<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, 1996
[ ] 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 24, 1997: $227,040,747
The registrant has one class of common stock, $10 par value. Numbers of shares
outstanding at February 24, 1997: 7,887,003.
Documents Incorporated By Reference
Documents Parts of Form 10-K into which incorporated
1996 Annual Report to Shareholders Part I and II
Proxy Statement for the March 18, 1997
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..............................................14
Item 12 Security Ownership of Certain Beneficial
Owners and Management...............................................14
Item 13 Certain Relationships and Related Transactions......................14
Part IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.................................................15
-1-
<PAGE> 2
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 16 of National Bancorp
of Alaska, Inc.'s 1996 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, 1996, the Bank's banking operations are conducted from 53
banking offices, 3 loan offices and 59 electronic branches located throughout
the state of Alaska, including 15 banking offices and 24 electronic branches in
Anchorage.
-2-
<PAGE> 3
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 $797 million under its supervision
as of December 31, 1996.
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. 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 1,110 people. Management considers employment
relations to be good. None of the Bank's employees are covered by a collective
bargaining agreement.
-3-
<PAGE> 4
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 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.
-4-
<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 shareholder, could be compelled
by bank regulatory authorities to invest additional capital.
-5-
<PAGE> 6
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 1996 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....................................42-43
C. Analysis of Changes in Net Interest
Income due to rate and volume............................43
II. Investment Portfolio:
A. Book Value of Investments................................36
B. Weighted Average Yield...................................36
III. Loan Portfolio:
A. Types of Loans for Each Reported Period..................37
B. Maturities and Sensitivity to Changes in
Interest Rates...........................................37
C. Risk Elements........................................... 38
IV. Summary of Loan Loss Experience:
A. Analysis of Allowances for Loan
Loss Experience..........................................39
V. Deposits:
A. Average Balance by Type..................................40
B. Large TCD Maturities - Over $100,000.....................37
VI. Return on Equity and Assets
Selected Ratios for Each Reported Period............................41
VII. Short-Term Borrowings...............................................40
-6-
<PAGE> 7
Schedules Included Herein
III. Loan Portfolio
C. Risk Elements.
Potential Problem Loans
At December 31, 1996, an additional $15,790,000 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,
1996.
-7-
<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 Reserves Reserves (000's)
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
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
-8-
<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 41 of its banking
offices (including five which are subject to ground leases) and leases 73 other
banking and loan offices under agreements expiring between 1997 and 2031.
ITEM 3. LEGAL PROCEEDINGS
For information concerning legal proceedings, see Note 10 of "Notes to
Financial Statements" at page 28 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 1996.
-9-
<PAGE> 10
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 44 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 18-19 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 34 through 43, 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 a 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 4% of Tier 1 capital to
total assets less goodwill. The table below illustrates the Corporation's
regulatory capital ratios as of December 31:
1996 1995
Tier 1 Capital $374,998 $343,954
Tier 2 Capital 23,002 21,529
---------------------
Total Qualifying Capital $398,000 $365,483
=====================
Risk Adjusted Total Assets (including
off-balance sheet exposure) $2,032,792 $1,869,720
=======================
Total Risk-Based Capital Ratio 19.58% 19.55%
===================
Leverage Ratio 14.13% 13.90%
===================
-10-
<PAGE> 11
<TABLE>
Interest Rate Sensitivity Analysis
December 31, 1996
(In Thousands)
<CAPTION>
90-365 OverTotal int. Non int. Total
1-90 days days 1-5 years years bearing bearing Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Investment securities 63,940 907,683 377,845 64,005 596,473 596,473
Securities available for sale 25,025 30,439 171,048 27,040 253,552 253,552
Interest-bearing balances
with banks 233 233 233
Federal funds sold and
securities purchased
under agreement to resell 20,000
Loans and leases 567,555 48,818 458,789 371,816 1,446,978 1,446,978
Loans held for sale 31,563 31,563 31,563
Other assets 262,897 262,897
--------------------------------------------------------------------
Total Assets 676,753 169,940 1,007,682 494,424 2,348,799 299,685 2,648,484
====================================================================
Deposits 1,020,460 181,079 126,205 1,327,744 539,309 1,867,053
Funds purchased 325,108 39,609 750 365,467 365,467
Other liabilities 38,561 38,561
Equity capital 377,403 377,403
--------------------------------------------------------------------
Total Liabilities and
Shareholder's Equity 1,345,568 220,688 126,955 - 1,693,211 955,273 2,648,484
====================================================================
Interest Sensitivity Gap (668,815) (50,748) 880,727 494,424 655,588 (655,588)
Cumulative Gap (719,563) 161,164 655,588
Ratio of Interest Sensitive
Assets to Interest
Sensitive Liabilities 0.50 0.77 7.94 -
Cumulative Ratio 0.50 0.54 1.10 1.39
</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
$775,528,000 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.
-11-
<PAGE> 12
Nonperforming Assets
Other real estate owned decreased from $3.1 million at December 31, 1995 to
$0.3 million at December 31, 1996. Assets with a book value of $3.1 million
were sold.
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 34 of the
Annual Report are incorporated herein by reference.
The quarterly financial data on page 44 of the Annual Report is incorporated
herein by reference.
ITEM 9. CHANGE IN ACCOUNTANTS
Not Applicable.
-12-
<PAGE> 13
PART III
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 1 through 5 of the Proxy
Statement for the March 18, 1997, 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
Positions and Offices Executive Officer
Name Age Currently Held with Bank Since
- -----------------------------------------------------------------------------
Donald L. Mellish 69 Chairman of theExecutive
Committee 1964
Edward B. Rasmuson 56 Chairman of the Board
of Directors 1972
Richard Strutz 46 President 1985
Kathleen Soderberg 48 Executive Vice President
and Treasurer 1982
Gary Dalton 42 Executive Vice President 1988
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to pages 6 through 10 of the Proxy Statement for the March
18, 1997, 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.
-13-
<PAGE> 14
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 1996
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, 1996 and 1995....................................21
Consolidated Statements of Income
Years ended December 31, 1996, 1995, and 1994.................20
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994.................22
Consolidated Statements of Changes in Shareholders'
Equity Years ended December 31, 1996, 1995, and 1994..........23
Notes to Consolidated Financial Statements....................23-33
Report of Independent Auditors................................33
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.
-14-
<PAGE> 15
(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,
1996.
(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
NBA 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, 1996.
(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,
1996, is incorporated herein by reference in Item 14(a)1.
-15-
<PAGE> 16
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 18, 1997 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 18, 1997 /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman of
the Board and Director (Principal
Executive Officer)
March 18, 1997 /s/Richard Strutz
Date Richard Strutz, President and
Director (Principal Financial Officer)
March 18, 1997 /s/Gary Dalton
Date Gary Dalton, Senior Vice President
(Principal Accounting Officer)
March 18, 1997 /s/Donald B. Abel, Jr.
Date Donald B. Able, Director
March 18, 1997 /s/Gary M. Baugh
Date Gary M. Baugh, Director
March 18, 1997 /s/Carl F. Brady, Jr.
Date Carl F. Brady, Jr., Director
-16-
<PAGE> 17
March 18, 1997 /s/Sharon Wikan
Date Sharon (Burrell) Wikan, Director
March 18, 1997 /s/James O. Campbell
Date James O. Campbell, Director
March 18, 1997 /s/Jeffrey J. Cook
Date Jeffrey J. Cook, Director
March 18, 1997 /s/Patrick S. Cowan
Date Patrick S. Cowan, Director
March 18, 1997 /s/Roy Huhndorf
Date Roy Huhndorf, Director
March 18, 1997 /s/James H. Jansen
Date James H. Jansen, Director
March 18, 1997 /s/Donald L. Mellish
Date Donald L. Mellish, Director
March 18, 1997 /s/Emil Notti
Date Emil Notti, Director
March 18, 1997 /s/Howard R. Nugent
Date Howard R. Nugent, Director
March 18, 1997 /s/Tennys B. Owens
Date Tennys B. Owens, Director
March 18, 1997 /s/Eugene A. Parrish
Date Eugene a. Parrish, Director
March 18, 1997 /s/Michael Pate,
Date Michael Pate, Director
March 18, 1997 /s/Martin R. Pihl,
Date Michael Pate, Director
-17-
<PAGE> 18
March 18, 1997 /s/Edward F. Randolph
Date Edward F. Randolph, Director
March 18, 1997 /s/Major General John Schaeffer
Date Major General John Schaefer(Ret.)
Director
March 18, 1997 /s/Michael K. Snowden
Date Michael K. Snowden, Director
March 18, 1997 /s/George S. Suddock
Date George S. Suddock, Director
March 18, 1997 /s/Richard A. Wien
Date Richard A. Wien, Director
-18-
1996 Annual Report
National Bancorp of Alaska
<PAGE> Cover
1996
A YEAR OF MILESTONES
ANNUAL REPORT
NATIONAL BANCORP OF ALASKA
(Photo of family playing in snow in front of their house.)
(Photo of man and two women at a desk reviewing documents.)
(Background collage of photos and graphs.)
<PAGE> Inside Cover
(Photo of president and chairman)
1996: A Year of Milestones
(Photo captions)
On the cover, Trudi and Roy Komakhuk and their family enjoy their new home
financed with the help of the Cook Inlet Housing Authority's homebuyers program
and NBA loan originator Bobbie Wirth. Pictured above are Richard Strutz, NBA
President, and Edward B. Rasmuson, Chairman of the Board.
TO OUR SHAREHOLDERS, CUSTOMERS AND FRIENDS:
To commemorate our 80th anniversary, we are pleased to present this report
highlighting a year of accomplishments, including our eighth consecutive year
of record net income. The past year was challenging, as we took on perhaps the
largest conversion effort that we will ever experience. In May, we
successfully converted our processing to M&I Data Services, making the
transformation to a new way of processing transactions.
Earlier in the year, we outsourced telecommunications to General
Communications, Inc. (GCI). GCI now supports our network of 66 local area
networks, 70 file servers, more than 1,100 personal computers and all of the
communication links. While we continue to address issues related to these
outsourcing efforts, we have already experienced operational benefits,
including decreased teller training time, better product and service
information for our customers and enhanced productivity in many backroom
functions.
It is a tribute to our staff that we achieved record net income, as well as
record deposit, personal loan, investment and trust volumes in the midst of
this massive effort. Our net income reached a record $46.5 million, up 12.7%
from $41.3 million for 1995. We have highlighted several of these achievements
and the related challenges in this report.
Until this year, the primary source of earnings for the bank had been core
earnings such as interest and fees on loans and other products that we handle.
However, a few years ago we began accumulating capital in excess of what was
needed to run the bank. We concluded that we could achieve higher returns by
investing this excess capital with some sophisticated investment companies.
At present, the bank holding company has committed to invest approximately
$75 million in these types of funds. The funds have a term of five to 10
years, with prospective returns that we could not achieve through our daily
banking practices. We currently have unrealized profits in these funds which
should help the non-core profits of the bank in future years. Profits realized
from investment management companies, being capital gains, come at irregular
intervals. The results during 1996 are summarized in the Financial Highlights
on page 34 of this report.
Another factor contributing to a successful year was a relatively stable
Alaska economy. Overall, we experienced very slight economic growth, with
positive outlooks in some industries and continued challenges in others. The
forecast for 1997 is basically the same.
We are proud of our accomplishments and look forward to another successful
year in 1997. We thank you, our shareholders and customers, for your business.
Sincerely,
/s/Edward B. Rasmuson
Edward B. Rasmuson, Chairman of the Board
/s/Richard Strutz
Richard Strutz, President
(80 years graphic)
<PAGE> 1
(Four Graphs)
(See below table of items represented in graphs)
(In Thousand except statistics)
1992 1993 1994 1995 1996
Total Assets $2,129,965 $2,207,280 $2,344,678 $2,450,921 $2,648,484
Shareholders' Equity 269,303 292,976 312,772 350,320 377,403
Net Income 34,027 35,626 37,520 41,280 46,513
Net Income Per Share
(In thousands except statistics) 1-Year 5-Year
1996 1995 1992 Change Change
Total Assets $2,648,484 $2,450,921 $2,129,965 8.1% 24.3%
Shareholders' Equity 377,403 350,320 269,303 7.7% 40.01%
Net Income 46,513 41,280 34,027 12.7% 36.7%
Net Income Per Share $5.84 $5.18 $4.27 12.7% 36.8%
TABLE OF CONTENTS
Milestones
2 Community Outreach
3 Consumer Loans
4 Deposit Products
5 Investment and Trust Services
6 Mortgage Loans
7 Small Business Banking
Economic Reviews
8 Construction
9 Fishing
10 Forest Products
11 Government
12 International Trade
13 Mining
14 Petroleum
15 Support Industries
16 Tourism
17 Financial Report
45 Board of Directors
45 Officer Listings
47 Advisory Boards
<PAGE> 2
COMMUNITY OUTREACH
Keeping in Touch With the Communities We Serve
(Photo of two female employees and a male employee talking to each other behind
the teller line.)
NBA's ongoing commitment to our communities and customers is evident by the
involvement of our employees and the quality of our products and services.
Throughout the bank, employees' involvement in organizations helps us monitor
the needs of our customers. Affordable housing, small business assistance, and
financial education continue to be the top three needs.
Providing safe, affordable housing is a top priority for NBA. While we
continue to be the leading bank for home purchase and home improvement loans,
we also look for other tools to help meet local housing needs.
We are an active member in the Federal Home Loan Bank of Seattle (FHLB) and
have used their housing programs to assist nonprofit organizations in
Anchorage, Nome and the Mat-Su Borough. We received FHLB's 1996 Community
Lender Award in recognition of our "record of service . . . and outreach to
households of all incomes."
We participated in loans that provided over 225 multi-family units in
Fairbanks, Anchorage, Valdez, Juneau and Homer. And, we are the leading lender
in four Alaska Native housing initiatives: Cook Inlet Housing Authority's
homebuyers program, HUD's Section 184 guarantee program, and two programs
operated through Barrow's Tagiugmiullu Nunamiullu Housing Authority.
We also provide homebuyer education through our Smart Start classes and
participate in other special programs targeting low-income homebuyers.
Small businesses are the state's largest employer. NBA has several
initiatives in place to assist urban and rural small business owners. We
opened a Small Business Center to coordinate small business lending in
Anchorage; provided bank officers to help teach the University of Alaska Small
Business Development Center's classes; supported two micro-lending programs
targeting low- and moderate-income individuals; and, continued two rural
initiatives _ the Business Cache, a quarterly publication providing news and
information to rural small businesses, and the Rural Small Business Conference,
a statewide educational and networking forum.
