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, 1999 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 identification No.)
incorporation or organization)
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 September 30, 1999, 8,756,817 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, 1999, is incorporated by reference and made
a part of Part I of Form 10-Q.
<PAGE>
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, 1999 and December 31,
1998. Consolidated Statements of Earnings - Nine months ended
September 30, 1999 and 1998.
Consolidated Statements of Cash Flows - Nine months ended September 30, 1999 and
1998 are set forth on page 2 of this report.
Consolidated Statements of Earnings and Comprehensive Income - Nine months ended
September 30, 1999 and 1998 are set forth on page 3 of this report.
Notes to Consolidated Financial Statements are included in this report appearing
on page 4.
Management's Discussion and Analysis of Financial Condition and Results of
Operations is presented on pages 5 through 10 of this report.
Part II. Other Information
- --------------------------
Part II items requiring a response are included on page 11 of this report.
1
<PAGE>
NATIONAL CITY BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
(In Thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 12,542 $ 12,234
Adjustments to reconcile net earnings to net cash from operating
activities:
Depreciation and amortization 2,081 2,177
Amortization of securities premiums and discounts 261 432
Provision for loan losses 2,970 820
Decrease in accrued income receivable 384 81
(Increase) decrease in other assets (846) 2,839
Increase (decrease) in other liabilities (771) 113
-----------------------
Total operating adjustments 4,079 6,462
-----------------------
Net cash from operating activities 16,621 18,696
-----------------------
Cash flows from investing activities:
Net (increase) in loans (67,656) (95,992)
Net (increase) decrease in federal funds sold 2,880 (26,385)
Available-for-sale securities:
Proceeds from maturities and principal repayments 34,654 48,501
Purchases of securities (33,146) (52,114)
Held-to-maturity securities:
Proceeds from maturities and principal repayments 10,728 14,157
Purchases of securities (17,396) (21,743)
Purchase of premises and equipment (901) (1,381)
-----------------------
Net cash from (used in) investing activities (70,837) (134,957)
-----------------------
Cash flows from financing activities:
Net (decrease) in non-interest bearing and savings deposits (30,474) (2,845)
Net increase in time deposits 72,447 21,874
Net increase in federal funds purchased and repurchase agreements 2,878 53,081
Net (decrease) in commercial paper (60,082) (23,283)
Net increase in other borrowed funds 27,991 4,170
Net increase in long-term debt 37,000 72,000
Purchase of treasury stock (1,422) (598)
Payment for fractional shares on stock dividends (40)
Payment for cash dividends (6,311)
-----------------------
Net cash from (used in) financing activities 42,027 124,359
-----------------------
Net increase (decrease) in cash and due from banks (12,189) 8,098
Cash and due from banks at beginning of year 52,271 52,847
-----------------------
Cash and due from banks at end of period $ 40,082 $ 60,945
=======================
Supplemental disclosures:
Cash paid during the year for:
Interest $ 29,315 $ 24,926
Income taxes 7,686 8,537
Unrealized securities (losses) net of tax (1,874) 765
</TABLE>
2
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(IN THOUSANDS) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $ 22,960 $ 22,485 $ 64,950 $ 63,440
Total interest expense 12,729 12,526 36,753 35,479
----------------------------------------------
Net interest income 12,629 12,366 36,653 36,049
Provision for loan losses 1,111 535 2,970 820
----------------------------------------------
Net interest income after provision for loan losses 11,618 11,991 33,783 34,659
Total noninterest income 3,647 2,177 8,483 7,264
Total noninterest expense 7,045 7,146 21,612 21,715
----------------------------------------------
Earnings from operations before taxes 8,220 7,022 20,654 20,208
Applicable income taxes 3,197 2,759 8,112 7,974
----------------------------------------------
Net Earnings 5,023 4,263 12,542 12,234
Other comprehensive income, before tax:
Unrealized gain (loss) on investments in securities (37) 1,165 (3,148) 1,286
Applicable income tax (15) 472 (1,274) 521
----------------------------------------------
Other comprehensive income, net of tax (22) 693 (1,874) 765
----------------------------------------------
Comprehensive Income $ 5,001 $ 4,956 $ 10,668 $ 12,999
==============================================
</TABLE>
3
<PAGE>
The Consolidated Balance Sheet as of September 30, 1999, the
Consolidated Statements of Earnings for the nine-month periods ended September
30, 1999 and 1998, the Consolidated Statements of Cash Flows for the nine-month
periods then ended September 30, 1999 and 1998 and the Consolidated Statements
of Earnings and Comprehensive Income for the nine-month periods then ended
September 30, 1999 and 1998 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, cash flows and comprehensive income
at and for the periods ended September 30, 1999 and 1998, 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, 1998 annual report to shareholders. The results of
operations for the period ended September 30, 1999 are not necessarily
indicative of the operating results for the full year. The Company has filed
Form 8-K on November 15, 1999 indicating that certain restatements of prior
periods will be made on Form 10-K\A.
