<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 10, 1999
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated May 6, 1999)
[NATIONAL COMMERCE LOGO TO APPEAR HERE]
FILED PURSUANT TO
RULE 424 (b) (3)
FILE NO: 333-76499
6,000,000 Shares
National Commerce Bancorporation
Common Stock
$ per share
--------
This is an offering of 6,000,000 shares of National Commerce Bancorporation
common stock. We are selling 4,072,805 shares of our common stock and certain
selling shareholders are selling 1,927,195 shares of common stock. We will not
receive any of the proceeds from the sale of shares by the selling
shareholders. The underwriters named in this prospectus may purchase up to
500,000 additional shares of common stock from us under certain circumstances.
The common stock is quoted on the Nasdaq National Market under the symbol
"NCBC." The last reported sale price of the common stock on the Nasdaq National
Market on May 7, 1999 was $25 3/8 per share.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued under this
prospectus or determined if this prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
These securities are not savings or deposit accounts or other obligations of
any bank or nonbank subsidiary of National Commerce Bancorporation, and they
are not insured by the Federal Deposit Insurance Corporation, the Bank
Insurance Fund or any other governmental agency.
--------
<TABLE>
<CAPTION>
Per
Share Total
------- -------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to National Commerce Bancorporation (before expenses) $ $
Proceeds to the Selling Shareholders (before expenses) $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about , 1999.
--------
Salomon Smith Barney
Lehman Brothers
Morgan Stanley Dean Witter
, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. National Commerce Bancorporation has not
authorized anyone to provide you with different information. National Commerce
Bancorporation is not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information provided
by this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements................................................. S-2
Prospectus Summary......................................................... S-3
Use of Proceeds............................................................ S-7
Price Range of Common Stock and Dividend Policy............................ S-7
Capitalization............................................................. S-8
Summary Discussion of Financial Condition and Results of Operations........ S-8
Business................................................................... S-12
Selling Shareholders....................................................... S-17
Underwriting............................................................... S-18
Validity of the Common Stock............................................... S-19
Experts.................................................................... S-20
Incorporation of Documents We File With the SEC............................ S-20
PROSPECTUS
About this Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
Incorporation of Information We File With the SEC.......................... 3
Forward-Looking Statements................................................. 4
The Company................................................................ 5
Ratio of Earnings to Fixed Charges......................................... 6
Use of Proceeds............................................................ 6
Regulatory Matters......................................................... 7
Description of Debt Securities............................................. 11
Description of Preferred Stock............................................. 18
Description of Common Stock................................................ 22
Selling Shareholders....................................................... 23
Plan of Distribution....................................................... 24
Validity of Securities..................................................... 25
Experts.................................................................... 25
</TABLE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by us or on our behalf. All
statements in this prospectus that are not historical facts or that express
expectations and projections with respect to future matters are "forward-
looking statements" for the purpose of the safe harbor provided by the Act. We
caution readers that such "forward-looking statements," including, without
limitation, those relating to future business initiatives and prospects,
revenues, working capital, liquidity, capital needs, interest costs and income,
and "Year 2000" remediation efforts, wherever they occur in this document or in
other statements attributable to us, are necessarily estimates reflecting the
best judgment of our senior management. Such statements involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the "forward-looking statements." "Forward-looking
statements" should, therefore, be considered in light of various important
factors, including those set forth in this document. Important factors
currently known to management that could cause actual results to differ
materially from those in "forward-looking statements" include significant
fluctuations in interest rates, inflation, economic recession, economic
conditions in the markets we serve, significant changes in the federal and
state legal and regulatory environment, significant under-performance in our
portfolio of outstanding loans, and competition in our markets. Other factors
set forth from time to time in our filings with the SEC should also be
considered. We undertake no obligation to update or revise "forward-looking
statements" to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial information appearing elsewhere
in or incorporated by reference into this prospectus.
National Commerce Bancorporation
Overview
We provide select financial services and consulting through a regional
network of banking affiliates and a national network of non-banking affiliates.
Our organization has a culture and compensation structure that promote sales,
marketing and superior financial performance. We operate 144 bank locations in
Tennessee, North Carolina, Georgia, Virginia, Mississippi and Arkansas.
-- At or for the quarter ended March 31, 1999, we had consolidated total
assets of $6.0 billion, annualized return on average assets of 1.64% and
return on average equity of 23.00%.
-- The May 1999 edition of U.S. Banker magazine ranked us as the top
performing bank in the United States for 1998 based on non-performing
asset ratio, net charge-off ratio, return on equity, efficiency ratio,
leverage ratio and tier one capital ratio. We have been ranked in the
top four by this publication each year since 1995.
-- We were among the top banks in the country in terms of efficiency for
the year ended December 31, 1998, with an efficiency ratio of 48.30%,
which we improved to 44.58% for the first quarter of 1999.
-- We have produced compound annual earnings per share growth of 14.2%
since 1988 and 15.7% since 1993. In addition, our annual earnings per
share growth exceeded 20% in each of the last two years.
We have three major lines of business: retail banking, commercial banking
and financial services. Financial services includes transaction processing, in-
store licensing and consulting, capital markets, trust and asset management and
treasury. Contributions to our 1998 net income were generally balanced among
retail banking, commercial banking and financial services.
Distribution Strategy
We believe that our multi-channel distribution strategy for banking products
and services is at the core of our success. Our delivery channels include in-
store and traditional branches, direct mail, telephone, ATM and Internet
banking. This strategy allows us to deliver high quality products, customer
service and convenience at a low cost.
Our hub and spoke branch network is the key to our overall distribution
strategy and allows us to efficiently expand into new markets. We target
markets that are expected to experience above-average economic growth and enter
them de novo. We open multiple in-store locations, primarily in supermarkets
that average 20,000 to 30,000 customer transactions and $250,000 in sales per
week (spokes). This expansion is followed by small in-market acquisitions or
construction of traditional locations to establish hub branches that complement
the in-store offerings and promote the development of commercial lending,
mortgage banking, real estate lending and private banking. We target one
traditional branch for every three to four in-store locations. Currently 107 of
our 144 branches are in-store. Utilizing this hub and spoke approach,
complemented by alternative distribution channels, we have achieved
profitability in new markets in less than two years.
S-3
<PAGE>
Operating Strategy
Our operating strategy is to (i) expand our distribution network, (ii)
deliver additional products and services that are valuable to our customers,
(iii) allocate resources efficiently, (iv) diversify our non-banking, fee-
generating services and (v) align management compensation with shareholders'
interests.
We measure the success of our operating strategy by focusing primarily on
the following four performance measures: (i) revenue growth, (ii) efficiency
ratio, (iii) net interest margin and (iv) credit quality. From 1994 to 1998:
-- Our compound annual revenue growth was 14.3%.
-- Our efficiency ratio improved from 52.70% to 48.30%.
-- Our net interest margin averaged 4.11%.
-- Our non-performing assets to total loans were at or near 0.0%.
Our focus on these four measures has resulted in an average return on equity
of 19.80% since 1994, with returns of 20.92% in 1997, 22.15% in 1998 and 23.00%
annualized for the quarter ended March 31, 1999. In addition, our earnings per
share have grown at an annual compound rate of 17.2% since 1994, with growth of
21.1% in 1997, 20.3% in 1998 and 21.1% for the quarter ended March 31, 1999.
We have developed incentive compensation plans for our executive officers
that closely align their compensation with shareholders' interests. Our
executive officers receive bonus payments only if we achieve both a minimum of
20% return on equity and 16% earnings per share growth. Maximum bonus payments
may be earned only if both measures are 20% or greater. At February 1, 1999,
our officers, directors and directors emeritus, as a group, held approximately
29% of all outstanding shares of our common stock, which we believe is among
the highest percentage holdings by such a group in our industry. Pro forma for
this offering, our officers, directors and directors emeritus will own
approximately 26% of all outstanding shares of our common stock.
Recent Developments
New Business Initiative
On April 28, 1999, we announced a new business initiative with The Kroger
Co., the nation's largest supermarket chain, that will expand our presence to
Charleston, West Virginia. Under the terms of the agreement, we expect to open
seven new in-store branches in the Charleston area by September 1999, pending
regulatory approval. We have similar arrangements with Kroger in six other
metropolitan markets.
Acquisition
On May 1, 1999, we agreed to acquire First Financial Corporation, a bank
holding company located in the Nashville metropolitan area, subject to approval
by their shareholders and regulatory approval. At December 31, 1998, First
Financial had total assets of approximately $260 million, total deposits of
approximately $248 million and seven full-service branches. We expect to
complete our acquisition of First Financial during the third quarter of 1999
and to account for the acquisition using the pooling-of-interests method of
accounting.
S-4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by National
Commerce Bancorporation.......... 4,072,805 shares
Common stock offered by selling
shareholders..................... 1,927,195 shares
Total........................... 6,000,000 shares
Common stock to be outstanding
after the offering............... 105,604,940 shares
Use of proceeds................... We intend to use our net proceeds of this
offering to add to our general funds, which
we may use to (i) finance expansion into
new markets and new business lines; (ii)
finance cash acquisitions of assets and
companies, although presently there are no
agreements for any such acquisitions;
(iii) meet our working capital
requirements; (iv) reduce our short term
indebtedness; (v) invest at the bank
holding company levels; or (vi) invest in
or extend credit to our affiliates and
other banks and companies engaged in other
financial service activities.
Nasdaq National Market symbol..... NCBC
</TABLE>
The number of shares of common stock to be outstanding after the offering
does not take into account shares reserved for outstanding stock options and
shares to be issued in connection with the First Financial acquisition.
Unless we specifically state otherwise, the information in this prospectus
does not take into account the issuance of up to 500,000 shares of common stock
which the underwriters have the option to purchase solely from us to cover
over-allotments. If the underwriters exercise this over-allotment option in
full, 106,104,940 shares will be outstanding after the offering.
S-5
<PAGE>
Summary Financial Data
The following financial data are derived from our consolidated financial
statements. This information should be read in conjunction with, and is
qualified by reference to, the more detailed information contained in our
consolidated financial statements and the accompanying notes thereto
incorporated by reference in this Prospectus Supplement and the Prospectus. See
"Incorporation of Information We File with the SEC" and "Where You Can Find
More Information" in the Prospectus.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(In thousands of dollars, except per share and ratio
data)
Results of Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income.... $ 52,594 $ 44,271 $ 192,618 $ 162,821 $ 135,466 $ 120,025 $ 110,021
Provisions for loan
losses................ 2,379 867 9,599 17,013 14,134 9,750 7,077
Non-interest income.... 20,494 21,006 84,871 82,405 69,635 53,868 49,940
Non-interest expenses.. 35,078 34,141 140,304 123,460 103,875 91,830 87,574
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................. 35,631 30,269 127,586 104,753 87,092 72,313 65,310
Applicable income
taxes................. 11,563 10,254 42,445 34,973 29,579 23,278 20,968
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............. $ 24,068 $ 20,015 $ 85,141 $ 69,780 $ 57,513 $ 49,035 $ 44,342
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
Per common share data:
<S> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per
share................. $ 0.24 $ 0.20 $ 0.85 $ 0.71 $ 0.59 $ 0.50 $ 0.46
Diluted earnings per
share................. 0.23 0.19 0.83 0.69 0.57 0.49 0.44
Cash dividends
declared.............. 0.09 0.07 0.32 0.23 0.20 0.18 0.16
Book value............. 4.14 3.79 4.03 3.60 3.22 2.99 2.29
<CAPTION>
Balance Sheet Data
(period average):
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets........... $5,877,917 $4,701,778 $5,114,126 $4,404,852 $3,812,114 $3,214,291 $2,845,135
Total loans, net of
unearned discounts.... 3,184,019 2,673,457 2,883,277 2,513,327 2,130,810 1,718,424 1,505,716
Total deposits......... 3,833,552 3,329,578 3,460,007 2,954,813 2,652,559 2,339,553 2,042,557
Total liabilities...... 5,458,686 4,330,928 4,679,893 4,033,245 3,516,288 2,941,814 2,605,232
Shareholders' equity... 419,231 370,850 384,342 333,528 295,826 272,477 239,903
<CAPTION>
Balance Sheet Data (end
of period):
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets........... $6,028,737 $4,992,478 $5,811,054 $4,692,011 $4,200,409 $3,695,042 $3,005,809
Total loans, net of
unearned discounts.... 3,205,888 2,719,212 3,197,673 2,608,967 2,347,973 1,931,213 1,592,806
Total deposits......... 3,943,347 3,509,202 3,947,275 3,251,242 2,976,430 2,574,770 2,154,390
Total liabilities...... 5,608,036 4,613,158 5,352,609 4,289,979 3,887,080 3,398,363 2,781,390
Shareholders' equity... 420,701 379,320 408,549 352,148 313,329 296,679 224,419
<CAPTION>
Profitability Ratios:
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average
equity................ 23.00% 21.76% 22.15% 20.92% 19.44% 18.00% 18.48%
Return on average
assets................ 1.64 1.70 1.66 1.58 1.51 1.53 1.56
Net interest margin.... 4.11 4.21 4.17 4.04 3.89 4.14 4.33
Efficiency ratio....... 44.58 51.31 48.30 48.50 49.70 51.20 52.70
<CAPTION>
Capitalization:
<S> <C> <C> <C> <C> <C> <C> <C>
Average equity to
assets................ 7.13% 7.89% 7.52% 7.57% 7.76% 8.48% 8.43%
Tier 1 capital ratio .. 11.94 12.82 11.79 12.61 11.05 12.30 13.62
Tier 1 leverage ratio.. 7.85 8.89 8.03 8.69 7.66 7.91 8.56
<CAPTION>
Credit Quality:
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for loan
losses to total
loans................. 1.54% 1.64% 1.54% 1.66% 1.51% 1.50% 1.53%
Net charge-offs to
average loans......... 0.25 0.11 0.26 0.39 0.35 0.29 0.28
Non-performing assets
to
total assets.......... 0.02 0.00 0.02 0.00 0.00 0.00 0.00
</TABLE>
S-6
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds to us from this offering, after deducting
underwriting commissions, discounts and offering expenses, will be
approximately $ , or $ if the underwriters' over-allotment
option is exercised in full. We will not receive any of the net proceeds from
the sale of our common stock by the selling shareholders. We intend to add our
net proceeds that we receive from the sale of our common stock to our general
funds, which we may use to (i) finance expansion into new markets and new lines
of business; (ii) finance cash acquisitions of assets and companies, although
presently there are no agreements for any such acquisitions; (iii) meet our
working capital requirements; (iv) reduce our short-term indebtedness; (v)
invest at the bank holding company level; or (vi) invest in or extend credit to
our affiliates and other banks and companies engaged in other financial service
activities. Until the net proceeds have been used, they may be invested in
short-term marketable securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded over-the-counter on the Nasdaq National Market
and is quoted under the trading symbol "NCBC." At December 31, 1998, there were
approximately 3,600 stockholders of record.
