<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 0-6094
------
NATIONAL COMMERCE BANCORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-0784645
--------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Commerce Square
Memphis, Tennessee 38150
------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code - (901)523-3434
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $2 par value -- 111,059,797 shares as of August 1, 2000
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL COMMERCE BANCORPORATION
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
June 30 Dec. 31
2000 1999
----------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents:
Interest-bearing deposits with other banks $ 36,342 $ 23,051
Cash and non-interest bearing deposits 207,840 181,999
Federal funds sold and securities
purchased under agreements to resell 34,550 61,058
----------- -----------
Total cash and cash equivalents 278,732 266,108
----------- -----------
Securities:
Available-for-sale 656,163 578,528
Held-to-maturity 1,926,151 1,763,752
----------- -----------
Total securities 2,582,314 2,342,080
----------- -----------
Trading account securities 37,660 30,294
Loans, net of unearned discounts 4,266,967 4,095,465
Less allowance for loan losses 62,064 62,555
----------- -----------
Net loans 4,204,903 4,032,910
----------- -----------
Premises and equipment, net 51,431 51,055
Broker/dealer customer receivables 26,274 25,047
Other assets 257,574 204,414
----------- -----------
Total assets $ 7,438,888 $ 6,951,908
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing deposits $ 511,963 $ 458,326
Interest-bearing deposits 4,233,425 4,147,054
----------- -----------
Total deposits 4,745,388 4,605,380
Short-term borrowings 1,175,354 883,038
Accounts payable and accrued liabilities 119,600 102,288
Federal Home Loan Bank advances 754,927 732,886
Long-term debt 6,372 6,372
----------- -----------
Total liabilities 6,801,641 6,329,964
----------- -----------
Capital trust pass-through securities 49,915 49,909
Stockholders' equity:
Common stock 218,621 219,474
Additional paid-in capital 78,958 108,783
Retained earnings 301,949 247,728
Accumulated other comprehensive loss (12,196) (3,950)
----------- -----------
Total stockholders' equity 587,332 572,035
----------- -----------
Total liabilities and
stockholders' equity $ 7,438,888 $ 6,951,908
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Income
(Unaudited)
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30 ended June 30
-------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans $ 92,892 $ 75,861 $ 181,597 $ 149,556
Securities:
Taxable 40,296 34,434 78,993 67,402
Non-taxable 3,427 3,139 6,510 6,371
Trading account securities 520 632 996 1,281
Deposits at bank 400 340 680 710
Other 495 1,140 1,984 1,996
--------- --------- --------- ---------
Total interest income 138,030 115,546 270,760 227,316
--------- --------- --------- ---------
Interest expense:
Deposits 49,743 38,905 96,816 76,677
Federal Home Loan Bank advances 12,636 9,801 24,985 19,050
Long-term debt 92 91 184 181
Federal funds purchased and securities
sold under agreements to repurchase
and other short-term borrowings 15,538 8,098 26,644 16,096
--------- --------- --------- ---------
Total interest expense 78,009 56,895 148,629 112,004
--------- --------- --------- ---------
Net interest income 60,021 58,651 122,131 115,312
Provision for loan losses 2,030 3,988 4,217 6,530
--------- --------- --------- ---------
Net interest income after
provision for loan losses 57,991 54,663 117,914 108,782
--------- --------- --------- ---------
Other income:
Trust service income 2,344 2,662 4,707 5,237
Service charges on deposits 7,388 5,133 13,843 10,110
Other service charges and fees 6,966 5,427 12,888 10,253
Broker/dealer revenue 3,301 4,892 7,699 10,323
Securities gains (losses) 249 (2,135) 327 (2,116)
Other 5,909 8,592 11,104 12,449
--------- --------- --------- ---------
Total other income 26,157 24,571 50,568 46,256
--------- --------- --------- ---------
Other expenses:
Salaries and employee benefits 19,392 19,844 39,643 39,504
Occupancy expense 3,834 3,436 7,364 6,839
Furniture and equipment expense 2,068 2,001 4,047 3,818
Other 15,470 15,619 30,715 29,203
--------- --------- --------- ---------
Total other expenses 40,764 40,900 81,769 79,364
--------- --------- --------- ---------
Income before income taxes 43,384 38,334 86,713 75,674
Income taxes 13,844 12,607 27,744 24,722
--------- --------- --------- ---------
Net income $ 29,540 $ 25,727 $ 58,969 $ 50,952
========= ========= ========= =========
Basic net income per share of common stock $ .27 $ .24 $ .54 $ .48
Diluted net income per share of common stock $ .27 $ .23 $ .53 $ .47
Dividends per share of common stock $ .105 $ .09 $ .21 $ .18
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
NATIONAL COMMERCE BANCORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
---------------------------
