-----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, DEE+E/+oImil7Y5zLRXbktrkHZ3e2SI78VvbiTajlhfFuI6bzpDp1OrsIoAoMs84 G8+gczepJxtRDBuTbWAT+g== /in/edgar/work/0000931763-00-002490/0000931763-00-002490.txt : 20001114 0000931763-00-002490.hdr.sgml : 20001114 ACCESSION NUMBER: 0000931763-00-002490 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA NATIONAL BANCORPORATION CENTRAL INDEX KEY: 0000926966 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 631114426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25160 FILM NUMBER: 759861 BUSINESS ADDRESS: STREET 1: 1927 FIRST AVENUE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35209 BUSINESS PHONE: 2055833600 MAIL ADDRESS: STREET 1: 1927 FIRST AVENUE NORTH STREET 2: 1927 FIRST AVENUE NORTH CITY: BIRMINGHAM STATE: AL ZIP: 35209 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-25160 ALABAMA NATIONAL BANCORPORATION ------------------------------- (Exact Name of Registrant as Specified in Its Charter) DELAWARE 63-1114426 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 1927 FIRST AVENUE NORTH, BIRMINGHAM, ALABAMA 35203-4009 ------------------------------------------------------- (Address of principal executive office) Registrant's telephone number, including area code: (205) 583-3600 -------------- ------------------------------------------------------------ (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at November 10, 2000 ----- -------------------------------- Common Stock, $1.00 Par Value 11,047,805 INDEX ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION PAGE - ----------------------------- ---- Item 1. Financial Statements (Unaudited) Consolidated statements of condition September 30, 2000 and December 31, 1999 ........................ 3 Consolidated statements of income Three months ended September 30, 2000 and 1999; nine months ended September 30, 2000 and 1999 ................... 4 Consolidated statements of other comprehensive income Three months ended September 30, 2000 and 1999; nine months ended September 30, 2000 and 1999 ................... 8 Consolidated statements of cash flows nine months ended September 30, 2000 and 1999 ................... 10 Notes to the unaudited consolidated financial statements September 30, 2000 .............................................. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................... 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk ...... 30 PART II. OTHER INFORMATION - -------------------------- Item 6. Exhibits and Reports on Form 8-K ................................ 30 SIGNATURES ............................................................... 31 FORWARD-LOOKING INFORMATION - --------------------------- Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements. In addition, Alabama National BanCorporation ("Alabama National" or, the "Company"), through its senior management, from time to time makes forward-looking public statements concerning its expected future operations and performance and other developments. Such forward-looking statements are necessarily estimates reflecting Alabama National's best judgment based upon current information and involve a number of risks and uncertainties, and various factors could cause results to differ materially from those contemplated by such forward-looking statements. Such factors could include those identified from time to time in Alabama National's Securities and Exchange Commission filings and other public announcements. With respect to the adequacy of the allowance for loan losses for Alabama National, these factors include the rate of growth in the economy, especially in the Southeast, the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets and the performance of the stock and bond markets. Part I - Financial Information - ------------------------------ Item 1 - Financial Statements (Unaudited) Alabama National BanCorporation and Subsidiaries Consolidated Statements of Condition ------------------------------------ (In thousands, except share amounts)
September 30, 2000 December 31, 1999 ------------------ ----------------- (Unaudited) Assets Cash and due from banks ...................................................... $ 75,246 $ 73,125 Interest-bearing deposits in other banks ..................................... 1,893 6,768 Investment securities (estimated market values of $34,454 and $19,738)........ 34,098 19,616 Securities available for sale................................................. 305,543 325,507 Trading securities ........................................................... 246 2,701 Federal funds sold and securities purchased under resell agreements .......... 44,449 33,568 Loans held for sale .......................................................... 8,761 8,615 Loans ........................................................................ 1,587,196 1,321,245 Unearned income .............................................................. (976) (1,085) ---------- ---------- Loans, net of unearned income ................................................ 1,586,220 1,320,160 Allowance for loan losses .................................................... (20,840) (18,068) ---------- ---------- Net loans .................................................................... 1,565,380 1,302,092 Property, equipment and leasehold improvements, net .......................... 48,388 43,855 Intangible assets ............................................................ 14,619 10,730 Cash surrender value of life insurance ....................................... 40,455 31,642 Receivable from investment division customers ................................ 8,102 24,573 Other assets.................................................................. 40,144 39,092 ---------- ---------- Totals........................................................................ $2,187,324 $1,921,884 ========== ========== Liabilities and Stockholders' Equity Deposits: Noninterest bearing......................................................... $ 248,896 $ 210,185 Interest bearing............................................................ 1,455,914 1,231,970 ---------- ---------- Total deposits ............................................................... 1,704,810 1,442,155 Federal funds purchased and securities sold under repurchase agreements ...... 138,089 131,878 Treasury, tax and loan accounts............................................... 2,551 6,199 Short-term borrowings......................................................... 72,589 18,389 Accrued expenses and other liabilities........................................ 37,109 61,003 Long-term debt ............................................................... 78,948 124,005 ---------- ---------- Total liabilities ............................................................ 2,034,096 1,783,629 Common stock, $1 par, authorized 17,500,000 shares; issued 11,187,019 shares at September 30, 2000 and December 31, 1999............... 11,187 11,187 Additional paid-in capital ................................................... 85,642 81,939 Retained earnings ............................................................ 65,466 54,897 Treasury stock at cost, 139,714 and 121,129 shares at September 30, 2000 and December 31, 1999, respectively......................................... (3,523) (3,226) Accumulated other comprehensive income (loss), net of tax .................... (5,544) (6,542) ---------- ---------- Total stockholders' equity ................................................... 153,228 138,255 ---------- ---------- Totals........................................................................ $2,187,324 $1,921,884 ========== ==========
See accompanying notes to unaudited consolidated financial statements 3 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Income (Unaudited) --------------------------------------------- (In thousands, except per share data)
For the three months ended September 30, ------------------------ 2000 1999 ------- ------- Interest income: Interest and fees on loans......................................................................... $35,638 $26,482 Interest on securities............................................................................. 5,796 5,238 Interest on deposits in other banks................................................................ 28 44 Interest on trading securities..................................................................... 35 77 Interest on Federal funds sold and securities purchased under resell agreements.................... 566 491 ------- ------- Total interest income................................................................................ 42,063 32,332 Interest expense: Interest on deposits............................................................................... 17,901 12,226 Interest on Federal funds purchased and securities sold under repurchase agreements...................................................................... 2,419 1,994 Interest on long and short-term borrowings......................................................... 2,657 1,080 ------- ------- Total interest expense.............................................................................. 22,977 15,300 ------- ------- Net interest income.................................................................................. 19,086 17,032 Provision for loan losses............................................................................ 400 408 ------- ------- Net interest income after provision for loan losses.................................................. 18,686 16,624 Noninterest income: Securities gains................................................................................... 1 - Gain (loss) on disposition of assets............................................................... (7) 38 Service charges on deposit accounts................................................................ 1,946 1,916 Investment division income......................................................................... 1,603 1,406 Securities brokerage income........................................................................ 1,300 779 Trust department income............................................................................ 555 550 Origination and sale of mortgage loans............................................................. 890 860 Bank owned life insurance.......................................................................... 503 386 Insurance commissions.............................................................................. 402 356 Other.............................................................................................. 957 648 ------- ------- Total noninterest income............................................................................. 8,150 6,939
4 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Income (Unaudited) (Continued) --------------------------------------------------------- (In thousands, except per share data) For the three months ended September 30, -------------------- 2000 1999 ------- ------- Noninterest expense: Salaries and employee benefits............................ 10,756 9,048 Occupancy and equipment expenses ......................... 2,131 1,885 Other..................................................... 4,983 4,301 ------- ------- Total noninterest expense .................................. 17,870 15,234 ------- ------- Income before provision for income taxes ................... 8,966 8,329 Provision for income taxes ................................. 2,760 2,609 ------- ------- Net income ................................................. $ 6,206 $ 5,720 ======= ======= Net income per common share (basic) ........................ $ .56 $ .51 ======= ======= Weighted average common shares outstanding (basic) ......... 11,047 11,127 ======= ======= Net income per common share (diluted) ...................... $ .55 $ .51 ======= ======= Weighted average common shares outstanding (diluted) ....... 11,219 11,315 ======= ======= See accompanying notes to unaudited consolidated financial statements 5 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Income (Unaudited) --------------------------------------------- (In thousands, except per share data)
For the nine months ended September 30, --------------------- 2000 1999 -------- ------- Interest income: Interest and fees on loans ............................................................................. $ 97,559 $73,877 Interest on securities.................................................................................. 17,627 14,716 Interest on deposits in other banks .................................................................... 152 65 Interest on trading securities ......................................................................... 97 286 Interest on Federal funds sold and securities purchased under resell agreements......................... 1,746 1,867 -------- ------- Total interest income .................................................................................... 117,181 90,811 Interest expense: Interest on deposits.................................................................................... 47,828 34,306 Interest on Federal funds purchased and securities sold under repurchase agreements..................... 6,683 5,377 Interest on long and short-term borrowings ............................................................. 6,982 2,758 -------- ------- Total interest expense ................................................................................... 61,493 42,441 -------- ------- Net interest income ...................................................................................... 55,688 48,370 Provision for loan losses ................................................................................ 1,553 1,338 -------- ------- Net interest income after provision for loan losses ...................................................... 54,135 47,032 Noninterest income: Securities gains ....................................................................................... 1 189 Gain (loss) on disposition of assets.................................................................... (15) 246 Service charges on deposit accounts .................................................................... 5,699 5,538 Investment division income.............................................................................. 3,949 5,364 Securities brokerage income............................................................................. 3,760 2,665 Trust department income................................................................................. 1,694 1,620 Origination and sale of mortgage loans ................................................................. 2,625 3,229 Bank owned life insurance .............................................................................. 1,491 1,111 Insurance commissions .................................................................................. 1,499 488 Other................................................................................................... 2,697 1,942 -------- ------- Total noninterest income ................................................................................. 23,400 22,392
6 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Income (Unaudited) (Continued) --------------------------------------------------------- (In thousands, except per share data)
For the nine months ended September 30, ------------------- 2000 1999 ----- ----- Noninterest expense: Salaries and employee benefits ......................................................... 30,960 27,538 Occupancy and equipment expenses ....................................................... 6,123 5,272 Other................................................................................... 14,817 13,043 ------- ------- Total noninterest expense ................................................................. 51,900 45,853 ------- ------- Income before provision for income taxes .................................................. 25,635 23,571 Provision for income taxes ................................................................ 7,868 7,452 ------- ------- Net income ................................................................................ $17,767 $16,119 ======= ======= Net income per common share (basic) ....................................................... $ 1.61 $ 1.45 ======= ======= Weighted average common shares outstanding (basic) ........................................ 11,059 11,084 ======= ======= Net income per common share (diluted) ..................................................... $ 1.58 $ 1.43 ======= ======= Weighted average common shares outstanding (diluted) ...................................... 11,221 11,273 ======= =======
See accompanying notes to unaudited consolidated financial statements 7 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Other Comprehensive Income (Unaudited) ----------------------------------------------------------------- (In thousands)
For the three months ended September 30, ---------------------- 2000 1999 ---- ---- Net income........................................................................................... $6,206 $5,720 Other comprehensive income (loss): Unrealized gains (losses) on securities available for sale ........................................ 3,341 (755) Less: Reclassification adjustment for net gains included in net income ............................. - - ------ ------ Other comprehensive income (loss), before tax ........................................................ 3,341 (755) Provision for (benefit of) income taxes related to items of other comprehensive income ............................................................... 1,162 (475) ------ ------ Other comprehensive income (loss), net of tax ....................................................... 2,179 (280) ------ ------ Comprehensive income ................................................................................ $8,385 $5,440 ====== ======
See accompanying notes to unaudited consolidated financial statements 8 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Other Comprehensive Income (Unaudited) ----------------------------------------------------------------- (In thousands)
For the nine months ended September 30, ---------------------- 2000 1999 ------- ------- Net income...................................................................... $17,767 $16,119 Other comprehensive income (loss): Unrealized gains (losses) on securities available for sale.................... 1,439 (5,959) Less: Reclassification adjustment for net gains included in net income................................................................. - 189 ------- ------- Other comprehensive income (loss), before tax .................................. 1,439 (6,148) Provision for (benefit of) income taxes related to items of other comprehensive income........................................... 441 (2,244) ------- ------- Other comprehensive income (loss), net of tax .................................. 998 (3,904) ------- ------- Comprehensive income ........................................................... $18,765 $12,215 ======= =======
See accompanying notes to unaudited consolidated financial statements 9 Alabama National BanCorporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) ------------------------------------------------- (In thousands)
For the nine months ended September 30, -------------------- 2000 1999 ---- ---- Net cash flows provided by operating activities .................................................... $ 20,021 $ 30,526 Cash flows from investing activities: Proceeds from maturities of investment securities .................................................. 6,476 13,100 Purchases of investment securities ................................................................. (20,954) - Purchases of securities available for sale ......................................................... (37,071) (210,425) Proceeds from sale of securities available for sale ................................................ 126 256 Proceeds from maturities of securities available for sale .......................................... 58,450 166,571 Net (increase) decrease in interest bearing deposits in other banks ................................ 4,875 (12,771) Net (increase) decrease in Federal funds sold and securities purchased under resell agreements .......................................................................... (10,881) (4,459) Net increase in loans .............................................................................. (198,370) (156,236) Purchases of property, equipment and leasehold improvements ........................................ (6,595) (6,900) Cash paid for bank-owned life insurance ............................................................ (8,213) - Costs capitalized on other real estate owned ....................................................... (48) - Proceeds from sale of other real estate owned ...................................................... 470 - Purchase of treasury stock in purchase business combination ........................................ - (3,226) Cash paid in purchase business combination, net of cash received ................................... (19,019) (114) Proceeds from sale of property, equipment and leasehold improvements ............................... 7 18 --------- -------- Net cash used in investing activities .............................................................. (230,747) (214,186) --------- -------- Cash flows from financing activities: Net increase in deposits .......................................................................... 208,639 133,790 Increase (decrease) in Federal funds purchased and securities sold under agreements to repurchase .................................................................. 6,211 (16,093) Net increase in short and long-term borrowings and capital leases.................................. 5,495 68,427 Exercise of stock options ......................................................................... 58 704 Purchase of treasury stock ........................................................................ (588) - Dividends on common stock ......................................................................... (6,968) (5,967) --------- --------- Net cash provided by financing activities ......................................................... 212,847 180,861 --------- --------- Increase in cash and cash equivalents ............................................................. 2,121 (2,799) Cash and cash equivalents, beginning of period .................................................... 73,125 70,813 --------- --------- Cash and cash equivalents, end of period .......................................................... $ 75,246 $ 68,014 ========= ========= Supplemental schedule of noncash investing and financing activities Acquisition of collateral in satisfaction of loans ................................................ $ 421 $ 1,017 ========= ========= Adjustment to market value of securities available for sale, net of deferred income taxes ........................................................................ $ 998 $ (3,904) ========= ========= Assets acquired in purchase business combination .................................................. $ 70,293 $ 3,704 ========= ========= Liabilities assumed in purchase business combination ............................................. $ 54,361 $ 721 ========= =========
See accompanying notes to unaudited consolidated financial statements 10 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2000, are subject to year-end audit and are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2000. These interim financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Alabama National's Annual Report on Form 10-K for the year ended December 31, 1999. NOTE B - COMMITMENT AND CONTINGENCIES - ------------------------------------- Alabama National's subsidiary banks make loan commitments and incur contingent liabilities in the normal course of business, which are not reflected in the consolidated statements of condition. NOTE C - RECENTLY ISSUED PRONOUNCEMENTS - --------------------------------------- Derivative Investments and Hedging Activities In June 1998, the FASB issued Statement of Financial Standard No. 133, Accounting for Derivative Instruments and Hedging Activities, ("Statement 133"), effective for all fiscal quarters of all fiscal years beginning after June 30, 1999. Statement 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. If certain conditions are met, an entity may elect to designate a derivative instrument as a hedging instrument. Statement 133 generally provides for matching the timing of gain or loss recognition on the hedging instrument with the recognition of (a) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (b) the earnings effect of the hedged forecasted transaction. Statement 133, as amended by Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No. 133, and Statement of Financial Accounting Standards No. 138, Accounting for Derivative Instruments and Hedging Activities - an Amendment of SFAS No. 133, is effective for fiscal years beginning after June 15, 2000, and is effective for interim periods in the year of adoption. Management of Alabama National does not expect the adoption of Statement 133 to have a material impact on its financial statements since Alabama National does not invest in derivative instruments. 11 NOTE D - EARNINGS PER SHARE - ----------------------------- The following table reflects the reconciliation of the numerator and denominator of the basic earnings per share computation to the diluted earnings per share computation for the three months and nine months ended September 30, 2000 and 1999.
