-----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, Qu+f7dNaFHJToRR7qhkalar3qdxQJ3xjW36DF2n4v6ImHYxhLOWEh4Falz51fCN7 IMJAdAtLcHIyEEYqrKKS8w== 0000950144-96-004957.txt : 19960809 0000950144-96-004957.hdr.sgml : 19960809 ACCESSION NUMBER: 0000950144-96-004957 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALABAMA NATIONAL BANCORPORATION CENTRAL INDEX KEY: 0000926966 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 631114426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25160 FILM NUMBER: 96605677 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 ALABAMA NATIONAL BANCORPORATION 10-Q 1 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 June 30, 1996 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) 583-3654 -------------- NONE ---- (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 June 30, 1996 ----- ---------------------------- Common Stock, $1.00 Par Value 6,200,418 2 INDEX ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION PAGE - ----------------------------- ---- Item 1. Financial Statements (Unaudited) Consolidated statements of condition June 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated statements of income Three month periods ended June 30, 1996 and 1995; Six month periods ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated statements of cash flows Six month periods ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Notes to the unaudited consolidated financial statements June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART II. OTHER INFORMATION - -------------------------- Item 4. Submission of Matters to a Vote of Security-Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
June 30, 1996 December 31, 1995 ------------- ----------------- (In thousands) ASSETS Cash and due from banks .................................................... $ 32,544 $ 37,288 Interest-bearing deposits in other banks ................................... 951 11,168 Investment securities (estimated market values of $74,334 and $55,860) .... 75,120 55,847 Securities available for sale .............................................. 70,935 87,867 Trading securities ........................................................ 1,813 4,402 Federal funds sold and securities purchased under agreements to resell .... 26,969 37,320 Loans ...................................................................... 551,173 536,110 Unearned income ............................................................ (2,035) (2,133) -------- -------- Loans, net of unearned income .............................................. 549,138 533,977 Allowance for loan losses .................................................. (8,811) (8,640) -------- -------- Net loans................................................................... 540,327 525,337 Property, equipment and leasehold improvements, net ........................ 19,334 18,802 Intangible assets .......................................................... 7,407 7,595 Other assets ............................................................... 16,513 20,948 -------- -------- Totals ..................................................................... $791,913 $806,574 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Noninterest bearing ..................................................... $ 99,797 $106,570 Interest bearing ....................................................... 543,580 540,044 -------- -------- Total deposits ............................................................. 643,377 646,614 Federal funds purchased and securities sold under agreements to repurchase.. 42,703 58,921 Treasury tax and loan account .............................................. 4,275 2,432 Short-term borrowings ...................................................... 32,150 21,280 Accrued expenses and other liabilities ..................................... 10,491 21,413 Capital lease obligations .................................................. 313 324 -------- -------- Total liabilities .......................................................... 733,309 750,984 -------- -------- STOCKHOLDERS' EQUITY: Common stock, $1 par; authorized 10,000,000 shares; issued 6,566,968 shares ............................................... 6,567 6,567 Additional paid-in capital ................................................. 51,923 51,923 Retained earnings .......................................................... 5,788 2,267 Treasury stock, 366,550 shares at cost ..................................... (5,023) (5,023) Unearned restricted stock .................................................. (232) (278) Unrealized gain (loss) on available for sale securities, net of taxes ...... (419) 134 -------- -------- Total stockholders' equity ................................................. 58,604 55,590 -------- -------- Totals ..................................................................... $791,913 $806,574 ======== ========
See accompanying notes to unaudited consolidated financial statements. 3 4 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the three months ended June 30, ----------------- 1996 1995 ------- ------ INTEREST INCOME: Interest and fees on loans ........................................ $12,536 $6,826 Interest on securities ............................................ 2,423 1,332 Interest on deposits in other banks ............................... 75 - Interest on trading securities .................................... 45 - Interest on federal funds sold and securities purchased under agreements to resell ............................................ 390 333 ------- ------ Total interest income ................................................. 15,469 8,491 INTEREST EXPENSE: Interest on deposits .............................................. 5,827 3,777 Interest on federal funds purchased and securities sold under agreements to repurchase ........................................ 888 382 Interest on long and short-term borrowings ........................ 514 212 ------- ------ Total interest expense ................................................ 7,229 4,371 ------- ------ Net interest income ................................................... 8,240 4,120 Provision for loan losses ............................................. 53 - ------- ------ Net interest income after provision for loan losses ................... 8,187 4,120 NONINTEREST INCOME: Securities gains .................................................. 3 - Gain on sale of assets and deposits ............................... 323 - Service charges on deposit accounts ............................... 864 348 Investment services ............................................... 1,796 544 Trust income ...................................................... 380 300 Other ............................................................. 513 178 ------- ------ Total noninterest income .............................................. 3,879 1,370
