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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Northern Lights Boulevard and C Street, Anchorage, AK 99503
(Address of principal executive offices) (Zip Code)
(907) 276-1132
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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___
The registrant has one class of Common Stock, $10 par value.
Number of shares outstanding as of August 8, 1997: 7,867,003
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Table of Contents
Page
PART I
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis of Financial Condition
and Results 7
PART II
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
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<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
THREE MONTHS SIX MONTHS
(In Thousands Except Statistics) ENDED JUNE 30 ENDED JUNE 30
INTEREST INCOME: 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Loans & Lease Financing Including Fee $37,928 $35,910 $73,132 $69,489
Balances with Banks 9 14 15 24
Federal Funds Sold and Securities Purchased
Under Agreement to Resell 32 33 163 33
Investment Securities Including Dividends
U.S. Treasury Securities 2,969 2,885 6,112 6,138
Obligations of Other U. S. Government
Agencies and Corporation 5,791 5,788 11,706 11,372
Obligations of States & Political
Subdivisions 157 92 327 185
Mortgage and Asset Backed Securities 2,515 2,362 5,013 4,769
Other Securities 2,459 2,372 4,959 4,408
TOTAL INTEREST INCOME 51,860 49,456 101,427 96,418
INTEREST EXPENSE:
Deposits 13,192 12,262 26,178 23,952
Federal Funds Purchased & Securities Sold
Under Agreement to Repurchase 4,776 4,411 8,909 8,646
Other Purchased Funds 6 4 9 9
TOTAL INTEREST EXPENSE 17,974 16,677 35,096 32,607
NET INTEREST INCOME 33,886 32,779 66,331 63,811
Provision for Loan Losses 900 750 1,800 1,500
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 32,986 32,029 64,531 62,311
OTHER INCOME:
Trust Department Income 580 527 1,177 1,028
Service Charges on Deposit Accounts 3,234 3,196 6,313 6,235
Mortgage Loan Servicing Fees 2,064 2,001 4,064 4,017
Securities Transactions 355 -- 543 --
Credit Card Service Fees 1,823 1,487 3,186 2,801
Other 3,575 2,143 6,863 4,521
TOTAL OTHER INCOME 11,631 9,354 22,146 18,602
OTHER EXPENSE:
Salaries 9,627 9,606 19,075 19,074
Profit Sharing & Other Employee Benefits 3,109 2,837 6,184 5,728
Net Occupancy Expense of Bank Premises 1,868 1,790 3,713 3,662
Furniture & Equipment Expense 2,315 2,392 4,574 4,450
Other 7,697 6,900 14,790 13,715
TOTAL OTHER EXPENSE 24,616 23,525 48,336 46,629
Income Before Income Taxes 20,001 17,858 38,341 34,284
Applicable Income Taxes 6,999 6,413 13,337 12,214
NET INCOME $13,002 $11,445 $25,004 $22,070
Per Share Statistics
Net Income $1.65 $1.44 $3.17 $2.77
Average Number of Shares Outstanding 7,873,816 7,968,800 7,884,004 7,968,800
(See note to consolidated statements.)
