UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission file number 0-6094
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NATIONAL COMMERCE BANCORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0784645
--------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation organization) Identification No.)
One Commerce Square
Memphis, Tennessee 38150
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code - (901)523-3242
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No _____
-----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $2 par value -- 24,619,876 shares as of May 2,
1995.
Page 1 of 15 Pages
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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NATIONAL COMMERCE BANCORPORATION
Consolidated Balance Sheets
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(In Thousands)
ASSETS Mar. 31 Dec. 31
------ 1995 1994
--------- -------
(unaudited)
Cash and cash equivalents:
Interest bearing deposits $ 16,583 $ 17,620
Cash and non-interest bearing deposits 96,993 123,138
Federal funds sold and securities
purchased under agreements to resell 5,975 25,675
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Total cash and cash equivalents 119,551 166,433
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Securities:
Held to maturity 283,942 283,906
Available for sale 806,209 872,379
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Total securities 1,090,151 1,156,285
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Trading account securities 22,905 13,507
Loans:
Commercial, financial and agricultural 343,627 356,035
Real estate - construction 102,189 91,424
Real estate - mortgage 496,503 501,489
Consumer 627,365 630,927
Lease financing 15,564 14,818
---------- ----------
Total loans 1,585,248 1,594,693
Less: Allowance for loan losses 24,846 24,310
Unearned discounts 2,025 1,887
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Net loans 1,558,377 1,568,496
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Bank premises and equipment 18,194 17,729
Broker/dealer customer receivables 6,415 1,130
Other assets 69,540 82,229
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Total assets $2,885,133 $3,005,809
========== ==========
See notes to consolidated financial statements.
2
Consolidated Balance Sheets (cont.)
- - ---------------------------
(In Thousands)
Mar. 31 Dec. 31
1995 1994
--------- -------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits:
Non-interest bearing deposits $ 265,438 $ 306,684
Money market checking 242,674 257,729
Savings deposits 90,322 93,094
Money market savings 660,974 705,551
Certificates of deposit less than $100,000 629,590 511,772
Certificates of deposit of $100,000 or more 303,660 279,560
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Total deposits 2,192,658 2,154,390
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Federal funds purchased and securities sold
under agreements to repurchase 215,869 275,136
Broker/dealer customer payables 1,057 399
Accounts payable and accrued liabilities 29,753 23,541
Federal Home Loan Bank advances 189,777 321,541
Long-term debt 6,382 6,383
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Total liabilities 2,635,496 2,781,390
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Stockholders' equity:
Common stock 49,219 49,094
Additional paid-in capital 78,481 77,785
Retained earnings 137,445 130,404
Unrealized securities gains (losses) (15,508) (32,864)
---------- ----------
Total stockholders' equity 249,637 224,419
Total liabilities and ---------- ----------
stockholders' equity $2,885,133 $3,005,809
========== ==========
See notes to consolidated financial statements.
3
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Income
---------------------------------
(Unaudited)
(In Thousands)
For the three months
ended March 31
----------------
1995 1994
---- ----
Interest income:
Loans $36,090 $28,958
Securities:
Taxable 16,538 11,841
Non-taxable 2,290 2,018
Trading account securities 229 641
Deposits at banks 250 151
Other 431 76
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Total interest income 55,828 43,685
Interest expense:
Deposits:
Money market checking 1,167 1,264
Savings 514 588
Money market savings 7,527 2,947
Certificates of deposit
less than $100,000 7,644 5,457
Certificates of deposit
of $100,000 or more 4,823 2,845
Federal Home Loan Bank advances 3,480 2,417
Long-term debt 113 96
Federal funds purchased and securities
sold under agreements to repurchase 2,763 1,824
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Total interest 28,031 17,438
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Net interest income 27,797 26,247
Provision for loan losses 1,708 1,661
Net interest income after ------- -------
provision for loan losses 26,089 24,586
------- -------
Other income:
Trust service income 1,949 2,119
Service charges on deposits 3,411 3,624
Other service charges and fees 1,200 1,127
Broker/dealer revenue 1,890 2,122
Securities gains 53 335
Other income 4,005 2,351
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Total non-interest income 12,508 11,678
------- -------
Other expenses:
Salaries and employee benefits 9,808 9,696
Occupancy expense 2,102 1,762
Furniture and equipment expenses 857 786
FDIC assessment 1,092 1,056
Other expenses 8,205 7,831
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Total non-interest expense 22,064 21,131
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4
Consolidated Statements of Income (cont.)
