<PAGE> Cover Form
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-10769
NATIONAL BANCORP OF ALASKA, INC.
(Exact name of registrant as specified in its charter)
Delaware 92-0087646
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 West Northern Lights Boulevard/P.O. Box 100600
Anchorage, Alaska 99510-0600
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (907) 276-1132
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
Aggregate market value of common stock held by nonaffiliates of National
Bancorp of Alaska, Inc., based on the closing bid price of the stock at
February 23, 1996: $197,918,748.
The registrant has one class of common stock, $10 par value. Numbers of shares
outstanding at February 23, 1996: 7,968,800.
Documents Incorporated By Reference
Documents Parts of Form 10-K into which incorporated
1995 Annual Report to Shareholders Part I and II
Proxy Statement for the March 19, 1996
Annual Meeting of Shareholders Part III
Form S-14, File No. 2-78795 for August 11, 1982 Part IV
<PAGE> 1
Table of Contents
Part I
Page
Item 1 Business.............................................................2
Item 2 Properties...........................................................9
Item 3 Legal Proceedings....................................................9
Item 4 Submission of Matters to a Vote of Security Holders..................9
Part II
Item 5 Market for the Registrant's Common Equity and Related Stockholder
Matters..............................................................10
Item 6 Selected Financial Data..............................................10
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations........................10
Item 8 Financial Statements and Supplementary Data..........................12
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................13
Part III
Item 10 Directors and Executive Officers of the Registrant...................14
Item 11 Executive Compensation...............................................15
Item 12 Security Ownership of Certain Beneficial Owners and Management.......15
Item 13 Certain Relationships and Related Transactions.......................15
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....16
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PART I
ITEM 1. BUSINESS.
National Bancorp of Alaska, Inc. (the Corporation) is a Delaware corporation
organized on June 21, 1982, and registered as a Bank holding company under the
Bank Holding Company Act of 1956.
The Corporation's principal asset is its investment in National Bank of Alaska
(the Bank), a wholly-owned subsidiary. Through its subsidiary, the Corporation
engages in commercial banking and trust activities.
For additional information concerning the business of National Bancorp of
Alaska, Inc. and its subsidiaries, see pages 2 through 20 of National Bancorp
of Alaska, Inc.'s 1995 Annual Report to Shareholders (Annual Report), which is
incorporated in this Item 1 by reference.
The Bank
The Bank was established as a state-chartered bank in 1916 and converted to a
national banking association in 1950.
General Banking Services
The Bank engages in general banking business offering checking accounts,
savings accounts, money market accounts, Time Certificates of Deposit,
securities sold under agreements to repurchase, Individual Retirement Accounts,
commercial loans, home equity loans, unsecured lines of credit, consumer loans,
construction and mortgage loans, lease financing, safe deposit services, night
depositories, Visa credit cards (Classic and Gold), walk-up and drive-in
banking with an international automated teller machine network and other
services incidental to serving the banking needs of individuals, corporations,
government and quasi-government bodies.
As of December 31, 1995, the Bank's banking operations are conducted from 52
banking offices and 48 electronic branches located throughout the state of
Alaska, including 15 offices and 19 electronic branches in Anchorage.
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Trust Services
The Bank's Trust Department offers services to individuals and corporations
throughout Alaska including estate planning, settlement of estates,
administration of living and testamentary trusts, management of investment
agency accounts, custodianships, and administration of employee benefit trusts.
The Bank had trust assets of approximately $804 million under its supervision
as of December 31, 1995.
International Banking
The Bank's International Department offers customer services in connection with
international business. The Department maintains correspondent relationships
with banks located in certain world trade centers, including Tokyo and New
York. Transactions handled by this Department include cable, wire, and mail
transfers of funds, negotiating and advancing funds under export Letters of
Credit, buying and selling foreign currencies, handling collection from foreign
banks, and financing imports and exports.
An Edge Act subsidiary, National Bank of Alaska International Banking, Corp.,
has a branch located in Seattle, Washington with its head office in Anchorage,
Alaska.
Competition
The Bank competes actively with national and state banks and other financial
institutions, including savings and loan associations, savings banks, brokerage
houses, money market funds, and credit unions located both in Alaska and other
states. The bank maintains a competitive position by providing convenient
service in the branch network located throughout the state and by competitive
pricing of the products mentioned above.
Alaska allows out-of-state bank holding companies to acquire banks and domestic
bank holding companies located in Alaska. The law does not require reciprocal
provisions by the home state of out-of-state bank holding companies.
Management is of the opinion that to the extent that out-of-state bank holding
companies enter the Alaskan market, the Corporation may encounter intensified
competition.
Employment
The Bank employs approximately 1,101 people. Management considers employment
relations to be good. None of the Bank's employees are covered by a collective
bargaining agreement.
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SUPERVISION AND REGULATION
National Bancorp of Alaska, Inc. is a bank holding company subject to
regulation under the Bank Holding Company Act of 1956. A bank holding company
is required to file with the Federal Reserve Board annual reports and other
information regarding the business operations of itself and its subsidiaries
and is also subject to examination by the Federal Reserve Board. A bank
holding company must obtain Federal Reserve Board approval prior to acquiring,
directly and indirectly, ownership or control of any voting shares of any bank
if, after such acquisition, it would own or control, directly or indirectly,
more than 5% of the voting stock of such bank unless it already owns a majority
of the voting stock of such bank. Furthermore, a bank holding company is, with
limited exceptions, prohibited from acquiring direct or indirect ownership or
control of any voting stock of any company which is not a bank or a bank
holding company, and must engage only in the business of banking or managing or
controlling banks or furnishing services to or performing services for its
subsidiary banks. One of the exceptions to this prohibition is the ownership
of shares of a company the activities of which the Federal Reserve Board has
determined to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto.
A bank holding company and its subsidiaries are prohibited from acquiring any
voting shares of, or interest in, any banks located outside of the state in
which the operations of the bank holding company's banking subsidiaries are
located, unless the acquisition is specifically authorized by the statutes of
the state in which the bank is located. Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit or provision of any property or
service. Thus, an affiliate may not extend credit, lease, sell property or
furnish any services or fix or vary the consideration for these on the
condition that (i) the customer must obtain or provide some additional credit,
property or service from or to its bank holding company or subsidiaries thereof
or (ii) the customer may not obtain some other credit, property or services
from a competitor, except to the extent reasonable conditions are imposed to
assure soundness of credit extended.
In approving acquisitions by bank holding companies of banks and companies
engaged in the banking-related activities, the Federal Reserve Board considers
a number of factors, including the benefit to the public such as greater
convenience, increased competition, conflicts of interest, or unsound banking
practices. The Federal Reserve Board is also empowered to differentiate
between new activities and activities commenced through acquisition of a going
concern.
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<PAGE> 5
Alaska law permits bank holding companies to acquire and own all or any portion
of the voting securities or other capital stock of, or all or substantially all
of the assets of, one or more banks or bank holding companies unless the bank
is a state or national bank conducting a banking business in Alaska that
commenced the business of banking in Alaska on or after July 1, 1982, and that
has not been in existence and continuously operating in Alaska for three years
or more. It is permissible under Alaska state law for out-of-state bank
holding companies to acquire banks and domestic bank holding companies located
in Alaska.
The banking laws of Alaska permit banks located in the state to establish
branches throughout the state.
The Bank is subject to regulation and supervision, of which regular bank
examinations are a part, by the Office of the Comptroller of the Currently
(OCC). The Bank is also a member of the Federal Deposit Insurance Corporation
(FDIC), which currently insures the deposits of each member bank to a maximum
of $100,000 per depositor. For this protection, each bank pays a semiannual
statutory assessment and is subject to the rules and regulations of the FDIC.
The Corporation is an "affiliate" of the Bank, which imposes restrictions on
loans by the Bank to the Corporation, on investments by the Bank in the stock
or securities of the Corporation and on the use of such stock or securities as
collateral security for loans by the Bank to any borrower. The Corporation is
also subject to certain restrictions with respect to engaging in the business
of issuing, flotation, underwriting, public sale and distribution of
securities.
The ability of the Corporation to pay dividends will largely depend upon the
amount of dividends declared by the Bank and any subsequently acquired
companies. Approval of the OCC will be required for any dividend to the
Corporation by the Bank, if the total of all dividends, including any proposed
dividend, declared by the Bank in any calendar year exceeds the total of its
net profits for that year combined with its retained net profits for the
preceding two years, less any required transfers to surplus. In the event that
the Bank were to experience either significant loan losses or rapid growth of
loans or deposits, the Corporation, as the sole stockholder, could be compelled
by bank regulatory authorities to invest additional capital.
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Statistical Disclosure
The information as required by the Securities and Exchange Commission's Guide 3
- - Statistical Disclosure by Bank Holding Companies is incorporated herein by
reference to the Registrant's 1995 Annual Report to Shareholders.
Description Annual Report
Page Numbers
I. Distribution of Assets, Liabilities and Stockholders'
Equity; Interest Rate and Interest Differential:
A. and B. Average Balance Sheet Combined with an
Analysis of Net Interest Earnings.......................46-47
C. Analysis of Changes in Net Interest
Income due to rate and volume...........................47
II. Investment Portfolio:
A. Book Value of Investments...............................40
B. Weighted Average Yield..................................40
III. Loan Portfolio:
A. Types of Loans for Each Reported Period.................41
B. Maturities and Sensitivity to Changes in
Interest Rates..........................................41
C. Risk Elements...........................................42
IV. Summary of Loan Loss Experience:
A. Analysis of Allowances for Loan
Loss Experience.........................................43
V. Deposits:
A. Average Balance by Type.................................44
B. Large TCD Maturities - Over $100,000....................41
VI. Return on Equity and Assets
Selected Ratios for Each Reported Period...........................45
VII. Short-Term Borrowings..............................................44
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<PAGE> 7
Schedules Included Herein
III. Loan Portfolio
C. Risk Elements.
Potential Problem Loans
At December 31, 1995, an additional $17,082,000 in loans are being closely
monitored by management. These loans are not included in any category of non-
performing loans. However, management has concern about the borrowers'
abilities to comply with their present loan repayment terms. These loans are
reviewed monthly to assess any change in collectability.
Foreign Outstandings
There were no foreign outstandings to individual countries as of December 31,
1995.
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<PAGE> 8
IV. Summary of Loan Loss Experience:
B. Allocation of the Allowance for Loan Losses:
Allocation of Reserves
To Loan Categories
Loan Category As a % % of Total Amount of
of Total Loans Reserve Reserves(000's)
December 31, 1995
Commercial and Industrial 35.5% 2.2% $468
Real Estate Construction 1.9 - 3
Real Estate Long-Term 31.9 1.2 267
Installment 25.0 15.3 3,288
Nontaxable 4.8 0.4 81
Lease Financing 0.9 - -
Unallocated - 80.9 17,422
-----------------------------------------
100.0% 100.0% $21,529
December 31, 1994
Commercial and Industrial 35.9% 5.4% $1,035
Real Estate Construction 1.8 0.9 165
Real Estate Long-Term 33.9 2.3 442
Installment 22.1 13.8 2,664
Nontaxable 5.5 0.8 152
Lease Financing 0.8 - -
Unallocated - 76.8 14,768
-----------------------------------------
100.0% 100.0% $19,226
December 31, 1993
Commercial and Industrial 37.9% 21.3% $3,704
Real Estate Construction 2.6 0.2 35
Real Estate Long-Term 33.9 13.0 2,271
Installment 18.2 6.9 1,195
Nontaxable 6.5 3.4 587
Lease Financing 0.9 - -
Unallocated - 55.2 9,616
-----------------------------------------
100.0% 100.0% $17,408
December 31, 1992
Commercial and Industrial 44.5% 21.3% $4,547
Real Estate Construction 2.0 1.3 269
Real Estate Long-Term 26.3 5.5 1,183
Installment 17.6 5.2 1,103
Nontaxable 8.8 3.8 807
Lease Financing 0.8 - -
Unallocated - 62.9 13,429
-----------------------------------------
100.0% 100.0% $21,338
December 31, 1991
Commercial and Industrial 46.7% 20.3% $4,314
Real Estate Construction 4.3 2.8 589
Real Estate Long-Term 24.4 4.4 947
Installment 14.7 2.7 572
Nontaxable 8.8 4.0 848
Lease Financing 1.1 - -
Unallocated - 65.8 14,014
-----------------------------------------
100.0% 100.0% $21,284
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<PAGE> 9
ITEM 2. PROPERTIES
The Bank's main banking office is at its headquarters building, which is
located at Northern Lights Boulevard and C Street, Anchorage, Alaska.
In addition to its headquarters building, the Bank owns 39 of its banking
offices (including four which are subject to ground leases) and leases 61 other
banking offices under agreements expiring between 1996 and 2031.
ITEM 3. LEGAL PROCEEDINGS
For information concerning legal proceedings, see Note 10 of "Notes to
Financial Statements" at page 32 of the Annual Report, which is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the fourth
quarter of 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
For information concerning market for the registrant's common equity and
related stockholder matters, reference is made to page 48 of the Annual Report,
which is incorporated herein by reference.
The above-referenced schedule shows the high and low bid quotations of the
Corporation's stock as reported by the National Association of Securities
Dealers Automated Quotations System (NASDAQ). National Bancorp of Alaska, Inc.
common stock is traded in the over-the-counter market. Such over-the-counter
market quotations reflect interdealer prices, without retail markup, markdown,
or commission and may not necessarily represent actual transactions.
The Corporation has engaged Salomon Brothers, Inc. for financial advisory and
investment banking services.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the prior ten years is incorporated herein by
reference on pages 22-23 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For management's discussion and analysis of financial condition and results of
operations see "Management Discussion and Analysis" at pages 38 through 47, and
the Chairman's message to shareholders on inside cover of the Annual Report,
which are incorporated herein by reference.
Capital Resources
The Federal Reserve Board has standards for measuring capital adequacy based on
"risk-adjusted" assets. As of December 31, 1992, banks and bank holding
companies are expected to meet target risk-based capital ratio of 8.00%.
Effective September 7, 1990, the Federal Reserve Board implemented regulations
that establish a minimum leverage capital ratio of 3% of Tier 1 capital to
total assets less goodwill. The table below illustrates the Corporation's
regulatory capital ratios as of December 31:
1995 1994
Tier 1 Capital $343,954 $314,243
Tier 2 Capital 21,529 19,226
--------------------
Total Qualifying Capital $365,483 $333,469
====================
Risk Adjusted Total Assets (including
off-balance sheet exposure) $1,869,720 $1,692,316
======================
Total Risk-Based Capital Ratio 19.55% 19.70%
=================
Leverage Ratio 13.90% 13.20%
=================
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<TABLE>
Interest Rate Sensitivity Analysis
December 31, 1995
(In Thousands)
<CAPTION>
1-90 days 90-365 Over 5 Total int. Non int. Total
days 1-5 years years bearing bearing Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Investment securities 55,273 107,244 370,157 20,727 553,401 553,401
Securities available for sale30,162 25,140 195,497 22,592 273,391 273,391
Interest-bearing balances
with banks 1,293 1,293 1,293
Federal funds sold and
securities purchased
under agreement to resell -
Loans and leases 546,188 56,014 422,070 302,568 1,326,840 1,326,840
Loans held for sale 33,099 33,099 33,099
Other assets 262,897 262,897
-------------------------------------------------------------------------
Total Assets 632,916 188,398 987,724 378,986 2,188,024 262,897 2,450,921
=========================================================================
Deposits 1,003,114 160,085 37,568 1,200,767 539,714 1,740,481
Funds purchased 297,406 29,223 911 327,540 327,540
Other liabilities 32,580 32,580
Equity capital 350,320 350,320
-------------------------------------------------------------------------
Total Liabilities and
Shareholder's Equity 1,300,520 189,308 38,479 - 1,528,307 922,614 2,450,921
=========================================================================
Interest Sensitivity Gap (667,604) (910) 949,245 378,986 659,717 (659,717)
Cumulative Gap (668,514) 280,731 659,717
Ratio of Interest Sensitive
Assets to Interest
Sensitive Liabilities 0.49 1.00 25.67 -
Cumulative Ratio 0.49 0.55 1.18 1.43
</TABLE>
Management monitors the asset and liability position closely. As market and
business conditon change, asset and liability positions and pricing structures
are adjusted to control the risks associated with interest rate movement and
to generate a stable growth in net interest income. The table above reflects
the contractual repricing dates for interest sensitive assets and liabilities.
Interest bearing demand and savings accounts with no stated maturity totaling
$743,653,000 are included in the 1 to 90-day category. These deposits reprice
at management's discretion and have normally repriced less frequently than
those products indexed to market rates. Due to the continuing policy of
analyzing rate sensitivity, management believes National Bancorp of Alaska
is reasonably well positioned for subsequent rate movements.
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<PAGE> 12
Nonperforming Assets
Other real estate owned decreased from $4.3 million at December 31, 1994 to
$3.1 million at December 31, 1995. During 1995, nonaccrual loans totaling $0.4
million were transferred to other real estate owned. Assets with a book value
of $2.2 million were sold. Restructured loans decreased from $1.7 million at
December 31, 1994 to $0.3 million at December 31, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of independent auditors and the consolidated financial statements
and notes to consolidated financial statements on pages 24 through 37 of the
Annual Report are incorporated herein by reference.
The quarterly financial data on page 48 of the Annual Report is incorporated
herein by reference.
ITEM 9. CHANGE IN ACCOUNTANTS
Not Applicable
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<PAGE> 13
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information concerning directors and executive officers of National Bancorp
of Alaska, Inc., see "Election of Directors" at pages 2 through 5 of the Proxy
Statement for the March 19, 1996, Annual Meeting of Shareholders, which is
incorporated herein by reference.
The following table sets forth the executive officers of the Bank, all of whom
serve at the discretion of the Board, their ages and their positions with the
Bank:
Served as an
Positions and Offices Currently Held Executive Officer
Name Age with Bank Since
Donald L. Mellish 68 Chairman of the Executive Committee 1964
Edward B. Rasmuson 55 Chairman of the Board of Directors 1972
Richard Strutz 45 President 1985
Kathleen Soderberg 47 Executive Vice President and Treasurer 1982
B. John Shipe 46 Executive Vice President 1984
Gary Dalton 41 Executive Vice President 1988
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<PAGE> 14
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to pages 5 through 9 of the Proxy Statement for the March 19,
1996, Annual Meeting of Shareholders, which is incorporated herein by reference
for information concerning management remuneration and transactions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
For information concerning the Corporation's security ownership by certain
beneficial owners and management, reference is made to pages 1 through 9 of the
Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information concerning certain relationships and related transactions, see
page 10 of the Proxy Statement, which is incorporated herein by reference.
