<PAGE>
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, 1996
Commission file number 0-6094
-------
NATIONAL COMMERCE BANCORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0784645
- ---------- ----------
(State or other jurisdiction (I.R.S Employer
of incorporation organization) Identification No.)
One Commerce Square
Memphis, Tennessee 38150
- ------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code - (901)523-3242
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $2 par value -- 24,667,583 shares as of May 9, 1996.
1
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
--------------------
NATIONAL COMMERCE BANCORPORATION
Consolidated Balance Sheets
--------------------------------
(In Thousands)
<TABLE>
<CAPTION>
March 31 Dec. 31
1996 1995
----------- ----------
(unaudited)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents:
Interest-bearing deposits with other banks $ 17,008 $ 16,660
Cash and non-interest bearing deposits 151,573 144,166
Federal funds sold and securities
purchased under agreements to resell 10,998 226,929
---------- ----------
Total cash and cash equivalents 179,579 387,755
---------- ----------
Securities:
Held-to-maturity 826,984 762,023
Available-for-sale 572,420 516,623
---------- ----------
Total securities 1,399,404 1,278,646
---------- ----------
Trading account securities 19,763 20,159
Loans:
Commercial, financial and agricultural 401,508 399,580
Real estate - construction 130,980 122,720
Real estate - mortgage 521,908 520,657
Consumer 913,756 871,407
Lease financing 17,564 18,678
---------- ----------
Total loans 1,985,716 1,933,042
Less: Allowance for loan losses 30,224 29,010
Unearned discounts 1,835 1,829
---------- ----------
Net loans 1,953,657 1,902,203
---------- ----------
Premises and equipment, net 18,963 18,382
Broker/dealer customer receivables 9,412 13,444
Other assets 82,594 74,453
---------- ----------
Total assets $3,663,372 $3,695,042
========== ==========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
Consolidated Balance Sheets (cont.)
- -----------------------------------
(In Thousands)
<TABLE>
<CAPTION>
March 31 Dec. 31
1996 1995
---------- ---------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest-bearing deposits $ 321,421 $ 331,436
Money market checking 277,658 274,876
Savings 89,497 86,989
Money market savings 742,803 735,911
Certificates of deposit less than $100,000 647,419 677,733
Certificates of deposit of $100,000 or more 477,564 467,825
---------- ----------
Total deposits 2,556,362 2,574,770
---------- ----------
Federal funds purchased and securities sold
under agreements to repurchase 347,535 404,746
Broker/dealer customer payables 2,387 1,271
Accounts payable and accrued liabilities 46,505 38,396
Federal Home Loan Bank advances 405,513 372,799
Long-term debt 6,381 6,381
---------- ----------
Total liabilities 3,364,683 3,398,363
---------- ----------
Stockholders' equity:
Common stock 49,606 49,669
Additional paid-in capital 77,879 80,605
Retained earnings 169,151 161,878
Unrealized gains on securities, net of taxes 2,053 4,527
---------- ----------
Total stockholders' equity 298,689 296,679
Total liabilities and ---------- ----------
stockholders' equity $3,663,372 $3,695,042
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Income
---------------------------------
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the three months
ended March 31
--------------------
1996 1995
-------- --------
<S> <C> <C>
Interest income:
Loans $43,979 $36,090
Securities:
Taxable 20,218 16,538
Non-taxable 2,006 2,290
Trading account securities 422 229
Deposits at banks 226 250
Other 399 431
------- -------
Total interest income 67,250 55,828
------- -------
Interest expense:
Deposits:
Money market checking 1,071 1,167
Savings 441 514
Money market savings 7,848 7,527
Certificates of deposit less than $100,000 9,267 7,644
Certificates of deposit of $100,000 or more 6,498 4,823
Federal Home Loan Bank advances 5,238 3,480
Long-term debt 114 113
Federal funds purchased and securities
sold under agreements to repurchase 4,442 2,763
------- -------
Total interest expense 34,919 28,031
------- -------
Net interest income 32,331 27,797
Provision for loan losses 2,842 1,708
------- -------
Net interest income after
provision for loan losses 29,489 26,089
------- -------
Other income:
Trust service income 2,189 1,949
Service charges on deposits 3,371 3,411
Other service charges and fees 1,750 1,200
Broker/dealer revenue 3,581 1,890
Securities gains 25 53
Other income 4,040 4,005
------- -------
Total other income 14,956 12,508
------- -------
</TABLE>
4
<PAGE>
Consolidated Statements of Income (cont.)
