-----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, QSwSHY6b48twEzwXl9Rki6r32SvEed6xPGAT4Bmao4+4cbOKaMivcvJXwKZ54S5e Sf2W5EiTH4GHqcjpej+gIg== 0000931763-99-003062.txt : 19991110 0000931763-99-003062.hdr.sgml : 19991110 ACCESSION NUMBER: 0000931763-99-003062 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 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: 99743948 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 September 30, 1999 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 or organization) Identification No.) One Commerce Square Memphis, Tennessee 38150 - ------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code - (901)523-3434 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 -- 108,238,048 shares as of November 1, 1999 PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements -------------------- NATIONAL COMMERCE BANCORPORATION Consolidated Balance Sheets -------------------------------- (In Thousands)
Sept. 30 Dec. 31 1999 1998 ----------- ---------- (unaudited) (Restated) ASSETS ------ Cash and cash equivalents: Interest-bearing deposits with other banks $ 18,945 $ 20,335 Cash and non-interest bearing deposits 178,421 236,159 Federal funds sold and securities purchased under agreements to resell 76,037 79,368 ---------- ---------- Total cash and cash equivalents 273,403 335,862 ---------- ---------- Securities: Held-to-maturity 1,706,812 1,377,102 Available-for-sale 500,811 777,615 ---------- ---------- Total securities 2,207,623 2,154,717 ---------- ---------- Trading account securities 18,723 62,737 Loans: Commercial, financial and agricultural 711,524 613,557 Real estate - construction 281,313 273,968 Real estate - mortgage 1,524,410 1,250,698 Consumer 1,311,698 1,207,431 Lease financing 33,424 29,805 Unearned discounts (2,861) (3,415) ---------- ---------- Total loans 3,859,508 3,372,044 Less allowance for loan losses 58,119 53,018 ---------- ---------- Net loans 3,801,389 3,319,026 ---------- ---------- Premises and equipment, net 46,637 45,527 Broker/dealer customer receivables 13,959 2,505 Other assets 181,835 169,917 ---------- ---------- Total assets $6,543,569 $6,090,291 ========== ==========
See notes to consolidated financial statements. 1 Consolidated Balance Sheets (cont.) - ----------------------------------- (In Thousands)
Sept. 30 Dec. 31 1999 1998 ---------- ------- (unaudited) (Restated) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities: Deposits: Non-interest-bearing deposits $ 443,784 $ 524,386 Money market checking 404,922 444,492 Savings 111,524 125,053 Money market savings 1,122,401 1,217,797 Certificates of deposit less than $100,000 993,488 958,253 Certificates of deposit of $100,000 or more 1,320,196 925,005 ---------- ---------- Total deposits 4,396,315 4,194,986 ---------- ---------- Federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings 445,813 599,378 Broker/dealer customer payables 4,898 714 Accounts payable and accrued liabilities 78,569 83,114 Federal Home Loan Bank advances 1,017,982 731,610 Other borrowed funds and long-term debt 6,372 6,372 ---------- ---------- Total liabilities 5,949,949 5,616,204 ---------- ---------- Capital trust pass-through securities 49,906 49,896 Stockholders' equity: Common stock 216,375 209,056 Additional paid-in capital 106,836 27,322 Retained earnings 221,919 186,415 Accumulated other comprehensive income (1,416) 1,398 ---------- ---------- Total stockholders' equity 543,714 424,191 ---------- ---------- Total liabilities and stockholders' equity $6,543,569 $6,090,291 ========== ==========
See notes to consolidated financial statements. 2 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Income ---------------------------------- (Unaudited)(Restated) (In Thousands, Except per Share Data)
For the three months For the nine months ended Sept. 30 ended Sept. 30 ---------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Interest income: Loans $ 79,161 $ 72,031 $224,369 $202,586 Securities: Taxable 36,047 26,165 102,867 79,326 Non-taxable 3,110 2,155 9,333 6,367 Trading account securities 532 985 1,813 2,564 Deposits at bank 54 279 725 1,119 Other 1,611 756 3,607 2,557 -------- ------- -------- -------- Total interest income 120,515 102,371 342,714 294,519 -------- ------- -------- -------- Interest expense: Deposits: Money market checking 1,181 1,076 3,524 2,912 Savings 501 627 1,575 1,644 Money market savings 10,765 11,690 32,967 33,141 Certificates of deposit less than $100,000 12,273 12,259 35,524 39,182 Certificates of deposit $100,000 or more 16,135 8,559 41,957 27,119 Federal Home Loan Bank advances 11,648 9,044 30,143 18,672 Long-term debt 93 1,413 274 6,044 Federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings 7,471 5,642 23,567 16,989 -------- ------- -------- -------- Total interest expense 60,067 50,310 169,531 145,703 -------- ------- -------- -------- Net interest income 60,448 52,061 173,183 148,816 Provision for loan losses 4,378 3,082 10,902 6,819 -------- ------- -------- -------- Net interest income after provision for loan losses 56,070 48,979 162,281 141,997 -------- ------- -------- -------- Other income: Trust service income 2,490 2,526 7,727 7,741 Service charges on deposits 5,619 5,087 15,610 14,695 Other services charges and fees 5,186 4,515 15,439 12,309 Broker/dealer revenue 3,747 4,385 14,070 14,055 Securities gains (losses) 20 137 (2,013) 182 Other 5,805 5,300 18,213 17,058 -------- ------- -------- -------- Total other income 22,867 21,950 69,046 66,040 -------- ------- -------- --------