Financial education continues to be the number one need of consumers
nationwide, as well as in Alaska. The top two reasons for loan declines are
"poor credit history" and "high debt to income ratios" _ both of which can be
addressed through financial education.
NBA's new employee group, Team NBA, has identified 25 individuals to teach
personal finance classes using the bank's "Basic Banking" manual. In addition,
NBA branches and employees participate in the Anchorage's School-Business
Partnership program, providing some form of financial education in addition to
other activities. The bank also sponsors banking curriculum through the
Anchorage Daily News' Newspaper in Education program.
NBA's new pilot project _ Bank on U _ provides employment, training,
mentoring and scholarship assistance to four low-income students at an
Anchorage high school. When each student graduates, NBA will provide them with
a $10,000 scholarship.
NBA's strong commitment to our communities and customers, along with efforts
such as those outlined above, have earned the bank an "outstanding" rating on
our last Community Reinvestment Act (CRA) examination.
(Photo caption)
Above, NBA Bank on U students Ramsee Taylor and Demarcus Binion receive
training from Jenny McClure, Minnesota-Benson Branch Manager and Bank on U
advisor.
(Photo caption for next page photo)
(At right) With the financial assistance of NBA and Ford Consumer Finance
Corporation, Phil and Cheryl Martin purchased a 1997 model manufactured home in
West Anchorage.
<PAGE> 3
CONSUMER LOANS
Providing Financing for Individuals Throughout the State
(photo of man and woman standing in their kitchen preparing food.)
National Bank of Alaska's consumer loan market share has grown steadily and
we continue to be the dominant bank consumer lender in the state. Our consumer
loan portfolio is at an all-time high and 23% above 1995 figures. Loans
outstanding as of year-end 1996 totaled $510.5 million (including all consumer
credit products for NBA and Northland Credit Corporation).
Total statewide production grew from 27,000 loans totaling $239 million in
1995 to over 30,000 loans totaling nearly $311 million in 1996. The growth is
broadbased, with increases in Anchorage and Southcentral Alaska, Southeast
Alaska and the Northern Tier.
The bank portfolio mix is moving toward higher volumes of direct consumer
loans due to aggressive target marketing of products such as equity and
installment loans, as well as pre-approved loan programs. Statewide direct
production grew over 40% in 1996.
We continue to experience record loan volume in the Dealer Loan area, which
serves over 120 automobile, marine and snowmachine dealers statewide. Total
dealer fundings were up 17% in 1996.
Loan by Phone also continued its growth pattern, doubling to 20,000 calls in
1996. The call center became the number one direct consumer loan-generating
center in the bank this year. This was made possible by the expanded use of a
loan decisioning system, enhanced marketing of the service and a unique, easily
identifiable phone number (NBA-LOAN). Loan by Phone is accessible statewide
through a toll-free number (1-800-NBA-LOAN).
We continue to promote our various consumer and business Visa cards. At
year-end, our Visa card base was stable and the total dollar amount outstanding
was slightly higher compared to 1995 (due to increased usage of the cards).
Northland Credit Corporation (NCC), a bank subsidiary initiated in 1993,
handles alternate forms of financing to Alaskans who may not qualify for
traditional bank or credit union loans. With offices in Anchorage, Fairbanks,
Wasilla and Juneau, NCC generated over 8,000 loans in 1996.
During the first quarter of 1995, NBA partnered with Ford Consumer Finance
Corporation to provide long-term financing for Alaska's manufactured housing
needs. In 1996, we financed 58 units for a total of $2.2 million. In March,
the Ford Consumer Finance Corporation named NBA as one of the "Five Outstanding
Performers for 1995." The bank was cited for oustanding production, commitment
to customer service and the quality of loan submissions and processing.
Personal Loan Portfolio
(Graph of the above caption)
(Table of amounts depicted in graph)
Outstanding Loans (in millions)
1995 $416
1996 $511
<PAGE> 4
DEPOSIT PRODUCTS
Meeting Alaskans' Needs with New and Traditional Banking Services
(Photo of woman at kitchen table ordering catalog merchandise by phone with her
Visa Check Card.)
At year-end, the bank's deposits reached a record $1.87 billion, a 7%
increase over 1995. This is significant given a general trend of little
growth in Alaskan deposit dollars.
Given this environment, it has been an ongoing challenge for the bank to
increase deposit dollars. To expand our share of the market, we continue to
focus on providing competitive products that meet the needs of our customers.
We also emphasize non-traditional services related to deposit accounts, such as
the ATM and Visa Check Cards, Bill Pay Service, etc.
In addition, we are benefitting from bankwide efforts to build our
reputation for providing excellent service combined with competitive products.
We continued our series of image television ads focusing on our fast, accurate
and friendly service while highlighting the various communities we serve.
Strong branch sales efforts play a significant role in our ability to
maintain deposit growth. Branches throughout the state continue to focus on
providing outstanding service to our customers by referring and selling the
products they need.
During January 1997, we introduced two new deposit accounts for individuals.
Both Carefree Plus and New Gold Account Checking provide a package of services
along with a traditional checking account.
Carefree Plus is a package of services that compliments Carefree Checking.
It offers free checks, free overdraft protection, a Visa Check Card with no
monthly fee, a Visa Credit Card with no annual fee and loan discounts. All of
these added features are available for a monthly "package" fee of $3.00 (in
addition to the $5.00 monthly fee).
New Gold Account Checking offers a more extensive array of features for
customers who wish to earn interest. The account is a relationship-based
account and the monthly maintenance fee is waived for customers who maintain
$10,000 or more in monthly balances in checking, savings and certificates of
deposit.
We will continue our focus on value-added services by introducing PC Banking
and an Internet website in the first quarter of 1997. PC Banking will allow
individuals and businesses to bank from the convenience of their personal
computers. Customers may receive balance and interest information, transfer
money between accounts, view transaction activity, receive information on new
products and services, communicate with NBA via Email, reconcile accounts with
an account register and export files to other financial software.
Deposit Growth
(Graph of the above caption)
(Table of amounts depicted in graph)
Deposit Dollars (in billions)
1992 $1.54
1993 $1.61
1994 $1.75
1995 $1.74
1996 $1.87
<PAGE> 5
INVESTMENT & TRUST SERVICES
Investing in Non-Traditional Bank Products
NBA has offered trust and investment management services statewide for over
40 years. We offer a full range of trust and investment products through two
departments: Investment Services and Trust Services.
NBA's Trust Services assets hit a record high of over $1.8 billion this
year. Trust assets include personal trusts, Individual Retirement Accounts,
business retirement plans, escrows, and custodial and managed agency accounts.
NBA's Trust Services department offers an extensive array of services for
individuals, including living and charitable trusts, trusts under will, life
insurance trusts, estate settlement, custodial and managed agency accounts,
escrow accounts, and Individual Retirement Accounts. We are the exclusive
provider of Frank Russell investment products in Alaska, and we are among their
top five bank advisors in the United States.
We also provide the full spectrum of trust services for businesses. We
offer a variety of retirement savings plans, including profit sharing plans,
401(k) plans, money purchase pension plans and combined plans. In addition, we
can hold or manage assets for companies through a custodial or managed agency
arrangement.
One of NBA's newest departments is Investment Services. The department was
formed in 1994 to offer security and insurance products to our customers,
allowing them to save time and money by consolidating their investment and
deposit accounts with one financial institution.
The cornerstone of the department is customized investment consulting for
individuals, profit and nonprofit corporations, municipalities, boroughs and
school districts. In addition, the department offers retirement accounts,
short-term cash maximization accounts, treasury accounts, money market mutual
funds, stock and bond mutual funds, annuities, government agency securities,
commercial paper, and corporate and municipal bonds.
In the past year, the Investment Services department tripled the assets
managed, increasing to over $200 million. All department sales staff are
licensed to sell securities and able to provide a full range of investment and
non-traditional bank products.
To ensure that bank staff are familiar with our investment products, the
Investment Services staff visit branches to discuss investment services and
products. In addition, over 30 bank employees have obtained their insurance
licenses, enabling them to sell fixed annuities. Employees throughout the bank
also serve as ambassadors for Investment Services, providing referrals to
potential customers.
(Photo of two men and one woman standing in front of the Skagway museum.)
(Photo caption)
Investment Services provides portfolio management for many corporations and
municipalities. Pictured above (left to right) are Sioux Plummer, Mayor of
Skagway; Kelly Roper, NBA Skagway Branch Manager and Bob Ward, Skagway City
Manager.
(Photo caption for prior page photo)
At left, Visa Check Card customer and NBA employee Ester Bayne uses her debit
card to place a catalog order by phone. Ester says she likes the convenience
and flexibility that the card provides.
<PAGE> 6
MORTGAGE LOANS
Financing a Record Number of Homes for Alaskans
(photo of two women and a man standing in front of a house.)
Mortgage loans continue to be a significant aspect of the bank's lending and
a major contributor to fee income. The majority of the mortgage loans made by
the bank are sold to institutional investors. We contract with our investors
to provide in-state servicing to our local customers.
The value of this portfolio has increased steadily in recent years. In
1996, NBA serviced over $2.34 billion of mortgage loans (see graph at right).
We continued to see strong loan production in 1996. By mid-year, we had
exceeded both the number and dollar amount of new loans generated in 1995. At
year-end, we had approved more than 2,500 new and refinanced loans totaling
$291.6 million.
In 1996, we initiated a number of changes to position the Mortgage Loans
department for continued growth on a statewide basis. We invested in
automation, developed a new training program and expanded our regional office
focus.
To assist in development of a professional mortgage lending staff, we added
a mortgage lending component to the bank's management training program.
Mortgage Management Trainees participate in the regular management training
program for four months and spend eight months in focused mortgage lending
training. Graduates of the program are available for mortgage positions
statewide.
Since mortgage lending requires specialized training and support, the bank
has developed regional offices in several areas of the state. The Southeast
Mortgage Loan Production office, formed in 1988, originates loans in the Juneau
area and serves as a centralized training and support staff for branches in
Southeast Alaska. This year, Ketchikan Branch mortgage lending became a sub-
regional office which assists the Metlakatla and Prince of Wales branches with
loan origination.
The Fairbanks mortgage loan operation became a regional office in January
1996. This new office focuses on increasing loan volume in the greater
Fairbanks area.
In addition, we opened the Kenai Peninsula Mortgage Loan Office in Soldotna
in February. To accomplish this, we consolidated mortgage lenders from the
bank's Kenai and Soldotna branches and the Soldotna office of Northland
Mortgage Company (a bank subsidiary). The office serves Soldotna, Kenai and
Homer.
In November, we opened a mortgage origination office at Re/Max Properties in
Anchorage. This expansion exemplifies our commitment to bring better and more
convenient services to Alaskan homebuyers.
During 1996, we implemented two new automation programs: automated
underwriting and automated applications. These programs increase the
efficiency of the mortgage production operation, speed up processing and
approval time, and reduce paperwork.
Mortgage Loans Serviced
(Graph of the above caption)
(Table of amounts depicted in graph)
Total Serviced Loans (in billions)
1992 $2.03
1993 $2.18
1994 $2.19
1995 $2.33
1996 $2.35
<PAGE> 7
SMALL BUSINESS BANKING
Serving Alaska Small Business Customers
Small businesses provide the backbone of urban and rural economies
throughout Alaska and are the state's largest employer. At NBA, we recognize
the value of small businesses. Our small business lending portfolio is the
largest in the state (nearly $400 million) and we continue to focus on new and
better ways to meet the needs of our business customers.
Throughout the state, Branch Managers and Business Bankers assist small
business customers with a variety of bank services, including loans. In 1996,
we supported these efforts with television commercials in Anchorage and
Fairbanks. These 30-second commercials featured customers assisted by NBA and
drew positive response.
In Anchorage, the bank's Small Business Center specializes in small business
loans. The department is located within the Commercial Loan department at
Corporate Headquarters. Two staff members work directly with customers and
with NBA branch staff. To facilitate small business lending, Anchorage
branches are divided into four hub areas with a Branch Manager or Business
Banker taking responsibility for area loans. The four hub branches are
Huffman, Russian Jack, Fourth Avenue and Corporate.
In 1996, our renewed focus on small business lending in Anchorage branches
resulted in tripled dollar volume of new loans. Bankwide, the number of new
business loans in the branches was up slightly, while the total dollar volume
was fairly flat.
In addition to making loans and providing loan support, the Small Business
Center serves as a clearinghouse for information for small businesses,
referring customers who need additional assistance to the University of Alaska
Small Business Development Center and other education resources.
Throughout the bank, officers participate in outreach programs within the
communities served by NBA. Bank officers also teach classes at the Small
Business Development Center and participate in other local educational efforts.
NBA also produces the quarterly Business Cache, a newsletter for rural small
businesses. In addition, we co-sponsor the Rural Small Business Conference, an
annual event providing seminars and networking for rural small businesses
throughout the state.
(Photo of two women in gift store)
(Photo caption)
Above, small business owner Della Clark, of Dillingham, earned the 1996 Alaska
Federation of Natives' Presidents Award for Small Business, sponsored by NBA.
The award recognizes an Alaska Native business owner or manager who has
demonstrated success in business and a commitment to their community.
(Photo caption for prior page photo)
First-time homebuyers Teresa and Nick Messina (left) financed their new home in
Fairbanks with the help of NBA loan officer Nancy King. The couple moved into
their new home in October.
<PAGE> 8
CONSTRUCTION REVIEW
by James McCormack, VP
The Association of General Contractors estimates private and government
construction projects in 1996 totaled a "slightly above average" $1.2 billion.
Statewide construction employment in the peak of the season was 15,600 persons,
an increase of 100 people from the same period last year. Industry
spokespersons predict 1997 will be much the same, with oil and mining related
construction continuing to offset a decline in federal and state spending.
State funding for construction projects was $185.7 million, a decline from
$210 million in 1995. The Alaska Department of Transportation & Public
Facilities awarded contracts for 180 projects. State projects underway in 1996
included: the $267-million Healy Clean Coal Project; the $22.5-million, 890-
foot Canyon Creek bridge on the Seward Highway; a $20-million breakwater in
Kodiak; site preparation for the $49.5-million Seward Sea Life Center; Phase
III of the $13-million Bird Creek to Girdwood highway project; and completion
of the $22-million Bethel sea wall. Funding for Fiscal Year (FY)1997 depends
largely on the pending re-authorization of the Federal Highway Authorization
Bill.
Federal funding also declined, with the Army Corps of Engineers awarding
$178.5 million in military and civilian projects compared to $193 million last
year. The Corps estimates 1997 awards to be $181.5 million. Major projects
underway included the $158-million Elmendorf AFB Hospital (targeted for
completion in 1998), the $107.5-million Alaska Native Medical Center and an $18-
million Coast Guard housing project.