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<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
FORM 8-K
(a) The following documents are filed as part of the report:
1. Financial Statements
The following consolidated financial statements of National Bancorp
of Alaska, Inc. and its subsidiaries and report of independent
auditors are incorporated in Item 8 by reference from the 1995
Annual Report to Shareholders. Page number references are to the
Annual Report:
National Bancorp of Alaska and subsidiaries: Page
Consolidated Statements of Condition
December 31, 1995 and 1994.............................25
Consolidated Statements of Income
Years ended December 31, 1995, 1994, and 1993..........24
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993..........26
Consolidated Statements of Changes in Shareholders'
Equity Years ended December 31, 1995, 1994, and 1993...27
Notes to Consolidated Financial Statements.............27-36
Report of Independent Auditors.........................37
2. Financial Statement Schedules
All schedules are omitted because they are not applicable, not
material or because the information is included in the financial
statements or the notes thereto.
3. Exhibits
(3) Articles of incorporation and bylaws are incorporated herein by
reference to Exhibit (3) to Registration on Form S-14, File No.
2-78795 dated August 11, 1982.
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<PAGE> 16
(4) Instruments defining the rights of security holders - specimen of
stock certificate to be issued by the Registrant (as amended to
date) is incorporated herein by reference to Exhibit (4) to
Registration on Form S-14, File No. 2-78795 dated August 11, 1982.
(13) Annual Report to shareholders for the year ended December 31, 1995.
(21) Subsidiaries of the registrant are as follows:
Business Name State Incorporated
National Bank of Alaska and
subsidiaries Alaska
National Bank of Alaska Leasing
Corporation Alaska
NBA Advertising, Inc. Alaska
National Bank of Alaska
International Banking Corporation Washington
Alaska Bankcard Center, Inc. Alaska
NBA Mortgage Corporation Delaware
Northland Credit Corporation Alaska
NB Aviation, Inc. Delaware
(22) There were no matters submitted to a vote of security holders during
the fourth quarter of 1995.
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1995.
(c) Exhibits - See list of exhibits set forth above at Item 14(a)3.
(d) Financial Statement Schedules
Schedules required to be filed in response to this portion of Item
14 are listed above in Item 14(a)2.
Report of independent auditors for Form 10-K for the year ended December 31,
1995, is incorporated herein by reference in Item 14(a)1.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 BANCORP OF ALASKA, INC.
March 19, 1996 By /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman of
the Board and Director (Principal
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
March 19, 1996 /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman of
the Board and Director (Principal
Executive Officer)
March 19, 1996 /s/Richard Strutz
Date Richard Strutz, President and
Director (Principal Financial Officer)
March 19, 1996 /s/Gary Dalton
Date Gary Dalton, Senior Vice President
(Principal Accounting Officer)
March 19, 1996 /s/Gary M. Baugh
Date Gary M. Baugh, Director
March 19, 1996 /s/Carl F. Brady, Jr.
Date Carl F. Brady, Jr., Director
March 19, 1996 /s/Alec W. Brindle
Date Alec W. Brindle, Director
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<PAGE> 18
March 19, 1996 /s/Sharon Burrell
Date Sharon Burrell, Director
March 19, 1996 /s/James O. Campbell
Date James O. Campbell, Director
March 19, 1996 /s/Jeffrey J. Cook
Date Jeffrey J. Cook, Director
March 19, 1996 /s/Patrick S. Cowan
Date Patrick S. Cowan, Director
March 19, 1996 /s/Roy Huhndorf
Date Roy Huhndorf, Director
March 19, 1996 /s/James H. Jansen
Date James H. Jansen, Director
March 19, 1996 /s/Donald L. Mellish
Date Donald L. Mellish, Director
March 19, 1996 /s/Tennys B. Owens
Date Tennys B. Owens, Director
March 19, 1996 /s/Eugene A. Parrish
Date Eugene a. Parrish, Director
March 19, 1996 /s/Michael Pate,
Date Michael Pate, Director
March 19, 1996 /s/Martin R. Pihl,
Date Michael Pate, Director
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<PAGE> 19
March 19, 1996 By /s/Edward F. Randolph
Date Edward F. Randolph, Director
March 19, 1996 By /s/Major General John Schaeffer
Date Major General John Schaefer(Ret.)
Director
March 19, 1996 By /s/Michael K. Snowden
Date Michael K. Snowden, Director
March 19, 1996 By /s/George S. Suddock
Date George S. Suddock, Director
March 19, 1996 By /s/Richard A. Wien
Date Richard A. Wien, Director
-19-
1995 Annual Report
National Bancorp of Alaska
Working Together for a New NBA
<PAGE> Inside Cover
(Picture)
(Chairman of the Board Edward Rasmuson and President Richard Strutz of National
Bancorp of Alaska)
TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:
We're pleased to report that 1995 was another successful year for the bank.
We achieved our seventh consecutive year of record net income, posting a return
of $41.3 million. Coupled with this, we made excellent progress at
transforming to a sales and service culture that will continue to differentiate
us in our marketplace.
We continue to focus on offering the products and services that meet the
needs of our customers. At the same time, we have streamlined operations in
many areas to allow staff to concentrate on customer service and community
outreach. Our annual report theme of "Working Together for a New NBA"
illustrates our philosophy of partnership with customers, employees and
community members.
Throughout the bank, we are adapting to a changing financial and
technological environment. During 1995, we made the strategic decision to out-
source our data processing so that we could offer better service and new
products to our customers. The partner we selected was M&I Data Services of
Milwaukee, a service provider for more than 1,000 financial institutions, and
one of the nation's leading data processing companies. The system conversion
is underway and will be completed by May 1996.
Throughout this report, you will find summaries of various efforts within
the bank, as well as highlights of the Alaska industries which are key factors
in the bank's and our customers' success. Overall, the Alaska economy remains
stable with moderate growth in most areas of the state. We continue to see
positive outlooks in some industries and ongoing challenges in others,
particularly those that are resource-based. We're optimistic that 1996 will be
another stable year for our state.
We are proud of the bank's efforts in 1995 and commend our employees,
customers and friends for their part in National Bank of Alaska's continued
success.
Sincerely,
/s/Edward B. Rasmuson
Edward B. Rasmuson
Chairman of the Board
/s/Richard Strutz
Richard Strutz
President
<PAGE> 1
TABLE OF CONTENTS
YEAR IN REVIEW
Construction / Working Together.........................Page 2
Fishing / Streamlining Branch Functions.................Page 4
Forest Products / Behind the Scenes.....................Page 6
Government / Commitment to Service......................Page 8
International Trade / Banking Made Easy.................Page 10
Mining / Simply Better Business.........................Page 12
Petroleum / Creating a Sales Team.......................Page 14
Support Industries / Community Partners.................Page 16
Tourism / Employee Groups ..............................Page 18
COMMUNITY ADVISORY BOARDS ................................Page 20
FINANCIAL REPORT..........................................Page 21
OFFICERS AND BOARD OF DIRECTORS ..........................Page 49
FINANCIAL HIGHLIGHTS
1995 1994 1991 1-year 5-year
(In thousand except statistics) change change
Total Assets $2,450,921 $2,344,678 $2,077,243 4.5% 18.0%
Shareholders' Equity 350,320 312,772 242,050 12.0% 44.7%
Net Income 41,280 37,520 28,403 10.0% 45.3%
Net Income Per Share $5.18 $4.71 $3.56 10.0% 45.5%
(Four graphs)
(See below table of items represented in graphs)
(In thousands except statistics)
1991 1992 1993 1994 1995
Total Assets $2,077,243 $2,129,965 $2,207,280 $2,344,678 $2,450,921
Shareholders' Equity 242,050 269,303 292,976 312,772 350,320
Net Income 28,403 34,027 35,626 37,520 41,280
Net Income per Share 3.56 4.27 4.47 4.71 5.18
<PAGE> 2
(Picture)
(Picture is of an NBA tellerline with employees and customers)
WORKING TOGETHER FOR A NEW NBA
Throughout the year, NBA management and employees worked diligently to
ensure that we are offering the products and services our customers want and
need. We offered several new products in 1995, including a Visa Check Card and
Business ATM and Visa cards.
We also reinforced our commitment to providing fast, accurate and friendly
service to customers. Throughout the bank, employees are dedicated to
providing exceptional service. We measure customer satisfaction through a
variety of surveys.
In every area of the bank, we continue to streamline policies and procedures
to enable us to focus on service quality and sales. We also made the decision
to out-source data processing services to give us better access to the latest
technology. We expect that our conversion in 1996 will allow us to serve
customers more efficiently and to offer new financial products.
In each of our communities, we continue to work with local organizations to
ensure that we are meeting the financial needs of the community. We have
developed partnerships with local housing organizations, non-profit groups,
schools and others to identify needs and solve problems.
For more detail on the year's efforts, please refer to the highlights
throughout this report.
CONSTRUCTION
Construction activity remained high in 1995 and comparable to recent years.
Though state capital appropriations were down, private, federal and school
construction projects kept the activity high.
Statewide construction employment in July was 15,500 persons, an increase of
500 people from the same period last year.
Two notably large projects began in the Interior this year. Construction
started on the Fort Knox gold mine near Fairbanks. At peak construction, about
400 workers will be employed. Construction also began on the Healy Clean Coal
Project, a $240-million facility slated for completion in 1998. The project
will provide Interior Alaska with a stable source of low-priced electricity.
It is expected to employ 200 workers during peak construction. The Alaska
Industrial Development & Export Authority (AIDEA) is building the project
funded by federal research money, state grants, and revenue bonds.
According to industry spokespersons, 1995 was a typical year for road and
airport work with about $260 million awarded from federal and state sources.
The Association of General Contractors estimates 1996 government and private
construction spending will be $1.2 billion.
The Alaska Department of Transportation & Public Facilities awarded
contracts for 160 projects totaling $210 million in 1995. That was slightly
below the $218 million awarded in 1994. The state
<PAGE> 3
expects to award up to $208 million during 1996 for 150 projects.
The Army Corps of Engineers had $193 million in funding for military and
civilian projects in 1995. The centerpiece of the Corps' activity is the $150-
million U. S. Air Force Hospital on Elmendorf. The Corps expects 1996 awards
to be $194 million.
Another federal construction project, the $110-million Alaska Native Medical
Center, is on schedule and expected to be completed in 1997. The 150-bed center
will employ 700 people.
Anchorage school projects totaling more than $200 million were started in
Fiscal Year 1995. Other projects underway in 1995 included: the $47-million
Alaska Sea Life Center in Seward; the $14-million Mount Roberts Tramway in
Juneau; the $10.9-million University of Alaska Anchorage Aviation Technology
Center; a $20-million University of Alaska Fairbanks geophysical science
building; a $6.5-million senior assisted living facility called the Providence
Horizon House; the $36-million state courthouse in Anchorage; and, the Food
Services of America Anchorage distribution center.
Residential construction increased in 1995. Anchorage and Eagle River led
the state with 801 single family permits compared to 718 permits in 1994. Low
existing home inventories and low interest rates contributed to the market's
robust performance. Also, permits were up elsewhere in the state, with 129
permits in Fairbanks, 179 in Juneau, and 68 in Ketchikan. Twenty-five new
homes were built in Barrow and neighboring villages.
Alaska Housing Finance Corporation reported delinquencies of 3.85% as of
September 1995, compared to 4.06% last year. The average foreclosed inventory
as of September 1995 was 60 units, reduced from 97 in January 1994.
Apartment vacancies remained tight in Anchorage throughout 1995, with a 4.3%
vacancy rate. Juneau's vacancy rate was also low, at about 1.47%.
(Picture Caption)
One of many school construction projects in Anchorage, the new Sand Lake school
is scheduled to be completed in February 1996. Below, Kyle Randich of Davis
Construction meets with Jo-Li Sellin, NBA Commercial Loan Officer.
(Picture)
<PAGE> 4
(Picture)
(Picture Caption)
It was another strong year for salmon harvests, particularly in areas such as
Kodiak. NBA is actively involved in the industry, providing financing for
fisherman such as Sam Mutch (right) pictured with Jim Brenner, Kodiak Branch
Manager.
FISHING
The 1995 salmon season ended with record harvest of more than 217 million
fish, up from the previous record of 194.5 million fish in 1994. This was a
substantial increase from the statewide forecast of 155 million fish. The large
catch resulted in an ex-vessel value of $460 million, up from $425 million in
1994.
The strongest harvests were in Bristol Bay (44 million sockeye salmon),
Kodiak (43 million pink salmon) and the Alaska Peninsula (16 million pink
salmon). Southeastern Alaska, which had forecast 20 million pink salmon due to
the drought of 1993, greatly exceeded expectations with a pink salmon harvest
of 48 million fish.
Pink salmon accounted for 60% of the statewide all-species catch. The
statewide forecast for pink salmon was 67 million fish, far exceeded by the
final harvest of 128 million fish. As a result, the amount of pink salmon
canned exceeded 4 million cases, breaking the record of 3.5 million cases in
1994.
The 1995 roe herring harvest of 49,300 metric tons was close to forecasted
levels. However, the catch had an ex-vessel value of $41 million, double the
1994 value. The Togiak area was particularly strong with a 26,700 metric ton
catch. Prince William Sound again failed to have a fishery due to a lack of
fish.
The crab fisheries continue to be in the doldrums. Reduced quotas have
Alaska's crab fishermen facing one of the most meager seasons in the history of
the industry in 1996. For the second consecutive year, the Bering Sea will be
closed to king crab fishing. The opilio crab quota dropped to 50.7 million
pounds for 1996, down from 55.7 million pounds in 1995. Bairdi crab harvest
guidelines were set at 5.5 million pounds, down slightly from last year.
Fishermen are optimistic that the opilio crab resource will rebound for the
1997 season, however, the outlook for other species remains pessimistic.
<PAGE> 5
The International Pacific Halibut Commission established the 1995 halibut
quota at 38.3 million pounds for Alaska. The final harvest was 33.7 million
pounds, with an ex-vessel value of approximately $65 million. This was the
first season of the new quota system for halibut and sablefish. Individual
transferable quotas eliminated the "derby-style" openings and assigned quotas
based upon past catch histories. Although somewhat controversial, quotas
enhanced the value of the fish to fishermen and provided a better product to
the public with less hazard to vessel operators.
The North Pacific Fisheries Management Council set 1996 groundfish
allocations in the Bering Sea/Aleutian Island area at levels similar to 1995 to
preserve the species and protect marine mammals in the fishing grounds. The
Bering Sea allocation is 2 million metric tons of groundfish. The total
allowable catch in the Gulf of Alaska for 1996 is set at 253,000 tons, slightly
reduced from 279,500 tons in 1995.
The industry faces several pricing challenges in 1996, including a depressed
Japanese economy. As the largest buyer of fresh Alaska salmon, Japan has a
significant impact on overall market prices. Sockeye salmon market prices were
low in 1995, and are projected to remain low in 1996. Additionally, the
unexpectedly large pink salmon harvest created further pressure on wholesale
prices of both fresh and canned products.
Further impacting the Alaska salmon industry is the growing aquaculture
industry. World farmed salmon production exceeded 500,000 tons in 1995, greater
than the total Alaska salmon production.
There are few bright spots in the Alaska fishing industry as more segments
come under pressure from world economic conditions and increased worldwide
production of products competing with the Alaska resource. Some segments of
the resource are declining while others experience an over-abundance.
STREAMLINING BRANCH FUNCTIONS
Throughout the bank, we place top priority on providing fast, accurate and
friendly service to our customers. Since our branches are the front line for
service efforts, we are working to remove any tasks that detract from sales or
service or can be done more efficiently elsewhere in the bank.
We continue to centralize tasks that can be performed in the "back office"
so that branch staff can provide the sales and service our customers deserve.
Our branch support area has assumed many of the duties previously completed in
branches such as editing new accounts and keying in address changes and stop
payments. They also balance branch cash, complete maintenance for various
accounts and file signature cards.
We anticipate even further streamlining opportunities with installation of
the new teller and platform systems when our out-sourcing conversion is
completed in May 1996. Both systems will simplify procedures and increase
opportunities for cross-selling products.
(Picture)
(Picture depicting "back office" department at work)
<PAGE> 6
(Picture)
( Picture depicting partnership between NBA and M&I Data Services. Pictured
are Sue Steger, M & I and Anna Rice, NBA)
BEHIND THE SCENES
Following the trend of banks across the nation, we made the decision in 1995
to out-source our data processing and telecommunications functions.
Out-sourcing will help the bank keep pace with rapidly evolving technology and
allow us to concentrate on providing financial services to our customers.
After a comprehensive analysis of the leading out-sourcing companies, we
selected two business partners. M&I Data Services, Inc. will be our data
processing partner and General Communications, Inc. (GCI) will support
telecommunications services.
M&I is one of the nation's largest financial service data processing
providers. In addition to processing information, they will provide NBA the
resources to enhance products such as cash management and home banking.
Tellers and customers will benefit from a new teller system which will increase
efficiency, allow us to provide faster service and increase opportunities for
cross-selling products. Personal Bankers will have a platform system which
provides customer relationship information, automatic printing of new account
documents and sales tools that will help match customers with products to meet
their needs.
Through the terms of the partnership, GCI will manage all telecommunications
among NBA offices, branches, and vendors including M&I. They also will
maintain and support all of the bank's telephones, personal computers and
network of more than 100 automated teller machines.
FOREST PRODUCTS
Like its counterparts in the Pacific Northwest, Alaska's forest products
industry continued adjusting to environmental and legislative challenges in
1995, including ongoing disputes over previously approved sales. Despite these
difficulties, however, harvest levels were comparable to previous years.
A major factor in the stability of the industry is the growth in harvests on
private lands. In 1995, 551 million board feet of a total of 777 million board
feet were harvested on private lands. High-volume sales by Native village
corporations are projected to continue to add volume over the next few years.