Per Share Income Shares Amount -------- --------- --------- (In thousands, except per share amounts) THREE MONTHS ENDED SEPTEMBER 30, 2000 Basic EPS net income................................... $ 6,206 11,047 $0.56 ===== Effect of dilutive securities.......................... - 172 ------- ------ Diluted EPS............................................ $ 6,206 11,219 $0.55 ======= ====== ===== THREE MONTHS ENDED SEPTEMBER 30, 1999 Basic EPS net income................................... $ 5,720 11,127 $0.51 ===== Effect of dilutive securities.......................... - 188 ------- ------ Diluted EPS............................................ $ 5,720 11,315 $0.51 ======= ====== ===== NINE MONTHS ENDED SEPTEMBER 30, 2000 Basic EPS net income................................... $17,767 11,059 $1.61 ===== Effect of dilutive securities.......................... - 162 ------- ------ Diluted EPS............................................ $17,767 11,221 $1.58 ======= ====== ===== NINE MONTHS ENDED SEPTEMBER 30, 1999 Basic EPS net income................................... $16,119 11,084 $1.45 ===== Effect of dilutive securities.......................... - 189 ------- ------ Diluted EPS............................................ $16,119 11,273 $1.43 ======= ====== =====
NOTE E - TREASURY STOCK REPURCHASE PLAN - ---------------------------------------- In the second quarter of 2000, the Board of Directors of Alabama National authorized the repurchase of up to 250,000 shares of the Company's common stock. On October 10, 2000, the Board of Directors rescinded this share repurchase program. A total of 30,000 shares were purchased under the rescinded plan. NOTE F - MERGERS AND ACQUISITIONS - ---------------------------------- On August 4, 2000, First American Bank, a subsidiary of Alabama National, completed the acquisition of two banking branches in Madison and Huntsville, Alabama. The acquisition increased loans and deposits by approximately $68.9 million and $54.0 million, respectively. The acquisition was accounted for as a purchase transaction. On October 10, 2000, Alabama National entered into a merger agreement with Peoples State Bank, located in Groveland, Florida. Under the terms of the merger agreement, Peoples State Bank will merge with a newly formed subsidiary of Alabama National, whereby Peoples State Bank will become a wholly owned subsidiary of Alabama National. Alabama National will issue approximately 735,000 shares of its common stock to existing Peoples State Bank shareholders at an exchange ratio of 1.164 shares of Alabama National common stock for each share of Peoples State Bank common stock. As of September 30, 2000, Peoples State Bank had assets of $121.6 million. The merger with Peoples State Bank is expected to be completed in the first quarter of 2001. The merger is subject to Peoples State Bank shareholder approval and certain regulatory approvals, and is expected to be accounted for as a pooling of interests. 12 NOTE G - SEGMENT REPORTING - --------------------------- Alabama National's reportable segments represent the distinct major product lines it offers and are viewed separately for strategic planning purposes by management. The following table is a reconciliation of the reportable segment revenues, expenses, and profit to Alabama National's consolidated totals (in thousands).
Investment Securities Mortgage Retail and Services Brokerage Trust Lending Insurance Commercial Corporate Elimination Division Division Division Division Division Banking Overhead Entries Total ---------- ---------- -------- -------- ---------- ---------- ---------- ------------ -------- Nine months ended September 30, 2000: - ------------------- Interest income $ - $2,793 $ - $ 318 $ 16 $115,599 $ (45) $(1,500) $117,181 Interest expenses 1,500 201 10 60,270 1,012 (1,500) 61,493 ----------------------------------------------------------------------------------------------------- Net interest income 1,293 117 6 55,329 (1,057) 55,688 Provision for loan losses 1,553 1,553 Noninterest income 3,949 3,760 1,694 2,840 1,499 9,642 16 23,400 Noninterest expense 3,764 4,400 987 2,060 1,421 36,941 $ 2,327 51,900 ----------------------------------------------------------------------------------------------------- Net income before tax $ 185 $ 653 $ 707 $ 897 $ 84 $ 26,477 $(3,368) $ - $ 25,635 ===================================================================================================== Nine months ended September 30, 1999: - ------------------- Interest income $ - $1,278 $ - $ 372 $ 1 $ 89,804 $ (72) $ (545) $ 90,638 Interest expenses 545 240 5 41,666 551 (545) 42,462 ----------------------------------------------------------------------------------------------------- Net interest income 733 132 (4) 48,138 (623) 48,376 Provision for loan losses 1,338 1,338 Noninterest income 5,364 2,665 1,620 3,420 488 8,654 175 22,386 Noninterest expense 4,752 3,091 856 2,288 449 32,415 2,002 45,853 ----------------------------------------------------------------------------------------------------- Net income before tax $ 612 $ 307 $ 764 $1,264 $ 35 $ 23,039 $(2,450) $ - $ 23,571 =====================================================================================================
Corporate overhead is comprised of compensation and benefits for certain members of management, merger-related costs, interest expense on parent company debt, amortization of intangibles and other expenses. 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Basis of Presentation - --------------------- The following is a discussion and analysis of the consolidated financial condition of Alabama National and results of operations as of the dates and for the periods indicated. All significant intercompany accounts and transactions have been eliminated. The accounting and reporting policies of Alabama National conform with generally accepted accounting principles and with general financial services industry practices. This information should be read in conjunction with Alabama National's unaudited consolidated financial statements and related notes appearing elsewhere in this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing in Alabama National's Annual Report on Form 10-K for the year ended December 31, 1999. Performance Overview - -------------------- Alabama National's net income was $6.21 million for the third quarter of 2000 (the "2000 third quarter") compared to $5.72 million for the third quarter of 1999 (the "1999 third quarter"). Net income for the nine month period ended September 30, 2000 (the "2000 nine months") was $17.77 million compared to $16.12 million for the nine months ended September 30, 1999 (the "1999 nine months"). Net income per diluted common share for the 2000 and 1999 third quarters was $0.55 and $0.51, respectively. For the 2000 nine months, net income per diluted common share was $1.58 compared to $1.43 for the 1999 nine months. The annualized return on average assets for Alabama National was 1.17% for the 2000 third quarter compared to 1.27% for the 1999 third quarter. The annualized return on average assets for Alabama National was 1.17% for the 2000 nine months compared to 1.25% for the 1999 nine months. The annualized return on average stockholders' equity for the 2000 third quarter was 16.39%, as compared to 16.45% for the 1999 third quarter. The annualized return on average stockholders' equity increased for the 2000 nine months to 16.42%, as compared to 15.86% for the 1999 nine months. Book value per share at September 30, 2000 was $13.87, an increase of $1.38 from year-end 1999. Tangible book value per share at September 30, 2000 was $12.55, an increase of $1.03 from year-end 1999. Alabama National paid cash dividends totaling $0.63 on common shares during the 2000 nine months, compared to $0.54 on common shares during the 1999 nine months. Net Income - ---------- The principal reason for the increase in net income for each of the 2000 third quarter and the 2000 nine months, compared to the same periods in 1999, was the growth in net interest income, which is the difference between the income earned on interest bearing assets and the interest paid on deposits and borrowings used to support such assets. Net interest income increased by $2.1 million, or 12.06%, to $19.1 million during the 2000 third quarter from $17.0 million during the 1999 third quarter. Net interest income increased to $55.7 million during the 2000 nine months from $48.4 million during the 1999 nine months, representing an increase of $7.3 million, or 15.1%. The increase in net interest income was offset by an increase in noninterest expense of $2.6 million, to $17.9 million for the 2000 third quarter, and $6.0 million to $51.9 million for the 2000 nine months, compared to $15.2 million and $45.9 million, respectively, for the same periods in 1999. 14 Average earning assets for the 2000 third quarter and nine months increased by approximately $313.6 million and $294.5 million, respectively, and was substantially matched by growth in average interest-bearing liabilities of $319.4 million and $306.6 million during the 2000 third quarter and nine months, respectively. The average taxable equivalent rate earned on assets was 8.74% and 8.56% for the 2000 third quarter and nine months compared to 8.02% and 7.93% for the 1999 third quarter and nine months, respectively. The average rate paid on interest-bearing liabilities was 5.36% and 5.06% for the 2000 third quarter and nine months, respectively, compared to 4.38% and 4.31% for the 1999 third quarter and nine months, respectively. The net interest margin for the 2000 third quarter and nine months was 3.94% and 4.04%, respectively, compared to 4.19% for both the 1999 third quarter and nine months, respectively. The reduction in net interest margin is largely due to strong loan demand in excess of growth in low cost deposit accounts. This has resulted in much of the incremental growth of loans being funded by higher cost liability sources, such as Federal Home Loan Bank advances, in-market CD's, and brokered CD's. The following tables depict, on a taxable equivalent basis for the 2000 and 1999 third quarter and nine months, certain information related to Alabama National's average balance sheet and its average yields on assets and average costs of liabilities. Such yields or costs are derived by dividing income or expense by the average daily balance of the associated assets or liabilities. 15 AVERAGE BALANCES, INCOME AND EXPENSES AND RATES (Amounts in thousands, except yields and rates)
Three months ended September 30, ---------------------------------------------------------------------------------- 2000 1999 -------------------------------------- ----------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost ----------- ----------- ----------- -------------- ----------- ----------- Assets: Earning assets: Loans (1) (3).................................. $1,544,399 $35,687 9.19% $1,226,461 $26,530 8.58% Securities: Taxable....................................... 313,077 5,418 6.88 302,275 4,832 6.34 Tax exempt.................................... 29,995 573 7.60 33,624 615 7.26 Cash balances in other banks................... 2,423 28 4.60 2,528 44 6.91 Funds sold..................................... 33,417 566 6.74 40,727 491 4.78 Trading account securities..................... 1,964 35 7.09 6,016 77 5.08 ---------- ------- ---------- ------- Total earning assets (2)................... 1,925,275 42,307 8.74 1,611,631 32,589 8.02 ---------- ------- ---------- ------- Cash and due from banks.......................... 68,189 67,595 Premises and equipment........................... 47,646 45,616 Other assets..................................... 90,903 73,084 Allowance for loan losses........................ (20,195) (17,419) ---------- ---------- Total assets.............................. $2,111,818 $1,780,507 ========== ========== Liabilities: Interest-bearing liabilities: Interest-bearing transaction accounts.......... $ 246,366 2,113 3.41 201,940 1,293 2.54 Savings deposits............................... 304,411 2,771 3.62 322,225 2,788 3.43 Time deposits.................................. 836,628 13,017 6.19 637,623 8,145 5.07 Funds purchased................................ 158,071 2,419 6.09 143,385 1,994 5.52 Other short-term borrowings.................... 80,953 1,452 7.14 12,880 181 5.58 Long-term debt................................. 79,571 1,205 6.02 68,506 899 5.21 ---------- ------- ---------- ------- Total interest-bearing liabilities........ 1,706,000 22,977 5.36 1,386,559 15,300 4.38 ---------- ------- ---------- ------- Demand deposits.................................. 225,129 219,187 Accrued interest and other liabilities........... 30,032 36,803 Stockholders' equity............................. 150,657 137,958 ---------- ---------- Total liabilities and stockholders' equity... $2,111,818 $1,780,507 ========== ========== Net interest spread.............................. 3.38% 3.64% ==== ==== Net interest income/margin on a taxable equivalent basis..................... 19,330 3.99% 17,289 4.26% ==== ==== Tax equivalent adjustment (2).................... 244 257 ------- ------- Net interest income/margin....................... $19,086 3.94% $17,032 4.19% ======= ==== ======= ====
________________ (1) Average loans include nonaccrual loans. All loans and deposits are domestic. (2) Tax equivalent adjustments are based upon assumed tax rate of 34%, and do not reflect the disallowance for Federal income tax purposes of interest expense related to certain tax exempt assets. (3) Fees in the amount of $826,000 and $704,000 are included in interest and fees on loans for the three months ended September 30, 2000 and 1999, respectively. 16 AVERAGE BALANCES, INCOME AND EXPENSES AND RATES (Amounts in thousands, except yields and rates)
Nine months ended September 30, ------------------------------------------------------------------------------- 2000 1999 ------------------------------------ --------------------------------------- Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost ------------ ---------- -------- ----------- ---------- -------- Assets: Earning assets: Loans (1) (3).................................... $1,446,936 $ 97,712 9.02% $1,163,205 $74,029 8.51% Securities: Taxable......................................... 319,475 16,500 6.90 290,197 13,491 6.22 Tax exempt...................................... 30,308 1,708 7.53 33,465 1,856 7.42 Cash balances in other banks..................... 3,650 152 5.56 1,393 65 6.24 Funds sold....................................... 37,322 1,746 6.25 49,683 1,867 5.02 Trading account securities....................... 1,891 97 6.85 7,163 286 5.34 ---------- -------- ---------- ------- Total earning assets (2)..................... 1,839,582 117,915 8.56 1,545,106 91,594 7.93 ---------- -------- ---------- ------- Cash and due from banks............................ 69,996 64,227 Premises and equipment............................. 46,249 42,147 Other assets....................................... 86,990 84,215 Allowance for loan losses.......................... (19,121) (17,149) ---------- ---------- Total assets................................ $2,023,696 $1,718,546 ========== ========== Liabilities: Interest-bearing liabilities: Interest-bearing transaction accounts............ $ 242,754 5,798 3.19 191,999 3,344 2.33 Savings deposits................................. 302,933 8,016 3.53 318,487 7,994 3.36 Time deposits.................................... 774,936 34,014 5.86 591,771 22,968 5.19 Funds purchased.................................. 150,894 6,683 5.92 145,187 5,377 4.95 Other short-term borrowings...................... 48,751 2,556 7.00 23,197 935 5.39 Long-term debt................................... 104,012 4,426 5.68 47,036 1,823 5.18 ---------- -------- ---------- ------- Total interest-bearing liabilities.......... 1,624,280 61,493 5.06 1,317,677 42,441 4.31 ---------- -------- ---------- ------- Demand deposits.................................... 223,952 216,458 Accrued interest and other liabilities............. 30,959 48,533 Stockholders' equity............................... 144,505 135,878 ---------- ---------- Total liabilities and stockholders' equity..... $2,023,696 $1,718,546 ========== ========== Net interest spread................................ 3.50% 3.62% ==== ==== Net interest income/margin on a taxable equivalent basis....................... 56,422 4.10% 49,153 4.25% ==== ==== Tax equivalent adjustment (2)...................... 734 783 -------- ------- Net interest income/margin......................... $ 55,688 4.04% $48,370 4.19% ======== ==== ======= ====