In the private sector, tourism related construction was dominant. Juneau
construction included the first phase of the $14-million Mount Roberts Tramway
and the $4-million Princess Tours dock. In Anchorage, work started on the 154-
room Anchorage Courtyard, by Marriott and NANA Corporation. This $15-million
project is financed by NBA and scheduled for opening in 1997.
Several hotels in Interior Alaska were completed, including: the 112-room
Denali Bluffs Hotel near Denali National Park; the 74-room Fairbanks Comfort
Inn; and the 157-room Bear Lodge at Wedgewood. Construction began on the $4.5-
million Timber Wolf Hotel. The $20-million, 120-room Mt. McKinley Princess
Lodge is near completion. Parent company Princess Cruises also rebuilt the
fire-damaged Denali Princess Lodge at a cost of $15 million.
Other construction projects in the state include: the completion of the $390-
million Ft. Knox mine; Cominco's $150-million expansion of the Red Dog Mine;
$22.2 million in water distribution and wastewater treatment projects in
Wainwright and Anaktuvuk Pass; a $9.7-million Alaska Native Primary Health Care
Center, owned by Cook Inlet Region Inc., and financed by NBA; and a $4 million
Alaska Electric Light and Power operations center in Juneau.
Residential construction kept pace with last year, with 859 permits issued
in Anchorage compared to 801 permits in 1995. Townhouse style condominium
projects made a small comeback due to increasing costs for developing single
family homes. Elsewhere in the state, there were 643 permits issued in
Fairbanks, 145 in Juneau, 57 in Ketchikan and 44 in Barrow and surrounding
villages.
Apartment vacancies, an indicator of the need for residential housing,
remained low. In Anchorage, the vacancy rate was 4.8% (through June), while
Juneau's vacancy rate was 1.94%.
Alaska Housing Finance Corporation (AHFC) reported delinquencies of 4.2% as
of September 1996, compared with 3.8% for the same period last year. The
average foreclosed inventory through the same period was 56 units compared with
60 units in 1995.
Construction Employment
(Graph of the above caption)
(Table of amounts depicted in graph)
(Annual average number of workers)
1992 10,200
1993 11,450
1994 12,300
1995 12,800
1996 est. 13,200
<PAGE> 9
FISHING REVIEW
by Frederick Richard, SVP
The 1996 harvest of 174 million salmon was down from the 1995 record of 217
million fish and slightly below the forecast of 182 million. The reduced
harvest, combined with the lowest ex-vessel prices in several years, brought
the total harvest value down to $361 million (compared to $460 million in
1995).
The Japanese market for Bristol Bay sockeye in 1996 was surprisingly strong
and resulted in better-than-expected prices for sockeye. The Prince William
Sound harvest of 26 million fish was slightly above forecast. The Bristol Bay
sockeye harvest of about 30 million fish was under forecast by about 5 million.
The pink salmon harvest of 94 million fish was down from 127 million fish in
1995; this resulted in a canned pack of about 1 million cases less than the 4
million cases in 1995. The federal government purchased a large quantity of
canned pink salmon and provided some relief from the high inventory. About 65%
of the pink salmon harvest was in Southeast Alaska where nearly 61 million pink
salmon were taken. Kodiak's pink salmon harvest was less than 4 million fish,
down from a record 43 million pink salmon in 1995.
Alaska continues to experience worldwide competition for its salmon, with
major competition coming from Norway and Chile. The aquaculture industry
continues to impact Alaska. In 1996, farmed salmon production exceeded Alaska
production despite high survival rates for wild stocks and several salmon
enhancement projects. After a difficult year in 1995, the processing industry
should, however, see improved profit margins as a result of strong sales to the
Japanese market and the reduced pink salmon canned pack.
The 1996 roe herring harvest of 50,980 metric tons was comparable to the
1995 harvest. The ex-vessel value, however, was up considerably, to $53.6
million compared to $41 million in 1995. The Togiak area was strong with 24.4
tons harvested. Prince William Sound did not have a fishery in 1996 but is
expected to resume herring fishing in 1997.
Crab harvests continue to be low, however there were some bright
developments in 1996. After two years without king crab fishing in the Bering
Sea, 8.4 million pounds were harvested in 1996 (exceeding the quota by more
than 3 million pounds). To meet the American demand for king crab, American
vessels have turned to joint ventures with Russian companies to harvest crabs
in Russian waters.
The opilio quota, which dropped to 50.7 million pounds in 1996, is set at
117 million pounds for 1997. The Bairdi crab harvest guideline was set at 6.2
million pounds, but only 1 million pounds were harvested.
The International Pacific Halibut Commission established the 1996 Alaska
halibut harvest level at 38.6 million pounds. The final harvest was
approximately 37 million pounds. Although somewhat controversial, the
individual fishing quota system established two years ago enhances the value of
the fish, provides a better product to the public and is less hazardous to
vessel owners.
The North Pacific Management Council set 1997 groundfish allocations in the
Bering Sea/Aleutian Island area at levels very similar to 1996. The Bering Sea
allocation is slightly less than 2 million metric tons of groundfish. The Gulf
of Alaska allocation is 268,000 tons.
(Photo of fishing boat with mountains in the background)
(Photo caption)
The Alaska fishing industry continues to be one of the state's major
industries. As with other resource-based products, pricing is largely
dependent on worldwide supply and demand.
<PAGE> 10
FOREST PRODUCT REVIEW
by Larry Cooper, VP
The forest products industry in Alaska continues to come under pressure from
the federal government and environmentalists. The overall harvest of
approximately 620 million board feet was well below the 770 million board feet
harvested in 1995. The majority, or 360 million board feet, came from
Southeast Alaska, although harvests in the Tongass National Forest are at their
lowest level in 20 years. Harvests on private land, mostly from Native
corporations, remained strong at 430 million board feet.
The biggest impact to the industry this year was the U.S. Forest Service's
(USFS) denial of a contract extension to fund $200 million in anti-pollution
upgrades for the Ketchikan Pulp Corporation (KPC). The resulting closure of
the Ketchikan Pulp Mill in the spring of 1997 will mean the loss of 500 direct
jobs plus road-building and subcontracting jobs.
An agreement between the state's congressional delegation and the
president's administration allows KPC a two-year grace period to operate the
Ketchikan and Metlakatla sawmills. The sawmill in Wrangell and the pulp mill
in Sitka remain closed.
As the USFS develops the Tongass Land Use Management Plan, the industry is
working hard to persuade them to allow enough timber volume to run Alaskan
sawmills at present levels. Roughly 30% to 40% of Southeast timber is not
sawlog quality, and with no pulp mills left in the state to handle low-grade
logs, there is pressure to reduce allowable harvest volumes. Recent
indications are that the Forest Service may attempt to reduce harvests to less
than 300 million board feet.
The Southcentral and Kenai Peninsula harvest remained strong at over 220
million board feet. The continued spread of the spruce bark beetle spurred
many landowners to harvest beetle-killed timber. In the Chugach Forest, the
Secretary of Agriculture stopped sales in July after only 2.7 million board
feet had been released. The Forest Service plans to offer 21 million board
feet for sale in 1997, contingent upon Congressional re-authorization of the
Timber Salvage rider. The regions' primary product is white spruce, much of
which is shipped as chips to Japan for use in high-quality paper products.
Interior harvests were flat at 40 million board feet. While most of the
harvest comes from Tok and Chitina, there is significant effort to increase
volumes and establish value-added processing facilities under new legislation
designed to assist small operators.
In 1996, pulp timber prices crashed from the highs of 1995. The 1995 prices
were artificially inflated when Canadian mills began to hoard timber in
response to announcements of reductions in allowable harvests on federal lands
over the next five to 10 years. Although many operators withheld selling and
large inventories remain, the outlook for pulp prices is positive. By January
1997, prices were near the 15-year average, but still significantly lower than
1995. Industry observers believe there is a world fiber shortage that will bode
well for Alaskan timber operators who weather current difficulties.
(Photo of Ketchikan Pulp Mill)
(Photo caption)
The closure of the Ketchikan Pulp Mill in the spring of 1997 will signify the
end of an era. The mill is Alaska's last remaining pulp operation.
<PAGE> 11
GOVERNMENT REVIEW
by Peter Crandall, SVP
Fiscal Year (FY) 1996 marked a historic first when income from the Alaska
Permanent Fund reached $1.8 billion and exceeded the amount the state collected
from petroleum. This 80% increase in prior year's earnings was a result of
taking unrealized stock market gains into income and sharing the appreciation
gains with Alaskans. The market value of the fund's total assets reached $19
billion and the dividend payout of $643 million was the largest ever. More
than 62,000 of the $1,131.68 dividend payments were electronically deposited
into National Bank of Alaska accounts in 1996, up 11% from 1995.
A proposal by the state's Long Range Financial Planning Commission for using
permanent fund income to help finance state government stimulated rigorous
debate during 1996, but garnered little support in the legislature.
Despite the well-publicized news of state budget deficits and federal cuts,
Alaska's government sector was stable in 1996. Total government jobs declined
by 1%, the same rate as last year. Again, federal job cuts were offset by
modest increases in state and local government jobs.
In June, the governor approved a $2.4 billion general fund budget for FY97,
down slightly from the year before. Rising oil prices allowed the state to
reduce the withdrawal from the budget reserve account to $291 million, about
two-thirds of the amount budgeted. Although general fund deficits are forecast
for FY 97, the state ended FY 96 with a small surplus and a budget reserve of
over $3 billion.
In 1996, the legislature mandated that two state-owned agencies provide
annual contributions to the state treasury to help balance the budget. Alaska
Industrial Development and Export Authority (AIDEA) and Alaska Housing
Financial Corporation (AHFC) contribute to the state economy through their
business and housing programs as well.
AIDEA, with over $1 billion dollars in assets, generated $43 million in net
income, as well as providing $60 million return of capital to the state
treasury. NBA is AIDEA's largest participant, with 93 loans totaling more than
$78 million. NBA is also the largest participant in the AIDEA Rural
Development and Initiative Fund with 24 of the 31 loans established to create
economic opportunities in rural Alaska.
Alaska Housing Finance Corporation (AHFC) provided a $70 million payment to
the state treasury and earned $115 million on $4.3 billion of assets. NBA
remains the largest servicing agent for AHFC, servicing more than 12,000 home
loans totaling more than $1 billion. NBA, through participation in the new
AHFC multi-family housing program, helped construct or rehabilitate 190
apartment units statewide, totaling $4.4 million.
The military force in Alaska remained stable during 1996 as down-sizing
efforts slowed. Relocation of troops from Ft. Greely in Delta to Ft.
Wainwright in Fairbanks continued, but troop levels remain at approximately
20,000, the same as 1995.
Alaska General Fund Budget
(Graph of the above caption)
(Table of amounts depicted in graph)
(in billions of dollars)
1993 $2.69
1994 $3.08
1995 $2.57
1996 $2.51
1997 est. $2.42
<PAGE> 12
INTERNATIONAL TRADE REVIEW
by Seung Choi, VP
International trade continues to be a significant industry in Alaska,
boosted by the state's strategic role as a major air cargo hub. The value of
the industry, including exports produced in the Lower 48 and shipped through
Alaska was $3.80 billion for the first eight months of 1996, a decline of about
2% compared to the same period in 1995.
The state continues to grow as an air cargo hub. Anchorage is the port of
export for merchandise manufactured in the Lower 48 for shipping destinations
such as Japan, Korea, Hong Kong, Singapore and Taiwan. Air freight exports
during the first eight months of 1996 were about $2.05 billion, a 3% increase
over the same period in 1995.
Products produced in the state and shipped through Alaska accounted for
about $1.75 billion of the total exports, a 7% decline over the same period in
1995. Although exports of petroleum and minerals increased during 1996, this
did not offset the decline in seafood and timber export products.
Pacific Rim countries continue to be Alaska's principal export market and
the destination for 90% of the products produced in Alaska during the first
eight months of the year. Japan, the largest trading partner, received $1.18
billion or 75% of the state's export products. Korea received $199 million;
China received $83 million; Taiwan, $68 million; and all other Asian countries
totaled, $38 million. European countries imported $98 million in Alaska goods
and Canada received $58 million.
Alaskan seafood comprises about half of the total U.S. seafood exported and,
as in previous years, seafood products were Alaska's number one export. The
value of seafood exports dropped to $957 million in 1996 compared to $1.13
billion in 1995. Salmon, shellfish, and surimi exports declined in value by
28% in 1996 compared to 1995, while bottomfish exports increased by 15%, to
$218 million.
The value of timber exports dropped by 18%, to $311 million, due to the
closure of sawmills and lack of product to export.
Although 1996 saw a general decline in Alaska product exports, mineral
exports increased by 21% (to $116 million) and petroleum by 41% (to $361
million). The mineral increase is primarily due to substantial increases in
the production of zinc ores. The lifting of the North Slope Crude Oil export
ban in 1996 also contributed to the increase in the value of petroleum products
exported. The value of crude oil exports should rise substantially in the
future due to the export ban lifting.
Industry experts predict that the value of Alaskan exports for 1997 will be
greater than 1996. The value of Alaska-produced products, such as seafood,
timber, petroleum and mineral products, will be affected by world commodity
price fluctuation. The long-term outlook for Alaskan exports is favorable,
considering the state's abundant natural resources and strategic location for
international freight distribution. International trade will continue to play
an important role for the state's economy.
(photo of man and woman standing outside of a mine.)
(Photo caption)
Greens Creek Mine, near Juneau, was a major contributor to the state's
increased mineral production during 1996. Pictured here are Michael Kelly,
Greens Creek Mine, and Natasha von Imhof, manager of NBA's new Lemon Creek
Branch in Juneau.
<PAGE> 13
MINING REVIEW
by James Cloud, SVP
This was a year of benchmarks for Alaska mining, with production and related
expenditures approaching $1 billion. An estimated 3,700 workers were employed
in mining in 1996 and industry experts predict that employment could increase
by as much as 2,000 positions in the next decade with continued favorable
conditions.
In 1996, stable mineral prices, more receptive Native and state government
landowners and airborne geophysical mapping data enabled Alaska to compete
worldwide for exploration efforts. Several global mining companies targeted
Alaska and exploration expenditures topped $43 million,
$9 million higher than 1995. Investment in exploration will increase as
companies step up their efforts to locate reserves of nickel, copper, gold,
zinc and lead.
At the same time, mine development expenditures increased to $396 million.
The value of mineral production for 1996 is estimated at $545 million, $8
million greater than 1995, largely due to production at Red Dog, Greens Creek,
and Nixon Fork mines. With production expansion more fully realized in 1997,
total statewide production should be even greater in 1997.