The following table sets forth for the periods indicated the high and low
closing sales prices for our common stock as reported on the Nasdaq National
Market, as restated to give retroactive recognition to all stock dividends and
stock splits.
<TABLE>
<CAPTION>
NCBC Common Stock
-----------------------
High Low Dividends
------ ------ ---------
<S> <C> <C> <C>
1997
First Quarter.................................. $11.50 $ 8.94 $0.05
Second Quarter................................. 11.81 9.63 0.06
Third Quarter.................................. 13.82 11.44 0.05
Fourth Quarter................................. 17.88 13.59 0.07
1998
First Quarter.................................. $21.57 $15.13 $0.07
Second Quarter................................. 23.38 19.69 0.08
Third Quarter.................................. 25.75 16.50 0.08
Fourth Quarter................................. 19.06 13.94 0.09
1999
First Quarter.................................. $24.38 $17.56 $0.09
Second Quarter (through May 7, 1999)........... 25.67 22.44 0.09 (a)
</TABLE>
- --------
(a) Payable on July 1, 1999 to shareholders of record as of June 4, 1999.
We have paid regular dividends on our common stock without interruption
since our incorporation. Our Board of Directors has the discretion to decide
whether to pay dividends in the future and the amount of any such dividends.
Our ability to pay dividends to our shareholders may be limited by certain
factors including regulatory capital requirements and broad enforcement powers
of the Federal Reserve. See "Regulatory Matters" in the Prospectus.
Our primary source of funds for payment of common stock dividends to our
shareholders is dividends we receive from our banking subsidiaries. The amount
of dividends that a bank may declare in any year is subject to certain
regulatory restrictions. See "Regulatory Matters" in the Prospectus. At March
31, 1999, $28,497,000 of the total shareholders' equity of our subsidiary banks
was available for payment of dividends to us without approval by the applicable
regulatory authority.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization at March 31,
1999 and as adjusted to give effect to our net proceeds from the issuance and
sale of 4,072,805 shares of common stock by National Commerce Bancorporation in
this offering (assuming a price of $25 3/8 per share). The table should be read
in conjunction with our consolidated financial statements and the accompanying
notes incorporated by reference in this prospectus. See "Incorporation of
Information We File with the SEC" in this Prospectus Supplement and "Where You
Can Find More Information" in the Prospectus.
<TABLE>
<CAPTION>
March 31, 1999
----------------------
As
Actual Adjusted
---------- ----------
(in thousands)
<S> <C> <C>
Long-term debt and bank notes.......................... $ 784,045 $ 784,045
Capital trust pass-through securities.................. 49,899 49,899
Shareholders' equity
Common stock (par value $2.00 per share--authorized
175,000,000 shares; issued and outstanding
101,532,135, actual; issued and outstanding
105,604,940, pro forma)............................. $ 203,032 $ 211,178
Additional paid-in capital........................... 29,236 120,987
Retained earnings and accumulated other comprehensive
income.............................................. 188,433 188,433
---------- ----------
Total shareholders' equity........................... $ 420,701 $ 520,598
---------- ----------
Total capitalization................................... $1,254,645 $1,354,542
Ratios:
Tier 1 capital ratio................................. 11.94% 14.53%
Total risk-based capital ratio....................... 13.19 15.78
Tier 1 leverage ratio................................ 7.85 9.39
</TABLE>
SUMMARY DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion is to summarize important factors affecting
our financial condition and results of operations. The following are excerpts
from our Results of Operations and Capital Resources sections of Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A"). The full text of our MD&A with respect to the discussion, "Quarter
Ended March 31, 1999 Compared to the Quarter Ended March 31, 1998," is included
in our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
which was filed with the Securities and Exchange Commission (the "SEC") on May
7, 1999. The full text of our MD&A with respect to the discussion, "Year Ended
December 31, 1998 Compared to the Year Ended December 31, 1997 and the Year
Ended December 31, 1996," is included in our Annual Report on Form 10-K for the
year ended December 31, 1998, which was filed with the SEC on March 26, 1999.
You should read these excerpts together with the full text of the respective
MD&A. In addition, you should refer to our consolidated financial statements,
including the accompanying notes, incorporated by reference in this prospectus,
and the summary selected financial data presented elsewhere in this prospectus,
for an understanding of the following discussion. To obtain a copy of our MD&A
or our consolidated financial statements, see "Incorporation of Information We
File with the SEC" in this Prospectus Supplement and "Where You Can Find More
Information" in the Prospectus.
Quarter Ended March 31, 1999 Compared to the Quarter Ended March 31,
1998. Net income was $24,068,000 for the first quarter of 1999, a 20.2%
increase over the $20,015,000 reported for the same period a year earlier.
Diluted earnings per share were $0.23, compared to $0.19 per share in 1998, up
21.1%. Basic earnings per share were $0.24, compared to $0.20 per share in
1998, up 20.0%. Our annualized return on average assets and return on average
equity were 1.64% and 23.00%, respectively, for the first quarter of 1999.
These compared with 1998 first quarter returns of 1.70% and 21.76%,
respectively.
S-8
<PAGE>
Other highlights include:
-- Net Interest Income. Net interest income (taxable equivalent), the
difference between interest earned on loans and investments and interest
paid on interest-bearing liabilities, increased by $10,371,000 or 22.8%
for the first quarter of 1999. This increase reflects a $17,939,000, or
20.1%, increase in total interest income that more than offsets a
$7,568,000, or 17.2%, increase in interest expense.
-- Interest Income. Interest income increased in 1999 due to an
increase of $1.1 billion or 25.6% in total average earning assets,
which was partially offset by a decrease in the yield on average
earning assets from 8.27% in the first quarter of 1998 to 7.91% in
the first quarter of 1999. The increased volume of earning assets
raised interest income by approximately $22,877,000, while the
decreased yield reduced interest income by approximately $4,938,000.
-- Interest Expense. Interest expense increased $7,568,000 in the first
quarter of 1999, reflecting an increase in average interest-bearing
liabilities of $1.1 billion or 28.1%, and a decrease in the cost of
interest-bearing liabilities from 4.70% to 4.30%. The decrease in
the rate paid on interest-bearing liabilities reduced interest
expense by approximately $4,762,000, and the increase in average
outstandings raised interest expense by approximately $12,330,000.
-- Net Interest Margin. The net interest margin (taxable equivalent net
interest income as a percentage of average earning assets) was 4.11%
in the first quarter of 1999, compared to 4.21% in the first quarter
of 1998.
-- Provision for Loan Losses. The provision for loan losses in the first
quarter of 1999 was $2,379,000, versus $867,000 for the first quarter
1998. Net charge-offs were $2,017,000 for the first quarter of 1999, or
0.25% of average loans, compared to $762,000, or 0.11% of average loans
in the first quarter of 1998.
-- Allowance for Loan Losses. The allowance for loan losses totaled
$49,484,000 at March 31, 1999, representing 1.54% of total loans,
compared to $44,643,000, at March 31, 1998, representing 1.64% of total
loans.
-- Non-performing Assets. There were $129,000 non-performing loans and $1.2
million non-performing assets for the quarter ended March 31, 1999.
There were no non-performing loans and $217,000 non-performing assets
for the quarter ended March 31, 1998. Loans past due 90 days or more
were $4.1 million, or 0.13% of our total loans for the quarter ended
March 31, 1999, compared to $4.6 million, or 0.17% of our total loans,
for the quarter ended March 31, 1998.
-- Non-interest Income. Non-interest income, excluding securities
transactions, totaled $20,493,000 for the first quarter of 1999, a
decrease of $511,000 or 2.4% from the first quarter of 1998. Our broker-
dealer revenue increased $733,000 versus first quarter 1998, reflecting
favorable market conditions. All other sources of non-interest income,
including service charge income, trust service income, fuel card
processing income and supermarket sublicense income decreased a net of
$1,244,000 or 7.6%.
-- Non-interest Expenses. Non-interest expense (excluding the provision for
loan losses) increased by $937,000 or 2.7% in the first quarter, 1999,
primarily reflecting increased employment and other expenses relating to
new products and locations and increased promotional expenses of new
loan and deposit gathering campaigns.
-- Capital Resources. The total capital ratio for first quarter 1999 was
13.19% compared to 14.07% for first quarter 1998. The tier 1 capital
ratio for first quarter 1999 was 11.94% compared to 12.82% for first
quarter 1998. The leverage ratio was 7.85% for first quarter 1999
compared to 8.89% for first quarter 1998.
S-9
<PAGE>
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
and the Year Ended December 31, 1996. For the year ended December 31, 1998, net
income totaled $85,141,000, a $15,361,000 or 22.0% increase over 1997 net
income of $69,780,000. Net income increased by $12,267,000 or 21.3% in 1997.
Basic earnings per share were $0.85 in 1998, compared to $0.71 in 1997 and
$0.59 in 1996. Diluted earnings per share were $0.83 in 1998, compared to $0.69
in 1997 and $0.57 in 1996. For 1998, return on average assets was 1.66%,
compared to 1.58% in 1997 and 1.51% in 1996. Return on average equity
(excluding unrealized gains or losses on investment securities) was 22.15% in
1998, compared to 20.92% in 1997 and 19.44% in 1996.
Other highlights include:
-- Net Interest Income. Net interest income increased by $31,374,000 or
18.7% in 1998, increased by $26,895,000 or 19.1% in 1997 and increased
by $14,830,000 or 11.8% in 1996. The increase in 1998 reflects a
$48,171,000 or 14.1% increase in interest income and a $16,797,000 or
9.6% increase in total interest expense.
-- Interest Income. The increase in interest income in 1998 was the
result of a $369,950,000, or 14.7%, increase in average loans and a
$209,866,000 or 13.4% increase in average investment securities,
offset by a decrease in the average yield on earning assets from
8.24% in 1997 to 8.18% in 1998. The increased volume of average
earning assets (partially funded by an increase of $171,076,000 in
average non-interest-bearing liabilities, net of non-interest-
earning assets) raised interest income by approximately $50 million,
while the decreased yield on average earning assets reduced interest
income by approximately $2 million.
-- Interest Expense. Interest expense increased in 1998, reflecting a
$538,198,000, or 14.8%, increase in average outstanding interest-
bearing liabilities, and a decrease in the cost of interest-bearing
liabilities from 4.79% in 1997 to 4.58% in 1998. The decrease in the
rate paid on interest-bearing liabilities reduced interest expense
by approximately $7 million and the increase in average outstandings
raised interest expense by approximately $24 million.
-- Net Interest Margin. The net interest margin was 4.17% in 1998,
compared to 4.04% in 1997 and 3.89% in 1996.
-- Provision for Loan Losses. Our provision for loan losses was $9,599,000
for 1998, compared to $17,013,000 for 1997 and $14,134,000 for 1996. The
1998 provision was primarily the result of loan growth. Net loan charge-
offs were $7,610,000 (0.26% of average loans, net of unearned discounts)
in 1998, compared to $9,855,000 (0.39% of average loans, net of unearned
discounts) in 1997, and $7,515,000 (0.35% of average loans, net of
unearned discounts) in 1996.
-- Allowance for Loan Losses. The allowance for loan losses at December 31,
1998, was $49,122,000 or 1.54% of loans, net of unearned discounts,
compared to $43,297,000 or 1.66% of loans at December 31, 1997, and
$35,514,000 or 1.51% of net loans at December 31, 1996.
-- Non-performing Assets. In 1998, there were $975,000 in non-performing
assets. There were no non-performing assets at December 31, 1997 or
1996. Based on the regulatory definition, we have no "Highly Leveraged
Transactions." We also have no loans involving syndicated leveraged
buyouts. Our management believes that the allowance for loan losses is
adequate to provide for inherent losses in the loan portfolio.
-- Non-interest Income. Non-interest income (excluding securities gains or
losses) increased $2,189,000 or 2.7% in 1998. Non-interest income
increased $12,853,000 or 18.5% in 1997. Included in 1997 non-interest
income was a net gain of $8 million relating to the sale of
substantially all of our credit card receivables. The net income impact
of the credit card sale was an after-tax gain of $1,784,000 ($0.02 per
share) for the year and the fourth quarter of 1997. All other sources of
non-interest income including broker-dealer revenue, trust service
income, service charge income, fuel card processing income and in-store
banking licensing income increased a net of $10,766,000 or 16.9%.
Securities gains totaled $197,000 in 1998, and securities losses totaled
$80,000 in 1997.
S-10
<PAGE>
-- Non-interest Expenses. Non-interest expenses (excluding the provision
for loan losses) increased by $16,844,000 or 13.6% in 1998, primarily
reflecting increased employment and other expenses relating to new
products and locations, and increased promotional expenses of new loan
and deposit gathering campaigns. Total non-interest expenses increased
by $19,585,000 or 18.9% in 1997, primarily for the same reasons.
-- Capital Resources. Total average assets increased by 16.1% in 1998,
15.5% in 1997 and 18.6% in 1996. Correspondingly, total average equity
capital increased by 15.2% in 1998, 12.7% in 1997 and 8.6% in 1996. The
percentage of average equity capital to average assets was 7.52% in
1998, 7.57% in 1997 and 7.76% in 1996. The total capital ratio for 1998
was 13.04% compared to 13.86% in 1997 and 12.30% in 1996. The tier 1
capital ratio for 1998 was 11.79% compared to 12.61% for 1997 and 11.05%
for 1996. The leverage ratio was 8.03% in 1998 compared to 8.69% in 1997
and 7.66% in 1996.
S-11
<PAGE>
BUSINESS
Overview
We provide select financial services and consulting through a regional
network of banking affiliates and a national network of non-banking affiliates.
Our organization has a culture and compensation structure that promote sales,
marketing and superior financial performance. We operate 144 branch locations
in Tennessee, North Carolina, Georgia, Virginia, Mississippi and Arkansas.
-- We were incorporated in Tennessee as a bank holding company in February
1966. Our name was changed to National Commerce Bancorporation in April
1978. Our largest operating subsidiary, National Bank of Commerce, began
operations in 1873.
-- At or for the quarter ended March 31, 1999, we had consolidated total
assets of $6.0 billion, annualized return on average assets of 1.64% and
return on average equity of 23.00%.
-- Of the seven primary metropolitan markets in which we operate, six
markets had per capita income growth above the national average from
1990 to 1997.
-- The May 1999 edition of U.S. Banker magazine ranked us as the top
performing bank in the United States for 1998 based on non-performing
asset ratio, net charge-off ratio, return on equity, efficiency ratio,
leverage ratio and tier one capital ratio. In previous years, U.S.