3 Consolidated Statements of Income (cont.) - --------------------------------- (Unaudited)(Restated) - --------------------
For the three months For the nine months ended Sept. 30 ended Sept. 30 ---------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Other expenses: Salaries and employee benefits 18,663 17,951 57,108 53,403 Occupancy expense 3,676 3,296 10,425 9,299 Furniture and equipment expenses 1,850 1,634 5,543 4,646 Other 13,497 14,502 42,028 43,623 -------- -------- -------- -------- Total other expenses 37,686 37,383 115,104 110,971 -------- -------- -------- -------- Income before income taxes 41,251 33,546 116,223 97,066 Income taxes 13,092 10,702 37,561 32,224 -------- -------- -------- -------- Net income $ 28,159 $ 22,844 $ 78,662 $ 64,842 ======== ======== ======== ======== Basic net income per share of common stock $.26 $.22 $.74 $.62 Diluted net income per share of common stock $.26 $.22 $.73 $.61 Dividends per share of common stock $.09 $.08 $.27 $.23
See notes to consolidated financial statements. 4 NATIONAL COMMERCE BANCORPORATION Consolidated Statements of Cash Flows ------------------------------------- (Unaudited)(Restated)
For the Nine Months Ended Sept. 30 ---------------------- 1999 1998 ---- ---- (In Thousands) Operating activities: Net income $78,662 $64,842 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for loan losses 10,902 6,819 Provision for depreciation and amortization 5,543 5,980 Amortization of security premiums and accretion of discounts, net 240 (2,252) Deferred income taxes (credit) (3,098) 1,336 (Increase) decrease in trading account securities 44,014 59,970 Realized securities (gains) losses 2,013 (182) (Increase) decrease in broker/dealer customer receivables (11,454) 3,429 (Increase) decrease in interest receivable 5,742 (2,119) (Increase) decrease in other assets (14,562) (6,569) Increase (decrease) in broker/dealer customer payables 4,184 484 Increase (decrease) in interest payable (6,313) 270 Increase (decrease) in accounts payable and accrued expenses 8,936 (3,532) -------- ------- Net cash provided by (used in) operating activities 124,809 128,476 -------- ------- Investing activities: Proceeds from the maturities of securities 180,168 775,685 Proceeds from sales of securities 293,826 26,220 Purchases of securities (533,751) (1,042,672) Net (increase) decrease in loans (493,265) (474,571) Purchase of premises and equipment (6,653) (12,913) -------- -------- Net cash provided by (used in) investing activities (559,675) (728,251) -------- -------- Financing activities: Net increase (decrease) in demand deposits, NOW accounts and savings accounts (229,097) 151,518 Net increase (decrease) in certificates of deposit 430,426 207,584 Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase (153,565) 53,641 Increase (decrease) in long-term debt 10 (149,871) Increase (decrease) in Federal Home Loan Bank advances 286,372 343,440 Proceeds from exercise of stock options 4,211 4,003 Issuance of common stock 81,309 19,535 Repurchases of common stock (18,960) (28,426) Cash dividends paid (28,299) (22,403) -------- -------- Net cash provided by (used in) financing activities 372,407 579,021 -------- -------- Decrease in cash and cash equivalents (62,459) (20,754) Cash and cash equivalents at beginning of period 335,862 263,137 -------- -------- Cash and cash equivalents at end of period $273,403 $242,383 ======== ======== Interest paid $163,218 $145,589 Income taxes paid $ 39,034 $ 26,888
See notes to consolidated financial statements. 5 NATIONAL COMMERCE BANCORPORATION -------------------------------- Notes to Consolidated Financial Statements ------------------------------------------ September 30, 1999 ------------------ (Unaudited) --------- Note A - Basis of Presentation - ------------------------------ The consolidated balance sheet at December 31, 1998 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, 1998. 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. During third quarter, 1999, the Company acquired First Financial Corporation of Mt. Juliet, Tennessee, and Nashville-based Southeastern Mortgage of Tennessee. These acquisitions, which were accounted for using the pooling-of-interest method, are incorporated into reported results. For comparative purposes, all prior year results are restated to include these acquisitions. