Commerce Bancshares - 10-Q quarterly report FY

 

 

 

 

 

 

 

For the quarterly period ended June 30, 2001  

 

 

 

For the transition period from                      to                                   

 

 

 

Missouri		43-0889454
(State of Incorporation)		(IRS Employer Identification No.)

 

 

 

          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

 

          As of August 7, 2001, the registrant had outstanding 62,764,947 shares of its $5 par value common stock, registrant’s only class of common stock.  

 

 

          In the opinion of management, the consolidated financial statements of Commerce Bancshares, Inc. and Subsidiaries as of June 30, 2001 and December 31, 2000 and the related notes include all material adjustments which were regularly recurring in nature and necessary for fair presentation of the financial condition and the results of operations for the periods shown.  

 

          The consolidated financial statements of Commerce Bancshares, Inc. and Subsidiaries and management’s discussion and analysis of financial condition and results of operations are presented in the schedules as follows:  

 

Schedule 1:		Consolidated Balance Sheets
Schedule 2:		Consolidated Statements of Income
Schedule 3:		Consolidated Statements of Changes in Stockholders’ Equity
Schedule 4:		Consolidated Statements of Cash Flows
Schedule 5:		Notes to Consolidated Financial Statements
Schedule 6:		Management’s Discussion and Analysis of Financial Condition and Results of   Operations, including Quantitative and Qualitative Disclosures about Market Risk

 

 

 

          The annual meeting of shareholders of Commerce Bancshares, Inc. was held on April 18, 2001. Proxies for the meeting were solicited pursuant to Regulation 14 of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management’s nominees, as listed in the proxy statement. The five nominees for the five directorships (constituting one-third of the Board of Directors) being elected at this meeting received the following votes:  

 

 

Name of  Director		Votes For		Votes Withheld
David W. Kemper		53,371,845			202,232
Thomas A. McDonnell		53,290,931			283,146
Benjamin F. Rassieur, III		53,375,195			198,882
Andrew C. Taylor		43,210,149			10,363,928
Robert H. West		53,381,537			192,540

 

 

          No reports on Form 8-K were filed during the quarter ended June 30, 2001.  

 

 

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  

 

 

 

 

 

 

 

		June 30   2001			December 31   2000
		(Unaudited)
		(In thousands)
ASSETS
Loans, net of unearned income		$   7,791,411			$   7,906,665
Allowance for loan losses		(131,109)			(128,445)
Net loans		7,660,302			7,778,220
Investment securities:
Available for sale		2,283,513			1,864,991
Trading		21,409			20,674
Non-marketable		54,554			55,238
Total investment securities		2,359,476			1,940,903
Federal funds sold and securities purchased under agreements to resell		546,380			241,835
Cash and due from banks		664,863			616,724
Land, buildings and equipment, net		292,932			257,629
Goodwill and core deposit premium, net		54,405			58,182
Other assets		161,047			221,624
Total assets		$11,739,405			$11,115,117
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing demand		$   1,154,334			$   1,564,907
Savings and interest bearing demand		5,554,885			5,049,729
Time open and C.D.’s of less than $100,000		2,283,035			2,081,057
Time open and C.D.’s of $100,000 and over		531,600			386,045
Total deposits		9,523,854			9,081,738
Federal funds purchased and securities sold under agreements to repurchase		669,779			543,874
Long-term debt and other borrowings		193,092			224,684
Accrued interest, taxes and other liabilities		133,695			121,066
Total liabilities		10,520,420			9,971,362
Stockholders’ equity:
Preferred stock, $1 par value.
Authorized and unissued 2,000,000 shares		—			—
Common stock, $5 par value.
Authorized 100,000,000 shares; issued 63,557,187 shares in 2001 and 62,655,891 shares in 2000		317,786			313,279
Capital surplus		149,409			147,436
Retained earnings		745,760			671,147
Treasury stock of 618,849 shares in 2001 and 78,513 shares in 2000, at cost		(22,129)			(2,895)
Other		(2,141)			(1,179)
Accumulated other comprehensive income		30,300			15,967
Total stockholders’ equity		1,218,985			1,143,755
Total liabilities and stockholders’ equity		$11,739,405			$11,115,117

 

See accompanying notes to consolidated financial statements.  