Work continued on the $200-million expansion project at the Red Dog Mine
north of Kotzebue. Red Dog Mine is the leading world producer of zinc and lead
concentrates while also holding the distinction of being the lowest-cost
producer.
Gold production continues to rise in Alaska with steady demand for jewelry
and art fabrication, as well as use in electronics manufacturing and dentistry.
Gold prices were stable in 1996, ranging between $370 and $400 per ounce, but
started falling off at year-end.
In 1997, gold production should top 400,000 ounces with the completion of
the Fort Knox Mine north of Fairbanks and the Illinois Creek Mine southwest of
Galena, as well as a second full year of operation at the Nixon Fork Mine near
McGrath. This will be Alaska's highest gold production year since 1942.
The Kensington mine, located near Juneau, is in the final stages of
permitting and construction is expected to start in mid-1997. This mine is
expected to produce 200,000 ounces of gold and employ 300 miners annually.
Early in 1997, the owners of the AJ mine, also near Juneau, announced that
they were dropping plans to further develop the property, writing off $77
million of their investment.
Coal production increased to 1.6 million tons in 1995, but fell off slightly
in 1996. Production is expected to continue to rise with the start-up of the
Wishbone Hill this year and completion of the Healy Clean Coal Project in 1998.
High oil prices make coal-fired electricity in the interior of Alaska
economical while the new technology employed at Healy significantly reduces
sulfur emissions.
The Federal Government owns 215.7 million acres or 59% of the total 365.5
million acres in Alaska. While 162.4 million acres of federal acreage and 9.9
million acres of state-owned land are closed to mineral exploration, Alaska has
44 million acres of private land and another 95 million acres of state land
available for exploration. While this is less than 40% of the total Alaskan
acreage, it is a vast area.
Alaska will continue to benefit from investment by mining companies as long
as mineral prices are viable, land access is reasonable and cost-competitive,
and the State of Alaska has stable taxation and regulatory policies.
Economic Value of the Alaska Mining Industry
In Millions
'92 '93 '94 '95 Est. '96
- ------------------------------------------------------
Exploration $30 $30 $31 $34 $43
Development $30 $28 $45 $149 $396
Production $561 $449 $508 $537 $545
- -------------------------------------------------------
Total $621 $507 $584 $720 $984
Source: State of Alaska, Division of Mining.
Year-round equivalents
'92 '93 '94 '95 Est. '96
- -------------------------------------------------------
Employment 3,492 3,130 3,083 3,406 3,700
<PAGE> 14
PETROLEUM REVIEW
by Pita Jelley Benz, VP
A number of developments in 1996 contributed to optimism about the state
petroleum industry's future. Two important events were Arco Alaska's
announcement of a major new field and BP Exploration Alaska's commitment to
move forward with construction and development of the Northstar field.
Enhancement of existing fields also provided positive news.
The Alpine field is the first oil discovery on land owned by Alaska Natives
since the Alaska Native Claims Act of 1971. Alpine is in the Colville River
delta, 34 miles west of the Kuparuk River field. Arco will operate the field
for itself and its partners, Anadarko Petroleum Corporation and Union Texas
Petroleum Alaska. The field has an estimated 1 billion barrels of oil in
place, with 350 million recoverable barrels. Construction will begin in late
1997 and developmental drilling is scheduled for 1999. The plan calls for two
drill sites and use of extended reach drilling.
The state agreed to renegotiate terms of the Northstar lease to make
development of the field economical for BP. This was another important signal
that Alaska is serious about encouraging the oil industry to continue to
explore and develop smaller fields to maintain a viable industry as the giant
Prudhoe Bay field declines. BP, for its part, committed to an Alaska-hire
program and to construct the modules for the field in Alaska rather than the
Lower 48. Pipeline insulation and related fabrication will also take place in
Alaska. The Northstar field is estimated to have 145 million barrels of
recoverable oil. A buried, subsea pipeline will deliver the crude to shore.
Construction on the field and facilities will begin in early 1997 and
production is scheduled to start in 1999.
BP completed a $180-million expansion and facilities upgrade at the Milne
Point field. Production capacity at Milne Point has increased to 65,000
barrels per day, up from 24,000. At the Kuparuk field, an enhanced oil
recovery project began operating in the fall of 1996. This project will
ultimately increase recovery from Kuparuk by 200 million barrels.
The industry continued developing cost-effective systems for production of
the heavy oil accumulations at West Sak and Schrader Bluff. The North Slope
contains about 20 billion barrels of heavy oil. This type of oil is expensive
and difficult to produce because of its molasses-like thickness.
On the North Slope, 10 fields are currently in production and several more
are scheduled to come on line within the next few years. The new, but smaller
fields will partially offset an annual 10% decline in Prudhoe Bay production.
North Slope production peaked in 1988 at 2 million barrels per day and by late
1996 averaged 1.5 million barrels per day. A huge reduction in drilling costs
is a major factor in making the smaller fields more economical. Drilling costs
were $7 million per well 20 years ago. Today's technological advances have
reduced drilling costs to around $2 million per well. There has also been an
increase in extended reach and horizontal drilling, drilling through tubing,
and multilateral wells.
Arco signed a two-year agreement with Anadarko Petroleum Corporation calling
for Anadarko to serve as the operator to explore Arco's acreage in Upper Cook
Inlet. Anadarko has the potential to earn up to 50% of Arco's working
interests in the areas explored.
Anchorage's city-owned utility, Municipal Light and Power, purchased Shell
Western E&P's interest in the Beluga gas field, located across Cook Inlet from
Anchorage. The purchase price was $125 million.
Total Alaska Petroleum
(Graph of the above caption)
(Table of amounts depicted in graph)
(Annual production, in millions of barrels of oil)
1992 626
1993 576
1994 570
1995 540
1996 est. 515
<PAGE> 15
SUPPORT INDUSTRIES REVIEW
by Margaret Richmond, AVP
The Alaska economy experienced its ninth consecutive year of employment
growth and its sixth year of economic growth in 1996. Continued growth was
supported by expansion of the services sector, tourism, trade, mining and
construction. However, growth was less than 1%, slower than at any other time
during the 1990s. The forecast for 1997 is for continued, slow growth.
The retail trade boom that began three years ago with the arrival of
national retailers is over. Retail trade continued to expand, however, with
the opening of Computer USA and Barnes & Noble Booksellers. Eating and
drinking establishments set the pace for growth in Anchorage with the opening
of three micro-breweries, a Pizza Hut, and several small eateries, coffee
houses and gift shops. Experts predict continued consolidation and attrition in
retail trade through 1997 as heavy competition affects profitability.
The air transportation industry is prospering in spite of the demise of
MarkAir and MarkAir Express. Reno Air became a full-time operator in Alaska in
1996, along with America West and World Airways. Considering landed weight for
all-cargo aircraft, Anchorage is the top U.S. airport and significant to the
trans-Pacific freight trade. The effect of this is seen with United Parcel
Service's construction of a $5.5-million facility, as well as Federal Express'
new flight simulator facility. The Taiwanese transport EVA Air and Air Hong
Kong, owned by Cathay Pacific, are also flying through Anchorage. Next year,
United Airlines will begin cargo service between Asia and North America.
Engineers, architects and surveyors experienced a good year with
construction and mining projects. This growth should continue for the next two
years with the expansion of the Red Dog mine. For the fourth consecutive year,
legal services declined in growth.
The service sector is the growth leader, registering a
2.5 % increase in employment. Fueled by the 5% increase in the visitor
industry, hotels and lodging places are burgeoning. Hotel expansion occurred
in Fairbanks and Anchorage. Business services and temporary help agencies are
benefiting from increased use of contract workers for data processing,
accounting, and purchasing services.
Health care is also a leading contributor to growth in the service industry.
Health care professionals are moving to Alaska to escape managed care.
Alaska's aging population and the move away from hospitalization to home care
is also contributing to industry growth.
The finance sector of the economy has seen minimal growth, while the
insurance industry remains flat. Real estate prices in Anchorage are up, but
the profit margin for contractors is competitive.
The Alaskan economy is in transition from a predominant dependence on the
mining, timber, seafood and oil industries, to one where service and trade are
of growing importance. While experts predict little growth in the overall
economy in 1997, the service sector will continue to see the most employment
growth. The public sector will diminish in size with the gradual privatization
of the Alaska Native Hospital, operated by a consortium of Native Corporations,
and with the privatization of the Municipal Utility in Fairbanks.
(Photo of three men with a sign and partially-constructed building in
background)
(Photo caption )
With financing provided by NBA, Pen Air began construction of a new hanger and
administrative office, located on the north side of Anchorage International
Airport. Pictured at the site are (left to right): David Hamilton, NBA Loan
Officer, Jan Sieberts, NBA Senior Vice President and Orin Seybert, Pen Air
President.
<PAGE> 16
TOURISM REVIEW
by Ben Barrera, VP
It was an excellent year for the largest growth industry in Alaska, with the
number of visitors up nearly 10% from 1995 (estimated at 1.2 million
travelers). Cruise, air, and convention travel showed growth, while the
number of highway visitors was lower than expected. The forecast for 1997 is
moderate but healthy growth of the industry.
With continued growth anticipated, tourism providers committed over $100
million to the development of tourism infrastructure in the state in 1996. New
hotels or property additions were started in Anchorage, Fairbanks and the South
Denali region. In addition, approximately $40 million was invested in small
vessels, private campgrounds and new start-up inventory.
Funding for promotion of the state as a tourism destination remains a
challenge. The major marketer for the state is the Alaska Tourism and Marketing
Council (ATMC), an organization of tourism and government representatives.
ATMC's budget, currently just $2 million, has decreased dramatically in recent
years. With limited resources, ATMC focuses its efforts on promoting the
Division of Tourism's Vacation Planner, a resource with information on over
1,500 Alaska providers.
Besides ATMC, the cruise lines are the major advertisers of Alaska.
Increasingly, the bulk of the promotion of the state focuses on Alaska as a
cruise destination. Many in the industry argue that alternate funding must be
found to inform potential travelers that Alaska is far more than a cruise
vacation.
Another area of concern in the industry is the development of wildlife
viewing areas, one of the top three reasons people visit the state. There has
been much discussion regarding development of additional world-class viewing
areas, similar to Denali National Park. With increased visitor volume, the
park continues to face the challenge of maintaining the animal habitat while
allowing tourists to view the wildlife. The Wrangell-St. Elias area is being
considered for potential development of what is being considered the new
"Denali Park."
To develop funding for such improvements, the Alaska Visitors Association
endorses a national sales tax on all outdoor gear. The Watchable Wildlife Tax,
if accepted by Congress, will designate proceeds to establish wildlife viewing
areas, trails, pullouts and other facilities in state parks. As the law is now
written, funds would be distributed to the state proportional to their park
lands acreage. If the law is approved with this formula, Alaska could receive
between $5 million and $10 million per year.
The future of Alaska tourism is changing as Alaska Native corporations
pursue investments in the industry. With vast land holdings and substantial
capital, the Native corporations are well positioned to offer access to
recreational areas, wildlife viewing and new tourism options. Native
organizations are successfully challenging laws giving them operational
preference on U.S. parklands. Goldbelt Corporation of Juneau, for instance,
was awarded the concession to Glacier Bay and is very involved in tourism
throughout Southeast Alaska. Goldbelt operates a lodge, tram, cruise
facilities, travel agency and hotel.
The Native commitment to tourism throughout the state is sizable. In
Anchorage, NANA will open its new Courtyard by Marriott this year. CIRI has
hired a former tourism and hotel executive to head their efforts.
It appears for mutual benefits native corporation/private corporation
partnerships and joint ventures will escalate, as will NANA-Marriott, CIRI-
Princess and others. This is an important development as ownership in the
industry will shift to Alaskans.