4 5 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the three months ended June 30, ------------------ 1996 1995 ------ ------ NONINTEREST EXPENSE: Salaries and employee benefits ................................................ 5,637 2,248 Occupancy and equipment expenses .............................................. 1,057 569 Other ......................................................................... 2,514 1,207 ------ ------ Total noninterest expense ..................................................... 9,208 4,024 ------ ------ Income before provision for income taxes and minority interest in earnings of consolidated subsidiaries ................................................................. 2,858 1,466 Provision for (benefit from) income taxes ..................................... 964 (222) ------ ------ Income before minority interest in earnings of consolidated subsidiaries .................................................... 1,894 1,688 Minority interest in earnings of consolidated subsidiaries ................................................................. 8 253 ------ ------ Net income .................................................................... $1,886 $1,435 ====== ====== Net income per common share ................................................... $ 0.30 $ 0.56 ====== ====== Weighted average common and common equivalent shares outstanding ........................................................... 6,372 2,562 ====== ======
See accompanying notes to unaudited consolidated financial statements. 5 6 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the six months ended June 30, ------------------- 1996 1995 ------- ------- INTEREST INCOME: Interest and fees on loans ................................................ $25,021 $13,384 Interest on securities .................................................... 4,668 2,638 Interest on deposits in other banks ....................................... 188 - Interest on trading securities ............................................ 124 - Interest on federal funds sold and securities purchased under agreements to resell .................................................... 1,016 432 ------- ------- Total interest income ......................................................... 31,017 16,454 INTEREST EXPENSE: Interest on deposits ...................................................... 12,011 7,084 Interest on federal funds purchased and securities sold under agreements to repurchase ................................................ 1,819 732 Interest on long and short-term borrowings ................................ 989 418 ------- ------- Total interest expense ........................................................ 14,819 8,234 ------- ------- Net interest income ........................................................... 16,198 8,220 Provision for loan losses ..................................................... 200 - ------- ------- Net interest income after provision for loan losses ........................... 15,998 8,220 NONINTEREST INCOME: Securities gains .......................................................... 34 - Gain on sale of assets and deposits ....................................... 323 - Service charges on deposit accounts ....................................... 1,686 689 Investment services ....................................................... 4,141 655 Trust income .............................................................. 710 576 Other ..................................................................... 1,041 330 ------- ------- Total noninterest income ...................................................... 7,935 2,250
6 7 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the six months ended June 30, ------------------- 1996 1995 ------- ------ NONINTEREST EXPENSE: Salaries and employee benefits ................................................ 10,693 4,109 Occupancy and equipment expenses .............................................. 2,112 1,131 Other ......................................................................... 4,679 2,185 ------- ------ Total noninterest expense ..................................................... 17,484 7,425 ------- ------ Income before provision for income taxes and minority interest in earnings of consolidated subsidiaries ................................................................. 6,449 3,045 Provision for income taxes .................................................... 2,301 110 ------- ------ Income before minority interest in earnings of consolidated subsidiaries .................................................... 4,148 2,935 Minority interest in earnings of consolidated subsidiaries ................................................................. 10 442 ------- ------ Net income .................................................................... 4,138 2,493 Less cash dividends on preferred stock ........................................ - 79 ------- ------ Net income available for common shares ........................................ $ 4,138 $2,414 ======= ====== Net income per common share ................................................... $ 0.65 $ 0.94 ======= ====== Weighted average common and common equivalent shares outstanding ........................................................... 6,379 2,562 ======= ======
7 8 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the six months ended June 30, --------------------- 1996 1995 -------- -------- (In thousands) Net cash provided by (used in) operating activities ........................ $ 1,864 $ (85) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investment securities ......................................... (22,626) (4,759) Proceeds from maturities of investment securities .......................... 3,294 1,919 Purchases of securities available for sale ................................. (21,425) - Proceeds from sale of securities available for sale ........................ 953 - Proceeds from maturities of securities available for sale .................. 35,967 - Net decrease in interest-bearing deposits in other banks ................... 10,217 - Net (increase) decrease in federal funds sold and securities purchased under agreements to resell ............................................... 10,351 (10,005) Net increase in loans ...................................................... (15,224) (23,025) Purchases of property, equipment and leasehold improvements ................ (1,343) (574) Proceeds from sale of property, equipment and leasehold improvements ....... 185 - Proceeds from sale of life insurance policy ................................ 250 - Proceeds from sale of banking offices, net of $8,226 cash paid ............. 