Banker ranked us #2 for 1997, #4 for 1996 and #1 for 1995.
-- We were among the top banks in the country in terms of efficiency for
the period ended December 31, 1998, with an efficiency ratio of 48.30%,
which we improved to 44.58% for the first quarter of 1999.
-- We have produced compound annual earnings per share growth of 14.2%,
since 1988 and 15.7% since 1993. In addition, our annual earnings per
share growth exceeded 20% in each of the last two years.
Distribution Strategy
We believe that our multi-channel distribution strategy for banking products
and services is at the core of our success. Our delivery channels include in-
store and traditional branches, direct mail, telephone, ATM and Internet
banking. This strategy allows us to deliver high quality products, customer
service and convenience at a low cost.
Our hub and spoke branch network is the key to our overall distribution
strategy and allows us to efficiently expand into new markets. We target
markets that are expected to experience above-average economic growth and enter
them de novo. We open multiple in-store locations, primarily in supermarkets
that typically average 20,000 to 30,000 customer transactions and $250,000 in
sales per week (spokes). This expansion is followed by small in-market
acquisitions or construction of traditional locations to establish hub branches
that complement the in-store offerings and promote the development of
commercial lending, mortgage banking, real estate lending and private banking.
We target one traditional branch for every three to four in-store locations.
Currently 107 of our 144 branches are in-store. Utilizing this hub and spoke
approach, complemented by alternative distribution channels, we have achieved
profitability in new markets in less than two years.
Beginning in 1985, we expanded our geographic presence outside of our
Memphis market with the opening of de novo banks in Nashville, Tennessee (1985)
and Knoxville, Tennessee (1986). We continued this expansion by entering new
markets outside of Tennessee, including Roanoke, Virginia (1993); Raleigh/
Durham, North Carolina (1994); Greensboro, North Carolina (1996); north Georgia
(1996); and Richmond, Virginia (1997).
S-12
<PAGE>
Specific examples of our expansion include:
-- Our entry into the Roanoke, Virginia market began with the opening of
six in-store branches in July 1993. Subsequently, we have added three
in-store branches and, in the first quarter of 1999, acquired five
traditional branches which will serve as hubs.
-- We opened two in-store locations in north Georgia in late 1996 and seven
additional in-store branches during 1997. With the spokes in place, we
acquired First Community Bank and Trust in 1998, a $100 million-asset
company to provide hubs for our distribution network. At March 31, 1999,
we had nine in-store branches and two traditional branches located along
the Interstate-75 corridor north of Atlanta.
-- We entered into an innovative joint venture in November 1997. We
partnered with Ukrop's Super Markets Inc., an up-scale, privately owned
supermarket leader in the greater Richmond area, to create First Market
Bank of which we own 49%. Unlike our previous de novo market entries, we
immediately established hubs to take advantage of Ukrop's superior
customer loyalty and market share. At March 31, 1999, we had sixteen in-
store branches and four traditional branches in the Richmond market.
Our most recent new business initiative and acquisition are reflective of
our hub and spoke strategy:
-- On April 28, 1999, we announced a new business initiative with Kroger
that will allow us to enter Charleston, West Virginia de novo. Under the
terms of the agreement, we expect to open seven new in-store branches in
the Charleston area by September 1999, pending regulatory approval.
-- On May 1, 1999, we signed a definitive agreement to acquire First
Financial Corporation, a Tennessee bank holding company located in the
Nashville metropolitan area, subject to approval by their shareholders
and regulatory approval. When completed, the First Financial acquisition
will provide us with additional hubs in the Nashville area.
Business Lines
We operate three major lines of business: retail banking, commercial banking
and financial services.
Based on segment reporting data, the contributions to net income by the
three business lines were generally balanced:
<TABLE>
<CAPTION>
For the quarter ended March 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Retail Banking............................. 35% 36%
Commercial Banking......................... 28 33
Financial Services ........................ 37 31
--------------- ---------------
100% 100%
=============== ===============
</TABLE>
Retail Banking
Our retail banking business includes deposit, credit, investment and
insurance products, private banking and financial planning services for
individuals. Over the last fifteen years, we have transformed our business to
emphasize retail banking. For example, retail loans, which comprised 36% of
total loans at December 31, 1984, accounted for 73% of our loans at March 31,
1999. For the quarter ended March 31, 1999, retail banking contributed 35% of
our net income.
To enhance retail distribution, we developed our Internet banking capability
in 1997. In June 1998, we entered into a joint marketing effort with BellSouth
Corporation to further promote our Internet banking services. Customers in the
Southeast who use our Internet banking service, NBC Internet Banking, and
S-13
<PAGE>
BellSouth.net Internet access service receive special benefits, such as free
Internet banking and rebates when paying bills electronically.
We strive to create innovative products and services that improve our
relationships with our customers and in-store partners, while increasing our
profitability. One such product, the Market Share Card, is a customer loyalty
card jointly created with Ukrop's in 1997. The Market Share Card is a debit
card tied to a customer's retail banking account. The card awards points based
on the customer's level of business with Ukrop's and with us. Based on total
points accumulated, the customer will receive a coupon redeemable for goods and
services. We share the cost of the coupons based on the breakdown of the
customer's point allocation between banking business and Ukrop's purchases.
Results to date have shown that the Market Share Card builds customer loyalty
and improves the relationship between the cardholder and us. We are exploring
concepts similar to the Market Share Card with other retailers.
Commercial Banking
Our commercial banking business includes full service banking for small
companies, and lending and related financial services to medium- and large-
sized corporations and other financial institutions. Our medium-sized clients
typically have total revenues between $7 and $50 million, with $20 to $25
million being the average. Our large-sized clients have total revenues in
excess of $50 million. Services we provide to these clients include checking
accounts, certificates of deposit, cash management services, short-term loans
for seasonal or working capital purposes and term loans.
We provide to our commercial banking customers accounts receivable and
inventory financing and also offer specialty services, such as leasing,
aircraft lending, correspondent banking, real estate finance, asset based
lending and residential construction lending. At March 31, 1999, commercial
loans comprised 27% of our loan portfolio. For the quarter ended March 31,
1999, commercial banking contributed 28% of our net income.
Financial Services
We operate non-banking businesses that are national as well as international
in scope. We believe that these businesses complement our retail and commercial
product offerings and strongly contribute to our profitability. Net income from
financial services grew by 43.2% from the first quarter of 1998 to the first
quarter of 1999 and financial services contributed 37% of our net income for
the quarter ended March 31, 1999. Our financial services business include:
Transaction Processing. Transaction processing consists primarily of our
Bankruptcy Trustee Division and our wholly owned subsidiary, TransPlatinum
Service Corp. ("TransPlatinum").
Our Bankruptcy Trustee Division offers cash management services for
bankruptcy trustees in 32 states. The services provided to the trustees include
back-office processing, record keeping, bill payment and deposit management. At
March 31, 1999, we provided complete cash management services for 60 of the
approximately 195 Chapter 13 Bankruptcy Trustees, which represented a national
market share of nearly 30%, and for approximately 20 Chapter 7 Bankruptcy
Trustees.
TransPlatinum offers fuel debit card services to the trucking industry and
merchant card processing. The TransPlatinum fuel card allows employers to
monitor and limit driver expenses. This card is used by over 1,200 trucking
lines and is accepted at approximately 4,000 locations throughout the United
States. TransPlatinum currently targets companies with three to 300 trucks, and
is expanding its customer base to include larger companies and related
industries. TransPlatinum also offers the only PC-based third-party operating
system for the trucking industry. TransPlatinum generates fees for providing
customer information and processing of fuel card transactions.
In-store Consulting and Licensing. Our in-store bank consulting affiliate,
National Commerce Bank Services, Inc. ("NCBS"), assists retailers and banks in
creating in-store banking facilities. Services include consulting, facilities
design and construction and training. Fees generally consist of a one-time
consulting fee
S-14
<PAGE>
and monthly fees or rent for up to 20 years. Rent is generated from our lease
of the in-store space, which we sublease to the residing bank. NCBS operates in
all 50 states and in nine foreign countries and has assisted nearly 100
retailers and more than 300 banks in creating over 1,000 in-store banking
facilities.
Capital Markets. NBC Capital Markets Group, Inc., owned 80% by us and 20% by
its key employees, provides investment services to individual and institutional
investors. NBC Capital Markets is a registered broker-dealer with the SEC and
the National Association of Securities Dealers, Inc. NBC Capital Markets
recently received approval from the Office of the Comptroller of the Currency
to underwrite municipal revenue bonds. At December 31, 1998, NBC Capital
Market's capital totaled $12,525,000.
Trust and Asset Management. Trust and asset management includes our trust
division and our wholly owned subsidiary, Commerce Capital Management, Inc. We
had approximately $3.8 billion in assets under management at December 31, 1998.
Treasury. Our largest financial services business is treasury, which
includes balance sheet management activities such as oversight of our
investment portfolios, non-deposit based funding and interest rate risk
management.
Operating Strategy
Our operating strategy is to:
-- Expand our distribution network. We will continue de novo expansion of
our low-cost distribution network in markets that exhibit attractive
growth and demographic characteristics. Our goal is to enter a new
market using our core hub and spoke distribution strategy every 18 to 24
months. As part of this strategy, we will pursue strategic acquisitions
that provide us an entrance into new markets or enhance our presence in
our existing markets. In 1998, we acquired 4 commercial banks totaling
approximately $300 million in assets. As of the date of this Prospectus
Supplement, we have agreed to acquire of First Financial Corporation,
which has total assets of approximately $260 million.
-- Deliver additional products and services that are valuable to our
customers. Our distribution strategy is to increase the products and
services we deliver through our multi-channel network with in-market
acquisitions or construction of traditional locations. These hubs
complement the in-store branches by promoting the development of
commercial lending, mortgage banking, real estate lending and private
banking. This strategy allows us to deliver full service, high quality
financial products, customer service and convenience at a low cost.
-- Allocate resources efficiently. We seek to achieve our profitability
goals by developing economies of scale in new markets and products. In
addition, we will exit markets and discontinue products where our
presence is too small to achieve the scale and return we desire and
where prospects for further growth are limited. Our objective is to
focus on markets and businesses where we believe we have the best
opportunities for growth or a strong competitive position.
-- Diversify our non-banking, fee-generating services. We believe we have
identified profitable niches in non-banking service areas that
complement our traditional bank products and services. We believe that
non-banking services offer opportunities to achieve above-average levels
of growth and profitability. Our strategy is to expand the non-banking
services we now offer and to acquire businesses that will enhance our
product and service capabilities.
-- Align management compensation with shareholders' interests. We believe
our managers and employees perform best when their interests are aligned
with those of our shareholders. A large portion of their compensation
depends on the achievement of individual, group, division and overall
corporate performance targets that are designed to enhance shareholder
value. We must achieve both a minimum return on equity of 20% and
earnings per share growth of 16% over the prior year before our
executive officers receive any incentive bonus payment. Our executive
officers may receive the maximum amount
S-15
<PAGE>
of the incentive bonus for which they are eligible only if we achieve a
20% return on equity and 20% growth in earnings per share over the prior
year. In addition, we establish individual performance targets for some
of our executive officers. These standards include targeted increases in
the net income of some of our subsidiaries. At February 1, 1999, our
officers, directors and directors emeritus, as a group, held
approximately 29% of all outstanding shares of our common stock, which
we believe is among the highest percentage holdings for such a group in
our industry. Pro forma for this offering, our officers, directors and
directors emeritus will own approximately 26% of all outstanding shares
of our common stock.
We measure the success of our operating strategy by focusing primarily on
the following four measures of performance:
-- Revenue growth;
-- Efficiency ratio;
-- Net interest margin; and
-- Credit quality.
From 1994 to 1998, our revenue (net interest income (taxable equivalent)
plus non-interest income excluding securities gains) has grown from $166.2
million to $283.5 million, a compound growth rate of 14.3%. We believe that
our growth is attributable to our de novo expansion and acquisitions in our
retail segment, loan growth in our existing retail and commercial markets and
expansion of our financial services business. Revenue growth for the quarter
ended March 31, 1999 versus the quarter ended March 31, 1998 was 14.8%.
Since 1994, our efficiency ratio has improved from 52.7% in 1994 to 44.6%
for the quarter ended March 31, 1999, making us one of the most efficient
banks in the country. We believe we have achieved this efficiency through our
low-cost in-store branch network, centralization of our back office functions
and the cost-conscious culture of our organization.
Despite a volatile interest rate environment from 1994 to 1998, our net
interest margin has remained relatively stable (declining 16 basis points from
4.33% to 4.17%). We believe the decline in net interest margin would have been
greater without our close management of interest rates.
Our non-performing assets to total loans, a measure of credit quality, was
0.03% at December 31, 1998 and 0.04% for the quarter ended March 31, 1999. We
did not have any non-performing assets in 1997 and 1996. We believe we were
able to achieve this high level of credit quality through our centralized loan
underwriting, high credit standards and the shift in our total loan portfolio
from commercial to retail.
Our focus on these four measures has resulted in a return on average equity
of 20.92% in 1997, 22.15% in 1998 and 23.00% for the quarter ended March 31,
1999. Our earnings per share grew at 21.1% in 1997, 20.3% in 1998 and 21.1%
for the quarter ended March 31, 1999.
S-16
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of February 1, 1999 by all selling
shareholders, as adjusted to give effect to the offering by each selling
shareholder:
<TABLE>
<CAPTION>
Beneficial Ownership Prior Shares to Beneficial Ownership After
To Offering be Sold Offering (1)
--------------------------------- in ------------------------------
Name Of Beneficial Owner Shares Percent Offering Shares Percent
- ------------------------ ---------------- ------------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Selling Shareholders:
John D. Canale, III.... 6,043,320(2) 5.8% 900,000 5,143,320 4.7%
Thomas M. Garrott...... 4,080,263(3) 3.9 308,738 3,771,525 3.5
Harry J. Phillips,
Sr.................... 1,746,452(4) 1.7 261,967 1,484,485 1.4
James E. McGehee, Jr... 3,776,101(5) 3.6 251,490 3,524,611 3.2
Mackie H. Gober........ 603,140(6) 0.6 90,000 513,140 0.5
Bruce E. Campbell...... 578,690(7) 0.6 75,000 503,690 0.5
Gus B. Denton.......... 758,322(8) 0.7 40,000 718,322 0.7
---------------- ---------- --------- ---------------- ----------
Selling Shareholders as
a group:............... 17,586,288 16.7 1,927,195 15,659,093 14.4
================ ========== ========= ================ ==========
</TABLE>
- --------
(1) Assumes no exercise of the underwriters' over-allotment option.