- - ---------------------------------
For the three months
ended March 31
--------------------
1995 1995
---- -----
Income before income taxes l6,533 15,133
Income taxes 5,313 4,978
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Net income $11,220 $10,155
======= =======
Net income per share of
common stock $.45 $.41
Dividends per share of
common stock $.17 $.15
See notes to consolidated financial statements.
5
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Cash Flows
-------------------------------------
(Unaudited)
For the Three Months
Ended March 31
1995 1994
---- ----
(In Thousands)
Operating Activities:
Net income $11,220 $10,155
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for loan losses 1,708 1,661
Provision for depreciation
and amortization 1,029 931
Amortization of security premiums
and accretion of discounts, net (9) 74
Deferred income taxes (credit) (631) (400)
Decrease (increase) in trading
account securities (9,398) 20,745
Realized securities gains (losses) (53) (335)
(Increase) decrease in broker/dealer
customer receivables (5,285) 11,242
Increase (decrease) in interest receivable 760 (864)
Increase (decrease) in other assets 1,317 (3,566)
Increase (decrease) in broker/dealer
customer payables 658 (9,029)
Increase in interest payable 1,470 1,962
Increase in accounts payable and
accrued expenses 4,917 12,874
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Net cash provided by operating activities 7,703 45,450
-------- --------
Investing Activities:
Available for sale securities:
Proceeds from the maturities of securities 14,842 88,956
Proceeds from sales of securities 80,451 58,858
Purchases of securities (627) (256,056)
Net increase (decrease) in loans 8,411 (54,442)
Purchase of premises and equipment (1,390) (2,309)
-------- --------
Net cash provided by (used in) investing
activities 101,687 (164,993)
-------- --------
Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts (103,650) 20,447
Net increase in certificates of deposit 141,918 68,829
Net decrease in federal funds purchased
and securities sold under agreements
to repurchase (59,267) (23,791)
Increase (decrease) in long-term debt (1) 14
Increase (decrease) in Federal Home
6
Loan Bank advances (131,764) 70,334
Proceeds from exercise of stock options 672 183
Issuance of common stock 0 88
Cash dividends paid (4,180) (3,666)
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Net cash provided by (used in)
financing activities (156,272) 132,438
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Increase (decrease) in cash and cash equiv. (46,882) 12,895
Cash and cash equivalents at
beginnning of period 166,433 120,396
-------- --------
Cash and Cash Equivalents at End of Period $119,551 $133,291
======== ========
Cash paid during the period for:
Interest expense $26,561 $15,476
======= =======
Income taxes $1,757 $1,235
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7
NATIONAL COMMERCE BANCORPORATION
--------------------------------
Notes to Consolidated Financial Statements
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(Unaudited)
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Note A - Basis of Presentation
- - ------------------------------
The consolidated balance sheet at December 3l, 1994, has been derived
from the audited financial statements at that date. The accompanying
unaudited interim consolidated financial statements reflect all
adjustments (consisting only of normally recurring accruals) which
are, in the opinion of management, necessary for a fair statement of
the results for the interim periods presented. The statements should
be read in conjunction with the summary of accounting policies and
notes to financial statements included in the Registrant's annual
report for the year ended December 31, 1994. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the rules of the Securities and
Exchange Commission.
Note B - Securities Portfolio
- - -----------------------------
The Company adopted FAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" at December 31, 1993. As a result, as of
March 31, 1995, the securities in the "Available for Sale" category
included $25,423,000 in unrealized losses. Accordingly, total
securities and total stockholders' equity were decreased by $25.4
million and $15.5 million (net of taxes), respectively, at March 31,
1995, to reflect the adjustment of the securities portfolio to market.