________________ (1) Average loans include nonaccrual loans. All loans and deposits are domestic. (2) Tax equivalent adjustments are based upon assumed tax rate of 34%, and do not reflect the disallowance for Federal income tax purposes of interest expense related to certain tax exempt assets. (3) Fees in the amount of $2,376,000 and $2,250,000 are included in interest and fees on loans for the three months ended September 30, 2000 and 1999, respectively. 17 The following tables set forth, on a taxable equivalent basis, the effect which varying levels of earning assets and interest-bearing liabilities and the applicable rates had on changes in net interest income for the 2000 third quarter and nine months compared to the 1999 third quarter and nine months, respectively. For the purposes of these tables, changes, which are not solely attributable to volume or rate, are allocated to volume and rate on a pro rata basis. ANALYSIS OF CHANGES IN NET INTEREST INCOME (Amounts in thousands)
Nine Months Ended September 30, -------------------------------------- 2000 Compared to 1999 Variance Due to -------------------------------------- Volume Yield/Rate Total -------------------------------------- Earning assets: Loans................................................. $19,262 $4,421 $23,683 Securities: Taxable............................................. 1,444 1,565 3,009 Tax exempt.......................................... (192) 44 (148) Cash balances in other banks.......................... 99 (12) 87 Funds sold............................................ (677) 556 (121) Trading account securities............................ (293) 104 (189) ------- ------ ------- Total interest income............................ 19,643 6,678 26,321 Interest-bearing liabilities: Interest-bearing transaction accounts................. 1,024 1,430 2,454 Savings and money market deposits..................... (521) 543 22 Time deposits......................................... 7,795 3,251 11,046 Funds purchased....................................... 218 1,088 1,306 Other short-term borrowings........................... 1,275 346 1,621 Long-term debt........................................ 2,411 192 2,603 ------- ------ ------- Total interest expense........................... 12,202 6,850 19,052 ------- ------ ------- Net interest income on a taxable equivalent basis............................... $ 7,441 $ (172) 7,269 ======= ====== Taxable equivalent adjustment......................... 49 ------- Net interest income................................... $ 7,318 =======
18 ANALYSIS OF CHANGES IN NET INTEREST INCOME (Amounts in thousands)
Three Months Ended September 30, ------------------------------------- 2000 Compared to 1999 Variance Due to -------------------------------------- Volume Yield/Rate Total -------------------------------------- Earning assets: Loans................................................ $7,186 $1,971 $9,157 Securities: Taxable............................................ 173 413 586 Tax exempt......................................... (189) 147 (42) Cash balances in other banks......................... (2) (14) (16) Funds sold........................................... (463) 538 75 Trading account securities........................... (179) 137 (42) ------ ------ ------ Total interest income........................... 6,526 3,192 9,718 Interest-bearing liabilities: Interest-bearing transaction accounts................ 321 499 820 Savings and money market deposits.................... (620) 603 (17) Time deposits........................................ 2,853 2,019 4,872 Funds purchased...................................... 212 213 425 Other short-term borrowings.......................... 1,207 64 1,271 Long-term debt....................................... 156 150 306 ------ ------ ------ Total interest expense.......................... 4,129 3,548 7,677 ------ ------ ------ Net interest income on a taxable equivalent basis.............................. $2,397 $ (356) 2,041 ====== ====== Taxable equivalent adjustment........................ 13 ------ Net interest income.................................. $2,054 ======
The provision for loan losses represents a charge to current earnings necessary to maintain the allowance for loan losses at an appropriate level based on management's analysis of the potential risk in the loan portfolio. The amount of the provision is a function of the level of loans outstanding, the level of non-performing loans, historical loan loss experience, the amount of loan losses actually charged against the allowance during a given period and current economic conditions. The provision for loan losses was $400,000 for the 2000 third quarter, compared with $408,000 in the 1999 third quarter. The provision for loan losses was $1,553,000 for the 2000 nine months, compared to $1,338,000 in the 1999 nine months. The higher provision for loan losses in the 2000 nine months is attributable to the growth in loans during the 2000 nine months compared to the 1999 nine months. The allowance for loan losses as a percentage of outstanding loans, net of unearned income, was 1.31% at September 30, 2000, compared to 1.37% at December 31, 1999. Because of the inherent uncertainty of assumptions made during the assessment process, there can be no assurance that loan losses in future periods will not exceed the allowance for loan losses or that additional allocations to the allowance will not be required. See Asset Quality. ------------- Total noninterest income for the 2000 third quarter was $8.2 million, compared to $6.9 million for the 1999 third quarter. For the 2000 nine months, noninterest income increased to $23.4 million compared to $22.4 million for the 19 1999 nine months. Noninterest income includes service charges on deposits, investment division revenue, securities brokerage revenue, trust department revenue, fees relating to the origination and sale of mortgage loans, and insurance commission revenue. Service charges on deposits for both the 2000 third quarter and 1999 third quarter were $1.9 million. For the 1999 nine months, service charge income increased to $5.7 million from the 1999 nine months' level of $5.5 million. During the 2000 third quarter investment division revenue increased to $1.6 million compared to $1.4 million for the 1999 third quarter. Despite the slight increase in investment division revenue during the 2000 third quarter, revenue for the investment division for the 2000 nine months decreased by $1.5 million, to $3.9 million, compared to $5.4 million for the 1999 nine months. The decreased revenue for the 2000 nine months reflects a decline in demand for debt securities from community banks. Securities brokerage revenue increased 66.9% to $1.3 million during the 2000 third quarter and totaled $3.8 million for the 2000 nine months, an increase of 41.1% over 1999 nine month total of $2.7 million. The increase in brokerage revenue is attributable to continued strong production in this area and favorable market conditions. Trust fees remained relatively flat for the third quarter and nine months of 2000 and 1999. Fees generated from the origination and sale of mortgages for the 2000 third quarter totaled $890,000, relatively unchanged from 1999's third quarter total of $860,000. During the 2000 nine months fees generated from the origination and sale of mortgage loans were $2.6 million compared to $3.2 million for the 1999 nine months. The year to date decrease is due to rising interest rates and the impact of rising interest rates on refinancing and new mortgage origination activity. Insurance commission revenue increased to $402,000 for the 2000 third quarter, representing a 12.9% increase over 1999's third quarter total of $356,000. Insurance commission revenue totaled $1.5 million for the 2000 nine months, compared to $488,000 during the 1999 nine months. The insurance division was acquired on May 28, 1999, so the 1999 nine months include only four month's results for this division. Noninterest expense was $17.9 million for the 2000 third quarter compared to $15.2 million for the 1999 third quarter. For the 2000 nine months, noninterest expense was $51.9 million compared to $45.9 million for the 1999 nine months. Noninterest expense includes salaries and employee benefits, occupancy and equipment expenses and other expenses. Salaries and employee benefits were $10.8 million for the 2000 third quarter compared to $9.0 million for the 1999 third quarter. For the 2000 nine months, salaries and employee benefits were $31.0 million compared to $27.5 million in the 1999 nine months. The increase in salaries and employee benefits partially results from the acquired insurance agency noted above, and the acquisition of two banking branches during the 2000 third quarter, but primarily represents general staffing increases in other areas of Alabama National relating to continued expansion and additional compensation related to annual performance reviews. Occupancy and equipment expense totaled $2.1 million in the 2000 third quarter and $1.9 million in the 1999 third quarter. Occupancy and equipment expense totaled $6.1 million in the 2000 nine months and $5.3 million in the 1999 nine months. Other noninterest expense increased to $5.0 million in the 2000 third quarter, compared with $4.3 million in the 1999 third quarter. Other noninterest expense was $14.8 million in the 2000 nine months and $13.0 million in the 1999 nine months. Other noninterest expense is comprised of advertising expenses, banking assessments, data processing expenses, legal and professional fees, directors fees, postage and freight charges, supplies and printing expenses, amortization of intangibles and various other expenses. Because of an increase in pre-tax income, income tax expense was $2.8 million for the 2000 third quarter compared to $2.6 million for the 1999 third quarter. For the 2000 nine months income tax expense was $7.9 million, compared to $7.5 million for the 1999 nine months. The effective tax rates for the 2000 third quarter and the 2000 nine months were 30.8% and 30.7%, respectively, compared to 31.3% and 31.6% for the same periods of 1999. These effective rates are impacted by items of income and expense that are not subject to federal or state taxation. 20 Earning Assets - -------------- Loans comprised the largest single category of Alabama National's earning assets on September 30, 2000. Loans, net of unearned income, were $1.59 billion or 72.5% of total assets at September 30, 2000, compared to $1.32 billion or 68.7% at December 31, 1999. Loans grew $266.1 million, or 20.2%, during the 2000 nine months compared to 1999 year-end totals, due to continued strong loan demand in many markets served by Alabama National and the successful calling efforts by the lending staff. Average loans grew $283.7 million, or 24.4%, during the 2000 nine months, compared to the 1999 nine months. Loans, net of unearned income and average loans were impacted by the acquisition of two banking branches during the 2000 third quarter. The acquired branches had outstanding loans of approximately $68.9 million. The following table details the composition of the loan portfolio by category at the dates indicated: COMPOSITION OF LOAN PORTFOLIO (Amounts in thousands, except percentages)
September 30, 2000 December 31, 1999 ---------------------------- -------------------------- Percent Percent Amount of Total Amount of Total ---------- -------- ---------- -------- Commercial, financial and agricultural............................. $ 258,603 16.29% $ 257,047 19.45% Real estate: Construction............................. 207,221 13.06 148,228 11.22 Mortgage - residential................... 426,241 26.85 358,400 27.13 Mortgage - commercial.................... 444,276 27.99 369,158 27.94 Mortgage - other......................... 3,973 .25 3,111 .24 Consumer................................... 75,407 4.75 73,388 5.55 Other...................................... 171,475 10.80 111,913 8.47 ---------- ------ ---------- ------ Total gross loans........................ 1,587,196 100.00% 1,321,245 100.00% ====== ====== Unearned income............................ (976) (1,085) ---------- ---------- Total loans, net of unearned income........................ 1,586,220 1,320,160 Allowance for loan losses.................. (20,840) (18,068) ---------- ---------- Total net loans.......................... $1,565,380 $1,302,092 ========== ==========
Investment securities increased $14.5 million in the 2000 nine months from $19.6 million at December 31, 1999 to $34.1 million at September 30, 2000. During the 2000 nine months, the Company purchased $21.0 million of investment securities and received $6.5 million from maturities, including principal paydowns of mortgage backed securities. Securities available for sale decreased $20.0 million in the 2000 nine months from $325.5 million at December 31, 1999, to $305.5 million at September 30, 2000. Purchases of available for sale securities totaled $37.1 million and maturities, calls, and sales of available for sale securities totaled $58.6 million. Write downs to estimated market value of available for sale securities totaled $1.0 million, net of income taxes, during the 2000 nine months. Trading account securities, which had a balance of $246,000 at September 30, 2000, are securities owned by Alabama National prior to sale and delivery to Alabama National's customers. It is the policy of Alabama National to limit positions in such securities to reduce its exposure to market and interest rate changes. Federal funds sold and securities purchased under agreements to resell totaled $44.4 million at September 30, 2000, and $33.6 million at December 31, 1999. 21 Deposits and Other Funding Sources - ---------------------------------- Deposits increased $262.7 million from year-end 1999, to $1.70 billion at September 30, 2000. All categories of deposits experienced growth during the 2000 nine months. During the 2000 third quarter, deposits increased $54.0 million due to the acquisition of the two banking branches in Huntsville, Alabama. Included in deposits at September 30, 2000 and December 31, 1999, were $93.1 million and $47.5 million of brokered deposits, respectively. Federal funds purchased and securities sold under agreements to repurchase totaled $138.1 million at September 30, 2000, an increase of $6.2 million from December 31, 1999. The treasury, tax and loan account decreased to $2.6 million at September 30, 2000, compared with $6.2 million at December 31, 1999. Short- term borrowings at September 30, 2000, totaled $72.6 million, including a note payable to a third party bank of $26.6 million and advances from the Federal Home Loan Bank ("FHLB") totaling $46.0 million. At September 30, 2000, the Company also had $78.9 million of FHLB advances classified as long-term debt. Alabama National's short-term debt at September 30, 2000 and December 31, 1999 is summarized as follows: SHORT-TERM BORROWINGS (Amounts in thousands)
September 30, December 31, 2000 1999 ------------- ------------ Note payable to third party bank under secured master note agreement; interest rate varies with LIBOR and was 7.306% and 7.2113% at September 30, 2000 and December 31, 1999, respectively; collateralized by the Company's stock in subsidiary banks. $26,589 $16,389 FHLB open ended notes payable, interest rate varies daily based on the FHLB Daily Rate Credit interest price and was 6.70% and 4.55% at September 30, 2000 and December 31, 1999, respectively; collateralized by FHLB stock and certain first mortgage loans. 1,000 2,000 FHLB debt due July 25, 2001; interest at a fixed rate of 6.40%; collateralized by FHLB stock and certain pledged available for sale securities. Borrowing was classified as long-term at December 31, 1999. 2,000 - FHLB debt due June 4, 2001; interest rate varies with three month LIBOR and was 6.6225% on September 30, 2000; collateralized by FHLB stock and certain first mortgage loans. 43,000 - ------- ------- Total short-term borrowings $72,589 $18,389 ======= =======
22 Alabama National's long-term debt at September 30, 2000 and December 31, 1999 is summarized as follows: LONG-TERM BORROWINGS (Amounts in thousands)
