-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P1B/bQ9bhjsaOFFkOwaCjWs0wxMY0YvHBMCpwGiP3PlZkuGajdwI/ZtMzrIZBiDr yKycfpo0G9LohtGNK0NQGA== 0000931763-98-002016.txt : 19980810 0000931763-98-002016.hdr.sgml : 19980810 ACCESSION NUMBER: 0000931763-98-002016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL COMMERCE BANCORPORATION CENTRAL INDEX KEY: 0000101844 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 620784645 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06094 FILM NUMBER: 98678913 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ CITY: MEMPHIS STATE: TN ZIP: 38150 BUSINESS PHONE: 9015233242 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ CITY: MEMPHIS STATE: TN ZIP: 38150 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TENNESSEE BANCSHARES CORP DATE OF NAME CHANGE: 19780820 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TENNESSEE BANSHARES CORP DATE OF NAME CHANGE: 19780525 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 Commission file number 0-6094 ------- NATIONAL COMMERCE BANCORPORATION -------------------------------- (Exact name of registrant as specified in its charter) Tennessee 62-0784645 - ----------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation organization) Identification No.) One Commerce Square Memphis, Tennessee 38150 - ------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code - (901)523-3242 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 and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $2 par value -- 99,707,902 shares as of July 30, 1998 PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements -------------------- NATIONAL COMMERCE BANCORPORATION Consolidated Balance Sheets -------------------------------- (In Thousands)
June 30 Dec. 31 1998 1997 ----------- ----------- (unaudited) ASSETS Cash and cash equivalents: Interest-bearing deposits with other banks $ 19,140 $ 18,293 Cash and non-interest bearing deposits 205,789 206,191 Federal funds sold and securities purchased under agreements to resell 17,088 23,009 ---------- ---------- Total cash and cash equivalents 242,017 247,493 ---------- ---------- Securities: Held-to-maturity 1,131,779 1,210,071 Available-for-sale 687,151 408,083 ---------- ---------- Total securities 1,818,930 1,618,154 ---------- ---------- Trading account securities 67,878 98,332 Loans: Commercial, financial and agricultural 555,411 512,534 Real estate - construction 260,483 241,334 Real estate - mortgage 922,451 781,826 Consumer 1,122,226 1,045,420 Lease financing 29,368 30,046 Unearned discounts (2,486) (2,193) ---------- ---------- Total loans 2,887,453 2,608,967 Less allowance for loan losses 45,050 43,297 ---------- ---------- Net loans 2,842,403 2,565,670 ---------- ---------- Premises and equipment, net 32,120 27,404 Broker/dealer customer receivables 55,615 7,695 Other assets 141,654 127,263 ---------- ---------- Total assets $5,200,617 $4,692,011 ========== ==========
See notes to consolidated financial statements. 1 Consolidated Balance Sheets (cont.) - ----------------------------------- (In Thousands)
June 30 Dec. 31 1998 1997 ---------- ----------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities: Deposits: Non-interest-bearing deposits $ 435,119 $ 417,748 Money market checking 317,191 286,555 Savings 102,008 83,626 Money market savings 1,031,327 943,422 Certificates of deposit less than $100,000 898,886 899,027 Certificates of deposit of $100,000 or more 631,257 620,864 ---------- ---------- Total deposits 3,415,788 3,251,242 ---------- ---------- Federal funds purchased and securities sold under agreements to repurchase 477,075 423,573 Broker/dealer customer payables 0 59 Accounts payable and accrued liabilities 86,429 68,969 Federal Home Loan Bank advances 636,812 389,884 Other borrowed funds and long-term debt 156,345 156,252 ---------- ---------- Total liabilities 4,772,449 4,289,979 ---------- ---------- Capital trust pass-through securities 49,890 49,884 Stockholders' equity: Common stock 99,512 97,704 Additional paid-in capital 50,753 52,524 Retained earnings 225,562 199,670 Unrealized gains (losses) on securities, net of taxes 2,451 2,250 ---------- ---------- Total stockholders' equity 378,278 352,148 Total liabilities and --------- --------- stockholders' equity $5,200,617 $4,692,011 ========== ==========
See notes to consolidated financial statements. 2 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Income ---------------------------------- (Unaudited) (In Thousands, Except per Share Data)
For the three months For the six months ended June 30 ended June 30 -------------------- ------------------ 1998 1997 1998 1997 --------- --------- -------- -------- Interest income: Loans $63,060 $55,914 $123,036 $108,929 Securities: Taxable 27,398 25,219 52,253 48,497 Non-taxable 1,934 1,434 3,890 3,751 Trading account securities 852 519 1,579 824 Deposits at banks 248 233 462 456 Other 1,095 200 1,594 399 ------- ------- -------- -------- Total interest income 94,587 83,519 182,814 162,856 ------- ------- -------- -------- Interest expense: Deposits: Money market checking 664 883 1,503 1,826 Savings 387 408 865 790 Money market savings 10,430 10,304 20,950 20,653 Certificates of deposit less than $100,000 13,058 10,383 25,903 20,333 Certificates of deposit $100,000 or more 8,189 7,757 16,320 15,578 Federal Home Loan Bank advances 5,575 6,169 9,628 11,251 Long-term debt 2,319 2,336 4,631 4,585 Federal funds purchased and securities sold under agreements to repurchase 6,312 5,417 11,090 10,074 ------- ------- -------- -------- Total interest expense 46,934 43,657 90,890 85,090 ------- ------- -------- -------- Net interest income 47,653 39,862 91,924 77,766 Provision for loan losses 2,630 3,551 3,497 7,005 ------- ------- -------- -------- Net interest income after provision for loan losses 45,023 36,311 88,427 70,761 ------- ------- -------- -------- Other income: Trust service income 2,417 2,120 5,215 4,354 Service charges on deposits 4,611 3,947 9,104 7,798 Other services charges and fees 4,042 3,711 7,670 6,855 Broker/dealer revenue 4,972 2,226 9,670 4,732 Securities gains (losses) 43 30 45 29 Other 4,862 6,816 10,249 12,677 ------- ------- -------- -------- Total other income 20,947 18,850 41,953 36,445 ------- ------- -------- --------
