-----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, EV3KgeQGAGINb+agyDEPu31N9fzBadmN1z+RthtnIDkbMJwi8oPuRq78jWg1rq5U IpHV08vCyurplCRChaToVw== 0000931763-98-001357.txt : 19980515 0000931763-98-001357.hdr.sgml : 19980515 ACCESSION NUMBER: 0000931763-98-001357 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 98619982 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 10Q 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 March 31, 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 -- 50,054,180 shares as of April 30, 1998 PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements -------------------- NATIONAL COMMERCE BANCORPORATION Consolidated Balance Sheets -------------------------------- (In Thousands) March 31 Dec. 31 1998 1997 ----------- ----------- (unaudited) ASSETS Cash and cash equivalents: Interest-bearing deposits with other banks $ 17,704 $ 18,293 Cash and non-interest bearing deposits 216,050 206,191 Federal funds sold and securities purchased under agreements to resell 54,923 23,009 ---------- ---------- Total cash and cash equivalents 288,677 247,493 ---------- ---------- Securities: Held-to-maturity 1,254,194 1,210,071 Available-for-sale 541,840 408,083 ---------- ---------- Total securities 1,796,034 1,618,154 ---------- ---------- Trading account securities 52,049 98,332 Loans: Commercial, financial and agricultural 517,937 512,534 Real estate - construction 229,514 241,334 Real estate - mortgage 870,937 781,826 Consumer 1,073,666 1,045,420 Lease financing 29,505 30,046 Unearned discounts (2,347) (2,193) ---------- ---------- Total loans 2,719,212 2,608,967 Less allowance for loan losses 44,643 43,297 ---------- ---------- Net loans 2,674,569 2,565,670 ---------- ---------- Premises and equipment, net 29,984 27,404 Broker/dealer customer receivables 11,554 7,695 Other assets 139,611 127,263 ---------- ---------- Total assets $4,992,478 $4,692,011 ========== ========== See notes to consolidated financial statements. 1 Consolidated Balance Sheets (cont.) - ----------------------------------- (In Thousands) March 31 Dec. 31 1998 1997 ---------- --------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest-bearing deposits $ 439,495 $ 417,748 Money market checking 341,911 286,555 Savings 101,891 83,626 Money market savings 1,041,527 943,422 Certificates of deposit less than $100,000 937,630 899,027 Certificates of deposit of $100,000 or more 646,748 620,864 ---------- ---------- Total deposits 3,509,202 3,251,242 ---------- ---------- Federal funds purchased and securities sold under agreements to repurchase 465,527 423,573 Broker/dealer customer payables 8,566 59 Accounts payable and accrued liabilities 82,812 68,969 Federal Home Loan Bank advances 340,866 389,884 Other borrowed funds and long-term debt 156,298 156,252 ---------- ---------- Total liabilities 4,563,271 4,289,979 ---------- ---------- Capital trust pass-through securities 49,887 49,884 Stockholders' equity: Common stock 100,028 97,704 Additional paid-in capital 63,617 52,524 Retained earnings 213,275 199,670 Unrealized gains (losses) on securities, net of taxes 2,400 2,250 ---------- ---------- Total stockholders' equity 379,320 352,148 ---------- ---------- Total liabilities and stockholders' equity $4,992,478 $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 ended March 31 --------------------- 1998 1997 --------- ---------- Interest income: Loans $59,976 $53,015 Securities: Taxable 24,855 23,278 Non-taxable 1,956 2,317 Trading account securities 727 305 Deposits at banks 214 223 Other 499 199 ------- ------- Total interest income 88,227 79,337 ------- ------- Interest expense: Deposits: Money market checking 839 943 Savings 478 382 Money market savings 10,520 10,349 Certificates of deposit less than $100,000 12,845 9,950 Certificates of deposit $100,000 or more 8,131 7,821 Federal Home Loan Bank advances 4,053 5,082 Long-term debt 2,312 2,249 Federal funds purchased and securities sold under agreements to repurchase 4,778 4,657 ------- ------- Total interest expense 43,956 41,433 ------- ------- Net interest income 44,271 37,904 Provision for loan losses 867 3,454 ------- ------- Net interest income after provision for loan losses 43,404 34,450 ------- ------- Other income: Trust service income 2,798 2,234 Service charges on deposits 4,493 3,851 Other service charges and fees 3,628 3,144 Broker/dealer revenue 