September 30, December 31, 2000 1999 ------------- ------------ FHLB debt due October 21, 2003; interest at fixed rate of 4.30%; convertible at the option of the FHLB on October 21, 2000 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. $10,000 $ 10,000 FHLB debt due April 23, 2004; interest rate varies with LIBOR and was 6.46% and 5.9425% at September 30, 2000 and December 31, 1999, respectively; rate changes to 5.02% from April 23, 2001 to April 23,2004; convertible at the option of the FHLB on April 23, 2001 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. 13,700 13,700 FHLB debt due March 26, 2008; interest at fixed rate of 5.51%; convertible at the option of the FHLB on March 26, 2003 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. 5,000 5,000 FHLB debt due July 25, 2001; interest at a fixed rate of 6.40%; collateralized by FHLB stock and certain pledged available for sale securities. Borrowing classified as short-term at September 30, 2000. - 2,000 FHLB debt due June 18, 2003; interest at a fixed rate of 5.40%; convertible at the option of the FHLB on June 18, 2000 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. Note was called during 2000. - 5,000 FHLB debt due November 5, 2003; interest at a fixed rate of 4.74%; convertible at the option of the FHLB on November 5, 2001 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. 5,000 5,000 FHLB debt due August 7, 2009; interest at a fixed rate of 4.95%; convertible at the option of the FHLB on February 7, 2000 and any payment date thereafter; collateralized by FHLB stock and certain first mortgage loans. Note was called during 2000. - 25,000 FHLB debt due July 30, 2004; interest at a fixed rate of 5.715%; convertible in whole at the option of the FHLB on July 30, 2001; collateralized by FHLB stock and certain first mortgage loans. 5,000 5,000 FHLB debt due December 2, 2009; interest at a fixed rate of 5.29%; convertible in whole at the option of the FHLB on June 2, 2000; collateralized by FHLB stock, certain first mortgage loans and pledged available for sale securities. Note was called during 2000. - 43,000
23
September 30, December 31, 2000 1999 ------------- ------------ FHLB debt due October 12, 2001; interest rate varies with LIBOR and reprices monthly; rate at September 30, 2000 and December 31, 1999 was 6.66063% and 6.50125%, respectively; collateralized by FHLB stock, certain first mortgage loans and certain pledged available for sale securities. 10,000 10,000 FHLB debt due February 11, 2003; interest rate varies with LIBOR and reprices monthly; rate at September 30, 2000 was 6.42%; collateralized by FHLB stock and certain first mortgage loans. 25,000 - FHLB debt due June 15, 2010; interest at a fixed rate of 6.00%; convertible in whole at the option of FHLB on December 15, 2000 to a three month LIBOR advance; collateralized by FHLB stock and certain first mortgage loans. 5,000 - Various notes payable 29 39 Capital leases payable 219 266 ------- -------- Total long-term borrowings $78,948 $124,005 ======= ========
Asset Quality - ------------- Nonperforming loans are comprised of loans past due 90 days or more and still accruing interest, loans accounted for on a nonaccrual basis and loans in which the terms have been restructured to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower. At September 30, 2000, the Company had no loans past due 90 days or more and still accruing interest. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that the collection of interest is doubtful. It is Alabama National's policy to place a delinquent loan on nonaccrual status when it becomes 90 days or more past due. When a loan is placed on nonaccrual status, all interest that is accrued on the loan balance is reversed and deducted from earnings as a reduction of reported interest. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. When a problem loan is finally resolved, there may ultimately be an actual writedown or charge-off of the principal balance of the loan which could necessitate additional charges to the allowance for loan losses. 24 At September 30, 2000, nonperforming assets totaled $5.8 million, an increase of $1.0 million from December 31, 1999. At September 30, 2000, nonperforming assets as a percentage of loans plus other real estate were 0.37%, unchanged from year-end 1999. The following table presents the Company's nonperforming assets for the dates indicated. NONPERFORMING ASSETS (Amounts in thousands, except percentages)
September 30, December 31, 2000 1999 ----------- ------------ Nonaccrual loans ....................................... $ 4,615 $ 4,141 Restructured loans ..................................... - 5 Loans past due 90 days or more and still accruing ...... - - ------- ------- Total nonperforming loans............................ 4,615 4,146 Other real estate owned ................................ 1,225 687 ------- ------- Total nonperforming assets........................... $ 5,840 $ 4,833 ======= ======= Allowance for loan losses to period-end loans .......... 1.31% 1.37% Allowance for loan losses to period-end nonperforming loans.................................. 451.57 435.79 Allowance for loan losses to period-end nonperforming assets................................. 356.85 373.85 Net charge-offs to average loans ...................... 0.02 0.04 Nonperforming assets to period-end loans and other real estate owned.......................... 0.37 0.37 Nonperforming loans to period-end loans ................ 0.29 0.31
25 Net loan charge-offs for the 2000 nine months totaled $181,000, or 0.02% (annualized) of average loans for the period. The allowance for loan losses as a percentage of total loans, net of unearned income, was 1.31% at September 30, 2000, compared to 1.37% at December 31, 1999. The following table analyzes activity in the allowance for loan losses for the 2000 nine months. ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES For the Nine Months Ended September 30, 2000 (Amounts in thousands, except percentages) Allowance for loan losses at beginning of period............................................ $18,068 Charge-offs: Commercial, financial and agricultural......................... 216 Real estate - mortgage......................................... 84 Consumer....................................................... 486 ------- Total charge-offs............................................ 786 ======= Recoveries: Commercial, financial and agricultural......................... 139 Real estate - mortgage......................................... 205 Consumer....................................................... 261 ------- Total recoveries............................................. 605 ------- Net charge-offs.............................................. 181 ------- Provision for loan losses......................................... 1,553 Additions to allowance through purchase........................... 1,400 ------- Allowance for loan losses at end of period.................................................. $20,840 ======= The loan portfolio is periodically reviewed to evaluate the outstanding loans and to measure both the performance of the portfolio and the adequacy of the allowance for loan losses. This analysis includes a review of delinquency trends, actual losses and internal credit ratings. Based on this analysis, management considers the allowance for loan losses at September 30, 2000, to be adequate to cover probable loan losses in the portfolio as of that date. However, because of the inherent uncertainty of assumptions made during the evaluation process, there can be no assurance that loan losses in future periods will not exceed the allowance for loan losses or that additional allocations to the allowance will not be required. Interest Rate Sensitivity - ------------------------- The Company monitors and manages the pricing and maturity of its assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on net interest income. The principal monitoring technique employed by the Company is simulation analysis, which technique is augmented by "gap" analysis. In simulation analysis, the Company reviews each individual asset and liability category and their projected behavior in various different interest rate environments. These projected behaviors are based upon management's past experiences and upon current competitive environments, including the various environments in the different markets in which the Company competes. Using this projected behavior and differing rate scenarios as inputs, the simulation analysis generates as output a projection of net interest income. The Company also periodically verifies the validity of this approach by comparing actual results with those that were projected in previous models. See Market Risk. ----------- 26 Another technique used by the Company in interest rate management is the measurement of the interest sensitivity "gap," which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets and liabilities, selling securities available for sale, replacing an asset or liability at maturity, or by adjusting the interest rate during the life of an asset or liability. The Company evaluates interest sensitivity risk and then formulates guidelines regarding asset generation and repricing, and sources and prices of off-balance sheet commitments in order to decrease interest sensitivity risk. The Company uses computer simulations to measure the net income effect of various interest rate scenarios. The modeling reflects interest rate changes and the related impact on net income over specified periods of time. The following table illustrates Alabama National's interest rate sensitivity at September 30, 2000, assuming relevant assets and liabilities are collected and paid, respectively, based upon historical experience rather than their stated maturities. INTEREST SENSITIVITY ANALYSIS (Amounts in thousands, except ratios)
September 30, 2000 ------------------------------------------------------------------------ Zero After Three One Through Through Through Three Twelve Three Greater Than Months Months Years Three Years Total --------- ----------- -------- ------------ ---------- Assets: Earning assets: Loans (1)................................. $723,514 $ 239,059 $281,576 $346,217 $1,590,366 Securities (2)............................ 26,462 35,277 72,647 194,813 329,199 Trading securities........................ 246 - - - 246 Interest-bearing deposits in other banks............................. 1,893 - - - 1,893 Funds sold................................ 44,449 - - - 44,449 -------- --------- -------- -------- ---------- Total interest-earning assets........ $796,564 $ 274,336 $354,223 $541,030 $1,966,153 Liabilities: Interest-bearing liabilities: Interest-bearing deposits: Demand deposits....................... $ 78,220 $ - $ - $184,869 $ 263,089 Savings and money market deposits..... 88,457 - - 211,590 300,047 Time deposits (3)..................... 258,848 534,234 78,318 21,378 892,778 Funds purchased.......................... 138,089 - - - 138,089 Short-term borrowings (4)................ 70,589 2,000 - - 72,589 Long-term debt........................... 63,709 5,023 10,066 150 78,948 -------- --------- -------- -------- ---------- Total interest-bearing liabilities.... $697,912 $ 541,257 $ 88,384 $417,987 $1,745,540 -------- --------- -------- -------- ---------- Period gap................................... $ 98,652 $(266,921) $265,839 $123,043 ======== ========= ======== ======== Cumulative gap............................... $ 98,652 $(168,269) $ 97,570 $220,613 $ 220,613 ======== ========= ======== ======== ========== Ratio of cumulative gap to total earning assets.............................. 5.02% -8.56% 4.96% 11.22%
____________________________ (1) Excludes nonaccrual loans of $4,615,000. (2) Excludes available for sale equity securities of $10,362,000. (3) Excludes matured certificates which have not been redeemed by the customer and on which no interest is accruing. (4) Includes treasury, tax and loan account of $2,551,000. 27 Alabama National generally benefits from increasing market rates of interest when it has an asset-sensitive gap and generally benefits from decreasing market rates of interest when it is liability sensitive. Alabama National is liability sensitive through the one-year time frame, except for the zero through three- month period. However, Alabama National's gap analysis is not a precise indicator of its interest sensitivity position. The analysis presents only a static view of the timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those rates are viewed by management as significantly less interest- sensitive than market-based rates, such as those paid on non-core deposits. Accordingly, management believes that a liability-sensitive gap position is not as indicative of Alabama National's true interest sensitivity as it would be for an organization which depends to a greater extent on purchased funds to support earning assets. Net interest income may be affected by other significant factors in a given interest rate environment, including changes in the volume and mix of earning assets and interest-bearing liabilities. Market Risk - ----------- Alabama National's earnings are dependent on its net interest income which is the difference between interest income earned on all earning assets, primarily loans and securities, and interest paid on all interest bearing liabilities, primarily deposits. Market risk is the risk of loss from adverse changes in market prices and rates. Alabama National's market risk arises primarily from inherent interest rate risk in its lending, investing and deposit gathering activities. Alabama National seeks to reduce its exposure to market risk through actively monitoring and managing its interest rate risk. Management relies upon static "gap" analysis to determine the degree of mismatch in the maturity and repricing distribution of interest earning assets and interest bearing liabilities, which quantifies, to a large extent, the degree of market risk inherent in Alabama National's balance sheet. Gap analysis is further augmented by simulation analysis to evaluate the impact of varying levels of prevailing interest rates and the sensitivity of specific earning assets and interest bearing liabilities to changes in those prevailing rates. Simulation analysis consists of evaluating the impact on net interest income given changes from 200 basis points below to 200 basis points above the current prevailing rates. Management makes certain assumptions as to the effect varying levels of interest rates have on certain earning assets and interest bearing liabilities, which assumptions consider both historical experience and consensus estimates of outside sources. With respect to the primary earning assets, loans and securities, certain features of individual types of loans and specific securities introduce uncertainty as to their expected performance at varying levels of interest rates. In some cases, imbedded options exist whereby the borrower may elect to repay the obligation at any time. These imbedded prepayment options make anticipating the performance of those instruments difficult given changes in prevailing rates. At September 30, 2000, mortgage backed securities totaling $190.8 million, or 8.72% of total assets and essentially every loan, net of unearned income, (totaling $1.59 billion, or 72.5% of total assets), carry such imbedded options. Management believes that assumptions used in its simulation analysis about the performance of financial instruments with such imbedded options are appropriate. However, the actual performance of these financial instruments may differ from management's estimates due to several factors, including the diversity and financial sophistication of the customer base, the general level of prevailing interest rates and the relationship to their historical levels, and general economic conditions. The difference between those assumptions and actual results, if significant, could cause the actual results to differ from those indicated by the simulation analysis. Deposits totaled $1.70 billion, or 77.9%, of total assets at September 30, 2000. Since deposits are the primary funding source for earning assets, the associated market risk is considered by management in its simulation analysis. Generally, it is anticipated that deposits will be sufficient to support funding requirements. However, the rates paid for deposits at varying levels of prevailing interest rates have a significant impact on net interest income and therefore, must be quantified by Alabama National in its simulation analysis. Specifically, Alabama National's spread, the difference between the rates earned on earning assets and rates paid on interest bearing liabilities, is generally higher when prevailing rates are higher. As prevailing rates reduce, the spread 28 tends to compress, with severe compression at very low prevailing interest rates. This characteristic is called "spread compression" and adversely effects net interest income in the simulation analysis when anticipated prevailing rates are reduced from current rates. Management relies upon historical experience to estimate the degree of spread compression in its simulation analysis. Management believes that such estimates of possible spread compression are reasonable. However, if the degree of spread compression varies from that expected, the actual results could differ from those indicated by the simulation analysis. The following table illustrates the results of simulation analysis used by Alabama National to determine the extent to which market risk would affect net interest margin for the next twelve months if prevailing interest rates increased or decreased the specified amounts from current rates. Because of the inherent use of estimates and assumptions in the simulation model used to derive this information, the actual results of the future impact of market risk on Alabama National's net interest margin may differ from that found in the table. MARKET RISK (Amounts in thousands)
As of September 30, 2000 As of December 31, 1999 Change in ------------------------------ -------------------------------- Prevailing Interest Net Interest Change from Net Interest Change from Rates Income Amount Income Amount Income Amount Income Amount - -------------------- ------------- ------------- ------------- ------------- +200 basis points $85,029 5.69% $74,125 1.49% +100 basis points 83,168 3.37 73,490 0.62 0 basis points 80,455 - 73,037 - -100 basis points 78,868 (1.97) 71,591 (1.98) -200 basis points 75,935 (5.62) 69,424 (4.95)