3 Consolidated Statements of Income (cont.) - ---------------------------------
For the three months For the six months ended June 30 ended June 30 -------------------- ------------------ 1998 1997 1998 1997 --------- --------- -------- -------- Other expenses: Salaries and employee benefits 16,331 14,117 32,773 27,794 Occupancy expense 2,921 2,574 5,724 5,146 Furniture and equipment expenses 1,300 1,174 2,680 2,298 Other 14,296 12,602 27,812 24,230 ------- ------- ------- ------- Total other expenses 34,848 30,467 68,989 59,468 ------- ------- ------- ------- Income before income taxes 31,122 24,694 61,391 47,738 Income taxes 10,643 8,585 20,897 16,514 ------- ------- ------- ------- Net income $20,479 $16,109 $40,494 $31,224 ======= ======= ======= ======= Basic net income per share of common stock* $ .20 $ .16 $ .40 $ .32 Diluted net income per share of common stock* $ .20 $ .16 $ .40 $ .31 Dividends per share of common stock* $ .08 $ .06 $ .15 $ .11
* Adjusted to reflect 2-for-1 stock split declared April 22, 1998 effective July 1, 1998. See notes to consolidated financial statements. 4 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Cash Flows ------------------------------------- (Unaudited)
For the Six Months Ended June 30 ---------- ---------- 1998 1997 ---------- ---------- (In Thousands) Operating activities: Net income $ 40,494 $ 31,224 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses 3,497 7,005 Provision for depreciation and amortization 2,593 2,465 Amortization of security premiums and accretion of discounts, net (1,498) 26 Deferred income taxes (credit) 1,223 (19) (Increase) decrease in trading account securities 30,454 (15,400) Realized securities (gains) losses (45) (29) (Increase) decrease in broker/dealer customer receivables (47,920) (9,229) (Increase) decrease in interest receivable (4,956) (839) (Increase) decrease in other assets 6,187 (24,116) Increase (decrease) in broker/dealer customer payables (59) (1,002) Increase (decrease) in interest payable 1,324 (171) Increase (decrease) in accounts payable and accrued expenses 20,054 19,182 --------- --------- Net cash provided by (used in) operating activities 51,348 22,250 --------- --------- Investing activities: Proceeds from the maturities of securities 451,705 23,071 Proceeds from sales of securities 1,155 78,214 Purchases of securities (651,771) (200,145) Net increase (decrease) in loans (280,230) (197,088) Purchase of premises and equipment (7,309) (4,075) --------- --------- Net cash provided by (used in) investing activities (486,450) (300,653) --------- --------- Financing activities: Net increase (decrease) in demand deposits, NOW accounts and savings accounts 154,294 (11,517) Net increase (decrease) in certificates of deposit 10,252 32,632 Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 53,502 206,006 Increase (decrease) in long-term debt 99 49,970 Increase (decrease) in Federal Home Loan Bank advances 246,928 8,615 Proceeds from exercise of stock options 2,660 2,212 Issuance of common stock 0 17 Repurchases of common stock (23,723) (4,616) Cash dividends paid (14,386) (10,815) --------- --------- Net cash provided by (used in) financing activities 429,626 272,504 --------- --------- Decrease in cash and cash equivalents (5,476) (5,899) Cash and cash equivalents at beginning of period 247,493 195,902 --------- --------- Cash and cash equivalents at end of period $ 242,017 $ 190,003 ========= ========= Interest paid $ 92,214 $ 86,162 Income taxes paid $ 18,171 $ 16,211
See notes to consolidated financial statements. 5 NATIONAL COMMERCE BANCORPORATION -------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ June 30, 1998 ------------- (Unaudited) --------- Note A - Basis of Presentation - ------------------------------ The consolidated balance sheet at December 31, 1997 has been derived from the audited financial statements at that date. The accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting only of normally recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The statements should be read in conjunction with the summary of accounting policies and notes to consolidated financial statements included in the Registrant's annual report for the year ended December 31, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the rules of the Securities and Exchange Commission. Note B - Securities Portfolio - ----------------------------- In accordance with FAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities", as of June 30, 1998 the securities in the "Available for Sale" category included $4.0 million in unrealized gains. Accordingly, total securities and total stockholders' equity were increased by $4.0 million and $2.5 million (net of taxes), respectively, at June 30, 1998, to reflect the adjustment of the securities portfolio to market. The calculation of book value per share reflects these mark-to-market unrealized losses, whereas the calculation of ROA and ROE do not, because the unrealized gains are not included in net income. The fair value of the "Held to Maturity" category was $1.1 billion at June 30, 1998. Note C - Floating Rate Capital Trust Pass-through Securities - ------------------------------------------------------------ In March, 1997, the Company issued $49,875,000 in Floating Rate Capital Trust Pass-through Securities ("Capital Securities"). The proceeds of this issue are being used by the Company for general corporate purposes and may be counted as Tier I capital. Note D - Earnings Per Share - --------------------------- The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ In Thousands, Except Per Share Data 1998 1997 1998 1997 -------- -------- -------- -------- Numerator: Net income $ 20,479 $ 16,109 $ 40,494 $ 31,224 ======== ======== ======== ======== Denominator: Denominator for basic earnings per share - weighted average shares 100,039 98,363 99,998 98,187 Dilutive potential common shares - Employee stock options 2,579 3,076 2,530 3,070 -------- -------- -------- -------- Denominator for diluted earnings per share - adjusted weighted average and assumed conversions 102,618 101,439 102,528 101,257 ======== ======== ======== ======== Basic earnings per share* $ .20 $ .16 $ .40 $ .32 Diluted earnings per share* $ .20 $ .16 $ .40 $ .31