Visitors to Alaska
(Graph of the above caption)
(Table of amounts depicted in graph)
(In millions of visitors)
1992 .90
1993 1.05
1994 1.12
1995 1.15
1996 1.20
<PAGE> 17
FINANCIAL SECTION
Content Page
Ten Year Record...........................................................18
Financial Statements
Consolidated Statements of Income......................................20
Consolidated Statements of Condition...................................21
Consolidated Statements of Cash Flows..................................22
Consolidated Statements of Changes in Shareholders' Equity.............23
Notes to Consolidated Financial Statements.............................23
Report of Independent Auditors............................................33
Management Discussion & Analysis
Highlights.............................................................34
Net Interest Income....................................................34
Noninterest Income.....................................................35
Noninterest Expense....................................................35
Investment Securities, Securities Available for Sale and
Short-Term Investments...............................................36
Liquidity and Interest Rate Sensitivity................................36
Loans and Lease Financing..............................................37
Reserve for Loan Losses and Provision for Loan Losses..................39
Deposits and Short-Term Borrowings.....................................40
Limited Partnership Investments........................................41
Shareholders' Equity and Capital Resources.............................41
The Impact of Inflation................................................41
Consolidated Average Balance Sheets/Interest Income and Expenses/Rates....42
Analysis of Changes in Net Interest Margin................................43
Quarterly Financial Data..................................................44
Market for Common Stock...................................................44
<PAGE> 18 and 19
<TABLE>
TEN YEAR RECORD
(For the Years Ended December 31) (In thousands except per share
amounts and statistics)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating Results
Net interest income $130,413 $120,547 $113,471 $112,820 $100,763
Provision for loan losses 6,650 (3,100) 2,200 7,700 4,000
Other income 50,627 33,992 35,538 38,517 38,284
Other expenses 102,361 94,688 89,072 89,571 83,704
- ----------------------------------------------------------------------------------------------------
Income before income taxes 72,029 62,951 57,737 54,066 51,343
Income taxes 25,513 21,671 20,217 18,440 17,316
- ----------------------------------------------------------------------------------------------------
Net income 46,516 41,280 37,520 35,626 34,027
Cash dividends declared $ 15,915 $ 13,547 $ 11,953 $ 11,953 $ 6,774
Per Share Statistics
Net income $5.84 $5.18 $4.71 $4.47 $4.27
Cash dividends declared 2.00 1.70 1.50 1.50 0.85
Stock dividends - declared percent - - - - -
Book value at year-end $47.54 $43.96 $39.25 $36.77 $33.79
Year-End Totals
Demand deposits $ 539,309 $ 539,714 $ 522,285 $ 514,667 $ 468,077
Interest-bearing deposits:
NOW 174,470 148,896 163,088 145,057 126,481
Money market savings 304,000 291,325 326,386 266,949 261,134
Time and savings 849,274 760,546 735,862 679,474 680,578
- ----------------------------------------------------------------------------------------------------
Total Interest-bearing Deposits 1,327,744 1,200,767 1,225,336 1,091,480 1,068,193
Total Deposits 1,867,053 1,740,481 1,747,621 1,606,147 1,536,270
Federal funds purchased and securities
sold under agreement to repurchase 364,569 325,859 259,983 283,665 300,335
Loans and lease financing 1,446,978 1,326,840 1,226,164 1,122,570 928,999
Investment securities:
U.S. government and federal agencies 317,145 303,304 345,319 282,110 382,460
State and municipal 15,878 9,008 20,239 6,773 10,605
Other 263,450 241,089 213,174 215,386 298,322
- ---------------------------------------------------------------------------------------
Total Investment Securities 596,473 553,401 578,732 504,269 691,387
Securities available for sale 253,552 273,391 273,723 186,209 154,514
Shareholders' equity account 377,403 350,320 312,772 292,976 269,303
Total assets $2,648,484 $2,450,921 $2,344,678 $2,207,280 $2,129,965
- ----------------------------------------------------------------------------------------------------
Other year-end statistics:
Number of shares outstanding 7,938,800 7,968,800 7,968,800 7,968,800 7,968,800
Number of shareholders 1,199 1,224 1,243 1,279 1,826
Number of employees 1,110 1,101 1,130 1,202 1,137
</TABLE>
<TABLE>
TEN YEAR RECORD(Continued)
<CAPTION>
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C>
Operating Results
Net interest income $93,739 $85,384 $73,411 $59,870 $51,985
Provision for loan losses 3,000 9,562 14,112 22,100 4,551
Other income 32,875 30,847 37,043 26,768 21,136
Other expenses 82,062 74,889 70,427 59,275 50,344
- ----------------------------------------------------------------------------------------------------
Income before income taxes 41,552 31,780 25,915 5,263 18,226
Income taxes 13,149 6,268 3,199 (972) 1,872
- ----------------------------------------------------------------------------------------------------
Net income 28,403 25,512 22,716 6,235 16,354
Cash dividends declared $ 3,984 $ 3,984 $ 2,988 $ 2,988 $ 2,739
Per Share Statistics
Net income $3.56 $3.20 $2.85 $0.78 $2.06
Cash dividends declared 0.50 0.50 0.38 0.38 0.35
Stock dividends - declared percent - 33.33% - - 20.00%
Book value at year-end $30.37 $27.31 $24.61 $22.13 $21.73
Year-End Totals
Demand deposits $ 415,584 $ 444,761 $ 484,177 $ 361,349 $ 342,194
Interest-bearing deposits:
NOW 122,376 104,106 106,310 93,605 92,204
Money market savings 248,852 216,284 222,601 253,597 299,423
Time and savings 738,178 799,251 868,287 565,459 685,506
- ----------------------------------------------------------------------------------------------------
Total Interest-bearing Deposits 1,109,406 1,119,641 1,197,198 912,661 1,077,133
Total Deposits 1,524,990 1,564,402 1,681,375 1,274,010 1,419,327
Federal funds purchased and securities
sold under agreement to repurchase 271,625 245,660 224,005 172,592 110,129
Loans and lease financing 874,118 922,505 892,634 787,900 839,735
Investment securities:
U.S. government and federal agencies 395,401 516,867 588,496 455,788 301,949
State and municipal 4,639 7,257 12,488 19,330 23,419
Other 266,657 262,760 221,954 37,761 3,180
- ----------------------------------------------------------------------------------------------------
Total Investment Securities 666,697 786,884 822,938 512,879 328,548
Securities available for sale 176,341 - - - -
Shareholders' equity account 242,050 217,631 196,103 176,375 173,128
Total assets $2,077,243 $2,063,258 $2,139,923 $1,652,505 $1,742,657
- ----------------------------------------------------------------------------------------------------
Other year-end statistics:
Number of shares outstanding 7,968,800 7,968,800 5,976,600 5,976,600 5,976,600
Number of shareholders 1,332 1,351 1,352 1,405 1,441
Number of employees 1,138 1,132 1,146 921 1,034
</TABLE>
<PAGE> 20
CONSOLIDATED STATEMENTS OF INCOME
(For the Years Ended December 31) (In thousands except per share amounts)
1996 1995 1994
Interest Income:
Loans and lease financing including fees $141,178 $132,336 $117,934
Balances with banks 46 41 138
Federal funds sold and securities purchased
under agreement to resell 2,265 806 1,745
Investment securities including dividends:
U.S. Treasury securities 12,339 13,920 11,320
Obligations of other U.S. government
agencies and corporations 22,467 22,753 18,167
Obligations of states and political
subdivisions 422 812 363
Other securities 18,814 18,588 12,940
- ---------------------------------------------------------------------------
Total Interest Income 197,531 189,256 162,607
Interest Expense:
Deposits 50,205 50,413 39,014
Federal funds purchased and securities sold
under agreement to repurchase 16,894 18,273 10,100
Other purchased funds 19 23 22
- ---------------------------------------------------------------------------
Total Interest Expense 67,118 68,709 49,136
- ---------------------------------------------------------------------------
Net Interest Income 130,413 120,547 113,471
Provision for loan losses 6,650 (3,100) 2,200
- ---------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 123,763 123,647 111,271
Other Income:
Trust department income 2,238 2,114 2,013
Service charges on deposit accounts 12,292 11,867 10,721
Mortgage loan servicing fees 8,112 7,936 7,574
Securities transactions 6,121 (3,832) 209
Credit card service fees 6,178 5,849 5,161
Other 15,686 10,058 9,860
- ---------------------------------------------------------------------------
Total Other Income 50,627 33,992 35,538
Other Expense:
Salaries 38,251 36,802 37,167
Profit sharing and other employee benefits 11,427 10,415 10,566
Net occupancy expense of bank premises 7,394 7,135 7,038
Furniture and equipment expense 9,267 8,267 7,764
Other 36,022 32,069 26,537
- ---------------------------------------------------------------------------
Total Other Expense 102,361 94,688 89,072
Income before income taxes 72,029 62,951 57,737
Income taxes 25,513 21,671 20,217
- ---------------------------------------------------------------------------
Net Income $ 46,516 $ 41,280 $ 37,520
===========================================================================
Net income per share $5.84 $5.18 $4.71
===========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 21
CONSOLIDATED STATEMENTS OF CONDITION
(For the Years Ended December 31) (In thousands except per share amounts)
1996 1995
Assets:
Cash and due from banks $ 166,771 $ 149,307
Interest-bearing balances with banks 233 1,293
Federal funds sold 20,000 -
Investment securities:
Obligations of other U.S. government agencies
and corporations 317,145 303,304
Obligations of states and political
subdivisions 15,878 9,008
Other securities 263,450 241,089
- -----------------------------------------------------------------------------
Total Investment Securities 596,473 553,401
(Market value $599,687 in 1996
and $558,335 in 1995)
Securities available for sale at market
(Cost $249,509 in 1996 and $266,595 in 1995) 253,552 273,391
Loans and lease financing 1,446,978 1,326,840
Reserve for loan losses (23,002) (21,529)
- -----------------------------------------------------------------------------
Net loans and lease financing 1,423,976 1,305,311
Loans held for sale 31,563 33,099
Net premises and equipment 71,212 62,217
Other assets 84,704 72,902
- -----------------------------------------------------------------------------
Total Assets $2,648,484 $2,450,921
=============================================================================
Liabilities and Shareholders' Equity:
Demand deposits $ 539,309 $ 539,714
Interest-bearing deposits:
NOW 174,470 148,896
Savings 297,058 303,432
Money market savings 304,000 291,325
Time 552,216 457,114
- -----------------------------------------------------------------------------
Total Interest-Bearing Deposits 1,327,744 1,200,767
- -----------------------------------------------------------------------------
Total Deposits 1,867,053 1,740,481
Federal funds purchased 7,655 42,812
Securities sold under agreement to repurchase 356,914 283,047
Other purchased funds 898 1,681
Other liabilities 38,561 32,580
- -----------------------------------------------------------------------------
Total Liabilities 2,271,081 2,100,601
Shareholders' Equity:
Common stock - $10 par value 1996 1995 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 234,303 203,702
Net unrealized gains on securities available
for sale, net of taxes 2,405 4,044
Treasury stock at cost (61,200 shares in 1996
and 31,200 shares in 1995) (2,305) (426)
- -----------------------------------------------------------------------------
Total Shareholders' Equity 377,403 350,320
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,648,484 $2,450,921
=============================================================================
Net book value per share (Based on 7,938,800
shares in 1996 and 7,968,800 shares in 1995
outstanding) $47.54 $43.96
=============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 22
CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the Years Ended December 31) (In thousands)1996 1995 1994
Operating Activities
Net Income $ 46,516 $ 41,280 $ 37,520
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 6,650 (3,100) 2,200
Deferred tax expense (credit) (1,893) (124) 497
Provision for depreciation and amortization 8,628 6,995 6,415
Net amortization on securities (1,959) 606 4,058
Gain on security transactions (6,121) (127) (2,113)
Loss on security transactions - 3,959 1,904
Gain on loan sales (1,140) (405) (1,634)
Loss (gain) on sales of premises and equipment (177) (4) 125
Loss (gain) on sales of other assets (3,375) 50 (216)
Net decrease(increase) in loans held for sale 2,676 (13,022) 146,188
Decrease (increase) in interest receivable,
prepaid expenses, and other assets 1,604 (1,688) (4,350)
Increase (decrease) in interest payable,
accrued expenses, and other liabilities 1,144 7,177 (858)
- ------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 52,553 41,597 189,736
Investing Activities
Net decrease (increase) in federal funds sold
and interest-bearing balances with other banks (18,940) 8,902 10,590
Proceeds from maturities of securities held
to maturity 126,379 99,193 180,018
Purchases of securities held to maturity (166,996) (74,456) (276,876)
Proceeds from maturities of securities
available for sale 35,000 _ 30,588
Proceeds from sales of securities
available for sale 25,558 183,626 75,565
Purchases of securities available for sale (43,911) (170,759) (184,820)
Net increase in lending activities (125,603) (96,574) (98,418)
Proceeds from sales of premises and equipment 310 28 557
Proceeds from sales of other assets 14,850 6,731 3,860
Purchases of premises and equipment (15,884) (9,534) (8,335)
Purchase of other assets (15,470) (20,985) (6,258)
Acquisition of banks - (100) (10,040)
- ------------------------------------------------------------------------------
Net Cash Used in Investing Activities (184,707) (73,928) (283,569)
Financing Activities
Net increase (decrease) in total deposits 129,500 (7,040) 151,514
Net increase (decrease) in short-term borrowings 37,927 65,854 (22,998)
Acquisition of treasury stock (1,879) - -
Cash dividends (15,930) (11,555) (11,953)
- ------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 149,618 47,259 116,563
- ------------------------------------------------------------------------------
Increase in cash and cash equivalents 17,464 14,928 22,730
Cash and cash equivalents at beginning of year 149,307 134,379 111,649
- ------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $166,771 $149,307 $134,379
==============================================================================
Total interest payments on deposits and purchased funds were $67,303,000 in
1996, $65,872,000 in 1995, and $49,050,000 in 1994. Income tax payments made
during the calendar years of 1996, 1995 and 1994 were $26,096,000, $21,129,000,
and $17,381,000, respectively. 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 the net change in unrealized gains on
securities available for sale of $(1,639,000) and $9,815,000, net of tax, has
been reflected in shareholders' equity in 1996 and 1995, respectively.
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 23
<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, 1994 $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
Net income - - 46,516 - - 46,516
Cash dividend declared - - (15,915) - - (15,915)
Purchase of treasury stock - - - - (1,879) (1,879)
Net unrealized loss on
securities available for sale - - - (1,639) - (1,639)
- ----------------------------------------------------------------------------------------------------
Balance December 31, 1996 $80,000 $63,000 $234,303 $2,405 $(2,305) $377,403
====================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The National Bancorp of Alaska, Inc. (the Corporation) is the largest bank
holding company in Alaska providing a full range of financial services through
its principal subsidiary, National Bank of Alaska (the Bank). The Corporation
with its subsidiaries provide banking services to Alaskan customers from
operating offices located throughout the state of Alaska and in Seattle,
Washington, and also engage in trust and investment banking, mortgage banking,
consumer finance, credit card and merchant processing, and investments in
limited partnerships.
PRESENTATION AND CONSOLIDATION: The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
prevailing practices of the banking industry, which require management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those estimates. Significant
estimates that could differ significantly relate to the determination of the
reserve for loan losses.
The consolidated financial statements include the accounts of National Bancorp
of Alaska, Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year balances
have been reclassified to conform to the current year presentation.
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.
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. Gains and losses from the sale of securities are
computed under the specific identification method.
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 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
consideration in estimating existing and inherent loan losses in the portfolio.
For the purpose of computing income tax, the Corporation provides the maximum
expense allowable under applicable income tax laws.
Loans are deemed to be impaired when it is probable that all amounts due under
the contractual terms of the loan agreements will not be collectable.
Impairment is measured by comparing the fair value of the collateral or present
value of future cash flows to the recorded investment in the loan. Impairment
is recognized by establishing an allowance for impaired loan losses with a
charge to the provision for loan losses.
<PAGE> 24
TRUST ASSETS: Assets held in a fiduciary or agency capacity by the Bank's Trust
Department for its customers are not included in these statements. 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 OWNED: Other real estate owned 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
writedown 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: Effective January 1, 1996, the Corporation
prospectively adopted Statement of Financial Accounting Standards (SFAS) 122,
"Mortgage Servicing Rights." This statement eliminates the accounting
distinction between purchased mortgage servicing rights and the retained rights
associated with mortgage loans originated and sold. An asset is recognized for
mortgage servicing rights based on the relative fair values of the servicing
rights and the loan without the servicing rights. Impairment of servicing right
assets is evaluated using fair value and recognized through a valuation
allowance.
LIMITED PARTNERSHIPS: Investments in limited partnerships are recorded at cost
and income is recognized when realized. Other than temporary impairments of
value are recognized by a valuation allowance and a charge to income.
LONG-LIVED ASSETS: Effective January 1, 1996, the Corporation prospectively
adopted SFAS 121, "Accounting for Impairment of Long-lived Assets." This
statement establishes standards for the impairment of long-lived assets and
certain identifiable intangibles, where impairment is recognized whenever the
carrying amount of the asset is not recoverable or supportable by the fair
value of the asset.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: During June, 1996, the Financial
Accounting Standards Board (FASB) issued SFAS 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement provides guidance for identifying and recording transfers of
financial assets as either sales or secured borrowings by application of a
financial-components approach that focuses on transfer of control of the
assets. Under that approach, an entity recognizes financial and servicing
assets it controls and liabilities it has incurred, and derecognizes assets
when control has been surrendered and liabilities extinguished. The statement
is effective for years beginning after December 31, 1996.