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings. The adoption of Statement No. 133 on April 1, 1999, did not have a material effect on the consolidated operating results or financial position of the Company. Note B - Securities Portfolio - ----------------------------- In accordance with FAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities", as of September 30, 1999 the securities in the "Available for Sale" category included $3,087,000 in unrealized losses. Accordingly, total securities and total stockholders' equity were decreased by $3,087,000 and $1,884,000 (net of taxes), respectively, at September 30, 1999, 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 losses are not included in net income. The fair value of the "Held to Maturity" category was $1.6 billion at September 30, 1999. 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 are counted as Tier I capital. Note D - Segment Information - ---------------------------- The Company operates several major lines of business. The commercial banking segment includes lending and related financial services provided to large and medium-sized corporations. Included among these services are several specialty services such as real estate finance, asset based lending and residential construction. The retail banking segment includes sales and distribution of financial products and services to individuals. These services include loan products such as residential mortgages, home equity lending, automobile and other personal financing needs. 6 Retail banking also offers various deposit products that are designed for customers' saving and transaction needs. The other financial services segment includes trust, asset management, insurance and brokerage activities. Financial services also includes income from treasury, transaction processing, in-store consulting/licensing and specialty leasing. The accounting policies of the individual segments are the same as those of the Company described in Note A. Transactions between business segments are conducted at fair value and are eliminated for reporting consolidated financial position and results of operations. Interest income for tax- exempt loans and securities is adjusted to a taxable equivalent basis. Expenses for centrally provided services such as deposit servicing, data processing, technology and loan servicing and underwriting are allocated to each segment based upon various statistical information. Other indirect costs, such as management overhead and corporate support, are also allocated to each segment based upon various statistical information. The portion of the provision for loan losses that is not related to specific net charge-offs is allocated to the segment based upon loan growth. There are no significant intersegment revenues. Performance is assessed primarily on net interest margin by the chief operating decision makers. The following tables (in thousands of dollars) present condensed income statements on a fully taxable equivalent basis and average assets for each reportable segment.
Quarter Ended September 30, 1999: Commercial Retail Financial Banking Banking Services Total ---------- ------- --------- ----- Net interest income $13,863 $27,416 $22,626 $63,905 Provision for loan losses (137) (4,103) (138) (4,378) ------- ------- ------- ------- Net interest income after provision 13,726 23,313 22,488 59,527 Non-interest income 1,038 2,894 18,935 22,867 Non-interest expense (4,066) (11,265) (22,355) (37,686) ------- ------- ------- ------- Net income before taxes 10,698 14,942 19,068 44,708 Income taxes (2,701) (5,061) (8,787) (16,549) ------- ------- ------- ------- Net income $ 7,997 $ 9,881 $10,281 $28,159 ======= ======= ======= ======= Average assets $1,068,085 $2,922,062 $2,657,665 $6,647,812 Quarter Ended September 30, 1998: Commercial Retail Financial Banking Banking Services Total ---------- ------- --------- ----- Net interest income $11,224 $23,018 $19,119 $53,361 Provision for loan losses 527 (3,562) (47) (3,082) ------- ------- ------- ------- Net interest income after provision 11,751 19,456 19,072 50,279 Non-interest income 857 2,985 18,108 21,950 Non-interest expense (4,461) (11,315) (21,607) (37,383) ------- ------- ------- ------- Net income before taxes 8,147 11,126 15,573 34,846 Income taxes (2,069) (2,870) (7,063) (12,002) ------- ------- ------- ------- Net income $ 6,078 $ 8,256 $ 8,510 $22,844 ======= ======= ======= ======= Average assets $927,837 $2,463,780 $1,935,442 $5,327,059
7