4
<PAGE>
NATIONAL CITY BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS:
Net earnings for the third quarter ended September 30, 1999 were
$5,023,000 compared with $4,263,000 in the third quarter of 1998. Basic earnings
per share was $ .57 for the third quarter of 1999, compared with earnings per
share of $ .48 in the third quarter of 1998. Net earnings in the third quarter
of 1999 in comparison with the same period last year, were affected by a state
income tax refund with an after-tax effect of approximately $769,000. Without
the tax refund, net income would have been $4,254,000 or $.49 per share for the
third quarter and $11,773,000 or $1.34 per share for the nine months. Earnings
information is summarized below:
- --------------------------------------------------------------------------------
Third Quarter Nine Months
1999 1998 1999 1998
---- ---- ---- ----
Net income $5,023 $4,263 $12,542 $12,234
Earnings per share $ .57 $ .48 $ 1.43 $ 1.38
Return on average equity 11.94% 11.96% 11.24% 11.92%
Return on average assets 1.65% 1.67% 1.58% 1.69%
- --------------------------------------------------------------------------------
Net interest income for the third quarter was $12,729,000 compared
with $12,526,000 in the third quarter of 1998. 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 THIRD QUARTER 1998
Resulting from:
Total Rates Volumes
Interest On: ------- ------- -------
Total Earning Assets $ 496 $(1,091) $ 1,587
Total Interest Bearing Liabilities 272 (600) 872
------- ------- -------
Change in Net Interest Income $ 224 $ (491) $ 715
===============================
NET INTEREST INCOME* CHANGE FROM NINE MONTHS 1998
Resulting from:
Total Rates Volumes
Interest On: ------- ------- -------
Total Earning Assets $ 1,539 $(4,429) $ 5,968
Total Interest Bearing Liabilities 236 (2,711) 2,947
------- ------- -------
Change in Net Interest Income $ 1,303 $(1,718) $ 3,021
===============================
*on a fully taxable equivalent basis
- -----------------------------------------------------------------------------
5
<PAGE>
The tax equivalent net interest margin for the quarter was 5.06
percent compared with 5.26 percent for the same period last year. The yield on
earning assets has declined in 1999 due to a general decline in interest rates
and increased competition. In the same period, the rate paid on interest bearing
liabilities has not declined as much, due to both increased funding costs and
changes in the funding mix. Funding costs increased at the Company's commercial
finance subsidiary Diversified Business Credit, Inc. (DBCI). during the quarter
DBCI issued $70 million in long-term debt in a private placement. The note
issuance increased the subisdiary's cost of funds and correspondingly improved
liquidity by extending the maturity of funding sources. We continue to face
strong competition for loans in our market niche. Notwithstanding the
competitive environment, loans increased by 8.4 percent over December 31, 1998.