The calculation of book value per share reflects this mark-to-market
unrealized loss, whereas the calculation of ROA and ROE do not,
because the unrealized loss is not included in net income. The fair
value of the "Held to Maturity" category was $278.6 million at March
31, 1995.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
-------------------------
The purpose of this discussion is to focus on important factors affecting
the Company's financial condition and results of operations. Reference
should be made to the consolidated financial statements (including the
notes thereto) for an understanding of the following discussion and
analysis. In this discussion, net interest income and net interest margin
are presented on a fully taxable equivalent basis. All per share data is
adjusted to reflect all stock dividends and stock splits declared through
March 31, 1995.
Financial Condition
-------------------
Following is a comparison of the March 31, 1995, and December 31, 1994
, consolidated balance sheets. In the liability section, total deposits
increased by $38 million or 1.8%, principally as a result of $118 million
or 23.0% increase in certificates of deposit less than $100,000 and a $24
million or 8.6% increase in certificates of deposit of $1000,000 or more.
Partially offsetting these increases, money market savings deposits
decreased $45 million or 6.3%, total non interest-bearing deposits
decreased $41 million or 13.4% reflecting current market trends and
normally higher year-end non-interest-bearing deposit levels, money market
checking accounts decreased $15 million or 5.8%, and savings deposits
decreased $3 million or 3.0%
Federal funds purchased and securities sold under agreements to
repurchase decreased $59 million or 21.5% from year-end 1994 levels. This
category of liabilities fluctuates with the availability of overnight funds
purchased from downstream correspondent banks.
Federal Home Loan Bank advances decreased $132 million or 41.0% from
December 31, 1994. This decrease is principally the result of
asset/liability management decisions due to the current interest rate
environment.
In the assets section, total gross loans decreased by $9 million or
.6% compared to December 31, 1994 levels. Commercial loans decreased by $12
million or 3.5%, and real estate construction loans increased by $11
million or 11.8%, reflecting current demand. Consumer loans decreased $4
million or 0.6%, and real estate mortgage loans decreased by $5 million or
1.0%, reflecting a higher interest rate environment.
Securities decreased by $66 million or 5.7% from year-end 1994. U.S.
Government securities decreased $44 million or 36.4%, Federal agency
securities decreased by $22 million or 2.6%, and
9
state and municipal securities decreased $1 million or 0.7%, and other
securities increased $1 million or 2.9%. Effective December 31, 1993, the
Company early adopted Financial Accounting Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", which resulted in
the adjustment of the majority of the securities portfolio to market value.
This adjustment decreased the securities portfolio by $53.9 million and
decreased stockholders' equity by $32.9 million at December 31, 1994, and
decreased the securities portfolio by $25.4 million and decreased
stockolders' equity by $15.5 million at March 31, 1995. The amortized cost
of securities held to maturity totaled $283.9 million, and the market value
of securities available for sale totaled $806.2 million at March 31, 1995.
Federal funds sold and securities purchased under agreements to
resell decreased by $19.7 million or 76.7% from December 31, 1994 levels,
reflecting excess funds that otherwise were not employed in loans or
securities at March 31, 1995.
Trading account securities increased by $9.4 million or 69.6% from
year-end 1994 levels. This increase relates to inventories of Commerce
Investment Corporation, the Company's broker/dealer subsidiary, which
fluctuate from time to time. Broker/dealer customer receivables and
payables both increased, reflecting levels of activity.
Results of Operations
---------------------
Three Months Ended March 31, 1995, Compared to Three Months Ended March 31,
1994
---------------------------------------------------------------------------
Net income was $11,220,000 for the first quarter of 1995, a 10.5%
increase over the $10,155,000 reported for the same period a year earlier.
Earnings per share were $.45, compared to $.41 per share in 1994, up 9.8%.
Net interest income, the difference between interest earned on loans
and investments and interest paid on interest-bearing liabilities,
increased by $1,804,000 or 6.6% for the first quarter of 1995. This
increase reflects a $12,397,000 or 27.6% increase in total interest income
that more than offsets a $10,593,000 or 60.7% increase in interest expense.