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
June 30 December 31
(In Thousands Except Statistics) 1997 1996 1996
ASSETS:
<S> <C> <C> <C>
Cash and Due from Banks $ 140,932 $ 141,293 $ 166,771
Interest-Bearing Balances with Banks 2,500 136 233
Federal Funds Sold and Securities
Purchases under agreement to resell 50,260 -- 20,000
Investment Securities:
Obligations of Other U. S. Government
Agencies and Corporations 304,069 306,049 317,145
Obligations of States and Political Subdivisions 14,436 7,314 15,878
Mortgage and Asset-Backed Securities 139,793 132,811 144,738
Other Securities 114,460 118,020 118,712
Total Investment Securities 572,758 564,194 596,473
(Market Value $574,739 in 1997)
Securities Available for Sale 223,488 238,634 253,552
Net Loans and Lease Financing 1,466,057 1,437,646 1,446,978
Less Reserve for Possible Loan Losses (23,478) (20,887) (23,002)
Net loans and Lease Financing Less Reserves 1,442,579 1,416,759 1,423,976
Loans Held For Sale 85,730 28,560 31,563
Premises and Equipment 69,630 69,719 71,212
Other Assets 99,054 85,342 84,704
Total Assets $2,686,931 $2,544,637 $2,648,484
LIABILITIES AND SHAREHOLDERS EQUITY:
Demand Deposits $ 573,259 $ 527,552 $ 539,309
Interest-Bearing Deposits:
NOW 173,744 149,913 174,470
Savings 277,679 289,029 297,058
Money Market Savings 291,622 286,084 304,000
Time 584,365 528,170 552,216
Total Interest-Bearing Deposits 1,327,410 1,253,196 1,327,744
Total Deposits 1,900,669 1,780,748 1,867,053
Federal Funds Purchased 2,976 30,615 7,655
Securities Sold Under Agreement to Repurchase 352,883 334,396 356,914
Other Purchased Funds 4,404 1,094 898
Other Liabilities 36,786 35,754 38,561
Total Liabilities 2,297,718 2,182,607 2,271,081
Shareholders Equity
Common Stock-$10 Par Value 1997 1996 80,000 80,000 80,000
Shares Authorized 10,500,000 10,500,000
Shares Outstanding 8,000,000 8,000,000
Capital Surplus 63,000 63,000 63,000
Retained Earnings 251,429 217,803 234,303
Net Unrealized Holding Losses on
Available-For-Sale Securities 2,168 1,653 2,405
Less Treasury Stock at Cost (132,997 Shares on
June 30, 1997 and 31,200 Shares on June 30, 1996 ( 7,384) (426) (2,305)
Total Shareholders Equity 389,213 362,030 377,403
Total Liabilities and Shareholders Equity $2,686,931 $2,544,637 $2,648,484
Per Share Statistics
Net Book Value $49.47 $45.43 $47.54
(See note to consolidated statements.)
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands) Six Months Ended June 30 1997 1996
OPERATING ACTIVITIES:
Net Income $ 25,004 $ 22,070
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 1,800 1,500
Deferred Taxe Expense (Credit) (1,505) 235
Depreciation and Amortization 3,814 3,751
Net Amortization on Securities (178) (1,308)
Gain on Security Transactions (543) --
Gain on Loan Sales (140) (969)
Loss (Gain) on Disposal of Premises and Equipment 10 (9)
Loss (Gain) on Disposal of Other Assets (36) 149
Net Decrease (Increase) in Loans Held for Sale (4,027) 5,509
Increase in Interest Receivable, Prepaid Expense,
and Other Assets (2,593) (2,989)
Increase (Decrease) in Interest Payable, Accrued
Expenses and Other Liabilities 2,078 (1,744)
Net cash Provided by Operating Activities 23,684 26,195
INVESTING ACTIVITIES:
Net Decrease (Increase) in Federal Funds Sold and
Interest Bearing Deposits with Other Banks (32,527) 1,157
Proceeds from Maturities of Securities Held to Maturity 71,374 68,822
Proceeds from Maturities of Securities Available for Sale 34,125 35,000
Proceeds from Sales of Securities Available for Sale 25,148 --
Purchases of Securities Held to Maturity (46,427) (78,656)
Purchase of Securities Available for Sale (30,344) (3,911)
Net Increase in Lending Activities (70,613) (114,583)
Proceeds from Sale of Premises and Equipment 39 13
Proceeds from Sale of Other Assets 1,541 830
Purchases of Premises, Equipment, and Other Assets (15,365) (15,419)
Net Cash Used in Investing Activities (63,049) (106,747)
FINANCING ACTIVITIES:
Net Increase in Total Deposit 31,722 41,942
Net Increase in Short-Term Borrowings (5,204) 38,565
Acquision of Treasury Stock (5,079) --
Cash Dividends (7,913) (7,969)
Net Cash Provided by Financing Activities 13,526 72,538
Decrease in Cash and Cash Equivalents (25,839) (8,014)
Cash and Cash Equivalents at Beginning of Year 166,771 149,307
Cash and Cash Equivalents at End of June $140,932 $141,293
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National Bancorp of Alaska
Notes to the Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statement have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions and regulations for filing Form
10-Q. Operating results for the six-month period ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
The statements should be read in conjunction with the summary of accounting
policies and notes to the financial statements included in the Registrant's
annual report for the year ended December 31, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals necessary
for a fair presentation) have been included.