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Operating activities:
Net income $ 58,969 $ 50,952
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses 4,217 6,530
Provision for depreciation and amortization 4,536 5,852
Amortization of security premiums and accretion
of discounts, net (345) 201
Deferred income taxes (credit) (4,443) 615
(Increase) decrease in trading account securities (7,366) (19,929)
Realized securities (gains) losses (327) 2,116
(Increase) decrease in broker/dealer customer receivables (1,227) (34,586)
(Increase) decrease in other assets (49,614) (26,104)
Increase (decrease) in accounts payable and accrued expenses 16,035 97,853
--------- ---------
Net cash provided by (used in) operating activities 20,435 83,500
--------- ---------
Investing activities:
Proceeds from the maturities of securities 34,068 168,949
Proceeds from sales of securities 0 63,828
Purchases of securities (278,982) (514,821)
Net (increase) decrease in loans (176,210) (247,103)
Purchase of premises and equipment (4,009) (8,555)
--------- ---------
Net cash provided by (used in) investing activities (425,133) (537,702)
--------- ---------
Financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts (73,052) (180,655)
Net increase (decrease) in certificates of deposit 213,060 344,037
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 292,316 111,731
Increase (decrease) in Federal Home Loan Bank advances 22,041 46,492
Proceeds from exercise of stock options 2,182 1,690
Issuance of common stock 776 81,626
Repurchases of common stock (17,167) (10,726)
Cash dividends paid (22,834) (19,478)
--------- ---------
Net cash provided by (used in) financing activities 417,322 374,717
--------- ---------
Increase (decrease) in cash and cash equivalents 12,624 (79,485)
Cash and cash equivalents at beginning of period 266,108 338,787
--------- ---------
Cash and cash equivalents at end of period $ 278,732 $ 259,302
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
NATIONAL COMMERCE BANCORPORATION
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
Note A - Basis of Presentation
The consolidated balance sheet at December 31, 1999 has been derived
from the audited financial statements at that date. The accompanying
unaudited interim consolidated financial statements reflect all
adjustments (consisting only of normally recurring accruals) which are,
in the opinion of management, necessary for a fair statement of the
results for the interim periods presented. The statements should be
read in conjunction with the summary of accounting policies and notes
to consolidated financial statements included in the Registrant's
annual report for the year ended December 31, 1999. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the rules of the Securities and
Exchange Commission. During third quarter, 1999, the Company acquired
First Financial Corporation of Mt. Juliet, Tennessee, and
Nashville-based Southeastern Mortgage of Tennessee. During first
quarter, 2000, the Company acquired Piedmont Bancorp, Inc. of
Hillsborough, North Carolina. These acquisitions, which were accounted
for using the pooling-of-interest method, are incorporated into
reported results. For comparative purposes, all prior year results are
restated to include these acquisitions. Reported results do not include
the results of CCB Financial Corporation, with whom the Company merged
on July 5, 2000 in a merger of equals transaction accounted for using
the pooling-of-interests method, and the results of FMT Holdings, Inc.
which the Company acquired by merger on July 27, 2000 in a transaction
accounted for using the pooling-of-interests method.
Note B - Segment Information
The Company operates three principal lines of business. The commercial
banking segment includes lending and related financial services
provided to large and medium-sized corporations. Included among these
services are several specialty services such as real estate finance,
asset based lending and residential construction.
The retail banking segment includes sales and distribution of financial
products and services to individuals. These products and services
include loan products such as residential mortgages, home equity
lending, automobile and other personal financing needs. Retail banking
also offers various deposit products that are designed for customers'
saving and transaction needs.
The other financial services segment includes investment management,
non-deposit based funding, interest rate risk management, transaction
processing, in-store consulting/licensing, securities brokerage and
specialty leasing.
The accounting policies of the individual segments are the same as
those of the Company described in Note A. Transactions between business
segments are conducted at fair value and are eliminated for reporting
consolidated financial position and results of operations. Interest
income for tax-exempt loans and securities is adjusted to a taxable
equivalent basis.