Interest income increased in 1995 due to an increase of $328,529,000 or
13.2% in total average earnings assets, and an increase in the yield on
average earning assets from 7.31% in the first quarter of 1994 to 8.24% in
the first quarter of 1995. The increased volume of earning assets
positively impacted interest income by approximately $5,918,000, while the
increased yield positively impacted interest income by approximately
$6,479,000. Interest expense increased in the first quarter of 1995,
reflecting an increase in average interest-bearing liabilities of
$305,500,000
10
or 14.3%, and an increase in the cost of interest-bearing liabilities from
3.32% to 4.67%, primarily as a result of deposit gathering in new markets.
The increase in the rate paid on interest-bearing liabilities negatively
affected interest expense by approximately $8,092,000, and the increase in
average outstandings negatively affected interest expense by approximately
$2,501,000. The net interest margin (taxable equivalent net interest income
as a percentage of average earning assets) was 4.21% in first quarter 1995,
compared to 4.47% in first quarter of 1994.
The provision for loan losses in the first quarter of 1995 was
$1,708,000, versus $1,661,000 for the quarter of 1994. Net charge-offs were
$1,172,000, compared to $896,000 in 1994. The allowance for loan losses
totaled $24,846,000 at March 31, 1995, representing 1.57% of quarter-end
net loans, compared to $22,232,000 or 1.53% of quarter-end net loans at
March 31, 1994.
Following is a comparison of non-earning assets and loans past due 90
days of more for the quarters ended March 31, 1995, December 31, 1994, and
March 31, 1994, (dollars in thousands):
3-31-95 12-31-94 3-31-94
------- -------- -------
Non-accrual loans 0 0 0
Renegotiated loans 0 0 0
Other real estate 0 61 1,816
- -- -----
Total non-earning assets 0 61 1,816
= == =====
Loans past due 90 days
or more 2,426 2,432 2,238
Non-interest income totaled $12,508,000 for the quarter, an increase
of $830,000, or 7.1%, from last year's first quarter. The Company's
broker/dealer revenue decreased $232,000 versus first quarter, 1994,
reflecting current market conditions. All other sources of non-interest
income, including service charge income, trust service income, and
supermarket sublicence income increased a net of $1,062,000 or 11.1%.
Non-interest expenses (excluding the provision for loan losses)
increased by $933,000 or 4.4% in first quarter, 1995, primarily reflecting
expenses of new locations totaling approximately $525,000.
The Company's return on average assets and return on average equity,
excluding unrealized losses on investment securities, were 1.49% and 17.32%
respectively, for the first quarter of 1995. These compared with 1994 first
quarter returns of 1.52% and 17.75%.
11
Liquidity and Capital Resources
- - -------------------------------
Interest-bearing bank balances, federal funds sold, trading account
securities,and securities held for sale are the principal sources of short-term
asset liquidity. Other sources of short-term liquidity include federal funds
purchased and repurchase agreements, credit lines with other banks, and
borrowings from the Federal Reserve Bank and the Federal Home Loan Bank.
Maturing loans and investment securities are the principal sources of long-term
assets liquidity.
Total realized stockholders' equity increased by $7,862,000 from December
31, 1994, with retained earnings accounting for substantially all of the
increase.
The following capital ratios do not include the effect of FAS No. 115 on
Tier I capital, total capital, or total risk-weighted assets.
3-31-95 12-31-94 3-31-94
------- -------- -------
Total capital to risk-weighted
assets 15.48% 14.87% 14.90%
Tier I capital to risk-weighed
assets 14.23% 13.62% 13.65%
Leverage ratio 9.19% 8.56% 8.45%
12
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11. Computation of Earnings per Share
27. Financial Data Shedule
b. Reports on Form 8-K
The Registrant did not file any reports on Form 8-K
during the quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NATIONAL COMMERCE BANCORPORATION
(Registrant)
By______________________________
Lewis E. Holland
Vice President and Chief
Financial Officer
(Authorized Officer)
(Principal Financial Officer)
Date ______________________
13