- -----------------------------------------
<TABLE>
<CAPTION>
For the three months
ended March 31
--------------------
1996 1995
-------- --------
<S> <C> <C>
Other expenses:
Salaries and employee benefits 11,977 9,808
Occupancy expense 2,350 2,102
Furniture and equipment expenses 903 857
FDIC assessment 110 1,092
Other expenses 9,081 8,205
------- -------
Total other expenses 24,421 22,064
------- -------
Income before income taxes 20,024 16,533
Income taxes 6,748 5,313
------- -------
Net income $13,276 $11,220
======= =======
Net income per share of common stock $.53 $.45
Dividends per share of common stock $.19 $.17
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Cash Flows
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31
----------------------
1996 1995
--------- ---------
(In Thousands)
<S> <C> <C>
Operating activities:
Net income $ 13,276 $ 11,220
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 2,842 1,708
Provision for depreciation and amortization 1,028 1,029
Amortization of security premiums and
accretion of discounts, net (51) (9)
Deferred income taxes (credit) 98 (631)
Decrease (increase) in trading account
securities 396 (9,398)
Realized securities gains (losses) (24) (53)
(Increase) decrease in broker/dealer
customer receivables 4,032 (5,285)
Increase in interest receivable 1,845 760
Increase (decrease)in other assets (9,919) 1,317
Increase in broker/dealer customer payables 1,116 658
Increase (decrease) in interest payable (1,326) 1,470
Increase in accounts payable and
accrued expenses 11,913 4,917
--------- ---------
Net cash provided by operating activities 25,226 7,703
--------- ---------
Investing activities:
Available for sale securities:
Proceeds from the maturities of securities 156,478 14,842
Proceeds from sales of securities 149,690 80,451
Purchases of securities available for sale (281,201) (627)
Purchases of securities held to maturity (149,707) 0
Net increase (decrease) in loans (55,577) 8,41l
Purchase of premises and equipment (1,459) (1,390)
--------- ---------
Net cash provided by (used in) investing activities (181,776) 101,687
--------- ---------
Financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 2,167 (103,650)
Net increase (decrease) in certificates of deposit (20,575) 141,918
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (57,211) (59,267)
Increase (decrease) in long-term debt 0 (1)
Increase (decrease) in Federal Home Loan Bank advances 32,714 (131,764)
Proceeds from exercise of stock options 2,168 672
Issuance of common stock 3,583 0
Repurchases of common stock (9,751) 0
Cash dividends paid (4,721) (4,180)
--------- ---------
Net cash provided by (used in) financing activities (51,626) (156,272)
--------- ---------
Decrease in cash and cash equivalents (208,176) (46,882)
Cash and cash equivalents at beginning of period 387,755 166,433
--------- ---------
Cash and cash equivalents at end of period $ 179,579 $ 119,551
========= =========
Interest expense $ 36,245 $ 26,561
Income taxes paid $ 1,739 $ 1,757
</TABLE>
6
<PAGE>
NATIONAL COMMERCE BANCORPORATION
--------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
(Unaudited)
---------
Note A - Basis of Presentation
- ------------------------------
The consolidated balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date. The accompanying unaudited interim
consolidated financial statements reflect all adjustments (consisting only of
normally recurring accruals) which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented. The statements should be read in conjunction with the summary of
accounting policies and notes to consolidated financial statements included
in the Registrant's annual report for the year ended December 31, 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the rules of the Securities
and Exchange Commission.