Nine Months Ended September 30, 1999: Commercial Retail Financial Banking Banking Services Total ---------- --------- --------- ----- Net interest income $ 40,242 $ 79,415 $ 63,643 $ 183,300 Provision for loan losses (827) (9,806) (269) (10,902) ---------- ---------- ---------- ---------- Net interest income after provision 39,415 69,609 63,374 172,398 Non-interest income 3,081 8,775 57,190 69,046 Non-interest expense (11,719) (32,026) (71,359) (115,104) ---------- ---------- ---------- ---------- Net income before taxes 30,777 46,358 49,205 126,340 Income taxes (10,358) (17,041) (20,279) (47,678) ---------- ---------- ---------- ---------- Net income $ 20,419 $ 29,317 $ 28,926 $ 78,662 ========== ========== ========== ========== Average assets $1,030,972 $2,755,957 $2,594,717 $6,381,646 Nine Months Ended September 30, 1998: Commercial Retail Financial Banking Banking Services Total ---------- --------- --------- ----- Net interest income $ 36,526 $ 65,704 $ 50,489 $ 152,719 Provision for loan losses 158 (6,753) (224) (6,819) ----------- ---------- ---------- ---------- Net interest income after provision 36,684 58,951 50,265 145,900 Non-interest income 3,054 8,678 54,308 66,040 Non-interest expense (12,110) (31,749) (67,112) (110,971) ----------- ---------- ---------- ---------- Net income before taxes 27,628 35,880 37,461 100,969 Income taxes (9,172) (11,911) (15,044) (36,127) ----------- ---------- ---------- ---------- Net income $ 18,456 $ 23,969 $ 22,417 $ 64,842 =========== ========== ========== ========== Average assets $ 911,313 $2,322,316 $1,960,906 $5,194,535
8 Note E - Earnings Per Share - --------------------------- The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Nine Months Ended Sept 30 Sept 30 ------------------------- ------------------------ In Thousands, Except Per Share Data 1999 1998 1999 1998 ---- ---- ---- ---- Numerator: Net income $28,159 $22,844 $78,662 $64,842 ======= ======= ======= ======= Denominator: Denominator for basic earnings per share - weighted average shares 108,214 103,242 106,233 103,491 Dilutive potential common shares - Employee stock options 1,970 2,387 2,114 2,482 ------- ------- ------- ------- Denominator for diluted earnings per share - adjusted weighted average and assumed conversions 110,184 105,629 108,347 105,973 ======= ======= ======= ======= Basic earnings per share $.26 $.22 $.74 $.62 Diluted earnings per share $.26 $.22 $.73 $.61
Note F - Comprehensive Income - ----------------------------- During the third quarter of 1999 and 1998, total comprehensive income amounted to $26,882,000 and $22,771,000 respectively. The year-to-date total comprehensive income for 1999 and 1998 was $75,848,000 and $64,970,000 respectively. 9 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. The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by or on behalf of the Company. All statements in this Quarterly Report on Form 10-Q that are not historical facts or that express expectations or projections with respect to future matters are "forward-looking statements" for the purpose of the safe harbor provided by the Act. The Company cautions readers that such "forward-looking statements," including, without limitation, those relating to future business initiatives and prospects, revenues, working capital, liquidity, capital needs, interest costs and income, and "Year 2000" remediation efforts, wherever they occur in this document or in other statements attributable to the Company, are necessarily estimates reflecting the best judgment of the Company's senior management. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward-looking statements." Such "forward-looking statements" should, therefore be considered in light of various important factors, including those set forth in this document. 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. Other factors set forth from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission should also be considered. 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 operating results over time. Financial Condition - ------------------- Following is a comparison of the September 30, 1999 and December 31, 1998 consolidated balance sheets. Total deposits increased by $201 million or 4.8%, principally as a result of a $395 million or 42.7% increase in certificates of deposit greater than $100,000 and a $35 million or 3.7% increase in certificates of deposit less than $100,000. This increase was partially offset by a $95 million or 7.8% decrease in money market savings accounts, a $39 million or 8.9% decrease in money market checking accounts, a $13 million or 10.8% decrease in savings accounts and an $81 million or 15.4% decrease in non-interest-bearing deposits from normally higher year-end levels. The change in deposits are a result of asset/liability management decisions related to the current interest rate environment. Federal funds purchased and securities sold under agreements to repurchase decreased $154 million or 25.6% from year-end 1998 levels. This category of liabilities fluctuates with the availability of overnight funds purchased from downstream correspondent banks. Federal Home Loan Bank advances increased $286 million or 39.1% from December 31, 1998. This increase is principally the result of asset/liability management decisions related to the current interest rate environment. Total loans, net of unearned discounts, increased by $487 million or 14.5% compared to December 31, 1998 levels. Commercial loans increased by $98 million or 16.0% and real estate construction loans increased by $7 million or 2.7%, reflecting current demand. Real estate mortgage loans increased by $274 million or 21.9% and consumer loans increased $104 million or 8.6%, reflecting an increased emphasis on promoting home equity loans and other consumer products. 