Liquidity and Capital Adequacy - ------------------------------ Alabama National's net loan to deposit ratio was 93.0% at September 30, 2000, compared to 91.5% at year-end 1999. Alabama National's liquid assets as a percentage of total deposits were 7.13% at September 30, 2000, compared to 7.87% at year-end 1999. At September 30, 2000, Alabama National had unused federal funds lines of approximately $157.7 million, unused lines at the Federal Home Loan Bank of $142.7 million and an unused credit line with a third party bank of $5.4 million. The Company also has access to approximately $170.9 million via a credit facility with the Federal Reserve Bank of Atlanta. At September 30, 2000, and year-end 1999, there were no outstanding borrowings under this Federal Reserve credit facility. Management analyzes the level of off-balance sheet assets such as unfunded loan commitments and outstanding letters of credit as they relate to the levels of cash, cash equivalents, liquid investments, and available funds lines in an attempt to minimize the possibility that a potential liquidity shortfall will exist. Based on this analysis, management believes that Alabama National has adequate liquidity to meet short-term operating requirements. However, no assurances can be given in this regard. Alabama National's stockholders' equity increased by $15.0 million from December 31, 1999, to $153.2 million at September 30, 2000. This increase was attributable to the following (in thousands): Net income....................................................... $17,767 Dividends........................................................ (6,968) Purchase of treasury stock....................................... (588) Issuance of stock from treasury.................................. 61 Decrease in unrealized loss on securities........................ available for sale, net of deferred taxes...................... 998 Additional paid in capital related to stock based compensation... 3,703 ------- Net increase..................................................... $14,973 ======= 29 A strong capital position is vital to the continued profitability of Alabama National because it promotes depositor and investor confidence and provides a solid foundation for future growth of the organization. The capital of Alabama National and its subsidiary banks (the "Banks") exceeded all prescribed regulatory capital guidelines at September 30, 2000. Under the capital guidelines of their regulators, Alabama National and the Banks are currently required to maintain a minimum risk-based total capital ratio of 8%, with at least 4% being Tier 1 capital. Tier 1 capital consists of common stockholders' equity, qualifying perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less goodwill. In addition, Alabama National and the Banks must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total assets) of at least 3%, but this minimum ratio is increased by 100 to 200 basis points for other than the highest rated institutions. The following table sets forth the risk-based and leverage ratios of Alabama National and each subsidiary bank at September 30, 2000:
Tier 1 Risk Total Risk Tier 1 Based Based Leverage ----------- ---------- -------- Alabama National BanCorporation............. 8.67% 9.91% 6.90% National Bank of Commerce of Birmingham..... 9.40 10.57 7.70 Alabama Exchange Bank....................... 12.75 14.00 7.48 Bank of Dadeville........................... 12.05 13.24 7.96 Citizens & Peoples Bank, N.A................ 12.15 13.40 8.95 Community Bank of Naples, N.A............... 10.50 11.75 7.15 First American Bank......................... 9.48 10.73 8.60 First Citizens Bank......................... 14.07 15.31 7.24 First Gulf Bank............................. 9.07 10.32 7.19 Georgia State Bank.......................... 11.22 12.36 7.63 Public Bank................................. 9.79 10.84 7.89 Required minimums........................... 4.00 8.00 4.00
Item 3 - Quantitative and Qualitative Disclosures about Market Risk The information required by this item is contained in Item 2 herein under the headings "Interest Rate Sensitivity" and "Market Risk". Part II Other Information Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 3.1 - Certificate of Incorporation (filed as an Exhibit to Alabama National's Registration Statement on Form S-1 (Commission File no. 33-83800) and incorporated herein by reference). Exhibit 3.1A - Certificate of Amendment of Certificate of Incorporation (filed as an Exhibit to Alabama National's Annual Report of Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). Exhibit 3.1B - Certificate of Merger (filed as an Exhibit to Alabama National's Annual Report of Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). Exhibit 3.1C - Certificate of Amendment of Certificate of Incorporation dated April 23, 1998 (filed as an Exhibit to Alabama National's Report of Form 10-Q for the quarter ended March 31, 1998 and incorporated herein by reference). Exhibit 3.2 - Bylaws (filed as an Exhibit to Alabama National's Registration Statement on Form S-1 (Commission File No. 33-83800) and incorporated herein by reference). Exhibit 10 - National Bank of Commerce Building Amended, Restated and Consolidating Lease. Exhibit 11 - Computation of Earnings Per Share Exhibit 27 - Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K None. 30 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 thereunto duly authorized. ALABAMA NATIONAL BANCORPORATION Date: November 10, 2000 /s/ John H. Holcomb, III ----------------- ---------------------------------------- John H. Holcomb, III, its Chairman and Chief Executive Officer Date: November 10, 2000 /s/ William E. Matthews, V. ----------------- ---------------------------------------- William E. Matthews, V., its Executive Vice President and Chief Financial Officer 31 EX-10 2 0002.txt AMENDED, RESTATED & CONSOLIDATING LEASE EXHIBIT 10 NATIONAL BANK OF COMMERCE BUILDING AMENDED, RESTATED AND CONSOLIDATING LEASE ----------------------------------------- THIS AMENDED, RESTATED AND CONSOLIDATING LEASE ("this Lease") is entered into as of June 1, 2000 by WOODWARD PROPERTIES, LLP, a limited liability partnership whose present address is P.O. Box 43327, Birmingham, Alabama 35243 ("Lessor"), and NATIONAL BANK OF COMMERCE OF BIRMINGHAM, a national banking association whose present address is P.O. Box 10686, Birmingham, Alabama 35202 ("Lessee"). Recitals -------- A. Lessor and Lessee have entered into the following leases and/or agreements relating to space in the Building described below (the "Original Leases"): (i) Lease dated December 17, 1984, relating to space on the Basement, First, Second and Third Floors, as amended by that certain First Amendment thereto dated August 25, 1993, and as further amended by that certain Second Amendment thereto dated June 21, 1995; (ii) Lease dated as of December 17, 1984, beginning July 1, 1985 relating to space on the Fourth Floor, as amended by that certain First Amendment thereto dated August 25, 1993, and as further amended by that certain Second Amendment thereto dated June 21, 1995; (iii)Lease dated July 1, 1995, relating to space on the Eighth Floor; and (iv) That certain Letter Agreement dated April 2, 1999 relating to space on the Sixth Floor. B. Lessee has requested Lessor, and Lessor has agreed, to make certain modifications to the Original Leases and to permit Lessee to lease certain space located on the Seventh Floor of the Building, and, in connection therewith, Lessor and Lessee have agreed to amend, restate and consolidate the Leases in their entirety, as more particularly set forth herein. Agreement --------- NOW, THEREFORE, in consideration of the premises, Lessor and Lessee hereby agree to amend and restate the Original Leases in their entirety as follows: 1. Demise. Lessor, upon the terms and conditions hereinafter expressed, ------ hereby leases to Lessee the following described space (the "Premises") in the National Bank of Commerce Building situated on the south side of First Avenue North, between 19th and 20th Streets in the City of Birmingham, Alabama (the "Building"), which Premises shall consist of a total of 70,565 rentable square feet: All rentable space on the Basement, First, Second, Third, Fourth, Sixth, Seventh and Eighth floors of the Building. 2. Term. This Lease shall be for a term of 240 months (the "Term"), ---- beginning June 1, 2000 ("Commencement Date") and ending May 31, 2020. 3. Use. The Premises are leased for use and occupancy by Lessee for the --- following and no other use or purpose: Commercial Bank. Lessor makes no representation or warranty that the Premises are suitable for the use or uses for which the same are leased. 4. Rent; CPI Adjustment; Triple Net Lease. -------------------------------------- (a) During the term of this Lease, Lessee agrees to pay to the Lessor monthly in advance on the first day of each calendar month, rent composed of (i) base rent (the "Base Rent") in an amount equal to one-twelfth of the amount determined by multiplying the applicable base rental rate calculated under this Paragraph 4(a) (the "Base Rental Rate") times the number of rentable square feet in the Premises specified in Paragraph 1 above, and (ii) an Operating Cost Allowance (as defined in Paragraph 4(b)), which shall initially be $5.25 per square foot, subject to adjustment as set forth in Paragraph 4(b). Lessee shall pay said rent, and all other sums of money as shall become due from and payable by Lessee to Lessor hereunder as and when the same shall become due and payable, without demand therefor and without any abatement, deduction (except as specifically set forth in this Lease) or set off whatsoever, at CRM, 2213 Morris Avenue, Suite 200, Birmingham, Alabama 35203, or at such other address as Lessor may from time to time direct by written notice to Lessee. The applicable Base Rental Rate shall be determined as follows: (1) From the date of this Lease until May 31, 2005, the Base Rental Rate shall be $9.75 per square foot per annum. (2) Commencing on June 1, 2005, and on June 1 of each five-year anniversary date thereafter, the Base Rental Rate shall be subject to adjustment in accordance with changes in the Consumer Price Index ("CPI") as published by the Bureau of Labor Statistics for All Urban Consumers (CPI-U), 1982-84 = 100. The Base Rental Rate payable for each five-year period from June 1 through May 31 in the fifth year thereafter (a "Rental Period"), commencing June 1, 2000, shall be an amount equal to the initial Base Rental Rate of $9.75 per square foot, -2- multiplied by a fraction, the denominator of which shall be the CPI for May, 2000 and the numerator of which shall be the CPI for May of the calendar year in which the Rental Period commences. (3) It is the intention of the parties that the determination of the Base Rental Rate shall not be distorted by any changes in the method by which the CPI is determined or the form in which the CPI is presented, including but not limited to, changes in the reference year on which the CPI is based or changes in the components of the CPI. Accordingly, if the method by which the CPI is determined or the form in which the CPI is presented is hereafter changed, the index used in the numerator of the fraction described above shall be adjusted so that such index is determined and presented on the same basis as the CPI used in the denominator of such fraction. To the extent possible, such adjustment shall be based on any adjustment factor published by the U.S. Department of Labor or any successor governmental agency. If for any reason the index used in the numerator of such fraction cannot be determined on the same basis as the CPI used in the denominator of such fraction, or if the CPI is not hereafter published, the Base Rental Rate shall be determined by reference to the index of consumer prices then published by the U.S. Government, or an agency thereof, that most nearly resembles the CPI as in effect for May, 2000. (4) Lessor shall determine the adjusted Base Rental Rate payable for each Rental Period, commencing June 1, 2000, and shall give Lessee notice of any adjustment in the Base Rental Rate payable for such Rental Period not less than thirty (30) days' prior to the first day of such Rental Period. Such notice shall include the calculations on which the adjustment in the Base Rental Rate was based. Commencing the first day of the Rental Period, Lessee shall make payments of Base Rent based on the revised Base Rental Rate until notified by Lessor of a new revised Base Rental Rate as set forth above. Lessor's failure to notify Lessee prior to the commencement of a Rental Period of an adjustment in the Base Rental Rate applicable to such Rental Period shall not release Lessee from paying, nor diminish Lessee's obligation to pay, Base Rent for the Rental Period at the adjusted Base Rental Rate, within a reasonable period of time after Lessee receives notice of the adjusted rate, effective for the entire Rental Period. (b) The monthly rental rate set out in Paragraph 4(a) above shall be subject to adjustment as follows (provided, that no adjustment shall be made that would result in lower rental rate than that set out in Paragraph 4(a) above (except as set forth in Paragraph 4(b)(3) below): (1) As used in this Paragraph 4(b): (i) "Operating Costs Allowance" shall mean $5.25 per rentable ------------------------- square foot of the Building per Operating Year. -3- (ii) "Operating Costs" means the actual cost to Lessor for any --------------- Operating Year for operating expenses of the Building, which shall include, but not necessarily be limited to, the items as listed in ANNEX A, attached hereto and by reference herein made becomes ------- a part of this Lease. (iii)"Operating Year" shall mean a 12-month period beginning -------------- on January 1 in each year and ending on December 31 in that year. (2) The following rent adjustments shall be made at the end of the Operating Year that ends December 31, 2000, and at the end of each succeeding Operating Year for the remainder of the term of this Lease. (i) If the Operating Costs for any Operating Year are more than the Operating Costs Allowance, Lessee shall pay to Lessor within 15 days after receipt of written notice thereof from Lessor, as a retroactive adjustment of the monthly rent on this Lease for each month (or any part of a month) that this Lease was in effect during such Operating Year, an amount equal to one- twelfth (1/12) of the amount by which the actual Operating Costs for such Operating Year exceeded the sum of the Operating Costs Allowance and any estimated excess Operating Costs paid by Lessee for such Operating Year under Paragraph 4(b)(2)(ii) below, divided by the rentable square feet in the Building, multiplied by the number of rentable square feet in the Premises. (ii) If the Operating Costs for any Operating Year are more than the Operating Costs Allowance, in order to cover the estimated excess Operating Costs for the next succeeding Operating Year, the monthly rent to be paid by Lessee on the first day of each month during such Operating Year shall be increased by an amount equal to one-twelfth (1/12) of the amount by which the Operating Costs exceeded the Operating Costs Allowance in the previous Operating Year, divided by the rentable square feet in the Building, multiplied by the number of rentable square feet in the Premises. However, if the actual Operating Costs, as determined at the end of that Operating Year, should be less than the estimated excess Operating Costs included in the monthly rental for that year, the excess Operating Costs paid during such year shall be credited toward the rent for the next succeeding Operating Year. (iii)For purposes of this Paragraph 4(b) it is agreed that the number of rentable square feet in the Premises on the date of this Lease is 70,565 and the total number of rentable square feet in the Building is 91,643. -4- 5. Possession. Lessor and Lessee hereby acknowledge that, as of the date ---------- of this Lease, Lessee is in possession of the Premises, and Lessee accepts the Premises "as-is". 