Each segment's balance sheet is adjusted to reflect its net funding
position. Assets are increased if excess funds are provided;
liabilities are increased if funds are needed to support assets. Each
segment's net interest income is affected by the internal transfer rate
assigned to its net funding position, which rate is equivalent to the
Company's average external cost of funds. Interest income for
tax-exempt loans and securities is adjusted to a taxable equivalent
basis.
Expenses for centrally provided services such as deposit servicing,
data processing, technology and loan servicing and underwriting are
allocated to each segment based upon various statistical information.
Other indirect costs, such as management
4
<PAGE>
overhead and corporate support, are also allocated to each segment
based upon various statistical information. The portion of the
provision for loan losses that is not related to specific net
charge-offs is allocated to the segment based upon loan growth. There
are no significant intersegment revenues.
Performance is assessed primarily on net interest margin by the chief
operating decision makers.
The following tables (in thousands of dollars) present condensed income
statements on a fully taxable equivalent basis and average assets for
each reportable segment.
<TABLE>
<CAPTION>
Quarter Ended June 30, 2000:
Other
Commercial Retail Financial
Banking Banking Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $ 14,419 $ 25,762 $ 24,001 $ 64,182
Provision for loan losses (552) (1,231) (247) (2,030)
----------- ----------- ----------- -----------
Net interest income after provision 13,867 24,531 23,754 62,152
Non-interest income 823 4,022 21,312 26,157
Non-interest expense (4,199) (12,968) (23,597) (40,764)
----------- ----------- ----------- -----------
Net income before taxes 10,491 15,585 21,469 47,545
Income taxes (3,973) (5,901) (8,131) (18,005)
----------- ----------- ----------- -----------
Net income $ 6,518 $ 9,684 $ 13,338 $ 29,540
=========== =========== =========== ===========
Average assets $ 1,069,039 $ 3,458,437 $ 2,844,274 $ 7,371,750
<CAPTION>
Quarter Ended June 30, 1999:
Other
Commercial Retail Financial
Banking Banking Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $ 13,343 $ 33,773 $ 14,891 $ 62,007
Provision for loan losses 245 (4,094) (139) (3,988)
----------- ----------- ----------- -----------
Net interest income after provision 13,588 29,679 14,752 58,019
Non-interest income 1,310 5,583 17,678 24,571
Non-interest expense (4,431) (19,436) (17,033) (40,900)
----------- ----------- ----------- -----------
Net income before taxes 10,467 15,826 15,397 41,690
Income taxes (4,009) (6,059) (5,895) (15,963)
----------- ----------- ----------- -----------
Net income $ 6,458 $ 9,767 $ 9,502 $ 25,727
=========== =========== =========== ===========
Average assets $ 1,109,230 $ 2,702,509 $ 2,669,160 $ 6,480,899
<CAPTION>
Six Months Ended June 30, 2000:
Other
Commercial Retail Financial
Banking Banking Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $ 29,378 $ 52,984 $ 48,029 $ 130,391
Provision for loan losses (751) (3,156) (310) (4,217)
----------- ----------- ----------- -----------
Net interest income after provision 28,627 49,828 47,719 126,174
Non-interest income 1,727 6,902 41,939 50,568
Non-interest expense (8,511) (23,512) (49,746) (81,769)
----------- ----------- ----------- -----------
Net income before taxes 21,843 33,218 39,912 94,973
Income taxes (8,281) (12,593) (15,130) (36,004)
----------- ----------- ----------- -----------
Net income $ 13,562 $ 20,625 $ 24,782 $ 58,969
=========== =========== =========== ===========
Average assets $ 1,060,695 $ 3,416,519 $ 2,820,630 $ 7,297,844
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999:
Other
Commercial Retail Financial
Banking Banking Services Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $ 29,179 $ 65,767 $ 27,106 $ 122,052
Provision for loan losses (641) (5,653) (236) (6,530)
----------- ----------- ----------- -----------
Net interest income after provision 28,538 60,114 26,870 115,522
Non-interest income 2,070 9,770 34,416 46,256
Non-interest expense (8,604) (39,729) (31,031) (79,364)
----------- ----------- ----------- -----------
Net income before taxes 22,004 30,155 30,255 82,414
Income taxes (8,400) (11,512) (11,550) (31,462)
----------- ----------- ----------- -----------
Net income $ 13,604 $ 18,643 $ 18,705 $ 50,952
=========== =========== =========== ===========
Average assets $ 1,054,321 $ 2,647,601 $ 2,614,253 $ 6,316,175
</TABLE>
Note C - Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
In Thousands, Except Per Share Data 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 29,540 $ 25,727 $ 58,969 $ 50,952
======== ======== ======== ========
Denominator:
Denominator for basic earnings per
share - weighted average shares 109,425 107,477 109,608 106,739
Dilutive potential common shares -
Employee stock options 1,300 2,256 1,389 2,187
-------- -------- -------- --------
Denominator for diluted earnings per
share - adjusted weighted average
and assumed conversions 110,725 109,733 110,997 108,926
======== ======== ======== ========
Basic earnings per share $ .27 $ .24 $ .54 $ .48
Diluted earnings per share $ .27 $ .24 $ .53 $ .47
</TABLE>
Note D - Comprehensive Income
During the second quarter of 2000 and 1999, total comprehensive income
amounted to $26,940,000 and $25,932,000 respectively. The year-to-date
total comprehensive income for 2000 and 1999 was $50,723,000 and
$48,962,000 respectively.
