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 June 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
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 June 30, 1999, 8,756,895 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 June 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 - June 30, 1999 and December 31, 1998.
Consolidated Statements of Earnings - Six months ended June 30, 1999
and 1998.
Consolidated Statements of Cash Flows - Six months ended June 30, 1999 and 1998
are set forth on page 2 of this report.
Consolidated Statements of Earnings and Comprehensive Income - Six months ended
June 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>
SIX MONTHS ENDED
JUNE 30,
(IN THOUSANDS) 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,519 $ 7,971
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 1,388 1,441
Amortization of securities premiums and discounts 210 237
Provision for loan losses 1,121 740
(Increase) in accrued income receivable (211) (230)
Decrease in other assets 1 2,286
(Decrease) in other liabilities (1,074) (817)
Other increase (decrease) 1,199 (126)
----------------------------
Total operating adjustments 2,634 3,531
----------------------------
Net cash from operating activities 10,153 11,502
----------------------------
Cash flows from investing activities:
Net (increase) in loans (50,809) (58,716)
Net (increase) decrease in federal funds sold 2,600 (16,520)
Available-for-sale securities:
Proceeds from maturities and principal repayments 22,549 41,829
Purchases of securities (21,340) (31,669)
Held-to-maturity securities:
Proceeds from maturities and principal repayments 8,209 10,559
Purchases of securities (17,396) (17,854)
Purchase of premises and equipment (602) (1,109)
----------------------------
Net cash from (used in) investing activities (56,789) (73,480)
----------------------------
Cash flows from financing activities:
Net increase (decrease) in non-interest bearing and savings deposits (6,486) 9,864
Net increase in time deposits 6,211 12,341
Net increase in federal funds purchased and repurchase agreements 29,240 25,987
Net increase (decrease) in commercial paper (25,155) 19,242
Net increase in other borrowed funds 45,053 2,539
Purchase of treasury stock (1,421) (598)
Payment for fractional shares on stock dividends (40)
Payment for cash dividends (5,260)
----------------------------
Net cash from (used in) financing activities 42,182 69,335
----------------------------
Net increase (decrease) in cash and due from banks (4,454) 7,357
Cash and due from banks at beginning of year 52,271 52,847
----------------------------
Cash and due from banks at end of period $ 47,817 $ 60,204
============================
Supplemental disclosures
Cash paid during the year for:
Interest $ 18,212 $ 18,432
Income taxes 5,387 5,211
Unrealized securities (losses) net of tax (1,852) 72
</TABLE>
2
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(IN THOUSANDS) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total interest income $ 20,971 $ 21,084 $ 41,252 $ 41,410
Total interest expense 9,152 9,127 17,966 18,002
-----------------------------------------------------------
Net interest income 11,819 11,957 23,286 23,408
Provision for loan losses 509 260 1,121 740
-----------------------------------------------------------
Net interest income after provision for loan losses 11,310 11,697 22,165 22,668
Total noninterest income 2,423 2,678 4,836 5,087
Total noninterest expense 7,263 7,219 14,567 14,569
-----------------------------------------------------------
Earnings from operations before taxes 6,470 7,156 12,434 13,186
Applicable income taxes 2,556 2,836 4,915 5,215
-----------------------------------------------------------
Net Earnings 3,914 4,320 7,519 7,971
Other comprehensive income, before tax:
Unrealized gain (loss) on investments in securities (2,411) 142 (3,111) 121
Applicable income tax (976) 57 (1,259) 49
-----------------------------------------------------------
Other comprehensive income, net of tax (1,435) 85 (1,852) 72
-----------------------------------------------------------
Comprehensive Income $ 2,479 $ 4,405 $ 5,667 $ 8,043
===========================================================
</TABLE>
3
<PAGE>
The Consolidated Balance Sheet as of June 30, 1999, the Consolidated
Statements of Earnings for the six-month periods ended June 30, 1999 and 1998,
the Consolidated Statements of Cash Flows for the six-month periods then ended
June 30, 1999 and 1998 and the Consolidated Statements of Earnings and
Comprehensive Income for the six-month periods then ended June 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
June 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 June 30, 1999 are not necessarily indicative of
the operating results for the full year.