4,698 2,506 Securities gains (losses) 2 (1) Other 5,387 5,861 ------- ------- Total other income 21,006 17,595 ------- ------- 3 Consolidated Statements of Income (cont.) - --------------------------------- For the three months ended March 31 -------------------- 1998 1997 --------- --------- Other expenses: Salaries and employee benefits 16,442 13,677 Occupancy expense 2,803 2,572 Furniture and equipment expenses 1,380 1,124 Other 13,516 11,628 ------- ------- Total other expenses 34,141 29,001 ------- ------- Income before income taxes 30,269 23,044 Income taxes 10,254 7,929 ------- ------- Net income $20,015 $15,115 ======= ======= Basic net income per share of common stock* $ .20 $ .16 Diluted net income per share of common stock* $ .19 $ .15 Dividends per share of common stock* $ .07 $ .06 * Adjusted to reflect 2-for-1 stock split declared April 22, 1998. See notes to consolidated financial statements. 4 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Cash Flows ------------------------------------- (Unaudited)
For the Three Months Ended March 31 ---------------------- 1998 1997 ---------- ---------- (In Thousands) Operating activities: Net income $ 20,015 $ 15,115 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses 867 3,454 Provision for depreciation and amortization 1,493 1,330 Amortization of security premiums and accretion of discounts, net (896) 15 Deferred income taxes (credit) 769 (19) (Increase) decrease in trading account securities 46,283 (13,599) Realized securities (gains) losses (2) 1 (Increase) decrease in broker/dealer customer receivables (3,859) (13,109) (Increase) decrease in interest receivable (143) (1,013) (Increase) decrease in other assets 4,159 (6,477) Increase (decrease) in broker/dealer customer payables 8,507 2,626 Increase (decrease) in interest payable (710) 592 Increase (decrease) in accounts payable and accrued expenses 16,942 20,034 --------- --------- Net cash provided by (used in) operating activities 93,425 8,950 --------- --------- Investing activities: Available for sale securities: Proceeds from the maturities of securities 170,415 5,894 Proceeds from sales of securities 1,155 29,998 Purchases of securities available for sale (168,304) (62,932) Purchases of securities held to maturity (180,000) (71,539) Net (increase) decrease in loans (109,766) (85,578) Purchase of premises and equipment (4,073) (1,770) --------- --------- Net cash provided by (used in) investing activities (290,573) (185,927) --------- --------- Financing activities: Net increase (decrease) in demand deposits, NOW accounts and savings accounts 193,473 (15,745) Net increase (decrease) in certificates of deposit 64,487 5,823 Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 41,954 118,067 Increase (decrease) in long-term debt 49 49,921 Increase (decrease) in Federal Home Loan Bank advances (49,018) 33,669 Proceeds from exercise of stock options 1,140 1,086 Issuance of common stock 0 17 Repurchases of common stock (7,365) (132) Cash dividends paid (6,388) (5,399) --------- --------- Net cash provided by (used in) financing activities 238,332 187,307 --------- --------- Increase (decrease) in cash and cash equivalents 41,184 10,330 Cash and cash equivalents at beginning of period 247,493 195,902 --------- --------- Cash and cash equivalents at end of period $ 288,677 $ 206,232 ========= ========= Interest paid $ 43,246 $ 40,888 Income taxes paid $ 7,200 $ 1,203
See notes to consolidated financial statements. 5 NATIONAL COMMERCE BANCORPORATION -------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ March 31, 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 March 31, 1998 the securities in the "Available for Sale" category included $3,935,000 in unrealized gains. Accordingly, total securities and total stockholders' equity were increased by $3,935,000 and $2,400,000 (net of taxes), respectively, at March 31, 1998, to reflect the adjustment of the securities portfolio to market. The calculation of book value per share reflects these mark-to-market unrealized gains, 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 $1.26 million at March 31, 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 were 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 March 31 ------------------ In Thousands, Except Per Share Amounts 1998 1997 -------- -------- Numerator: Net income $ 20,015 $ 15,115 ======== ======== Denominator: Denominator for basic earnings per share - weighted average shares 99,955 98,008 Dilutive potential common shares - Employee stock options 2,482 3,066 -------- -------- Denominator for diluted earnings per share - adjusted weighted - average and assumed conversions 102,437 101,074 ======== ======== Basic earnings per share* $ .20 $ .16 Diluted earnings per share* $ .19 $ .15 * All share and per share amounts have been retroactively restated for stock dividends and splits declared through April 22, 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 first quarter of 1998 and 1997, total comprehensive income amounted to $20,165 and $11,866. 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) 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. 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 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 to differ materially from those in forward-looking statements include significant fluctuations in interest rates, inflation, economic recession, 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 occurance of unanticipated events or changes to future results over time. Financial Condition - ------------------- Following is a comparison of the March 31, 1998 and December 31, 1997 consolidated balance sheets. In the liability section, total deposits increased by $258 million or 7.9%, principally as a result of a $98 million or 10.4% increase in money market savings accounts, a $55 million or 19.3% increase in money market checking accounts, a $39 million or 4.3% increase in certificates of deposit less than $100,000, a $26 million or 4.2% increase in certificates of deposit greater than $100,000, a $22 million or 5.2% increase in non-interest bearing deposits and a $18 million or 21.8% increase in savings accounts. These deposit increases are the result of new deposit gathering campaigns initiated in first quarter, 1998. Federal funds purchased and securities sold under agreements to repurchase increased $42 million or 9.9% 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 decreased $49 million or 12.6% from December 31, 1997. This decrease is principally the result of asset/liability management decisions related to the current interest rate environment. Total gross loans increased by $110 million or 4.2% compared to December 31, 1997 levels. Commercial loans increased by $5 million or 1.1% and real estate construction loans decreased by $12 million or 4.9% reflecting current demand. Real estate mortgage loans increased by $89 million or 11.4%, and consumer loans increased $28 million or 2.7%, reflecting an increased emphasis on promoting home equity and other consumer products. Securities increased by $178 million or 11.0% from year-end 1997. Securities held to maturity increased by $44 million or 3.6%, and securities available for sale increased $134 million or 32.8%, reflecting current portfolio investment strategies, and current market conditions. Federal funds sold and securities purchased under agreements to resell increased by $32 million or 138.7% from December 31, 1997 levels, reflecting excess funds that otherwise were not employed in loans or securities at March 31, 1998. Trading account securities decreased by $46 million or 47.1% from year-end 8 1997 levels. This increase 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 $4 million or 50.1% and payables increased $9 million or 100.0% reflecting levels of activity. Results of Operations - --------------------- Three Months Ended March 31, 1998, Compared to Three Months Ended March 31, 1997 - -------------------------------------------------------------------------------- Net income was $20,015,000 for the first quarter of 1998, a 32.4% increase over the $15,115,000 reported for the same period a year earlier. Diluted earnings per share were $.19, compared to $.15 per share in 1997, up 26.7%. Basic earnings per share 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 $6,397,000 or 16.4% for the first quarter of 1998. This increase reflects a $8,920,000 or 11.l% increase in total interest income that more than offsets a $2,523,000 or 6.1% increase in interest expense. Interest income increased in 1998 due to an increase of $398,578,000 or 10.0% in total average earning assets, and an increase in the yield on average earning assets from 8.19% in the first quarter of 