Noninterest income for the third quarter was $3,647,000 compared
with $2,177,000 in 1998. The third quarter of 1999 included a state income tax
refund of $1,233.000. Excluding the tax refund, noninterest income increased
$237,000 over the previous year. The increase occurred in all categories of
noninterest income.
Noninterest expense was $7,045,000 for the third quarter compared
with $7,146,000 for the third quarter of 1998. The Company's noninterest expense
includes charges incurred in connection with making its computer systems Year
2000 compliant as discussed below. Increases in personnel expenses and occupancy
costs were offset by decreases in other expenses, such as, advertising and
marketing expense, consulting fees, and Federal Reserve Bank service charges.
The efficiency ratio was 43.02 percent for the third quarter of 1999
compared to 48.60 percent for the same period last year. The improved efficiency
was due to the increase in noninterest income, including a state income tax
refund, a slight decrease in noninterest expense, and higher net interest
income.
YEAR 2000 COMPLIANCE:
In 1997 the Company formed a project team, and with the assistance
of an outside consulting firm, assessed the effect of Year 2000 on the Company's
critical hardware and software, and on the embedded technology in its physical
facilities and automated equipment. This assessment also considered the
potential effect of Year 2000 on customers, business partners and vendors. A
Year 2000 plan was developed, which included prioritized tasks, implementation,
testing schedules, and contingency plans. The Company has replaced or modified
certain systems to ensure Year 2000 compliance. The Company has substantially
completed the testing of remediated systems related to Year 2000 compliance. The
Company estimates the cost of its Year 2000 compliance program at approximately
$1.1 million, the majority of which has been incurred.
6
<PAGE>
Costs incurred to modify internal use software are expensed. A significant
amount of the total estimated cost represents enhancements and improvements,
which will be amortized over the estimated useful life of the enhancement or
improvement. The Company has funded the expenditures from operating earnings.
The potential effect of the Year 2000 issue will depend not only on
the corrective measures the Company undertakes, but also on the way in which the
Year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to, or receive data from the Company, or whose
financial condition or operational capability is important to the Company. The
Company continues to monitor the actions of these third parties to appropriately
address their own Year 2000 issues and to evaluate any likely effect on the
Company. There is no guarantee that the systems of other companies or entities
on which the Company relies will be remediated on a timely basis, or that a
remediation or conversion will be compatible with the Company's systems. If
these issues are not adequately resolved, the Company's future business
operations and, in turn, its financial position and results of operations, could
be adversely affected. In addition, the Company's credit risk associated with
its borrowers may increase as a result of their individual Year 2000 issues.
However, at this time, it is not possible to quantify the potential effect of
such situations.
As of September 30, 1999, the Company had completed testing of its
mission critical business systems. A Year 2000 Business Process Continuity Plan
was developed for critical business processes to assure that service to
customers will not be impaired. This plan was tested in the third quarter using
backup power resources and alternative processing methods. Federal banking
regulators have conducted special examinations of banks to determine whether
they are taking the necessary steps to prepare for Year 2000. They are closely
monitoring the progress being made by the banks to ensure that key steps are
fully completed as required by the individual bank plans.
ALLOWANCE FOR LOAN LOSSES:
Net loan recoveries during the third quarter were $63,000 compared
with net loan charge-offs of $201,000 for the same period last year. The loan
loss provision was $1,111,000 for the third quarter, compared with $535,000 in
the third quarter of 1998. The provision is based on management's continuing
evaluation of the Company's loan portfolio, including estimates and appraisals
of collateral values, and current economic conditions. At September 30, 1999,
the allowance for loan losses was $13,553,000, or 1.63 percent of loans,
compared to $13,785,000 or 1.80 percent of loans at December 31, 1998.
Nonperforming assets were 2.1 million at September 30, 1999 compared with 11.5
million at December 31, 1998.