4
<PAGE>
NATIONAL CITY BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS:
Net earnings for the second quarter ended June 30, 1999 were $3,914,000
compared with $3,605,000 in the first quarter of 1999 and $4,320,000 in the
second quarter of 1998. Basic earnings per share was $ .45 for the second
quarter of 1999, compared with earnings per share of $ .49 in the second quarter
of 1998. Net earnings in the second quarter of 1999 in comparison with the same
period last year, were adversely affected by the loss of interest income on
increased nonperforming assets in the approximate amount of $108,000. Earnings
information is summarized below:
- --------------------------------------------------------------------------------
Second Quarter Six Months
1999 1998 1999 1998
---- ---- ---- ----
Net income $3,914 $4,320 $7,519 $7,971
Earnings per share $ .45 $ .49 $ .86 $ .90
Return on average equity 10.88% 12.66% 10.35% 11.89%
Return on average assets 1.52% 1.81% 1.47% 1.70%
- --------------------------------------------------------------------------------
Net interest income for the second quarter was $11,819,000 compared
with $11,957,000 in the second quarter of 1998. Net interest income in the
second quarter of 1999 was adversely affected by the loss of interest income on
nonperforming assets, which reduced net interest income by approximately
$180,000. 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 SECOND QUARTER 1998
Resulting from:
Interest On: Total Rates Volumes
----- ----- -------
Total Earning Assets $ (97) $ (2,382) $ 2,285
Total Interest Bearing Liabilities 25 (1,066) 1,091
--------- --------- ---------
Change in Net Interest Income $ (122) $ (1,316) $ 1,194
=========================================
NET INTEREST INCOME* CHANGE FROM SECOND SIX MONTHS 1998
Resulting from:
Interest On: Total Rates Volumes
----- ----- -------
Total Earning Assets $ (150) $ (4,710) $ 4,560
Total Interest Bearing Liabilities (36) (2,123) 2,087
--------- --------- ---------
Change in Net Interest Income $ (114) $ (2,587) $ 2,473
=========================================
*on a fully taxable equivalent basis
- --------------------------------------------------------------------------------
5
<PAGE>
The tax equivalent net interest margin for the quarter was 4.87 percent
compared with 5.40 percent for the same period last year. The yield on earning
assets has declined in 1999 due to the effect of increased nonperforming assets,
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 the longer maturities of certain deposit
products. We continue to face strong competition for loans in our market niche.
Notwithstanding the competitive environment, average loans increased by 13
percent over the second quarter of 1998.
Noninterest income for the second quarter was $2,423,000 compared with
$2,678,000 in 1998. An increase in service charges on deposit accounts was
offset by a decrease in trust fee income. The second quarter of 1998 included a
one-time loan cancellation fee of $298,000.
Noninterest expense was $7,263,000 for the second quarter compared with
$7,219,000 for the second 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 51.00 percent for the second quarter of 1999
compared to 49.33 percent for the same period last year. The slightly lower
efficiency was due to the moderate decreases in net interest income and
noninterest income, including the one-time fee of $298,000 collected last year.
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. Substantially all of the
testing related to critical systems was concluded by June 30, 1999. The Company
estimates the cost of its Year
6
<PAGE>
2000 compliance program at approximately $1.1 million, the majority of which has
been incurred. 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 June 30, 1999, the Company had substantially 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 will be 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.
RESERVE FOR LOAN LOSSES:
Net loan recoveries during the second quarter were $1,000 compared with
net loan charge-offs of $150,000 for the same period last year. The loan loss
provision was $509,000 for the second quarter, compared with $260,000 in the
second 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 June 30, 1999, the
allowance for loan losses was $11,549,000, or 1.42 percent of loans, compared to
1.37 percent of loans at December 31, 1998. Nonperforming assets were 2.3
million at June 30, 1999
7
<PAGE>
compared with 11.5 million at December 31, 1998 and 11.8 million at March 31,
1999. The reduction resulted primarily from the liquidation of collateral
related to non-accrual loans at the Company's commercial finance subsidiary.
Nonperforming assets consist of loans 90 days or more past due, non-accrual
loans and restructured loans.
Activity regarding the allowance is summarized below:
- --------------------------------------------------------------------------------
(in thousands)
Second Quarter Six Months
1999 1998 1999 1998
---- ---- ---- ----
Balance beginning of period $11,039 $10,566 $10,423 $10,071
Provision charge to operating expense 509 260 1,121 740
Less net loan charge-offs (recoveries) (1) 150 (5) 135
------- ------- ------- -------
Balance June 30 $11,549 $10,676 $11,549 $10,676
=========================================
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES:
The Company's average total assets were $ 1.044 billion for the
six-months ended June 30, 1999, up from $ 959.9 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 $ 139 million at June 30, 1999, in the form of
Federal Home Loan Bank advances at National City Bank and senior notes issued by
DBCI and guaranteed by the Company. The notes are rated BBB by Duff and Phelps.