* All share and per share amounts have been retroactively restated for stock dividends and splits declared through July 1, 1998. 6 Note E - Comprehensive Income - ----------------------------- As of January 1, 1998, the Company adopted Statement 130, "Reporting Comprehensive Income". Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or stockholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption were reported separately in stockholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. During the second quarter of 1998 and 1997, total comprehensive income amounted to $20,530 and $19,018, respectively. The year-to date total comprehensive income for 1998 and 1997 was $40,695 and $30,884, respectively. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------------------- The purpose of this discussion is to focus on important factors affecting the Company's financial condition and results of operations. Reference should be made to the consolidated financial statements (including the notes thereto) set forth in this report for an understanding of the following discussion and analysis. In this discussion, net interest income and net interest margin are presented on a fully taxable equivalent basis. All per share data is adjusted to reflect all stock dividends and stock splits declared through June 30, 1998. This Form 10-Q may contain or incorporate by reference statements which may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance and involve known and unknown risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results, performance or achievements of the Company to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, general economic and business conditions, significant changes in the federal and state legal and regulatory environment, significant underperformance in the Company's portfolio of outstanding loans, and competition in the Company's markets. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future results over time. Financial Condition - ------------------- Following is a comparison of the June 30, 1998, and December 31, 1997, consolidated balance sheets. Total deposits increased by $165 million or 5.1%, principally as a result of an $88 million or 9.3% increase in money market savings accounts, a $31 million or 10.7% increase in money market checking accounts, a $10 million or 1.7% increase in certificates of deposit greater than $100,000, and an $18 million or 22.0% increase in savings accounts. These deposit increases are the result of new locations opened during 1998 and new deposit gathering campaigns initiated in 1998. Federal funds purchased and securities sold under agreements to repurchase increased $54 million or 12.6% from year-end 1997 levels. This category of liabilities fluctuates with the availability of overnight funds purchased from downstream correspondent banks. Federal Home Loan Bank advances increased $247 million or 63.3% from December 31, 1997. This increase is principally the result of asset/liability management decisions related to the current interest rate environment. Total gross loans increased by $278 million or 10.7% compared to December 31, 1997 levels. Commercial loans increased by $43 million or 8.4% and real estate construction loans increased by $19 million or 7.9%, reflecting current demand. Real estate mortgage loans increased by $141 million or 18.0% and consumer loans increased $77 million or 7.3%, reflecting an increased emphasis on promoting home equity loans and other consumer products. Securities increased by $201 million or 12.4% from year-end 1997. Securities held to maturity decreased by $78 million or 6.5, and securities available for sale increased by $279 million or 68.4%, reflecting current portfolio investment strategies, and current market conditions. Federal funds sold and securities purchased under agreements to resell decreased by $6 million or 25.7% from December 31, 1997 levels, reflecting excess funds that otherwise were not employed in loans or securities at June 30, 1998. 8 Trading account securities decreased by $30 million or 31.0% from year-end 1997 levels. This decrease reflects the trading activity generated by NBC Capital Markets, Group, Inc., the Company's broker/dealer subsidiary, which fluctuates from time to time. Broker/dealer customer receivables increased $48 million or 622.7% and payables decreased $59 thousand or 100.0% reflecting levels of activity. Results of Operations - --------------------- Three Months Ended June 30, 1998, Compared to Three Months Ended June 30, 1997 - ------------------------------------------------------------------------------ Net income was $20,479,000 for the second quarter of 1998, a 27.1% increase over the $16,109,000 reported for the same period a year earlier. Diluted earnings per share were $.20, compared to $.16 per share in 1997, up 25.0%. Basic earnings per shares were $.20, compared to $.16 per share in 1997, up 25.0%. Net interest income, the difference between interest earned on loans and investments and interest paid on interest-bearing liabilities, increased by $7,834,000 or 19.1% for the second quarter of 1998, compared to second quarter 1997. This increase reflects an $11,111,000 or 13.1% increase in total interest income that more than offsets a $3,277,000 or 7.5% increase in interest expense. Interest income increased in 1998 due to an increase of $495,805,000 or 11.9% in total average earning assets, and an increase in the yield on average earning assets from 8.18% in the second quarter of 1997 to 8.27% in the second quarter of 1998. The increased volume of earning assets positively impacted interest income by approximately $10,000,000, while the increased yield positively impacted interest income by approximately $1,000,000. Interest expense increased in the second quarter of 1998, reflecting an increase in