7
<PAGE>
Nonperforming assets consist of loans 90 days or more past due, non-accrual
loans and restructured loans. Certain activity in the Allowance for Loan Losses
and the loan loss provision have been restated for periods prior to September
30, 1999. These restatements will be included in Form 10-K\A to be filed by the
Company prior to December 31, 1999.
Activity regarding the allowance is summarized below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(in thousands)
Third Quarter Nine Months
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance beginning of period $ 12,379 $ 14,433 $ 13,785 $ 14,283
Provision charge to operating expense 1,111 535 2,970 820
Less net loan charge-offs (recoveries) (63) 201 3,202 336
-------- -------- -------- --------
Balance September 30 $ 13,553 $ 14,767 $ 13,553 $ 14,767
==============================================
- -----------------------------------------------------------------------------------------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company's average total assets were $ 1.045 billion for the
nine-months ended September 30, 1999, up from $ 969 million for the same period
in 1998. The majority of the increase was attributed to loans to businesses. The
Company continues to fund asset growth from various liability sources, including
interest and noninterest bearing deposits, short-term and long-term borrowings,
and retention of earnings. Short-term borrowings include commercial paper and a
bank line of credit, which are 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 $ 176 million at September 30, 1999, in the form
of senior notes issued by DBCI and guaranteed by the Company. The notes are
rated BBB by Duff and Phelps. The Company issues commercial paper primarily in
its local market. The commercial paper is rated D2 by Duff and Phelps and F3 by
Fitch IBCA.
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,
1999 1998
---- ----
RISK CAPITAL RATIOS
Tier I Capital 15.5% 16.0%
Tier II Capital 16.8% 17.5%
LEVERAGE RATIO 14.0% 13.4%
- -------------------------------------------------------------------------------
BUSINESS SEGMENTS:
The Company has two business segments, National City Bank of
Minneapolis (commercial bank) and Diversified Business Credit, Inc. (commercial
finance). The main offices of each segment are
8
<PAGE>
located in the business district of downtown Minneapolis. The commercial bank
has a detached facility drive-up location in downtown Minneapolis and a full
service branch bank in Edina, Minnesota. The commercial finance segment also has
an office in Milwaukee, Wisconsin.
The commercial bank offers the usual banking services including
business, consumer, and real estate loans, deposit and cash management services,
correspondent banking, and safe deposit. In addition, the commercial bank also
offers trust services including management of funds for individuals, the
administration of estates and trusts, and for corporations, governmental bodies,
and public authorities, paying agent services, trustee under corporate
indenture, pension and profit sharing agreements, and record keeping and
reporting for 401-K savings plans. The commercial bank originates the majority
of its business in the Minneapolis/St. Paul area.
The net income of the commercial bank increased to $3.0 million in
the third quarter of 1999 from $2.3 million in the same period of 1998. In the
third quarter of 1999, the bank had a state income tax refund with an after-tax
effect of approximately $769,000, and in the third quarter of 1998, the bank had
a one-time loan fee with an after-tax effect of approximately $300,000. The bank
has increased its net earnings from ongoing operations through the growth of its
loan portfolio and the use of low-cost funding sources, primarily deposits, and
by maintaining the level of non-interest expenses incurred.
The following table summarizes the commercial bank's performance
measures:
- --------------------------------------------------------------------------------
(in thousands)
Third Quarter Nine Months
1999 1998 1999 1998
---- ---- ---- ----
Total revenue $ 17,352 $ 16,325 $47,266 $46,354
Net earnings 2,966 2,348 6,805 5,847
Total assets 775,677 772,337
Return on average equity 15.67% 14.24% 14.19% 13.01%
Efficiency ratio 58.67% 62.84% 60.81% 64.39%
- --------------------------------------------------------------------------------
The commercial finance segment specializes in providing working
capital loans secured by accounts receivable, inventory, and other marketable
assets. Loans are made on a demand basis with no fixed repayment schedule.