274 - Proceeds from sale of other real estate owned .............................. 119 321 -------- -------- Net cash provided by (used in) investing activities ........................ 992 (36,123) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits ................................................... 5,033 26,310 Sale of deposits ........................................................... (8,500) - Increase (decrease) in federal funds purchased, securities sold under agreements to repurchase, and treasury tax and loan account .............. (14,375) 7,803 Net increase in short-term borrowings and capital lease obligations ........ 10,859 2,541 Dividends on common stock .................................................. (617) - Dividends on preferred stock ............................................... - (79) Retirement of preferred stock .............................................. - (2,500) -------- -------- Net cash provided by (used in) financing activities ........................ (7,600) 34,075 -------- -------- Decrease in cash and cash equivalents ...................................... (4,744) (2,133) Cash and cash equivalents, beginning of period ............................. 37,288 18,268 -------- -------- Cash and cash equivalents, end of period ................................... $ 32,544 $ 16,135 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ..................................................... $ 15,075 $ 7,871 ======== ======== Cash paid for income taxes ................................................. $ 2,358 $ 118 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: Acquisition of collateral in satisfaction of loans ......................... $ 70 $ 1,238 ======== ======== Adjustment to market value of other real estate owned ...................... $ 15 $ - ======== ======== Adjustment to market value of securities available for sale, net of deferred income taxes ............................................. $ 553 $ 1,191 ======== ========
See accompanying notes to unaudited consolidated financial statements. 8 9 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 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 six months ended June 30, 1996 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, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in Form 10-K, Annual Report under the Securities Exchange Act of 1934, for the year ended December 31, 1995. NOTE B - COMMITMENT AND CONTINGENCIES The Company'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 In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," ("Statement 121") which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement 121 effective January 1, 1996. The adoption of Statement 121 did not have a material effect on the Company's unaudited consolidated financial statements. In May 1995, the FASB issued Statement of Financial Accounting Standards No. 122 "Accounting for Mortgage Servicing Rights, an Amendment of FASB No. 65," ("Statement 122"). Statement 122 requires companies that originate mortgage loans to capitalize the cost of mortgage servicing rights separate from the cost of originating the loan when a definitive plan to sell those loans and retain the mortgage servicing rights exist. Prior to the adoption of Statement 122 only mortgage servicing rights that are purchased from other parties are capitalized and recorded as an asset. Therefore, Statement 122 eliminates the accounting inconsistencies that existed between mortgage servicing rights that are derived from loan origination activities and those acquired through purchase transactions. Statement 122 also requires that capitalized mortgage servicing rights be assessed for impairment based on the fair value of those rights. The Company adopted Statement 122 effective January 1, 1996, with no material effect on the Company's unaudited consolidated financial statements. 9 10 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 NOTE D-MERGERS AND ACQUISITIONS On December 29, 1995, Alabama National BanCorporation ("ANB") merged ("the Merger") with National Commerce Corporation ("NCC") and Commerce Bankshares, Inc. ("CBS") (collectively the "Company"). The Merger was accomplished by converting each share of NCC stock into 348.14 shares of ANB stock and each share of CBS stock into 7.0435 shares of ANB stock for a total of 3,106,981 shares (or 50.1%) of the Company stock. The Merger was accounted for as a "reverse acquisition," whereby NCC is deemed to have acquired ANB for financial reporting purposes. However, ANB remains the continuing legal entity and registrant for Securities and Exchange Commission filing purposes. Consistent with the reverse acquisition accounting treatment, the historical financial statements of the Company presented for the three months and the six months ended June 30, 1995 are actually only the consolidated financial statements of NCC and differ from the consolidated financial statements of ANB as previously reported. The operations of ANB are included in the financial statements from the date of the Merger. The historical stockholders' equity of NCC prior to the Merger is retroactively restated for the equivalent number of shares received in the Merger after giving effect to any difference in par value of ANB's and NCC's stock by an offset to paid-in capital. The purchase price, determined by the ANB common stock average closing price for the month of March 1995, prior to the announcement of the Merger plus direct acquisition costs, was allocated to the ANB assets and liabilities acquired based on their fair market value at the date of acquisition. The excess of the purchase price over the fair market value of net assets acquired is being amortized on a straight line basis over twenty five years. The ANB assets purchased and liabilities assumed (at fair market values) as of December 29, 1995 were as follows (in thousands): Cash, due from banks, interest-bearing deposits with other banks, and federal funds sold . . . . . . . . . . . . . . . . . $ 27,788 Securities available for sale . . . . . . . . . . . . . . . . . . . . . 27,821 Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 19,954 Loans, net of unearned income and allowance for loan losses . . . . . . 204,485 Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . 11,734 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,423 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,354 Deposits assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . (253,611) Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . (20,217) ---------- Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,731 ==========
The following pro forma consolidated results of operations for the three and the six months ended June 30, 1995, are presented as if the Merger had occurred on January 1, 1995.