average interest-bearing liabilities of $439,703,000 or 12.1%, partially offset by a decrease in the cost of interest-bearing liabilities from 4.82% to 4.62%. The decrease in the rate paid on interest-bearing liabilities positively affected interest expense by approximately $2,000,000 and the increase in average outstandings negatively affected interest expense by approximately $5,300,000. The net interest margin (taxable equivalent net interest income as a percentage of average earning assets) was 4.22% in second quarter 1998, compared to 3.96% in second quarter of 1997. The provision for loan losses in the second quarter of 1998 was $2,630,000, versus $3,551,000 for the second quarter of 1997. Net charge-offs were $2,223,000, or .32% of average net loans, compared to $2,480,000 or .40% of average net loans in 1997. The allowance for loan losses totaled $45,050,000 at June 30, 1998, representing 1.56% of quarter-end net loans, compared to $38,110,000 or 1.50% of quarter-end net loans at June 30, 1997. Following is a comparison of non-earning assets and loans past due 90 days or more for the quarters ended June 30, 1998, March 31, 1998 and June 30, 1997 (dollars in thousands):
6-30-98 3-31-98 6-30-97 -------- -------- -------- Non-accrual loans $ 543 $ 0 $ 0 Renegotiated loans 0 0 0 Other real estate 263 217 0 -------- -------- ------ Total non-earning assets $ 806 $ 217 $ 0 ======== ======== ====== Loans past due 90 days or more $ 3,050 $ 4,602 $4,196 Percentage of total loans .11% .17% .17%
Non-interest income, excluding securities transactions, totaled $20,904,000 for the quarter, an increase of $2,084,000, or 11.1%, from last year's second 9 quarter. Securities gains totaled $43,000 in second quarter, 1998, compared to $30,000 in 1997. Non-interest expenses (excluding the provision for loan losses) increased by $4,381,000 or 14.4% in second quarter, 1998, primarily reflecting increased employment and occupancy expenses relating to new products and locations and increased promotional expenses of new loan and deposit gathering campaigns. The Company's return on average assets and return on average equity were 1.64% and 21.54% respectively, for second quarter of 1998. These compared with 1997 second quarter returns of 1.46% and 19.38%, respectively. Six Months Ended June 30, 1998, Compared to Six Months Ended June 30, 1997 - -------------------------------------------------------------------------- For the six months ended June 30, 199, net income totaled $40,494,000, a 29.7% increase over the $31,224,000 for the first six months of 1997. Diluted earnings per share were $.40, compared to $.31 for the same period in 1997, a 29.0% increase. Basic earnings per share were $.40 compared to $.32 in 1997, a 25.0% increase. For the six-month period, return on average assets and return on average stockholders' equity were $1.67% and 21.65% respectively. These compared with 1997 six month returns of 1.45% and 19.21%. Net interest income increased by $14,231,000 or 17.8% for the first six months of 1998. This increase reflects a $20,031,000 or 12.1% increase in total income that more than offsets a $5,800,000 or 6.8% increase in interest expense. Interest income increased in 1998 due to an increase of $447,190,000 or 11.0% in total average earning assets and an increase in the yield on average earning assets from 8.19% in 1997 to 8.27% in 1998. The increased volume of earning assets positively impacted interest income by approximately $18,000,000, and the increased yield positively impacted interest income by approximately $2,000,000. Interest expense increased in the first six months of 1998, reflecting an increase in average interest-bearing liabilities of $356,986,000 or 10.0%, with the cost of interest-bearing liabilities decreasing from 4.80% to 4.66% in 1998. The increase in average outstandings negatively impacted interest expense by approximately $8,500,000 while the decreased rate positively impacted interest expense by approximately $2,750,000. The net interest margin was 4.21% in the first six months of 1998, compared to 3.97% in the first six months of 1997. The provision for loan losses for the first six months of 1998 was $3,497,000, versus $7,005,000 for the first six months of 1997. Net charge-offs were $2,985,000, or .22% of average net loans compared to $5,034,000, or .41% of average net loans in 1997. Non-interest income, excluding securities transactions, totaled $41,908,000 for the first six months of 1998, compared to a total of $36,416,000 for the first six months of 1997, an increase of 15.1%. Securities gains totaled $45,000 in 1998, compared to $29,000 in 1997. Non-interest expenses (excluding the provision for loan losses) increased by $9,521,000 or 16.0% for the first six months of 1998. Increased employment and occupancy expenses relating to new products and locations, and increased promotional expenses of new loan and deposit gathering campaigns were the primary reasons for the increase. Liquidity and Capital Resources - ------------------------------- Interest-bearing bank balances, federal funds sold, trading account securities, and securities available for sale are the principal sources of short-term asset liquidity. Other sources of short-term liquidity include federal funds purchased and repurchase agreements, credit lines with other banks, and borrowings from the Federal Reserve Bank and the Federal Home Loan Bank. Maturing loans and securities are the principal sources of long-term asset liquidity. 10 Total realized stockholders' equity increased by $25,929,000 from December 31, 1997. Retained earnings accounted for the majority of the increase. Through June 30, 1998, 6.74 million shares had been repurchased and cancelled under a stock repurchase program initiated in January, 1996, and extended in December, 1997. The following capital ratios do not include the effect of FAS No. 115 on Tier I capital, total capital, or total risk-weighted assets. As indicated in the following table, the Company and its banking subsidiaries exceeded all minimum required capital ratios for well-capitalized institutions at June 30, 1998.