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Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations
National Bancorp of Alaska (the Corporation) recorded earnings of $13.0 million
in the second quarter of 1997 compared to $11.4 million for the second quarter
of 1996. Earnings per share were $1.65 as of June 30, 1997 up 15% from the
$1.44 earned through June 30, 1996.
Return on average assets using annualized income from operations plus year-to-
date net security gains was 1.92% for the six-month period ended June 30, 1997,
compared to 1.79% for the six-month period ended June 30, 1996. The annualized
return on average stockholders' equity was 13.16% for the first six months of
1997.
Net interest income increased $2,220,000 after the provision for loan loss
recoveries during the first six months of 1997 compared to the same period
during the previous year. Interest on earning assets increased $2.4 million
from the second quarter of 1996 to the second quarter of 1997, while interest
expense increased $1.3 million.
The provision for loan loss was $1,800,000 through June 30, 1997, compared to a
provision for loan loss of $1,500,000 at June 30, 1996. The reserve for loan
loss was 1.55% of outstanding loans at June 30, 1997 and 1.45% at June 30, 1996
and 1.59% at December 31, 1996. Nonperforming assets, defined as other real
estate owned, nonaccrual loans, restructured loans, and loans past due 90 days
and still accruing, as a percentage of total loans and other real estate owned
decreased to 0.93% at June 30, 1997 from 1.23% at June 30, 1996, and decreased
from 1.10% at December 31, 1996.
Non-interest income increased $3,544,000 for the first six months of 1997 over
the same period in 1996 mainly du to encreased investment and income from Low
Income Housing Partnerships. Non-interest expense increased by $1,707,000 over
the first six months of 1996 due to an increase of $456,000 in employee
benefits expenses and increase of $1,075,000 in other expenses.
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Material Changes in Financial Condition
Total assets at June 30, 1997, were $2,686,931,000 an increase of 5.6% or
$142,294,000 from the same period one year earlier, and an increase of
$38,447,000 or 1.5% from December 31, 1996. Investment securities have
increased by $8.6 million over the second quarter of 1996. Loans, leases and
loans held for sale have increased $85.6 million over the same period in 1996.
Included in loans held for sale at June 30, 1997 are $50 million in comsumer
installment loans. Total deposits have increased by $119,921,000 from June 30,
1996, and increased by $33,616,000 from December 31, 1996.
Liquidity
The Corporation maintains sufficient excess liquidity to satisfy contractual
liabilities, meet withdrawal requirements of depositors, fund operations, and
provide for customers' credit needs. Management knows of no demand,
commitments, or events that would result in liquidity changing in a material
amount.
Capital Resources
Shareholders' equity increased by $12 million from December 31, 1996, to $389
million at June 30, 1997. Federal regulatory agencies have established capital
adequacy guidelines setting a minimum for leverage and risk based capital
ratios. These minimum and the Corporation's ratios are as follows:
June 30 December 31
Minimum 1997 1996 1996
Tier 1 Risk Based Capital Ratio 4% 18.52% 18.22% 18.45%
Total Risk Based Capital Ratio 8 19.64 19.28 19.58
Leverage Ratio 4 14.71 14.29 14.13
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Statistical Disclosures
The information as requested by the Securities and Exchange Commission of
selected Guide 3-Statistical Disclosure by Bank Holding Companies as follows:
III. Loan Portfolio
C. Risk Elements
Nonperforming Assets
June 30 December 31
(In Thousands) 1997 1996 1996
Nonaccrual
Commercial and industrial $5,867 $2,439 $1,451
Real estate construction 220 214 166
Real estate long-term 4,604 4,735 3,841
Other 104 45 35
Total 10,795 7,433 5,493
Restructured Loans
Real estate construction 80 90 85
Real estate long-term 93 97 95
Total 173 187 180
Accruing loans past due 90 days or more 2,336 7,821 9,945
Other real estate owned 270 2,237 326
Total nonperforming assets $13,574 $17,678 $15,944
Nonperforming assets as a percentage
of loans and leases and other real
estate owned at end of period 0.93% 1.23% 1.10%
Potential Problem Loans
At March 31, 1997, an additional $34,296,000 in loans are being closely
monitored by management. These loans are not include in any category of non-
performing loans. However, management has concern about the borrow's abilities
to comply with their present loan repayment terms. These loans are reviewed
monthly to assess any change in collectability.