(2) Does not include shares owned by Peggy W. Canale or Christopher W. Canale,
either individually or as trustee, who are the mother and brother,
respectively, of John D. Canale, III. Also includes 644,980 shares owned by
the estate of his father, John D. Canale. As an executor of the estate, Mr.
Canale shares investment and voting power. Also includes 5,241,832 shares
held by D. Canale & Co. as to which Mr. Canale has a 50% voting interest.
Also includes 200 shares held by Mr. Canale as custodian for his nephew as
to which he disclaims any beneficial interest.
(3) Includes 168,000 shares that Mr. Garrott has the right to purchase upon the
exercise of stock options, 85,868 shares attributable to Mr. Garrott
pursuant to the National Commerce Bancorporation's ESOP/401K as to which
Mr. Garrott has the power to direct voting. Also includes 302,880 shares
held in trust for the benefit of his children, 95,248 shares held by Mr.
Garrott's wife, and 420,000 shares held by MBA Corp., all of which shares
of MBA Corp. are owned by his children, and as to which Mr. Garrott
disclaims any beneficial interest.
(4) Includes 240,332 shares owned by Mr. Phillip's wife, as to which Mr.
Phillips disclaims any beneficial interest.
(5) Includes 2,559,588 shares held by certain family entities or members over
which Mr. McGehee retains voting control but as to which Mr. McGehee
disclaims any beneficial interest. Mr. McGehee has no investment power with
regard to 2,042,150 of those shares.
(6) Includes 60,972 shares attributable to Mr. Gober pursuant to National
Commerce Bancorporation's ESOP/401K and 124,000 shares that he has the
right to purchase upon the exercise of stock options.
(7) Includes 71,708 shares held by his wife, sons, and daughter-in-law as to
which he disclaims any beneficial interest, and 251,904 shares held jointly
by Mr. Campbell and his wife.
(8) Includes 92,850 shares attributable to Mr. Denton pursuant to National
Commerce Bancorporation's ESOP/401K and 11,200 shares that he has the right
to purchase upon the exercise of stock options. Also includes 37,732 shares
held in trust as to which Mr. Denton shares voting power.
S-17
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated , each underwriter named below has severally agreed to purchase, and
National Commerce Bancorporation and the selling shareholders have agreed to
sell to such underwriter, the number of shares set forth opposite the name of
such underwriter.
<TABLE>
<CAPTION>
Number
Name of Shares
---- ---------
<S> <C>
Salomon Smith Barney Inc. .........................................
Lehman Brothers Inc. ..............................................
Morgan Stanley & Co. Incorporated..................................
---------
Total.......................................................... 6,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Lehman Brothers Inc.
and Morgan Stanley & Co. Incorporated are acting as representatives, propose to
offer some of the shares directly to the public at the public offering price
set forth on the cover page of this prospectus and some of the shares to
certain dealers at the public offering price less a concession not in excess of
$ per share. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share on sales to certain other dealers.
If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms.
National Commerce Bancorporation has granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to
500,000 additional shares of common stock at the public offering price less the
underwriting discount. The underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent such option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares
approximately proportionate to such underwriter's initial purchase commitment.
National Commerce Bancorporation, its executive officers and directors and
the selling shareholders have agreed that, for a period of 90 days from the
date of this prospectus, they will not, without the prior written consent of
Salomon Smith Barney Inc., dispose of or hedge any shares of common stock of
National Commerce Bancorporation or any securities convertible into or
exchangeable for common stock; provided, however, that this prohibition does
not apply, with respect to executive officers and directors other than selling
shareholders, to the disposal of shares of common stock pursuant to Rule 144 of
the Securities Act of 1933 and, with respect to National Commerce
Bancorporation, to the issuance of shares by National Commerce Bancorporation
in connection with conversion rights in effect as of the date of the
underwriting agreement, its employee benefit or shareholder plans existing on
the date of the underwriting agreement or acquisitions by National Commerce
Bancorporation. Salomon Smith Barney Inc. in its sole discretion may release
any of the securities subject to these lock-up agreements at any time without
notice.
Our common stock is quoted on the Nasdaq National Market under the symbol
"NCBC."
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price
of the common stock while the offering is in progress.
S-18
<PAGE>
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on the Nasdaq National
Market or in the over-the counter market, or otherwise and, if commenced, may
be discontinued at any time.
In addition, in connection with this offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the common stock on the Nasdaq National Market, prior to the pricing and
completion of the offering. Passive market making consists of displaying bids
on the Nasdaq National Market no higher than the bid prices of independent
market makers and making purchases at prices no higher than those independent
bids and effected in response to order flow. Net purchases by a passive market
maker on each day are limited to a specified percentage of the passive market
maker's average daily trading volume in the common stock during a specified
period and must be discontinued when such limit is reached. Passive market
making may cause the price of the common stock to be higher than the price that
otherwise would exist in the open market in the absence of such transactions.
If passive market making is commenced, it may be discontinued at any time.
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by National Commerce Bancorporation and the selling
shareholders in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of common stock.
<TABLE>
<CAPTION>
Paid by NCBC Paid by Selling Shareholders
------------------------- -----------------------------
No Exercise Full Exercise No Exercise Full Exercise
----------- ------------- -----------------------------
<S> <C> <C> <C> <C>
Per share........ $ $ $ $
Total............ $ $ $ $
</TABLE>
National Commerce Bancorporation and the selling shareholders estimate that
their respective portions of the total expenses of this offering will be $
and $ .
The representatives have performed certain investment banking services for
National Commerce Bancorporation from time to time for which they have received
customary fees and expenses. The representatives may, from time to time, engage
in transactions with and perform services for National Commerce Bancorporation
in the ordinary course of their business.
National Commerce Bancorporation and the selling shareholders have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to payments the underwriters
may be required to make in respect of any of those liabilities.
VALIDITY OF THE COMMON STOCK
The validity of the shares of common stock offered hereby will be passed
upon for us by King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303,
and for the Underwriters by Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York 10019. Attorneys at King & Spalding working
on this matter owned approximately 13,000 shares of common stock as of the date
of this Prospectus Supplement.
S-19
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements incorporated by reference in our Annual Report on Form 10-
K for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this Prospectus Supplement. Our consolidated
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
INCORPORATION OF DOCUMENTS WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file with
them, which means:
-- incorporated documents are considered part of this prospectus;
-- we can disclose important information to you by referring you to those
documents; and
-- information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934 ("Exchange Act"):
(1) Our Annual Report on Form 10-K for the year ended on December 31, 1998,
filed on March 26, 1999;
(2) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed on May 7, 1999; and
(3) The description of our Common Stock contained in the Registration
Statement on Form S-8 (File No. 33-38552), filed on January 11, 1991.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of this prospectus
and prior to the time we sell all of the Common Stock offered by this
prospectus:
-- Reports filed under Section 13(a) and (c) of the Exchange Act;
-- Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent shareholders meeting; and
-- Any reports filed under Section 15(d) of the Exchange Act.
You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses
listed above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You
can obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone from us at the following address:
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Attention: Kathy Shelton, Assistant Treasurer
Telephone: (901) 523-3434
If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day
after we receive your request.
S-20
<PAGE>
PROSPECTUS
$300,000,000
NATIONAL COMMERCE BANCORPORATION
From time to time, we may sell any of the following securities:
-- DEBT SECURITIES
-- PREFERRED STOCK
-- COMMON STOCK
We will provide the specific terms of these securities in one or more
supplements to this Prospectus. You should read this Prospectus and any
Prospectus Supplement carefully before you invest.
Our common stock is traded over-the-counter on The Nasdaq Stock Market's
National Market under the trading symbol "NCBC." The applicable Prospectus
Supplement will contain information, where applicable, as to any other listing
(if any) on The Nasdaq Stock Market's National Market or any securities
exchange of the securities covered by the Prospectus Supplement.
In addition, up to 6,000,000 shares of common stock being registered may be
offered by certain selling shareholders. For additional information on the
methods of sale, you should refer to the section entitled "Plan of
Distribution."
The securities may be sold directly by us or, in case of the common stock,
may be sold by selling shareholders, to investors, through agents designated
from time to time or to or through underwriters or dealers. See "Plan of
Distribution." If any underwriters are involved in the sale of any securities
in respect of which this Prospectus is being delivered, the names of such
underwriters and any applicable commissions or discounts will be set forth in a
Prospectus Supplement. The net proceeds we expect to receive from such sale
also will be set forth in a Prospectus Supplement. We would not receive any of
the proceeds from the sale of common stock by selling shareholders.
This Prospectus may not be used to offer or sell any securities unless
accompanied by a Prospectus Supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued under this
Prospectus or determined if this Prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense. These securities are not
savings or deposit accounts or other obligations of any bank or nonbank
subsidiary of National Commerce Bancorporation, and they are not insured by the
Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other
governmental agency.
The date of this Prospectus is May 6, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement (the "Registration
Statement") that we filed with the Securities and Exchange Commission (the
"SEC"), which registers the distribution of the securities offered under this
Prospectus. The Registration Statement, including the attached exhibits and
schedules, contains additional relevant information about our company and the
securities. The Registration Statement can be read at the SEC's web site or at
the offices mentioned under the heading "Where You Can Find More Information."
The Registration Statement utilizes a "shelf" registration process. Under
the shelf process, we may, from time to time over approximately the next two
years, sell debt securities, preferred stock and common stock, either
separately or in units, in one or more offerings up to a total dollar amount of
$300,000,000 or the equivalent of this amount in foreign currencies or foreign
currency units. Under the shelf process, selling shareholders may, from time to
time over approximately the next two years, sell up to 6,000,000 shares of
common stock in one or more offerings.
This Prospectus provides you with a general description of the securities we
may offer. Each time we sell securities, we will provide a Prospectus
Supplement that will contain specific information about the terms of that
offering. The Prospectus Supplement may also add, update or change information
contained in this Prospectus. You should read both this Prospectus and any
Prospectus Supplement, together with additional information described under the
heading "Where You Can Find More Information."
You should rely only on the information provided in this Prospectus and in
any Prospectus Supplement, including any information incorporated by reference.
We have not authorized anyone to provide you with different information. We may
only use this Prospectus to sell securities if it is accompanied by a
Prospectus Supplement. We are only offering the securities in states where
offers are permitted. You should not assume that the information in this
Prospectus or any Prospectus Supplement, is accurate at any date other than the
date indicated on the cover page of these documents.
When we refer to "our company," "we," "our" and "us" in this Prospectus
under the headings "Forward-Looking Statements," "The Company," "Use of
Proceeds" and "Ratios of Earnings to Fixed Charges," we mean National Commerce
Bancorporation and its subsidiaries. When such terms are used elsewhere in this
Prospectus, we refer only to National Commerce Bancorporation unless the
context indicates otherwise.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at the SEC's following public reference
facilities:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further
information on the operations of the public reference facilities. Our SEC
filings are also available at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006.
2
<PAGE>
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file with
them, which means:
-- incorporated documents are considered part of this Prospectus;
-- we can disclose important information to you by referring you to those
documents; and
-- information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934 ("Exchange Act"):
(1) Our Annual Report on Form 10-K for the year ended on December 31, 1998,
filed on March 26, 1999; and
(2) The description of our Common Stock contained in the Registration
Statement on Form S-8 (File No. 33-38552), filed on January 11, 1991.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of the Registration
Statement and prior to the time we sell all of the Securities offered by this
Prospectus:
-- Reports filed under Section 13(a) and (c) of the Exchange Act;
-- Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent shareholders meeting; and
-- Any reports filed under Section 15(d) of the Exchange Act.
You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses
listed above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Prospectus. You
can obtain documents incorporated by reference in this Prospectus by requesting
them in writing or by telephone from us at the following address:
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Attention: Kathy Shelton, Assistant Treasurer
Telephone: (901) 523-3434
If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day
after we receive your request.
3
<PAGE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on our behalf. All
statements in this Prospectus that are not historical facts or that express
expectations and projections with respect to future matters are "forward-
looking statements" for the purpose of the safe harbor provided by the Act. We
caution readers that such "forward-looking statements," including, without
limitation, those relating to future business initiatives and prospects,
revenues, working capital, liquidity, capital needs, interest costs and income,
and "Year 2000" remediation efforts, wherever they occur in this document or in
other statements attributable to us, are necessarily estimates reflecting the
best judgment of our senior management. Such statements involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the "forward-looking statements." "Forward-looking
statements" should, therefore, be considered in light of various important
factors, including those set forth in this document. Important factors
currently known to management that could cause actual results to differ
materially from those in "forward-looking statements" include significant
fluctuations in interest rates, inflation, economic recession, significant
changes in the federal and state legal and regulatory environment, significant
under-performance in our portfolio of outstanding loans, and competition in the
our company's markets. Other factors set forth from time to time in our filings
with the SEC should also be considered. We undertake no obligation to update or
revise "forward-looking statements" to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
4
<PAGE>
THE COMPANY
We are a registered bank holding company incorporated under the laws of the
State of Tennessee. We operate several major lines of business in three major
industry segments:
-- commercial banking, which includes lending and related financial
services to large- and medium-sized corporations;
-- retail banking, which includes sale and distribution of financial
products and services to individuals; and
-- financial services, which include various national and regional
businesses to include transaction processing, consulting, capital
markets, treasury, trust and asset management.
We conduct our business through our wholly owned subsidiaries to which we
provide advice and counsel relating to financial and employee benefit matters,
perform certain record keeping functions relating to compliance with accounting
and regulatory requirements and provide assistance in obtaining additional
financing:
-- National Bank of Commerce, Memphis, Tennessee, which provides a full
range of banking and trust services;
-- NBC Bank, FSB, Knoxville, Tennessee, which, among other things, operates
full service banking facilities in Tennessee, North Carolina and Georgia
and has two equipment leasing subsidiaries;
-- NBC Bank, FSB, Roanoake, Virginia, which operates full service banking
facilities in Roanoke, Virginia;
-- Commerce Capital Management, Inc., Memphis, Tennessee, which is a
registered investment advisor with the SEC;
-- TransPlatinum Service Corp., Nashville, Tennessee, which offers
financial services to the trucking and petroleum industries and bankcard
services to merchants; and
-- U.S.I. Alliance Corp., Memphis Tennessee, which primarily leases
personal lockboxes in long-term care facilities.