6-30-98 3-31-98 6-30-97 ------- ------- ------- Total capital to risk-weighted assets 13.47% 14.07% 13.91% Tier I capital to risk-weighted assets 12.22% 12.82% 12.65% Tier I capital to assets (leverage ratio) 8.32% 8.89% 8.58%
Year 2000 Preparations - ---------------------- Management has developed a plan to modify the Company's information technology and equipment to recognize the year 2000 and has begun converting critical data processing systems. The Company has also initiated discussions with its significant vendors to ensure that those parties have appropriate plans to remediate year 2000 issues where their systems interface with the Company's systems or otherwise impact its operations. The Company is assessing the extent to which its operations are vulnerable and developing contingency plans should those organizations fail to remediate their systems properly. This project is not expected to have a significant effect of the Company's business operations. Currently, management expects the project to be substantially complete by early 1999. Incremental costs, which exclude the costs to upgrade and replace systems in the ordinary course of business, are not expected to be material to the Company's consolidated results of operations or financial position. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- No significant changes since December 31, 1997. See Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 PART II. OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- At the Company's Annual Meeting of Shareholders held April 22, 1998, the following proposals were approved by the shareholders of the Company: The following individuals were elected to serve as directors of the Company for terms that expire at the Annual Meeting of Shareholders to be held in 2001: R. Grattan Brown, Jr.; Bruce E. Campbell, Jr.; Thomas M. Garrott; and Harry J. Phillips, Sr. (35,958,194 shares in favor of the slate of directors; 49,413 withheld and 8,298 exceptions), The appointment of Ernst & Young LLP as auditors of the Company for 1998 was ratified. (35,912,449 shares in favor; 61,075 against; and 42,381 abstained). The Company's charter was amended to authorize an increase in the number of authorized shares of common stock, par value $2.00 per share, to 175,000,000. (15,763,895 shares in favor; 39,865 against; and 15,544 abstained). Item 6. Exhibits and Reports on Form 8-K --------------------------------- a. Exhibits 3.l. Charter of National Commerce Bancorporation as amended and restated. 27. Financial Data Schedule b. Reports on Form 8-K The Registrant did not file any reports on Form 8-K during the quarter ended June 30, 1998. SIGNATURES 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 hereunto duly authorized. NATIONAL COMMERCE BANCORPORATION (Registrant) By /s/ Lewis E. Holland -------------------------------------- Lewis E. Holland Vice Chairman, Treasurer and Chief Financial Officer (Authorized Officer) (Principal Financial Officer) Date August 7, 1998 -------------------- 12 EX-3.1 2 AMENDED AND RESTATED CHARTER EXHIBIT 3.1. Charter of National Commerce Bancorporation as amended and restated - ------------------------------------------------------------------------- RESTATED CHARTER OF NATIONAL COMMERCE BANCORPORATION UNDER SECTION 48-20-107 OF THE TENNESSEE BUSINESS CORPORATION ACT Pursuant to the provisions of Section 48-20-107 of the Tennessee Business Corporation Act, the undersigned corporation adopts the following Restated Charter: FIRST. The name of this Corporation is NATIONAL COMMERCE BANCORPORATION. SECOND. The address of the principal office of this Corporation in the State of Tennessee is One Commerce Square, Memphis, Tennessee, County of Shelby, 38150. THIRD. (a) The complete address of the Corporation's registered office in Tennessee is One Commerce Square, Memphis, Tennessee, County of Shelby, 38150. (b) The name of the registered agent to be located at the address listed in part (a) of this Article Third is Charles A. Neale. FOURTH. The general nature of the business to be transacted by this Corporation is: (1) To acquire by purchase, subscription or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock (whether such shares be voting or nonvoting), or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by banks, trust companies or other corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any state or other governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof. (2) To the extent permitted by law, to promote, finance, aid and assist, financially and otherwise, any bank, trust company, other corporation, association, joint stock company, syndicate, firm, trust or person, public or private, governmental agency or other entity, of which any stock, share, voting trust certificate, bond, mortgage, debenture, note, right, warrant, scrip, commercial paper, chose in action, contract, evidence of indebtedness or other obligation or security is held directly or indirectly by or for the Corporation, or in the business, financing or welfare of which the Corporation shall have any interest; and in connection therewith and to the extent permitted by law, to guarantee or become surety for the performance of any undertaking or obligations of such entity; to guarantee by endorsement or otherwise the payment of the principal of or interest or dividends on or sinking fund payments with respect to any such security of any such entity or any other payments whatsoever to be made by it; and to join in any reorganization with respect to such entity. (3) To pay for any property, securities, rights or interests acquired by the Corporation in cash or other property, rights or interests held by the Corporation or by issuing and delivering in exchange therefor its own property, stock, shares, bonds, debentures, notes or warrants for capital 1 stock, certificates of indebtedness, obligations or other securities howsoever evidenced. (4) To acquire by purchase, gift, lease, exchange or otherwise, real and personal property, or either, situated either within or without the State of Tennessee; and to lease, sell, or otherwise dispose of or encumber the same; to turn the same to account as may seem expedient; and, in particular, to prepare building sites, and to construct, reconstruct, alter, improve, manage and maintain buildings of all kinds including bank buildings, general office buildings, and other structures. (5) To conduct a general real estate business, whether as principal or as agent or in any other capacity whatsoever, in the purchase, sale, lease, exchange, and management of real estate and the negotiation of loans thereon; to buy, sell, deal, and