6. Alterations. Lessee shall make no alterations, additions, ----------- installations, substitutions, improvements or decorations in or to the Premises without the express prior written consent of Lessor. All fixtures, equipment, improvements and appurtenances attached to or built into the Premises at the commencement of or during the term of this Lease, whether or not in whole or in part by or at the expense of Lessee, shall be and remain a part of the Premises, shall be deemed the property of Lessor and shall not be removed by Lessee, except as may be expressly otherwise provided in this Lease. 7. Repairs and Maintenance. ----------------------- (a) Lessee shall at all times during the Term at its own cost and expense repair, maintain, keep and make replacements to the Premises, and all equipment, fixtures and mechanical systems within or necessarily incidental to the Premises and the Building, and any other improvement now or hereafter made to the Premises and the Building in good order and repair, as a careful owner would do, and Lessee covenants to perform such maintenance, to effect such repairs and replacements at its own cost and expense as and when necessary or reasonably required so to do by Lessor (provided, however, Lessee shall not be required to -------- ------- make any capital repairs or improvements that relate exclusively to space located on the fifth (5th) and ninth (9th) floors of the Buidling). (b) Lessee shall keep and maintain the Premises and the Building in first class order, condition and repair throughout the term of this Lease, as same may be renewed, including, without limitation, the roof, ceiling, walls, floor and foundation of the Building, and all trade fixtures and other fixtures and equipment contained therein (including, but not limited to, all elevators located in the Building), the exterior and interior portions of all doors, windows, glass, plate glass, store fronts, locks, hardware, signs, or any casing, frames or caulking which support or surround same, any damages caused by wood-destroying organisms, and all plumbing, sewage, sprinkler, electrical, wiring, heating, ventilating and air conditioning equipment and systems. Any and all such repairs shall be performed at Lessee's sole expense with materials and labor of such kind and quality equal or superior to the original work. Lessee shall permit no waste, damage or injury to the Premises or the Building or any part or system thereof. Lessee's obligation under this Paragraph 7(b) shall include the obligation to repair all structural and non-structural items, exterior and interior items, including, without limitation, the sidewalks, driveways, parking areas and parking lots, and all landscaped areas, lawns, grounds and streets in front of or appurtenant to same (provided, however, -------- ------- Lessee shall not be required to make any capital repairs or improvements that relate exclusively to space located on the fifth (5th) and ninth (9th) floors of the Buidling). Lessee shall not violate, nor permit Lessor or the Premises to be in violation of, any Laws, and Lessee shall pay any and all costs and expenses incident to such compliance, and perform all repairs related thereto, and Lessee shall and does hereby indemnify and hold harmless Lessor from and against any and all costs, expenses, claims and damages by reason of any violations of any Laws affecting or imposed upon the Premises or any portion -5- thereof, whether or not same relate to or be for a period prior to the Commencement Date of this Lease, or relate to or involve any extraordinary or ordinary, or structural or non-structural, change and irrespective of whether such Laws or Repairs be of a kind that might be deemed to be within the contemplation of the parties hereto. In the event Lessee fails to so make such Repairs, as required hereunder, Lessor may do so, during the term hereby granted as same may be renewed, or after the expiration thereof, and all costs and expenses consequent or in any way related thereto, shall be promptly repaid by Lessee to Lessor as additional rent hereunder. (c) Lessee shall at all times keep the Premises and the Building in neat, clean and sanitary condition and will not allow any refuse or garbage, or cartons or like material resulting from deliveries, or loose or waste material to accumulate in or about the Premises or the Building. All trash, rubbish, waste material and other garbage must be disposed of by Lessee on a regular basis, at Lessee's sole expense. In the event Lessee fails to clean in accordance with this Paragraph 7 upon written notice from Lessor so to do, Lessor may clean the same and the cost thereof will be paid by Lessee to Lessor upon demand as additional rent. (d) Before commencing any material repairs, replacements, maintenance, alteration, decoration or improvements set out above, or elsewhere referred to in this Lease, Lessee shall obtain Lessor's written approval, which approval shall not be unreasonably withheld or denied, and will, if required by Lessor to do so, submit plans and specifications therefor. Any repairs, replacements, maintenance, alterations, decorations or improvements so done by Lessee must be carried out in a good and workmanlike manner. (e) If Lessee refuses or neglects to repair properly as required hereunder and to the reasonable satisfaction of Lessor, Lessor may make such repairs without liability to Lessee for any loss or damage that may accrue to Lessee's merchandise, fixtures or other property or to Lessee's business by reason thereof, and upon completion thereof, Lessee shall pay Lessor's actual reasonable costs in the circumstances for making such repairs, immediately upon presentation of a bill therefor. (f) Lessee waives the provisions of any applicable law or regulation that would require Lessor to maintain the Premises in a tenantable condition or would provide Lessee with the right to make repairs and deduct the cost of those repairs from the rent. 8. Compliance with Laws. Lessee, at its expense, shall comply with all -------------------- laws, orders and regulations of federal, state, county and local authorities (collectively, "Laws"), and with any direction of any public officer or officers, pursuant to law, which shall impose any violation, order or duty upon Lessor or Lessee with respect to the Premises, or the use or occupation thereof, provided such violation, order or duty arises from or results from Lessee's failure to comply with Lessee's covenants or agreements in this Lease or from Lessee's negligence or from the use of the Premises in a manner contrary to the purposes for which the same are leased to Lessee. -6- 9. Lessee's Property. ----------------- (a) All business and trade fixtures, machinery and equipment, communications equipment and office equipment, installed in the Premises by Lessee without expense to Lessor, and all furniture, furnishings and other articles of movable personal property owned by Lessee and located in the Premises, shall be and shall remain the property of Lessee and may be removed by Lessee at any time during the term of this Lease; provided (i) that Lessee shall repair or pay the cost of repairing any damage to the Premises or to the Building resulting from such removal, (ii) that Lessee is not in default under the terms of this Lease, and (iii) that the provisions of this Paragraph 9(a) shall be subject to the provisions of Paragraph 23 below. (b) Any items of Lessee's property (except money, securities and other like valuables) which shall remain in the Premises after the date fixed for termination of this Lease or after a period of ten days following an earlier termination date, may, at the option of Lessor, be deemed to have been abandoned, and in such case either may be retained by Lessor as its property or may at Lessee's expense be disposed of, without accountability, in such manner as Lessor may see fit. 10. Insurance. --------- (a) Lessor shall, during the whole of the Term and during such other time as Lessee occupies the Premises, take out and maintain the following insurance at Lessor's sole expense (subject to reimbursement as an Operating Expense as set forth in Paragraph 4(b) above), in such form and with such companies, in such amounts, and with such deductibles, as Lessee may approve in its reasonable discretion: (i) covering the Building and other improvements that are a part of the Premises, a policy of standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, with liability limits of not less than Thirteen Million Dollars ($13,000,000) with guaranteed full replacement value; (ii) comprehensive general liability including non-owned automobile liability insurance against claims for bodily injury, including death and property damage or loss arising out of the use or occupation of the Building and the Premises, or Lessee's business on or about the Premises; such insurance must be in the joint name of Lessee and Lessor so as to indemnify and protect both Lessee and Lessor and must contain a "cross liability" or "severability of interests" clause so that Lessor and Lessee may be insured in the same manner and to the same extent as if individual policies had been issued to each, and must be for the amount of not less than One Million Dollars ($1,000,000) combined single limit or such other amount as may be reasonably required by Lessor from time to time, and such comprehensive general liability insurance must, for Lessee's benefit only, include contractual liability insurance in a form and of a nature broad enough to insure the obligations imposed upon Lessee under the terms of this Lease; and -7- (b) Lessee shall, during the whole of the Term and during such other time as Lessee occupies the Premises, take out and maintain, at Lessee's sole expense, in such form and with such companies, in such amounts, and with such deductibles, as Lessor may approve in its reasonable discretion, all-risk insurance upon its furniture, fixtures and improvements and upon all other property in the Premises owned by Lessee or for which Lessee is legally liable, including business interruption and insurance upon all glass and plate glass in the Premises against breakage and damage from any cause, all in an amount equal to the full replacement value thereof. (c) If any insurance policy upon the Premises, or any part thereof, is canceled or is threatened by the insurer to be canceled, or the coverage thereunder reduced in any way by the insurer by reason of the use and occupation of the Premises or any part thereof by Lessee or by any assignee or subtenant of Lessee, or by anyone permitted by Lessee to be upon the Premises, and if Lessee fails to remedy the condition giving rise to cancellation or reduction of coverage within forty-eight (48) hours after notice thereof by Lessor, Lessor may remedy the condition giving rise to such cancellation, threatened cancellation or reduction, and Lessee will immediately pay the cost thereof to Lessor which cost may be collected by Lessor as additional rent. 11. Destruction or Damage. --------------------- (a) In case of damage to or destruction of the Premises or the Building by fire or other casualty, Lessee shall give immediate notice thereof to Lessor, and Lessor shall, if Lessor elects to repair, cause the damage to be repaired with reasonable dispatch at the expense of Lessor, due allowance being made for any delay which may arise by reason of adjustment of loss under insurance policies on the part of either Lessor or Lessee or by reason of any other cause beyond Lessor's control. If Lessor shall elect not to repair, this Lease, at the option of Lessor, may be terminated upon written notice to Lessee of Lessor's decision to terminate. Unless repairs are commenced by Lessor within sixty days from the date of any such destruction or damage, Lessee may cancel this Lease by giving notice thereof to Lessor promptly upon the expiration of said sixty day period. (b) Provided Lessor's right of full recovery under its insurance policies is not prejudiced, Lessor hereby waives any and all right of recovery which it might otherwise have against Lessee, Lessee's servants, agents, employees and invitees, for loss or damage occurring to the Building and the fixtures, appurtenances and equipment therein, to the extent the same is covered by Lessor's insurance, notwithstanding that such loss or damage may result from the negligence or fault of Lessee, Lessee's servants, agents, employees or invitees. Provided that Lessee's right of full recovery under Lessee's insurance policies is not prejudiced, Lessee hereby waives any and all right of recovery which Lessee might otherwise have against Lessor, its servants, agents, employees or invitees and against every other tenant in the Building who shall have executed a similar waiver, for loss or damage to Lessee's furniture, furnishings, fixtures and other property, to the extent that same is covered by Lessee's insurance, notwithstanding that such loss or damage may result from the negligence or fault of Lessor, its servants, agents, employees or invitees, or such other tenant. -8- (c) The rent shall, to the extent the Premises have been rendered untenantable, be proportionately abated from the date of any fire or casualty not caused by the fault or negligence of Lessee, Lessee's servants, agents, employees or invitees, until the Premises are repaired, and shall be adjusted as of the date of the fire or casualty in the event this Lease is terminated pursuant to Paragraph 11(a) hereof. 12. Taxes and Assessments. Lessor shall pay (subject to reimbursement as --------------------- an Operating Expense as set forth in Paragraph 4(b) above) to the appropriate public authorities, on or before the last day on which payment may be made without penalty or interest, all taxes, assessments, permit, inspection, and license fees, and other public charges of whatever nature that are assessed against the Premises and the Building or arise because of the occupancy, use or possession of the Premises (including but not limited to taxes on, or which shall be measured by, any rents or rental income), subsequent to the commencement of the Term, and all installments of assessments that are due during the Term. 13. Services. Subject to reimbursement under Paragraph 4(b) hereof, -------- Lessor will, so long as Lessee is not in default under any of the provisions of this Lease, at the proper seasons and during reasonable hours, furnish the following: (a) Heating and air conditioning service. (b) Continuous passenger elevator service. (c) General cleaning and janitor services, but not including cleaning of drapes and furniture, except for normal vacuuming and dusting. (d) Electric current for lighting and operation of normal office equipment and replacement of fluorescent tubes and incandescent bulbs in Building standard lighting fixtures. (e) Water, gas, telephone and other utilities used or consumed in the Premises (f) Cold drinking water in the corridor on each floor of the Building. (g) Men's and women's restrooms on each floor and toilet supplies and hot and cold water therefor. Lessee shall be responsible for the cost of power or additional air conditioning required for special equipment that may be installed by Lessee or because of unusually large number of personnel in the Premises. Such cost shall be determined by separate meter, by agreement based on load factors or by such other methods as may be agreed upon by Lessor and Lessee. 