In addition, through our subsidiary, National Bank of Commerce, we own five
active, non-banking subsidiaries:
-- Commerce General Corporation, which provides a variety of data
processing services to our banking subsidiaries and other commercial
enterprises;
-- Commerce Finance Company, which emphasizes second- and third-mortgage
loans primarily for resale;
-- NBC Insurance Services, Inc., which provides life, property and casualty
insurance and annuities through NBC's in-store retail banking system;
-- National Commerce Bank Services, Inc., which provides in-store bank
consulting services to retailers and other financial institutions; and
-- NBC Capital Markets Group, Inc., which serves the needs of institutional
and individual investors as a broker-dealer of investment products,
including stocks, bonds, municipal obligations, mutual funds and unit
investment trusts.
Our common stock, which has a par value per share of $2.00 (the "Common
Stock"), is traded on The Nasdaq Stock Market's National Market under the
symbol "NCBC." Our principal executive offices are located at One Commerce
Square, Memphis, Tennessee 38150, and our telephone number is (901) 523-3434.
5
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for our company are set forth below
for the periods indicated, excluding or including interest on deposits as
indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest expense on deposits............... 5.18 4.73 5.32 6.37 6.44
Including interest expense on deposits............... 1.65 1.58 1.57 1.56 1.75
</TABLE>
For purposes of calculating the ratios, fixed charges consist of:
-- interest on debt;
-- amortization of discount on debt; and
-- the interest portion of rental expense on operating leases.
The ratio of earnings to fixed charges is calculated as follows:
(Income before extraordinary charges and income taxes) + (fixed charges)-
(capitalized interest)
--------------------------------------------------------------------
(fixed charges)
USE OF PROCEEDS
Unless the applicable Prospectus Supplement states otherwise, the net
proceeds from the sale of the offered securities will be added to our general
funds and may be used to:
-- finance acquisitions of assets and companies;
-- meet our working capital requirements;
-- reduce our short-term indebtedness;
-- invest at the bank or bank holding company levels; and
-- invest in or extend credit to our affiliates and other banks and
companies engaged in other financial service activities.
Until the net proceeds have been used, they may be invested in short-term
marketable securities.
We will not receive any of the proceeds from the sale of common stock that
may be offered by selling shareholders.
6
<PAGE>
REGULATORY MATTERS
The following discussion sets forth certain of the elements of the
regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to us and our
subsidiaries. This regulatory framework is intended primarily for the
protection of depositors and the federal deposit insurance funds and not for
the protection of securityholders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to those provisions. A change in the statutes, regulations or
regulatory policies applicable to us or our subsidiaries may have a material
adverse effect on our business.
General. As a bank holding company, we are subject to regulation under the
Bank Holding Company Act of 1956, as amended (the "BHCA"), and to inspection,
examination and supervision by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). Under the BHCA, bank holding companies
generally may not acquire the ownership or control of more than 5% of the
voting shares or substantially all the assets of any company, including a bank,
without the Federal Reserve's prior approval. In addition, bank holding
companies generally may engage, directly or indirectly, only in banking and
such other activities as are determined by the Federal Reserve to be closely
related to banking.
Various governmental requirements, including Sections 23A and 23B of the
Federal Reserve Act, as amended, limit borrowings by us and our nonbank
subsidiaries from our affiliate banks. These requirements also limit various
other transactions between us and our nonbank subsidiaries, on the one hand,
and our affiliate banks, on the other. For example, Section 23A limits to no
more than 10% of its total capital the aggregate outstanding amount of any
bank's loans and other "covered transactions" with any particular nonbank
affiliate, and limits to no more than 20% of its total capital the aggregate
outstanding amount of any bank's covered transactions with all of its nonbank
affiliates. Section 23A also generally requires that a bank's loans to its
nonbank affiliates be secured, and Section 23B generally requires that a bank's
transactions with its nonbank affiliates be on arms' length terms.
NBC Bank, FSB, Knoxville, Tennessee ("Knoxville"), and NBC Bank, FSB,
Roanoke, Virginia ("Roanoke"), are federally chartered savings banks that are
primarily regulated by the Office of Thrift Supervision (the "OTS") and
secondarily regulated by the Federal Deposit Insurance Corporation ("FDIC") and
the Federal Reserve. The federal savings banks are subject to examination and
comprehensive regulation by the OTS. National Bank of Commerce, Memphis,
Tennessee ("NBC" and, together with Knoxville and Roanoke, the "Banks") is a
national banking association and, as such, is subject to regulation primarily
by the Office of the Comptroller of the Currency ("OCC") and, secondarily, by
the FDIC and the Federal Reserve. Our company and its subsidiaries also are
affected by the fiscal and monetary policies of the federal government and the
Federal Reserve, and by various other governmental requirements and
regulations.
Liability for Bank Subsidiaries. Under the Federal Reserve policy, we, as a
bank holding company, are expected to act as a source of financial and
managerial strength to each of our subsidiary banks and to maintain resources
adequate to support each such subsidiary bank. This support may be required at
times when we may not have the resources to provide it. In addition, Section 55
of the National Bank Act, as amended, permits the OCC to order the pro rata
assessment of shareholders of a national bank whose capital has become
impaired. If a shareholder fails within three months to pay such an assessment,
the OCC can order the sale of the shareholder's stock to cover the deficiency.
We, as the sole shareholder of our subsidiary banks, are subject to such
provisions. In the event of our bankruptcy, any commitment by us to a federal
bank regulatory agency to maintain the capital of a subsidiary bank would be
assumed by the bankruptcy trustee and entitled to priority of payment.
Any depository institution insured by the FDIC can be held liable for any
loss incurred, or reasonably expected to be incurred, by the FDIC in connection
with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution in danger of default. "Default"
is defined generally as the appointment of a conservator
7
<PAGE>
or receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the
absence of regulatory assistance. All of the Banks are FDIC-insured
institutions. Also, in the event that such a default occurred with respect to a
Bank, any capital loans from us to such Bank would be subordinate in right of
payment to payment of the bank's depositors and certain of the Bank's other
obligations.
Capital Requirements. We are subject to risk-based capital requirements and
guidelines imposed by the Federal Reserve. Our bank subsidiaries are subject to
similar capital requirements and guidelines imposed by the Federal Reserve, the
OTS, the OCC and the FDIC, as applicable. For this purpose, a depository
institution's or holding company's assets and certain specified off-balance
sheet commitments are assigned to four risk categories, each weighted
differently based on the level of credit risk that is ascribed to such assets
or commitments. In addition, risk weighted assets are adjusted for low-level
recourse and market risk equivalent assets. A depository institution's or
holding company's capital, in turn, is divided into three tiers:
-- core ("Tier 1") capital, which includes common equity, non-cumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred stock and related surplus (excluding auction rate issues), and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill, certain identifiable intangible assets and certain other
assets;
-- supplementary ("Tier 2") capital, which includes, among other items,
perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, subordinated debt and allowances for loan and
lease losses, subject to certain limitations, less certain required
deductions; and
-- market risk ("Tier 3") capital, which includes qualifying unsecured
subordinated debt.
We, like other bank holding companies, currently are required to maintain
Tier 1 and total capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal
to at least 4% and 8% of our total risk-weighted assets, respectively. At
December 31, 1998, we met both requirements, with Tier 1 and total capital
equal to 11.79% and 13.04% of our total risk-weighted assets, respectively.
The Federal Reserve, the FDIC, the OTS and the OCC have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements,
incorporating market risk, became effective January 1, 1998. Under the new
market risk requirements, capital will be allocated to support the amount of
market risk related to a financial institution's ongoing trading activities.
The Federal Reserve also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3%, if
the holding company has the highest regulatory rating or has implemented the
risk-based capital measures for market risk, or 4% if the holding company does
not meet these requirements. At December 31, 1998, our leverage ratio was
8.03%. The Federal Reserve may set capital requirements higher than the
minimums noted above for holding companies if circumstances warrant it. For
example, holding companies experiencing or anticipating significant growth may
be expected to maintain capital ratios including tangible capital positions
well above the minimum levels. The Federal Reserve has not, however, imposed
any such special capital requirement on us.
Each of the Banks is subject to similar risk-based and leverage capital
requirements adopted by its applicable federal banking agency. Failure to meet
capital requirements could subject a bank to a variety of enforcement remedies,
including the termination of deposit insurance by the FDIC, and to certain
restrictions on its business, which are described below. Each of the Banks was
in compliance with the applicable minimum capital requirements as of December
31, 1998.
FDICIA. The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the
8
<PAGE>
respective federal regulatory agencies to implement systems for "prompt
corrective action" for insured depository institutions that do not meet minimum
capital requirements within such categories. The Banks are subject to such
regulation.
The FDICIA imposes progressively more restrictive constraints on operations,
management and capital distributions, depending on the category in which an
institution is classified. Failure to meet the capital guidelines could also
subject a depository institution to capital raising requirements. In the event
a depository institution's capital deteriorates to the "undercapitalized"
category or below, the FDICIA and OTS regulations prescribe an increasing
amount of regulatory intervention, including the adoption by the institution of
a capital restoration plan and a guarantee of the plan by its parent holding
company and the placement of a hold on increases in assets, number of branches
and lines of business. Our liability as the parent holding company under any
such guarantee is limited to the lesser of 5% of the depository institution's
assets at the time it became "undercapitalized" or the amount needed to comply
with the plan. Furthermore, in the event of our bankruptcy, such guarantee
would take priority over our general unsecured creditors. In addition, FDICIA
requires the various regulatory agencies to prescribe certain non-capital
standards for safety and soundness relating generally to operations and
management, asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such standards.
As of December 31, 1998, each Bank was "well capitalized," based on the
"prompt corrective action" ratios and guidelines described above. We note that
a bank's capital category is determined solely for the purpose of applying the
OTS's or the OCC's (or the FDIC's) "prompt corrective action" regulations and
that the capital category may not constitute an accurate representation of the
Banks' overall financial condition or prospects.
Dividend Restrictions. Various federal and state statutory provisions limit
the amount of dividends our affiliate banks can pay to us without regulatory
approval. Dividend payments by national banks are limited to the lesser of (i)
the level of undivided profits and (ii) absent regulatory approval, an amount
not in excess of net income for the current year combined with retained net
income for the preceding two years. The OTS rule generally provides for three
tiers of savings associations:
-- Tier 1 associations, associations that have capital ("total capital" as
calculated under the OTS capital regulations) equal to or greater than
their capital requirements prior to, and on a pro forma basis after
giving effect to, a proposed dividend payment;
-- Tier 2 associations, associations that have capital equal to or greater
than their minimum capital requirements, but less than their Tier 1
capital requirements prior to, and on a pro forma basis after giving
effect to, a proposed dividend payment; and
-- Tier 3 associations, associations that do not meet their minimum capital
requirements, either before or after giving effect to a proposed
dividend payment.
Under the OTS rule, a Tier 1 association may declare dividends without OTS
approval of up to the greater of 100% of its net income during a calendar year
plus the amount that would reduce by one-half its surplus capital ratio (the
percentage by which the association's capital-to-assets ratio exceeds the ratio
of its Tier 1 capital requirements to its assets) at the beginning of the
calendar year, or 75% of its net income over the most recent four-quarter
period. A Tier 2 association is authorized without OTS approval to declare
dividends of up to 75% of net income over the most recent four-quarter period
if it satisfies its fully phased-in risk-based capital requirement, or up to
50% of such net income if it satisfies its interim (90% of fully phased-in
amount) risk-based capital requirement. Tier 3 associations are not authorized
to declare dividends without prior written OTS approval unless, in the case of
an association operating in compliance with an approved capital plan, the
dividend payments are consistent with the association's capital plan. The OTS
has supervisory authority to prohibit the payment of dividends for Tier 1 and
Tier 2 associations.
At December 31, 1998, $24.3 million of the total shareholders' equity of the
Banks was available for payment of dividends to us without approval by the
applicable regulatory authority.
9
<PAGE>
In addition, federal bank regulatory authorities have authority to prohibit
the Banks from engaging in an unsafe or unsound practice in conducting their
business. The payment of dividends, depending upon the financial condition of
the bank in question, could be deemed to constitute such an unsafe or unsound
practice. The ability of the Banks to pay dividends in the future is currently,
and could be further, influenced by bank regulatory policies and capital
guidelines. For example, under the FDICIA, each of the Banks may not make
capital distributions, including the payment of dividends, or pay any
management fees to us if it is undercapitalized or if such payment would cause
it to become undercapitalized. See "--FDICIA."
Deposit Insurance Assessments. The deposits of each of the Banks are insured
up to regulatory limits by the FDIC and are subject to the FDIC's deposit
insurance assessments to maintain the Bank Insurance Fund ("BIF") and Savings
Association Insurance Fund ("SAIF"). The FDIC has adopted regulations
establishing a permanent risk-related deposit insurance assessment system. Each
financial institution is assigned to one of three capital groups -- well
capitalized, adequately capitalized or undercapitalized -- and further assigned
to one of three subgroups within a capital group, on the basis of supervisory
evaluations by the institution's primary federal and, if applicable, other
information relevant to the institution's financial condition and the risk
posed to the applicable insurance fund. The assessment rate applicable to the
Banks in the future will depend in part upon the risk assessment classification
assigned to each Bank by the FDIC and in part on the BIF assessment schedule
adopted by the FDIC. Institutions are prohibited from disclosing the risk
classification to which they have been assigned.
The Deposit Insurance Funds Act of 1996 (the "DIFA") provides for
assessments to be imposed on insured depository institutions with respect to
deposits insured by the BIF and the SAIF. Currently, the annual insurance
premiums on bank deposits insured by the BIF and SAIF vary between $0.00 to
$0.27 per $100 of deposits. In addition, the DIFA provides for assessment to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF to pay for the cost of Financing Corporation ("FICO")
funding. The FDIC's 1998 FICO assessment rates were approximately $0.012 per
$100 annually for BIF-assessable deposits and $0.061 per $100 annually for
SAIF-assessable deposits depending upon a depository institution's
capitalization or supervisory evaluations. The Banks held approximately
$193,823,000 of SAIF-assessable deposits as of December 31, 1998. The FICO
assessments do not vary depending upon a depository institution's
capitalization or supervisory evaluations.
Federal savings banks, such as Knoxville and Roanoke, are required by OTS
regulations to pay assessments to the OTS to fund the operations of the OTS.
The general assessment is paid on a quarterly basis and is computed based on
total assets of the institution, including subsidiaries.
Depositor Preference Statute. Federal legislation has been enacted providing
that deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such institution,
including federal funds and letters of credit, in the "liquidation or other
resolution" of the institution by any receiver.
Brokered Deposits. Under FDIC regulations, no FDIC-insured depository
institution may accept brokered deposits unless it (i) is well capitalized or
(ii) is adequately capitalized and receives a waiver from the FDIC. In
addition, these regulations prohibit any depository institution that is not
well capitalized from (y) paying an interest rate on deposits in excess of 75
basis points over certain prevailing market rates or (z) offering "pass
through" deposit insurance on certain employee benefit plan accounts unless it
provides certain notice to affected depositors.
Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Riegle-Neal"), subject to certain concentration limits
and other requirements:
-- bank holding companies such as our company are permitted to acquire
banks and bank holding companies located in any state;
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-- any bank that is a subsidiary of a bank holding company is permitted to
receive deposits, renew time deposits, close loans, service loans and
receive loan payments as an agent for any other bank subsidiary of that
holding company; and
-- banks are permitted to acquire branch offices outside their home states
by merging with out-of-state banks, purchasing branches in other states,
and establishing de novo branch offices in other states.
However, in the case of any such purchase or opening of individual branches,
the host state must have adopted legislation "opting in" to those provisions of
Riegle-Neal and, in the case of a merger with a bank located in another state,
the host state must not have adopted legislation "opting out" of that provision
of Riegle-Neal. We may use Riegle-Neal to acquire banks in additional states
and to consolidate the Banks under a smaller number of separate charters.
Our nonbanking subsidiaries are regulated and supervised by applicable bank
regulatory agencies, as well as by various other regulatory bodies. For
example, Commerce Finance Company is a consumer finance company organized under
the laws of the State of Tennessee. It is primarily regulated by the Consumer
Finance Division of the Tennessee Department of Financial Institutions. The
Federal Trade Commission has primary federal regulatory authority. Commerce
Capital Management, Inc. is registered with the SEC and is an investment
adviser pursuant to the Investment Advisers Act of 1940, as amended. NBC
Capital Markets Group, Inc. is registered as a broker-dealer with the SEC and
the National Association of Securities Dealers, Inc. It is also a member of the
Security Investor Protection Corporation. All regulatory agencies require
periodic audits and regularly scheduled reports of financial information.
DESCRIPTION OF DEBT SECURITIES
We may from time to time offer and sell debt securities, consisting of
debentures, notes and/or other unsecured evidences of indebtedness, the "Debt
Securities." The Debt Securities will be either our unsecured senior debt
securities, the "Senior Debt Securities," or our unsecured subordinated debt
securities, the "Subordinated Debt Securities." The Senior Debt Securities will
be issued under an Indenture, the "Senior Indenture," between us and The Bank
of New York, as trustee (the "Senior Trustee"). The Senior Securities will be
our direct, unsecured obligations and will rank equally with all of our
outstanding unsecured senior indebtedness. The Subordinated Debt Securities are
to be issued under a second Indenture, the "Subordinated Indenture," between us
and The Bank of New York, as trustee (the "Subordinated Trustee"). The
Subordinated Securities will be our direct, unsecured obligations and, unless
otherwise specified in the Prospectus Supplement relating to a particular
series of Subordinated Securities offered by such Prospectus Supplement, will
be subject to the subordination provisions. The Senior Indenture and the
Subordinated Indenture are together called the "Indentures" and the Senior
Trustee and the Subordinated Trustee are together called the "Trustee."
The following summary of certain provisions of the Indentures is not
complete. You should refer to the form of each Indenture, copies of which are
exhibits to the Registration Statement. For a copy of the Registration
Statement, see "Where You Can Find More Information." Section references below
are to the section in the applicable Indenture. Capitalized terms have the
meanings assigned to them in the applicable Indenture. The referenced sections
of the Indentures and the definitions of capitalized terms are incorporated by
reference.
The following section describes certain general terms and provisions of the
Debt Securities. The particular terms of the Debt Securities offered by any
prospectus supplement will be described in the applicable Prospectus
Supplement.
We are a bank holding company, and our right to participate as a shareholder
in any distribution of assets of any subsidiary upon its liquidation or
reorganization or winding-up is subject to the prior claims of creditors of any
subsidiary. Consequently, the ability of the holders of the Debt Securities to
benefit, as our creditors, from any distributions is also subject to these
prior claims.
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General. The Indentures do not limit the aggregate principal amount of Debt
Securities that we may issue. Each Indenture provides that Debt Securities of
any series may be issued under it up to the aggregate principal amount which
may be authorized from time to time by us and may be denominated in any
currency or currency unit that we designate. Neither the Indentures nor the
Debt Securities will limit or otherwise restrict the amount of other
indebtedness which we may incur or the other securities that we or any of our
subsidiaries may issue. (Section 3.01)
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with or without coupons
attached ("Bearer Securities") or in the form of one or more global securities
in registered or bearer form (each a "Global Security"). Bearer Securities, if
any, will be offered only to non-United States persons and to offices located
outside the United States of certain United States financial institutions.
The Prospectus Supplement relating to each series of Debt Securities being
offered will specify the particular terms of those Debt Securities. The terms
may include:
-- the title and the type of the Debt Securities;
-- any limit on the aggregate principal amount of the Debt Securities or
aggregate initial public offering price;
-- the priority of payment of the Debt Securities;
-- the price or prices (which may be expressed as a percentage of the
aggregate principal amount thereof) at which the Debt Securities will be
issued;
-- the date or dates on which the principal and premium, if any, of the
Debt Securities are payable;
-- the interest rate or rates (which may be fixed or variable) of the Debt
Securities, if any;
-- the interest payment date or dates, if any, or the method or methods by
which such rates may be determined, if any, the date or dates on which
payment of such interest, if any, will commence, the Interest Payment
Dates on which such interest will be payable and the Regular Record
Dates for such Interest Payment Dates;
-- the extent to which any of the Debt Securities will be issuable in
temporary or permanent global form, or the manner in which any interest
payable on a temporary or permanent Global Debt Security will be paid;
-- each office or agency where, subject to the terms of the applicable
Indenture, the Debt Securities may be presented for registration of
transfer or exchange;
-- the place or places where, subject to the terms of the applicable
Indenture, the principal of (and premium, if any) and interest, if any,
on the Debt Securities will be payable;
-- the date or dates, if any, after which the Debt Securities may be
redeemed or purchased in whole or in part, at our option or mandatorily
pursuant to any sinking, purchase or analogous fund or may be required
to be purchased or redeemed at the option of the holder, and the
redemption or repayment price or prices;
-- the denomination or denominations in which the Debt Securities will be
issuable;
-- the currency, currencies or units based on or related to currencies for
which the Debt Securities may be purchased and the currency, currencies
or currency units in which the principal of, premium, if any, and any
interest on such Debt Securities may be payable;
-- any index used to determine the amount of payments of principal of,
premium, if any, and interest on the Debt Securities;
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-- whether any of the Debt Securities are to be issuable as Bearer
Securities and/or Registered Securities, and if issuable as Bearer
Securities, any limitations on issuance of such Bearer Securities and
any provisions regarding the transfer or exchange of such Bearer
Securities (including exchange for registered Debt Securities of the
same series);
-- the payment of any additional amounts with respect to the Debt
Securities;
-- whether any of the Debt Securities will be issued as Original Issue
Discount Securities (as defined below);
-- information with respect to book-entry procedures, if any;
-- any additional covenants or Events of Default not currently set forth in
the applicable Indenture; and
-- any other terms of the Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If any of the Debt Securities are sold for one or more foreign currencies or
foreign currency units or if the principal of, premium, if any, or interest on
any series of Debt Securities is payable in one or more foreign currencies or
foreign currency units, the restrictions, elections, tax consequences, specific
terms and other information with respect to such issue of Debt Securities and
such currencies or currency units will be set forth in the applicable
Prospectus Supplement. (Section 3.01)
Debt Securities may be issued as original issue discount Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) ("Original Issue Discount Securities"), to be sold at a
substantial discount below their stated principal amount. There may not be any
periodic payments of interest on Original Issue Discount Securities. In the
event of an acceleration of the maturity of any Original Issue Discount
Security, the amount payable to the holder of such Original Issue Discount
Security upon such acceleration will be determined in accordance with the
Prospectus Supplement, the terms of such security and the Indenture, but will
be an amount less than the amount payable at the maturity of the principal of
such Original Issue Discount Security. (Section 7.02) The federal income tax
considerations with respect to Original Issue Discount Securities will be
explained in the Prospectus Supplement we prepare for the Original Issue
Discount Securities.
Limitation on Disposition of Stock of the Banks. The Senior Indenture
contains a covenant by us that, so long as any of the Senior Securities are
outstanding (but subject to our rights in connection with our consolidation or
merger with or into another person or a sale of our assets), neither we nor any
Intermediate Subsidiary (as defined below) will dispose of any shares of voting
stock of the Banks (or any securities convertible into, or options, warrants or
rights to purchase shares of voting stock of the Banks), except to us or an
Intermediate Subsidiary. In addition, the covenant provides that neither we nor
any Intermediate Subsidiary will permit any Bank to issue any shares of its
voting stock (or securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of its voting stock), nor will we permit any
Intermediate Subsidiary to cease to be an Intermediate Subsidiary. These
restrictions will not apply if (i) any disposition of voting stock of a Bank
(or any securities convertible into, or options, warrants or rights to purchase
shares of voting stock of the Bank) is made for fair market value, as
determined by our Board of Directors or the Board of Directors of the
Intermediate Subsidiary, and (ii) after giving effect to the transaction, we
and any one or more of our Intermediate Subsidiaries will collectively own at
least 80% of the issued and outstanding voting stock of that Bank (or any
successor to the Bank) free and clear of any security interest. The above
covenant also does not restrict the Banks from being consolidated with or
merged into another domestic banking corporation, if after the merger or
consolidation we and any one or more Intermediate Subsidiaries own at least 80%
of the voting stock of the resulting bank and no Event of Default (as defined
below), (and no event which, after notice or lapse of time or both, would
become an Event of Default), occurred and is continuing. An Intermediate
Subsidiary is defined in the Senior Indenture as a Subsidiary (i) that is
organized under the laws of any domestic jurisdiction and (ii) of which all the
shares of capital stock, and all securities convertible into, and options,
warrants and rights to purchase shares of such capital stock, are owned
directly by us, free and clear of any security interest. The above covenant
does not prevent the Banks from engaging in a sale of assets to the extent
otherwise permitted by the Senior Indenture. (Section 5.07)
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Consolidation, Merger or Sale of Assets. Each Indenture provides that we
may, without the consent of the holders of any of the Debt Securities
outstanding under the applicable Indenture, consolidate with, merge into or
transfer our assets substantially as an entirety to any person, provided that:
-- any successor assumes our obligations on the applicable Debt Securities
and under the applicable Indenture;
-- after giving effect to the transaction, there is no Default or Event of
Default that is continuing; and
-- certain other conditions under the applicable Indenture are met.
(Section 10.01)
Accordingly, any such consolidation, merger or transfer of assets substantially
as an entirety, which meets the conditions described above, would not create
any Event of Default which would entitle holders of the Debt Securities, or the
Trustee on their behalf, to take any of the actions described below under "--
Events of Default, Waivers, Etc."
Leveraged And Other Transactions. The Indentures and the Debt Securities do
not contain, among other things, provisions which would afford holders of the
Debt Securities protection in the event of a highly leveraged or other
transaction involving our company which could adversely affect the holders of
Debt Securities.
Modification of the Indenture; Waiver of Covenants. Each Indenture provides
that, with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Debt Securities of each affected series,
modifications and alterations of such Indenture may be made which affect the
rights of the holders of such Debt Securities. However, no such modification or
alteration may be made without the consent of the holder of each Debt Security
so affected which would, among other things:
-- change the maturity of the principal of, or of any installment of
interest (or premium, if any) on, any Debt Security issued pursuant to
such Indenture;
-- change the principal amount thereof, premium thereon, if any, or
interest thereon;
-- change the method of calculation of interest or the currency of payment
of principal or interest (or premium, if any) thereon;
-- reduce the minimum rate of interest thereon;
-- impair the right to bring suit for the enforcement of any such payment
on or with respect to any such Debt Security;
-- reduce the amount of principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity
thereof; or
-- reduce the above-stated percentage in principal amount of outstanding
Debt Securities required to modify or alter such Indenture; or (Section
9.02)
-- change our obligation to maintain an office or agency as required by the
applicable Indenture.
Global Securities. The Debt Securities of a series may be issued in the form
of one or more Global Securities that will be deposited with a Depositary or
its nominee identified in the applicable Prospectus Supplement. In such a case,
one or more Global Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by the Global
Security or Securities. Unless and until it is exchanged in whole or in part
for Debt Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for the
Global Security to a nominee for the Depositary (Section 3.05) and except in
the circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities and certain limitations and restrictions
relating to a series of Bearer Securities in the form of one or more Global
Securities will be described in the applicable Prospectus Supplement.
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Events of Default, Waivers, Etc. An Event of Default with respect to the
Senior Debt Securities of any series, and a Default with respect to the
Subordinated Debt Securities of any series, is defined in the applicable
Indentures as:
(i) default in the payment of principal of or premium, if any, on any Debt
Security of that series when due;
(ii) default in the payment of interest on any Debt Security of that series
when due, which continues for 30 days;
(iii) default in the performance by us of any of our other covenants in the
applicable Indenture with respect to the Debt Securities of such series,
which continues for 90 days after written notice;
(iv) certain events of bankruptcy, insolvency or reorganization of our
company; and
(v) any other event that may be specified in a Prospectus Supplement with
respect to any series of Debt Securities. (Section 7.01 of the Senior
Indenture; Section 7.07 of the Subordinated Indenture)
If an Event of Default with respect to any series of Senior Debt Securities
or a Default specified in clauses (iv) and (v) of this section with respect to
the Subordinated Debt Securities occurs and is continuing, either the Trustee
or the holders of not less than 25% in aggregate principal amount of the Debt
Securities of such series outstanding may declare the principal amount (or if
such Debt Securities are Original Issue Discount Securities, such portion of
the principal amount as may be specified in the terms of that series) of all
Debt Securities of that series to be immediately due and payable. The holders
of a majority in aggregate principal amount of the Debt Securities of any
series may waive such Event of Default or Default, as applicable, resulting in
acceleration of such Debt Securities, but only if all Events of Default or
Default, as applicable, with respect to the Debt Securities of such series have
been remedied and all payments due (other than those due as a result of
acceleration) have been made. (Sections 7.02 and 7.13)
If an Event of Default with respect to the Senior Debt Securities or a
Default with respect to the Subordinated Debt Securities occurs and is
continuing, the Trustee may, in its discretion, and at the written request of
holders of not less than a majority in aggregate principal amount of the Debt
Securities of any series, and upon reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request and
subject to certain other conditions set forth in the applicable Indenture will,
proceed to protect the rights of the holders of all the Debt Securities of such
series. (Sections 7.03 and 7.07) Prior to acceleration of maturity of the Debt
Securities of any series outstanding under the applicable Indenture, the
holders of a majority in aggregate principal amount of such Debt Securities may
waive any past default under the applicable Indenture except a default in the
payment of principal of, premium, if any, or interest on the Debt Securities of
such series. (Section 7.02)
The Indentures provide that upon the occurrence of an Event of Default with
respect to the Senior Debt Securities specified in clauses (i) or (ii) of this
section or a Default with respect to the Subordinated Debt Securities specified
in clauses (i) or (ii) of this section, we will, upon demand of the Trustee,
pay to it, for the benefit of the holder of any such Debt Security, the whole
amount then due and payable on such Debt Securities for principal, premium, if
any, and interest. The Indentures further provide that if we fail to pay such
amount upon such demand, the Trustee may, among other things, institute a
judicial proceeding for the collection of the amount due. (Section 7.03)
The Indentures also provide that notwithstanding any other provision of the
applicable Indenture, the holder of any Debt Security of any series will have
the right to institute suit for the enforcement of any payment of principal of,
premium, if any, and interest on such Debt Securities when due and that such
right will not be impaired without the consent of such holder. (Section 7.08)
We are required to file annually with the applicable Trustee a written
statement as to the existence or non-existence of defaults under the Indentures
or the Debt Securities. (Section 5.05)
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Subordination of the Subordinated Debt Securities. The Subordinated Debt
Securities will be our direct, unsecured obligations and, unless otherwise
specified in the Prospectus Supplement relating to a particular series of
Subordinated Debt Securities offered by such Prospectus Supplement, will be
subject to the subordination provisions described in this section. Upon any
distribution of our assets due to any dissolution, winding up, liquidation or
reorganization, the payment of the principal of, premium, if any, and interest
on the Subordinated Debt Securities is to be subordinated in right of payment
to all Senior Indebtedness (as defined below), to the extent provided in the
Subordinated Indenture. In certain events of bankruptcy or insolvency, the
payment of the principal of and interest on the Subordinated Debt Securities
will, to the extent provided in the Subordinated Indenture, also be effectively
subordinated in right of payment to all General Obligations (as defined below).