trade in mortgages or other liens on or interest in real estate. (6) To conduct a general insurance agency and insurance brokerage business of all kinds including but not limited to fire, life, accident, fidelity, plate glass, boiler, theft, health, hospitalization, burglary, marine, airplane, credit, and all other kinds of insurance whatsoever, and in all its branches. (7) To engage in and carry on either as principal or as agent, or in any other capacity whatsoever, the business of rendering management services and advice to any and all types of business enterprise and activity in connection with the operation, management, supervision, control, personnel policies, purchasing, selling, advertising, financing, and all other phases of operation. (8) To borrow or raise money for any of the purposes of the Corporation and from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds and other negotiable or non-negotiable instruments and evidences of indebtedness therefor, to make and enter into indentures or trust agreements, to make and issue its debenture bonds or certificates of indebtedness, payable to bearer or otherwise, with or without interest coupons attached, and in addition to such interest, until such debenture bond or certificate of indebtedness is discharged but not thereafter, with or without participation in the earnings, or a share of the earnings of the Corporation, and to secure the payment of any of the foregoing evidences of indebtedness and of the interest thereof by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation whether at the time owned or thereafter acquired, and to sell, pledge, exchange or otherwise dispose of such obligations of the Corporation for its corporate purposes. (9) To loan to any person, firm or corporation any of its surplus funds, either with or without security. (10) In general, to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Tennessee upon corporations formed under the Tennessee Business Corporation Act, and amendments thereto, and to do any and all of the things hereinbefore set forth to the same extent as natural persons might or could do, it being hereby specifically provided that the enumeration of certain specific powers herein shall not be held to limit or restrict in any manner such general powers; provided, however, and notwithstanding any provision in this Restated Charter or any amendment thereof to the contrary, so long as the Corporation is subject to the provisions of the United States Bank Holding Company Act of 1956 or acts 2 amendatory thereof, the Corporation shall not engage in any activities prohibited thereby, unless it is determined that any such activity is exempt therefrom or the prohibition is otherwise inapplicable thereto. The objects and purposes specified in the foregoing Article Fourth shall, except where otherwise expressed, be in nowise limited or restricted by reference to or inference from the terms of any other clause hereof, but the objects and purposes specified in each of the foregoing clauses of this Article Fourth shall be regarded as independent objects and purposes. FIFTH. This Corporation shall have the authority to issue a maximum of 175,000,000 shares of common stock, par value $2.00 per share, which shares collectively shall have unlimited voting rights and the right to receive the net assets of the Corporation upon dissolution. No holder of any class of this Corporation's common stock shall have preemptive rights. Members of the Board of Directors, other than directors elected to fill vacancies caused by an increase in the number of directors or by the removal, death or resignation of existing directors, shall be elected by the shareholders only and shall be elected by a plurality of the votes cast in any such election. Except as otherwise provided by the laws of the State of Tennessee, as now in effect or hereafter amended, the Bylaws of the Corporation may be amended or repealed or additional Bylaws may be adopted by the Board of Directors by a vote of a majority of the entire Board of Directors. The Corporation is hereby authorized to issue 5,000,000 shares of preferred stock without par value and subject to the following designations, preferences, limitations and relative rights: I. So long as any of the preferred stock is outstanding, no dividends (other than (i) dividends on common stock payable in common stock, (ii) dividends payable in stock junior to the preferred stock both as to dividends and upon liquidation, and (iii) cash in lieu of fractional shares in connection with any such dividends) shall be paid or declared in cash or otherwise, nor shall any other distribution be made on the common stock or any other securities junior to the preferred stock as to dividends, unless (a) there shall be no arrearages in dividends on the preferred stock for all previous dividend periods, and the full dividend on the preferred stock for the current dividend period shall have been or shall then be paid or declared and funds set aside therefor, and (b) the Corporation shall not be in default on its obligation to redeem any of the preferred stock called for redemption. Subject to the foregoing provisions, such dividends as may be determined by the Board of Directors may be declared and paid from time to time on the common stock or on any stock junior to the preferred stock, without any right or participation therein by the holders of the preferred stock. II. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary ("liquidation"), the holders of the preferred stock shall be entitled to receive an amount per share equal to the amount fixed and determined by the Board of Directors in the resolution establishing the preferred stock, plus an amount equal to all dividends accrued on the preferred stock to the date fixed for the payment in liquidation, before any distribution shall be made to the holders of the common stock or any stock junior to the preferred stock as to the distribution of assets upon liquidation. If the assets of the Corporation are insufficient to permit the payment of the full preferential amounts payable to the holders of the preferred stock, then the assets available for distribution 3 to holders of the preferred stock shall be distributed ratably to the holders of the preferred stock, in proportion to the full preferential amounts payable on their respective shares upon liquidation. III. This Restated Charter does not establish series of the preferred stock and does not fix and determine variations in the relative rights and preferences as between series of the preferred stock. There is hereby expressly vested in the Board of