Note B - Securities Portfolio
- -----------------------------
In accordance with FAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities", as of March 31, 1996 the securities in the "Available
for Sale" category included $3,366,000 in unrealized gains. Accordingly,
total securities and total stockholders' equity were increased by $3.4
million and $2.1 million (net of taxes), respectively, at March 31, 1996, to
reflect the adjustment of the securities portfolio to market. The calculation
of book value per share reflects this mark-to-market unrealized gain, whereas
the calculation of ROA and ROE do not, because the unrealized gain is not
included in net income. The fair value of the "Held to Maturity" category was
$819.3 million at March 31, 1996.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
The purpose of this discussion is to focus on important factors affecting the
Company's financial condition and results of operations. Reference should be
made to the consolidated financial statements (including the notes thereto) for
an understanding of the following discussion and analysis. In this discussion,
net interest income and net interest margin are presented on a fully taxable
equivalent basis. All per share data is adjusted to reflect all stock dividends
and stock splits declared through March 31, 1996.
Financial Condition
- -------------------
Following is a comparison of the March 31, 1996, and December 31, 1995,
consolidated balance sheets. In the liability section, total deposits decreased
by $18 million or 0.7%, principally as a result of a $30 million or 4.5%
decrease in certificates of deposit less than $100,000 reflecting current market
trends and a $10 million or 3.0% decrease in non-interest-bearing deposits
reflecting normally higher year-end non-interest-bearing deposit levels.
Partially offsetting these decreases, money market checking accounts increased
$3 million or 1.0%, money market savings deposits increased $7 million or 0.9%,
savings deposits increased $3 million or 2.9%, and certificates of deposit of
$100,000 or more increased $10 million or 2.1%.
Federal funds purchased and securities sold under agreements to repurchase
decreased $57 million or 14.1% from year-end 1995 levels. This category of
liabilities fluctuates with the availability of overnight funds purchased from
downstream correspondent banks.
Federal Home Loan Bank advances increased $33 million or 8.8% from December
31, 1995. This increase is principally the result of asset/liability management
decisions related to the current interest rate environment.
In the asset section, total gross loans increased by $53 million or 2.7%
compared to December 31, 1995 levels. Commercial loans increased by $2 million
or 0.5%, and real estate construction loans increased by $8 million or 6.7%,
reflecting current demand. Consumer loans increased $42 million or 4.9%,
reflecting increased emphasis on promoting indirect automobile loans.
Securities increased by $121 million or 9.4% from year-end 1995. U.S.
Government securities increased $18 million or 95.3%, Federal agency securities
increased by $42 million or 4.1%, and state and municipal securities decreased
$999 thousand or 0.7%, and other securities increased $62 million or 75.7%.
Federal funds sold and securities purchased under agreements to resell
decreased by $216 million or 95.2% from December 31, 1995 levels, reflecting
less excess funds that otherwise were not employed in loans or securities at
March 31, 1996.
Trading account securities decreased by $396 thousand or 2.0% from year-end
1995 levels. This decrease reflects the trading activity generated by Commerce
Investment Corporation, the Company's broker/dealer subsidiary, which fluctuates
from time to time.
Broker/dealer customer receivables decreased $4 million and payables
increased $1 million reflecting levels of activity.
8
<PAGE>
Results of Operations
- ---------------------
Three Months Ended March 31, 1996, Compared to Three Months Ended March 31, 1995
- --------------------------------------------------------------------------------
Net income was $13,276,000 for the first quarter of 1996, an 18.3% increase
over the $11,220,000 reported for the same period a year earlier. Earnings per
share were $.53, compared to $.45 per share in 1995, up 17.8%.