During December 1996, FASB issued SFAS 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125." This statement defers the
implementation of the transfer and collateral provisions of SFAS 125 for one
year. Prospective adoption of the provisions of these statements as they become
effective 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
(7,959,251 in 1996 and 7,968,800 shares in 1995 and 1994).
FAIR VALUE OF FINANCIAL INSTRUMENTS: A table of fair value of financial
instruments is 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
values 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 values of residential mortgages with commitments
to sell within 90 days are based upon the amounts receivable under the
commitments. Fair values 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 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 borrowings: 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.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to meet statutory reserve requirements. In part, these
requirements are met by maintaining balances in a noninterest-bearing account
at a Federal Reserve Bank. During 1996 and 1995, the average balance in this
account totaled $12,548,000 and $12,490,000, respectively.
<PAGE> 25
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.
Investment Securities
December 31, 1996 Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
U.S. agencies and corporations $317,145 $2,096 $(1,385) $317,856
State and political subdivisions 15,878 33 (3) 15,908
Corporate notes 95,082 1,418 (28) 96,472
Mortgage and asset backed securities 144,738 1,545 (462) 145,821
Other securities 23,630 - - 23,630
- -------------------------------------------------------------------------------
Total $596,473 $5,092 $(1,878) $599,687
===============================================================================
Securities available for sale
December 31, 1996 Amortized Unrealized Unrealized Market
(in thousands) Cost Gains Losses Value
U.S. Treasury $188,933 $3,226 $ - $192,159
U.S. agencies and corporations 34,074 279 - 34,353
Other securities 26,502 797 (259) 27,040
- -------------------------------------------------------------------------------
Total $249,509 $4,302 $(259) $253,552
===============================================================================
Investment Securities
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
===============================================================================
Maturities Distribution of Debt Securities
Investment Securities Available for Sale
December 31, 1996 Amortized Market Amortized Market
(in thousands) Cost Value Cost Value
Due in 1 year or less $102,205 $102,129 $ 55,168 $ 55,464
Due after 1 year through 5 years 430,263 433,790 167,839 171,048
Due after 5 years through 10 years 27,372 27,147 - -
Due after 10 years 13,003 12,991 - -
- -------------------------------------------------------------------------------
Total $572,843 $576,057 $223,007 $226,512
===============================================================================
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 $477,295,000 of its U.S. Treasury and U.S.
agencies and corporations securities and $1,350,000 of its state and
political subdivisions securities as of December 31, 1996, to secure public
deposits, trust funds, securities sold under repurchase agreements and
for other purposes. In 1995, $412,081,000 of its U.S. Treasury and U.S.
agencies and corporations securities and $2,010,000 of its state and
political subdivision were pledged. The Corporation does not have a trading
security portfolio.
<PAGE> 26
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) 1996 1995
Commercial and industrial $ 503,309 $ 470,480
Real estate construction 34,767 24,999
Real estate long-term 462,958 423,872
Consumer installment 379,898 331,531
Nontaxable 55,372 64,356
Lease financing 10,674 11,602
- ------------------------------------------------------------
Loans and Lease Financing $1,446,978 $1,326,840
============================================================
The carrying amount and fair value of the loan portfolio, excluding leases,
consists of the following at December 31:
1996 1995
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
Commercial and industrial $ 503,309 $ 501,789 $ 470,480 $ 474,431
Real estate construction 34,767 34,774 24,999 24,966
Real estate long-term 462,958 460,603 423,872 422,841
Consumer installment 379,898 379,503 331,531 330,326
Nontaxable 55,372 55,568 64,356 64,119
- -----------------------------------------------------------------------------
Loans $1,436,304 $1,432,237 $1,315,238 $1,316,683
=============================================================================
5. RESERVE FOR LOAN LOSSES
The following is a reconciliation of the loan loss reserve for the year ended
December 31:
(in thousands) 1996 1995 1994
Balance at beginning of year $21,529 $19,226 $17,408
Loans charged off (7,737) (4,544) (2,884)
Recoveries of loans charged off 2,560 9,947 2,502
Net (charge offs) recoveries (5,177) 5,403 (382)
Provision charged to operating expense 6,650 (3,100) 2,200
- ---------------------------------------------------------------------------
Balance at End of Year $23,002 $21,529 $19,226
===========================================================================
The total investment in impaired loans was $5,493,000 and $2,073,000 at
December 31, 1996 and 1995, respectively. Interest income on impaired loans is
recorded on the cash basis and totaled $54,000 for 1996 and $132,000 for 1995.
The average balance of impaired loans was $6,466,000 for 1996 and $3,434,000
for 1995. It has been determined that an allocation of the reserve for loan
losses to impaired loans is not required.
<PAGE> 27
6. PREMISES AND EQUIPMENT
The following table summarizes the components of premises and equipment at
December 31:
(in thousands) 1996 1995
Buildings $66,054 $64,284
Land 14,191 13,796
Leasehold improvements 4,885 4,656
Equipment, furniture and fixtures 50,830 38,519
- ----------------------------------------------------------------------
Total Cost 135,960 121,255
Less accumulated depreciation (64,748) (59,038)
- ----------------------------------------------------------------------
Net Book Value $71,212 $62,217
======================================================================
Depreciation expense was $6,756,000 in 1996, $5,535,000 in 1995 and
$5,132,000 in 1994.
7. SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
Information related to the Corporation's securities sold under agreement to
repurchase at December 31, 1996, 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 $ 94,971 $ 5,449 $ 7,564 $17,010 $124,994
Market value 96,520 5,555 7,714 17,184 126,973
Repurchase agreements 92,959 3,563 3,051 13,453 113,026
Interest rate 4.91% 4.52% 4.65% 5.28% 4.94%
- ------------------------------------------------------------------------------
U.S. government agencies
and corporations:
Carrying value $205,261 $15,189 $11,649 $32,142 $264,241
Market value 205,794 15,417 11,704 32,290 265,205
Repurchase agreements 198,755 7,102 11,125 26,906 243,888
Interest rate 4.36% 4.79% 5.05% 5.19% 4.50%
- ------------------------------------------------------------------------------
Total
Carrying value $300,232 $20,638 $19,213 $49,152 $389,235
Market value 302,314 20,972 19,418 49,474 392,178
Repurchase agreements 291,714 10,665 14,176 40,359 356,914
Interest rate 4.54% 4.70% 4.96% 5.22% 4.64%
- ------------------------------------------------------------------------------
Carrying value and market value of the securities include accrued interest.
8. SHAREHOLDERS' EQUITY
Dividends: The Corporation declared cash dividends of $2.00 per share in 1996.
Regulatory Restrictions: Federal banking regulations restrict dividends
declared by the bank to current year net income combined with retained earnings
from the prior two years. In 1997, the Bank may declare dividends of $663,000
plus 1997 net profits without receiving approval from the Comptroller of the
Currency.
The Bank is also limited in making loans to affiliates, including the
Corporation, unless the loans are collateralized by specific obligations.
Under capital adequacy guidelines and regulatory framework for prompt
correction action, the Bank must meet specific ratios of capital to assets as
defined to avoid regulatory action. At December 31, 1996, the minimum Tier I,
total capital, and leverage ratio requirements were 4%, 8%, and 4%,
respectively. The Bank must also meet certain Tier I, total capital, and
leverage ratios to be categorized as well capitalized. As of December 31, 1996,
these ratios were 6%, 10% and 5%, respectively.
The Bank's Tier I, total capital, and leverage ratios at December 31, 1996,
were 12.9%, 14.1% and 9.6%, respectively. The Bank's ratios at December 31,
1995 were 13.5%, 14.7% and 10.0%, respectively. The Bank was categorized as
well capitalized in the most recent notification by the Comptroller of the
Currency. There have been no events or conditions since that notification that
management believes would change the Bank's capital category.
<PAGE> 28
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, 1996, are as
follows:
Minimum Lease
(in thousands) Payments
1997 $1,729
1998 920
1999 761
2000 653
2001 329
Later Years 3,658
- ------------------------------------------------------------
Total Minimum Lease Payments $8,050
============================================================
Rental expense for all operating leases was $2,891,000, $3,316,000, and
$3,220,000 for the years ended 1996, 1995 and 1994, 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 $17,174,000 at December 31, 1996
and $9,768,000 at December 31, 1995. Commitments for loans and investments
approximated $568,937,000 at December 31, 1996 and $364,069,000 at December 31,
1995. At December 31, 1996, the fair value of commitments for loans and letters
of credit is $8,014,000, approximating the current fees charged for similar
contracts to customers with similar characteristics. The fair value at December
31, 1995 was $5,104,000. 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 andits subsidiaries
of these parties approximated $36,695,000 and $43,028,000 at December 31, 1996
and 1995, respectively. During 1996, $57,517,000 of new loans were made and
repayments totaled $50,721,000. 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> 29
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 $5,582,000 in 1996, $4,954,000 in 1995, and $4,502,000 in 1994.
The plan provides a voluntary deferred compensation program, which permits
participants to defer up to 15% of their salaries. The Corporation 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 accumulated benefit obligation was determined using a discount rate of 8.0%
in 1994 and 1995 and 7.5% in 1996 and an assumed health care cost trend rate of
8.0% for 1994 and 1995 and 5.5% for 1996. 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.
Accumulated Benefit Obligation:(in thousands) 1996 1995 1994
Actives - fully eligible $ 263 $ 172 $ 161
Actives - other 1,190 1,170 1,095
Retirees 1,420 1,824 1,706
- ---------------------------------------------------------------------------
Total $ 2,873 $ 3,166 $ 2,962
- ---------------------------------------------------------------------------
Unrecognized Transition
Obligation $ (1,929) $ (2,058) $ (2,187)
Unrecognized Net
Gain 1,081 602 643
- ---------------------------------------------------------------------------
Accrued Postretirement
Benefit Cost $ 2,025 $ 1,710 $ 1,418
- ---------------------------------------------------------------------------
Net Periodic Cost:
Service Cost $ 105 $ 105 $ 110
Interest Cost 248 232 216
Amortization of unrecognized
transition obligation 129 129 129
Amortization of net gain (34) (41) (16)
- --------------------------------------------------------------------------
Total Expense $ 448 $ 425 $ 439
- ---------------------------------------------------------------------------
The effect on the present value of a one percent increase in the health care
cost trend rate, would result in an increase of $498,000 in the obligation and
a corresponding increase of $67,000 in the 1996 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:
1996 1995
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
Cash and due from banks $ 166,771 $ 166,771 $ 149,307 $ 149,307
Interest-bearing balances with banks 233 233 1,293 1,293
Federal funds sold 20,000 20,000 - -
Investment securities 596,473 599,687 553,401 558,335
Securities available for sale 253,552 253,552 273,391 273,391
Loans (excluding lease financing) 1,436,304 1,432,237 1,315,238 1,316,683
Loans held for sale 31,563 31,593 33,099 33,269
Demand deposits $ 539,309 $ 539,309 $ 539,714 $ 539,714
NOW 174,470 174,470 148,896 148,896
Savings 297,058 297,058 303,432 303,432
Money market savings 304,000 304,000 291,325 291,325
Time 552,216 552,606 457,114 459,367
Federal funds purchased 7,655 7,655 42,812 42,812
Securities sold under agreement to
repurchase 356,914 356,978 283,047 283,142
Other purchased funds 898 898 1,681 1,681
Methods and assumptions used to determine fair values of financial instruments
are included in note 1. Additional details on fair value of securities is
included in note 3. Additional detail on fair value of loans is included in
note 4.
<PAGE> 30
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) 1996 1995 1994
Current tax expense
Federal income taxes $21,733 $17,626 $16,014
State income taxes 5,673 4,169 3,706
- ---------------------------------------------------------------------------
Total Current Tax Expense 27,406 21,795 19,720
Deferred tax expense (credit) (1,893) (124) 497
- ---------------------------------------------------------------------------
Total $25,513 $21,671 $20,217
===========================================================================
Applicable to operating income $23,345 $22,987 $20,144
Applicable to securities transactions 2,168 (1,316) 73
- ---------------------------------------------------------------------------
Total $25,513 $21,671 $20,217
===========================================================================
A reconciliation between the statutory federal income tax rate and the
effective income tax rate follows:
1996 1995 1994
(in thousands) Percent Percent Percent
Statutory federal income tax rate 35.0% 35.0% 35.0%
Tax-exempt interest income (2.2) (3.3) (3.1)
State income tax, net of federal tax benefit 5.1 4.3 4.3
Other (2.5) (1.7) (1.2)
- --------------------------------------------------------------------------
Total Provision For Income Taxes 35.4% 34.3% 35.0%
The Corporation had net deferred tax assets of $7,634,000 at December 31, 1996,
and $4,625,000 at December 31, 1995. Temporary differences which gave rise to a
significant portion of deferred tax assets and liabilities were as follows:
1996 1995
Deferred Tax Deferred Tax
(in thousands) Assets Liabilities Assets Liabilities
Provision for loan losses $ 10,135 $ - $ 9,324 $ -
Alaska state income tax 1,279 - 1,442 -
Other real estate owned 353 - 615 -
Depreciation and amortization - 1,549 - 2,853
Net unrealized security gains - 1,637 - 2,752
Other 1,820 1,189 2,193 1,731
- -----------------------------------------------------------------------------
Subtotal 13,587 4,375 13,574 7,336
Valuation Allowance (1,578) - (1,613) -
- -----------------------------------------------------------------------------
Total deferred taxes $12,009 $4,375 $11,961 $7,336
=============================================================================
The Corporation has established a valuation allowance of $1,578,000 against
deferred tax assets, and it has not changed materially during the year.