10 Securities increased by $53 million or 2.5% from year-end 1998. Securities held to maturity increased by $330 million or 23.9%, and securities available for sale decreased by $277 million or 35.6%, reflecting current portfolio investment strategies, and current market conditions. Federal funds sold and securities purchased under agreements to resell decreased by $3 million or 4.2% from December 31, 1998 levels, reflecting levels of activity of correspondent banks at September 30, 1999. Trading account securities decreased by $44 million or 70.2% from year-end 1998 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 $11 million or 457.2% and payables increased $4 million or 586.0% reflecting levels of activity. Results of Operations - --------------------- Three Months Ended September 30, 1999, Compared to Three Months Ended September 30, 1998 - ------------------------------------------------------------------------------- Net income was $28,159,000 for the third quarter of 1999, a 23.3% increase over the $22,844,000 reported for the same period a year earlier. Diluted earnings per share were $.26, compared to $.22 per share in 1998, up 18.2%. Basic earnings per share were $.26, compared to $.22 per share in 1998, up 18.2%. Net interest income, the difference between interest earned on loans and investments and interest paid on interest-bearing liabilities, increased by $10,544,000 or 19.8% for the third quarter of 1999, compared to third quarter 1998. This increase reflects a $20,301,000 or 19.6% increase in total interest income that more than offsets a $9,757,000 or 19.4% increase in interest expense. Interest income increased in 1999 due to an increase of $1,300,917,000 or 26.4% in total average earning assets, and decrease in the yield on average earning assets from 8.34% in the third quarter of 1998 to 7.89% in the third quarter of 1999. The increased volume of earning assets increased interest income by approximately $27,347,000 while the decreased yield reduced interest income by approximately $7,046,000. Interest expense increased in the third quarter of 1999, reflecting an increase in average interest-bearing liabilities of $1,148,981,000 or 26.5% and a decrease in the cost of interest-bearing liabilities from 4.61% to 4.35%. The decrease in the rate paid on interest- bearing liabilities decreased interest expense by approximately $3,601,000 and the increase in average outstandings increased interest expense by approximately $13,358,000. The net interest margin (taxable equivalent net interest income as a percentage of average earning assets) was 4.07% in third quarter 1999, compared to 4.29% in third quarter of 1998. The provision for loan losses in the third quarter of 1999 was $4,378,000, versus $3,082,000 for the third quarter of 1998. Net charge-offs were $1,760,000, or .19% of average net loans, compared to $1,710,000 or .22% of average net loans in 1998. The allowance for loan losses totaled $58,119,000 at September 30, 1999, representing 1.51% of quarter-end net loans, compared to $48,421,000 or 1.50% of quarter-end net loans at September 30, 1998. Following is a comparison of non-earning assets and loans past due 90 days or more for the quarters ended September 30, 1999, June 30, 1999, and September 30, 1998 (dollars in thousands): 11
9-30-99 6-30-99 9-30-98 ------- ------- ------- Non-accrual loans $ 76 $ 250 $ 604 Renegotiated loans 0 0 0 Other real estate 217 1,200 724 ------- ------- ------- Total non-earning assets $ 293 $ 1,450 $ 1,328 ======= ======= ======= Loans past due 90 days or more $ 3,704 $ 4,202 $ 4,915 Percentage of total loans .10% .12% .15%