The Company has $23 million in senior notes maturing in September, 1999. The
Company is in the process of issuing additional senior notes. 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:
- --------------------------------------------------------------------------------
June 30,
1999 1998
---- ----
RISK CAPITAL RATIOS
Tier I Capital 15.6% 16.4%
Tier II Capital 16.8% 17.6%
LEVERAGE RATIO 13.7% 13.8%
- --------------------------------------------------------------------------------
8
<PAGE>
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 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 $2.0 million in the second
quarter of 1999 from $1.9 million in the same period of 1998. The bank has
increased its net earnings 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)
Second Quarter Six Months
1999 1998 1999 1998
---- ---- ---- ----
Total revenue $15,149 $15,123 $29,914 $30,029
Net earnings 1,986 1,890 3,839 3,499
Total assets 746,603 730,620
Return on average equity 12.73% 12.78% 12.15% 11.87%
Efficiency ratio 60.26% 66.21% 63.92% 68.50%
- --------------------------------------------------------- ----------------------
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
second quarter of 1999 compared with $2.1 million in the same period of 1998. An
increased level of non-performing loans compared to the prior year resulted in a
loss of interest income. These loans were significantly reduced by June 30. In
addition, funding costs have increased, reflecting a reduction in commercial
paper placements. Alternative funding sources are more costly. These two factors
combined to decrease net income compared to the prior year.
The following table summarizes the commercial finance segment's performance
measures:
- --------------------------------------------------------------------------------
(in thousands)
Second Quarter Six Months
1999 1998 1999 1998
---- ---- ---- ----
Total revenue $8,341 $8,773 $16,358 $16,673
Net earnings 1,561 2,109 2,974 3,849
Total assets 328,639 287,247
Return on average equity 17.56% 28.08% 17.16% 26.62%
Efficiency ratio 28.03% 24.02% 29.23% 25.81%
- --------------------------------------------------------------------------------
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.
Election of Directors
At the annual stockholders' meeting held on April 21, 1999, the
shareholders reelected Wendell R. Anderson, John H. Daniels, Jr., David
C. Malmberg, and Walter E. Meadley, Jr. to the Company's Board of
Directors.
Affirmative Negative
Votes Votes Abstentions
Wendell R. Anderson 8,107,927 34,672 639,300
John H. Daniels, Jr. 8,137,208 5,391 639,300
David C. Malmberg 8,130,498 12,101 639,300
Walter E. Meadley, Jr. 8,138,951 3,648 639,300
Item 6. Exhibits and reports of Form 8-K.
Exhibit index:
Number Description
------ -----------
19 Quarterly Report to Stockholders
27 Financial Data Schedule
There were no reports on Form 8-K filed for the six months ended June
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: August 12, 1999 By: /S/ David L. Andreas
----------------- -------------------------------------
President & Chief Executive Officer
Dated: August 12, 1999 By: /S/ Thomas J. Freed
----------------- -------------------------------------
Secretary and Chief Financial Officer
12
EXHIBIT 19
NATIONAL CITY
BANCORPORATION
1999
SECOND QUARTER
REPORT
SIX MONTHS
ENDED
JUNE 30, 1999
<PAGE>
TO OUR STOCKHOLDERS:
The Company's performance in the second quarter was marked by increased net
earnings compared with the previous quarter, and a significant reduction in non-
accrual loans. Expenses were held to 1998 levels as we continue to focus on
operating efficiency.
Net earnings were $3,914,000 for the second quarter of 1999, compared with
$3,605,000 in the first quarter of 1999 and $4,320,000 in the second quarter of
1998. Earnings per share were 45 cents, compared with 41 cents in the first
quarter of 1999 and 49 cents in the second quarter of 1998. Net earnings for the
second quarter of 1999 in comparison with the same period last year, were
adversely affected by the loss of interest income on non-accrual loans, which
acted to lower the current quarter net earnings compared with last year.
Non-accrual loans and the detrimental effect on earnings have been significantly
reduced in the second quarter. Nonperforming assets, including nonperforming
loans, were $2.3 million or .28 percent of total loans at June 30, 1999 compared
with $11.8 million or 1.51 percent of total loans at March 31, 1999.