 

 

 

		For the Three Months  Ended June 30				For the Six Months  Ended June 30
		2001		2000		2001		2000
		(Unaudited)
		(In thousands, except per share data)
INTEREST INCOME
Interest and fees on loans		$153,586		$164,655		$317,968		$321,373
Interest on investment securities		32,714		34,139		61,466		71,141
Interest on federal funds sold and securities purchased under  agreements to resell		6,426		3,678		14,477		6,788
Total interest income		192,726		202,472		393,911		399,302
INTEREST EXPENSE
Interest on deposits:
Savings and interest bearing demand		27,367		37,099		63,171		72,600
Time open and C.D.’s of less than $100,000		32,046		26,813		63,464		53,388
Time open and C.D.’s of $100,000 and over		7,428		4,606		14,345		8,468
Interest on federal funds purchased and securities sold under  agreements to repurchase		5,439		11,663		12,228		23,358
Interest on long-term debt and other borrowings		2,797		1,281		6,158		1,285
Total interest expense		75,077		81,462		159,366		159,099
Net interest income		117,649		121,010		234,545		240,203
Provision for loan losses		7,992		10,211		17,522		18,876
Net interest income after provision for loan losses		109,657		110,799		217,023		221,327
NON-INTEREST INCOME
Trust fees		16,790		14,353		31,992		28,587
Deposit account charges and other fees		21,355		17,909		40,584		34,491
Credit card transaction fees		13,695		12,362		26,402		23,554
Trading revenue		3,578		2,325		7,430		4,710
Net gains on securities transactions		510		506		1,747		505
Other		14,748		16,536		29,385		28,940
Total non-interest income		70,676		63,991		137,540		120,787
NON-INTEREST EXPENSE
Salaries and employee benefits		58,772		54,963		116,685		109,826
Net occupancy		7,550		7,374		15,988		14,851
Equipment		5,527		5,298		11,155		10,437
Supplies and communication		8,600		8,062		16,610		16,659
Data processing		9,637		9,579		18,518		18,619
Marketing		3,571		3,319		6,388		6,469
Goodwill and core deposit amortization		1,853		2,018		3,777		4,073
Other		16,209		14,985		30,734		29,624
Total non-interest expense		111,719		105,598		219,855		210,558
Income before income taxes		68,614		69,192		134,708		131,556
Less income taxes		22,831		23,589		45,048		44,698
Net income		$   45,783		$   45,603		$   89,660		$   86,858
Net income per share—basic		$          .72		$          .71		$        1.42		$        1.34
Net income per share—diluted		$          .72		$          .70		$        1.41		$        1.33

 

See accompanying notes to consolidated financial statements.  

 

 

 

 

		Number of Shares Issued		Common Stock		Capital Surplus			Retained Earnings			Treasury Stock			Other			Accumulated Other Comprehensive Income (Loss)					Total
		(Unaudited)
		(Dollars in thousands)
Balance January 1, 2001		62,655,891		$313,279		$147,436			$671,147			$   (2,895)			$(1,179)				$15,967				$1,143,755
Net income									89,660														89,660
Change in unrealized gain (loss) on available for sale securities																			14,250				14,250
Total comprehensive income																							103,910
Pooling acquisition		876,750		4,384		5,414			5,198										83				15,079
Purchase of treasury stock												(29,684)											(29,684)
Issuance of stock under purchase, option and benefit plans		2,982		15		(4,160)						10,068											5,923
Issuance of stock under restricted stock award plan		21,564		108		719						382			(1,209)								—
Restricted stock award amortization															247								247
Cash dividends paid ($.32 per share)									(20,245)														(20,245)
Balance June 30, 2001		63,557,187		$317,786		$149,409			$745,760			$(22,129)			$(2,141)				$30,300				$1,218,985
Balance January 1, 2000		62,428,078		$312,140		$129,173			$642,746			$   (2,089)			$    (916)				$   (1,222	)			$1,079,832
Net income									86,858														86,858
Change in unrealized gain (loss) on available for sale securities																			(6,837	)			(6,837)
Total comprehensive income																							80,021
Purchase of treasury stock												(46,578)											(46,578)
Issuance of stock under purchase, option and benefit plans						(452)						1,646											1,194
Issuance of stock under restricted stock award plan						(30)						499			(469)								—
Restricted stock award amortization															106								106
Cash dividends paid ($.295 per share)									(19,040)														(19,040)
Balance June 30, 2000		62,428,078		$312,140		$128,691			$710,564			$(46,522)			$(1,279)				$   (8,059	)			$1,095,535

 

 

See accompanying notes to consolidated financial statements  

 

 

 