Southeast Alaska accounted for the bulk of Alaska timber harvests, with a
total of 497 million board feet harvested in 1995. Through successful lobbying
efforts by qualified buyers, U.S. Forest Service (USFS) releases of Small
Business Adminstration sales were more reliable and smaller mill operators in
Ketchikan and Prince of Wales remained in operation, although not at full
capacity.
Alaska Pulp Corporation's mills in Sitka and Wrangell remained closed in
1995. Ketchikan Pulp Corporation also closed its sawmill in early spring and
did not restart operations until December, when it was able to purchase logs
from a Canadian seller. The outlook for production on USFS lands in Southeast
Alaska remains guarded as companies dependent on its fiber supply
<PAGE> 7
continue to wait for sales with sufficient volume to satisfy their production
capacity.
The Kenai Peninsula continued to be the fastest growing timber-producing
area, with a total of 235 million board feet on state and private lands. The
principal species harvested was white spruce destined for log export to the
Pacific Northwest and chips to the Orient.
The Interior also has become a major supplier of white spruce, producing
nearly 45 million board feet in 1995. There were significant sales increases
from both private and state lands, particularly from areas near Tok and
Chitina.
The highest volume of white spruce is sold for its pulp content to markets
in Canada, the Pacific Northwest and the Far East. As an end product, however,
white spruce sawlogs are valued by mills in Washington and Oregon for use in
laminate and veneer products. Recent cooperative efforts by the Governor's
office, the forest industry, and environmental groups may soon produce
legislation supportive of value-added processing of wood derived from state
lands.
The move to more effectively use the wood has created new activity for
Peninsula and Interior land holders and provided employment for Kenai
Peninsula, Tok, Chitina and Valdez communities. Current employment, however, is
still below the levels of the late 1980s and early 1990s.
Timber pricing in 1995 peaked in early spring and remained steady until late
summer. It dropped in the fall and remained low through year-end due to high
inventories of pulp wood in the United States and Canada. Industry operators
predict depressed prices until the second quarter of 1996.
In 1996 and 1997, production will be supplemented by the Alaska Division of
Forestry's release of more than 80 million board feet of wood infested by
spruce bark beetles. This timber sale will remove more than 600,000 acres of
damaged trees from timber stands throughout the state (particularly in the
Kenai Peninsula and Interior regions).
(Picture Caption)
While timber operators continue to find it difficult to purchase enough logs to
operate efficiently, they are developing opportunities in new geographic areas
of the state. Increasing harvests from private lands account for the bulk of
trees harvested.
(Picture)
<PAGE> 8
(Picture)
(Picture Caption)
As the state capital city, Juneau is the center of discussions regarding
declining budget revenue. The recently released Long Range Financial Plan
calls for elimination of the budget deficit by the year 2000.
GOVERNMENT
Alaska's government sector remained relatively stable in 1995 despite the
well-publicized news of state budget deficits and federal cut backs. State
jobs declined less than 1%; larger losses in federal employment were partly
offset by increases in local government. Total government jobs, excluding the
military, were down by 1%.
In June, the governor approved a $2.5 billion general fund budget for Fiscal
Year (FY) 1996. The operating budget declined from the previous year, but
capital appropriations totaled $151 million, up from $101 million in FY95.
Total general fund spending is essentially unchanged. FY96 revenue is expected
to total about $2 billion, with the deficit to be financed from the state's
$1.8 billion budget reserve.
In October, the state's Long Range Financial Planning Commission proposed a
combination of revenue-raising measures and spending reductions that it said
would eliminate the state's budget deficit by the year 2000. The plan calls for
Alaska Permanent Fund income to become a substantial source of support for the
state budget. A key factor in the increased role is reductions in the amount
of Alaska Permanent Fund income paid to residents as annual dividends. The
report illustrated a wide array of options available to state government for
managing its adjustment to reduced oil revenue. The commission's
recommendations are expected to stimulate a continuing public debate.
The Alaska Permanent Fund continues its tremendous impact on the state's
financial well-being. The annual distribution injects more money into the
state's economy than the total payroll of all but three of the state's major
industries: petroleum, U.S. military and federal government. More than $565
million was distributed to Alaskans in dividend checks of $983.90 each. More
than 55,000 dividends were electronically deposited into National Bank of
Alaska accounts in 1995, up 25% from 1994. Combining net income, appreciation
and oil revenues, the permanent
<PAGE> 9
fund's growth of $2.4 billion was the largest in its history. The fund's total
assets are $15.7 billion.
Vital contributions to the state's economy also came from two state-owned
corporations: the Alaska Housing Finance Corporation (AHFC) and the Alaska
Industrial Development & Export Authority (AIDEA).
AHFC, with net earnings of $96 million and $4.4 billion in assets, plays a
major role in providing housing for Alaskans. Utilizing AHFC's Senior Housing
Program, NBA provided a $1.1-million loan for MLH Manor, a 34-unit senior
housing project in Fairbanks; and a $2.8-million loan to Homer Senior Citizens,
a 40-unit complex. Also, NBA's Mortgage Loan Servicing Department serviced more
than 13,000 AHFC housing loans totaling $1 billion, about 45% of AHFC's loans.
With reduced federal loan guarantee funding, AIDEA's role became more
important in providing financing for Alaskan businesses in 1995. With
$1 billion in assets, AIDEA has more than $254 million in loans. NBA is AIDEA's
largest participant, with 118 loans, and is the largest participant in the
AIDEA Rural Development and Initiative Fund with 24 of the 31 loans established
to create employment opportunities in rural Alaska.
Military expenditures continue to be an important factor in the Alaskan
economy despite continued adjustments to operations in Alaska. Fort Greely in
Delta Junction was added to the base closure list and personnel will be
transferred to Fort Wainwright. Troop levels in Alaska appear to have
stabilized at approximately 19,600.
COMMITMENT TO SERVICE
At NBA, we are committed to providing service that exceeds our customers'
expectations. At every level of the bank, we encourage employees to do what it
takes to keep our customers happy.
We have two programs that reward employees for excellent service. The
"Thanks for Making It Easy" program allows employees to thank other employees
for their service by sending them a red "star" certificate. Supervisors can
reward staff with a blue "star" certificate thanking them for outstanding
service to a customer. As employees collect the certificates, they earn
prizes. Employees who receive a monthly Service Star award are eligible for a
yearly Customer Satisfaction Award.
We measure our performance with several printed and telephone surveys.
Branches use an Internal Customer Service Survey to evaluate departments that
have signed service agreements. We survey customers who open and close
accounts, encourage all customers to fill out comment forms and we randomly
call customers who have completed transactions or opened accounts.
Our goal is to be first in service statewide. A reputation of superior
service goes a long way in acquiring new customers and retaining existing
customers.
(Picture)
(Picture of customer service representative on the phone with a customer)
<PAGE> 10
(Picture)
(Picture of ATM card being inserted into ATM machine)
Our customers want easy access to financial services. We want to be
available when customers handle their finances - - and that's less often during
traditional banking hours. In 1995, we added the following conveniences:
Seven-days-a-week telephone banking service in our Central Customer Service
department, from 8:00 a.m. to 8:00 p.m.;
More flexible Saturday branch banking hours in Anchorage (10:00 a.m. to 6:00
p.m.) and an expanded number of branches statewide;
Speedy and flexible home loan applications with Loan by Phone service and a
Three-Day Express Mortgage credit approval (or preapproval);
Extended purchasing convenience with a Visa Check Card which provides the
same ATM and debit point-of-sale access as an ATM card, plus access to a
checking account at any merchant that accepts Visa credit cards worldwide;
Convenient and fun banking for kids with a Cool Cash ATM card (kids can make
deposits and check account balances at ATMs); and
An investment alternative, fixed annuities, for customers enjoying or
preparing for retirement, organizing their estates or interested in reducing
their taxes.
All of these changes and improvements continue our focus of making it easy
and convenient to bank with NBA.
INTERNATIONAL TRADE
Alaska's exports continue to grow in value, particularly as Alaska gains a
reputation as a major air cargo hub. Alaska's major exports are seafood,
timber, petroleum products, minerals and coal. The value of Alaska's exports
leaped to $3.86 billion for the first eight months of 1995, an 11% increase
from $3.48 billion for the first eight months of 1994. The year-end export
figure is expected to surpass $5 billion.
Air freight is the largest Alaska export. The value of Alaska's air freight
exports climbed to $2 billion, up 10% from $1.8 billion during the same period
in 1994.
Much of the impact of air freight exports is because Anchorage is considered
the port of export for products made by manufacturers from the Continental
United States and shipped out of the country. Millions of computer parts,
electronics, mechanical machinery, medical tools, and jet engine parts now
travel through the Anchorage International Airport to destinations in Japan,
Korea and Europe. Federal Express and United Parcel Service use the city as
hubs in their international distribution systems. The city benefits
<PAGE> 11
extensively from the air cargo activity, particularly in the jobs created to
off-load, sort and repackage the freight for shipment to destinations
throughout the world.
Seafood products, as in previous years, were Alaska's number one export
product. Despite depressed salmon prices, the export value reached $1.14
billion by the end of August 1995. This is a 7% increase from $1.06 billion for
the same period a year earlier. Of these seafood products, salmon and roe
account for the major share of total exports.
Pacific Rim countries, as in the past, are Alaska's biggest export market.
Total exports to Pacific Rim countries amounted to $3.65 billion, or 95% of
total Alaska exports. Of these countries, Japan is the largest trading partner,
receiving $2.21 billion, or 57% of total Alaska exports during the first eight
months of 1995. South Korea draws $298 million in Alaska goods. Exports to
Taiwan and China have reached $188 million and $121 million, respectively.
Canada is the biggest non-Asian export market for Alaska. Exports to Canada
reached $63 million during the first eight months of 1995.
Although Alaska's trade with Russia is in its infancy, Alaska has a special
relationship with the Russian Far East because of its location and our
historical and cultural ties.
Similar to Alaska, the Russian Far East is rich with natural resources such
as fish, timber, minerals, oils and gas. These resources need extraction,
development, processing and exporting, involving the Russian entrepreneurs and
Alaskan know-how.
Several NBA officers visited the Russian Far East in 1995 to establish a
correspondent relationship with Russian banks and build bridges between Russian
and Alaskan business interests.
(Picture Caption)
With Alaska's strategic geographic location, international trade continues to
grow. NBA officers including (left to right) Judith Crotty, Ben Barrera and
Steve Hasegawa, provide support to companies doing business with the Russian
Far East and the Pacific Rim.
(Picture)
<PAGE> 12
(Picture)
(Picture Caption)
Strong gold and silver prices led to a revitalized mining industry in 1995. At
left, Larry Lynch of Fairbanks Gold, Inc., and Debbie Kimmell, NBA Cushman
Branch Manager, review plans at the Fort Knox Mine, north of Fairbanks.
MINING
The Alaska mining industry rebounded in 1995. Steady gold and silver prices
and a favorable state and local regulatory environment encouraged increased
exploration for minerals on state and Native lands. Additional discoveries of
zinc and lead ore reserves added decades to the lives of two key mines and hint
at increased production.
Exploration expenditures were $35 million in 1995, $4 million higher than
1994. Mine development expenditures increased by $100 million to about $145
million, largely due to work on new mines such as the Fort Knox mine north of
Fairbanks. The value of mineral production is expected to be about $508 million
(the same as the 1994 value) due to continued low zinc prices and decreased
placer gold production.
Employment at mines was expected to remain at about 3,100 persons, however,
an additional 600 were employed as construction workers at new mines and mine
expansions in 1995.
Several potential gold mines made progress during the year. In Juneau, Coeur
D'Alene Mines plans to move ahead with permitting and development of its
Kensington Mine. And Echo Bay Mines began working on alternative solutions for
mine tailings disposal and permitting issues at the A-J Mine. Nevada
Consolidated Goldfields started production of their Nixon Fork hard rock gold
mine near McGrath. The Fort Knox Mine north of Fairbanks will begin production
in late 1996. Cook Inlet Region Inc. is working with USMX to develop the
Illinois Creek Mine near Galena.
Gold Prices
Stated in average dollars per ounce as of December of each year
(Graph of the above caption)
(Table of amount depicted in graph)
1991 $353
1992 333
1993 391
1994 383
1995 387
<PAGE> 13
Economic Value of the Alaska Mining Industry
In Millions '91 '92 '93 '94 '95
- --------------------------------------------------------------
Exploration $40 $30 $30 $31 $35
Development $26 $30 $28 $45 $145
Production $546 $561 $449 $508 $508
- --------------------------------------------------------------
Total $612 $621 $507 $584 $688
(Year-round equivalent)
'91 '92 '93 '94 '95
- -------------------------------------------------------------
Employment 3,650 3,492 3,130 3,083 3,100
In Kotzebue, Cominco Alaska and NANA Regional Corporation discovered
additional zinc and lead reserves that double the Red Dog Mine's reserve base.
They are studying the feasibility of expanding the mine to increase production
by another 30% while retaining the mine life of 40 years, making it the largest
zinc mine in the world.
Kennecott and its partners announced plans to expand and reopen the Greens
Creek Mine in 1997. The expansion will increase silver, gold and zinc
production by 50% at a cost of more than $70 million.
Gold production decreased in 1994 to about 182,000 ounces. It is expected
to decrease further in 1995 due to the closure of several placer mines, the
largest of which was the Valdez Creek Mine near Cantwell.
Work continued on several coal properties during the year, and higher coal
prices may lead to more activity. Projections are for increased demand from
Pacific Rim countries for low-sulfur coal. Construction on the Healy Clean Coal
Project progressed throughout 1995. This plant will supply energy to the
Interior, much of which will be needed to operate the Fort Knox mill facilities
north of Fairbanks.
There was some new claim activity on state lands in 1994 with 3,365 new
claims filed. The improved environment for mining on state and private lands
has attracted new players to the exploration game despite discouraging policies
on federal lands.
SIMPLY BETTER BUSINESS
Our "simply better business" approach gives business customers the tools
they need in today's challenging business environment. In 1995, we introduced
several new business products that give our business customers that extra
advantage.
NBA's Business ATM card allows business customers to access their checking
accounts at NBA ATMs, 24 hours a day. Customers choose a deposit-only card for
deposits and balance inquiries or a full-function card which allows transfers
and withdrawals. The Business Service Line, an automated customer service
line, lets customers access their NBA business account information and transfer
funds between accounts by telephone.
The Business Loan Application packet simplifies the loan application
process. And, our revolving and non-revolving Visa Business cards give
businesses financial convenience and control.
The "Business Banking" catalog helps customers learn about our services.
Our new retail lock box service speeds up the collection and deposit of checks
for business customers with large volumes of recurring remittances. All
remittances are delivered directly to the bank, bypassing the business' office.
We process and deposit funds into their accounts.
The introduction of these business products and sales tools reinforces that
NBA has cost-effective solutions to meet our business customers' needs.
(Picture)
(Picture of two National Bank of Alaska brochures titled Business Banking and
Business Loan Application and two National Bank of Alaska business cards, one
for ATM and VISA.)
<PAGE> 14
(Picture)
(Picture of Personal Banker seated at desk reviewing a brochure with a
customer)
CREATING A SALES TEAM
With NBA's transition into a full sales culture in 1995, we focused on
providing employees with skills and tools to achieve a true sales and service
climate. One of the biggest challenges was the blending of new
accounts\customer service and lending responsibilities into a Personal Banker
position.
Our new Personal Bankers attended a two-day "Service That Sells" workshop
that focused on exploring customer banking needs and building customer
relationships. Branch managers attended a three-day "Leading the Sales Team"
workshop; and we implemented a "Teller Excellence" training program.
To help employees become well-versed in our products and services in a fun
way, we repeated our successful competition, "Product Jeopardy." We added
sales resources to our Product Guide, updated the Personal Banking catalog, and
added a Business Banking catalog and several product-specific brochures. We
also introduced a Cash Management Services packet that allows staff to
customize presentations to business customers.
To complement our sales culture, we transformed branch lobbies into visually
exciting, high-impact selling environments. "Branch merchandising" heightens
our customers' awareness of bank products by profiling a new campaign each
quarter.
We will continue our commitment to sales and service training throughout
1996. The new platform systems which are part of our conversion to M&I Data
Services will be a significant tool for tellers and personal bankers.
PETROLEUM
Two major legislative actions by federal and state governments in 1995
created a positive outlook for the petroleum industry. In November, a new
federal law lifted the 22-year-old ban on export of Alaska North Slope crude.
Also, Alaska legislators approved a law allowing the state to adjust royalty
rates on marginal fields. Both actions are expected to yield positive results
for the industry. The state law may make economically viable the many smaller
fields which must be developed to help offset the decline in production from
Prudhoe Bay.
North Slope oil production averaged more than 1.5 million barrels per day,
down from the 1988 peak of 2 million barrels per day. The rate of production
decline at Prudhoe Bay continues to be offset by gains at other fields.
The Endicott field has outperformed early estimates. In August 1995, the
field pumped its 300 millionth barrel of oil. Recoverable reserves are now
estimated at 600 million barrels. Another stellar performer is the Point
McIntyre field, where 1995 daily average production exceeded estimates by 23%.
A large-scale enhanced oil recovery program has been announced for Kuparuk. The
program is anticipated to increase production by 200 million barrels over the
life of the project.
BP Exploration Alaska is in the final phase of a three-year project to
increase production and
<PAGE> 15
reserves from the Milne Point field. The project will increase production from
the current level of 25,000 barrels per day to a forecast level of 60,000
barrels per day. Also, development planning is underway for the smaller Cascade
and Northstar fields. BP is proceeding with design work on the Badami project,
despite an announcement that reserve estimates are lower than initially
forecast.
ARCO Alaska remains positive about development potential for the Colville
Delta west of the Kuparuk field. The current estimate of reserves for that area
is 100 million barrels. More exploratory drilling is scheduled in the winter
1995-1996 exploration season.
Industry analysts project a renewed interest in Alaska's prolific heavy oil
resources. The North Slope contains an estimated 20 billion barrels of heavy
oil. This type of oil is costly to produce due to its molasses-like thickness
and its location in shallow sands which crumble easily. BP drilled six wells in
1995 in the Shrader Bluff pool and further activity is scheduled in 1996. ARCO
announced new studies on the viability of producing the West Sak heavy oil
accumulation in the Kuparuk unit. Oil companies hope new technology will allow
for development of cost effective systems for production of the heavy oil
reserves.
