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 March 31, 1997 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
(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 March 31, 1997, 7,374,471 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 March 31, 1997, 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 - March 31, 1997 and December 31, 1996.
Consolidated Statements of Earnings - Three months ended March 31, 1997
and 1996.
Consolidated Statements of Cash Flows - Three months ended March 31, 1997 and
1996 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 and 5 of this report.
Part II. Other Information
Part II items requiring a response are included on page 6 of this report.
<TABLE>
<CAPTION>
NATIONAL CITY BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
March 31,
(In Thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $3,293 $2,839
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 796 533
Amortization of securities premiums and discounts 143 128
Provision for loan losses 790 435
Deferred income taxes 300
(Increase) in accrued income receivable (162) (97)
(Increase) decrease in other assets 218 (1,726)
Increase in other liabilities 1,083 851
------- -------
Total operating adjustments 2,868 424
------- -------
NET CASH FROM OPERATING ACTIVITIES 6,161 3,263
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) in loans (31,915) (2,660)
Net decrease in federal funds sold 49,785 24,340
Available-for-sale securities:
Proceeds from maturities and principal repayments 12,747 25,734
Purchases of securities (10,230) (32,605)
Held-to-maturity securities:
Proceeds from maturities and principal repayments 1,871 3,313
Purchases of securities (10,107)
Purchase of premises and equipment (699) (4,881)
------- -------
NET CASH FROM (USED IN) INVESTING ACTIVITIES 11,452 13,241
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in non-interest bearing and savings deposits (22,349) (17,542)
Net (decrease) in time deposits (42,419) (8,262)
Net increase (decrease) in federal funds purchased and repurchase agreements 33,856 (10,553)
Net (decrease) increase in commercial paper (8,720) 18,720
Net increase in other borrowed funds 8,752 1,455
Net increase in long-term debt 10,000
Purchase of treasury stock (1) (1)
------- -------
NET CASH FROM (USED IN) FINANCING ACTIVITIES (20,881) (16,183)
------- -------
Net increase in cash and due from banks (3,268) 321
Cash and due from banks at beginning of year 47,934 42,006
------- -------
Cash and due from banks at end of period $44,666 $42,327
======= ========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest $8,653 $8,648
Income taxes 421 565
Unrealized securities (losses) net of tax (827) (1,134)
</TABLE>
NATIONAL CITY BANCORPORATION
Notes to the Consolidated Financial Statements
The Consolidated Balance Sheet as of March 31, 1997, the Consolidated
Statements of Earnings for the three-month periods ended March 31, 1997 and 1996
and the Consolidated Statements of Cash Flows for the three-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 March 31, 1997
and 1996, 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, 1996 annual report to shareholders. The results of
operations for the period ended March 31, 1997 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
EARNINGS:
Net earnings for the first quarter ended March 31, 1997 increased to
$3,293,000 up 16 percent over 1996 earnings of $2,839,000. Earnings per share
increased to $ .45 for the first quarter of 1997, an increase of 18 percent over
earnings per share of $ .38 in the first quarter of 1996. Earnings information
is summarized below:
- --------------------------------------------------------------------------------
First Quarter
1997 1996
---- ----
Net income $3,293 $2,839
Earnings per share $ .45 $ .38
Return on average equity 11.17% 10.69%
Return on average assets 1.52% 1.46%
- --------------------------------------------------------------------------------
Net interest income for the first quarter was $10,379,000 up $679,000
or 7 percent over the first quarter of 1996. 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:
- --------------------------------------------------------------------------------
NET INTEREST INCOME CHANGE FROM FIRST QUARTER 1996
Resulting from:
Interest On: Total Rates Volumes
----- ----- -------
Total Earning Assets $ 1,518 $ (611) $ 2,129
Total Interest Bearing Liabilities 846 (225) 1,071
-----------------------------------
Change in Net Interest Income $ 672 $ (386) $ 1,058
===================================
-------------------------------------------------------------------------------
The tax equivalent net interest margin for the quarter was 5.22 percent
compared with 5.44 percent for the same period last year. We continue to face
strong competition for loans in our market niche. Notwithstanding the
competitive environment, loans increased by 13 percent over the first quarter of
1996.
Noninterest income for the first quarter was up $618,000 or 26 percent
when compared with 1996. The largest contributors to this increase were service
charges on deposit accounts and a one-time contract cancellation fee.
Noninterest expense increased $213,000 or 3 percent for the first
quarter. The categories with the largest increases were occupancy and equipment
expense which was 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.