		For the Six Months   Ended June 30
		2001			2000
		(Unaudited)   (In thousands)
OPERATING ACTIVITIES:
Net income		$       89,660			$   86,858
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		17,522			18,876
Provision for depreciation and amortization		18,428			18,337
Accretion of investment security discounts		(846)			(1,173)
Amortization of investment security premiums		4,764			5,010
Net gains on sales of investment securities (A)		(1,747)			(505)
Net (increase) decrease in trading securities		(10,198)			14,495
Increase in interest receivable		(152)			(4,287)
Increase (decrease) in interest payable		(1,719)			499
Other changes, net		845			(22,052)
Net cash provided by operating activities		116,557			116,058
INVESTING ACTIVITIES:
Cash received in acquisition		15,035			—
Cash paid in sale of branch		—			(6,353)
Proceeds from sales of investment securities (A)		229,084			3,930
Proceeds from maturities of investment securities (A)		635,173			771,358
Purchases of investment securities (A)		(1,207,205)			(444,272)
Net increase in federal funds sold and securities purchased under agreements to resell		(290,920)			(33,356)
Net (increase) decrease in loans		291,918			(277,441)
Purchases of land, buildings and equipment		(44,124)			(21,578)
Sales of land, buildings and equipment		1,996			1,711
Net cash used in investing activities		(369,043)			(6,001	)
FINANCING ACTIVITIES:
Net increase in non-interest bearing demand, savings, and interest bearing demand deposits		77,719			19,545
Net increase (decrease) in time open and C.D.’s		196,875			(31,715)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase		121,869			(176,509)
Repayment of long-term debt		(50,490)			(464)
Additional borrowings		—			100,000
Purchases of treasury stock		(29,684)			(46,578)
Issuance of stock under purchase, option and benefit plans		4,581			1,097
Cash dividends paid on common stock		(20,245)			(19,040)
Net cash provided by (used in) financing activities		300,625			(153,664)
Increase (decrease) in cash and cash equivalents		48,139			(43,607)
Cash and cash equivalents at beginning of year		616,724			685,157
Cash and cash equivalents at June 30		$    664,863			$641,550
(A)  Available for sale and non-marketable securities
Net income tax payments		$       46,222			$   46,439
Interest paid on deposits and borrowings		$    161,085			$158,629

See accompanying notes to consolidated financial statements.  

 

 

 

 

 

          The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2000 data to conform to current year presentation. Results of operations for the six month period ended June 30, 2001 are not necessarily indicative of results to be attained for any other period.  

 

          The significant accounting policies followed in the preparation of the quarterly financial statements are the same as those disclosed in the 2000 Annual Report to stockholders to which reference is made.  

 

 

          Effective March 1, 2001, the Company acquired Centennial Bank in St. Ann, Missouri, with assets of $254 million, loans of $189 million, and deposits of $216 million. The Company issued 876,750 shares as consideration in the transaction. The acquisition was accounted for as a pooling of interests; however, the Company’s financial statements were not restated because restated amounts did not differ materially from historical results.  

 

 

          The following is a summary of the allowance for loan losses.  

 

		For the Three Months Ended June 30				For the Six Months Ended June 30
		2001		2000		2001		2000
		(In thousands)
Balance, beginning of period		$131,080		$124,803		$128,445		$123,042
Additions:
Allowance for loan losses of acquired bank		—		—		2,519		—
Provision for loan losses		7,992		10,211		17,522		18,876
Total additions		7,992		10,211		20,041		18,876
Deductions:
Loan losses		11,243		10,492		24,493		20,244
Less recoveries on loans		3,280		2,502		7,116		5,350
Net loan losses		7,963		7,990		17,377		14,894
Balance, June 30		$131,109		$127,024		$131,109		$127,024

 

          At June 30, 2001, non-performing assets were $26,629,000, consisting of $24,458,000 in non-accrual loans and $2,171,000 in foreclosed real estate. Non-performing assets were .34% of total loans and .23% of total assets. Non-performing assets were $21,324,000 at December 31, 2000. Loans which were past due 90 days or more and still accruing interest amounted to $20,268,000 at June 30, 2001, compared to $26,670,000 at December 31, 2000.  

 

 

          Investment securities, at fair value, consist of the following at June 30, 2001 and December 31, 2000.  

 

		June 30   2001		December 31   2000
		(In thousands)
Available for sale:
U.S. government and federal agency obligations		$    963,613		$    749,620
State and municipal obligations		57,513		62,734
CMO’s and asset-backed securities		1,098,473		908,220
Other debt securities		113,942		99,731
Equity securities		49,972		44,686
Trading		21,409		20,674
Non-marketable		54,554		55,238
Total investment securities		$2,359,476		$1,940,903

 

 

          The shares used in the calculation of basic and diluted income per share are shown below.  