14. Eminent Domain. If the whole or any part of the Premises or of the -------------- Building (except any part of the Building the taking of which would not interfere with maintenance or operation of the Building) shall be taken by federal, state, county, municipal or other authority -9- for public use or under any statute, or by right of eminent domain, Lessor shall have the right, at its option to be exercised by written notice to Lessee, to terminate this Lease; upon the exercise by Lessor of such right of termination all rights of Lessee hereunder shall immediately cease and terminate, as of the date of such taking, and Lessee shall not be entitled to any part of the award that may be made for such taking nor to any damages therefor, except that the rent shall be adjusted as of the date of such termination. 15. Lessee Shall Discharge All Liens. Lessee shall have no authority to -------------------------------- allow any liens of any kind to be placed upon the Premises. Lessee shall promptly pay all its contractors and materialmen and shall do any and all things necessary so as to prevent any liens attaching to the Premises. Should any such lien be made or filed, Lessee shall discharge the same within ten (10) days thereafter at Lessee's expense and shall indemnify and hold harmless Lessor therefrom. Lessor may require, at Lessor's sole option, that Lessee provide to Lessor, at Lessee's sole cost and expense, a lien and completion bond acceptable to Lessor in an amount equal to at least one and one-half (1 1/2) times the estimated costs of any improvements, additions or alterations in the Premises which Lessee desires to make, to ensure Lessor against any liability for mechanics' and materialmen's liens and to ensure completion of the work. 16. Personal Property Taxes. Lessee shall promptly pay all personal ----------------------- property taxes and other taxes levied against Lessee's trade fixtures, fixtures, inventory, equipment, supplies and merchandise upon the Premises and against Lessee's business. When possible, Lessee shall cause such trade fixtures, fixtures, inventory, equipment, supplies and merchandise and all other personal property to be assessed and billed separately from the real property of Lessor. 17. Assignment, Subletting, etc. ---------------------------- (a) Lessee shall not without the express prior written consent of Lessor assign, mortgage or otherwise encumber or transfer this Lease or sublease, or permit any other person to use or occupy, all or any part of the Premises. The consent by Lessor to any assignment, mortgage, encumbrance, other transfer, sublease or use or occupancy by others shall not relieve Lessee of the necessity of obtaining the express prior written consent of Lessor to any other or further assignment, mortgage, encumbrance, transfer, sublease, or use or occupancy by others. No assignment, mortgage, encumbrance, other transfer, sublease or use of occupancy by others, with or without consent of Lessor, shall release Lessee from Lessee's primary liability for performance of all of Lessee's obligations and agreements under this Lease. (b) If this Lease is assigned or otherwise transferred, whether or not in violation of the provisions of this Lease, Lessor may collect rent from the assignee or other transferee. If the Premises or any part thereof be sublet or used or occupied by anyone other than Lessee, whether or not in violation of the provisions of this Lease, Lessor may, after default by Lessee and expiration of Lessee's time to cure such default, collect rent from the subtenant or occupant. In either event, Lessor may apply the net amount collected to the rents herein reserved, but no such collection shall be deemed a waiver of any of the provisions of Paragraph 17(a) hereof, or the acceptance by Lessor of the assignee, other transferee, subtenant or occupant as Lessee, or a -10- release of Lessee from the further performance by Lessee of Lessee's obligations under this Lease. 18. Access and Changes. ------------------ (a) Lessor may enter the Premises at reasonable hours (or at any time in the event of an emergency) to make repairs to the Premises or to any adjoining space, to inspect, maintain and clean the Premises, and to exhibit the Premises to prospective Lessees, purchasers or mortgagees. (b) Lessor may erect, use and maintain pipes, ducts and conduits in and through the Premises, provided the same are installed adjacent to or concealed behind walls and ceilings of the Premises and are installed at such times, by such methods and at such locations as will not materially interfere with or impair Lessee's use of the Premises or damage the appearance thereof. (c) Lessor reserves the right to make, at any time without incurring any liability to Lessee therefor, such other changes in or to the Building and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, elevators, escalators and stairways thereof, as it may deem necessary or desirable. (d) Lessor shall be allowed to take all material into and upon the Premises that may be required for the work, repairs or changes to be made by Lessor as the same is required for such purpose without being deemed thereby to have evicted Lessee in whole or in part, and the rent reserved shall in no wise abate while said repairs or alterations are being made by reason of loss or interruption of the business of Lessee because of the prosecution of any such work, provided Lessor diligently proceeds therewith and exercises reasonable diligence so as to minimize disturbance to Lessee. 19. Management of Building. Lessor hereby engages Lessee as its sole and ---------------------- exclusive management agent for the Term of this Lease, to operate and manage the Building, together with any and all expansions thereof and additions thereto, and Lessee hereby accepts such engagement, all upon and subject to the terms and provisions hereinafter set forth. Lessee agrees to perform the following services, and Lessor hereby authorizes Lessee, subject to the limitations set forth herein, to take such action as may be necessary or desirable in connection therewith, to-wit: (a) Lessee shall use its best efforts to manage, operate and maintain the Building in an efficient manner consistent with other first-class office buildings located in the Birmingham, Alabama market. Lessee shall act in a fiduciary capacity with respect to the proper protection of and accounting for the Building and the rents and other income from and proceeds of the Building. Lessee shall deal at arm's length with all third parties, and serve Lessor's interest at all times. (b) Lessee shall collect all rents and other income from the Building (other than the amounts due to be paid to Lessor by Lessee under this Lease) when due, and when necessary, as directed by Lessor, Lessee shall institute any and all legal actions or proceedings to effect such collections and to evict delinquent Lessees; and Lessee agrees to employ reasonable efforts -11- normally used by real estate agents of office buildings located in the Birmingham, Alabama area to attempt to collect such income, although Lessee shall not be liable for any failure to so collect, nor for any legal or other out-of-pocket expenses, all of which shall be paid by Lessor. Lessee shall use its best efforts to insure compliance by Lessees with their respective lease obligations. Lessee shall not terminate any tenant lease, or alter or waive any material term of any tenant lease, without the express prior written approval of Lessor. (c) Subject to the provisions of Subparagraph (d) below, Lessee shall deposit all monies received by Lessee for or on behalf of Lessor (less any sums properly deducted by Lessee pursuant to any of the provisions of this Lease) in a special account for the Building in a bank approved by Lessor (the "Depository Account"), which funds shall not be mingled with funds of Lessee, any affiliate of Lessee or any other third party. Such Depository Account shall be used exclusively for the purpose of depositing rents and other funds collected from the operation of the Building. Lessor shall have the right to approve any changes of the depository bank and shall have access to, and the right to draw against, the Depository Account. Lessee's authority to draw against the Depository Account shall be terminable at any time by Lessor without notice to Lessee. Lessee shall deduct from funds in the Depository Account any amounts required to be paid by lessees under any tenant leases, relating to, among other things, taxes, assessments, utility costs, repairs, replacement, maintenance costs and any other Operating Expenses (as such term is defined is such tenant leases). (d) Any balance remaining in the Depository Account after payment of expenses as herein provided shall be remitted from the Depository Account to Lessor monthly or as otherwise required by Lessor. (e) Unless and until Lessor directs Lessee to the contrary, Lessee, acting for and on behalf of and in the name of Lessor, shall enter into and supervise the performance of any and all contracts and agreements that Lessee may deem necessary or desirable to provide any repairs, alterations, maintenance, utilities and other services to or for the Building. (f) Within twenty (20) days after the end of each month, Lessee shall cause to be submitted to Lessor, at such place or places as may be designated by Lessor, an itemized account of income and expense, together with such other accounting and financial information and services as Lessee and Lessor may agree upon. Lessee shall make information and data supporting such statements available to Lessor and its authorized representatives, for examination and copying, during normal business hours. Lessee shall maintain adequate and separate books and records for the Building and maintain sufficient supporting documentation therefor. All books, records, computer information and other documents maintained by Lessee with respect to the Building shall at all times be and remain the property of Lessor. Lessor will at all times have the right to conduct examinations, without notification, of the books and records maintained for Lessor by Lessee with respect to the Building, no matter where such books and records are located. Lessor will also have the right to perform, at Lessor's sole expense, any and all additional audit tasks relating to Lessee's activities at the office of Lessee. -12- (g) Lessee shall perform other normal business functions and otherwise operate and manage the affairs of the Building in accordance with and as limited by this Lease. (h) Lessee shall perform such other services as may be mutually agreed from time to time by Lessor and Lessee. Notwithstanding the foregoing, Lessor and Lessee hereby acknowledge and agree that (i) Lessee may delegate to a real estate management company (which company must be mutually acceptable to Lessor and Lessee in their reasonable discretion) the functions set forth in this Paragraph 19; provided, however, in -------- ------- the event that Lessee does delegate such functions to another entity, Lessee shall remain primarily responsible for the matters set forth above and Lessee shall be liable for any and all matters arising from the actions or inactions of such entity; and (ii) in the event that a Change in Control (as such term is defined below) occurs with respect to either the Lessee or its parent, Alabama National Bancorporation, a Delaware corporation, Lessor shall have the right to terminate, upon ten (10) days' prior written notice, Lessee's rights and obligations under this Section 19. For purposes of this Section 19, a "Change in Control" of an entity means (i) any transaction, whether by merger, consolidation, asset sale, tender offer, reverse stock split, or otherwise, which results in the acquisition or beneficial ownership (as such term is defined under rules and regulations promulgated under the Securities Exchange Act of 1934, as amended) by any person or entity or any group of persons or entities acting in concert, of fifty percent (50%) or more of the outstanding shares of Common Stock of such entity; or (ii) the sale of all or substantially all of the assets of such entity; or (iii) the liquidation of such entity. 20. Non-Liability and Indemnification. --------------------------------- (a) Neither Lessor nor any agent or employee of Lessor shall be liable for death of or any injury or damage to Lessee or any other person or for any damage to, or loss (by theft or otherwise) of, any property of Lessee or of any other person, irrespective of the cause of such death, injury, damage or loss, unless caused by or due to the negligence of Lessor, its agents or employees without contributory negligence on the part of Lessee or such other person. (b) Lessee shall indemnify and save harmless Lessor and its agents against and from (A) any and all claims arising from (i) the conduct or management of the Premises or of any business therein, (ii) any work or thing whatsoever done, or any condition created (other than by Lessor) in or about the Premises during the term of this Lease or during the period of time, if any, prior to the beginning of the term hereof that Lessee may have been given access to the Premises, (iii) any negligent or otherwise wrongful act or omission of Lessee or any of Lessee's subtenants or licensees or Lessee's or their employees, agents or contractors, or (iv) any breach, violation or non-performance by Lessee, or Lessee's agents, servants or employees, of any covenant or provision of this Lease, and (B) all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon. -13- 21. Waivers. ------- (a) In the event that Lessee is in arrears in payment of rent hereunder, Lessee waives Lessee's right, if any, to designate the items against which any payments made by Lessee are to be credited, and Lessee agrees that Lessor may apply any payments made by Lessee to any items Lessor sees fit, irrespective of and notwithstanding any designation or request by Lessee as to the items against which any such payments shall be credited. The receipt by Lessor of rent or any other payment, or a lesser amount of rent or such payment due hereunder, with knowledge of breach of any obligation of this Lease shall not be deemed a waiver of such breach. No payment by Lessee or receipt by Lessor of rent or any payment in a lesser amount than due hereunder shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance or pursue any other remedy in this Lease or by law provided. (b) The failure of either party to insist in any one or more instances up on the strict performance of any one or more of the obligations of this Lease, or the Rules and Regulations hereof, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease, or the Rules and Regulations hereof, or of the right to exercise such election, but the same shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. No executory agreement hereafter made between Lessor and Lessee shall be effective to change, modify, waive, release, discharge, terminate or effect an abandonment of this Lease, in whole or in part, unless such executory agreement is in writing, refers expressly to this Lease and is signed by the party against whom enforcement of the change, modification, waiver, release, discharge or termination or effectuation of abandonment is sought. 