The efficiency ratio improved to 53.34 percent for the first quarter of
1997 compared to 57.31 percent for the same period last year. The improvement
was due to the increase in net interest income combined with the increase in
noninterest income, and the relatively modest increase in noninterest expense.
Net loan charge-offs during the first quarter were $470,000 compared
with $37,000 for the same period last year. The loan loss provision was $790,000
for the first quarter, compared with $435,000 in the first quarter of 1996. 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 March 31, 1997 the allowance for loan losses was $8,831,000, 1.41
percent of loans, compared to 1.43 percent at December 31, 1996. Credit quality
remains strong with non-performing loans at .4 percent of loans outstanding. At
quarter end the reserve coverage of non-performing assets was 382 percent.
Activity regarding the allowance is summarized below:
- -------------------------------------------------------------------------------
(in thousands)
First Quarter
1997 1996
---- ----
Balance beginning of period $8,511 $8,602
Provision charge to operating expense 790 435
Less net loan charge-offs (470) (37)
------------------
Balance March 31 $8,831 $9,000
==================
- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES:
The Company's average total assets were $ 875.5 million for the
three-months ended March 31, 1997, up from $ 780.8 million for the same period
in 1996. The majority of the increase was attributed to loans to businesses. 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. (DBCI). In
addition to deposits and short-term borrowings, the Company had long-term debt
of $ 58 million at March 31, 1997, principally in the form of senior notes, also
used to fund the loans of DBCI.
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:
- --------------------------------------------------------------------------------
March 31,
1997 1996
---- ----
RISK CAPITAL RATIOS
Tier I Capital 15.8% 15.9%
Tier II Capital 17.0% 17.2%
LEVERAGE RATIO 13.7% 13.7%
- --------------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-Q and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities as well as
other capital spending, financing sources and the effects of regulation and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to development and
construction activities, dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic or
global economic conditions, changes in federal or state tax laws or the
administration of such laws, litigation or claims, as well as all other risks
and uncertainties described in the Company's filings.
Part II Other Information
Item 4. Submission of matters to a vote of security holders.
Election of Directors:
At the annual stockholders' meeting held on April 21, 1997, the
shareholders re-elected Terry L. Andreas, Marvin Borman, Kenneth H.
Dahlberg, and Thomas E. Holloran.
Affirmative Negative
Votes Votes Abstentions
Terry L. Andreas 6,765,877 21,601 586,993
Marvin Borman 6,777,686 9,792 586,993
Kenneth H. Dahlberg 6,767,918 19,560 586,993
Thomas E. Holloran 6,777,737 9,741 586,993
Item 6. Exhibits and reports of Form 8-K.
There were no reports on Form 8-K filed for the three months ended
March 31, 1997.
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: May 12, 1997 By: /S/David L. Andreas
--------------------- ------------------------------------
Chairman & Chief Executive Officer
Dated: May 12, 1997 By: /S/Thomas J. Freed
--------------------- ------------------------------------
Controller
(Principal Financial Officer)
NATIONAL CITY
BANCORPORATION
1997
FIRST QUARTER
REPORT
THREE MONTHS
ENDED
MARCH 31, 1997
NATIONAL CITY BANCORPORATION
CHANGE OF ADDRESS FOR SHAREHOLDER
National City Bank of Minneapolis
Stock Transfer Department
P.O. Box E1919
Minneapolis, Minnesota 55480-1919
PLEASE CHANGE MY ADDRESS TO:
Name____________________________________________________
(Print name exactly as it appears on stock certificate)
STREET _________________________________________________
CITY ___________________________________________________
STATE_________________________ZIP CODE__________________
DATE ___________________________________________________
OLD ADDRESS
STREET _________________________________________________
CITY ___________________________________________________
STATE_________________________ZIP CODE ________________
SIGNATURE ______________________________________________
FINANCIAL HIGHLIGHTS
(in thousands except per share)
FIRST QUARTER ENDED
MARCH 31,
------------------------ PERCENT
1997 1996 CHANGE
--------- ---------- -------
EARNINGS:
Net interest income $ 10,379 $ 9,700 7%
Net earnings 3,293 2,839 16%
EARNINGS PER COMMON SHARE:
Net earnings $ 0.45 $ 0.38
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
BALANCE SHEET ITEMS
Total assets $882,902 $900,129 (2)%
Loans 628,419 596,504 5%
Deposits 454,863 519,631 (12)%
Stockholders' equity 120,477 118,013 2%
Book value per share 16.34 16.00
(adjusted for stock dividends)
DIRECTORS OF NATIONAL CITY
BANCORPORATION
David L. Andreas
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
National City Bancorporation
Wendell R. Anderson*
OF COUNSEL
Larkin, Hoffman, Daly and
Lindgren Ltd.