Compared to equity-based loans made by commercial banks and others, asset-based
loans require closer monitoring and typically interest rates earned on these
loans are higher. The commercial finance segment funds its loans through the
issuance of long-term debt in the form of Senior Notes and borrowings from the
parent company. The
9
<PAGE>
commercial finance segment originates the majority of its loans in Minnesota
with approximately 15 percent originated in its Wisconsin office.
The net earnings of the commercial finance segment were $1.6 million
in the third quarter of 1999 compared with $1.5 million in the same period of
1998. Net interest income has decreased due primarily higher funding costs for
the commercial finance segment. This is the result of a reduction in commercial
paper placements and the use of alternative funding sources, which are more
costly.
The following table summarizes the commercial finance segment's
performance measures:
- --------------------------------------------------------------------------------
(in thousands)
Third Quarter Nine Months
1999 1998 1999 1998
---- ---- ---- ----
Total revenue $ 9,473 $ 8,470 $26,569 $24,689
Net earnings 1,637 1,547 4,611 5,396
Total assets 305,754 304,233
Return on average equity 17.44% 19.20% 17.26% 23.96%
Efficiency ratio 22.61% 27.08% 25.26% 27.26%
- --------------------------------------------------------------------------------
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 material 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 actual results in the future and,
accordingly, such results may differ materially 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.
10
<PAGE>
NATIONAL CITY BANCORPORATION
Part II. Other Information
- --------------------------
Item 4. Submission of matters to a vote of security holders.
None
Item 6. Exhibits and reports of Form 8-K.
Exhibit index:
Number Description
------ -----------
19 Quarterly Report to Stockholders
27 Financial Data Schedule
The Company has filed a report on Form 8-K on November 15, 1999.
There were no reports on Form 8-K filed for the nine months ended
September 30, 1999.
11
<PAGE>
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 12, 1999 By: /S/David L. Andreas
----------------------- ---------------------------
President & Chief Executive Officer
Dated: November 12, 1999 By: /S/Thomas J. Freed
------------------------ ------------------------------------
Secretary & Chief Financial Officer
12
Exhibit 19
NATIONAL CITY
BANCORPORATION
1999
THIRD QUARTER
REPORT
NINE MONTHS
ENDED
SEPTEMBER 30, 1999
<PAGE>
TO OUR STOCKHOLDERS:
The Company's performance in the third quarter was marked by increased net
earnings compared with the previous quarter, and a reduction in non-accrual
loans. Expenses were held to 1998 levels as we continue to improve on operating
efficiency.
Net earnings were $5,023,000 for the third quarter of 1999, compared
with $4,263,000 in the third quarter of 1998. Earnings per share were 57 cents,
compared with 48 cents in the third quarter of 1998. Net earnings for the third
quarter of 1999 in comparison with the same period last year, were affected by a
refund of state income tax with an after-tax effect of approximately $769,000.
Third quarter net income was $4,254,000 or 49 cents per share, without the tax
refund.
Net earnings for the first nine months were $12,542,000 or $1.43 per share,
compared with $12,234,000 or $1.38 per share, last year. Without the effect of
the income tax refund, net income for the first nine months would have been
$11,773,000 or $1.34 per share. The effect on net interest income of non-accrual
loans during the first quarter of 1999 continues to impact current year earnings
compared with 1998. Nonperforming assets, including non-accrual loans, were $2.1
million or .26 percent of total loans at September 30, 1999, compared with $2.3
million or .28 percent of total loans at June 30, 1999.
The Company's allowance for loan losses at quarter-end was $13,553,000 or 1.63
percent of loans outstanding compared to $13,785,000 or 1.80 percent at December
31, 1998. There were net recoveries during the quarter of $63,000, compared with
net charge-offs of $201,000 in the third quarter of 1998.
Net interest income was $12,729,000 in the quarter, up 2 percent from the
year-earlier period. The increase was largely a result of increased loan volume.