Non-interest income, excluding securities transactions, totaled $22,847,000 for the quarter, an increase of $1,034,000, or 4.7%, from last year's third quarter. Securities gains totaled $20,000 in third quarter, 1999, compared to $137,000 in 1998. Non-interest expenses (excluding the provision for loan losses) increased by $303,000 or .8% in third quarter, 1999. The Company's return on average assets and return on average equity were 1.69% and 21.02% respectively, for third quarter of 1999. These compared with 1998 third quarter returns of 1.72% and 22.66%, respectively. Nine Months Ended September 30, 1999, Compared to Nine Months Ended September 30, 1998 - -------------------------------------------------------------------------------- For the nine months ended September 30, 1999, net income totaled $78,662,000, a 21.3% increase over the $64,842,000 for the first nine months of 1998. Diluted earnings per share were $.73, compared to $.61 for the same period in 1998, a 19.7% increase. Basic earnings per share were $.74 compared to $.62 in 1998, a 19.7% increase. For the nine-month period, return on average assets and return on average stockholders' equity were 1.64% and 21.84% respectively. These compared with 1998 six month returns of 1.66% and 21.87%. Net interest income increased by $30,581,000 or 20.0% for the first nine months of 1999. This increase reflects a $54,409,000 or 18.2% increase in total interest income that more than offsets a $23,828,000 or 16.4% increase in interest expense. Interest income increased in 1999 due to an increase of $1,155,309,000 or 24.0% in total average earning assets partially offset by a decrease in the yield on average earning assets from 8.29% in 1998 to 7.90% in 1999. The increased volume of earning assets increased interest income by approximately $71,601,000, and the decreased yield reduced interest income by approximately $17,192,000. Interest expense increased in the first nine months of 1999, reflecting an increase in average interest-bearing liabilities of $1,048,319,000 or 24.9%, with the cost of interest-bearing liabilities decreasing from 4.63% to 4.31% in 1999. The increase in average outstandings increased interest expense by approximately $36,302,000 while the decreased rate reduced interest expense by approximately $12,474,000. The net interest margin was 4.10% in the first nine months of 1999, compared to 4.24% in the first nine months of 1998. The provision for loan losses for the first nine months of 1999 was $10,902,000, versus $6,819,000 for the first nine months of 1998. Net charge- offs were $5,668,000, or .22% of average net loans compared to $5,028,000, or .23% of average net loans in 1998. Non-interest income, excluding securities transactions, totaled $71,059,000 for the first nine months of 1999, compared to a total of $65,858,000 for the first nine months of 1998, an increase of 7.9%. Included in 1999 is a $4,009,000 pre-tax gain from the sale of branches. Adjusting for this gain, non-interest income increased 1.8% over 1998. Securities losses totaled $2,013,000 in 1999, compared to a gain of $182,000 in 1998. Non-interest expenses (excluding the provision for loan losses) increased by 12 $4,133,000 or 3.7% for the first nine months of 1999. 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. Total realized stockholders' equity increased by $122,337,000 from December 31, 1998. Due to a sale of common stock in second quarter 1999, additional paid- in capital accounted for the majority of the increase. Through September 30, 1999, 8.2 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 or FAS No. 133 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 September 30, 1999.
9-30-99 6-30-99 9-30-98 ------- ------- ------- Total capital to risk-weighted assets 14.18% 14.45% 13.52% Tier I capital to risk-weighted assets 12.93% 13.21% 12.28% Tier I capital to assets (leverage ratio) 8.73% 8.96% 8.47%
Year 2000 Preparations - ---------------------- The Company is Y2K ready and has met recommended regulatory milestones which include: successful testing of all its mission critical systems for Year 2000 compliance; assessing risks associated with its major borrowers, funds providers and other business partners; and expanding its business continuity plans to address Year 2000 scenarios. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- No significant changes since December 31, 1998. See Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations." 13 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 September 30, 1999. 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 November 9, 1999 -------------------- 14 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 9-MOS 9-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 SEP-30-1999 SEP-30-1998 178,421 177,989 18,945 18,803 76,037 45,591 18,723 38,362 500,811 841,723 503,898 837,118 1,637,240 1,064,569 3,859,508 3,224,302 58,119 50,496 6,543,569 5,554,260 4,396,315 3,803,604 450,529 485,897 83,467 67,210 1,019,638 738,589 543,714 407,960 0 0 0 0 0 0 6,543,569 5,554,260 224,369 202,586 112,200 85,693 6,145 6,240 342,714 294,519 115,547 103,998 169,531 145,703 173,183 148,816 10,902 6,819 (2,013) 182 115,104 110,971 116,223 97,066 116,223 97,006 0 0 0 0 78,662 64,842 .74 .62 .73 .61 4.10 4.24 76 604 3,704 4,915 0 0 0 0 53,018 47,076 8,832 8,301 3,031 3,273 58,119 50,496 58,119 50,496 0 0 0 0
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