A number of exploratory wells are on tap for the 1995-1996 exploration
season. Activity will center on previous discoveries and further exploration of
areas drilled in other years.
Activity continues both onshore and offshore in Cook Inlet. The natural gas
industry is quite healthy, but oil production remains in a decline. Declining
production will not support the infrastructure costs, making additional
discoveries vital for the long-term prospects for the oil industry in
Southcentral Alaska. Exploratory wells were being drilled by ARCO and Marathon
in late 1995. Anchorage-based independent Stewart Petroleum completed its third
well in the West MacArthur River field and completed a stepout from its first
well location.
(Picture caption)
Two legislative actions increased long-term prospects for the oil industry in
Alaska by making it more feasible to develop smaller oil fields. Several
exploratory wells were drilled in late 1995.
(Picture)
(Picture of oil drill)
<PAGE> 16
(Picture)
(Picture caption)
The health care industry continues to grow in Alaska. In this photo,
Providence Alaska Medical Center Administrator Doug Bruce reviews expansion
plans with Margaret Richmond, NBA Business Development Officer.
SUPPORT INDUSTRIES
Alaska employment increased slightly in 1995 and the service, retail and
visitor sectors continue to be the catalysts for that growth. The number of
jobs in Alaska was up 1.1% from last year, despite an economic growth rate of
less than 1% in 1995.
Employment in Alaska is changing, however. Federal, state and local
governments, along with the oil industry, are decreasing modestly. During the
past 25 years, the federal government was a dominant player in the state's
economy. Today, the health care industry employs the same number of civilians
as the federal government. And with a stable economy in the Lower 48, there are
fewer workers migrating to Alaska. Unemployment will remain low, but it will be
harder to find higher paying jobs.
The service and retail sectors continue to grow, but not at the booming rate
of 1994, the biggest year in Anchorage's economic history.
The service sector grew by 3.6% this year. It added more than 2,200 jobs and
is Alaska's largest private-sector employer. The health care industry saw the
greatest growth. Employing more than 20,000 people, it mushroomed due to
Alaska's aging population and the move away from hospitalization.
<PAGE> 17
The retail market also is growing but at a much slower rate. Office Max and
Computer City opened Anchorage stores; Carrs opened a store in Juneau; Barnes &
Noble is slated to open a store in Anchorage in 1996; Home Depot is still
eyeing Anchorage; Safeway is planning to refurbish its Anchorage stores.
In 1994, Alaskan hotels had a 12% increase in room sales, the strongest in
the Pacific Northwest. This trend is continuing. In 1995, two new hotels
opened in Fairbanks, there is consideration of a new Juneau hotel and Princess
Tours announced plans to build a 160-room lodge at Talkeetna in the Denali
State Park.
There were both positives and negatives in the transportation sector in
1995. The closure of MarkAir in April and MarkAir Express in November created
job losses larger than those of the Anchorage Times and ARCO. Other areas of
transportation are healthy and growing. Total cargo at the Port of Anchorage is
up 10%. UPS is planning to expand with a $5.5 million addition at the Anchorage
International Airport next May. There was an increase in domestic passengers,
and, for the first time since 1990, an increase in the number of international
passengers disembarking in Anchorage. Air cargo landings increased due to
export activity to Asia and the Pacific Rim.
The finance sector is strong. Alaska's banks are all adding new
technological products and services.
Experts predict continued slow growth of 1% or less in 1996. The retail,
service and visitor industry will remain at the forefront of the anticipated
growth.
COMMUNITY PARTNERS
Partnerships with local communities and organizations have helped us address
the diverse financial needs in Alaska, particularly for housing and small
business.
NBA was a key founder of the Anchorage CRA Officers Group, a cooperative
effort of six Anchorage banks. The banks held community and neighborhood
forums to identify needs in several targeted communities. In response to these
needs, we held joint workshops on a variety of topics.
NBA also initiated three programs of our own: Smart Start home buyer
workshops, Money Minutes radio spots and Basic Banking financial education
seminars. We've worked closely with community groups and schools in sponsoring
these initiatives.
Our partnerships with the Central Council of Tlingit & Haida Indian Tribes
of Alaska and Women$fund provide small loans and technical assistance. We
provide low- and moderate-income housing through partnerships with housing
organizations in Anchorage, Fairbanks, Juneau, and Homer.
During 1995 we entered into a unique partnership with the Tagiugmiullu
Nunamiullu Housing Authority (TNHA) in Barrow. TNHA staff provide educational
seminars and help residents through NBA's mortgage process.
NBA has a long history of giving back to our communities through donations,
volunteer time, partnerships, and corporate leadership on community issues. We
are proud that we're the only Alaskan bank to claim the entire state as our
community.
(Picture)
(Picture of community agent demonstrating the use of an ATM to a customer)
<PAGE> 18
(Picture)
(Picture of NBA employee group leaders meeting with NBA Community Development
manager)
EMPLOYEE GROUPS
NBA employees provide an important link to our customers and help us meet
the banking needs of our communities. We've formed bank employee groups to
reach specific segments of the community.
The African American Employee Group (AAEG) helps us reach and serve the
African American community in Anchorage. AAEG's mission is to bridge the
communication gap between different ethnic, socioeconomic and political groups
in Anchorage through cultural awareness training, community outreach and
participation, thereby increasing the visibility and improving the image of
NBA.
In 1995, the AAEG surveyed local businesses and community-based
organizations, took part in cultural celebrations and sponsored events within
the bank. They also taught financial education classes and participated on the
boards of local community organizations.
The Hispanic Employee Forum (HEF) has a similar focus. They surveyed the
Anchorage Hispanic community and developed recommendations for outreach and
marketing of bank products and services. They assisted with two home buyer
classes in Spanish and are active participants in Hispanic/Latino cultural
celebrations.
Both groups have received such high marks in the community that the bank has
extended the opportunity for all employees to become involved. In January
1996, "Team NBA" was formed to provide a forum for community outreach and
involvement.
TOURISM
Tourism continues to be a stable growth industry for Alaska. The number of
visitors to the state increased in 1995 and further increases are expected in
1996. The industry faces numerous issues in the coming year however, including
a decline in tourist spending, increasingly crowded locations and the shrinking
marketing budget of the state's top marketer, the Alaska Tourism Marketing
Council (ATMC).
In Southeast Alaska, the top destination for Alaska cruise-ship passengers,
the number of visitors was up. Slightly more than 380,000 passengers traveled
through Juneau, an increase of approximately 7,000 passengers compared to 1994.
At the same time, an increase in vendors and secondary tour operators led to
greater competition for the tourists' disposable income.
Another trend noted by industry experts is reduced spending among cruise
ship passengers. As cruise companies throughout the world try to attract high-
income passengers, Alaska is now competing against exotic worldwide locations.
At the same time, Alaska cruise companies are aggressively pricing cruises in
order to fill the larger ships they've acquired in the past few years. As a
result, it appears that Alaska cruises attract moderate-income travelers who
view the state as a cost-effective alternative to other destinations.
It appears that the ATMC's marketing budget reduction has not impacted the
number of travelers to the state since it's budget decline has been
<PAGE> 19
offset by the cruise line promotions. Tourism experts fear, however, that it
has reduced the percentage of travelers who choose alternatives other than
cruises.
For the 1996 season, Southeast Alaska tour operators expect a strong year
with a potential 15% to 20% growth. Since most cruise travelers also have on-
shore excursion packages to South Central and Interior Alaska, those areas also
are expected to benefit.
Although a tourist count is not available for Southcentral Alaska, Anchorage
hotels report an 8% increase in room sales. The Anchorage
Convention and Visitors Bureau (ACVB) reports a $7.5-million bed tax level
through November. This equates to $90 million in hotel revenue. ACVB expects
that Anchorage will reach $8 million in bed taxes next year, a benchmark that
equates to $100 million in hotel revenue. ACVB also predicts a strong
convention year for 1996.
The question of what a visitor does while in Alaska is an increasing concern
for the tourism industry. Many Alaskan destinations such as Denali National
Park and the Portage Glacier outside of Anchorage are crowded. Tour operators
are extending trips to the Wrangell/St. Elias area to eliminate some of the
overcrowding and continuing to explore new opportunities.
The Interior also had a good year with an anticipated increase of nearly 10%
in the number of visitors this year. Businesses in the region also found that
cruise passengers expected all amenities to be part of their tour packages and
were less willing to spend additional money. The number of tourists to the
Interior is expected to follow the same trends as other areas of the state for
the next few years.
Western Alaska is less impacted by cruise ship travelers and appeals more to
the adventure traveler with higher income. Many visitors to Western Alaska come
from Europe. Last summer two charter flights made weekly trips to Alaska direct
from Germany and Switzerland. Southwest Alaska is expected to gain tourists in
the coming years.
(Picture Caption)
The number of visitors to all areas of the state rose in 1995. Small tour
operators, such as those offering flightseeing tours, compete aggressively for
the tourists' limited time and budgets.
(Picture)
<PAGE> 20
(Picture)
Advisory Boards
(Picture Caption)
Our advisory board network is comprised of 114 board members in 33 communities.
Above, Harvey Samuelson, a Dillingham Advisory Board member, discusses
community needs with Julie Woodworth, Dillingham Branch Manager.
Chairman
Terry S. Kipp
Barrow
Ronald Brower
Robin Harrison
Nate Olemaun
Cora Sakeagak
Bethel
Christopher R. Cooke
Robert Nick (Nunapitchuk)
Gene Peltola
Marc Stemp
Cordova
Richard Borer
Bill Webber
John Wheeler
John Wilson
Delta
Adrian Frederick
Lawrence Gilbertson
Scott Miller
Loretta Schooley
Dillingham
Robert Kallstrom
Robert Nanalook (Togiak)
Harvey Samuelson
Sally Smith
Eagle River
Lee Jordan
Charles McAlpine
Larry Thomas
Henry Warren
Fairbanks
Sam Brice
Jeffry J. Cook
Barbara Schuhmann
Richard Wien
Glennallen
Donald R. Horrell
Ken P. Johns (Copper Center)
Douglas Neeley
Herman Schliesing
Homer
Mary Ann Fell
Richard Inglima
J. Mike Pate
Leo Rhode
Bruce Turkington
Juneau
Donald B. Abel, Jr.
Anne Kaill
Robert Martin, Jr.
Malcolm A. Menzies
Kenai
Dr. Charles A. Bailie
Craig Lofstedt
Ron Malston
Valerie Morin
Ketchikan
Bob Berto
Ken Dole
Bob Elliot (WardsCove)
Martin Pihl
Gail Porter
King Salmon
Frank Hill
Dan O'Hara (Naknek)
Faye Yoas
Kodiak
Ben Ardinger
Alvin Burch
Peter Ramaglia
Edward Randolph
Dick Rohrer
Pete Squartsoff (Port Lions)
Norman Sutliff
Kotzebue
Levi Cleveland (Shungnak)
Marie Greene
Ron Hogan
Doug Neal
Roswell Schaeffer
Nome
Dave Cunningham (Unalakleet)
Charles Fagerstrom
Mary Knodel
Wiley Scott
Palmer
Charles R. Griffin
Sara Jansen
A. Max Olson
Mimi J. Pippel
Petersburg
Sharon Burrell
John Enge
Art Hammer
Alan Otness
Glenn Reid
James G. Taylor
Max Worhatch
Seattle
Dr.Dayton L. Alverson
Alec Brindle
James Ferguson
Norman Kaelber
John Sacia
Seward
Sharon Anderson
Blaine Bardarson
Pat Marrs
Sitka
Robert Allen
Frank Calvin
J. J. Conway
Carolyn Hammack
Cecil McClain
Charles M. Peterson
Mike Snowden
Harold Thompson
Soldotna
Irving Carlisle
Roger Covey (Ninilchik)
Pat Cowan
Darell Jelsma
Jan Stenga
Valdez
Mary Jo Evans
Lyle Von Bargen
Ann Derifield
Wasilla
Gordon Akelstad
Ernie Brannon
Charles Bruno
Dale Conover
Howard Nugent
Wrangell
Barbara Angerman
Leonard Campbell
Olaf Hansen
Bill Privett
Frank Warfel
<PAGE> 21
FINANCIAL SECTION
Contents Page
Ten Year Record.............................................................22
Financial Statements
Consolidated Statements of Income.........................................24
Consolidated Statements of Condition .....................................25
Consolidated Statements of Cash Flows ....................................26
Consolidated Statements of Changes in Shareholders' Equity ...............27
Notes to Consolidated Financial Statements ...............................27
Report of Independent Auditors..............................................37
Management Discussion & Analysis
Highlights ...............................................................38
Net Interest Income ......................................................38
Noninterest Income .......................................................39
Noninterest Expense ......................................................39
Investment Securities, Securities Available for Sale
and Short-Term Investments ..............................................40
Liquidity and Interest Rate Sensitivity ..................................40
Loans and Lease Financing.................................................41
Reserve for Possible Loan Losses and Provision for Loan Losses ...........43
Deposits and Short-Term Borrowings .......................................44
Shareholders' Equity and Capital Resources ...............................45
The Impact of Inflation ..................................................45
Consolidated Average Balance Sheets/Interest Income and Expenses/Rates .....46
Analysis of Changes in Net Interest Margin..................................47
Quarterly Financial Data....................................................48
Market for Common Stock ....................................................48
<PAGE> 22 and 23
<TABLE>
TEN YEAR RECORD
(For the Years Ended December 31)(in thousands except per share amounts and
statistics)
<CAPTION>
1995 1994 1993 1992 l991
<S> <C> <C> <C> <C> <C>
Operating Results
Net interest income $120,547 $113,471 $112,820 $100,763 $93,739
Provision for loan losses (3,100) 2,200 7,700 4,000 3,000
Other income 33,992 35,538 38,517 38,284 32,875
Other expenses 94,688 89,072 89,571 83,704 82,062
- ---------------------------------------------------------------------------------------------
Income before taxes 62,951 57,737 54,066 51,343 41,552
Applicable income taxes (benefit) 21,671 20,217 18,440 17,316 13,149
- ---------------------------------------------------------------------------------------------
Net income 41,280 37,520 35,626 34,027 28,403
Cash dividends declared $ 13,547 $ 11,953 $ 11,953 $ 6,774 $ 3,984
Per Share Statistics
Net income $5.18 $4.71 $4.47 $4.27 $3.56
Cash dividends declared 1.70 1.50 1.50 0.85 0.50
Stock dividends - declared percent - - - - -
Book value at year-end $43.96 $39.25 $36.77 $33.79 $30.37
Year-End Totals
Demand deposits $ 539,714 $ 522,285 $ 514,667 $ 468,077 $ 415,584
Interest-bearing deposits:
NOW 148,896 163,088 145,057 126,481 122,376
Money market savings 291,325 326,386 266,949 261,134 248,852
Time and savings 760,546 735,862 679,474 680,578 738,178
- ---------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 1,200,767 1,225,336 1,091,480 1,068,193 1,109,406
Total Deposits 1,740,481 1,747,621 1,606,147 1,536,270 1,524,990
Federal funds purchased
and securities sold
under agreement to repurchase 325,859 259,983 283,665 300,335 271,625
Loans and lease financing 1,326,840 1,226,164 1,122,570 928,999 874,118
Securities:
U.S. government and
federal agencies 303,304 345,319 282,110 382,460 395,401
State and municipal 9,008 20,239 6,773 10,605 4,639
Other 241,089 213,174 215,386 298,322 266,657
- ---------------------------------------------------------------------------------------------
Total Investment Securities 553,401 578,732 504,269 691,387 666,697
Shareholders' equity account 350,320 312,772 292,976 269,303 242,050
Total assets $2,450,921 $2,344,678 $2,207,280 $2,129,965 $2,077,243
- ---------------------------------------------------------------------------------------------
Other year-end statistics:
Number of shares outstanding 7,968,800 7,968,800 7,968,800 7,968,800 7,968,800
Number of shareholders 1,224 1,243 1,279 1,826 1,332
Number of employees 1,101 1,130 1,202 1,137 1,138
</TABLE>
<TABLE>
TEN YEAR RECORD(continued)
<CAPTION>
1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
Operating Results
Net interest income $85,384 $73,411 $59,870 $51,985 $54,970
Provision for loan losses 9,562 14,112 22,100 4,551 2,506
Other income 30,847 37,043 26,768 21,136 21,024
Other expenses 74,889 70,427 59,275 50,344 52,040
- ---------------------------------------------------------------------------------------------
Income before taxes 31,780 25,915 5,263 18,226 21,448
Applicable income taxes (benefit) 6,268 3,199 (972) 1,872 3,425
- ---------------------------------------------------------------------------------------------
Net income 25,512 22,716 6,235 16,354 18,023
Cash dividends declared $ 3,984 $ 2,988 $ 2,988 $ 2,739 $ 2,491
Per Share Statistics
Net income $3.20 $2.85 $0.78 $2.06 $2.27
Cash dividends declared 0.50 0.38 0.38 0.35 0.32
Stock dividends - declared percent 33 33% - - 20.00% -
Book value at year-end $27.31 $24.61 $22.13 $21.73 $20.02
Year-End Totals
Demand deposits $444,761 $ 484,177 $ 361,349 $ 342,194 $ 245,791
Interest-bearing deposits:
NOW 104,106 106,310 93,605 92,204 65,392
Money market savings 216,284 222,601 253,597 299,423 225,523
Time and savings 799,251 868,287 565,459 685,506 349,279
- ---------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 1,119,641 1,197,198 912,661 1,077,133 640,194
Total Deposits 1,564,402 1,681,375 1,274,010 1,419,327 885,985
Federal funds purchased
and securities sold
under agreement to repurchase 245,660 224,005 172,592 110,129 95,520
Loans and lease financing 922,505 892,634 787,900 839,735 668,927
Securities:
U.S. government and
federal agencies 516,867 588,496 455,788 301,949 203,101
State and municipal 7,257 12,488 19,330 23,419 29,391
Other 262,760 221,954 37,761 3,180 2,760
- ---------------------------------------------------------------------------------------------
Total Investment Securities 786,884 822,938 512,879 328,548 235,252
Shareholders' equity account 217,631 196,103 176,375 173,128 159,536
Total assets $2,063,258 $2,139,923 $1,652,505 $1,742,657 $1,168,664
- ---------------------------------------------------------------------------------------------
Other year-end statistics:
Number of shares outstanding 7,968,800 5,976,600 5,976,600 5,976,600 4,981,300
Number of shareholders 1,351 1,352 1,405 1,441 1,450
Number of employees 1,132 1,146 921 1,034 841
</TABLE>
<PAGE> 24
CONSOLIDATED STATEMENTS OF INCOME
(For the Years Ended December 31)
(in thousands except per share amounts) 1995 1994 1993
Interest Income:
Loans and lease financing including fees $132,336 $117,934 $106,890
Balances with banks 41 138 630
Federal funds sold and securities
purchased under agreement to resell 806 1,745 668
Investment securities including dividends:
U.S. Treasury securities 13,920 11,320 9,756
Obligations of other U.S. government
agencies and corporations 22,753 18,167 19,897
Obligations of states and
political subdivisions 812 363 337
Other securities 18,588 12,940 17,862
- -------------------------------------------------------------------------
Total Interest Income 189,256 162,607 156,040
Interest Expense:
Deposits 50,413 39,014 32,607
Federal funds purchased and securities
sold under agreement to repurchase 18,273 10,100 10,565
Other purchased funds 23 22 48
- -------------------------------------------------------------------------