Upon any distribution of our assets due to any dissolution, winding up,
liquidation or reorganization, the holders of Senior Indebtedness will first be
entitled to receive payment in full of all amounts due or to become due before
the holders of the Subordinated Debt Securities will be entitled to receive any
payment in respect of the Subordinated Debt Securities. If upon any such
payment or distribution of assets, after giving effect to such subordination
provisions in favor of the holders of Senior Indebtedness, (i) there remain any
amounts of cash, property or securities available for payment or distribution
in respect of the Subordinated Debt Securities ("Excess Proceeds") and (ii) if,
at such time, any creditors in respect of General Obligations have not received
payment in full of all amounts due or to become due on or in respect of such
General Obligations, then such Excess Proceeds will first be applied to pay or
provide for the payment in full of such General Obligations before any payment
or distribution may be made in respect of the Subordinated Debt Securities.
(Section 14.02)
In addition, no payment may be made on the Subordinated Debt Securities, or
in respect of any redemption, retirement, purchase or other acquisition of any
of the Subordinated Debt Securities, at any time in the event:
-- there is a default in the payment of the principal of, premium, if any,
interest on or otherwise in respect of any Senior Indebtedness; or
-- any event of default with respect to any Senior Indebtedness has
occurred and is continuing or would occur as a result of such payment on
the Subordinated Debt Securities or any redemption, retirement, purchase
or other acquisition of any of the Subordinated Debt Securities,
permitting the holders of such Senior Indebtedness to accelerate the
maturity thereof. (Section 14.03)
Except as described above, our obligation to make payments of the principal of,
premium, if any, or interest on the Subordinated Debt Securities will not be
affected. (Section 14.04)
By reason of the subordination in favor of the holders of Senior
Indebtedness, in the event of a distribution of assets upon any dissolution,
winding up, liquidation or reorganization, our creditors who are not holders of
Senior Indebtedness or the Subordinated Debt Securities may recover less,
proportionately, than holders of Senior Indebtedness and may recover more,
proportionately, than holders of the Subordinated Debt Securities.
Subject to payment in full of all Senior Indebtedness, the holders of
Subordinated Debt Securities will be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property or
securities of our company applicable to Senior Indebtedness. Subject to payment
in full of all General Obligations, the holders of the Subordinated Debt
Securities will be subrogated to the rights of the creditors in respect of
General Obligations to receive payments or distributions of cash, property or
securities of our company applicable to such creditors in respect of General
Obligations. (Section 14.02)
"Senior Indebtedness" for purposes of the Subordinated Indenture is the
principal of, premium, if any, and interest on:
-- all of our indebtedness for money borrowed (other than (i) the
Subordinated Debt Securities and (ii) the Junior Subordinated
Indebtedness (as defined below)) whether outstanding on the date of
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execution of the Subordinated Indenture or created, assumed or incurred
after that date, except such indebtedness as is by its terms expressly
stated to be not superior in right of payment to the Subordinated Debt
Securities or to rank equally with the Subordinated Debt Securities; and
-- any deferrals, renewals or extensions of any such Senior Indebtedness.
The term "indebtedness for money borrowed" as used in this paragraph includes,
without limitation, any obligation of, or any obligation guaranteed by us for
the repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments, and any deferred obligation for the payment
of the purchase price of property or assets. The Subordinated Indenture does
not limit our issuance of additional Senior Indebtedness.
The Subordinated Debt Securities will rank senior in right of payment to our
Junior Subordinated Indebtedness upon any distribution of our assets due to any
dissolution, winding up, liquidation or reorganization, to the extent provided
in the instruments creating our Junior Subordinated Indebtedness. "Junior
Subordinated Indebtedness" is the prinicipal of, premium, if any, and interest
on:
-- the Floating Rate Capital Trust Pass-through Securites due April 1,
2027, which were issued by National Commerce Capital Trust I, and which
we guarantee on a junior subordinated basis;
-- our Floating Rate Junior Subordinated Debentures due April 1, 2027;
-- all of our indebtedness for money borrowed whether outstanding on the
date of the execution of the Subordinated Indenture or created, assumed
or incurred after that date that is by its terms subordinated to the
Subordinated Debt Securities; and
-- any deferrals, renewals or extensions of any of such Junior Subordinated
Indebtedness.
The term "indebtedness for money borrowed" as used in this paragraph includes,
without limitation, any obligation of, or any obligation guaranteed by us for
the repayment of borrowed money, whether or not evidenced by bonds, debentures,
notes or other written instruments and any deferred obligation for the payment
of the purchase price of property or assets.
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Subordinated Debt Securities offered thereby, the term
"General Obligations" means all obligations to make payment on account of
claims in respect of derivative products such as interest and foreign exchange
rate contracts, commodity contracts and similar arrangements, other than:
(i) obligations on account of Senior Indebtedness;
(ii) obligations on account of indebtedness for money borrowed ranking
equal with or subordinate to the Subordinated Debt Securities; and
(iii) obligations which by their terms are expressly stated not to be
senior in right of payment to the Subordinated Debt Securities or to
rank equally with the Subordinated Debt Securities.
However, in the event that any rule, guideline or interpretation promulgated or
issued by the Federal Reserve (or other competent regulatory agency or
authority), as from time to time in effect, establishes or specifies criteria
for the inclusion in regulatory capital of subordinated debt of a bank holding
company requiring that such subordinated debt be subordinated to obligations to
creditors in addition to those set forth above, then the term "General
Obligations" will also include such additional obligations to creditors, as
from time to time in effect pursuant to such rules, guidelines or
interpretations. For purposes of this definition, "claim" will have the meaning
assigned thereto in Section 101(4) of the Bankruptcy Code of 1978, as amended
to the date of the Subordinated Indenture.
As of December 31, 1998, the aggregate amount of Senior Indebtedness and
General Obligations of the Company was approximately $738 million.
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Unless otherwise specified in the Prospectus Supplement relating to any
series of Subordinated Debt Securities, payment of principal of the
Subordinated Debt Securities may be accelerated only in case of the bankruptcy,
insolvency or reorganization our company.
Concerning the Trustee. Our company and certain of our affiliates maintain a
banking relationship with the Trustee and its affiliates. The Trustee also acts
as the transfer agent, registrar and dividend disbursing agent
for our common stock and as trustee for (i) the Floating Rate Capital Trust
Pass-through Securities due April 1, 2027 and (ii) our Floating Rate Junior
Subordinated Debentures due April 1, 2027.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of the general terms of the
preferred stock, without par value, the "Preferred Stock," to which any
Prospectus Supplement may relate. Certain terms of any series of the Preferred
Stock offered by any Prospectus Supplement will be described in such Prospectus
Supplement. If so indicated in the Prospectus Supplement, the terms of that
series may differ from the terms described below. The provisions of the
Preferred Stock described below are not complete. You should refer to our
Amended and Restated Charter (our "Charter" or the "Charter") and any
certificate of amendment to our Charter which will be filed with the SEC in
connection with the offering of Preferred Stock.
General. Under our Charter our Board of Directors has the authority, without
further shareholder action, to issue from time to time Preferred Stock in one
or more series and for such consideration as may be fixed from time to time by
our Board of Directors. Our Board of Directors also has the authority to fix
and determine, in the manner provided by law, the relative rights and
preferences of the shares of any series so established, such as dividend and
voting rights. Our Charter authorizes 5,000,000 shares of Preferred Stock.
Prior to the issuance of each series of Preferred Stock, our Board of Directors
will adopt resolutions creating and designating the series as a series of
Preferred Stock.
Under interpretations adopted by the Federal Reserve, if the holders of
Preferred Stock of any series become entitled to vote for the election of
directors because dividends on such series are in arrears as described under
"Voting Rights" below, such series may then be deemed a "class of voting
securities" and a holder of 25% or more of such series (or a holder of 5% or
more if it otherwise exercises a "controlling influence" over our company) may
then be subject to regulation as a bank holding company in accordance with the
BHCA. In addition, at such time as such series is deemed a class of voting
securities, any other bank holding company may be required to obtain the prior
approval of the Federal Reserve to acquire 5% or more of such series, and any
person other than a bank holding company may be required to obtain the prior
approval of the Federal Reserve to acquire 10% or more of such series.
The Preferred Stock will have the dividend, liquidation, redemption, voting
and conversion rights set forth below unless otherwise specified in the
applicable Prospectus Supplement. You should read the Prospectus Supplement
relating to the particular series of Preferred Stock offered thereby for
specific terms, including:
-- the designation, stated value and liquidation preference of such
Preferred Stock and the number of shares offered;
-- the initial public offering price at which such shares will be issued;
-- the dividend rate or rates (or method of calculation), the dividend
periods, the date on which dividends will be payable and whether such
dividends will be cumulative or noncumulative and, if cumulative, the
dates from which dividends will commence to cumulate;
-- any redemption or sinking fund provisions;
-- any conversion provisions; and
-- any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions
of such Preferred Stock.
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No shares of Preferred Stock are currently outstanding. The Preferred Stock
will, when issued, be fully paid and nonassessable and have no preemptive
rights. Unless otherwise specified in the applicable Prospectus Supplement, the
shares of each series of Preferred Stock will upon issuance rank equally in all
respects with each other then outstanding series of Preferred Stock. Unless
otherwise specified in the applicable Prospectus Supplement, The Bank of New
York, or an affiliate, will be the transfer agent and registrar for the
Preferred Stock.
Because we are a bank holding company, our rights and the rights of holders
of our securities, including the holders of the Preferred Stock, to participate
in the assets of any of our subsidiaries upon their liquidation or
recapitalization will be subject to the prior claims of such subsidiary's
creditors and preferred stockholders, except to the extent our company may
itself be a creditor with recognized claims against such subsidiary or a holder
of preferred shares of such subsidiary.
Rank. Any series of the Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding up and dissolution, rank:
-- senior to all classes of common stock and to all equity securities
issued by us, the terms of which specifically provide that the equity
securities will rank junior to the Preferred Stock;
-- equally with all equity securities issued by us, the terms of which
specifically provide that the equity securities will rank equally with
the Preferred Stock; and
-- junior to all equity securities issued by us, the terms of which
specifically provide that the equity securities will rank senior to the
Preferred Stock.
Dividends. The holders of the Preferred Stock will be entitled to receive,
when, as and if declared by our Board of Directors, dividends at such rates and
on such dates as will be specified in the applicable Prospectus Supplement.
Such rates may be fixed or variable or both. If variable, the formula used for
determining the dividend rate for each dividend period will be specified in the
applicable Prospectus Supplement. Dividends will be payable to the holders of
record as they appear on our stock books on such record dates as will be fixed
by our Board of Directors. Dividends may be paid in the form of cash, the
Preferred Stock (of the same or a different series) or common stock, in each
case as specified in the applicable Prospectus Supplement.
Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. If the
dividends on a series of the Preferred Stock are noncumulative ("Noncumulative
Preferred Stock") and our Board of Directors fails to declare a dividend
payable on a dividend payment date, then the holders of such Preferred Stock
will have no right to receive a dividend in respect of the dividend period
relating to such dividend payment date, and we will be obligated to pay the
dividend accrued for such period, whether or not dividends on such Preferred
Stock are declared or paid on any future dividend payment dates.
We will not declare or pay or set apart for payment any dividends on any
series of the Preferred Stock ranking, as to dividends, on a parity with or
junior to the outstanding Preferred Stock of any series unless (i) if such
outstanding Preferred Stock has a cumulative dividend ("Cumulative Preferred
Stock"), full cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
such payment on such Preferred Stock for all dividend periods terminating on or
prior to the date of payment of any such dividends on such other series of the
Preferred Stock, or (ii) if such outstanding Preferred Stock is Noncumulative
Preferred Stock, full dividends for the then-current dividend period on such
Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment.
Until full dividends are paid (or declared and payment is set aside) on the
Preferred Stock ranking equal as to dividends, then:
-- we will declare any dividends pro rata among the Preferred Stock of each
series and any Preferred Stock ranking equal to such Preferred Stock as
to dividends (i.e., the dividends we declare per share
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on each series of such Preferred Stock will bear the same relationship
to each other that the full accrued dividends per share on each such
series of the Preferred Stock (which will not, if such Preferred Stock
is Noncumulative Preferred Stock, include any accumulation in respect of
unpaid dividends for prior dividend periods) bear to each other);
-- other than such pro rata dividends, we will not declare or pay any
dividends or declare or make any distributions upon any security ranking
junior to or equal with the Preferred Stock as to dividends or upon
liquidation (except dividends on common stock payable in common stock,
dividends or distributions paid for with securities ranking junior to
the Preferred Stock as to dividends and upon liquidation and cash in
lieu of fractional shares in connection with such dividends); and
-- we will not redeem, purchase or otherwise acquire (or set aside money
for a sinking fund for) common stock or any other securities ranking
junior to or equal with the Preferred Stock as to dividends or upon
liquidation (except by conversion into or exchange for stock junior to
the Preferred Stock as to dividends and upon liquidation).