 

		For the Three Months Ended June 30				For the Six Months Ended June 30
		2001		2000		2001		2000
		(In thousands)
Weighted average common shares outstanding		63,050		64,273		62,962		64,716
Stock options		676		696		775		651
		63,726		64,969		63,737		65,367

 

 

          Comprehensive income is defined as the change in equity from transactions and other events and circumstances from non-owner sources, and excludes investments by and distributions to owners. Comprehensive income includes net income and other items of comprehensive income meeting the above criteria. The Company’s only component of other comprehensive income is the unrealized holding gains and losses on available for sale investment securities.  

 

		For the Three Months Ended June 30						For the Six Months Ended June 30
		2001			2000			2001			2000
		(In thousands)
Unrealized holding gains (losses)		$(1,310)			$(9,516)			$27,797			$(10,935)
Reclassification adjustment for gains included in net income		(2,425)			(258)			(4,820)			(258)
Net unrealized gains (losses) on securities		(3,735)			(9,774)			22,977			(11,193)
Income tax expense (benefit)		(1,409)			(3,828)			8,727			(4,356)
Other comprehensive income (loss)		$(2,326)			$(5,946)			$14,250			$(6,837)

 

 

          Management has established three operating segments within the Company. The Consumer segment includes the retail branch network, consumer finance, bankcard, student loans and discount brokerage services. The Commercial segment provides corporate lending, leasing, and international services, as well as business, government deposit and cash management services. The Money Management segment provides traditional trust and estate tax planning services, and advisory and discretionary investment management services.  

 

          The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were no material intersegment revenues between the three segments.  

 

		Consumer				Commercial					Money Management					Segment Totals		Other/  Elimination					Consolidated Totals
		(In thousands)
Six Months Ended June 30, 2001
Net interest income after loan loss expense			$    6,621				$155,158					$   (6,647	)			$155,132			$61,891					$217,023
Cost of funds allocation			130,729				(75,351	)				10,406				65,784			(65,784	)				—
Non-interest income			71,705				16,591					41,426				129,722			7,818					137,540
Total net revenue			209,055				96,398					45,185				350,638			3,925					354,563
Non-interest expense			133,156				46,493					28,851				208,500			11,355					219,855
Income before income taxes			$ 75,899				$   49,905					$16,334				$142,138			$   (7,430	)				$134,708
Six Months Ended June 30, 2000
Net interest income after loan loss expense			$ 11,923				$160,823					$   (6,986	)			$165,760			$55,567					$221,327
Cost of funds allocation			115,981				(76,635	)				10,156				49,502			(49,502	)				—
Non-interest income			66,494				14,130					35,967				116,591			4,196					120,787
Total net revenue			194,398				98,318					39,137				331,853			10,261					342,114
Non-interest expense			125,892				42,297					27,585				195,774			14,784					210,558
Income before income taxes			$ 68,506				$   56,021					$11,552				$136,079			$   (4,523	)				$131,556
Three Months Ended June 30, 2001
Net interest income after loan loss expense			$    4,972				$   75,141					$   (3,117	)			$   76,996			$32,661					$109,657
Cost of funds allocation			68,808				(34,463	)				4,984				39,329			(39,329	)				—
Non-interest income			36,096				8,775					21,033				65,904			4,772					70,676
Total net revenue			109,876				49,453					22,900				182,229			(1,896	)				180,333
Non-interest expense			68,749				23,315					14,580				106,644			5,075					111,719
Income before income taxes			$ 41,127				$   26,138					$   8,320				$   75,585			$   (6,971	)				$   68,614
Three Months Ended June 30, 2000
Net interest income after loan loss expense			$    6,307				$   82,399					$   (3,853	)			$   84,853			$25,946					$110,799
Cost of funds allocation			59,324				(40,582	)				5,472				24,214			(24,214	)				—
Non-interest income			36,968				7,257					17,850				62,075			1,916					63,991
Total net revenue			102,599				49,074					19,469				171,142			3,648					174,790
Non-interest expense			63,561				21,373					13,689				98,623			6,975					105,598
Income before income taxes			$ 39,038				$   27,701					$   5,780				$   72,519			$   (3,327	)				$   69,192

 

          The segment activity, as shown above, includes both direct and allocated items. Amounts in the “Other/Elimination” column include activity not related to the segments, such as that relating to administrative functions, and the effect of certain expense allocations to the segments.  