Total Interest Expense 68,709 49,136 43,220
- -------------------------------------------------------------------------
Net Interest Income 120,547 113,471 112,820
Provision for loan losses (3,100) 2,200 7,700
- -------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 123,647 111,271 105,120
Other Income:
Trust department income 2,114 2,013 1,916
Service charges on deposit accounts 11,867 10,721 10,582
Mortgage loan servicing fees 7,936 7,574 7,353
Securities transactions (3,832) 209 1,416
Credit card service fees 5,849 5,161 5,217
Other 10,058 9,860 12,033
- -------------------------------------------------------------------------
Total Other Income 33,992 35,538 38,517
Other Expense:
Salaries 36,802 37,167 36,551
Profit sharing and other employee benefits 10,415 10,566 10,774
Net occupancy expense of bank premises 7,135 7,038 6,803
Furniture and equipment expense 8,267 7,764 8,535
Other 32,069 26,537 26,908
- -------------------------------------------------------------------------
Total Other Expense 94,688 89,072 89,571
Income before income taxes 62,951 57 737 54,066
Applicable income taxes 21,671 20,217 18,440
- ------------------------------------------------------------------------
Net Income $ 41,280 $ 37,520 $ 35,626
========================================================================
Net income per share $5.18 $4.71 $4.47
========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 25
CONSOLIDATED STATEMENTS OF CONDITION
(For the Years Ended December 31)
(in thousands except per share amounts) 1995 1994
Assets:
Cash and due from banks $ 149,307 $ 134,379
Interest-bearing balances with banks 1,293 195
Federal funds sold - 10,000
Investment securities:
Obligations of other U.S. government agencies
and corporations 303,304 345,319
Obligations of states and political subdivisions 9,008 20,239
Other securities 241,089 213,174
- ------------------------------------------------------------------------------
Total Investment Securities(Market value
$558,335 in 1995 and $556,065 in 1994) 553,401 578,732
Securities available for sale at market (Cost
$266,595 in 1995 and $283,422 in 1994) 273,391 273,723
Loans and lease financing 1,326,840 1,226,164
Less reserve for possible loan losses (21,529) (19,226)
- ------------------------------------------------------------------------------
Loans and lease financing less reserve 1,305,311 1,206,938
Loans held for sale 33,099 19,627
Net premises and equipment 62,217 58,241
Other assets 72,902 62,843
- ------------------------------------------------------------------------------
Total Assets $2,450,921 $2,344,678
==============================================================================
Liabilities and Shareholders' Equity:
Demand deposits $ 539,714 $ 522,285
Interest-bearing deposits:
NOW 148,896 163,088
Savings 303,432 304,164
Money market savings 291,325 326,386
Time 457,114 431,698
- ------------------------------------------------------------------------------
Total Interest-Bearing Deposits 1,200,767 1,225,336
- ------------------------------------------------------------------------------
Total Deposits 1,740,481 1,747,621
Federal funds purchased 42,812 1,757
Securities sold under agreement to repurchase 283,047 258,226
Other purchased funds 1,681 1,703
Other liabilities 32,580 22,599
- ------------------------------------------------------------------------------
Total Liabilities 2,100,601 2,031,906
Shareholders' Equity: 1995 1994
Common stock - $10 par value 80,000 80,000
Shares authorized 10,500,000 10,500,000
Shares issued 8,000,000 8,000,000
Capital surplus 63,000 63,000
Retained earnings 203,702 175,969
Net unrealized gains (losses) on securities
available for sale, net of taxes 4,044 (5,771)
Treasury stock at cost (31,200 shares) (426) (426)
- ------------------------------------------------------------------------------
Total Shareholders' Equity 350,320 312,772
- ------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,450,921 $2,344,678
==============================================================================
Net book value per share (Based on 7,968,800
shares outstanding) $43.96 $39.25
==============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 26
CONSOLIDATED STATEMENT OF CASH FLOWS
(For the Years Ended December 31)
(in thousands) 1995 1994 1993
Operating Activities
Net Income $ 41,280 $ 37,520 $ 35,626
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses (3,100) 2,200 7,700
Deferred tax expense (credit) (124) 497 (851)
Provision for depreciation and amortization 6,995 6,415 6,316
Net amortization on securities 606 4,058 7,097
Gain on security transactions (127) (2,113) (1,554)
Loss on security transactions 3,959 1,904 138
Gain on loan sales (405) (1,634) (2,272)
Loss (gain) on sales of premises and equipment (4) 125 18
Loss (gain) on sales of other assets 50 (216) (1,252)
Net decrease (increase) in loans held for sale (13,022) 146,188 (94,053)
Increase in interest receivable, prepaid
expenses, and other assets (1,688) (4,350) (2,284)
Increase (decrease) in interest payable,
accrued expenses, and other liabilities 7,177 (858) (98)
- ------------------------------------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities 41,597 189,736 (45,469)
Investing Activities
Net decrease in federal funds sold and
interest-bearing balances with other banks 8,902 10,590 44,645
Proceeds from maturities of securities held
to maturity 99,193 180,018 372,566
Proceeds from sales of securities held
to maturity - - 9,105
Purchases of securities held to maturity (74,456) (276,876) (231,676)
Proceeds from maturities of securities
available for sale - 30,588 53,148
Proceeds from sales of securities available
for sale 183,626 75,565 40,132
Purchases of securities available for sale (170,759) (184,820) (119,503)
Net increase in lending activities (96,574) (98,418) (81,441)
Purchase of real estate loan portfolio - - (101,217)
Proceeds from sales of premises and equipment 28 557 103
Proceeds from sales of other assets 6,731 3,860 7,761
Purchases of premises and equipment (9,534) (8,335) (4,380)
Purchase of other assets (20,985) (6,258) (4,197)
Acquisition of banks (100) (10,040) (98)
- ------------------------------------------------------------------------------
Net Cash Used in Investing Activities (73,928) (283,569) (15,052)
Financing Activities
Net increase (decrease) in total deposits (7,040) 151,514 69,975
Net increase (decrease) in short-term borrowings 65,854 (22,998) (16,123)
Cash dividends (11,555) (11,953) (11,953)
- ------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 47,259 116,563 41,899
- ------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents 14,928 22,730 (18,622)
Cash and cash equivalents at beginning of year 134,379 111,649 130,271
- ------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $149,307 $134,379 $111,649
==============================================================================
Total interest payments on deposits and purchased funds were $65,872,000 in
1995, $49,050,000 in 1994, and $44,821,000 in 1993. Securities totaling
$14,434,000 were transferred between held to maturity and available for sale
upon adoption of SFAS 115 in 1994. An adjustment for unrealized gains (losses)
on securities available for sale of $9,815,000 and ($7,211,000), net of tax,
has been reflected in shareholders' equity in 1995 and 1994, respectively. The
accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 27
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
<CAPTION>
Common Net Unrealized Total
Stock $10 Capital Retained Gains(Losses) Treasury Shareholders'
(in thousands) Par Value Surplus Earnings on Securities Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1993 $80,000 $63,000 $126,729 $ - $(426) $269,303
Net income - - 35,626 - - 35,626
Cash dividend declared - - (11,953) - - (11,953)
- ------------------------------------------------------------------------------------------------
Balance December 31, 1993 80,000 63,000 150,402 - (426) 292,976
Adoption of SFAS 115 - - - 1,440 - 1,440
Net income - - 37,520 - - 37,520
Cash dividend declared - - (11,953) - - (11,953)
Net unrealized loss on
securities available
for sale - - - (7,211) - (7,211)
- ------------------------------------------------------------------------------------------------
Balance December 31, 1994 80,000 63,000 175,969 (5,771) (426) 312,772
Net income - - 41,280 - - 41,280
Cash dividend declared - - (13,547) - - (13,547)
Net unrealized gain on
securities available
for sale - - - 9,815 - 9,815
- ------------------------------------------------------------------------------------------------
Balance December 31, 1995 $80,000 $63,000 $203,702 $4,044 $(426) $350,320
================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of National Bancorp of Alaska,
Inc. (the Corporation) and its subsidiaries, including its principal
subsidiary, National Bank of Alaska (the Bank) and subsidiaries, conform
with generally accepted accounting principles and prevailing practices of the
banking industry.
CONSOLIDATION: The consolidated financial statements include the accounts
of National Bancorp of Alaska, Inc. and subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of cash
and due from banks.
SECURITIES: Investment securities are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Management believes it
has the ability and intent to hold such securities until maturity. Gains and
losses from the sale of investment securities are computed under the specific
identification method.
Securities available for sale, which are primarily U.S. Treasury securities,
are valued in the aggregate at market with unrealized gains or losses
recognized as a component of shareholders' equity. Although the
Corporation has the ability to hold such securities, these securities may
be sold in response to foreseeable events and conditions related to
interest rate changes.
LOANS AND LEASE FINANCING: Loans are carried at their principal amount
outstanding. Interest income on loans is accrued and recognized on the
principal amount outstanding except for those loans in a nonaccrual
status. Interest is accrued on loans past due 90 days or more only when
management has ascertained that collection of the interest is assured and
imminent. Loans are placed in nonaccrual status, and related accrued
interest reversed to income, when principal or interest is in default for 90
days or more, unless a loan is well secured and in the process of
collection. Income from nonaccrual loans is recorded only when interest
payments are received. The financing method of accounting is used for
direct lease contracts receivable. Under this method, income is recognized
during the term of the lease in proportion to the unrecovered investment.
LOAN FEES AND COSTS: Loan interest income is adjusted for amortization of
deferred loan origination and commitment fees to approximate the level
yield method of accounting.
LOANS HELD FOR SALE: Loans held for sale are primarily residential mortgage
loans and are valued in the aggregate at the lower of cost or market value.
RESERVE FOR POSSIBLE LOAN LOSSES: Loan losses are accounted for under
the reserve method. Losses and recoveries are charged or credited directly
to the reserve. The provision for loan losses is charged to operating
expense and is based on management's evaluation of the loan portfolio,
past loan loss experience, anticipated loan losses, growth in the loan
portfolio, and other factors including economic conditions that deserve
current recognition in estimating loan losses. For the purpose of
computing income tax, the Corporation provides the maximum expense
allowable under applicable income tax laws.
<PAGE> 28
TRUST ASSETS: Assets held in a fiduciary or agency capacity by the National
Bank of Alaska's Trust Department for its customers are not included in
these statements since such items are not assets of the Bank. The cash
deposits of the Trust Department held by the Bank in the normal course of
business are reported in the applicable deposit category of these
statements.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization
expense for financial reporting purposes is computed using the straight-
line method based upon the estimated useful lives of the assets, ranging
from five to 40 years. Maintenance and repairs are charged to current
operations, while renewals and betterments are capitalized.
OTHER REAL ESTATE: Other real estate comprises properties acquired through
a foreclosure proceeding or acceptance of a deed in lieu of foreclosure.
These amounts are recorded at the lower of cost or fair value. Any write-
down from the cost to fair value required at the time of foreclosure is
charged to the reserve for possible loan losses. Subsequent write-downs
and gains or losses recognized on the sale of these properties are
included in other expense or other income.
MORTGAGE SERVICING RIGHTS: In May of 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) 122, "Accounting for Mortgage Servicing Rights," which becomes
effective for years beginning after December 15, 1995. This statement
eliminates the accounting distinction between purchased mortgage
servicing rights and the retained servicing rights associated with
mortgage loans originated and sold. An asset will be recognized for
mortgage servicing rights based upon the relative fair values of the
servicing rights and the loan without the servicing rights. The statement
requires that capitalized mortgage servicing rights be evaluated for
impairment based on their fair value. Impairment will be recognized
through a valuation allowance.
The corporation plans on adopting the new rules prospectively in the first
quarter of 1996. Based on the level of recent mortgage activity, adopting
this statement is not expected to have a material effect on current
financial statements.
INCOME TAXES: A current income tax asset or liability is recognized for
estimated taxes payable or refundable on current year tax returns. A
deferred tax asset or liability is recognized for future tax effects
attributable to temporary differences arising between the amount of taxable
income and pretax financial income for the year and the tax bases of
assets or liabilities and their reported amounts in the financial statements.
The measurement of current and deferred tax assets and liabilities is
based on provisions of enacted tax law. The effect of a change in tax
rates on deferred taxes is recognized in income in the period that includes
the enactment date. Deferred tax assets are reduced by the amount of tax
benefits that are not expected to be realized.
EARNINGS PER SHARE: Earnings per share are computed based on the
weighted average number of shares outstanding during the year
(7,968,800 shares).
FAIR VALUE OF FINANCIAL INSTRUMENTS: A table of fair value of financial
instruments are included in note 13. The following methods and
assumptions were used to estimate fair value disclosures as defined under
SFAS 107, "Disclosures about Fair Value of Financial Instruments":
Cash and cash equivalents, federal funds sold and securities purchased
under agreement to resell: The carrying amounts reported in the balance
sheet represent their fair values.
Interest-bearing balances with banks: The carrying amounts of
investments with maturities less than 90 days represent their fair value.
For short-term investments with maturities longer than 90 days, fair
values are based on quoted market prices.
Investment securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently, fair values are based
on carrying amounts. An estimate of the fair value of the remaining
portfolio is based on discounted cash flow analyses applied to pools of
similar loans, using weighted average coupon rate, weighted average
maturity, and interest rates currently being offered for similar loans. Fair
value for nonaccrual loans are based on the value of the collateral or the
present value of the expected cash flow related to the loans.
Loan commitments and letters of credit: Fair values for loan commitments
and guarantees are based on the current fees charged for similar
contracts to customers with similar characteristics.
Loans held for sale: Fair value of residential mortgages with commitments
to sell within 90 days are based upon the amounts receivable under the
commitments. Fair value for other mortgages are based on the value of
loans with similar characteristics.
Deposit liabilities: The fair values of demand, NOW, savings, and money
market savings deposits, as defined in SFAS 107, are equal to the
carrying amount at the reporting date. The carrying amount for variable
rate time deposits approximate their fair value. Fair values for fixed rate
time deposits are estimated using a discounted cash flow calculation that
applies currently offered interest rates to a schedule of aggregate expected
monthly maturities of time deposits.
Short-term borrowing: For federal funds purchased, securities sold under
agreement to repurchase and other purchased funds with maturities less
than 90 days, the carrying amount represents their fair value. For
securities sold under agreement to repurchase with maturities longer than
90 days, fair values are estimated using a discounted cash flow
calculation using current interest rates for similar borrowings.
RECLASSIFICATIONS: Certain prior year balances have been reclassified to
conform to the current year presentation.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to meet statutory reserve requirements. In part, the
Bank meets these requirements by maintaining balances in a noninterest
bearing account at a Federal Reserve Bank. During 1995, the average
balance in this account totaled $12,490,000.
<PAGE> 29
3. SECURITIES
The following table shows the major components of the securities
portfolio, the maturity distribution of debt securities and a
comparison of book and market value.
December 31, 1995 Amortized Unrealized Unrealized Market
(in thousands) cost Gains Losses Value
U.S. agencies and corporations $303,304 $3,111 $(1,027) $305,388
State and political subdivisions 9,008 43 (3) 9,048
Corporate notes 89,925 2,143 (351) 91,717
Mortgage and asset backed securities 138,498 1,863 (845) 139,516
Other securities 12,666 - - 12,666
- -----------------------------------------------------------------------------
Total $553,401 $7,160 $(2,226) $558,335
=============================================================================
Securities available for sale
December 31 1995 Amortized Unrealized Unrealized Market
(in thousands) cost Gains Losses Value
U.S. Treasury $198,793 $6,008 $ - $204,801
U.S agencies and corporations 45,211 787 - 45,998
Other securities 22,591 719 (718) 22,592
- -----------------------------------------------------------------------------
Total $266,595 $7,514 $(718) $273,391
=============================================================================
December 31, 1994 Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
U.S. agencies and corporations $345,319 $ 82 $(15,352) $330,049
State and political subdivisions 20,239 - (154) 20,085
Corporate notes 43,323 - (693) 42,630
Mortgage and asset backed securities 157,781 149 (6,699) 151,231
Other securities 12,070 - - 12,070
- -----------------------------------------------------------------------------
Total $578,732 $ 231 $(22,898) $556,065
=============================================================================
Securities available for sale
December 31 1994 Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
U.S. Treasury $263,014 $ - $(8,425) $254,589
Other securities 20,408 43 (1,317) 19,134
- -----------------------------------------------------------------------------
Total $283,422 $ 43 $(9,742) $273,723
=============================================================================
Maturities Distribution of
Debt Securities Investment Securities Available for Sale
December 31, 1995 Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
Due in 1 year or less $110,207 $109,698 $ 54,946 $ 55,302
Due after 1 year through 5 years 422,468 427,818 189,058 195,497
Due after 5 years through 10 years 6,695 6,849 - -
Due after 10 years 1,365 1,304 - -
- ----------------------------------------------------------------------------
Total $540,735 $545,669 $244,004 $250,799
============================================================================
Maturities of mortgage and asset backed securities are classified
based on their anticipated repayment schedules. Actual repayments
may vary due to prepayment of the underlying loans.