We will not owe any interest, or any money in lieu of interest, on any dividend
payment(s) on any series of the Preferred Stock which may be past due.
Redemption. A series of the Preferred Stock may be redeemable, in whole or
in part, at our option, and may be subject to mandatory redemption pursuant to
a sinking fund or otherwise, in each case upon terms, at the times and at the
redemption prices specified in the applicable Prospectus Supplement. Redeemed
shares of the Preferred Stock will become authorized but unissued shares of
Preferred Stock that we may issue in the future.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that we will redeem each year and the redemption price per
share. If shares of Preferred Stock are redeemed, we will pay all accrued and
unpaid dividends thereon (which will not, if such Preferred Stock is
Noncumulative Preferred Stock, include any accumulation in respect of unpaid
dividends for prior dividend periods) up to but excluding the date of
redemption. The redemption price may be payable in cash or other property, as
specified in the applicable Prospectus Supplement. If the redemption price for
the Preferred Stock of any series is payable only from the net proceeds of the
issuance of our capital stock, the terms of such Preferred Stock may provide
that, if no such capital stock will have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Stock will automatically and
mandatorily be converted into shares of our applicable capital stock pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
If fewer than all the outstanding shares of Preferred Stock of any series
are to be redeemed, our Board of Directors will determine the number of shares
to be redeemed. We will redeem the shares pro rata from the holders of record
of such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or by lot or by any
other method as may be determined by our Board of Directors.
Even though the terms of a series of the Cumulative Preferred Stock may
permit redemption of such Cumulative Preferred Stock in whole or in part, if
any dividends, including accumulated dividends, on that series are past due:
-- we will not redeem any Preferred Stock of that series unless we
simultaneously redeem all outstanding Preferred Stock of that series;
and
-- we will not purchase or otherwise acquire any Preferred Stock of that
series.
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The prohibition discussed in the prior sentence will not prohibit us from
purchasing or acquiring Preferred Stock of that series pursuant to a purchase
or exchange offer if we make the offer on the same terms to all holders of that
series.
Under current regulations, bank holding companies may exercise an option to
redeem shares of preferred stock included as Tier 1 capital, or exchange
preferred stock for debt securities, without the prior approval of the Federal
Reserve, if the bank holding company will remain well capitalized, received a
composite rating of 1 or 2 under the bank holding company ratings system and is
not the subject of any unresolved supervisory issues.
Conversion Rights. The Prospectus Supplement relating to a series of
convertible Preferred Stock will describe the terms on which shares of such
series are convertible into our Common Stock, or another series of Preferred
Stock.
Rights upon Liquidation. Unless the applicable Prospectus Supplements states
otherwise, if we voluntarily or involuntarily liquidate, dissolve or wind up
our business, the holders of the Preferred Stock will be entitled to receive
out of our assets available for distribution to shareholders, before any
distribution of assets is made to holders of our common stock or any other
class or series of shares ranking junior to such Preferred Stock upon
liquidation, liquidating distributions in the amount of the liquidation
preference of such Preferred Stock plus accrued and unpaid dividends (which
will not, if such Preferred Stock is Noncumulative Preferred Stock, include any
accumulation in respect of unpaid dividends for prior dividend periods). If we
voluntarily or involuntarily liquidate, dissolve or wind up our business, the
amounts payable with respect to the Preferred Stock of any series and any of
our other securities ranking equal as to any such distribution are not paid in
full, the holders of such Preferred Stock and of such other shares will share
ratably in any such distribution of our assets in proportion to the full
respective preferential amounts to which they are entitled. After payment of
the full amount of the liquidating distribution to which they are entitled, the
holders of the Preferred Stock of any series will not be entitled to any
further participation in any distribution of our assets.
Because we are a bank holding company, our rights, the rights of our
creditors and of our shareholders to participate in the assets of any
subsidiary, upon the subsidiary's liquidation or recapitalization, may be
subject to the prior claims of the subsidiary's creditors except to the extent
that we may ourselves be a creditor with recognized claims against the
subsidiary.
Voting Rights. Except as described in this section or in the applicable
Prospectus Supplement, or except as expressly required by applicable law, the
holders of the Preferred Stock will not be entitled to vote. If the holders of
a series of Preferred Stock are entitled to vote and the applicable Prospectus
Supplement does not state otherwise, each such share will be entitled to one
vote on matters on which holders of such series of the Preferred Stock are
entitled to vote. For any series of Preferred Stock having one vote per share,
the voting power of such series, on matters on which holders of such series and
holders of other series of Preferred Stock are entitled to vote as a single
class, will depend on the number of shares in such series, not the aggregate
stated value, liquidation preference or initial offering price of the shares of
such series of Preferred Stock.
Unless we receive the consent of the holders of an outstanding series of
Preferred Stock and the outstanding shares of all other series of Preferred
Stock which (i) rank equal with such series either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up of our
business and (ii) have voting rights that are exercisable and that are similar
to those of such series, we will not:
-- authorize, create or issue, or increase the authorized or issued amount
of, any class or series of stock ranking prior to such outstanding
Preferred Stock with respect to payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of our business;
or
-- amend, alter or repeal, whether by merger, consolidation or otherwise,
the provisions of our Charter or of the resolutions contained in any
certificate of amendment creating such series of Preferred Stock
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so as to materially and adversely affect any right, preference,
privilege or voting power of such outstanding Preferred Stock.
This consent must be given by the holders of a majority of all such outstanding
Preferred Stock described in the preceding sentence, voting together as a
single class. We will not be required to obtain this consent with respect to
the actions listed in the second bullet point above, however, if we only (i)
increase the amount of the authorized Preferred Stock, (ii) create and issue
another series of Preferred Stock, or (iii) increase the amount of authorized
shares of any series of Preferred Stock, if such Preferred Stock in each case
ranks equal with or junior to the Preferred Shares with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution or
winding up of our business.
DESCRIPTION OF COMMON STOCK
This section describes the general terms and provisions of the shares of our
common stock, par value $2.00 per share (the "Common Stock"). The summary is
not complete and is qualified in its entirety by reference to the description
of the Common Stock incorporated by reference in this Prospectus. See
"Incorporation of Information We File with the SEC." We have also filed our
Charter and our bylaws as exhibits to the Registration Statement. You should
read our Charter and our bylaws for additional information before you buy any
Common Stock. See "Where You Can Find More Information."
General. As of March 5, 1999, our authorized Common Stock was 175,000,000
shares, of which 101,272,004 shares were issued and outstanding.
Dividends. Holders of Common Stock are entitled to receive pro rata
dividends when, as and if declared by our Board of Directors out of any funds
that we can legally use to pay dividends. We may pay dividends in cash, stock
or other property. In certain cases, holders of Common Stock may not receive
dividends until we have satisfied our obligations to any holders of outstanding
Preferred Stock. In the event we liquidate, dissolve or wind up our business,
the holders of Preferred Stock will receive an amount per share equal to the
amount fixed and determined by our Board of Directors, plus any amount equal to
all the dividends accrued on the Preferred Stock, before any distribution will
be made on the Common Stock.
Voting Rights. Each share of Common Stock is entitled to one vote on each
matter submitted to a vote of shareholders. The holders of the Common Stock
have noncumulative voting rights, which means that the holders of more than 50%
of the shares of Common Stock voting for the election of directors can elect
100% of the directors standing for election at any meeting if they choose to do
so and, in such event, the holders of the remaining shares voting for the
election of directors will not be able to elect any person or persons to our
Board of Directors.
Other Rights. The Common Stock has no conversion rights and is not
redeemable. The holders of the Common Stock do not have any preemptive rights
to subscribe for additional shares of our stock or other securities of ours
except as may be granted by our Board of Directors. There is no restriction on
our purchase of shares of Common Stock except for certain regulatory limits.
Fully Paid. The issued and outstanding shares of Common Stock are fully paid
and nonassessable (i.e., the full purchase price for the outstanding shares of
Common Stock has been paid and the holders of such shares will not be assessed
any additional monies for such shares).
Listing. The Common Stock is listed on The Nasdaq Stock Market's National
Market under the symbol "NCBC." The Bank of New York, or an affiliate thereof,
is the transfer agent, registrar and dividend disbursing agent for the Common
Stock.
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Special Provisions of the Charter. Article Seventh of the Charter provides
for a Board of Directors consisting of at least three and no more than twenty-
five directors and divided into three classes of directors serving staggered
three-year terms. The classification of directors has the effect of making it
more difficult for shareholders to change the composition of our Board of
Directors in a short period of time. At least two annual meetings of our
shareholders, instead of one, will generally be required to effect a change in
a majority of our Board of Directors.
Our Board of Directors can at any time, under the Charter and without
shareholder approval, issue one or more series of Preferred Stock. In some
cases, the issuance of Preferred Stock without shareholder approval could
discourage or make more difficult attempts to take control of our company
through a merger, tender offer, proxy contest or otherwise. Preferred Stock
with special voting rights or other features issued to persons favoring our
management could stop a takeover by preventing the person trying to take
control of our company from acquiring enough voting shares necessary to take
control.
Article Ninth of the Charter includes specific provisions with respect to
mergers and other business combinations (as defined in the Charter, a "Business
Combination"). In general, a Business Combination requires the affirmative vote
of the holders of at least two-thirds of the outstanding shares of each class
of our capital voting stock to approve the Business Combination, unless the
Business Combination is not with or does not involve:
(i) any Interested Shareholders (as defined in the Charter) or an Affiliate
(as defined in the Charter) of an Interested Shareholder if the
following conditions set forth in (ii)(a) below are met, in which event
such Business Combination will require only such affirmative vote as is
required by law and the Charter, or
(ii) an Interested Shareholder or an Affiliate of an Interested Shareholder
if the following conditions set forth in (a), (b) and (c) are met, in
which event such Business Combination will require only such
affirmative vote as is required by law and the Charter:
(a) if the Business Combination has been approved by at least two-
thirds of our entire Board of Directors at any time prior to the
consummation of the Business Combination;
(b) the aggregate amount of the cash and the fair market value as of
the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders
of our outstanding capital voting stock in such Business
Combination will be at least equal to the Minimum Price Per Share
(as defined in the Charter); and
(c) the consideration to be received by holders of a particular class
of outstanding voting stock will be in cash or in the same form as
the Interested Shareholder has previously paid for shares of such
class of voting stock. If the Interested Shareholder has paid for
shares of any class of voting stock with varying forms of
consideration, the form of consideration for such class of voting
stock will be either cash or the form used to acquire the largest
number of shares of such class of voting stock previously acquired
by it.
SELLING SHAREHOLDERS
The selling shareholders may be directors, executive officers or former
directors of our company. The Prospectus Supplement for any offering of the
Common Stock by selling shareholders will include the following information:
-- the names of the selling shareholders;
-- the number of shares held by each of the selling shareholders;
-- the percentage of the Common Stock held by each of the selling
shareholders; and
-- the number of shares of the Common Stock offered by each of the selling
shareholders.
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PLAN OF DISTRIBUTION
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
therein.
Our company and any selling shareholders may sell Securities directly,
through agents designated from time to time, through underwriting syndicates
led by one or more managing underwriters or through one or more underwriters
acting alone. Each Prospectus Supplement will describe the terms of the
Securities to which such Prospectus Supplement relates, the names of the
selling shareholders and the number of shares of Common Stock to be sold by
each, the name or names of any underwriters or agents with whom we or the
selling shareholders, or both, have entered into arrangements with respect to
the sale of such Securities, the public offering or purchase price of such
Securities and the net proceeds we or the selling shareholders will receive
from such sale. In addition, each Prospectus Supplement will describe any
underwriting discounts and other items constituting underwriters' compensation,
any discounts and commissions allowed or paid to dealers, if any, any
commissions allowed or paid to agents, and the securities exchange or
exchanges, if any, on which such Securities will be listed. Dealer trading may
take place in certain of the Securities, including Securities not listed on any
securities exchange.
If so indicated in the applicable Prospectus Supplement, we or the selling
shareholders, or both, will authorize underwriters or agents to solicit offers
by certain institutions to purchase Securities from us or the selling
shareholders, or both, pursuant to delayed delivery contracts providing for
payment and delivery at a future date. Institutions with which such contracts
may be made include, among others:
-- commercial and savings banks;
-- insurance companies;
-- pension funds;
-- investment companies;
-- educational and charitable institutions.
In all cases, such institutions must be approved by us or the selling
shareholders, or both. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of any purchaser under any such contract will not
be subject to any conditions except that (i) the purchase of the Securities
will not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (ii) if the Securities are
also being sold to underwriters acting as principals for their own account, the
underwriters will have purchased such Securities not sold for delayed delivery.
The underwriters and such other persons will not have any responsibility in
respect of the validity or performance of such contracts.
Any selling shareholder, underwriter or agent participating in the
distribution of the Securities may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Securities so offered and sold and any
discounts or commissions received by them, and any profit realized by them on
the sale or resale of the Securities may be deemed to be underwriting discounts
and commissions under the Securities Act.
Certain of any such underwriters and agents including their associates, may
be customers of, engage in transactions with and perform services for us and
our subsidiaries in the ordinary course of business. One or more of our
affiliates may from time to time act as an agent or underwriter in connection
with the sale of the Securities to the extent permitted by applicable law. The
participation of any such affiliate in the offer and sale of the Securities
will comply with Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding the offer and sale of securities of an
affiliate.
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Except as indicated in the applicable Prospectus Supplement, the Securities
are not expected to be listed on a securities exchange, except for the Common
Stock, which is listed on The Nasdaq Stock Market's National Market, and any
underwriters or dealers will not be obligated to make a market in Securities.
We cannot predict the activity or liquidity of any trading in the Securities.
We will not receive any proceeds from the sale of shares of Common Stock by
the selling shareholders. We will, however, bear certain expenses in connection
with the registration of the securities being offered under this Prospectus by
the selling shareholders, including all costs incident to the offering and sale
of the securities to the public other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes.
VALIDITY OF SECURITIES
The validity of the Securities offered hereby will be passed upon for us by
King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303, and for any
underwriters, selling agents and certain other purchasers by Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements incorporated by reference in our Annual Report on Form 10-
K for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this Form S-3. Our consolidated financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
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6,000,000 Shares
National Commerce Bancorporation
Common Stock
[LOGO OF NATIONAL COMMERCE BANCORPORATION APPEARS HERE.]
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PROSPECTUS SUPPLEMENT
, 1999
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Salomon Smith Barney
Lehman Brothers
Morgan Stanley Dean Witter
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