Noninterest income for the third quarter was $3,647,000, which included a
$1,233,000 state income tax refund. Without the tax refund, noninterest income
would have been $2,414,000, an increase of $237,000 over the same period of
1998. Noninterest expense for the third quarter was $7,045,000, compared with
$7,146,000 for the third quarter of 1998.
At its October 20, 1999 meeting, the Board of Directors declared a regular
quarterly cash dividend on common stock of 12 cents per share, payable December
1, 1999, to stock- holders of record November 4, 1999. Your Board will consider
future dividends on a quarterly basis and take action to provide an appropriate
yield to you reflective of our earnings and market value.
In addition, the Board of Directors approved a Dividend Reinvestment and Stock
Purchase Plan, effective with the dividend for the first quarter of the year
2000. All registered stockholders are eligible for the plan, which will reinvest
cash dividends in full and partial shares of common stock. The plan will also
permit stockholders to make supplemental cash payments and purchase additional
shares directly from the Company. The prospectus for the plan and the
authorization form for participation will be mailed to all stockholders before
the end of the year.
/s/ David C. Malmberg /s/ David L. Andreas
David C. Malmberg David L. Andreas
Chairman of the Board President and
Chief Executive Officer
<PAGE>
NATIONAL CITY BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash & due from banks ........................................ $ 40,082 $ 52,271
Federal funds sold and resale agreements ..................... 3,220 6,100
Available-for-sale securities:
U.S. Treasury ........................................... 4,992 5,077
U.S. Government agencies ................................ 21,676 17,089
Mortgage-backed ......................................... 91,311 108,930
Municipal ............................................... 9,366
Other securities ........................................ 2,884 2,801
----------- -----------
Total available-for-sale securities ................ 130,229 133,897
Held-to-maturity securities:
Mortgage-backed ......................................... 47,947 41,255
----------- -----------
Total held-to-maturity securities .................. 47,947 41,255
(approximate market value: 1999 $47,227; 1998 $41,569)
Loans ........................................................ 830,563 766,109
Less allowance for loan losses .......................... (13,553) (13,785)
----------- -----------
Net loans ............................................ 817,010 752,324
Premises and equipment ....................................... 9,219 10,399
Accrued interest receivable .................................. 7,115 7,499
Customer acceptance liability ................................ 795 824
Other assets ................................................. 21,959 21,113
----------- -----------
Total assets ....................................... $ 1,077,576 $ 1,025,682
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing ..................................... $ 138,742 $ 165,598
Interest bearing ........................................ 420,725 351,896
----------- -----------
Total deposits ..................................... 559,467 517,494
Federal funds purchased and repurchase agreements ............ 101,580 98,702
Commercial paper ............................................. 39,314 99,396
Other short-term borrowed funds .............................. 40,654 12,663
Acceptances outstanding ...................................... 795 824
Other liabilities ............................................ 9,544 10,315
Long-term debt ............................................... 176,000 139,000
----------- -----------
Total liabilities .................................. 927,354 878,394
Stockholders' equity:
Common stock, par value $1.25
Authorized shares: 40,000,000
Issued shares: 19998,861,944; 19988,861,944 ........ 11,077 11,077
Additional paid-in capital .............................. 121,982 121,982
Unrealized gains net of tax effect ...................... (961) 913
Retained earnings ....................................... 20,700 14,470
----------- -----------
Subtotal ........................................... 152,798 148,442