The Corporation pledged $412,081,000 of its U.S. Treasury
and U.S. agencies and corporations securities and $2,010,000 of its
state and political subdivisions securities as of December 31, 1995,
to secure public deposits, trust funds, securities sold under repurchase
agreements and for other purposes. The Corporation does not have a
trading security portfolio.
<PAGE> 30
4. LOANS AND LEASE FINANCING
The Bank grants commercial, real estate and consumer loans to customers
throughout the state. Collateral accepted against the commercial loan
portfolio includes accounts receivable, inventory and equipment. Autos,
second deeds of trust and boats are accepted as collateral for the
installment portfolio.
The following table represents an analysis of the loans and lease financing
portfolio at December 31:
(in thousands) 1995 1994
Commercial and industrial $ 470,480 $ 439,866
Real estate construction 24,999 21,845
Real estate long-term 423,872 415,017
Installment 331,531 271,294
Nontaxable 64,356 68,049
Lease financing 11,602 10,093
- -------------------------------------------------------------
Loans and Lease Financing $1,326,840 $1,226,164
=============================================================
The carrying amount and fair value of the loan portfolio, excluding
leases, consists of the following at December 31:
1995 1994
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
Commercial and industrial $ 470,480 $ 474,431 $ 439,866 $ 437,112
Real estate construction 24,999 24,966 21,845 19,894
Real estate long-term 423,872 422,841 415,017 406,711
Installment 331,531 330,326 271,294 272,736
Nontaxable 64,356 64,119 68,049 64,058
- ------------------------------------------------------------------------------
Loans $1,315,238 $1,316,683 $1,216,071 $1,200,511
==============================================================================
5. RESERVE FOR POSSIBLE LOAN LOSSES
The following is a reconciliation of the loan loss reserve for the year-ended
December 31:
(in thousands) 1995 1994 1993
Balance at beginning of year $19,226 $17,408 $21,338
Loans charged off (4,544) (2,884) (14,304)
Recoveries of loans charged off 9,947 2,502 2,674
Net charge offs 5,403 (382) (11,630)
Provision charged to operating expense (3,100) 2,200 7,700
- ---------------------------------------------------------------------
Balance at End of Year $21,529 $19,226 $17,408
=====================================================================
Effective January 1, 1995, the Corporation prospectively adopted SFAS
114, "Accounting by Creditors for Impairment of a Loan," as amended by
SFAS 118. These statements address the accounting and measurement of
the impairment of certain loans when it is probable that a creditor will be
unable to collect all amounts due under the contractual terms of the loan
agreements. Impairment is measured using the fair value of collateral or
the present value of future cash flows. Impairment is recognized when the
value is less than the recorded investment in the loan by establishing an
allowance for impaired loan losses with a charge to the provision for loan
losses.
The total investment in impaired loans was $2,073,000 at December 31,
1995. Interest income on impaired loans is recorded on the cash basis
and totaled $3,440,000 for 1995. The average balance of impaired loans
was $3,434,000 for 1995. It has been determined that an allocation of
the reserve for loan losses to impaired loans in accordance with SFAS 114
is not required.
<PAGE> 31
6. PREMISES AND EQUIPMENT
The following table summarizes the components of premises and
equipment at December 31:
(in thousands) 1995 1994
Buildings $64,284 $61,059
Land 13,796 12,390
Leasehold improvements 4,656 4,295
Equipment, furniture and fixtures 38,519 35,271
- -------------------------------------------------------------
Total Cost 121,255 113,015
Less accumulated depreciation (59,038) (54,774)
- -------------------------------------------------------------
Net Book Value $62,217 $58,241
=============================================================
Depreciation expense was $5,535,000 in 1995, $5,132,000 in 1994,
and $5,074,000 in 1993.
7. SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
Information related to the Corporation's securities sold under agreement
to repurchase at December 31, 1995, is segregated below by due date and
by the type of securities sold:
Less
Than 30-90 After
(in thousands) Overnight 30 Days Days 90 Days Total
U.S. Treasury
Carrying value $ 58,064 $ 4,446 $ 7,484 $11,971 $ 81,965
Market value 60,274 4,537 7,709 12,225 84,745
Repurchase agreements 57,986 4,357 7,384 11,701 81,428
Interest rate 4.64% 5.18% 5.36% 5.29% 4.83%
- ----------------------------------------------------------------------------
U.S government agencies
and corporations:
Carrying value $153,628 $13,712 $19,233 $18,924 $205,497
Market value 155,062 13,754 19,335 18,965 207,116
Repurchase agreements 151,020 13,397 18,769 18,433 201,619
Interest rate 4.54% 5.27% 5.45% 5.00% 4.72%
- ----------------------------------------------------------------------------
Total
Carrying value $211,692 $18,158 $26,717 $30,895 $287,462
Market value 215,336 18,291 27,044 31,190 291,861
Repurchase agreements 209,006 17,754 26,153 30,134 283,047
Interest rate 4.57% 5.24% 5.42% 5.12% 4.75%
- ----------------------------------------------------------------------------
Carrying value and market value of the securities include accrued
interest.
8. SHAREHOLDERS' EQUITY
DIVIDENDS: The Corporation declared cash dividends of $1.70 per share in
1995.
RESTRICTIONS ON DIVIDENDS OR LOANS: Under Federal banking law, dividends
declared by the Bank in any calendar year may not, without approval of
the Comptroller of the Currency, exceed net income (as defined) for the
year combined with its retained net income for the two preceding years
The Bank may declare dividends in 1996 up to $1,834,000 plus 1996 net
profits to the date of dividend declaration without receiving such approval.
The Bank is also required to maintain minimum amounts of Capital to total
risk weighted assets, as defined by the banking regulators. At December 31,
the Bank is required to have minimum Tier 1 and Total capital ratios
of 4.00% and 8.00%, respectively. The Bank's actual ratios at that date
were 13.53% and 14.73%, respectively. The Bank's leverage ratio at
December 31, 1995, was 10.01%.
Under Federal Reserve regulation, the Bank also is limited as to the
amount it may loan to its affiliates, including the Corporation, unless such
loans are collateralized by specified obligations.
<PAGE> 32
9. OPERATING LEASES
The Corporation, under various noncancelable agreements, leases certain
real and personal properties with terms ranging from one to ten years.
Most leases contain renewal options and some contain provisions for
increased rentals under certain conditions. Future minimum payments
under noncancelable operating leases with terms in excess of one year as
of December 31, 1995, are as follows:
Minimum Lease
(in thousands) Payments
1995 $2,444
1996 1,703
1997 1,045
1998 770
1999 666
Later Years 2,576
- ------------------------------------------------
Total Minimum Lease Payments $9,204
================================================
Rental expense for all operating leases was $3,316,000, $3,220,000, and
$3,544,000 for the years ended 1995, 1994 and 1993, respectively.
10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Corporation offers certain financial
products to its customers, including commitments for the extension of
credit, letters of credit, and guarantees, which are properly not reflected
in the financial statements. The exposure to credit loss in the event of
nonperformance by the other party to these financial instruments is
represented by the contractual notional amount of those instruments. The
Corporation had outstanding standby letters of credit totaling $9,768,000
at December 31, 1995 and $8,535,000 at December 31, 1994. Commitments
for loans and investments approximated $364,069,000 at December 31, 1995
and $370,949,000 at December 31, 1994. At December 31, 1995, the fair value
of commitments for loans and letters of credit is represented by a liability
of $5,104,000, approximating the current fees charged for similar contracts
to customers with similar characteristics. The fair value at December 31,
1994 was $5,411,000. There are no recourse obligations regarding the
servicing of loans.
The Corporation uses the same loan credit and collateral policies in
making commitments and conditional obligations as it does for other
lending operations. The Corporation has a diversified loan portfolio with no
concentrations of credit risk by industry deemed significant. Most of the
lending activity is with customers located within the state.
The Corporation from time to time may be a defendant in legal proceedings
related to the conduct of its businesses. In the opinion of management
after consultation with legal counsel, the financial position of the
Corporation will not be affected materially by the outcome of any current
legal proceedings.
11. RELATED PARTY TRANSACTIONS
In the ordinary course of business, executive officers and directors of the
Corporation and companies in which certain directors are principal owners,
were loan customers of, and had other transactions with the Corporation
and its subsidiaries. The aggregate indebtedness to the Corporation and
its subsidiaries of these parties approximated $43,028,000 and $28,750,000
at December 31, 1995 and 1994, respectively. During 1995, $82,771,000 of new
loans were made and repayments totaled $68,479,000 exclusive of changes in
directors. It is the policy of the Corporation and its subsidiaries that
such loans be made on substantially the same terms as those prevailing at
the time for comparable loans to other parties
<PAGE> 33
12. EMPLOYEE BENEFIT PLANS
The Corporation has a noncontributory, qualified profit sharing plan for its
salaried employees. Contributions to the plan are based on bank
performance and approved by the Board of Directors. Contributions to the
plan charged to operations were $4,954,000 in 1995, $4,502,000 in
1994, and $4,275,000 in 1993. The plan provides a voluntary deferred
compensation program, which permits participants to defer up to 15% of
their salaries if the Corporation has net profits for the year or
accumulated net profits, it will provide a matching contribution of 50% of
each participant's deferral, limited to 3% of the participant's total
salary. The employee's deferred salary account, which is immediately vested
and nonforfeitable at all times, is generally distributable in the same
manner as other benefits under this plan.
The Corporation currently offers continued enrollment in the medical
insurance program to qualified retiring employees and directors. This
postretirement benefit becomes available to participants in the medical:
insurance program if they meet minimum age and service requirements
and if they agree to contribute a portion of the cost. Postretirement
benefits accrue during the years of service prior to the vestment of the
benefits. The Corporation has the right to modify or terminate these
benefits for current and future retirees at any time.
The actuarial and recorded liabilities, none of which are funded, and
components of periodic cost for these postretirement benefits at
December 31 are in the following table.
(in thousands) 1995 1994 1993
Accumulated Benefit Obligation
Actives - fully eligible $ 172 $ 161 $ 212
Actives - other 1,170 1,095 1,100
Retirees 1,824 1,706 1,641
- ------------------------------------------------------------
Total $ 3,166 $ 2,962 $ 2,953
- ------------------------------------------------------------
Unrecognized Transition
Obligation $(2,058) $(2,187) $(2,316)
Unrecognized Net
Gain (Loss) 602 643 426
- ------------------------------------------------------------
Accrued Postretirement
Benefit Cost $ 1,710 $ 1,418 $ 1,063
- ------------------------------------------------------------
Net Periodic Cost:
Service Cost $ 105 $ 110 $ 146
Interest Cost 248 216 343
Amortization of unrecognized
transition obligation 129 129 176
Amortizations of net gain/loss (34) (16) -
- -----------------------------------------------------------
Total Expense $ 448 $ 439 $ 665
- -----------------------------------------------------------
The accumulated benefit obligation was determined using a discount rate of
8.0% in 1994 and 1995 and 7.5% in 1993 and an assumed health care cost
trend rate of 8.0% for 1994 and 1995 and 8.5% for 1993, decreasing uniformly
to 6% after eight years in 1994 and 1995 and nine years in 1993.
The effect on the present value of a one percent increase in the health
care cost trend rate, would result in an increase of $533,000 in the
obligation and a corresponding increase of $67,000 in the 1995 aggregate
service and interest components of expense.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table summarizes carrying amounts and fair values of financial
instruments at December 31:
1995 1994
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
Cash and due from banks $ 149,307 $ 149,307 $ 134,379 $ 134,379
Interest-bearing balances
with banks 1,293 1,293 195 195
Federal funds sold - - 10,000 10,000
Investment securities 553,401 558,335 578,732 556,065
Securities available for sale 273,391 273,391 273,723 273,723
Loans(excluding lease financing) 1,315,238 1,316,683 1,216,071 1,200,511
Loans held for sale 33,099 33,269 19,627 19,627
Demand deposits $ 539,714 $ 539,714 $ 522,285 $ 522,285
NOW 148,896 148,896 163,088 163,088
Savings 303,432 303,432 304,164 304,164
Money market savings 291,325 291,325 326,386 326,386
Time 457,114 459,367 431,698 431,306
Federal funds purchased 42,812 42,812 1,757 1,757
Securities sold under agreement
to repurchase 283,047 283,142 258,226 258,188
Other purchased funds 1,681 1,681 1,703 1,703
Methods and assumptions used to determine fair values of financial
instruments are included in footnote 1. Additional detail on fair value
of securities is included in footnote 3. Additional detail on fair value
of loans is included in footnote 4
<PAGE> 34
14. INCOME TAXES
The provision for income taxes, including the tax effect on securities
transactions for the year-ended December 31, is derived as follows:
(in thousands) 1995 1994 1993
Current tax expense
Federal income taxes $17,626 $16,014 $15,727
State income taxes 4,169 3,706 3,564
- -------------------------------------------------------------------
Total Current Tax Expense 21,795 19,720 19,291
Deferred tax expense (credit) (124) 497 (851)
- -------------------------------------------------------------------
Total $21,671 $20,217 $18,440
===================================================================
Applicable to operating income $22,987 $20,144 $17,957
Applicable to securities transactions (1,316) 73 483
- -------------------------------------------------------------------
Total $21,671 $20,217 $18,440
===================================================================
A reconciliation between the statutory Federal income tax rate and the
effective income tax rate follows:
1995 1994 1993
(in thousands) Percent Percent Percent
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax-exempt interest income (3.3) (3.1) (3.7)
State income tax, net of
federal tax benefit 4.3 4.3 4.3
Other (1.7) (1.2) (1.5)
- ------------------------------------------------------------------
Total Provision For Income Taxes 34.3% 35.0% 34.1%
==================================================================
Income tax payments made during the calendar years of 1995, 1994 and 1993
were $21,129,000, $17,381,000, and $22,586,000, respectively.
The Corporation had net deferred tax assets of $4,625,000 at December 31,
1995, and $11,181,000 at December 31, 1994. Temporary differences
which gave rise to a significant portion of deferred tax assets and
liabilities were as follows:
1995 1994
Deferred Tax Deferred Tax
(in thousands) Assets Liabilities Assets Liabilities
Provision for loan losses $ 9,324 $ - $ 8,363 $ -
Alaska state income tax 1,442 - 1,611 -
Other real estate owned 615 - 718 -
Depreciation and amortization - 2,853 - 2,613
Unrealized security gains/losses - 2,752 3,928 -
Other 2,193 1,731 3,066 2,279
- ------------------------------------------------------------------------
Subtotal 13,574 7,336 17,686 4,892
Valuation Allowance (1,613) - (1,613) -
- ------------------------------------------------------------------------
Total deferred taxes $11,961 $7,336 $16,073 $4,892
========================================================================
The Corporation has established a valuation allowance of $1,613,000
against deferred tax assets, and it has not changed materially during
the year. In order for the net deferred tax assets to be fully realized,
it would require sufficient taxable income of the appropriate character.
<PAGE> 35
15. NATIONAL BANCORP OF ALASKA, INC. (PARENT COMPANY ONLY)
FINANCIAL INFORMATION
STATEMENTS OF INCOME
Year-Ended December 31 (in thousands) 1995 1994 1993
Income:
Dividends from National Bank of Alaska $33,200 $31,200 $28,800
Interest on balances with banks 1,089 442 204
Dividends from securities 1,527 1,637 873
Interest on loans 1,424 1,336 1,019
Securities transactions 127 (118) 478
Other 120 - -
- ---------------------------------------------------------------------------
Total Income 37,487 34,497 31,374
Expenses 699 719 316
- ---------------------------------------------------------------------------
Income before income taxes and equity in
undistributed net income of subsidiaries 36,788 33,778 31,058
Applicable income taxes 444 46 260
- ---------------------------------------------------------------------------
36,344 33,732 30,798
Equity in undistributed net income
of subsidiaries 4,936 3,788 4,828
- ---------------------------------------------------------------------------
Net Income $41,280 $37,520 $35,626
===========================================================================
STATEMENTS OF CONDITION
December 31 (in thousands) 1995 1994
Assets:
Interest-bearing balances with banks $ 34,512 $ 29,937
Loans 24,248 19,626
Securities 22,592 19,134
Investment in subsidiaries 249,503 235,511
Limited partnerships 23,229 9,412
Other assets 507 1,279
- -------------------------------------------------------------------------
Total Assets $354,591 $314,899
=========================================================================
Liabilities and Shareholders' Equity:
Dividends payable $ 3,984 $ 1,992
Other liabilities 287 135
- -------------------------------------------------------------------------
Total Liabilities 4,271 2,127
Total Shareholders' Equity 350,320 312,772
- -------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $354,591 $314,899
=========================================================================
<PAGE> 36
STATEMENTS OF CASH FLOWS
Year-Ended December 31 (in thousands) 1995 1994 1993
Operating Activities
Net Income $41,280 $37,520 $35,626
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net income from subsidiaries (4,936) (3,788) (4,828)
(Gains) losses on securities transactions (127) 118 (478)
Decrease (increase) in receivables 257 398 (915)
Increase (decrease) in other liabilities 152 (30) 83
- ---------------------------------------------------------------------------
Net Cash Provided by Operating Activities 36,626 34,218 29,488
Investing Activities
Net increase in balances with banks (4,575) (l9,747) (1,703)
Net decrease (increase) in lending activity (4,621) 1,329 (6,550)
Investment in subsidiary _ (2,349) -
Proceeds from sales of assets 4,320 30,260 7,140
Purchase of limited partnerships (18,010) (2,366) (2,001)
Purchases of assets (2,185) (29,392) (14,421)
- ---------------------------------------------------------------------------
Net Cash Used in Investing Activities (25,071) (22,265) (17,535)
Financing Activities
Cash dividends (11,555) (11,953) (11,953)
- ---------------------------------------------------------------------------
Increase (decrease) in cash - - -
Cash at beginning of year - - -
- ---------------------------------------------------------------------------
Cash at End of Year $ - $ - $ -
===========================================================================
<PAGE> 37
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
Board of Directors
National Bancorp of Alaska, Inc.