For the three For the six months ended months ended ------------- ------------ June 30, 1995 ------------------------------------- (In thousands, except per share data) Net interest income .................................... $7,446 $14,841 Provision for loan losses .............................. 59 121 Noninterest income ..................................... 2,188 3,736 Noninterest expense .................................... 6,785 12,883 Provision for income taxes ............................. 196 877 Net income ............................................. 2,594 4,696 Earnings per common and common equivalent share ........ $ .41 $ .74
10 11 ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 NOTE D-MERGERS AND ACQUISITIONS (CONTINUED) Historical financial information of Alabama National BanCorporation and its subsidiaries prior to the Merger described above is as follows:
December 29, 1995 June 30, 1995 ----------------- ------------- (In thousands) Statement of Condition Data Investment securities ................................. $ 19,877 $ 33,848 Securities available for sale ......................... 27,821 17,900 Loans, net ............................................ 202,762 192,356 Total assets .......................................... 298,683 287,397 Total deposits ........................................ 253,611 255,379 Stockholders# equity .................................. 26,994 32,018 For the three For the six months ended months ended ------------- ------------ June 30, 1995 ------------------------------------- (In thousands, except per share data) Statement of Income Data Net interest income ................................... $3,575 $7,118 Provision for loan losses ............................. 59 121 Noninterest income .................................... 821 1,492 Noninterest expense ................................... 2,730 5,394 Net income ............................................ 1,087 2,215 Net income per common share ........................... $ .31 $ .61
CBS was formed on April 4, 1995 to succeed as owner of all the interest of National Bank of Commerce of Birmingham ("NBC"), a consolidated subsidiary of NCC. CBS, a bank and thrift holding company, was formed primarily to accomplish the acquisition of Talladega Federal Savings and Loan Association (TFSLA). On July 20, 1995, CBS issued 600,125 shares of its common stock to NCC and 95,126 shares of its common stock to the individual stockholders of NBC in exchange for all the common stock of NBC and became a consolidated subsidiary of NCC. Also, on August 1, 1995, CBS acquired all of the stock of TFSLA for $1,703,000 in cash. This acquisition was accounted for under the purchase method; accordingly, the purchase price was allocated to the assets and liabilities based on their fair values. No goodwill was recorded. At the date of acquisition, TFSLA had assets of $34,982,000 and equity of $1,813,000. The results of operations of TFSLA are included in NCC's results of operations beginning August 1, 1995. TFSLA was merged with Citizens Bank of Talladega, another subsidiary of the Company on December 29, 1995. The TFSLA assets purchased and liabilities assumed as of August 1, 1995 were as follows (in thousands): Cash, due from banks, interest-bearing deposits with other banks, and federal funds sold . . . . . . . . . . . . . . . . . $ 4,815 Securities available for sale . . . . . . . . . . . . . . . . . . . . . 334 Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 5,583 Loans, net of unearned income and allowance for loan losses . . . . . . 16,757 Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . 528 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,028 Deposits assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,956) Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . (386) -------- Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,703 ========
11 12 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 the Company at June 30, 1996, and the results of its operations for the three and six month periods ended June 30, 1996 and 1995. On December 29, 1995, Alabama National BanCorporation ("ANB") merged ("the Merger") with National Commerce Corporation ("NCC") and Commerce Bankshares, Inc. ("CBS") (collectively the "Company"). The Merger was accomplished, among other things, by converting each share of NCC stock into 348.14 shares of ANB stock and each share of CBS stock into 7.0435 shares of ANB stock for a total of 3,106,981 shares (or 50.1%) of the Company stock. The Merger was accounted for as a "reverse acquisition," whereby NCC is deemed to have acquired ANB for financial reporting purposes. However, ANB remains the continuing legal entity and registrant for Securities and Exchange Commission filing purposes. Consistent with the reverse acquisition accounting treatment, the historical financial statements of the Company presented for the three and six month periods ended June 30, 1995, are the consolidated financial statements of NCC and differ from the consolidated financial statements of ANB previously reported. The results of operations of ANB are included in the financial statements from the date of the Merger. (See Note D to the Company's unaudited consolidated financial statements.) This information should be read in conjunction with the Company'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 the Company's Annual Report on Form 10-K for the year ended December 31, 1995. PERFORMANCE OVERVIEW The Company's net income was $1.886 million for the second quarter of 1996 (the "1996 quarter") compared to $1.435 million for the second quarter of 1995 (the "1995 quarter"). Net income for the six month period ended June 30, 1996 (the "1996 six months") was $4.138 million compared to $2.493 million for the six months ended June 30, 1995 (the "1995 six months"). Net income per common share for the 1996 and 1995 quarters was $.30 and $.56, respectively. For the 1996 six months, net income per common share was $.65 compared to $.94 for the 1995 six months. The Company has approximately 3.8 million more common shares outstanding for the 1996 quarter and the 1996 six months as a result of the Merger. During the 1996 quarter, the Company absorbed an after tax charge of approximately $567,000 ($.09 per common share) as the result of termination of employment contracts with James A. Taylor, former Chairman and CEO of the Company. Excluding this charge, the per common share net income of the Company would have been $.38 and $.74, respectively for the 1996 quarter and the 1996 six months. The principal reason for the increase in net income for the 1996 quarter and the 1996 six months is the Merger. The improvement in 1996 net earnings through June 30 is attributable to an increased interest margin and increased noninterest income, a reduced minority interest in the earnings of consolidated