Net interest income, the difference between interest earned on loans and
investments and interest paid on interest-bearing liabilities, increased by
$4,350,000 or 14.8% for the first quarter of 1996. This increase reflects an
$11,238,000 or 19.6% increase in total interest income that more than offsets a
$6,888,000 or 24.6% increase in interest expense. Interest income increased in
1996 due to an increase of $595,733,000 or 21.1% in total average earning
assets, which more than offset a decrease in the yield on average earning assets
from 8.24% in the first quarter of 1995 to 8.07% in the first quarter of 1996.
The increased volume of earning assets positively impacted interest income by
approximately $12,800,000, while the decreased yield negatively impacted
interest income by approximately $1,600,000. Interest expense increased in the
first quarter of 1996, reflecting an increase in average interest-bearing
liabilities of $525,284,000 or 21.6%, and an increase in the cost of interest-
bearing liabilities from 4.67 to 4.74%, 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 $500,000, and
the increase in average outstandings negatively affected interest expense by
approximately $6,400,000. The net interest margin (taxable equivalent net
interest income as a percentage of average earning assets) was 3.96% in first
quarter 1996, compared to 4.21% in first quarter of 1995.
The provision for loan losses in the first quarter of 1996 was $2,842,000,
versus $1,708,000 for the first quarter of 1995. Net charge-offs were
$1,628,000, or .33% of average loans compared to $1,172,000 or .30% of average
loans in 1995. The increased provision was due to possible losses on current and
anticipated loan growth. The allowance for loan losses totaled $30,224,000 at
March 31, 1996, representing 1.52% of quarter-end net loans, compared to
$24,846,000 or 1.57% of quarter-end net loans at March 31, 1995.
Following is a comparison of non-earning assets and loans past due 90 days
or more for the quarters ended March 31, 1996, December 31, 1995, and March 31,
1995 (dollars in thousands):
3-31-96 12-31-95 3-31-95
------- -------- -------
Non-accrual loans 0 0 0
Renegotiated loans 0 0 0
Other real estate 0 30 0
----- ------ -----
Total non-earning assets 0 30 0
===== ====== =====
Loans past due 90 day
or more 3,670 3,252 2,426
Percentage of total loans .18% .17% .15%
Non-interest income totaled $14,956,000 for the quarter, an increase of
$2,448,000, or 19.6%, from last year's first quarter. The Company's
broker/dealer revenue increased $1,691,000 versus first quarter, 1995,
reflecting current market conditions. All other sources of non-interest income,
including service charge income, trust service income, and supermarket
sublicense income increased a net of $757,000 or 7.1%.
9
<PAGE>
Non-interest expenses (excluding the provision for loan losses) increased
by $2,357,000 or 10.7% in first quarter, 1996, primarily reflecting expenses of
new locations and the expenses of introducing new loan and cash management
products, partially offset by a reduction in FDIC insurance premiums.
The Company's return on average assets and return on average equity were
1.47% and 18.14% respectively, for first quarter of 1996. These compared with
1995 first quarter returns of 1.49% and 17.32%, respectively.
Liquidity and Capital Resources
- -------------------------------
Interest-bearing bank balances, federal funds sold, trading account
securities, and securities available for sale are the principal sources of
short-term asset liquidity. Other sources of short-term liquidity include
federal funds purchased and repurchase agreements, credit lines with other
banks, and borrowings from the Federal Reserve Bank and the Federal Home Loan
Bank. Maturing loans and securities are the principal sources of long-term
asset liquidity.
Total realized stockholders' equity increased by $2,010,000 from December
31, 1995, with retained earnings accounting for substantially all of the
increase, partially offset by the effect of a stock repurchase program initiated
in January, 1996. Through March 31, 1996, 369,250 shares had been repurchased
and cancelled under the program. This decrease in shares outstanding was offset
by the issue of 205,615 shares through the exercise of stock options and 129,908
shares issued in exchange for the remaining stock of TransPlatinum Service Corp.