We have audited the accompanying balance sheets of National Bancorp
of Alaska, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National Bancorp of Alaska, Inc. and subsidiaries as of December 31, 1995
and 1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Anchorage, Alaska
January 22, 1996
<PAGE> 38
MANAGEMENT DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HIGHLIGHTS
Net income for 1995 was $41,280,000 or 10% higher than 1994 net
income of $37,520,000. The increase in earnings was due to an increase
in net interest income after the provision for loan loss recoveries to
$123,647,000, or $12,376,000 over 1994.
Return on average assets was 1.70% in 1995 compared to 1.66% in
1994. Return on average equity in 1995 was 12.41% and 12.25% in
1994. The ratio of equity to total assets at December 31, 1995 was
14.29% compared to 13 34% at the end of 1994.
NET INTEREST INCOME
The most significant component of the Corporation's net income is net
interest income which is the difference between interest income earned on
assets and interest expense on liabilities.
In 1995, fully taxable net interest income increased $7,303,000 over
1994. The net interest margin decreased from 5.78% in 1994 to 5 70%
in 1995.
Two factors influenced a $26,876,000 growth in interest income in 1995.
First, loans averaged $59,443,000 higher than 1994. Loan growth was
primarily in the consumer and commercial categories. Second, securities
available for sale were sold and reinvested in the first quarter of 1995
resulting in an increase in the overall yield from 6.11% in 1994 to 6.81%
in 1995.
Interest rates continued to climb in the first part of 1995. The yield on
average earning assets increased to 8.84% compared to 8.20% in 1994.
Interest expense increased by $19,573,000 as the demand for time
deposits and repurchase agreements increased due to higher rates. The
cost of interest bearing liabilities increased to 4 42% in 1995 compared to
3.45% in 1994.
In 1994, fully taxable net interest income increased $414,000 over 1993.
The net interest margin decreased from 5.88% in 1993 to 5.78% in 1994.
Although there was little change in net interest income there were several
significant factors underlying the results. Interest rates, which had
reached historical low levels began to rise during 1994. The rate increase
curtailed mortgage refinancing activities and resulted in a decline in loans
held for sale and related fee income. Interest bearing deposits increased
by 12% during the year helping to fund increases in consumer, commercial and
portfolio real estate lending.
The increase in interest income was provided from greater loan demand as
the average balance in loans, including loans held for sale, increased by
9% or $105,516,000 over 1993. The yield on earning assets increased
from 8.05% in 1993 to 8.20% in 1994 as interest rates rose. Interest
expense increased $5,916,000 from 1993 to 1994 as the average rate paid
to interest bearing liabilities increased from 3.01% to 3.45%.
<TABLE>
Table 1 - Analysis of Net Interest Income
<CAPTION>
(in thousands) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Interest income * $ 189,256 $ 162,607 $ 156,040 $ 150,699 $ 168,680
Interest expense 68,709 49,136 43,220 49,936 74,941
- ----------------------------------------------------------------------------------------
Net interest income 120,547 113,471 112,820 100,763 93,739
Tax equivalent adjustment to
interest income * 4,489 4,262 4,499 4,574 5,512
- ----------------------------------------------------------------------------------------
Net interest income
(fully taxable equivalent) 125,036 117,733 117,319 105,337 99,251
Average earning assets $2,192,711 $2,035,844 $1,994,445 $1,848,974 $1,782,043
- ----------------------------------------------------------------------------------------
Net Interest Margin 5.70% 5.78% 5.88% 5.70% 5.57%
- ----------------------------------------------------------------------------------------
</TABLE>
* Interest income includes loan fees of $6,095,000 in 1995, $8,429,000
in 1994, $10,850,000 in 1993, $6,841,000 in 1992, and $4,814,000 in 1991.
The adjustment to convert nontaxable income to fully taxable equivalent
basis is based on a marginal income tax rate of 40.5% in 1995 through
1993 and 39.5% in 1992 and 1991.
<PAGE> 39
NONINTEREST INCOME
Noninterest income decreased 4% from 1994 to $33,992,000 in 1995.
Losses on security transactions of $3,832,000 and a decrease in gains on
loan sales to $405,000 lead to the decrease. Service charges on deposit
accounts increased $1,146,000 and credit card service fees increased
$688,000.
Noninterest income in 1994 was 8% or $2,979,000 less than 1993. The
two largest items were the decline in gains on sales of securities and
loans, which combined made up $1,845,000 of the decrease from 1993.
Both of these are related to the increase in interest rates which halted the
mortgage refinance activity and resulted in price depreciation in the bond
market. Mortgage servicing fees increased 3% to $7,574,000 as the
Corporation increased its share of the state's mortgage servicing market.
Table 2 - Analysis of Noninterest Income
Increase Increase
(Decrease) (Decrease)
(in thousands) 1995 % 1994 % 1993
Trust department income $ 2,114 5 % $ 2,013 5 % $ 1,916
Service charges on deposit accounts 11,867 11 10,721 1 10,582
Mortgage servicing fees 7,936 5 7,574 3 7,353
Credit card service fees 5,849 13 5,161 (1) 5,217
Securities transactions (3,832) N/A 209 (85) 1,416
Net gain on loan sales 405 (75) 1,634 (28) 2,272
Other 9,653 17 8,226 (16) 9,761
- -------------------------------------------------------------------------------
Total Noninterest Income $33,992 (4)% $35,538 (8)% $38,517
==============================================================================
NONINTEREST EXPENSE
Noninterest expense for 1995 increased $5,616,000 or 6% over 1994.
Computer programming and processing expense increased to $7,050,000
for 1995 due to a one-time charge of $3,140,000 associated with
executing a multi-year contract with M&l Data Services to provide
computer processing services. FDIC insurance premiums were lowered
during 1995, resulting in a reduction of $1,538,000 in expense from
1994.
Noninterest expense decreased 1% or $499,000 from 1993. Salaries
increased by 2% or $616,000 from 1993. Reductions were achieved in
furniture and equipment expense of 9%, stationery and supplies of 7%
and employee benefits of 2%. Changes to communication and software
systems increased cost by 12% in both the telecommunications and
computer program and processing categories.
Table 3 - Analysis of Noninterest Expense
Increase Increase
(Decrease) (Decrease)
(In thousands) 1995 % 1994 % 1993
Salaries $36,802 (1)% $37,167 2 % $36,551
Profit sharing and other
employee benefits 10,415 (1) 10,566 (2) 10,774
Net occupancy expense of
bank premises 7,135 1 7,038 3 6,803
Furniture and equipment expense 8,267 6 7,764 (9) 8,535
Stationery/printing 2,676 14 2,357 (7) 2,543
Telecommunications 2,469 16 2,127 12 1,897
Computer program and processing 7,050 103 3,479 12 3,098
FDIC insurance premium 1,958 (44) 3,496 6 3,311
Other 17,916 19 15,078 (6) 16,059
- ------------------------------------------------------------------------------
Total Noninterest Expense $94,688 6 % $89,072 (1)% $89,571
==============================================================================
<PAGE> 40
INVESTMENT SECURITIES, SECURITIES AVAILABLE FOR SALE AND SHORT-TERM
INVESTMENTS
In 1995, investment securities decreased 4% or $25,331,000 from the
prior year to fund growth in the loan portfolio. Securities issued by the
U.S. Treasury, federal agencies and corporations decreased by
$42,015,000, corporate notes increased by $46,602,000, and mortgage
and asset backed securities decreased $19,283,000 over 1994.
Mortgage and asset backed securities are collateralized with U.S. govern-
ment agency and corporate securities, residential mortgage loans or
consumer loans. All are investment grade with the majority having Aaa
Moody credit rating. These securities are paid down as the underlying
collateral is paid
The Corporation prudently manages the security portfolio to provide long
term financial stability, growth and profitability. The portfolio consists of
high credit quality securities with primarily short and medium term
maturities. The Corporation does not maintain a trading portfolio.
SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires that securities which may be sold for purposes of
liquidity or asset/liability management be classified as securities available
for sale and carried at market value.
Securities with a cost of $266,595,000 and a market value of
$273,391,000 have been classified as securities available for sale, at
December 31, 1995. These securities are held for long-term liquidity and
by definition may be sold prior to maturity.
In 1994, investment securities increased 15% or $74,463,000 over 1993
from an increase in deposits and a decline in loan demand primarily
related to mortgage refinancing activity. U.S. Treasury, federal agencies
and corporations securities increased $63,209,000 over 1993.
Table 4 - Investment Portfolio
Book Value December 31
(in thousands) 1995 1994 1993
U.S. Treasury, federal agencies and corporations $303,304 $345,319 $282,110
States and political subdivisions 9,008 20,239 6,773
Corporate notes 89,925 43,323 33,827
Mortgage and asset backed securities 138,498 157,781 148,957
Other securities 12,666 12,070 32,602
- -----------------------------------------------------------------------------
Total Investment Portfolio $553,401 $578,732 $504,269
=============================================================================
LIQUIDITY AND INTEREST RATE SENSITIVITY
A fundamental objective of management is to ensure that adequate
liquidity is maintained to meet cash flow requirements without adverse
liquidation of longer term assets. Long-term liquidity is provided from the
short-term maturity structure of the security portfolio and continuous
receipt of loan payments from bank customers. Other sources of long-term
liquidity include a substantial core deposit base and the growth of capital
The Corporation has various external sources of short-term liquidity
including federal funds lines and repurchase agreement lines for the sale
and repurchase of investment securities.
Interest rate sensitivity is related to liquidity because each is affected by
the maturity structure of the balance sheet and sources of funds. Interest
rate sensitivity, however, is concerned with the timing and the magnitude
of repricing assets compared to repricing liabilities in a changing interest
rate environment.
The potential for earnings to be affected by changes in interest rates is
inherent in a financial institution's business activities. Changing interest
rates create exposures to loss as well as opportunities for improving
profitability through management of the balance sheet position.
Management monitors the asset and liability position closely. As market
and business conditions change, asset and liability positions and pricing
structures are adjusted to control the risks associated with interest rate
movement and to generate a stable growth In net interest income.
Management believes that the Corporation is reasonably well positioned for
subsequent interest rate movements.
<TABLE>
Securities Portfolio Weighted Average Yield (Fully Taxable Equivalent)
<CAPTION>
December 31, 1995 Within 1 Year 1 - 5 Years 5-10 Years Over 10 Years
(in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal agencies and corporations $74,571 5.96% $223,346 6.70% $5,387 8.33% $ - -%
State and political subdivisions 4,496 7.15 4,512 7.12 - - - -
Corporate notes - - 89,925 6.63 - - - -
Mortgage and asset backed securities 31,140 6.52 104,685 7.25 1,308 11.73 1,365 6.91
Other securities - - - - - - 12,666 6.26
Securities available for sale 55,302 6.54 195,497 7.00 - - 22,592 6.80
<PAGE> 41
Loan Maturity and Interest Sensitivity (Selected Loans)
December 31, 1995
Maturity
Within 1 - 5 Over 5
(in thousands) 1 Year Years Years Total
Commercial and industrial $218,580 $140,021 $111,879 $470,480
Real estate construction 21,983 3,016 - 24,999
Nontaxable 3,313 18,503 42,540 64,356
- ----------------------------------------------------------------------
Total Selected Loans $243,876 $161,540 $154,419 $559,835
======================================================================
Predetermined interest rate $ 69,754 $ 84,307 $ 51,393 $205,454
Floating interest rate 174,122 77,233 103,026 354,381
- ----------------------------------------------------------------------
Total Selected Loans $243,876 $161,540 $154,419 $559,835
======================================================================
Maturity Distribution of Time Deposits over $100,000 (In Thousands)
Maturity in: December 31
(in thousands) 1995 1994
Within 3 months $ 79,168 $ 94,008
3 to 6 months 26,984 29,941
6 to 12 months 25,973 47,327
Over 12 months 58,998 20,384
- ------------------------------------------------------------
Total Time Deposits over $100,000 $191,123 $191,660
============================================================
LOANS AND LEASE FINANCING
One of the Corporation's most significant business activities is lending.
The Bank grants commercial, real estate and consumer loans to customers
throughout the state. The composition of the loan portfolio reflects the
Bank's commitment to our customers and an assessment of the
associated risks and opportunities of meeting their credit needs. The
Bank's lending policies assure that collateral lending of all types is
approached conservatively and is consistent with safe and sound standards.
Collateral accepted against the commercial loan portfolio includes accounts
receivable, inventory and equipment. Autos, second deeds of trust and
boats are accepted as collateral for the installment portfolio.
Net Loans and Leases were $1,326,840,000 at December 31, 1995, an
increase of 8% or $100,676,000 from December 31, 1994 Installment
loans increased by $60,237,000 or 22% over the prior year from
continued demand in consumer lending. Commercial and industrial loans
increased by $30,614,000 from loans throughout the statewide branch
system. Nontaxable loans decreased by 5% from 1994 while other loan
categories experienced moderate growth during the year.
The bank had no debt outstanding to developing countries at
December 31, 1995.
At December 31, 1994, net loans and leases were $1,226,164,000 an increase
of 9% over December 31, 1993. Installment loans increased by 33% or
66,550,000 over the prior year from a continued emphasis on consumer
lending. The long term real estate portfolio grew by $34,777,000 or 9%
over 1993 with growth in consumer lending secured by real estate. The
commercial loan portfolio posted a 3% increase or $14,679,000 largely
due to small business loans. The construction, nontaxable and lease
financing categories ended with lower balances than the previous year end.
Loans held for sale increased to $33,099,000 at December 31, 1995 from
$19,627,000 at December 31, 1994. The increase is consistent with the
declining interest rate environment at the end of 1995.
Table 5 - Loans and Lease Portfolio
December 31
(in thousands) 1995 1994 1993 1992 1991
Commercial and industrial $ 470,480 $ 439,866 $ 425,187 $412,419 $408,597
Real estate construction 24,999 21,845 28,971 18,613 37,628
Real estate long-term 423,872 415,017 380,240 244,366 213,228
Installment 331,531 271,294 204,744 163,796 128,007
Nontaxable 64,356 68,049 72,719 82,180 77,021
Lease financing 11,602 10,093 10,709 7,628 9,637
- -----------------------------------------------------------------------------
Loan and Lease Financing $1,326,840 $1,226,164 $1,122,570 $928,999 $874,118
=============================================================================
Loans Held for Sale $ 33,099 $ 19,627 $ 164,181 $ 67,856 $ 44,571
==============================================================================
<PAGE> 42
NONPERFORMING ASSETS
The quality of the loan portfolio is maintained with an effective loan
administration program combined with periodic credit reviews. Manage-
ment is actively involved in reviewing and evaluating the credit quality
of the loan portfolio. Also, an internal loan review staff conducts
periodic examinations of the portfolio's credit quality, documentation
and administration. Results of these examinations are reported to the
Chairman of the Board and the Audit Committee of the Board of Directors.
A primary measure of the loan quality is the percentage of the loan port
folio that is classified as nonperforming. Nonperforming assets are
defined as the sum of nonaccrual loans, restructured loans, loans past
due 90 days or more and other real estate owned. As shown in Table 6, the
ratio of nonperforming assets to total loans and other real estate owned
decreased to 0.83% at December 31, 1995, compared to 1.22% at
December 31, 1994. Total nonperforming assets decreased $3,956,000 in
1995. The progress is a result of continued active monitoring and
management of troubled credits and management's emphasis on the
recognition of losses as they are identified, together with a continued
stable economy.
A loan is classified as nonaccrual when principal or interest are in
default for 90 days or more, unless the loan is well secured and in the
process of collection. Accrual of interest is discontinued for nonaccrual
loans, and interest previously recorded as earned and not collected is
reversed. Interest income on nonaccrual loans which would have been
recorded if these loans had been current in accordance with their
original terms was $244,000 in 1995 and $476,000 in 1994. Actual interest
income recorded for these loans was $51,000 in 1995 and $140,000 in 1994.
Certain loans are restructured to provide a reduction or deferral of
interest or principal because of deterioration in the financial condition
of the respective borrowers. Once a loan is placed in this category, it
remains until the terms are no longer more favorable than those of other
customers. Interest income on restructured loans which would have been
recorded under their original terms was $310,000 in 1995 and $363,000
in 1994. Actual interest income recorded for those loans was $122,000 in
1995 and $225,000 in 1994. At December 31, 1995, the Bank had no
commitments to lend additional funds to borrowers with restructured
loans.
Table 6
(in thousands) 1995 1994 1993 1992 1991
Nonaccrual loans
Commercial and industrial $ 700 $ 1,763 $ 2,687 $ 4,991 $ 892
Real estate construction 166 63 163 65 68
Real estate long-term 1,162 1,528 687 648 1,146
Other 45 - - - 55
- -----------------------------------------------------------------------------
Total $ 2,073 $ 3,354 $ 3,537 $ 5,704 $ 2,161
- -----------------------------------------------------------------------------
Restructured loans
Commercial and industrial $ - $ - $ 143 $ 144 $ 1,978
Real estate construction 94 102 116 123 -
Real estate long-term 242 1,612 103 1,091 7,211
Non-taxable - - - - 1,066
- -----------------------------------------------------------------------------
Total $ 336 $ 1,714 $ 362 $ 1,358 $10,255
- -----------------------------------------------------------------------------
Accruing loans past due
90 days or more $ 5,459 $ 5,539 $ 2,098 $ 1,269 $ 1,842
- -----------------------------------------------------------------------------
Other real estate owned $ 3,127 $ 4,344 $11,259 $12,510 $15,213
- -----------------------------------------------------------------------------
Total nonperforming assets $10,995 $14,951 $17,256 $20,841 $29,471
- -----------------------------------------------------------------------------
Nonaccrual loans as a percentage
of loans and leases at year-end 0.16% 0.27% 0.32% 0.61% 0.25%
Restructured loans as a percentage
of loans and leases at year-end 0.03% 0.14% 0.03% 0.15% 1.17%
Nonperforming assets as a percentage
of loans and leases and other real
estate owned at year-end 0.83% 1.22% 1.52% 2.21% 3.31%
<PAGE> 43
RESERVE FOR POSSIBLE LOAN LOSSES AND PROVISION FOR LOAN LOSSES
Although the Bank maintains sound credit policies and procedures, credits
may deteriorate and are charged off as losses when identified. The reserve
for possible loan losses is maintained to absorb potential losses. Management
views this reserve as a source of financial strength. The reserve for
possible loan losses was $21,529,000 at December 31, 1995. This main-
tains a reserve of 1.62% of outstanding loans reflecting management's
commitment to maintain an adequate reserve against potential loan losses.