subsidiaries; less an increase in the provision for loan losses, noninterest expense and income taxes. The return on average assets for the Company was 1.04% for the 1996 six months compared to 1.24% for the 1995 six months. The return on average stockholders' equity decreased for the 1996 six months to 14.48%, as compared to 19.89% for the 1995 six months. Book value per share at June 30, 1996 was $9.45, an increase of $.48 from year end 1995. Tangible book value per share at June 30, 1996 was $8.26, an increase of $.52 from year end 1995. The Company paid a $.10 cash dividend on common shares in the 1996 six months. NET INCOME 12 13 The largest component of the Company's net income is its net interest income, which is the difference between the income earned on assets and the interest paid on deposits and borrowing used to support such assets. As a result of the Merger, average earning assets for the 1996 six months increased by approximately $285.5 million and average interest-bearing liabilities increased by approximately $256.9 million. The Company's net interest income benefited from the faster growth of average earning assets than average interest-bearing liabilities. The average taxable equivalent rates earned on assets were 8.52% for the 1996 six months compared to 8.70% for the 1995 six months. The average rates paid on interest-bearing liabilities were 4.71% for the 1996 six months compared to 5.12% for the 1995 six months. The net interest margin for the 1996 six months was 4.41% compared to 4.31% for the 1995 six months. 13 14 The following table depicts, on a taxable equivalent basis for the 1996 and 1995 six months, certain information related to the Company'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. AVERAGE BALANCES, INCOME AND EXPENSES AND RATES (AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
SIX MONTHS ENDED JUNE 30, ------------------------------------------------------ 1996 1995 ------------------------------------------------------ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ------ ------- ------- ------ ASSETS: Earning assets: Loans (1) (3) ........................................... $535,515 $25,046 9.35% $288,516 $13,541 9.39% Securities: Taxable ................................................ 135,649 4,260 6.28 78,319 2,625 6.70 Tax exempt ............................................. 14,850 618 8.32 - - - Cash balances in other banks ............................ 6,733 188 5.58 - - - Funds sold .............................................. 37,252 1,016 5.45 14,440 432 5.98 Trading account securities .............................. 3,878 124 6.40 392 13 6.63 -------- ------- -------- ------- Total earning assets (2) ............................ 733,877 31,252 8.52 381,667 16,611 8.70 -------- ------- -------- ------- Cash and due from banks ................................... 27,265 13,962 Premises and equipment .................................... 19,267 6,103 Other assets .............................................. 22,087 6,192 Allowance for loan losses ................................. (8,682) (4,839) -------- -------- Total assets ....................................... $793,814 $403,085 ======== ======== LIABILITIES: Interest-bearing liabilities: Interest-bearing transaction accounts ................... $78,493 $1,024 2.61 $28,778 $441 3.06 Savings and money market deposits ....................... 192,919 3,592 3.72 119,699 2,720 4.54 Time deposits ........................................... 258,105 7,395 5.73 134,695 3,923 5.83 Funds purchased ......................................... 69,403 1,819 5.24 26,261 732 5.57 Other short-term borrowings ............................. 29,948 974 6.50 11,835 402 6.79 Long-term debt .......................................... 318 15 9.43 340 16 9.41 -------- ------- -------- ------- Total interest-bearing liabilities ................. 629,186 14,819 4.71 321,608 8,234 5.12 -------- ------- ---- -------- ------- ---- Demand deposits ........................................... 95,555 48,401 Accrued interest and other liabilities .................... 11,932 8,006 Stockholders' equity ...................................... 57,141 25,070 -------- -------- Total liabilities and stockholders' equity ............ $793,814 $403,085 ======== ======== Net interest spread ....................................... 3.81% 3.58% ==== ==== Net interest income/margin on a taxable equivalent basis .............................. 16,433 4.48% 8,377 4.39% ==== ==== Tax equivalent adjustment ................................. 235 157 ------- ------- Net interest income/margin ................................ $16,198 4.41% $8,220 4.31% ======= ==== ======= ====
- -------------------------- (1) Average loans include nonaccrual loans. All loans and deposits are domestic. (2) Tax equivalent adjustments are based on an assumed tax rate of 34%, and do not give effect to the disallowance for Federal income tax purposes of interest expense related to certain tax exempt assets. (3) Fees in the amount of $720,000 and $295,000 are included in interest and fees on loans for the six months ended June 30, 1996 and 1995, respectively. 14 15 The following table sets 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 from the 1996 six months compared to the 1995 six months. For the purposes of this table, 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)
JUNE 30, ------------------------------ 1996 COMPARED TO 1995 VARIANCE DUE TO ------------------------------ VOLUME YIELD/RATE TOTAL ------ ---------- ----- EARNING ASSETS: Loans .................................................... $11,563 $ (58) $11,505 Securities: Taxable ................................................ 1,809 (174) 1,635 Tax exempt ............................................. 618 - 618 Cash balances in other banks ............................. 188 - 188 Funds sold ............................................... 625 (41) 584 Trading account securities ............................... 111 - 111 ------- ----- ------- Total interest income ............................... 14,914 (273) 14,641 INTEREST-BEARING LIABILITIES: Interest-bearing transaction accounts .................... 657 (74) 583 Savings and money market deposits ........................ 1,430 (558) 872 Time deposits ............................................ 3,540 (68) 3,472 Funds purchased .......................................... 1,132 (45) 1,087 Other short-term borrowings .............................. 590 (18) 572 Long-term debt ........................................... (1) - (1) ======= ===== ======= Total interest expense .............................. 7,348 (763) 6,585 ------- ----- ------- Net interest income on a taxable equivalent basis .................................. $ 7,566 $ 490 8,056 ======= ===== ======= Taxable equivalent adjustment ............................ (78) ------- Net interest income ...................................... $ 7,978 =======