In order for the net deferred tax asset to be fully realized, it would require
sufficient taxable income of the appropriate character
<PAGE> 31
15. NATIONAL BANCORP OF ALASKA, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
STATEMENTS OF INCOME
Year-Ended December 31 (in thousands) 1996 1995 1994
Income:
Dividends from National Bank of Alaska $36,400 $33,200 $31,200
Interest on balances with banks 1,412 1,089 442
Dividends from securities 1,683 1,527 1,637
Interest on loans 1,617 1,424 1,336
Securities transactions 6,063 127 (118)
Other 160 120 -
- ---------------------------------------------------------------------------
Total Income 47,335 37,487 34,497
Expenses 2,102 699 719
- ---------------------------------------------------------------------------
Income before income taxes and equity in
undistributed net income of subsidiaries 45,233 36,788 33,778
Income taxes 2,225 444 46
- ---------------------------------------------------------------------------
43,008 36,344 33,732
Equity in undistributed net income
of subsidiaries 3,508 4,936 3,788
- ---------------------------------------------------------------------------
Net Income $46,516 $41,280 $37,520
===========================================================================
STATEMENTS OF CONDITION
December 31 (in thousands) 1996 1995
Assets:
Interest-bearing balances with banks $ 41,852 $ 34,512
Loans 24,278 24,248
Securities 27,039 22,592
Investment in subsidiaries 256,053 249,503
Limited partnerships 32,197 23,229
Other assets 1,319 507
- ---------------------------------------------------------------------------
Total Assets $382,738 $354,591
===========================================================================
Liabilities and Shareholders' Equity:
Dividends payable $ 3,969 $ 3,984
Other liabilities 1,366 287
- ---------------------------------------------------------------------------
Total Liabilities 5,335 4,271
Total Shareholders' Equity 377,403 350,320
- ---------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $382,738 $354,591
===========================================================================
<PAGE> 32
STATEMENTS OF CASH FLOWS
Year-Ended December 31 (in thousands) 1996 1995 1994
Operating Activities
Net Income $46,516 $41,280 $37,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net income from subsidiaries (3,508) (4,936) (3,788)
(Gains) losses on securities transactions (6,063) (127) 118
Decrease in receivables 780 257 398
Increase (decrease) in other liabilities 1,079 152 (30)
- -----------------------------------------------------------------------------
Net Cash Provided by Operating Activities 38,804 36,626 34,218
Investing Activities
Net increase in balances with banks (7,340) (4,575) (19,747)
Net decrease (increase) in lending activity (30) (4,621) 1,329
Investment in subsidiary (5,000) - (2,349)
Advances to subsidiary (500) - -
Proceeds from sales of assets 8,386 4,320 30,260
Purchases of limited partnerships (12,600) (18,010) (2,366)
Purchases of assets (3,911) (2,185) (29,392)
- -----------------------------------------------------------------------------
Net Cash Used in Investing Activities (20,995) (25,071) (22,265)
Financing Activities
Cash dividends (15,930) (11,555) (11,953)
Acquisition of treasury stock (1,879) - -
- -----------------------------------------------------------------------------
Net Cash Used in Financing Activities (17,809) (11,555) (11,953)
Increase (decrease) in cash - - -
Cash at beginning of year - - -
- -----------------------------------------------------------------------------
Cash at End of Year $ - $ - $ -
==============================================================================
<PAGE> 33
16. OTHER INCOME AND EXPENSE
The following tables summarize the components of other income and expense:
Other Income
(in thousands) 1996 1995 1994
Trust department income $ 2,238 $ 2,114 $ 2,013
Service charges on deposit accounts 12,292 11,867 10,721
Mortgage servicing fees 8,112 7,936 7,574
Credit card service fees 6,178 5,849 5,161
Securities transactions 6,121 (3,832) 209
Net gain on sale of other real estate owned 3,375 82 216
Other 12,311 9,976 9,644
- ---------------------------------------------------------------------------
Total Other Income $50,627 $33,992 $35,538
===========================================================================
Other Expense
(in thousands) 1996 1995 1994
Salaries $ 38,251 $36,802 $37,167
Profit sharing and other employee benefits 11,427 10,415 10,566
Net occupancy expense of bank premises 7,394 7,135 7,038
Furniture and equipment expense 9,267 8,267 7,764
Stationery/printing 2,785 2,676 2,357
Telecommunications 4,066 2,469 2,127
Computer program and processing 5,414 7,050 3,479
FDIC insurance premium 2 1,958 3,496
Other 23,755 17,916 15,078
- ---------------------------------------------------------------------------
Total Other Expense $102,361 $94,688 $89,072
===========================================================================
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
Board of Directors
National Bancorp of Alaska, Inc.
We have audited the accompanying consolidated statements of condition of
National Bancorp of Alaska, Inc. and subsidiaries as of December 31, 1996 and
1995, 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, 1996. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of National Bancorp of Alaska, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Anchorage, Alaska
January 22, 1997
<PAGE> 34
MANAGEMENT DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HIGHLIGHTS
Net income for 1996 was $46,516,0000 or 13% higher than 1995 net income of
$41,280,000. The increase in earnings was due to an increase in net interest
income to $130,413,000, or $9,866,000 over 1995.
Return on average assets was 1.83% in 1996 compared to 1.70% in 1995. Return on
average equity in 1996 was 12.78% and 12.41% in 1995. The ratio of equity to
total assets at December 31, 1996 was 14.25% compared to 14.29% at the end of
1995.
During the fourth quarter of 1996 several significant transactions occurred. A
capital gain from limited partnership investments of $4,923,000 was realized
and a foreclosed property was sold for a gain of $3,305,000. Several large
expenses in the fourth quarter had the effect of offsetting these nonrecurring
gains. The reserve for possible loan loss was increased to $23,002,000 with a
fourth quarter provision for loan losses of $4,400,000 in recognition of
significant growth in the loan portfolio. In addition, charges against income
of $1,766,000 and $1,102,000 were taken to record write downs of intangible
assets related to purchases of assets and liabilities in previous years, and a
charge of $1,309,000 was made to reflect an other than temporary decline in
value of specific limited partnership investments.
In 1995, there were several unusual and nonrecurring transactions. During the
first and fourth quarters, recoveries of loan losses allowed a cumulative
provision for loan loss recoveries of $3,100,000 to be recorded for the year.
During the first quarter, a portion of the securities portfolio was reinvested
at higher yields and security losses of $3,947,000 were realized. In the fourth
quarter, a contract to provide computer processing services was signed with M&I
Data Services creating a one time charge of $3,140,000.
NET INTEREST INCOME
The most significant component of the Corporation's net income is net interest
income which is the difference between interest and fee income earned on assets
and interest expense on liabilities.
In 1996, fully taxable net interest income increased $9,430,000 over 1995. The
net interest margin increased from 5.70% in 1995 to 5.89% in 1996. The increase
in net interest income was a result of continued loan growth. Loans grew
$120,138,000 from December 31, 1995 to $1,446,978,000 at December 31, 1996.
Consumer and commercial loans continued a growth pattern from the prior year
spurred by activity in the branch network. Consumer real estate and
construction lending resulted in a growth in real estate loans.
Interest rates leveled off and remained stable for much of the year providing a
slight reduction in the cost of interest bearing funds from 4.42% in 1995 to
4.16%. The yield of earning assets was 8.83% in 1996 compared to 8.84% in 1995,
with yields on loans dropping slightly from the prior year.
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.
Table 1 - Analysis of Net Interest Income
(in thousands) 1996 1995 1994 1993 1992
Interest income* $ 197,531 $ 189,256 $ 162,607 $ 156,040 $ 150,699
Interest expense 67,118 68,709 49,136 43,220 49,936
- --------------------------------------------------------------------------------
Net interest income 130,413 120,547 113,471 112,820 100,763
Tax equivalent adjustment
to interest income* 4,053 4,489 4,262 4,499 4,574
- --------------------------------------------------------------------------------
Net interest income(fully
taxable equivalent) 134,466 125,036 117,733 117,319 105,337
Average earning assets $2,283,157 $2,192,711 $2,035,844 $1,994,445 $1,848,974
- --------------------------------------------------------------------------------
Net Interest Margin 5.89% 5.70% 5.78% 5.88% 5.70%
- --------------------------------------------------------------------------------
*Interest income includes loan fees of $7,221,000 in 1996, $6,095,000 in 1995,
$8,429,000 in 1994, $10,850,000 in 1993, and $6,841,000 in 1992. The adjustment
to convert nontaxable income to fully taxable equivalent basis is based on a
marginal income tax rate of 40.5% in 1996 through 1993 and 39.5%
in 1992.
<PAGE> 35
NONINTEREST INCOME
Noninterest income in 1996 was 49% or $16,635,000 greater than in 1995. Gains
on securities were $6,178,000 compared to security losses in 1995 of
$3,832,000. This included capital gains from limited partnership investments of
$6,063,000 and $127,000 in 1996 and 1995, respectively. Gains on sales of other
real estate owned were $3,375,000 compared to $82,000 in 1995. Gains and fees
related to lending activity included in other income grew by $1,315,000 over
1995.
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 led to the decrease. Service charges on deposit accounts increased
$1,146,000 and credit card service fees increased $688,000.
Table 2 - Analysis of Noninterest Income
Increase Increase
(Decrease) (Decrease)
(in thousands) 1996 % 1995 % 1994
Trust department income $ 2,238 6% $ 2,114 5% $ 2,013
Service charges on deposit accounts 12,292 4 11,867 11 10,721
Mortgage servicing fees 8,112 2 7,936 5 7,574
Credit card service fees 6,178 6 5,849 13 5,161
Securities transactions 6,121 N/A (3,832) N/A 209
Net gain on sale of other real
estate owned 3,375 N/A 82 (62) 216
Other 12,311 23 9,976 3 9,644
- -----------------------------------------------------------------------------
Total Noninterest Income $50,627 49% $33,992 (4)% $35,538
=============================================================================
NONINTEREST EXPENSE
In 1996, noninterest expense increased $7,673,000 to $102,361,000. Other
expense in noninterest expense include charges of $1,766,000 and $1,102,000 to
record write downs of intangible assets related to purchases of assets and
liabilities in previous years and a charge of $1,100,000 which was made to
reflect an other than temporary decline in value of limited partnership
investments. Computer program and processing expense is down due to the one
time charge taken in 1995 associated with the contract with M&I Data Services.
The telecommunications expense increase resulted from a contract executed with
General Communications, Inc. to provide telecommunication and distributed
processing services, some of which were previously provided internally and
reflected in other expense categories. FDIC insurance premiums were lowered to
the minimum level in 1996.
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&I 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.
Table 3 - Analysis of Noninterest Expense
Increase Increase
(Decrease) (Decrease)
(in thousands) 1996 % 1995 % 1994
Salaries $ 38,251 4% $36,802 (1)% $37,167
Profit sharing and other
employee benefits 11,427 10 10,415 (1) 10,566
Net occupancy expense of
bank premises 7,394 4 7,135 1 7,038
Furniture and equipment expense 9,267 12 8,267 6 7,764
Stationery/printing 2,785 4 2,676 14 2,357
Telecommunications 4,066 65 2,469 16 2,127
Computer program and processing 5,414 (23) 7,050 103 3,479
FDIC insurance premium 2 (99) 1,958 (44) 3,496
Other 23,755 33 17,916 19 15,078
- -----------------------------------------------------------------------------
Total Noninterest Expense $102,361 8% $94,688 6% $89,072
=============================================================================
<PAGE> 36
INVESTMENT SECURITIES, SECURITIES AVAILABLE FOR SALE AND SHORT-TERM INVESTMENTS
In 1996, investment securities increased $43,072,000 to $596,473,000, funded by
a growth in time deposits and securities sold under an agreement to repurchase.
Securities issued by U.S. Treasury, federal agencies and corporations increased
by $13,841,000 and other securities increased by $10,964,000 due primarily to
acquisition of restricted stock of Federal Home Loan Bank.
Mortgage and asset backed securities are collateralized with U.S. government
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. Securities which may be
sold for purposes of liquidity or asset/liability management are classified as
securities available for sale and carried at market value.
Securities with a cost of $249,509,000 and a market value of $253,552,000 have
been classified as securities available for sale, at December 31, 1996. These
securities are held for long-term liquidity and by definition may be sold prior
to maturity.
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.
Table 4 - Investment Portfolio
Book Value December 31
(in thousands) 1996 1995 1994
U.S. Treasury, federal agencies and corporations $317,145 $303,304 $345,319
States and political subdivisions 15,878 9,008 20,239
Corporate notes 95,082 89,925 43,323
Mortgage and asset backed securities 144,738 138,498 157,781
Other securities 23,630 12,666 12,070
- ------------------------------------------------------------------------------
Total Investment Portfolio $596,473 $553,401 $578,732
==============================================================================
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, 1996 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 $73,903 5.52% $219,283 7.13% $23,959 6.86% $ - -%
State and political subdivisions 3,376 7.10 12,502 7.37 - - - -
Corporate notes 5,016 5.65 90,066 6.87 - - - -
Mortgage and asset backed securities 19,910 5.86 108,412 7.26 3,413 8.80 13,003 7.43
Other securities - - - - - - 23,630 7.57
Securities available for sale 55,464 6.83 171,048 6.94 - - 27,040 10.06
</TABLE>
<PAGE> 37
Loan Maturity and Interest Sensitivity (Selected Loans)
December 31, 1996
Maturity
Within 1 - 5 Over 5
(in thousands) 1 Year Years Years Total
Commercial and industrial $220,545 $162,477 $120,287 $503,309
Real estate construction 29,950 4,817 - 34,767
Nontaxable 3,001 14,865 37,506 55,372
- -----------------------------------------------------------------------------
Total Selected Loans $253,496 $182,159 $157,793 $593,448
=============================================================================
Predetermined interest rate $ 83,826 $ 92,874 $ 61,156 $237,856
Floating interest rate 169,670 89,285 96,637 355,592
- -----------------------------------------------------------------------------
Total Selected Loans $253,496 $182,159 $157,793 $593,448
=============================================================================
Maturity Distribution of Time Deposits over $100,000 (In Thousands)
Maturity in: December 31
(in thousands) 1996 1995
Within 3 months $ 69,533 $ 79,168
3 to 6 months 27,899 26,984
6 to 12 months 51,095 25,973
Over 12 months 127,874 58,998
- -----------------------------------------------------------------------------
Total Time Deposits over $100,000 $276,401 $191,123
=============================================================================
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.
At December 31, 1996, loans and leases were $1,446,978,000, an increase of 9%
over December 31, 1995. Installment loans increased by 15% or $48,367,000 over
the prior year from a continued emphasis on consumer lending. The long term
real estate portfolio grew by $39,086,000 or 9% over 1995 with growth in
consumer lending secured by real estate. The commercial loan portfolio posted a
7% increase or $32,829,000. Real estate construction increased by $9,768,000
over 1995. Nontaxable and lease financing categories ended with lower balances
than the previous year end.
The Bank had no debt outstanding to developing countries at
December 31, 1996.
Loans and leases were $1,326,840 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.