L.W. Andreas
RETIRED CHAIRMAN OF
THE BOARD AND
CHIEF EXECUTIVE OFFICER
National City Bancorporation
Terry L. Andreas
CHAIRMAN OF THE BOARD
School for Field Studies
Beverly, Massachusetts
Marvin Borman*
PARTNER
Maslon, Edelman, Borman
and Brand
Kenneth H. Dahlberg
CHAIRMAN OF THE BOARD
Dahlberg, Inc.
John H. Daniels, Jr.*
PARTNER
Willeke and Daniels
Thomas E. Holloran*
PROFESSOR, GRADUATE PROGRAMS
IN MANAGEMENT
University of St. Thomas
C. Bernard Jacobs
RETIRED PRESIDENT AND
CHIEF EXECUTIVE OFFICER
National City Bancorporation
RETIRED CHAIRMAN OF THE BOARD
National City Bank
David C. Malmberg
NON-EXECUTIVE CHAIRMAN
OF THE BOARD
National City Bank
Walter E. Meadley, Jr.
RETIRED VICE CHAIRMAN
OF THE BOARD
National City Bank
Roger H. Scherer*
CHAIRMAN OF THE BOARD
Scherer Bros. Lumber Company
*Members of the Audit Committee
OFFICERS OF NATIONAL CITY
BANCORPORATION
David L. Andreas
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Thomas J. Freed
SECRETARY AND CONTROLLER
PRINCIPAL OFFICERS OF
SUBSIDIARIES
DIVERSIFIED BUSINESS
CREDIT INC.
David L. Andreas
CHAIRMAN OF THE BOARD
Robert L. Olson
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
NATIONAL CITY BANK
OF MINNEAPOLIS
David C. Malmberg
NON-EXECUTIVE CHAIRMAN
OF THE BOARD
David L. Andreas
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
William J. Klein
EXECUTIVE VICE PRESIDENT
CLIENT SERVICES
Craig E. Cina
SENIOR VICE PRESIDENT
MARKETING
Thomas J. Freed
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Donald W. Kjonaas
SENIOR VICE PRESIDENT
OPERATIONS
Claudith Washington
SENIOR VICE PRESIDENT
HUMAN RESOURCES
<TABLE>
<CAPTION>
NATIONAL CITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) March 31, December 31,
1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 44,666 $ 47,934
Federal funds sold and resale agreements 10,335 60,120
Available-for-sale securities:
U.S. Treasury 23,810 23,903
U.S. Government agencies 9,838 9,661
Mortgage-backed 90,555 94,671
Other securities 4,955 4,955
--------- ---------
Total available-for-sale securities 129,158 133,190
Held-to-maturity securities:
Mortgage-backed 39,507 31,254
Other securities 228 251
--------- ---------
Total held-to-maturity securities 39,735 31,505
(approximate market value: 1997-$39,428; 1996-$31,812)
Loans 628,419 596,504
Less allowance for loan losses (8,831) (8,511)
--------- ---------
Net loans 619,588 587,993
Bank premises and equipment 11,801 11,798
Accrued interest receivable 6,468 6,306
Customer acceptance liability 873 787
Other assets 20,278 20,496
--------- ---------
Total assets $ 882,902 $ 900,129
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 136,591 $ 162,895
Interest bearing 318,272 356,736
--------- ---------
Total deposits 454,863 519,631
Federal funds purchased and repurchase agreements 130,496 96,640
Commercial paper 89,387 98,107
Other short-term borrowed funds 20,118 11,366
Acceptances outstanding 873 787
Other liabilities 8,768 7,665
Long-term debt 57,920 47,920
--------- ---------
Total liabilities 762,425 782,116
Stockholders' equity:
Common stock, par value $1.25
Authorized shares: 20,000,000
Issued shares: 1997-- 7,374,520; 1996-- 7,374,520 9,218 9,218
Additional paid-in capital 79,199 79,199
Unrealized gains (losses) net of tax effect (1,233) (405)
Retained earnings 33,294 30,001
--------- ---------
Subtotal 120,478 118,013
Less common stock in treasury at cost:
1997-- 49 shares; 1996-- 16 shares (1)
--------- ---------
Total stockholders' equity 120,477 118,013
--------- ---------
Total liabilities and stockholders' equity $ 882,902 $ 900,129
========= =========
</TABLE>
<TABLE>
<CAPTION>
NATIONAL CITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share) Three Months Ended
March 31,
1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 15,333 $ 14,106
Interest on federal funds sold & resale agreements 258 212
Interest and dividends on securities:
Taxable 2,816 2,555
Exempt from federal income taxes 9
---------- ----------
2,816 2,564
---------- ----------
Total interest income 18,407 16,882
INTEREST EXPENSE
Interest on deposits 3,863 3,593
Interest on short-term borrowed funds 3,323 2,768