15 16 Net revenue from earning assets during the 1996 six months increased $8.0 million or 97.1%, over the corresponding period in 1995. Approximately 94% of this increase came from volume, principally from the Merger. 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 nonperforming loans, historical loan loss experience, the amount of loan losses actually charged against the allowance during a given period and current and anticipated economic conditions. The provision for loan losses was $53,000 for the 1996 quarter, while no provision was made during the 1995 quarter. Recoveries exceeded charge-offs by $217,000 for the 1996 quarter compared to net recoveries of $21,000 for the same period of 1995. The provision for loan losses was $200,000 for the 1996 six months, compared with no provision for the 1995 six months. Charge-offs exceeded recoveries by $29,000 for the 1996 six months, compared to net charge-offs of $293,000 for the 1995 six months. The allowance for loan losses as a percentage of outstanding loans, net of unearned income was 1.60% at June 30, 1996, compared to 1.62% at December 31, 1995. 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. Noninterest income for the 1996 quarter was $3.9 million, compared to $1.4 million for the 1995 quarter. For the 1996 six months noninterest income increased to $7.9 million, compared to $2.3 million for the 1995 six months. Gain on the sale of assets and deposits of $323,000 during the 1996 quarter and the 1996 six months resulted from the sale of a branch and the deposits at that branch of $274,000, the sale of other real estate of $28,000 and the sale of loans of $21,000. Service charges on deposits for the 1996 quarter were $864,000, compared with $348,000 for the 1995 quarter. For the 1996 six months, service charges were $1.7 million, compared with $689,000 for the 1995 six months. For both 1996 periods, substantially all of the increase in service charges came from the banks acquired in the Merger. Continued increased activity in the investment services division resulted in a $1.3 million increase in the 1996 quarter over the same period in 1995 and a $3.5 million increase in the 1996 six months, when compared to the 1995 six months. Management anticipates this increased activity to continue, but is unable to predict the impact on the future results of operations. A slowdown was experienced in the 1996 quarter. Trust fees increased $80,000 in the 1996 quarter compared to the 1995 quarter and increased $134,000 for the 1996 six months, when compared with the 1995 six months. Other noninterest income increased $335,000 in the 1996 quarter when compared to the 1995 quarter and increased $711,000 for the 1996 six months when compared with the 1995 six months. $57,000 of this increase in the 1996 quarter and $265,000 of this increase in the 1996 six months came from banks acquired in the Merger. Miscellaneous charges by NBC Securities, Inc., a subsidiary of the Company, accounted for $159,000 of the increase for the 1996 quarter and $186,000 increase for the 1996 six months. The 1996 quarter and 1996 six months includes an $80,000 recovery from a settlement with a third-party financial institution. Noninterest expense was $9.2 million for the 1996 quarter, compared to $4.0 million for the 1995 quarter. For the 1996 six months, noninterest expense was $17.5 million, a $10.1 million increase over the 1995 six months. Salaries and employee benefits increased to $5.6 million for the 1996 quarter, compared to $2.2 million for the 1995 quarter. For the 1996 six months, salaries and employee benefits increased to $10.7 million from $4.1 million in the 1995 six months. The increase in the 1996 quarter were principally the result of (1). $1.3 million in salaries and employee benefits of the banks acquired in the Merger, (2). a $525,000 charge in connection with the settlement of employee contracts with James A. Taylor, former Chairman and CEO of the Company, (3). a $422,000 charge in connection with the termination of one of the subsidiary bank presidents, and (4). increased salaries and employee benefits of the investment services division resulting from increased activity totaling approximately $946,000. The increase in salaries and employee benefits for the 1996 six months were principally the result of (1). $2.9 million in salaries and employee benefits of the banks acquired in the Merger, (2). the $525,000 and $422,000 charges discussed above and (3). increased salaries and employee benefits of the investment services division of approximately $2.4 million. Occupancy and equipment expense increased to $1.1 million in the 1996 quarter, compared to $569,000 in the 1995 quarter. Approximately $418,000 of this increase came from the banks acquired in the Merger. For the 1996 six months, occupancy and equipment expenses increased to $2.1 million compared to $1.1 million for the same period on 1995. Approximately $850,000 of this increase came from banks acquired in the Merger. Other noninterest expense increased to $2.5 million in the 1996 quarter, compared with $1.2 million in the 1995 quarter. Approximately $935,000 came from banks acquired in the Merger and a $375,000 charge came from settlement of the employee contracts with Mr. Taylor. Other noninterest expense increased $4.7 million in the 1996 six months from $2.2 million in the 1995 six months. Approximately $1.9 million came from the banks acquired in the Merger and a $375,000 charge came from the settlement of the employee contracts with Mr. Taylor. 16 17 Income tax expense was $964,000 for the 1996 quarter compared to a benefit of $222,000 for the 1995 quarter. For the 1996 six months, income tax expense was $2.3 million, compared to $110,000 for the 1995 six months. The principal reason for these increases was NCC's utilization of its loss carryforwards and credit carry forwards in the year ended December 31, 1995. The effective tax rates the 1996 quarter and the 1996 six months were 33.7% and 35.7%, respectively. EARNING ASSETS Loans comprised the largest single category of the Company's earning assets on June 30, 1996. Loans, net of unearned income were $549.1 million or 69.3% of total assets at June 30, 1996, compared to $534.0 million or 66.2% at December 31, 1995. Loans grew $15.1 million or 2.8% during the 1996 six months. Investment securities increased $19.3 million in the 1996 six months. Purchases of investment securities totaled $22.6 million and maturities and calls of investment securities totaled $3.3 million. Securities available for sale decreased $16.9 million in the 1996 six months. Purchases of available for sale securities totaled $21.4 million and sales, maturities and calls of available for sale securities totaled $36.9 million. Overall investment securities and securities available for sale increased $2.3 million during the 1996 six months. Trading accounts securities decreased $2.6 million during the 1996 six months. The trading account securities are securities owned by the Company prior to delivery to the Company's customers. It is the policy of the Company 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 $27.0 million at June 30, 1996 compared to $37.3 at December 31, 1995, a decrease of $10.3 million. Interest-bearing deposits in other banks at June 30, 1996 were $1.0 million compared to $11.2 million at December 31, 1995. Approximately $8.5 million of this reduction in interest-bearing deposits at other banks was used to fund the sale of deposits by a subsidiary bank. DEPOSITS AND OTHER FUNDING SOURCES Deposits decreased $3.2 million from year-end 1995, to $643.4 million at June 30, 1996. One of the subsidiary banks sold a branch and its deposits, which totaled $8.5 million. Additionally, one customer used escrow funds at another subsidiary bank totaling $9.4 million. Excluding these two transactions, deposits grew approximately $14.7 million. Federal funds purchased and securities sold under agreements to repurchase totaled $42.7 million at June 30, 1996 an decrease of $16.2 million from December 31, 1995. The Treasury tax and loan account increased to $4.3 million at June 30, 1996, compared with $2.4 million at December 31, 1995. Short-term borrowings at June 30, 1996 totaled $32.2 million and consisted of $19.2 million in borrowings by the Company from an independent bank and $13.0 million in borrowings by a subsidiary bank from the Federal Home Loan Bank. The Company's only long-term debt at June 30, 1996 was capital lease obligations which decreased $11,000 during the 1996 six months. 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 on 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. 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. A delinquent loan is generally placed on nonaccrual status when it becomes 90 days or more past due. When a loan is placed on nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. 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 would necessitate additional charges to earnings. 17 18 At June 30, 1996, nonperforming assets totaled $2.7 million, a decrease of $131,000 from December 31, 1995. Nonperforming assets as a percentage of loans plus other real estate was .50% at June 30, 1996 compared to .54% at December 31,1995. NONPERFORMING ASSETS (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
JUNE 30, DECEMBER 31, 1996 1995 ---------- ----------- Nonaccrual loans ............................................... $1,528 $1,243 Restructured loans ............................................. 841 891 Loans past due 90 days or more and still accruing .............. - 121 ------ ------ Total nonperforming loans ................................. 2,369 2,255 Other real estate owned ........................................ 380 625 ------ ------ Total nonperforming assets ................................ $2,749 $2,880 ====== ====== Nonperforming assets to period-end loans and foreclosed real estate ................................... 0.50% 0.54% Allowance for loan losses to period-end nonperforming assets ...................................... 320.52 300.00 Net charge-offs (recoveries) to average loans (1)............... 0.01 (0.04)
- --------------------- (1) Annualized for the six months ended June 30, 1996. Net charge-offs for the 1996 six months totaled $29,000. The allowance for loan losses as a percentage of total loans was 1.60% at June 30,1996 compared to 1.62% on December 31,1995. 18 19 ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES FOR THE SIX MONTHS ENDED JUNE 30, 1996 (AMOUNTS IN THOUSANDS) Allowance for loan losses at December 31,1995 . . . . . . . . . . . . . . . . . . . . . $ 8,640 Charge-offs: Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . 477 Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 -------- Total charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730 Recoveries: Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . 557 Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 -------- Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701 -------- Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Provision charged to income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 -------- Allowance for loan losses at June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . $ 8,811 ========
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 June 30, 1996 to be adequate to cover possible 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 its net interest income. The principal monitoring technique employed by the Company 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. Managing the amount of assets and liabilities repricing in this same time interval helps to hedge the risk and minimize the impact of rising or falling interest rates on net interest income. The Company evaluates interest sensitivity risk and then formulates guidelines regarding asset generation and repricing, funding sources and pricing and 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 the Company's interest rate sensitivity at June 30, 1996, assuming relevant assets and liabilities are collected and paid, respectively, in accordance with their stated maturities. 19 20 INTEREST SENSITIVITY ANALYSIS (AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
JUNE 30, 1996 ------------------------------------------------------------------------ AFTER ONE AFTER THREE THROUGH THROUGH WITHIN ONE THREE TWELVE WITHIN ONE GREATER THAN MONTH MONTHS MONTHS YEAR ONE YEAR TOTAL ---------- --------- ------------ ---------- ------------ ----- ASSETS: Earning assets: Loans (1) ..................................... $ 240,200 $ 39,573 $ 82,444 $ 362,217 $185,393 $547,610 Securities (2) ................................ 11,061 1,033 7,935 20,029 124,150 144,179 Interest-bearing deposits in other banks ................................. 951 - - 951 - 951 Funds sold .................................... 26,969 - - 26,969 - 26,969 --------- --------- --------- --------- -------- --------- Total earning assets ..................... 279,181 40,606 90,379 410,166 309,543 719,709 LIABILITIES: Interest-bearing liabilities: Interest-bearing deposits: Demand deposits ........................... 80,665 - - 80,665 - 80,665 Savings deposits .......................... 207,450 - - 207,450 - 207,450 Time deposits (3) ......................... 25,716 47,544 120,418 193,678 61,787 255,465 Funds purchased .............................. 42,703 - - 42,703 - 42,703 Short-term borrowings (4) .................... 36,425 - - 36,425 - 36,425 Long-term debt ............................... 1 4 15 20 293 313 --------- --------- --------- --------- -------- --------- Total interest-bearing liabilities ........ 392,960 47,548 120,433 560,941 62,080 623,021 --------- --------- --------- --------- -------- ---------- Period gap ....................................... $(113,779) $ (6,942) $ (30,054) $(150,775) $247,463 ========= ========= ========= ========= ======== Cumulative gap ................................... $(113,779) $(120,721) $(150,775) $(150,775) $ 96,688 $ 96,688 ========= ========= ========= ========= ======== ======== Ratio of cumulative gap to total earning assets ................................. (15.81)% (16.77)% (20.95)% (20.95)% 13.43%