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IV. Summary of Loan Loss Experience
A: Analysis of Reserve for Loan Loss
(In Thousands) June 30, 1997 December 31, 1996
Balance January 1 $23,002 $21,529
Provision charged to operations 1,800 6,650
Recoveries on loans previously charged off 1,533 2,560
Less loans charged off (2,857) (7,737)
Balance at end of period $23,478 $23,002
Composition of Loan Charge Off and Recoveries
Loans Charged Off:
Commercial loans and leases $ 556 $ 1,867
Real estate construction - 6
Real estate long-term 46 1,574
Consumer 1,786 3,232
Visa 469 1,058
Total Charge Offs 2,857 7,737
Recoveries:
Commercial loans and leases 175 403
Real estate construction 3 5
Real estate long-term 353 286
Consumer 929 1,633
Visa 73 233
Total Recoveries 1,533 2,560
Net Charge Offs $1,324 $5,177
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B. Allocation of the Allowance for Loan Loss
Allocation of Reserves
To Loan Categories
Loan Category As a % % of Total Amount of
of Total Loans Reserve Reserves(000's)
June 30, 1997
Commercial and Industrial 38.1% 6.8% $ 1,585
Real Estate Construction 2.6 0.1 11
Real Estate Long Term 32.3 1.0 236
Installment 22.8 25.9 6,090
Nontaxable 3.5 - -
Lease Financing 0.7 0.4 98
Unallocated - 65.8 15,458
100.0% 100.0% $23,478
December 31, 1996
Commercial and Industrial 34.8% 1.4% $ 329
Real Estate Construction 2.4 - 5
Real Estate Long Term 32.0 0.7 150
Installment 26.3 24.8 5,708
Nontaxable 3.8 - -
Lease Financing 0.7 - -
Unallocated - 73.1 16,810
100.0% 100.0% $23,002
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PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Not applicable.
Item 2: Changes in Securities
Not applicable.
Item 3: Defaults Upon Senior Securities
Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5: Other Information
Not applicable.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27. Financial Data Schedule
(b) Not applicable
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SIGNATURES
Pursuant to the requirements of Sections 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.
August 11,1997 /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman
of the Board
August 11, 1997 /s/Richad Strutz
Date Richard Strutz, President
August 8, 1997 /s/Gary Dalton
Date Gary Dalton, Executive Vice
President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 140,932
<INT-BEARING-DEPOSITS> 2,500
<FED-FUNDS-SOLD> 50,260
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 223,488
<INVESTMENTS-CARRYING> 572,758
<INVESTMENTS-MARKET> 574,739
<LOANS> 1,516,057
<ALLOWANCE> 23,478
<TOTAL-ASSETS> 2,686,931
<DEPOSITS> 1,900,669
<SHORT-TERM> 360,263
<LIABILITIES-OTHER> 36,786
<LONG-TERM> 0
<COMMON> 389,213
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 2,686,931
<INTEREST-LOAN> 73,132
<INTEREST-INVEST> 28,117
<INTEREST-OTHER> 178
<INTEREST-TOTAL> 101,427
<INTEREST-DEPOSIT> 26,178
<INTEREST-EXPENSE> 35,096
<INTEREST-INCOME-NET> 66,331
<LOAN-LOSSES> 1,800
<SECURITIES-GAINS> 543
<EXPENSE-OTHER> 48,336
<INCOME-PRETAX> 38,341
<INCOME-PRE-EXTRAORDINARY> 25,004
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,004
<EPS-PRIMARY> 3.17
<EPS-DILUTED> 3.17
<YIELD-ACTUAL> 0
<LOANS-NON> 10,795
<LOANS-PAST> 2,336
<LOANS-TROUBLED> 173
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 23,002
<CHARGE-OFFS> 2,857
<RECOVERIES> 1,533
<ALLOWANCE-CLOSE> 23,478
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
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