Directors of the Corporation the authority to divide the class of preferred stock authorized in this Restated Charter into series, and to fix and determine, in the manner provided by law, the relative rights and preferences of the shares of any series so established. The Board of Directors is also authorized to make any changes in the designations, terms, limitations or relative rights or preferences of any series of the preferred stock, before the issuance of any shares of that series, in the manner provided by law. SIXTH. The amount of capital with which this Corporation will begin business shall be Five Thousand Dollars ($5,000.00). SEVENTH. The Board of Directors of the Corporation shall consist of not less than three (3) and not more than twenty-five (25) natural persons. The exact number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. The Board of Directors shall be divided into three (3) classes, as nearly equal in number as possible, with the term of office of one class expiring each year. At the annual meeting of shareholders in 1983, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, and upon expiration of such one-year term and thereafter, such class of directors shall be eligible to hold office for terms of three (3) years. At the annual meeting of shareholders in 1983, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting, and upon the expiration of such two-year term and thereafter, such class of directors shall be eligible to hold office for terms of three (3) years. At the annual meeting of shareholders in 1983, directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting, and thereafter such class of directors shall continue to be eligible to hold office for terms of three (3) years. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, including the removal of directors, may be filled by the Board of Directors acting by a majority of directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which the director shall have been chosen and until a successor shall be elected and qualified. Notwithstanding any other provision of this Restated Charter or the Bylaws of the Corporation, and notwithstanding specification of some lesser percentage by law, any one or more directors or the entire Board of Directors of the Corporation may be removed for cause, at any time, by the affirmative vote of at least two-thirds of the entire Board of Directors. Notwithstanding any provision of this Restated Charter or of the Bylaws of this Corporation, and notwithstanding the specification of some lesser percentage by law, the affirmative vote of the holders of two- thirds or more of the outstanding shares of each class of stock of the Corporation entitled to vote thereon shall be required to amend, alter, change or repeal any provision of this Article Seventh; provided, however, that if a two-thirds majority of the entire Board of Directors shall adopt a resolution setting forth a proposed amendment to this Article Seventh and directing that it be submitted to a vote at a meeting of shareholders, then such amendment shall be approved upon receiving the affirmative vote of the holders of a majority of all the outstanding shares of each class of stock of the Corporation entitled to vote thereon. 4 EIGHTH. Any action which the Board of Directors of this Corporation may properly take may be taken without a meeting. If all directors consent to taking such action without a meeting, the affirmative vote of the number of directors that would be necessary to authorize or take such action at a meeting shall be the act of the Board. The action must be evidenced by one or more written consents setting forth the action so taken, signed by each member of the Board of Directors, indicating each signing director's vote or abstention on the action, and shall be included in the minutes or filed with the corporate records reflecting the action taken. The Corporation shall have the right to purchase its own shares in accordance with Sections 48-16-302 and 48-16-401 of the Tennessee Business Corporation Act. The Board of Directors may authorize and the Corporation may make certain distributions to its shareholders, in accordance with Section 48-16-401 of the Tennessee Business Corporation Act. NINTH. SECTION 1. Certain Definitions. ------------------- For the purpose of this Article Ninth, the terms: A. "Business Combination" means any merger, consolidation, or amalgamation of the Corporation or any of its subsidiaries with any Person; any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with any Person of net assets of the Corporation having an aggregate fair market value in excess of $5,000,000; the issuance or transfer by the Corporation or any of its subsidiaries of any securities of the Corporation to any Person in exchange for cash, securities or other property having a fair market value in excess of $5,000,000; a liquidation of the Corporation proposed by any Person; any reclassification of securities or recapitalization of the Corporation. B. "Interested Shareholder" means any Person, other than the Corporation or any of its subsidiaries, who (i) is the beneficial owner, directly or indirectly, of more than 5% of the voting power of any class of outstanding voting stock; or (ii) is an Affiliate of the Corporation and at anytime within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 5% or more of the voting power of any class of the then outstanding voting stock. C. "Affiliate" has the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1983. D. "Minimum Price Per Share" shall mean the higher of (i) the highest gross per share price paid or agreed to be paid by the Interested Shareholder for any shares of common stock of the Corporation acquired or agreed to be acquired by it (1) within the four-year period immediately prior to the first public announcement of the Business Combination (the "Announcement Date"), or (2) in the transaction in which it became an Interested Shareholder, whichever is higher, or (ii) the fair market value per share of common stock of the Corporation on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder, whichever is higher. The calculation of the Minimum Price Per Share shall require appropriate adjustments for capital changes, including without limitation stock splits, stock dividends and reverse stock splits. E. "Person" shall mean any individual, firm, partnership, trust, business association, corporation, or other entity. 