Net earnings for the first six months were $7,519,000 or 86 cents per share,
compared with $7,971,000 or 90 cents per share last year.
The Company's reserve for loan losses at quarter-end was $11,549,000 or 1.42
percent of loans outstanding compared to $10,423,000 and 1.37 percent at
December 31, 1998. There were net recoveries during the quarter of $1,000
compared with net chargeoffs of $150,000 in the second quarter of 1998.
Net interest income which represents 83 percent of total revenues, was
$11,819,000 in the quarter, down slightly from the year-earlier period, but up 3
percent from the previous quarter. The increase was largely a result of
increased loan volume. Net interest income was adversely affected by the lost
interest income on nonperforming assets in comparison with last year.
Noninterest income for the second quarter was up slightly from last quarter, but
down 10 percent from the year-earlier period. The relative decline relates to
additional fees collected in the prior year. Noninterest expense declined from
last quarter and increased less than one percent compared with last year.
At its July 21, 1999 meeting the Board of Directors declared a regular quarterly
cash dividend on common stock of 12 cents per share, payable September 1, 1999,
to stockholders of record August 4, 1999. This dividend follows our first cash
dividend paid in June of this year which related to earnings for the previous
five quarters. 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.
/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
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
- -------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash & due from banks ....................................... $ 47,817 $ 52,271
Federal funds sold and resale agreements .................... 3,500 6,100
Available-for-sale securities:
U.S. Treasury ............................................. 4,978 5,077
U.S. Government agencies .................................. 24,731 17,089
Mortgage-backed ........................................... 88,936 108,930
Municipal ................................................. 7,877
Other securities .......................................... 2,884 2,801
----------- -----------
Total available-for-sale securities .................... 129,406 133,897
Held-to-maturity securities:
Mortgage-backed ........................................... 50,463 41,255
----------- -----------
Total held-to-maturity securities ...................... 50,463 41,255
(approximate market value: 1999$49,871; 1998$41,569)
Loans ....................................................... 813,561 762,747
Less allowance for loan losses ............................ (11,549) (10,423)
----------- -----------
Net loans ............................................... 802,012 752,324
Premises and equipment ...................................... 9,613 10,399
Accrued interest receivable ................................. 7,710 7,499
Customer acceptance liability ............................... 312 824
Other assets ................................................ 21,112 21,113
----------- -----------
Total assets ........................................... $ 1,071,945 $ 1,025,682
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing ....................................... $ 164,685 $ 165,598
Interest bearing .......................................... 352,534 351,896
----------- -----------
Total deposits ......................................... 517,219 517,494
Federal funds purchased and repurchase agreements ........... 127,942 98,702
Commercial paper ............................................ 74,241 99,396
Other short-term borrowed funds ............................. 57,716 12,663
Acceptances outstanding ..................................... 312 824
Other liabilities ........................................... 9,241 10,315
Long-term debt .............................................. 139,000 139,000
----------- -----------
Total liabilities ...................................... 925,671 878,394
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 ........................ (939) 913
Retained earnings ......................................... 16,729 14,470
----------- -----------
Subtotal ............................................... 148,849 148,442
Less common stock in treasury at cost:
1999 -- 105,049 shares; 1998 -- 45,030 shares ............. (2,575) (1,154)
----------- -----------
Total stockholders' equity ............................. 146,274 147,288
----------- -----------
Total liabilities and stockholders' equity ............. $ 1,071,945 $ 1,025,682
=========== ===========
</TABLE>
<PAGE>
NATIONAL CITY BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans .......................... $ 18,126 $ 18,152 $ 35,576 $ 35,454