Less common stock in treasury at cost: 1999
105,127 shares; 1998 45,030 shares ......................... (2,576) (1,154)
----------- -----------
Total stockholders' equity ......................... 150,222 147,288
----------- -----------
Total liabilities and stockholders' equity ......... $ 1,077,576 $ 1,025,682
=========== ===========
</TABLE>
<PAGE>
NATIONAL CITY BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share) Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans ........................ $ 20,071 $ 19,238 $ 56,385 $ 54,237
Interest on federal funds sold & resale agreements 214 296 408 591
Interest and dividends on securities .............. 2,675 2,951 8,157 8,612
---------- ---------- ---------- ----------
Total interest income ........................ 22,960 22,485 64,950 63,440
INTEREST EXPENSE
Interest on deposits .............................. 4,500 4,295 11,910 12,184
Interest on short-term borrowed funds ............. 3,408 3,862 9,750 11,694
Interest on long-term debt ........................ 2,323 1,802 6,537 4,083
---------- ---------- ---------- ----------
Total interest expense ....................... 10,231 9,959 28,197 27,961
---------- ---------- ---------- ----------
Net interest income .......................... 12,729 12,526 36,753 35,479
Provision for loan losses ......................... 1,111 535 2,970 820
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 11,618 11,991 33,783 34,659
NONINTEREST INCOME
Service charges on deposit accounts ............... 614 498 1,851 1,591
Fees for other customer services .................. 486 433 1,371 1,249
Trust fees ........................................ 1,189 1,139 3,614 3,745
State income tax refund ........................... 1,233 1,233
Other ............................................. 125 107 414 679
---------- ---------- ---------- ----------
Total noninterest income ..................... 3,647 2,177 8,483 7,264
NONINTEREST EXPENSES
Salaries and employee benefits .................... 3,980 3,913 12,242 11,878
Net occupancy expense ............................. 815 809 2,494 2,338
Equipment rentals, depreciation & maintenance ..... 900 964 2,645 2,667
Other ............................................. 1,350 1,460 4,231 4,832
---------- ---------- ---------- ----------
Total noninterest expense .................... 7,045 7,146 21,612 21,715
---------- ---------- ---------- ----------
Earnings before taxes ............................. 8,220 7,022 20,654 20,208
Applicable income taxes ........................... 3,197 2,759 8,112 7,974
---------- ---------- ---------- ----------
Net earnings ................................. $ 5,023 $ 4,263 $ 12,542 $ 12,234
========== ========== ========== ==========
Basic earnings per share ............................... $ 0.57 $ 0.48 $ 1.43 $ 1.38
Average common and common equivalent shares outstanding 8,756,876 8,861,933 8,771,368 8,864,012
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(in thousands except per share)
THIRD QUARTER ENDED
SEPTEMBER 30,
------------------ PERCENT
1999 1998 CHANGE
------- ------- -------
EARNINGS:
Net interest income $12,729 $12,526 2%
Net earnings ....... 5,023 4,263 18%
BASIC EARNINGS PER SHARE:
Net earnings ....... $ 0.57 $ 0.48 19%
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
------- -------
EARNINGS:
Net interest income $36,753 $35,479 4%
Net earnings ....... 12,542 12,234 3%
BASIC EARNINGS PER SHARE:
Net earnings ....... $ 1.43 $ 1.38 4%
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------------------------
BALANCE SHEET ITEMS
Total assets ........ $1,077,576 $1,025,682 5%
Loans ............... 830,563 766,109 8%
Deposits ............ 559,467 517,494 8%
Stockholders' equity. 150,222 147,288 2%
Book value per share. 17.15 16.71
<PAGE>
DIRECTORS OF NATIONAL CITY OFFICERS OF NATIONAL CITY
BANCORPORATION BANCORPORATION
David C. Malmberg David L. Andreas
CHAIRMAN OF THE BOARD PRESIDENT AND
National City Bancorporation CHIEF EXECUTIVE OFFICER
Wendell R. Anderson* Thomas J. Freed
OF COUNSEL SECRETARY AND
Larkin, Hoffman, Daly and CHIEF FINANCIAL OFFICER
Lindgren Ltd.
PRINCIPAL OFFICERS OF
David L. Andreas SUBSIDIARIES
PRESIDENT AND
CHIEF EXECUTIVE OFFICER DIVERSIFIED BUSINESS
National City Bancorporation CREDIT, INC.