In 1995, $3,100,000 was credited to income for the provision for loan
loss. Actual recoveries exceeded loan charge offs by $5,403,000 during
1995 compared to net charge offs of $382,000 in 1994.
Management evaluates the adequacy of the Bank's reserve for possible
loan loss on at least a quarterly basis. This evaluation takes into
consideration current economic conditions, with particular emphasis on
Alaska's economy, historical loss experience, review of portfolio credit
quality, and management's monthly evaluation of specific, identified
nonperforming loans. Management believes the reserve for possible loan
losses is adequate to absorb potential losses and intends to maintain the
reserve at a prudent level
Table 7
(in thousands) 1995 1994 1993 1992 1991
Analysis of Reserve for
Possible Loan Losses
Balance January 1 $19,226 $17,408 $21,338 $21,284 $19,449
Provision charged to operations (3,100) 2,200 7,700 4,000 3,000
Recoveries on loans
previously charged off 9,947 2,502 2,674 1,537 1,724
Less loans charged off (4,544) (2,884) (14,304) (5,483) (2,889)
- ------------------------------------------------------------------------------
Balance December 31 $21,529 $19,226 $17,408 $21,338 $21,284
==============================================================================
Composition of Loan Charge
Off and Recoveries
Loans Charged Off:
Commercial loans and leases $ 954 $ 265 $12,064 $ 2,130 $ 639
Real estate construction 113 50 115 1,401 92
Real estate long-term 116 86 123 427 855
Consumer 2,644 1,804 1,438 968 827
Visa 717 679 564 557 461
Nontaxable - - - - 15
- ------------------------------------------------------------------------------
Total Charge Offs 4,544 2,884 14,304 5,483 2,889
- ------------------------------------------------------------------------------
Recoveries:
Commercial loans and leases 7,643 514 920 514 350
Real estate construction 16 122 175 151 198
Real estate long-term 657 495 621 263 478
Consumer 1,445 1,204 787 439 541
Visa 167 153 155 159 143
Nontaxable 19 14 16 11 14
- ------------------------------------------------------------------------------
Total Recoveries 9,947 2,502 2,674 1,537 1,724
- ------------------------------------------------------------------------------
Net Charge Offs $ (5,403) $ 382 $11,630 $ 3,946 $ 1,165
==============================================================================
Loan and Lease Statistics
Average loans and leases $1,306,685 $1,202,249 $1,052,326 $889,548$879,590
Loans and leases at year-end 1,326,840 1,226,164 1,122,570 928,999 874,118
Reserve for possible loan
losses as a percentage of:
Average loans and leases 1.65% 1.60% 1.65% 2.40% 2.42%
Loans and leases at year-end 1.62 1.57 1.55 2.30 2.43
Net charge offs as a
percentage of:
Average loans and leases (0.41) 0.03 1.11 0.44 0.13
Loans and leases at year-end (0.41) 0.03 1.04 0.42 0.13
<PAGE> 44
DEPOSITS AND SHORT-TERM BORROWINGS
Total deposits decreased 0.4% or $7,140,000 to $1,740,481,000 at
December 31, 1995. Interest rates continued to climb during the early
part of 1995 leading to a 6% or $25,416,000 growth in time deposits at
December 31, 1995. Other deposit categories including NOW, savings and
money market savings decreased $49,985,000 or 6% compared to
December 31, 1994. Demand deposits increased 3% or $17,429,000
over 1994.
In 1994, total deposits increased $141,474,000 or 9% from December 31,
1993. Interest bearing accounts experienced the greatest growth as
interest rates rose and national stock and bond markets fluctuated. At
December 31, 1994, NOW, savings, and money market savings increased
$89,212,000 or 13% over 1993. Time deposits increased $44,644,000 or
12% from the prior year's balance. Demand deposits increased 1% or
$7,618,000 for the same period.
Short-term borrowings include Federal funds purchased and repurchase
agreements in the amount of $325,859,000 and other borrowings of
$1,681,000 at December 31, 1995.
Table 8 - Deposit Structure
Average for Year Ended December 31
(in thousands) 1995 1994 1993 1992 1991
Demand $ 512,401 $ 506,669 $ 474,226 $ 430,154 $ 403,569
NOW 150,401 151,276 133,987 120,080 105,351
Savings 296,784 302,566 265,452 229,340 176,919
Money Market Savings 296,735 299,948 265,422 256,095 225,047
Time 460,613 399,159 404,351 460,398 566,188
- --------------------------------------------------------------------------
Total Deposits $1,716,934 $1,659,618 $1,543,438 $1,496,067 $1,477,074
==========================================================================
Deposits by Type of Depositor at December 31
(in thousands) 1995 1994 1993 1992 1991
Individuals, partnerships
and corporations $1,632,547 $1,630,233 $1,490,039 $1,419,837 $1,400,464
United States government 5,543 6,814 4,466 5,696 5,756
State and political
subdivisions 86,855 90,270 91,985 92,615 94,470
Other 15,536 20,304 19,657 18,122 24,300
- ------------------------------------------------------------------------------
Total $1,740,481 $1,747,621 $1,606,147 $1,536,270 $1,524,990
==============================================================================
Time deposits include $100,000 in 1994, $10,140,000 in 1993, $10,238,000 in
1992, and $27,892,000 in 1991 in brokered deposits assumed through bank
acquisitions. The Bank did not renew maturing brokered deposits.
</TABLE>
<TABLE>
Table 9 - Funds Purchased
The following table provides an analysis of funds purchased:
<CAPTION>
Federal Funds Purchased and
Securities Sold Under Total
Agreement to Repurchase Purchased
Funds
(in thousands) 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31 $325,859 $259,983 $283,665 $327,540 $261,686 $284,684
Average for the year 348,261 271,475 363,816 349,622 272,308 365,742
Maximum month-end balance 407,675 291,032 441,561 408,789 291,651 447,859
Average rate for the year* 5.25% 3.72% 2.90% 5.23% 3.72% 2.90%
Average rate at year-end 4.86 4.57 2.71 4.84 4.56 2.72
</TABLE>
* The average interest rate is computed by dividing the respective
interest expense by the average daily balance.
<PAGE> 45
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
The Corporation is a strongly capitalized bank holding company.
Shareholders' equity increased by $37,548,000 from December 31, 1994
to $350,320,000 at December 31, 1995.
The ratio of equity to total assets was 13.71% for 1995 compared to
13.56% for the year 1994. The Corporation's level of capitalization
exceeds current and proposed regulatory guidelines. The current quarterly
dividend rate is $0.50 per share. In December 1995, the board of
directors increased the quarterly cash dividend to $.50 per share as a
result of the Corporation's strong earnings.
Table 10 - Analysis of Shareholders' Equity
(in thousands) 1995 1994 1993 1992 1991
Balance January 1 $312,772 $292,976 $269,303 $242,050 $217,631
Net income 41,280 37,520 35,626 34,027 28,403
Cash dividends declared (13,547) (11,953) (11,953) (6,774) (3,984)
Net unrealized gains (losses)
on securities 9,815 (5,771) - - -
- ------------------------------------------------------------------------------
Balance December 31 $350,320 $312,772 $292,976 $269,303 $242,050
==============================================================================
Per Share Statistics
Net income $ 5.18 $ 4.71 $ 4.47 $ 4.27 $ 3.56
Cash dividends declared 1.70 1.50 1.50 0.85 0.50
Book value at year-end $43.96 $39.25 $36.77 $33.79 $30.37
Ratios (Based on Average Balances)
Return on assets 1.70% 1.66% 1.61% 1.65% 1.42%
Equity to total assets 13.71 13.56 12.83 12.49 11.48
Dividend payout ratio 32.82 31.86 33.56 19.91 14.03
Return on equity 12.41 12.25 12.52 13.24 12.35
Equity to total deposits 19.38 18.46 18.43 14.43 15.57
THE IMPACT OF INFLATION
The banking industry's exposure to inflation differs from that of most
industries. For industrial companies, the interplay between inflationary
trends and methods of inventory valuation and depreciation accounting can
significantly affect earnings. However, virtually all of a bank's assets and
liabilities are monetary in nature. Therefore, while changes in interest
rates may significantly impact a bank's earnings, interest rates do not
necessarily move in the same direction or with the same magnitude as do
the prices of other goods and services.
It is clear that inflationary trends are reflected in the Bank's noninterest
expense. Consequently, adjustments to service charge schedules are made
from time to time to recover costs where possible. The effect of these
adjustments is reflected in noninterest income.
<PAGE> 46
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEETS/
INTEREST INCOME AND EXPENSES/RATES
<CAPTION>
Year-Ended December 31 1995 1994
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(in thousands) Balance Expense Cost Balance Expense Cost
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing balances with
banks $ 645 $ 41 6.36% $ 2,792 $ 138 4.94%
Federal funds sold and securities
purchased under agreement
to resell 14,184 806 5.68 40,270 1,745 4.33
Securities 842,517 57,353 6.81 716,860 43,806 6.11
Loans and lease financing* 1,335,365 135,545 10.15 1,275,922 121,180 9.50
- ----------------------------------------------------------------------------------------------
Total Earning Assets $2,192,711 $193,745 8.84% $2,035,844 $166,869 8.20%
Reserve for possible loan losses (20,578) (18,557)
Cash and due from banks 127,299 130,893
Bank premises and equipment 61,306 57,452
Other assets 66,445 54,353
- ---------------------------------------------------------------------------------------------
Total Assets $2,427,183 $2,259,985
=============================================================================================
Liabilities and Shareholders' Equity:
NOW $ 150,401 $ 4,245 2.82% $ 151,276 $ 3,997 2.64%
Savings deposits 296,784 10,847 3.65 302,566 9,409 3.11
Money market savings 296,735 10,172 3.43 299,948 8,818 2.94
Time deposits 460,613 25,149 5.46 399,159 16,790 4.21
- ----------------------------------------------------------------------------------------------
Total Interest-Bearing
Deposits 1,204,533 50,413 4.19 1,152,949 39,014 3.38
Federal funds purchased and
securities sold under agreement
to repurchase 348,261 18,273 5.25 271,475 10,100 3.72
Other purchased funds 1,361 23 1.69 833 22 2.64
- ----------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities 1,554,155 68,709 4.42 1,425,257 49,136 3.45
Demand deposits 512,401 506,669
Other liabilities 27,947 21,718
- ----------------------------------------------------------------------------------------------
Total Liabilities 2,094,503 1,953,644
Shareholders' Equity 332,680 306,341
- ----------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,427,183 $2,259,985
==============================================================================================
Net Interest Margin $125,036 5.70% $117,733 5.78%
==============================================================================================
</TABLE>
The above tables are presented on a fully taxable equivalent basis
assuming a 40.5% income tax rate for 1995 through 1993. Income and
yield on loans include loan fees. Nonaccrual loans are included in
the average balance computations. Changes in net interest income
that are not due to volume or rate have been allocated on a prorated
basis.
*The average balances include securities available for sale and
loans held for sale.
<PAGE> 47
CONSOLIDATED AVERAGE BALANCE SHEETS/
INTEREST INCOME AND EXPENSES/RATES (continued)
1993
Interest Average
Average Income/ Yield/
Balance Expense Cost
Assets:
Interest-bearing balances with
banks $18,676 $ 630 3.37%
Federal funds sold and securities
purchased under agreement
to resell 21,373 668 3.13
Securities 783,990 48,488 6.18
Loans and lease financing* 1,170,406 110,753 9.46
- ---------------------------------------------------------------------
Total Earning Assets $1994,445 $160,539 8.05%
Reserve for possible loan losses (21,783)
Cash and due from banks 130,496
Bank premises and equipment 56,183
Other assets 57,753
- ---------------------------------------------------------------------
Total Assets $2,217,094
=====================================================================
Liabilities and Shareholders' Equity:
NOW $ 133,987 $ 3,285 2.45%
Savings deposits 265,452 7,689 2.90
Money market savings 265,422 6,489 2.44
Time deposits 404,351 15,144 3.75
- ---------------------------------------------------------------------
Total Interest-Bearing
Deposits 1,069,212 32,607 3.05
Federal funds purchased and
securities sold under agreement
to repurchase 363,816 10,565 2.90
Other purchased funds 1,926 48 2.49
- ---------------------------------------------------------------------
Total Interest-Bearing
Liabilities 1,434,954 43,220 3.01
Demand deposits 474,226
Other liabilities 23,436
- ---------------------------------------------------------------------
Total Liabilities 1,932,616
Shareholders' Equity 284,478
- ---------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,217,094
=====================================================================
Net Interest Margin $117,319 5.88%
=====================================================================
<TABLE>
ANALYSIS OF CHANGES IN NET INTEREST MARGIN
<CAPTION>
1995 vs. 1994 1994 vs 1993
Due to Due to Total Due to Due to Total
Rate Volume Change Rate Volume Change
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing balances with
banks $ 31 $ (128) $ (97) $ 205 $ (697) $ (492)
Federal funds sold and securities
purchased under agreement
to resell 429 (1,368) (939) 328 749 1,077
Securities 5,338 8,209 13,547 (574) (4,108) (4,682)
Loans and lease financing* 8,563 5,802 14,365 407 10,020 10,427
- -------------------------------------------------------------------------------------------
Total Earning Assets $14,361 $12,515 $26,876 $ 366 $5,964 $6,330
Reserve for possible loan losses
Cash and due from banks
Bank premises and equipment
Other assets
Total Assets
Liabilities and Shareholders' Equity:
NOW $ 271 $ (23) $ 248 $ 268 $ 444 $ 712
Savings deposits 1,621 (183) 1,438 593 1,127 1,720
Money market savings 1,449 (95) 1,354 1,418 911 2,329
Time deposits 5,512 2,847 8,359 1,843 (197) 1,646
- -------------------------------------------------------------------------------------------
Total Interest-Bearing
Deposits 8,853 2,546 11,399 4,122 2,285 6,407
Federal funds purchased and
securities sold under agreement
to repurchase 4,838 3,335 8,173 2,574 (3,039) (465)
Other purchased funds (10) 11 1 3 (29) (26)
- -------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities 13,681 5,892 19,573 6,699 (783) 5,916
Demand deposits
Other liabilities
Total Liabilities
Shareholders' Equity
Total Liabilities and
Shareholders' Equity
- -------------------------------------------------------------------------------------------
Net Interest Margin $ 680 $6,623 $7,303 $(6,333) $6,747 $ 414
===========================================================================================
</TABLE>
<PAGE> 48
QUARTERLY FINANCIAL DATA
(in thousands except 1995
per share amounts) First Second Third Fourth
Total interest income $44,653 $47,687 $48,182 $48,734
Total interest expense 16,838 18,009 16,986 16,876
Net interest income 27,815 29,678 31,196 31,858
Provision for loan losses (3,300) 600 600 (1,000)
Securities transactions (3,947) - 115 -
Other income 8,694 9,389 9,730 10,011
Other expense 22,861 23,524 22,288 26,015
- -------------------------------------------------------------------
Income before taxes 13,001 14,943 18,153 16,854
Applicable income taxes 4,358 5,041 6,402 5,870
- -------------------------------------------------------------------
Net Income $ 8,643 $ 9,902 $11,751 $10,984
===================================================================
Net Income Per Share $1.08 $1.24 $1.47 $1.39
===================================================================
(in thousands except 1994
per share amounts) First Second Third Fourth
Total interest income $38,227 $39,024 $41,245 $44,111
Total interest expense 10,279 11,177 12,847 14,833
Net interest income 27,948 27,847 28,398 29,278
Provision for loan losses 600 600 600 400
Securities transactions 1,177 (664) (231) (73)
Other income 8,373 9,367 9,100 8,489
Other expense 22,464 22,352 22,321 21,935
- -------------------------------------------------------------------
Income before taxes 14,434 13,598 14,346 15,359
Applicable income taxes 5,119 4,708 5,085 5,305
- -------------------------------------------------------------------
Net Income $ 9,315 $ 8,890 $ 9,261 $10,054
===================================================================
Net Income Per Share $1.17 $1.11 $1.17 $1.26
===================================================================
MARKET FOR COMMON STOCK (BID QUOTATIONS)
First Second Third Fourth
1995
High 51 52 64 66
Low 49 49 52 62
1994
High 56 56 56 52
Low 50 49 50 49
Cash Dividend Declared
Per Share
1995 0 40 0.40 0.40 0 50
1994 0 25 0 25 0.75 0.25
The above schedule shows the high and low bid quotations of the
Corporation's stock as reported by the National Association of
Securities Dealers Automated Quotations System (NASDAQ).
National Bancorp of Alaska, Inc.'s common stock is traded in
the over-the-counter market.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 149,307
<INT-BEARING-DEPOSITS> 1,293
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 273,391
<INVESTMENTS-CARRYING> 553,401
<INVESTMENTS-MARKET> 558,335
<LOANS> 1,326,840
<ALLOWANCE> 21,529
<TOTAL-ASSETS> 2,450,921
<DEPOSITS> 1,740,481
<SHORT-TERM> 327,540
<LIABILITIES-OTHER> 32,580
<LONG-TERM> 0
<COMMON> 350,320
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 2,450,921
<INTEREST-LOAN> 132,336
<INTEREST-INVEST> 56,073
<INTEREST-OTHER> 847
<INTEREST-TOTAL> 189,256
<INTEREST-DEPOSIT> 50,413
<INTEREST-EXPENSE> 68,709
<INTEREST-INCOME-NET> 120,547
<LOAN-LOSSES> (3,100)
<SECURITIES-GAINS> (3,832)
<EXPENSE-OTHER> 94,688
<INCOME-PRETAX> 62,951
<INCOME-PRE-EXTRAORDINARY> 62,951
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,280
<EPS-PRIMARY> 5.18
<EPS-DILUTED> 5.18
<YIELD-ACTUAL> 5.70
<LOANS-NON> 2,073
<LOANS-PAST> 5,459
<LOANS-TROUBLED> 336
<LOANS-PROBLEM> 17,082
<ALLOWANCE-OPEN> 19,226
<CHARGE-OFFS> 4,544
<RECOVERIES> 9,947
<ALLOWANCE-CLOSE> 21,529
<ALLOWANCE-DOMESTIC> 4,107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,422
</TABLE>