- ---------------------------- (1) Excludes nonaccrual loans of $1,528,000. (2) Excludes investment equity securities of $3,689,000. (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 $4,275,000. 20 21 The Company generally would benefit from increasing market rates of interest when it has an asset-sensitive gap and generally would benefit from decreasing market rates of interest when it is liability sensitive. The Company is liability sensitive through the one year time frame. However, the Company'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 the Company'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. LIQUIDITY AND CAPITAL ADEQUACY The Company's net loan to deposit ratio increased to 85.4% at June 30, 1996, compared to 82.6% at year end 1995. The Company's liquid assets as a percentage of total deposits were 9.40% at June 30, 1996, compared to 13.3% at year-end 1995. At June 30, 1996, the Company had unused federal funds lines of approximately $64.5 million, unused lines at the Federal Home Loan Bank of $47.2 million and an unused credit line at an independent bank of $3.85 million. 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 shortfall will exist. Based on this analysis, management believes that the Company has adequate liquidity to meet short-term operating requirements. The Company's stockholders' equity increased by $3.0 million to $58.6 million at June 30, 1996 from December 31, 1995. This increase was attributable to: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,138,000 Increase in unrealized losses on securities available for sale, net of deferred income tax benefits . . . . . . . . . . . . . . . . . . . . . . (553,000) Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . (617,000) Decrease in unearned restricted stock . . . . . . . . . . . . . . . . . . . 46,000 ---------- Net increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,014,000 ==========
A strong capital position is vital to the continued profitability of the Company because it promotes depositor and investor confidence and provides a solid foundation for future growth of the organization. The capital of the Company and its subsidiary banks (the "Banks") exceeded all prescribed regulatory capital guidelines at June 30, 1996. Under the capital guidelines of their regulators, the Company 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, the Company 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 the Company and each subsidiary bank at June 30, 1996: 21 22
TIER 1 RISK TOTAL RISK TIER 1 BASED BASED LEVERAGE ----- ----- -------- Alabama National BanCorporation 9.30% 10.55% 6.61% Subsidiary Banks: National Bank of Commerce.................................... 11.54 12.79 7.96 Alabama Exchange Bank........................................ 13.23 14.48 9.58 Bank of Dadeville............................................ 12.84 13.99 9.74 First National Bank of Ashland............................... 11.89 13.02 7.92 Gulf Bank.................................................... 11.85 13.10 10.32 Citizens Bank of Talladega................................... 14.20 15.45 8.95 St. Clair Federal Savings Bank............................... 10.87 12.12 7.55 Required minimums............................................ 4.00 8.00 4.00
22 23 Part II Other Information Item 4 - Submission of Matters to a Vote of Security-Holders ANB held its 1996 Annual Meeting on June 6, 1996. At the meeting, the stockholders of ANB were asked to vote on the four matters, each of which was described in the Proxy Statement accompanying the Notice of the Meeting and filed with the Securities and Exchange Commission in accordance with Rule 14a-6. The matters voted on at the meeting and the results of the voting are described below. 1. Vote on Proposed amendments to the Certificate of Incorporation of ANB to eliminate the classification of the Board of Directors and to eliminate the requirement for a super majority vote for the removal of a director and the approval of certain amendments to ANB's Certificate of Incorporation and By Laws.
FOR AGAINST ABSTAIN BROKER NON-VOTES --- ------- ------- ---------------- 4,474,527 14,020 1,960 907,733
2. Election of 13 directors to serve on the ANB Board of Directors until the next annual meeting.
FOR WITHOLD AUTHORITY --- ----------------- James R. Andrews, M.D. 5,393,430 4,810 T. Morris Hackney 5,392,923 5,317 John H. Holcomb III 5,393,930 4,310 John D. Johns 5,393,680 4,560 C. Phillip McWane 5,392,923 5,317 Drayton Nabers, Jr. 5,393,930 4,310 Victor E. Nichol, Jr. 5,393,430 4,810 G. Ruffner Page, Jr. 5,392,930 5,310 W. Stancil Starnes 5,383,630 14,610 William V. Muse, Ph.D. 5,312,600 85,640 Frank W. Whitehead, CPA 5,320,980 77,260 James Mailon Kent, Jr. 5,391,930 6,310 Ronald W. Orso, M.D. 5,393,930 4,310
23 24 3. Approval of the Adoption of the Alabama National BanCorporation Performance Share Plan:
FOR AGAINST ABSTAIN BROKER NON-VOTES --- ------- ------- ---------------- 4,419,414 67,840 3,253 907,733
4. Approval of the Adoption of the Alabama National BanCorporation Deferred Compensation Plan for Directors who are not employees of ANB:
FOR AGAINST ABSTAIN BROKER NON-VOTES --- ------- ------- ---------------- 4,432,851 48,653 9,003 907,733
24 25 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: There is one exhibit required to be filed for the quarter to which this report applies. 27 - Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K The Company filed one report on Form 8-K for an event occurring April 25, 1996 reporting a change in independent auditors. 25 26 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: August 5, 1996 /s/John H. Holcomb, III -------------- ----------------------- John H. Holcomb, III, its Chairman and Chief Executive Officer DATE: August 5 1996 /s/Frank W. Whitehead ------------- --------------------- Frank W. Whitehead, its Executive Vice President, Treasurer and Chief Financial Officer
26 EX-27 2 FINANCIAL DATA SCHEDULE
CT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ALABAMA NATIONAL BANCORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 791,913 0 0 6,567 52,037 791,913 38,952 2,301 4,138 0 0 0 4,138 .65 0
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