5 SECTION 2. Vote Required for Business Combinations. --------------------------------------- In addition to any affirmative vote required by law or this Restated Charter, and except as otherwise expressly provided in Section 3 of this Article Ninth, any Business Combination shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of each class of capital voting stock of the Corporation. SECTION 3. When Higher Vote is Not Required. -------------------------------- The provisions of Section 2 of this Article Ninth shall not be applicable to (i) any Business Combination not with or involving any Interested Shareholders or an Affiliate of an Interested Shareholder if the conditions of the following Paragraph A are met, in which event such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Restated Charter, or (ii) any Business Combination with or involving an Interested Shareholder or an Affiliate of an Interested Shareholder if all of the conditions in both of the following Paragraphs A and B are met, in which event such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Restated Charter. A. Approval by the Board of Directors. The Business ---------------------------------- Combination shall have been approved by at least two- thirds of the entire Board of Directors of the Corporation at anytime prior to the consummation of the Business Combination. B. Price and Form of Consideration. Both of the following ------------------------------- conditions shall have been met: (i) The aggregate amount of the cash and the fair market value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of outstanding capital voting stock of the Corporation in such Business Combination shall be at least equal to the Minimum Price Per Share. (ii) The consideration to be received by holders of a particular class of outstanding voting stock shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of voting stock. If the Interested Shareholder has paid for shares of any class of voting stock with varying forms of consideration, the form of consideration for such class of voting stock shall be either cash or the form used to acquire the largest number of shares of such class of voting stock previously acquired by it. SECTION 4. Determination of Certain Matters. -------------------------------- Notwithstanding any other provision of this Restated Charter or the Bylaws of the Corporation, the directors of the Corporation shall have the power and duty to determine for the purposes of this Article Ninth, on the basis of information known to them after reasonable inquiry, (A) whether a Person is an Interested Shareholder, (B) the number of shares of voting stock beneficially owned by any Person, (C) whether a Person is an Affiliate of another, and (D) whether the net assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any of its subsidiaries in any Business Combination has, an aggregate fair market value of $5,000,000 or more. 6 SECTION 5. No Effect on Fiduciary Obligations of Interested ------------------------------------------------ Shareholders. ------------ Nothing contained in this Article Ninth shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. SECTION 6. Amendment, Repeal and Other Matters. ----------------------------------- Notwithstanding any provisions of this Restated Charter or the Bylaws of the Corporation, and notwithstanding the specification of some lesser percentage by law, the affirmative vote of the holders of two-thirds or more of the outstanding shares of each class of stock of the Corporation entitled to vote thereon shall be required to amend, alter, change or repeal any provision of this Article Ninth; provided, however, that if at least two-thirds majority of the entire Board of Directors shall adopt the resolution setting forth the proposed amendment to this Article Ninth and directing that it be submitted to a vote at a meeting of the shareholders, then such amendment shall be approved upon receiving the affirmative vote of the holders of a majority of the outstanding shares of each class of stock of the Corporation entitled to vote thereon. TENTH. The Corporation is to have perpetual existence. The Corporation is for profit. ELEVENTH. Special meetings of shareholders may be called by the Chairman, President or a Vice President, or by a majority of the members of the Board of Directors acting with or without a meeting, upon notice to the shareholders being delivered not less than ten (10) days nor more than two (2) months before the date of the meeting. Such notice shall include a description of the purpose or purposes for which the meeting is called and shall be effective when mailed postpaid and correctly addressed to the shareholder's address shown in the Corporation's current record of shareholders. Special meetings of shareholders also may be called by the holders of at least ten percent (10%) of all the votes entitled to be cast on any issue proposed to be considered at such meeting upon request in writing, signed, dated and delivered either in person or by registered or certified mail, return receipt requested, to the Secretary of the Corporation by such shareholders at least ninety (90) days before the date of the meeting. Upon receipt of such request, it shall be the duty of such Secretary forthwith to cause to be given to the shareholders entitled thereto notice of such meeting, which notice shall be given on a date not more than one (1) month after the date such request was delivered to such Secretary, as such Secretary may fix and shall be effective when mailed postpaid and correctly addressed to the shareholder's address shown in the Corporation's current record of shareholders. 7 TWELFTH. No director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except: (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or (iii) for unlawful distributions under Section 48-18-304 of the Tennessee Business Corporation Act. NATIONAL COMMERCE BANCORPORATION By: --------------------------------- - ---------------------------------- Gus B. Denton, Secretary 8 EX-27 3 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS 6-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 JUN-30-1998 JUN-30-1997 205,789 147,431 19,140 17,933 17,088 24,639 67,878 34,059 687,151 733,615 1,131,779 882,584 1,134,487 869,030 2,887,453 2,540,652 45,050 38,110 5,200,617 4,521,583 3,415,788 2,997,545 478,726 757,331 81,370 75,939 156,345 156,158 0 0 0 0 378,278 332,924 0 0 5,200,617 4,521,583 123,036 108,929 56,143 52,248 3,635 1,679 182,814 162,856 65,541 59,180 90,890 85,090 91,924 77,766 3,497 7,005 45 29 68,989 59,468 61,391 47,738 61,391 47,738 0 0 0 0 40,494 31,224 .40 .32 .40 .31 4.21 3.97 543 0 3,050 4,196 0 0 175 0 43,297 35,514 5,507 6,554 2,522 1,520 45,050 38,110 45,050 38,110 0 0 0 0
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