The following capital ratios do not include the effect of FAS No. 115 on
Tier I capital, total capital, or total risk-weighted assets.
As indicated in the following table, the Company and its banking
subsidiaries exceeded all minimum required capital ratios for well-capitalized
institutions at the indicated dates.
3-31-96 12-31-95 3-31-95
------- -------- -------
Total capital to risk-weighted
assets 13.25% 13.52% 15.48%
Tier I capital to risk-weighted
assets 12.01% 12.3% 14.23%
Tier I capital to assets
(leverage ratio) 8.01% 7.91% 9.19%
10
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
11. Computation of Earnings per Share
27. Financial Data Schedule
b. Reports on Form 8-K
The Registrant did not file any reports on Form 8-K
during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL COMMERCE BANCORPORATION
(Registrant)
By /s/ Lewis E. Holland
--------------------------------------
Lewis E. Holland
Executive Vice President, Treasurer and
Chief Financial Officer
(Authorized Officer)
(Principal Financial Officer)
Date May 13, 1996
------------------
11
<PAGE>
EXHIBIT 11. Computation of Earnings Per Share
- ----------------------------------------------
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data)
-------------------------------------
Three Months Ended March 31
1996 1995
------- -------
<S> <C> <C>
Primary:
Average shares outstanding 24,834 24,578
Less leveraged ESOP shares (105) (50)
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using average
market price 511 655
------- -------
Total 25,240 25,183
======= =======
Net income $13,276 $11,220
Per share amount $ .53 $ .45
Fully Diluted:
Average shares outstanding 24,834 24,578
Less leveraged ESOP shares (105) (50)
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using higher
of quarter-end and average market
price 624 655
------- -------
Total 25,353 25,183
======= =======
Net income $13,276 $11,220
Per share amount $ .52 $ .45
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 151,573 96,993
<INT-BEARING-DEPOSITS> 17,008 16,583
<FED-FUNDS-SOLD> 10,998 5,975
<TRADING-ASSETS> 19,763 22,905
<INVESTMENTS-HELD-FOR-SALE> 572,420 806,209
<INVESTMENTS-CARRYING> 826,984 283,942
<INVESTMENTS-MARKET> 819,297 278,593
<LOANS> 1,983,881 1,583,223
<ALLOWANCE> 30,224 24,846
<TOTAL-ASSETS> 3,663,372 2,885,133
<DEPOSITS> 2,556,362 2,192,658
<SHORT-TERM> 393,267 286,219
<LIABILITIES-OTHER> 48,892 30,810
<LONG-TERM> 366,162 125,809
<COMMON> 298,689 249,637
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 3,663,372 2,885,133
<INTEREST-LOAN> 43,979 36,090
<INTEREST-INVEST> 22,224 18,828
<INTEREST-OTHER> 1,047 910
<INTEREST-TOTAL> 67,250 55,828
<INTEREST-DEPOSIT> 25,125 21,675
<INTEREST-EXPENSE> 34,919 28,031
<INTEREST-INCOME-NET> 32,331 27,797
<LOAN-LOSSES> 2,842 1,708
<SECURITIES-GAINS> 25 53
<EXPENSE-OTHER> 24,421 22,064
<INCOME-PRETAX> 20,024 16,533
<INCOME-PRE-EXTRAORDINARY> 20,024 16,533
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,276 11,220
<EPS-PRIMARY> .53 .45
<EPS-DILUTED> .52 .45
<YIELD-ACTUAL> 3.96 4.21
<LOANS-NON> 0 0
<LOANS-PAST> 3,670 2,426
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 530 905
<ALLOWANCE-OPEN> 29,010 24,310
<CHARGE-OFFS> 2,607 1,746
<RECOVERIES> 979 574
<ALLOWANCE-CLOSE> 30,224 24,846
<ALLOWANCE-DOMESTIC> 30,224 24,846
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