22. Inability to Perform. If, by reason of (a) strike, (b) other labor -------------------- troubles, (c) governmental pre-emption in connection with a national emergency, (d) any rule, order or regulation of any governmental agency, (e) conditions of supply or demand which are affected by war or other national, state or municipal emergency, or (f) other cause beyond Lessor's control (whether or not similar to any of the causes listed in (a) through (f) above), Lessor shall be unable to fulfill its obligations under this Lease (including but not limited to delivery of possession of the Premises and completion of Lessor's Work and Lessee's Work) or shall be unable to supply any service which Lessor is obligated to supply, this Lease and Lessee's obligation to pay rent hereunder shall in no wise be affected, impaired or excused, and Lessor shall not be liable to Lessee or to anyone else for damages for or on account of any failure of Lessor to perform because of any such inability. 23. Lien. Lessor shall have, and is hereby given and granted a lien (in ---- addition to the statutory lien existing in favor of Lessors) on all of Lessee's furniture, fixtures, goods, merchandise and effects at any time on or moved into the Premises during the term of this Lease, to secure the payment of the rent and any and all other indebtedness which shall accrue to Lessor under the terms of this Lease. The lien hereby granted shall be and remain effective -14- notwithstanding the removal from the Premises of any part or all of such property of Lessee. Lessee hereby represents to Lessor, as an inducement to Lessor to enter into this Lease, that all furniture, fixtures, goods, merchandise and effects which have been or are to be moved into or used on the Premises under this Lease belong to Lessee. 24. Exemptions and Attorney's Fee. As to or against the payment of rent ----------------------------- and any other indebtedness which shall accrue to Lessor under the terms of this Lease, Lessee waives all exemptions as to personal property allowed Lessee under the constitution and laws of the State of Alabama, or any other State, and agrees to pay all costs of collecting the same, including a reasonable attorney's fee. In the event of the breach by Lessee of any one or more of the terms and conditions of this Lease, Lessor shall be and is hereby authorized to employ attorneys to do any and all things deemed by Lessor or such attorneys necessary to protect, conserve or promote the interests of Lessor under this Lease, including the institution of legal proceedings against Lessee of any nature, and including suit for damages for any such breach, and Lessee agrees in that event to pay a reasonable attorney's fee to said attorneys for such services, which fee shall be secured by the lien granted to Lessor in Paragraph 23 above. 25. Curing Lessee's Defaults. If Lessee shall default in the performance ------------------------ of any of Lessee's obligations under this Lease, Lessor, without thereby waiving such default, may (but shall not be obligated to) perform the same for the account and at the expense of Lessee, without notice in a case of emergency, and in any other case if such default continues after the expiration of (i) ten days from the date Lessor gives Lessee notice of intention so to perform, or (ii) the applicable grace period provided elsewhere in this Lease for cure of such default, whichever occurs later. All costs, expenses and disbursements of every kind and nature whatsoever incurred by Lessor in connection with any such performance by it for the account of Lessee, including any expenses incurred for any property, material, labor or services provided, furnished or rendered, by Lessor or at its instance to Lessee, together with any interest thereon, shall be paid by Lessee to Lessor within ten days after Lessor's rendition of each bill therefor to Lessee. 26. Events of Default. Each of the following shall constitute an event of ----------------- default by Lessee: (a) The failure of Lessee to pay at the time and place when and where due any installment of rent or any other payment payable by Lessee to Lessor pursuant to this Lease; (b) The vacating (except in event of casualty) or abandonment of the Premises by Lessee; (c) The violation by Lessee of any other covenant, term or provision in this Lease binding upon Lessee and the failure of Lessee to remedy such violation for a period of ten days after written notice thereof by Lessor to Lessee, or if such violation cannot be remedied within such ten day period, the failure of Lessee to commence within such ten day period and thereafter diligently to prosecute to completion all steps necessary to remedy such violation; -15- (d) The filing of any petition by or against Lessee, or by or against any then owner of Lessee's estate and interest in this Lease, under any provision of the United States Bankruptcy Code or any law of like import; (e) Any assignment by Lessee for the benefit of creditors; (f) Any appointment of a receiver for all or any substantial part of the assets of Lessee; (g) Any levy of an execution or other legal process on the property of Lessee or Lessee's interest in this Lease; and (h) Any event whereby this Lease or the estate hereby granted or the unexpired balance of the term hereof would, by operation of law or otherwise, devolve upon or pass to any person, firm or corporation other than Lessee, except as permitted in this Lease. 27. Remedies. -------- (a) Upon the occurrence of any event of default by Lessee, Lessor or its agents shall have the right, without notice to Lessee, to re-enter and re-let the Premises from time to time, as agent of Lessee, and such re-entry or re- letting shall not discharge Lessee from any liability or obligation hereunder, except that net rents (that is, gross rents less the expense of collecting and handling, and less commissions) collected as a result of such re-letting shall be a credit on Lessee's liability for rents under the terms of this Lease. Nothing herein contained, however, shall be construed to require Lessor to re- enter and re-let in such event; nor shall anything herein contained be construed to postpone the right of Lessor to sue for rents, whether matured by acceleration or otherwise, but on the contrary, Lessor is hereby given the right to sue therefor at any time after default. (b) Upon the occurrence of any event of default by Lessee, Lessor shall also have the right, at Lessor's sole option, to terminate this Lease at any time, by giving ten days' written notice to Lessee of Lessor's election so to terminate. Such termination shall be effective upon the expiration of ten days from the date such notice is given to Lessee. Upon such termination, Lessor shall have the right immediately to re-enter and repossess the Premises, without notice to anyone. Upon such termination the rent for the entire agreed upon term of this Lease, and all other indebtedness, if any, payable under the provisions hereof by Lessee to Lessor, shall be and become immediately due and payable, without notice to Lessee or anyone else, and without regard to whether or not possession of the Premises shall have been surrendered to or taken by Lessor, and Lessee agrees to pay the same to Lessor at once, together with payment of all loss or damage which Lessor shall have suffered by reason of such event of default. Upon making such payment, Lessee shall receive from Lessor all net rents received thereafter by Lessor from other Lessees of the Premises during the agreed term of this Lease but not in excess, however, of the amount paid as rent by Lessee pursuant to the preceding sentence. -16- (c) Suit or suits for the recovery of damages, or any installments thereof, may be brought by Lessor from time to time at its election, and nothing contained herein shall be deemed to require Lessor to postpone suit until the date when the term of this Lease would have expired if it had not been terminated under the provisions of Paragraph 27(b) hereof, or under any provision of law, or had Lessor not re-entered the Premises. Nothing herein contained shall be construed to limit or preclude recovery by Lessor against Lessee of any sums or damages to which, in addition to the damages particularly provided above, Lessor may lawfully be entitled by reason of any default hereunder on the part of Lessee. (d) The special remedies to which Lessor may resort hereunder are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Lessor may lawfully be entitled at any time, and Lessor may invoke any remedy allowed at law or in equity as if specific remedies were not provided for herein. 28. Name of Building. The Building shall be known as the "NATIONAL BANK ---------------- OF COMMERCE BUILDING". Lessor, however, reserves the right, to be exercised at Lessor's sole discretion, to change said name from time to time. Lessee agrees not to refer to the Building by any name other than as aforesaid or as the same may be changed by Lessor or by its street address, which shall be: 1927 First Avenue North, Birmingham, Alabama 35203. 29. Rules and Regulations. Lessee and Lessee's employees and agents shall --------------------- faithfully observe and comply with the Rules and Regulations attached hereto as ANNEX B, and such reasonable changes therein as Lessor at any time or times - ------- hereafter may make and communicate in writing to Lessee. In case of any conflict or inconsistency between the provisions of this Lease and any of the Rules and Regulations as originally promulgated or as changed, the provisions of this Lease shall control. Nothing contained in this Lease shall be construed to impose upon Lessor any duty or obligation to Lessee to enforce the Rules and Regulations or the terms, covenants or conditions in any other lease, as against any other Lessee of the Building, and Lessor shall not be liable to Lessee for violation of the same by any other Lessee or its employees, agents or visitors. 30. Subordination. This Lease is subordinate to all mortgages which may ------------- now or hereafter affect the real property of which the Premises form a part, and to all renewals and extensions thereof. In confirmation of such subordination, Lessee shall execute promptly any instrument of subordination that Lessor may request. Lessee hereby irrevocably constitutes and appoints Lessor as Lessee's attorney in fact to execute any such instrument or instruments of subordination for and on behalf of Lessee. 31. Entire Contract. This Lease evidences the entire contract between --------------- Lessor and Lessee, and no representations of, or understanding or agreement had between the parties or agents or others, except as set forth herein, shall be binding on the parties hereto. 32. Notices. Any notice, statement, demand or other communication ------- required or permitted to be given, rendered or made by either party to the other, pursuant to this Lease or -17- pursuant to any applicable law or requirement of public authority, shall be in writing (whether or not so stated elsewhere in this Lease) and shall be deemed to have been properly given, rendered or made, if and when sent by registered or certified mail, return receipt requested, addressed to the other party at the address hereinabove set forth. Either party may, by notice as aforesaid, designate a different address or addresses for notices, statements, demands or other communications intended for it. 33. Surrender. On the termination of this Lease, or upon any re-entry by --------- Lessor upon the Premises, Lessee shall quit and surrender the Premises to Lessor in good order, condition and repair, except for ordinary wear and tear and such damage or destruction as Lessor is required to repair or restore under this Lease, and Lessee shall remove all of Lessee's property therefrom except as otherwise expressly provided in this Lease. Lessee's obligation to observe or perform this covenant shall survive the expiration or other termination of this Lease. 34. Holding Over. If Lessee remains in possession of the Premises, or any ------------ part thereof, after termination of this Lease, whether with or without the consent of Lessor, such possession shall be a tenancy at sufferance and in no event a tenancy by month to month or from year to year. 35. Quiet Enjoyment. Lessor covenants and agrees with Lessee that upon --------------- Lessee's paying the rent reserved in this Lease and observing and performing all the terms, covenants and conditions of this Lease on Lessee's part to be observed and performed, Lessee may peaceably and quietly enjoy the Premises, subject to the terms and conditions of this Lease. 36. Parties Bound. ------------- (a) The designation "Lessee", and all plural and singular words used herein to refer to the person(s) or organization(s) hereby leasing the Premises from Lessor, shall be construed to refer to all of the undersigned (except Lessor), whether one or more. The terms, provisions and agreements herein contained shall be inure to the benefit of Lessor and to its successors and assigns. In the event of a conveyance of the Building (or, in the event of surrender of possession of the Building if Lessor holds the same merely as mortgagee in possession) the purchaser or new owner shall take subject to and shall be bound by the provisions and obligations of this Lease, and thereupon the undersigned Lessor shall be released from the agreements and burdens hereof. (b) If Lessor, or any successor to Lessor's interests under this Lease, shall be an individual, joint venture, tenancy in common, co-partnership, unincorporated association or other unincorporated aggregate of individuals or entities, or of both, or a corporation, Lessee shall look only to Lessor's or such successor's estate and property in the Building (or the proceeds thereof) for the satisfaction of Lessee's remedies for the collection of a judgment (or other judicial process) requiring the payment of money in the event of any default by Lessor or any such successor hereunder, and no other property or assets of Lessor or any such successor shall be subject to levy, execution or other enforcement procedure for the satisfaction of Lessee's remedies under -18- or with respect to this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use or occupancy of the Premises. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written. WOODWARD PROPERTIES, LLP By: /s/ John J. McMahon, Jr. ---------------------------- Its: Manager ----------- NATIONAL BANK OF COMMERCE OF BIRMINGHAM ATTEST: By: /s/ William E. Matthews V By: /s/ John H. Holcomb III ------------------------------------ ------------------------------------- Its: Executive Vice President & CFO Its: President and CEO --------------------------------- ------------------------------------ -19- EX-11 3 0003.txt COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11
Alabama National BanCorporation Computation of Earnings Per Share (Unaudited) (In thousands, except per share amounts) ---------------------------------------- Per Share Income Shares Amount -------- -------- --------- THREE MONTHS ENDED SEPTEMBER 30, 2000 Basic EPS net income....................... $ 6,206 11,047 $0.56 ====== Effect of dilutive securities.............. - 172 -------- ------- Diluted EPS................................ $ 6,206 11,219 $0.55 ======== ======= ====== THREE MONTHS ENDED SEPTEMBER 30, 1999 Basic EPS net income....................... $ 5,720 11,127 $0.51 ====== Effect of dilutive securities.............. - 188 -------- ------- Diluted EPS................................ $ 5,720 11,315 $0.51 ======== ======= ====== NINE MONTHS ENDED SEPTEMBER 30, 2000 Basic EPS net income....................... $17,767 11,059 $1.61 ====== Effect of dilutive securities.............. - 162 -------- ------- Diluted EPS................................ $17,767 11,221 $1.58 ======== ======= ====== NINE MONTHS ENDED SEPTEMBER 30, 1999 Basic EPS net income....................... $16,119 11,084 $1.45 ====== Effect of dilutive securities.............. - 189 -------- ------- Diluted EPS................................ $16,119 11,273 $1.43 ======== ======= ======
EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 75,246 1,893 44,449 246 305,543 34,098 34,454 1,586,220 20,840 2,187,324 1,704,810 72,589 37,109 78,948 0 0 11,187 142,041 2,187,324 97,559 17,627 1,995 117,181 47,828 13,665 55,688 1,553 1 51,900 25,635 25,635 0 0 17,767 1.61 1.58 4.04 4,615 0 0 18,566 18,068 786 605 20,840 20,840 0 20,840
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