1997 to 8.27% in the first quarter of 1998. The increased volume of earning assets positively impacted interest income by approximately $8,000,000, while the increased yield positively impacted interest income by approximately $900,000. Interest expense increased in the first quarter of 1998, reflecting an increase in average interest-bearing liabilities of $274,265,000 or 7.8%, partially offset by a decrease in the cost of interest- bearing liabilities from 4.77% to 4.70%. The decrease in the rate paid on interest-bearing liabilities positively affected interest expense by approximately $700,000 and the increase in average outstandings negatively affected interest expense by approximately $3,200,000. The net interest margin (taxable equivalent net interest income as a percentage of average earning assets) was 4.21% in first quarter 1997, compared to 3.98% in first quarter of 1997. The provision for loan losses in the first quarter of 1998 was $867,000, versus $3,454,000 for the first quarter of 1997. Net charge-offs were $762,000, or .11% of average loans compared to $2,554,000 or .43% of average loans in 1997. The allowance for loan losses totaled $44,643,000 at March 31, 1998, representing 1.64% of quarter-end net loans, compared to $36,739,000 or 1.51% of quarter-end net loans at March 31, 1997. Following is a comparison of non-earning assets and loans past due 90 days or more for the quarters ended March 31, 1998, December 31, 1997, and March 31, 1997 (dollars in thousands): 3-31-98 12-31-97 3-31-97 -------- -------- ------- Non-accrual loans 0 0 0 Renegotiated loans 0 0 0 Other real estate 217 0 0 ----- ----- ----- Total non-earning assets 217 0 0 ===== ===== ===== Accruing loans past due 90 days or more 4,602 3,134 4,430 Percentage of total loans .17% .12% .18% Non-interest income, excluding securities transactions, totaled $21,004,000 for the quarter, an increase of $3,408,000, or 19.4%, from last year's first 9 quarter. The Company's broker/dealer revenue increased $2,192,000 versus first quarter 1997, reflecting current market conditions. All other sources of non- interest income, including service charge income, trust service income, fuel card processing income, and supermarket sublicense income increased a net of $1,216,000 or 8.1%. Securities gains totaled $2,000 in first quarter 1998, compared to securities losses of $1,000 in 1997. Non-interest expenses (excluding the provision for loan losses) increased by $5,140,000 or 17.7% in first quarter, 1998, primarily reflecting increased employment and other expenses relating to new products and locations and increased promotional expenses of new loan and deposit gathering campaigns. The Company's annualized return on average assets and return on average equity were 1.70% and 21.76% respectively, for first quarter of 1998. These compared with 1997 first quarter returns of 1.44% and 19.02%, respectively. 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. Total realized stockholders' equity increased by $27,022,000 from December 31, 1997. Retained earnings accounted for the majority of the increase. Through March 31, 1998, 2.98 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 March 31, 1998. 3-31-98 12-31-97 3-31-97 ------- -------- ------- Total capital to risk-weighted assets 14.07% 13.86% 13.91% Tier I capital to risk-weighted assets 12.82% 12.61% 12.66% Tier I capital to assets (leverage ratio) 8.89% 8.69% 8.76% 10 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits 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 March 31, 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 May 14, 1998 -------------------- 11 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 3-MOS 3-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 MAR-31-1998 MAR-31-1997 216,050 183,451 17,704 18,304 54,923 4,477 52,049 45,411 0 724,847 0 886,277 0 870,244 2,719,212 2,431,322 44,643 36,739 4,992,478 4,429,162 3,509,202 2,966,508 467,832 610,389 91,378 88,292 494,859 391,977 0 0 0 0 379,320 322,121 0 0 4,992,478 4,429,162 59,976 53,015 26,811 25,595 1,440 727 88,227 79,337 32,813 29,445 43,956 41,433 44,271 37,904 867 3,454 2 (1) 34,141 20,001 30,269 23,044 30,269 23,044 0 0 0 0 20,015 15,115 .20 .16 .19 .15 4.21 3.98 0 0 4,602 4,430 0 0 0 0 43,297 35,514 2,525 3,339 1,763 785 44,643 36,739 44,643 36,739 0 0 0 0
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