 

 

          Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and its amendments were adopted by the Company on January 1, 2001. SFAS No. 133 established accounting and reporting standards for derivative instruments and hedging activities. All derivatives must be recognized on the balance sheet at fair value, with the adjustment to fair value recorded in current earnings. For derivatives qualifying as hedges, changes in the fair value of the derivative will be either offset against the changes in fair value of the hedged item through current earnings, or recognized in other comprehensive income until the hedged item is recognized in current earnings based on the nature of the hedge. The ineffective portion of the derivative’s change in fair value will be immediately recognized in current earnings.  

 

          The SFAS 133 transition adjustment increased 2001 net income by $8,670. Because of its immateriality, the adjustment is not presented separately in the income statement. The Company’s usage of derivative instruments is discussed below.  

 

          The Company’s primary risk associated with its lending activity is interest rate risk. Interest rates contain an ever-present volatility, as they are affected by the public’s perception of the economy’s health at any one point in time, as well as by specific actions of the Federal Reserve. These fluctuations can either compress or enhance fixed rate interest margins depending on the liability structure of the funding organization. The Company’s balance sheet is somewhat asset sensitive. Over the longer term, rising interest rates have a negative effect on interest margins as funding sources become more expensive relative to these fixed rate loans that do not reprice as quickly with the change in interest rates. However, in order to maintain its competitive advantage, in certain circumstances the Company offers fixed rate commercial financing whose term extends beyond its traditional three to five year parameter. This exposes the Company to the risk that the fair value of the fixed rate loan may fall if market interest rates increase. To reduce this exposure for certain specified loans, the Company enters into interest rate swaps, paying interest based on a fixed rate in exchange for interest based on a variable rate. At June 30, 2001, the Company had two swaps which were designated as fair value hedges.  

 

          The Company’s mortgage banking operation makes commitments to extend fixed rate loans secured by 1-4 family residential properties, which are considered to be derivative instruments. These commitments have an average term of 60 to 90 days. The Company’s general practice is to sell such loans in the secondary market. During the term of the loan commitment, the value of the loan commitment, which includes mortgage servicing rights, changes in inverse proportion to changes in market interest rates. The Company obtains forward sale contracts with investors in the secondary market in order to manage these risk positions. Most of the contracts are matched to a specific loan on a “best efforts” basis, in which the Company is obligated to deliver the loan only if the loan closes. Hedge accounting has not been applied to these activities.  

 

          The Company’s foreign exchange activity involves the purchase and sale of forward foreign exchange contracts, which are commitments to purchase or deliver a specified amount of foreign currency at a specific future date. This activity enables customers involved in international business to hedge their exposure to foreign currency exchange rate fluctuations. The Company minimizes its related exposure arising from these customer transactions with offsetting contracts for the same currency and time frame. In addition, the Company uses foreign exchange contracts, to a limited extent, for trading purposes, including taking proprietary positions. Risk arises from changes in the currency exchange rate and from the potential for counterparty nonperformance. These risks are controlled by adherence to a foreign exchange trading policy which contains control limits on currency amounts, open positions, maturities and losses, and procedures for approvals, record-keeping, monitoring and reporting. Hedge accounting has not been applied to these foreign exchange activities.  

 

 

 

 

          The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company’s 2000 Annual Report on Form 10-K. Results of operations for the six month period ended June 30, 2001 are not necessarily indicative of results to be attained for any other period.  

 

		Three Months   Ended June 30						Six Months   Ended June 30
		2001			2000			2001			2000
Per Share Data
Net income—basic		$     .72			$     .71			$   1.42			$   1.34
Net income—diluted		.72			.70			1.41			1.33
Cash dividends		.160			.148			.320			.295
Book value								19.39			17.14
Market price								36.90			28.33
Selected Ratios
(Based on average balance sheets)
Loans to deposits		83.39	%		86.65	%		84.96	%		85.60	%
Non-interest bearing deposits to total deposits		13.49			14.80			13.66			14.99
Equity to loans		15.29			13.97			15.06			14.04
Equity to deposits		12.75			12.10			12.79			12.02
Equity to total assets		10.40			9.84			10.42			9.78
Return on total assets		1.58			1.65			1.58			1.57
Return on realized stockholders’ equity		15.60			16.71			15.54			15.98
Return on total stockholders’ equity		15.23			16.79			15.21			16.07
(Based on end-of-period data)
Efficiency ratio		58.50			56.14			58.35			57.28
Tier I capital ratio								12.82			11.75
Total capital ratio								14.21			13.08
Leverage ratio								9.88			9.42