PRESIDENT AND
CHIEF EXECUTIVE OFFICER Robert L. Olson
National City Bank of PRESIDENT AND
Minneapolis CHIEF EXECUTIVE OFFICER
Terry L. Andreas Janet L. Pomeroy
CHAIRMAN OF THE BOARD SENIOR VICE PRESIDENT
School for Field Studies
Beverly, Massachusetts NATIONAL CITY BANK
OF MINNEAPOLIS
Michael J. Boris*
PRIVATE INVESTOR AND David L. Andreas
CONSULTANT PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Marvin Borman*
PARTNER William J. Klein
Maslon, Edelman, Borman EXECUTIVE VICE PRESIDENT
and Brand CLIENT SERVICES
Sharon Bredeson Thomas J. Freed
PRESIDENT AND SENIOR VICE PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Staff-Plus, Inc.
Donald W. Kjonaas
Kenneth H. Dahlberg SENIOR VICE PRESIDENT
CHAIRMAN OF THE BOARD OPERATIONS
Dahlberg, Inc.
John H. Daniels, Jr.*
PARTNER
Willeke and Daniels
James B. Goetz, Sr.
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Goetz Companies
Esperanza Guerrero-Anderson*
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Milestone Growth Fund, Inc.
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
Walter E. Meadley, Jr.
RETIRED VICE CHAIRMAN
OF THE BOARD
National City Bank
Robert L. Olson
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Diversified Business Credit, Inc.
Roger H. Scherer*
CHAIRMAN OF THE BOARD
Scherer Bros. Lumber Company
*Members of the Audit Committee
<PAGE>
NATIONAL CITY BANCORPORATION
CHANGE OF ADDRESS FOR SHAREHOLDER
National City Bank of Minneapolis
Stock Transfer Department
P.O. Box 1919
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
-----------------------------------------------
<PAGE>
NATIONAL CITY BANCORPORATION | BULK RATE |
651 Nicollet Mall | U.S. POSTAGE |
Minneapolis, Minnesota 55402-1611 | PAID |
Telephone 612-904-8500 | MINNEAPOLIS, MN |
| PERMIT NO. 2816 |
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 40,082
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,220
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 130,229
<INVESTMENTS-CARRYING> 47,947
<INVESTMENTS-MARKET> 47,227
<LOANS> 830,563
<ALLOWANCE> 13,553
<TOTAL-ASSETS> 1,077,576
<DEPOSITS> 559,467
<SHORT-TERM> 181,548
<LIABILITIES-OTHER> 9,544
<LONG-TERM> 176,000
0
0
<COMMON> 11,077
<OTHER-SE> 139,145
<TOTAL-LIABILITIES-AND-EQUITY> 1,077,576
<INTEREST-LOAN> 56,385
<INTEREST-INVEST> 8,157
<INTEREST-OTHER> 408
<INTEREST-TOTAL> 64,950
<INTEREST-DEPOSIT> 11,910
<INTEREST-EXPENSE> 28,197
<INTEREST-INCOME-NET> 36,753
<LOAN-LOSSES> 2,970
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 21,612
<INCOME-PRETAX> 20,654
<INCOME-PRE-EXTRAORDINARY> 20,654
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,542
<EPS-BASIC> 1.43
<EPS-DILUTED> 1.43
<YIELD-ACTUAL> 5.06
<LOANS-NON> 1,836
<LOANS-PAST> 78
<LOANS-TROUBLED> 225
<LOANS-PROBLEM> 11,888
<ALLOWANCE-OPEN> 13,785
<CHARGE-OFFS> 3,270
<RECOVERIES> 68
<ALLOWANCE-CLOSE> 13,553
<ALLOWANCE-DOMESTIC> 11,271
<ALLOWANCE-FOREIGN> 225
<ALLOWANCE-UNALLOCATED> 2,057
</TABLE>