Note E - Business Combination with CCB Financial Corporation
On July 5, 2000, the Company consummated a merger with CCB Financial
Corporation. After consummation of the strategic merger of equals with
CCB, the Company now has approximately $16 billion in assets and
approximately 400 branch banking offices and 220 ATMS in 9 southeastern
states.
The following unaudited pro forma data summarizes the three-month and
six-month combined results of operations of the Company and CCB as if
the merger had been effective for all periods presented.
The pro-forma data does not reflect any impact of expected merger
related charges or any related cost savings resulting from the merger.
6
<PAGE>
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
June 30 June 30
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $ 143,933 $ 142,376 $ 287,558 $ 279,895
Net income $ 61,342 $ 77,812 $ 123,949 $ 136,790
Basic net income per share $ .30 $ .38 $ .60 $ .67
Diluted - operating EPS $ .32 $ .27 $ .62 $ .56
Non-recurring items (.02)(b) .10(a) (.02)(b) .10(a)
----------- ----------- ----------- -----------
Diluted - reported EPS $ .30 $ .37 $ .60 $ .66
=========== =========== =========== ===========
</TABLE>
(a) represents CCB's sale of credit card receivables
(b) represents one-time charges related to acquisitions
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this discussion is to focus on important factors affecting the
Company's financial condition and results of operations. Reference should be
made to the consolidated financial statements (including the notes thereto) set
forth in this report for an understanding of the following discussion and
analysis. In this discussion, net interest income and net interest margin are
presented on a fully taxable equivalent basis. During third quarter, 1999, the
Company acquired First Financial Corporation of Mt. Juliet, Tennessee, and
Nashville-based Southeastern Mortgage of Tennessee. During second quarter, 2000,
the Company acquired Piedmont Bancorp, Inc. of Hillsborough, North Carolina.
These acquisitions, which were accounted for using the pooling-of-interest
method, are incorporated into reported results. For comparative purposes, all
prior year results are restated to include these acquisitions. All per share
data is adjusted to reflect all stock dividends and stock splits declared. On
July 5, 2000, the Company merged with CCB Financial Corporation, with the
Company as the surviving entity. Because the merger occurred after June 30,
2000, the historical financial statements included in this report do not give
effect to the merger, nor does this discussion give effect to the merger.
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor for forward-looking statements made by or on behalf of
the Company. All statements in this Quarterly Report on Form 10-Q that are not
historical facts or that express expectations or projections with respect to
future matters are "forward-looking statements" for the purpose of the safe
harbor provided by the Act. The Company cautions 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 the
Company, are necessarily estimates reflecting the best judgment of the Company's
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." Such "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 underperformance in the Company's portfolio
of outstanding loans, difficulty in integrating the operations of the Company
and CCB Financial Corporation, lower than expected cost savings following the
Company's merger with CCB Financial Corporation and competition in the Company's
markets. Other factors set forth from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission should
also be considered. The Company undertakes 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.
Financial Condition
Following is a comparison of the June 30, 2000 and December 31, 1999
consolidated balance sheets.
In the asset section, total loans, net of unearned discounts, increased
by $172 million or 4.2% compared to December 31, 1999 levels. Commercial loans
increased by $15 million or 2.2%, real estate construction loans increased by
$19 million or 6.7%, and real estate mortgage loans increased by $152 million or
8.8% reflecting current demand. Consumer loans decreased $17 million or 1.3%.
Securities increased by $240 million or 10.3% from year-end 1999.
Securities held to maturity increased by $162 million or 9.2%, and securities
available for sale increased by $78 million or 13.4%, reflecting current
portfolio investment strategies, and current market conditions.
Federal funds sold and securities purchased under agreements to resell
8
<PAGE>
decreased by $27 million or 43.4% from December 31, 1999 levels, reflecting
levels of activity of correspondent banks at June 30, 2000.
Trading account securities increased by $7 million or 24.3% from
year-end 1999 levels. This increase reflects the trading activity generated by
NBC Capital Markets Group, Inc., the Company's broker/dealer subsidiary, which
fluctuates from time to time.
Broker/dealer customer receivables increased $1 million or 4.9%.
In the liability section, total deposits increased by $140 million or
3.0%, principally as a result of a $174 million or 12.5% increase in
certificates of deposit greater than $100,000, a $39 million or 4.0% increase in
certificates of deposit less than $100,000 and a $54 million or 11.7% increase
in non-interest-bearing deposits. This increase was partially offset by a $108
million or 8.9% decrease in money market savings accounts, and a $20 million or
4.7% decrease in money market checking accounts.
Federal funds purchased and securities sold under agreements to
repurchase increased $292 million or 33.1% from year-end 1999 levels. This
category of liabilities fluctuates with the availability of overnight funds
purchased from downstream correspondent banks.
Federal Home Loan Bank advances increased $22 million or 3.0% from
December 31, 1999. This increase is principally the result of asset/liability
management decisions related to the current interest rate environment.
Results of Operations
Three Months Ended June 30 2000, Compared to Three Months Ended June 30, 1999
Net income was $29,540,000 for the second quarter of 2000 a 14.8%
increase over the $25,727,000 for the same period a year earlier. Diluted
earnings per share were $.27, compared to $.24 per share in 1999, up 12.5%.
Basic earnings per share were $.27, compared to $.24 per share in 1999, up
12.5%.
Net interest income, the difference between interest earned on loans
and investments and interest paid on interest-bearing liabilities, increased by
$2,175,000 or 3.5% for the second quarter of 2000, compared to second quarter
1999. This increase reflects a $23,289,000 or 19.6% increase in total interest
income that more than offsets a $21,114,000 or 37.1% increase in interest
expense. Interest income increased in 2000 due to an increase of $868,852,000 or
14.3% in total average earning assets, and an increase in the yield on average
earning assets from 7.87% in the second quarter of 1999 to 8.25% in the second
quarter of 2000. The increased volume of earning assets increased interest
income by approximately $17,038,000 while the increased yield increased interest
income by approximately $6,251,000. Interest expense increased in the second
quarter of 2000, reflecting an increase in average interest-bearing liabilities
of $775,000 or 14.5% and an increase in the cost of interest-bearing liabilities
from 4.28% to 5.14%. The increase in the rate paid on interest-bearing
liabilities increased interest expense by approximately $12,841,000 and the
increase in average outstandings increased interest expense by approximately
$8,273,000. The net interest margin (taxable equivalent net interest income as a
percentage of average earning assets) was 3.72% in second quarter 1999, compared
to 4.10% in second quarter of 1999.
The provision for loan losses in the second quarter of 2000 was
$2,030,000, versus $3,988,000 for the second quarter of 1999. Net charge-offs
were $2,023,000, or .19% of average net loans, compared to $1,999,000 or .23% of
average net loans in 1999. The allowance for loan losses totaled $62,064,000 at
June 30, 2000, representing 1.45% of quarter-end net loans, compared to
$59,050,000 or 1.45% of quarter-end net loans at March 31, 2000.
9
<PAGE>
Following is a comparison of non-earning assets and loans past due 90
days or more for the quarters ended June 30, 2000, March 31, 2000, and June 30,
1999 (dollars in thousands):
<TABLE>
<CAPTION>
6-30-00 3-31-00 6-30-99
------- ------- -------
<S> <C> <C> <C>
Non-accrual loans $1,377 $1,207 $1,601
Renegotiated loans 0 0 0
Other real estate 1,309 272 1,200
------ ------ ------
Total non-earning assets $2,686 $1,479 $2,801
====== ====== ======
Loans past due 90 days or more $6,142 $5,037 $4,395
Percentage of total loans .14% .12% .12%
</TABLE>
Non-interest income, excluding securities transactions, totaled
$25,908,000 for the quarter, a decrease of $798,000, or 3.0%, from last year's
second quarter. Securities gains totaled $249,000 in second quarter, 1999,
compared to a loss of $2,135,000 in 1999. Non-interest expenses (excluding the
provision for loan losses) decreased by $136,000 or .3% in second quarter, 2000.
The Company's return on average assets and return on average equity
were 1.60% and 20.24% respectively, for second quarter of 2000. These compared
with 1999 second quarter returns of 1.59% and 21.27%, respectively.
Six Months Ended June 30, 2000, Compared to Six Months Ended June 30, 1999
For the six months ended June 30, 2000, net income totaled $58,969,000,
a 15.7% increase over the $50,952,000 for the first six months of 1999. Diluted
earnings per share were $.53, compared to $.47 for the same period in 1999, a
12.8% increase. Basic earnings per share were $.54 compared to $.48 in 1999, a
12.5% increase. For the six-month period, return on average assets and return on
average stockholders' equity were 1.62% and 20.25% respectively. These compared
with 1999 six month returns of 1.61% and 22.14%.
Net interest income increased by $8,339,000 or 6.8% for the first six
months of 2000. This increase reflects a $44,964,000 or 19.2% increase in total
interest income that more than offsets a $36,625,000 or 32.7% increase in
interest expense. Interest income increased in 2000 due to an increase of
$953,158,000 or 16.1% in total average earning assets and an increase in the
yield on average earning assets from 7.99% in 1999 to 8.18% in 2000. The
increased volume of earning assets increased interest income by approximately
$37,777,000, and the increased yield increased interest income by approximately
$7,187,000. Interest expense increased in the first six months of 2000
reflecting an increase in average interest-bearing liabilities of $865,373,000
or 16.6%, with the cost of interest-bearing liabilities increasing from 4.34% to
4.93% in 2000. The increase in average outstandings increased interest expense
by approximately $18,638,000 and the increased rate increased interest expense
by approximately $17,987,,000. The net interest margin was 3.82% in the first
six months of 2000, compared to 4.17% in the first six months of 1999.
The provision for loan losses for the first six months of 2000 was
$4,217,000, versus $6,530,000 for the first six months of 1999. Net charge-offs
were $4,708,000, or .11% of average net loans compared to $4,022,000, or .12% of
average net loans in 1999.
Non-interest income, excluding securities transactions, totaled
$50,241,000 for the first six months of 2000 compared to a total of $48,372,000
for the first six months of 1999, an increase of 3.9%. Included in 1999 is a
$4,009,000 pre-tax gain from the sale of branches. Adjusting for this gain,
non-interest income increased 13.2% over 1999. Securities gains totaled $327,000
in 2000, compared to a
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loss of $2,116,000 in 1999.
Non-interest expenses (excluding the provision for loan losses)
increased by $2,405,000 or 3.0% for the first six months of 2000. Increased
employment and occupancy expenses relating to new products and locations, and
increased promotional expenses of new loan and deposit gathering campaigns were
the primary reasons for the increase.
Liquidity and Capital Resources
Interest-bearing bank balances, federal funds sold, trading account
securities, and securities available for sale are the principal sources of
short-term asset liquidity. Other sources of short-term liquidity include
federal funds purchased and repurchase agreements, credit lines with other
banks, and borrowings from the Federal Reserve Bank and the Federal Home Loan
Bank. Maturing loans and securities are the principal sources of long-term asset
liquidity.
Total realized stockholders' equity increased by $15,297,000 from
December 31, 1999. Retained earnings accounted for the majority of the increase.
Through June 30, 2000, 9.3 million shares had been repurchased and cancelled
under a stock repurchase program initiated in January, 1996, extended in
December, 1997 and December, 1999.
The following capital ratios do not include the effect of FAS No. 115
or FAS No. 133 on Tier I capital, total capital, or total risk-weighted assets.
As indicated in the following table, the Company and its banking
subsidiaries exceeded all minimum required capital ratios for well-capitalized
institutions at June 30, 2000.
<TABLE>
<CAPTION>
6-30-00 3-31-00 6-30-99
------- ------- -------
<S> <C> <C> <C>
Total capital to risk-weighted assets 13.96% 13.50% 15.02%
Tier I capital to risk-weighted assets 12.71% 12.25% 13.77%
Tier I capital to assets (leverage ratio) 8.52% 8.52% 9.37%
</TABLE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No significant changes since December 31, 1999. See Item 2 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held April 26, 2000,
the following proposals were approved by the shareholders of the Company:
The following individuals were elected to serve as directors of the
Company for terms that expire at the Annual Meeting of Shareholders to held in
2003: John D. Canale III; R. Lee Jenkins; W. Neely Mallory, Jr.; James E.
McGehee, Jr.; William R. Reed, Jr.; and G. Mark Thompson. (81,405,586 shares in
favor of the slate of directors; 500,077 withheld; and 8,581,473 exceptions.)
The appointment of Ernst & Young LLP as auditors of the Company for
2000 was ratified. (90,105,967 shares in favor; 285,615 against; and 95,454
abstained).
The proposal to increase by 4,000,000 shares the total number of shares
of the Company's Common Stock for which options to purchase may be granted
pursuant to the Company's 1994 Stock Plan as Amended and Restated was approved.
(80,802,883 shares in favor; 9,407,330 against; and 276,823 abstained).
At the Company's Special Shareholders Meeting held June 29, 2000, the
following proposals were approved by the shareholders of the Company:
The Agreement and Plan of Merger dated as of March 17, 2000 by and
between CCB Financial Corporation and the Company and the amendment to the NCBC
charter to increase the number of authorized shares of NCBC common stock from
175,000,000 to 400,000,000 were approved. (74,791,705 shares in favor; 896,062
shares against; and 367,961 shares abstained).
The proposal to amend the 1994 Stock Plan to increase the limitation on
the number of shares of the Company's common stock for which options may be
granted to an employee in any given year from 60,000 to 200,000, and in the case
of the Company's Chairman and Chief Executive Officer from 100,000 to 400,000
was approved (62,118,972 shares in favor; 13,425,616 against; and 511,140
abstained).
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
3.1 Charter of National Commerce Bancorporation as amended
and restated filed as Exhibit 3.1 to the Registrant's
Form 8-K dated July 11, 2000 (File No. 0-6094) and
incorporated herein by reference.
10.21 Amendment to National Commerce Bancorporation 1994
Stock Plan
10.22 Employment Agreement entered into as of March
17, 2000, effective as of July 5, 2000, by and among
National Bank of Commerce, National Commerce
Bancorporation and Thomas M. Garrott
10.23 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and Ernest C. Roessler
10.24 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and William R. Reed, Jr.
10.25 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and Richard L. Furr
10.26 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and Lewis E. Holland
10.27 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and J. Scott Edwards
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<PAGE>
10.28 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and Sheldon M. Fox
10.29 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and David T. Popwell
10.30 Employment Agreement dated as of March 17, 2000,
effective as of July 5, 2000, by and between National
Commerce Bancorporation and Tom W. Scott
10.31 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and Ernest C. Roessler
10.32 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and William R. Reed,
Jr.
10.33 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and Richard L. Furr
10.34 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and Lewis E. Holland
10.35 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and J. Scott Edwards
10.36 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and Sheldon M. Fox
10.37 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and David T. Popwell
10.38 Change of Control Agreement dated as of July 5, 2000,
effective upon a Change of Control, by and between
National Commerce Bancorporation and Tom W. Scott
27. Financial Data Schedule
b. Reports on Form 8-K
A current report on Form 8-K dated June 20, 2000 was
filed under Item 5 - Other Events discussing the
approval of the merger with CCB Financial Corporation by
The Board of Governors of the Federal Reserve System.
A current report on Form 8-K dated July 5, 2000 was
filed under Item 5 - Other Events reporting the
consummation of the CCB merger.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL COMMERCE BANCORPORATION
(Registrant)
By /s/ Mark A. Wendel
---------------------------------
Mark A. Wendel
Senior Vice President and Chief
Accounting Officer
(Authorized Officer)
(Chief Accounting Officer)
Date August 10, 2000
---------------
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