Interest on federal funds sold & resale agreements .. 57 177 194 295
Interest and dividends on securities ................ 2,788 2,755 5,482 5,661
----------- ----------- ----------- -----------
Total interest income ........................... 20,971 21,084 41,252 41,410
INTEREST EXPENSE
Interest on deposits ................................ 3,726 3,880 7,410 7,889
Interest on short-term borrowed funds ............... 3,785 4,106 6,342 7,832
Interest on long-term debt .......................... 1,641 1,141 4,214 2,281
----------- ----------- ----------- -----------
Total interest expense .......................... 9,152 9,127 17,966 18,002
----------- ----------- ----------- -----------
Net interest income ............................. 11,819 11,957 23,286 23,408
Provision for loan losses ........................... 509 260 1,121 740
----------- ----------- ----------- -----------
Net interest income after provision for loan losses . 11,310 11,697 22,165 22,668
NONINTEREST INCOME
Service charges on deposit accounts ................. 643 530 1,237 1,093
Fees for other customer services .................... 471 463 885 816
Trust fees .......................................... 1,187 1,276 2,425 2,606
Other ............................................... 122 409 289 572
----------- ----------- ----------- -----------
Total noninterest income ........................ 2,423 2,678 4,836 5,087
NONINTEREST EXPENSES
Salaries and employee benefits ...................... 4,065 3,913 8,262 7,965
Net occupancy expense ............................... 853 770 1,679 1,529
Equipment rentals, depreciation & maintenance ....... 869 830 1,745 1,703
Other ............................................... 1,476 1,706 2,881 3,372
----------- ----------- ----------- -----------
Total noninterest expense ....................... 7,263 7,219 14,567 14,569
----------- ----------- ----------- -----------
Earnings before taxes ............................... 6,470 7,156 12,434 13,186
Applicable income taxes ............................. 2,556 2,836 4,915 5,215
----------- ----------- ----------- -----------
Net earnings .................................... $ 3,914 $ 4,320 $ 7,519 $ 7,971
=========== =========== =========== ===========
Basic earnings per share .............................. $ 0.45 $ 0.49 $ 0.86 $ 0.90
Average common and common equivalent shares outstanding 8,761,732 8,861,960 8,778,735 8,865,069
</TABLE>
<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>
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>
FINANCIAL HIGHLIGHTS
(in thousands except per share)
SECOND QUARTER ENDED
JUNE 30,
-------------------------- PERCENT
1999 1998 CHANGE
---------- ---------- -------
EARNINGS:
Net interest income .............. $ 11,819 $ 11,957 (1)%
Net earnings ..................... 3,914 4,320 (9)%
BASIC EARNINGS PER SHARE:
Net earnings ..................... $ 0.45 $ 0.49 (8)%
SIX MONTHS ENDED
JUNE 30,
--------------------------
1999 1998
---------- ----------
EARNINGS:
Net interest income .............. $ 23,286 $ 23,408 (1)%
Net earnings ..................... 7,519 7,971 (6)%
BASIC EARNINGS PER SHARE:
Net earnings ..................... $ 0.86 $ 0.90 (4)%
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
BALANCE SHEET ITEMS
Total assets ..................... $1,071,945 $1,025,682 5 %
Loans ............................ 813,561 762,747 7 %
Deposits ......................... 517,219 517,494
Stockholders' equity ............. 146,274 147,288 (1)%
Book value per share ............. 16.70 16.71
<PAGE>
NATIONAL CITY BANCORPORATION BULK RATE
651 Nicollet Mall U.S. POSTAGE
Minneapolis, Minnesota 55402-1611 PAID
Telephone 612-904-8503 MINNEAPOLIS, MN
PERMIT NO. 2816
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 47,817
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 129,406
<INVESTMENTS-CARRYING> 50,463
<INVESTMENTS-MARKET> 49,871
<LOANS> 813,561
<ALLOWANCE> 11,549
<TOTAL-ASSETS> 1,071,945
<DEPOSITS> 517,217
<SHORT-TERM> 259,899
<LIABILITIES-OTHER> 9,241
<LONG-TERM> 139,000
0
0
<COMMON> 11,077
<OTHER-SE> 135,197
<TOTAL-LIABILITIES-AND-EQUITY> 1,071,945
<INTEREST-LOAN> 35,576
<INTEREST-INVEST> 5,482
<INTEREST-OTHER> 194
<INTEREST-TOTAL> 41,252
<INTEREST-DEPOSIT> 7,410
<INTEREST-EXPENSE> 17,966
<INTEREST-INCOME-NET> 23,286
<LOAN-LOSSES> 1,121
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,567
<INCOME-PRETAX> 12,434
<INCOME-PRE-EXTRAORDINARY> 12,434
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,519
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.86
<YIELD-ACTUAL> 4.88
<LOANS-NON> 1,778
<LOANS-PAST> 298
<LOANS-TROUBLED> 229
<LOANS-PROBLEM> 8,787
<ALLOWANCE-OPEN> 10,423
<CHARGE-OFFS> 61
<RECOVERIES> 66
<ALLOWANCE-CLOSE> 11,549
<ALLOWANCE-DOMESTIC> 3,800
<ALLOWANCE-FOREIGN> 220
<ALLOWANCE-UNALLOCATED> 7,529
</TABLE>