Interest on long-term debt 842 821
---------- ----------
Total interest expense 8,028 7,182
---------- ----------
Net interest income 10,379 9,700
Provision for loan losses 790 435
---------- ----------
Net interest income after provision for loan losses 9,589 9,265
NONINTEREST INCOME
Service charges on deposit accounts 655 488
Fees for other customer services 372 473
Trust department income 1,284 1,149
Other 669 252
---------- ----------
Total noninterest income 2,980 2,362
NONINTEREST EXPENSES
Salaries and employee benefits 3,879 3,901
Net occupancy expense of bank premises 764 675
Equipment rentals, depreciation & maintenance 892 679
Other 1,591 1,658
---------- ----------
Total noninterest expense 7,126 6,913
---------- ----------
Earnings before taxes 5,443 4,714
Applicable income taxes 2,150 1,875
---------- ----------
Net earnings $ 3,293 $ 2,839
========== ==========
Net earnings per common share $ 0.45 $ 0.38
Average common and common equivalent shares outstanding 7,374,492 7,374,566
</TABLE>
TO OUR STOCKHOLDERS:
Net earnings were $3,293,000 for the first quarter of 1997, up 15.99 percent,
compared with $2,839,000 in the first quarter of 1996. Earnings per share
increased to $0.45 compared with $0.38 in the first quarter of 1996.
First quarter net interest income was $10,379,000, which was higher by $679,000,
or 7 percent, than in the first quarter of 1996. The improvement was primarily
attributable to an increase in average loans, which were up $73.2 million, or
13.2 percent from the first quarter of 1996. The growth in loans occurred mainly
in commercial lending at both subsidiaries, National City Bank of Minneapolis
and Diversified Business Credit, Inc. The net interest margin was 5.22 percent
for the first quarter compared with 5.44 percent for the same period last year.
Noninterest income for the first quarter was $618,000 or 26.2 percent more than
the first quarter of 1996. Noninterest expense for the first quarter was
$213,000 or 3.1 percent more than the first quarter of 1996. The increases
occurred mainly in equipment and occupancy costs, offset partially by decreased
personnel costs.
Net loan charge-offs for the first quarter were $470,000. Additional loss
provisions of $790,000 were added to the reserve during the quarter. As a
result, the Company's reserve for loan losses at quarter-end was $8,831,000 or
1.41 percent of loans outstanding compared to $8,511,000 and 1.43 percent at
December 31, 1996. Nonperforming assets were down to $2.3 million or .37 percent
of total loans at March 31, 1997 compared with $3.2 million or .54 percent of
total loans at December 31, 1996.
At the Annual Stockholders' meeting held on April 21, 1997, Terry L. Andreas,
Marvin Borman, Kenneth H. Dahlberg, and Thomas E. Holloran were reelected to the
Board of Directors. The Directors also declared a 10 percent stock dividend to
stockholders of record May 5, 1997, payable June 5, 1997.
/s/ David L. Andreas
David L. Andreas
Chairman of the Board and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 44,666
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,335
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,158
<INVESTMENTS-CARRYING> 39,735
<INVESTMENTS-MARKET> 39,428
<LOANS> 628,419
<ALLOWANCE> 8,831
<TOTAL-ASSETS> 882,902
<DEPOSITS> 454,863
<SHORT-TERM> 240,001
<LIABILITIES-OTHER> 8,768
<LONG-TERM> 57,920
0
0
<COMMON> 9,218
<OTHER-SE> 111,259
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<INTEREST-INVEST> 2,816
<INTEREST-OTHER> 258
<INTEREST-TOTAL> 18,407
<INTEREST-DEPOSIT> 3,863
<INTEREST-EXPENSE> 8,028
<INTEREST-INCOME-NET> 10,379
<LOAN-LOSSES> 790
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,126
<INCOME-PRETAX> 5,443
<INCOME-PRE-EXTRAORDINARY> 3,293
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,293
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
<YIELD-ACTUAL> 5.21
<LOANS-NON> 1,796
<LOANS-PAST> 518
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 17,109
<ALLOWANCE-OPEN> 8,511
<CHARGE-OFFS> 737
<RECOVERIES> 267
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<ALLOWANCE-UNALLOCATED> 6,869
</TABLE>
