directors and executive officers as a group. Except as otherwise noted, the individuals have sole voting and investment power with respect to such securities. Included are amounts of shares which may be acquired on January 31, 1997 or within 60 days of January 31, 1997 pursuant to exercisable employee stock options or through conversion of Mark Twain Bancshares, Inc. 7% Convertible Subordinated Capital Notes due 1999 ("Notes").
As required by the Securities and Exchange Commission rules under Section 16 of the Securities and Exchange Act of 1934, the Company believes, based upon review and representations that during 1996 all Securities and Exchange Commission filing requirements applicable to executive officers and directors have been complied with.
(c) Changes in Control - On October 27, 1996, the Company and Mercantile Bancorporation Inc. ("Mercantile"), entered into an Agreement and Plan of Reorganization (the "Merger Agreement"), pursuant to which the Company will be merged with Ameribanc, Inc., a wholly owned subsidiary of Mercantile (the "Merger"). The Board of Directors of the Company and the Executive Committee of the Board of Directors of Mercantile approved the Merger at their meetings held on October 27 and October 23, 1996, respectively.
In accordance with the terms of the Merger Agreement, (i) each share of the Company's common stock, par value $1.25 per share ("Bancshares Common Stock"), outstanding immediately prior to the effective time of the Merger (the "Effective Time") will be converted into the right to receive 0.952 of a share (the "Exchange Ratio") of Mercantile common stock, par value $5.00 per share ("Mercantile Common Stock"), and associated preferred share purchase rights under Mercantile's Rights Agreement, dated May 23, 1988.
The Merger is intended to constitute a tax-free reorganization under the Internal Revenue Code of 1986, as amended, and to be accounted for as a pooling of interest.
Consummation of the Merger is subject to various conditions, including: (i) receipt of approval by the shareholders of each of the Company, Mercantile, and Ameribanc, Inc. of appropriate matters relating to the Merger Agreement and the Merger; (ii) receipt of requisite regulatory approvals from the Board of Governors of the Federal Reserve system and other federal and state regulatory authorities as necessary; (iii) receipt of an opinion of counsel as to the tax treatment of certain aspects of the Merger; (iv) registration of the shares of Mercantile Common Stock to be issued in the Merger under the Securities Act of 1933, as amended (the "1933 Act") and all applicable state securities laws; and (v) satisfaction of certain other conditions. Certain directors and officers of the Company, who in the aggregate have voting power over approximately 14.9% of the outstanding shares of Bancshares Common Stock, based upon 16,384,722 shares of Bancshares Common Stock outstanding as of September 30, 1996, as represented by the Company, have agreed with Mercantile to vote all such shares of Bancshares Common Stock to approve the Merger and not to sell any of such shares other than pursuant to the Merger without Mercantile's consent.
The Merger Agreement and the transactions contemplated thereby will be submitted for approval at meetings of the shareholders of each of the Company and Mercantile. Prior to such meetings, Mercantile will file a registration statement with the Securities and Exchange Commission registering under the 1933 Act the Mercantile Common Stock to be issued in the Merger. Such shares of Mercantile Common Stock will be offered to the Company's shareholders pursuant to a prospectus that will also serve as a joint proxy statement for the shareholders' meetings.
The preceding description of the Merger Agreement is qualified in its entirety by reference to the copy of the Merger Agreement included as Exhibit 10.10 to this Form 10-K and which is hereby incorporated herein by reference.
In connection with the Merger Agreement, the Company and Mercantile entered into a Stock Option Agreement, dated October 27, 1996 (the "Stock Option Agreement"), pursuant to which Bancshares granted to Mercantile an irrevocable option to purchase, under certain circumstances, up to 3,261,522 authorized and unissued shares of Bancshares Common Stock at a price, subject to certain adjustments, of $42.375 per share (the "Mercantile Option"). The Mercantile Option, if exercised, would equal, before giving effect to the exercise of the Mercantile Option, 19.9% of the total number of shares of Bancshares Common Stock outstanding. The Mercantile Option was granted by the Company as a condition and inducement to Mercantile's willingness to enter into the Merger Agreement. Under certain circumstances, the Company may be required to repurchase the Mercantile Option or the shares acquired pursuant to the exercise of the Mercantile Option.
The preceding description of the Stock Option Agreement is qualified in its entirety by reference to the copy of the Stock Option Agreement included as Exhibit 10.11 to this Form 10-K and which is hereby incorporated herein by reference
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, as in prior years, the Company's Subsidiary Banks made loans to certain directors and executive officers of Mark Twain Bancshares, Inc. and its principal subsidiaries, as well as to certain persons or organizations related to directors and executive officers. All such loans were made in the ordinary course of business, and on substantially the same terms, including interest rates and collateral, as those prevailing at the time comparable loans to other persons, and non involved more than a normal risk of collectibility or presented other unfavorable features.
During 1996, rental payment for certain premises of the Company and its subsidiaries, aggregating approximately $75,700 were made to the Siteman Organization, Inc., a real estate development and management company which is an affiliate of Mr. Siteman. Management believes that all such rental payments are comparable to fair market rates for such premises.
During 1996, the Company entered into a construction contract for renovations to a facility to be opened in 1997 in Clayton, Missouri. Murphy Company Mechanical Contractors and Engineers ("Murphy Co."), which is an affiliate of Mr. Murphy, is a subcontractor for the renovation project. Murphy Co. is engaged to designed and construct the HVAC system for the renovated building. Payments to be made under the construction contract are estimated to be approximately $498,000. In addition, during 1996, the Company and its subsidiaries made payments aggregating approximately $32,700 to Murphy Co. for routine repairs and maintenance to the HVAC systems at various facilities. Management believes that such contract and repair amounts are comparable to fair market rates for such services.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements - The following consolidated financial statements of Mark Twain Bancshares, Inc. and Subsidiaries and the accountants' report thereon are incorporated by reference from the 1996 Annual Report to Shareholders of Mark Twain Bancshares, Inc.:
Consolidated Balance Sheet - December 31, 1996 and 1995
Consolidated Statement of Income - Years ended December 31, 1996, 1995 and 1994
Consolidated Statement of Changes in Shareholders' Equity - Years ended December 31, 1996, 1995 and 1994
Consolidated Statement of Cash Flows - Years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules - All schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or the notes thereto.
(a) (3) Exhibits
Exhibit 10 Material contracts:
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated October 10, 1996 announcing earnings for the three and nine month periods ending September 30, 1996. The Company filed an 8-K on November 6, 1996 related to entering into the Agreement and Plan of Reorganization with Mercantile Bancorporation Inc. and entering into the Stock Option Agreement with Mercantile Bancorporation Inc. The Company filed a Form 8-K dated January 15, 1997 announcing earnings for the three and twelve month periods ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bancshares has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, and the State of Missouri, on the 20th day of February, 1997.
MARK TWAIN BANCSHARES, INC.
/s/ JOHN P. DUBINSKY ------------------------------------- John P. Dubinsky President and Chief Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated.