SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1996 Commission file number 09426
NATIONAL CITY BANCORPORATION
(Exact name of registrant as specified in its charter)
Iowa 42-0316731
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
651 Nicollet Mall
Minneapolis, Minnesota 55402-1611
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code 612-904-8500
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No____
As of September 30, 1996, 7,374,512 shares of $1.25 par value common
stock of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1)National City Bancorporation's Quarterly Report to Stockholders for
the quarter ended September 30, 1996, is incorporated and made a part
of Part I of Form 10-Q.
NATIONAL CITY BANCORPORATION
INDEX
Part I Financial Statements
The following data is incorporated by reference from National City
Bancorporation's Quarterly Report to Stockholders filed as Exhibit 1.
Consolidated Balance Sheets - September 30, 1996 and December 31, 1995.
Consolidated Statements of Earnings - Three months and nine months
ended September 30, 1996 and 1995.
Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and
1995 are included on page 2 of this report.
Notes to Consolidated Financial Statements are included on page 3 of this
report.
Management's Discussion and Analysis of Financial Condition and Results of
Operations is included on pages 4, 5, and 6 of this report.
Part II. Other Information
Part II items requiring a response are included on page 7 of this report.
<TABLE>
<CAPTION>
NATIONAL CITY BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SEPTEMBER 30,
(IN THOUSANDS) 1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 9,210 $ 8,470
Adjustments to reconcile net earnings to net cash from operating
activities:
Depreciation and amortization 1,525 1,124
Amortization of securities premiums and discounts 388 264
Provision for loan losses 1,395 1,032
Deferred income taxes 58
Loss on sale of securities 122
(Increase) decrease in accrued income receivable 342 (354)
(Increase) in other assets (46) (901)
(Decrease) in other liabilities (3,943) (1,216)
-----------------------
(339) 129
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NET CASH FROM OPERATING ACTIVITIES 8,871 8,599
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in loans (43,475) (88,788)
Net (increase) decrease in federal funds sold 10,350 (250)
Available-for-sale securities:
Proceeds from maturities and principal repayments 46,356 9,648
Proceeds from sale of securities 7,848
Purchases of securities (52,715) (19,171)
Held-to-maturity securities:
Proceeds from maturities and principal repayments 11,586 6,108
Proceeds from sale of securities 45
Purchases of securities (9,000) (14,649)
Purchase of premises and equipment (8,353) (1,324)
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NET CASH (USED IN) INVESTING ACTIVITIES (45,251) (100,533)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in non-interest bearing and savings deposits (21,659) (5,406)
Net (decrease) increase in time deposits (6,812) 34,809
Net increase in federal funds purchased and repurchase agreements 27,348 28,703
Net increase in commercial paper 29,193 21,353
Net increase in other borrowed funds 13,704 2,766
Net (decrease) in long-term debt (200) (5,000)
Purchase of treasury stock (2) (3)
Payment for fractional shares on stock dividends (25) (20)
-----------------------
NET CASH FROM (USED IN) FINANCING ACTIVITIES 41,547 77,202
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Net increase (decrease) in cash and due from banks 5,167 (14,732)
Cash and due from banks at beginning of year 42,006 47,133
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Cash and due from banks at end of period $ 47,173 $ 32,401
=======================
SUPPLEMENTAL DISCLOSURES Cash paid during the year for:
Interest $ 23,582 $ 20,928
Income taxes 5,771 5,720
Unrealized securities (losses) net of tax (1,210) (2,764)
</TABLE>
NATIONAL CITY BANCORPORATION
Notes to the Consolidated Financial Statements
The Consolidated Balance Sheet as of September 30, 1996, the
Consolidated Statement of Earnings for the three-month and nine-month periods
ended September 30, 1996 and 1995 and the Consolidated Statements of Cash Flows
for the nine-month periods then ended have been prepared by the Company, without
audit. In the opinion of management, all adjustments necessary to present fairly
the financial position, results of operations and cash flows at and for the
periods ended September 30, 1996 and 1995, respectively, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's December 31, 1995 annual report to shareholders. The results of
operations for the period ended September 30, 1996 are not necessarily
indicative of the operating results for the full year.
NATIONAL CITY BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS:
Net earnings for the third quarter ended September 30, 1996 were
$3,429,000 or $0.47 per share compared with $3,019,000 or $0.41 per share for
the same period in 1995. For the nine-month period ended September 30, 1996, net
earnings were $9,210,000 or $1.25 per share compared with $8,470,000 or $1.15
per share for the same period last year. Earnings information is summarized
below:
Third Quarter Nine Months
1996 1995 1996 1995
---- ---- ---- ----
Net income $3,429 $3,019 $9,210 $8,470
Earnings per share $ .47 $ .41 $ 1.25 $ 1.15
Return on average equity 12.10% 11.90% 11.21% 11.56%
Return on average assets 1.68% 1.61% 1.55% 1.59%
Net interest income for the third quarter was $9,853,000 up $474,000 or
5 percent over the third quarter of 1995 and for the nine-months up $1,862,000
or 7 percent. Fluctuations in net interest income can result from changes in the
volume of assets and liabilities as well as changes in interest rates. The
following table summarizes variances in net interest income attributed to
changes in balance sheet volumes and interest rates:
<TABLE>
<CAPTION>
NET INTEREST INCOME CHANGE FROM 1995
Third Quarter Nine Months
Resulting from: Resulting from:
Interest On: Total Rates Volumes Total Rates Volumes
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<S> <C> <C> <C> <C> <C> <C>
Total Earning Assets $ 553 $ (881) $ 1,434 $ 3,141 $ (2,490) $ 5,631
Total Interest Bearing Liabilities 79 (556) 635 1,279 (1,218) 2,497
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Change in Net Interest Income $ 474 $ (325) $ 799 $ 1,862 $ (1,272) $ 3,134
================================================================
</TABLE>
The tax equivalent net interest margin for the quarter was 5.25 percent
and for the nine-months 5.32 percent, compared with 5.40 percent and 5.57
percent respectively for the same periods last year. We continue to face strong
competition for loans in our market niche. Notwithstanding the competitive
environment, loans increased by 8 percent. Credit quality remains strong with
non-accrual loans remaining at .7 percent of loans outstanding.
Noninterest income for the third quarter was down slightly but was up
$391,000 or 6 percent for the nine-months when compared with 1995. The largest
contributors to this increase were service charges on deposit accounts, sales of
retail investment products, and fees from the origination of mortgage loans.
Noninterest expense decreased $76,000 or 1 percent for the third
quarter and increased $447,000 or 2 percent for the nine-months. The categories
with the largest increases were occupancy and marketing expenses which were
related to the relocation of the Company offices from 75 South Fifth Street to
651 Nicollet Mall, in Gaviidae Common, during the first quarter of 1996.
However, the actual relocation expenses are at or below what was planned.
The efficiency ratio improved to 49.31 percent for the third quarter of
1996 compared to 51.78 percent for the same period last year. The improvement
was due to a 5 percent increase in net interest income combined with the
decrease in noninterest expense, primarily personnel expenses. For the
nine-months the efficiency ratio improved to 54.08 percent compared with 56.45
percent last year. The improvement was due to net revenues increasing more
rapidly than noninterest expense.
Net loan charge-offs during the third quarter were $1,429,000 compared
with $675,000 for the same period last year. The loan loss provision was
$495,000 for the third quarter, compared with $762,000 in the third quarter of
1995. The provision is based on management's continuing evaluation of the loan
portfolio, including estimates and appraisals of collateral values, and current
economic conditions. At September 30, 1996 the allowance for loan losses was
$8,526,000, 1.43 percent of loans, compared to 1.56 percent at December 31,
1995. At quarter end the reserve coverage of non-accrual loans was 199 percent.
Activity regarding the allowance is summarized below:
<TABLE>
<CAPTION>
(in thousands)
Third Quarter Nine Months
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance beginning of period $9,460 $8,203 $8,602 $7,946
Provision charge to operating expense 495 762 1,395 1,032
Less net loan charge-offs (1,429) (675) (1,471) (688)
--------------------- ----------------------
Balance September 30 $8,526 $8,290 $8,526 $8,290
===================== ======================
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company's average total assets were $ 794.0 million for the
nine-months ended September 30, 1996, up from $ 709.9 million for the same
period in 1995. Loans reflect the majority of the increase. The Company
continues to fund asset growth from various liability sources, including
interest bearing deposits, short term borrowings, retention of earnings, and
noninterest bearing deposits. Short term borrowings include commercial paper
which is used to fund the loans of Diversified Business Credit, Inc. In addition
to deposits and short term borrowings, the Company has long-term debt of $ 48
million, principally in the form of senior notes.
The Company continues to maintain a capital position that exceeds
regulatory risk based and leverage ratio capital requirements. The required risk
based ratio is 8 percent and the required leverage ratio is 3 to 5 percent. The
following table shows the Company's capital ratios:
September 30,
1996 1995
---- ----
RISK CAPITAL RATIOS
Tier I Capital 15.8% 15.4%
Tier II Capital 16.9% 16.6%
LEVERAGE RATIO 13.5% 13.4%
NATIONAL CITY BANCORPORATION
Part II Other Information
Item 4. None
Item 6. Exhibits and reports of Form 8-K.
There were no reports on Form 8-K filed for the three months ended
September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL CITY BANCORPORATION
Dated: November 5, 1996 By: /S/David L. Andreas
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Chairman & Chief Executive Officer
Dated: November 5, 1996 By: /S/Thomas J. Freed
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Controller
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 47,173
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 14,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 126,039
<INVESTMENTS-CARRYING> 33,481
<INVESTMENTS-MARKET> 33,564
<LOANS> 596,056
<ALLOWANCE> 8,526
<TOTAL-ASSETS> 846,712
<DEPOSITS> 411,515
<SHORT-TERM> 267,453
<LIABILITIES-OTHER> 5,516
<LONG-TERM> 47,920
0
0
<COMMON> 9,218
<OTHER-SE> 104,789
<TOTAL-LIABILITIES-AND-EQUITY> 846,712
<INTEREST-LOAN> 14,660
<INTEREST-INVEST> 2,642
<INTEREST-OTHER> 90
<INTEREST-TOTAL> 17,392
<INTEREST-DEPOSIT> 3,668
<INTEREST-EXPENSE> 7,539
<INTEREST-INCOME-NET> 9,853
<LOAN-LOSSES> 495
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,027
<INCOME-PRETAX> 5,706
<INCOME-PRE-EXTRAORDINARY> 2,277
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,429
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 5.25
<LOANS-NON> 4,292
<LOANS-PAST> 1,196
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 23,430
<ALLOWANCE-OPEN> 9,460
<CHARGE-OFFS> 1,448
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 8,526
<ALLOWANCE-DOMESTIC> 2,575
<ALLOWANCE-FOREIGN> 237
<ALLOWANCE-UNALLOCATED> 5,714
</TABLE>