 

 

		Three Months Ended June 30											Six Months Ended June 30
		2001			2000			% Change					2001			2000			% Change
		(Dollars in thousands)
Net interest income		$117,649			$121,010				(2.8	)%			$234,545			$240,203				(2.4	)%
Provision for loan losses		(7,992	)		(10,211	)			(21.7	)			(17,522	)		(18,876	)			(7.2	)
Non-interest income		70,676			63,991				10.4				137,540			120,787				13.9
Non-interest expense		(111,719	)		(105,598	)			5.8				(219,855	)		(210,558	)			4.4
Income taxes		(22,831	)		(23,589	)			(3.2	)			(45,048	)		(44,698	)			.8
Net income		$   45,783			$   45,603				.4	%			$   89,660			$   86,858				3.2	%

 

          Consolidated net income for the second quarter of 2001 was $45.8 million; a $180 thousand, or .4%, increase over the second quarter of 2000. Diluted earnings per share increased 2.9% to $.72 for the second quarter of 2001, compared to $.70 for the second quarter of 2000. Non-interest income increased 10.4%, while net interest income declined 2.8% and non-interest expense increased 5.8% compared to last year. Return on average assets for the quarter was 1.58% compared to 1.65% for the second quarter of 2000. Return on average realized stockholders’ equity declined to 15.60% from 16.71% in the same quarter of last year. The Company’s efficiency ratio was 58.50% for the second quarter of 2001 compared to 56.14% for the second quarter of 2000.  

 

          Consolidated net income for the first six months of 2001 was $89.7 million, a 3.2% increase over the first six months of 2000. Diluted earnings per share was $1.41 compared to $1.33 for the first six months of last year. Non-interest income improved in key sources of fee income, including credit card, trust, deposit account, and trading income, resulting in an overall increase of 13.9%. Non-interest expense increased 4.4% over the first six months of 2000, mainly in salaries and employee benefits.  

 

          Effective March 1, 2001, the Company completed its acquisition of Centennial Bank in St. Ann, Missouri, with assets of $254 million, loans of $189 million, and deposits of $216 million. The Company issued 876,750 shares of common stock as consideration in the transaction. The acquisition was accounted for as a pooling of interests; however, the Company’s financial statements were not restated because the restated amounts did not differ materially from the Company’s historical results.  

 

 

          The following table summarizes the changes in net interest income on a fully tax equivalent basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates. Changes not solely due to volume or rate changes are allocated to rate. Management believes this allocation method, applied on a consistent basis, provides meaningful comparisons between the respective periods.  

 

 

		Three Months Ended   June 30, 2001 vs. 2000									Six Months Ended   June 30, 2001 vs. 2000
		Change due to									Change due to
		Average   Volume			Average   Rate			Total			Average   Volume			Average   Rate			Total
		(In thousands)
Interest income, fully taxable equivalent  basis:
Loans		$1,536			$(12,579)			$(11,043)			$   6,132			$   (9,501)			$   (3,369)
Investment securities:
U.S. government and federal agency securities		(1,091)			(405)			(1,496)			(6,786)			(274)			(7,060)
State and municipal obligations		(323)			(16)			(339)			(613)			(134)			(747)
CMO’s and asset-backed securities		470			(156)			314			(2,595)			18			(2,577)
Other securities		487			(495)			(8)			1,156			(756)			400
Federal funds sold and securities purchased  under agreements to resell		5,928			(3,180)			2,748			11,387			(3,698)			7,689
Total interest income		7,007			(16,831)			(9,824)			8,681			(14,345)			(5,664)
Interest expense:
Deposits:
Savings		2			(572)			(570)			(73)			(657)			(730)
Interest bearing demand		1,022			(10,184)			(9,162)			1,146			(9,845)			(8,699)
Time open & C.D.’s of less than $100,000		2,795			2,438			5,233			3,791			6,285			10,076
Time open & C.D.’s of $100,000 and over		2,907			(85)			2,822			4,950			927			5,877
Federal funds purchased and securities sold  under agreements to repurchase		(3,412)			(2,812)			(6,224)			(7,998)			(3,132)			(11,130)
Long-term debt and other borrowings		1,965			(245)			1,720			4,530			537			5,067
Total interest expense		5,279			(11,460)			(6,181)			6,346			(5,885)			461
Net interest income, fully taxable equivalent  basis		$1,728			$   (5,371)			$   (3,643)			$   2,335			$   (8,460)			$   (6,125)