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) 1996 1995 1994 1993 1992
Commercial and industrial $ 503,309 $ 470,480 $ 439,866 $ 425,187 $412,419
Real estate construction 34,767 24,999 21,845 28,971 18,613
Real estate long-term 462,958 423,872 415,017 380,240 244,366
Consumer installment 379,898 331,531 271,294 204,744 163,796
Nontaxable 55,372 64,356 68,049 72,719 82,180
Lease financing 10,674 11,602 10,093 10,709 7,625
- --------------------------------------------------------------------------------
Loans and Lease Financing $1,446,978 $1,326,840 $1,226,164 $1,122,570 $928,999
================================================================================
Loans Held for Sale $ 31,563 $ 33,099 $ 19,627 $ 164,181 $ 67,856
================================================================================
<PAGE> 38
Nonperforming Assets
The quality of the loan portfolio is maintained with an effective loan
administration program combined with periodic credit reviews. Management 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 portfolio
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 increased to 1.10% at December 31,
1996, compared to 0.83% at December 31, 1995. Total nonperforming assets
increased $4,949,000 in 1996. The low level of nonperforming assets 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 $744,000 in 1996 and
$244,000 in 1995. Actual interest income recorded for these loans was $54,000
in 1996 and $51,000 in 1995.
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 $183,000 in 1996 and $310,000 in 1995. Actual interest
income recorded for those loans was $109,000 in 1996 and $122,000 in 1995. At
December 31, 1996, the Bank had no commitments to lend additional funds to
borrowers with restructured loans.
Table 6
(in thousands) 1996 1995 1994 1993 1992
Nonaccrual loans
Commercial and industrial $ 1,451 $ 700 $ 1,763 $ 2,687 $ 4,991
Real estate construction 166 166 63 163 65
Real estate long-term 3,841 1,162 1,528 687 648
Other 35 45 - - -
- ------------------------------------------------------------------------------
Total $ 5,493 $ 2,073 $ 3,354 $ 3,537 $ 5,704
- ------------------------------------------------------------------------------
Restructured loans
Commercial and industrial $ - $ - $ - $ 143 $ 144
Real estate construction 85 94 102 116 123
Real estate long-term 95 242 1,612 103 1,091
- ------------------------------------------------------------------------------
Total $ 180 $ 336 $ 1,714 $ 362 $ 1,358
- ------------------------------------------------------------------------------
Accruing loans past due
90 days or more $ 9,945 $ 5,459 $ 5,539 $ 2,098 $ 1,269
- ------------------------------------------------------------------------------
Other real estate owned $ 326 $ 3,127 $ 4,344 $11,259 $12,510
- ------------------------------------------------------------------------------
Total nonperforming assets $15,944 $10,995 $14,951 $17,256 $20,841
- ------------------------------------------------------------------------------
Nonaccrual loans as a percentage
of loans and leases at year-end 0.38% 0.16% 0.27% 0.32% 0.61%
Restructured loans as a percentage
of loans and leases at year-end 0.01% 0.03% 0.14% 0.03% 0.15%
Nonperforming assets as a percentage
of loans and leases and other real
estate owned at year-end 1.10% 0.83% 1.22% 1.52% 2.21%
<PAGE> 39
RESERVE FOR 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 loan
losses is maintained to absorb potential losses. Management views this reserve
as a source of financial strength. The reserve for loan losses was $23,002,000
at December 31, 1996. This maintains a reserve of 1.59% of outstanding loans
reflecting management's commitment to maintain an adequate reserve against
potential losses.
The provision for loan losses charged to income was $6,650,000 in 1996,
compared to a provision for loan loss recovery of $3,100,000 credited to income
in 1995. Net charge offs were $5,177,000 in 1996 compared to net recoveries of
$5,403,000 in 1995.
Management evaluates the adequacy of the Bank's reserve for 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 loan losses is adequate to absorb potential losses and intends to
maintain the reserve at a prudent level.
Table 7
(in thousands) 1996 1995 1994 1993 1992
Analysis of Reserve for
Loan Losses
Balance January 1 $21,529 $19,226 $17,408 $21,338 $21,284
Provision charged to operations 6,650 (3,100) 2,200 7,700 4,000
Recoveries on loans
previously charged off 2,560 9,947 2,502 2,674 1,537
Less loans charged off (7,737) (4,544) (2,884) (14,304) (5,483)
- --------------------------------------------------------------------------------
Balance December 31 $23,002 $21,529 $19,226 $17,408 $21,338
================================================================================
Composition of Loan Charge
Off and Recoveries
Loans Charged Off:
Commercial loans and leases $ 1,867 $ 954 $ 265 $12,064 $ 2,130
Real estate construction 6 113 50 115 1,401
Real estate long-term 1,574 116 86 123 427
Consumer 3,232 2,644 1,804 1,438 968
Visa 1,058 717 679 564 557
- --------------------------------------------------------------------------------
Total Charge Offs 7,737 4,544 2,884 14,304 5,483
- --------------------------------------------------------------------------------
Recoveries:
Commercial loans and leases 403 7,643 514 920 514
Real estate construction 5 16 122 175 151
Real estate long-term 286 657 495 621 263
Consumer 1,633 1,445 1,204 787 439
Visa 233 167 153 155 159
Nontaxable - 19 14 16 11
- --------------------------------------------------------------------------------
Total Recoveries 2,560 9,947 2,502 2,674 1,537
- --------------------------------------------------------------------------------
Net Charge Offs $ 5,177 $(5,403) $ 382 $11,630 $ 3,946
================================================================================
Loan and Lease Statistics
Average loans and leases $1,405,194 $1,306,685 $1,202,249 $1,052,326 $889,548
Loans and leases at year-end 1,446,978 1,326,840 1,226,164 1,122,570 928,999
Reserve for loan losses as a
percentage of:
Average loans and leases 1.64% 1.65% 1.60% 1.65% 2.40%
Loans and leases at year-end 1.59 1.62 1.57 1.55 2.30
Net charge offs as a
percentage of:
Average loans and leases 0.37 (0.41) 0.03 1.11 0.44
Loans and leases at year-end 0.36 (0.41) 0.03 1.04 0.42
<PAGE> 40
DEPOSITS AND SHORT-TERM BORROWINGS
In 1996, total deposits increased $126,572,000 or 7% from December 31, 1995.
At December 31, 1996, NOW, savings, and money market savings increased
$31,875,000 or 4% over 1995, with most of the growth in a competitively priced
business NOW product. Time deposits increased $95,102,000 or 21% from the prior
year's balance. Time deposits from the Alaska Permanent Fund Corporation
increased $75,000,000 to $125,000,000 during 1996. Demand deposits did not
change compared to the same period in 1995.
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.
Short-term borrowings include Federal funds purchased and repurchase agreements
in the amount of $364,569,000 and other borrowings of $898,000 at December 31,
1996.
Table 8 - Deposit Structure
Average for Year Ended December 31
(in thousands) 1996 1995 1994 1993 1992
Demand $ 529,227 $ 512,401 $ 506,669 $ 474,226 $ 430,154
NOW 156,695 150,401 151,276 133,987 120,080
Savings 294,374 296,784 302,566 265,452 229,340
Money Market Savings 295,932 296,735 299,948 265,422 256,095
Time 511,696 460,613 399,159 404,351 460,398
- -----------------------------------------------------------------------------
Total Deposits $1,787,924 $1,716,934 $1,659,618 $1,543,438 $1,496,067
=============================================================================
Deposits by Type of Depositor at December 31
(in thousands) 1996 1995 1994 1993 1992
Individuals, partnerships
and corporations $1,682,900 $1,632,547 $1,630,233 $1,490,039 $1,419,837
United States government 5,035 5,543 6,814 4,466 5,696
State and political
subdivisions 164,171 86,855 90,270 91,985 92,615
Other 14,947 15,536 20,304 19,657 18,122
- -------------------------------------------------------------------------------
Total $1,867,053 $1,740,481 $1,747,621 $1,606,147 $1,536,270
===============================================================================
Time deposits include $100,000 in 1994, $10,140,000 in 1993 and $10,238,000 in
1992 in brokered deposits assumed through bank acquisitions. The Bank did not
renew maturing brokered deposits.
<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) 1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31 $364,569 $325,859 $259,983 $365,467 $327,540 $261,686
Average for the year 354,613 348,261 271,475 356,266 349,622 272,308
Maximum month-end balance 385,275 407,675 291,032 386,399 408,789 291,651
Average rate for the year* 4.76% 5.25% 3.72% 4.75% 5.23% 3.72%
Average rate at year-end 4.67 4.86 4.57 4.67 4.84 4.56
</TABLE>
*The average interest rate is computed by dividing the respective
interest expense by the average daily balance.
<PAGE> 41
LIMITED PARTNERSHIP INVESTMENTS
The Corporation has a relatively large amount of capital as a percentage of
assets. In an effort to improve shareholder returns, the Corporation has
invested in limited partnerships with eight investment firms who in turn make
various equity investments. These investments provide higher returns than those
available from traditional bank investments and have a higher risk associated
with them. Each firm has invested from $1,000 to $4,000,000 in 4 to 46
individual companies. The Corporation's percentage share of any individual
company does not exceed 10%.
At December 31, 1996, the Corporation had investments totaling $32,197,000
compared to $23,229,000 at December 31, 1995. The Corporation had commitments
to invest an additional $45,760,000 at December 31, 1996.
Capital gains from these investments were $6,063,000 in 1996, $127,000 in 1995
and $1,439,000 in 1994. Write offs and net expenses from venture capital
investments were $1,581,000 in 1996, $180,000 in 1995 and $486,000 in 1994.
SHAREHOLDERS' EQUITY AND CAPITAL RESOURCES
The Corporation is a strongly capitalized bank holding company. Shareholders'
equity increased by $27,083,000 from December 31, 1995 to $377,403,000 at
December 31, 1996.
The ratio of equity to total assets was 14.33% for 1996 compared to 13.71% for
1995. The Corporation's level of capitalization exceeds current and proposed
regulatory guidelines. The current quarterly dividend rate is $0.50 per share.
Table 10 - Analysis of Shareholders' Equity
(in thousands) 1996 1995 1994 1993 1992
Balance January 1 $350,320 $312,772 $292,976 $269,303 $242,050
Net income 46,516 41,280 37,520 35,626 34,027
Cash dividends declared (15,915) (13,547) (11,953) (11,953) (6,774)
Purchase of treasury stock (1,879) - - - -
Net unrealized gains (losses)
on securities (1,639) 9,815 (5,771) - -
- -------------------------------------------------------------------------------
Balance December 31 $377,403 $350,320 $312,772 $292,976 $269,303
===============================================================================
Per Share Statistics
Net income $ 5.84 $ 5.18 $ 4.71 $ 4.47 $ 4.27
Cash dividends declared 2.00 1.70 1.50 1.50 0.85
Book value at year-end $47.54 $43.96 $39.25 $36.77 $33.79
Ratios(Based on Average Balances)
Return on assets 1.83% 1.70% 1.66% 1.61% 1.65%
Equity to total assets 14.33 13.71 13.56 12.83 12.49
Dividend payout ratio 34.21 32.82 31.86 33.56 19.91
Return on equity 12.78 12.41 12.25 12.52 13.24
Equity to total deposits 20.35 19.38 18.46 18.43 14.43
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 the 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> 42
<TABLE>
CONSOLIDATED AVERAGE BALANCE SHEETS/
INTEREST INCOME AND EXPENSES/RATES
<CAPTION>
Year-Ended December 31 1996 1995
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 $ 884 $ 46 5.20% $ 645 $ 41 6.36%
Federal funds sold and securities
purchased under agreement
to resell 43,036 2,265 5.26 14,184 806 5.68
Securities* 794,002 55,131 6.94 842,517 57,353 6.81
Loans and lease financing* 1,445,235 144,142 9.97 1,335,365 135,545 10.15
- --------------------------------------------------------------------------------------------------
Total Earning Assets $2,283,157 $201,584 8.83% $2,192,711 $193,745 8.84%
Reserve for possible loan losses (21,453) (20,578)
Cash and due from banks 128,065 127,299
Bank premises and equipment 68,424 61,306
Other assets 80,420 66,445
- -------------------------------------------------------------------------------------------------
Total Assets $2,538,613 $2,427,183
==================================================================================================
Liabilities and Shareholders' Equity:
NOW $ 156,695 $ 4,177 2.67% $ 150,401 $ 4,245 2.82%
Savings deposits 294,374 9,599 3.26 296,784 10,847 3.65
Money market savings 295,932 9,830 3.32 296,735 10,172 3.43
Time deposits 511,696 26,599 5.20 460,613 25,149 5.46
- --------------------------------------------------------------------------------------------------
Total Interest-Bearing
Deposits 1,258,697 50,205 3.99 1,204,533 50,413 4.19
Federal funds purchased and
securities sold under agreement
to repurchase 354,613 16,894 4.76 348,261 18,273 5.25
Other purchased funds 1,653 19 1.15 1,361 23 1.69
- --------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities 1,614,963 67,118 4.16 1,554,155 68,709 4.42
Demand deposits 529,227 512,401
Other liabilities 30,570 27,947
- --------------------------------------------------------------------------------------------------
Total Liabilities 2,174,760 2,094,503
Shareholders' Equity 363,853 332,680
- --------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,538,613 $2,427,183
==================================================================================================
Net Interest Margin $134,466 5.89% $125,036 5.70%
==================================================================================================
</TABLE>
The above tables are presented on a fully taxable equivalent basis assuming a
40.5% income tax. 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> 43
CONSOLIDATED AVERAGE BALANCE SHEETS/
INTEREST INCOME AND EXPENSES/RATES(Continued)
Year-Ended December 31 1994
Interest Average
Average Income/ Yield/
(in thousands) Balance Expense Cost
Assets:
Interest-bearing balances with
banks $ 2,792 $ 138 4.94%
Federal funds sold and securities
purchased under agreement
to resell 40,270 1,745 4.33
Securities* 716,860 43,806 6.11
Loans and lease financing* 1,275,922 121,180 9.50
- ----------------------------------------------------------------------------
Total Earning Assets $2,035,844 $166,869 8.20%
Reserve for possible loan losses (18,557)
Cash and due from banks 130,893
Bank premises and equipment 57,452
Other assets 54,353
- ----------------------------------------------------------------------------
Total Assets $2,259,985
============================================================================
Liabilities and Shareholders' Equity:
NOW $ 151,276 $ 3,997 2.64%
Savings deposits 302,566 9,409 3.11
Money market savings 299,948 8,818 2.94
Time deposits 399,159 16,790 4.21
- ----------------------------------------------------------------------------
Total Interest-Bearing
Deposits 1,152,949 39,014 3.38
Federal funds purchased and
securities sold under agreement
to repurchase 271,475 10,100 3.72
Other purchased funds 833 22 2.64
- ----------------------------------------------------------------------------
Total Interest-Bearing
Liabilities 1,425,257 49,136 3.45
Demand deposits 506,669
Other liabilities 21,718
- ----------------------------------------------------------------------------
Total Liabilities 1,953,644
Shareholders' Equity 306,341
- ----------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,259,985
============================================================================
Net Interest Margin $117,733 5.78%
============================================================================
<TABLE>
ANALYSIS OF CHANGES IN NET INTEREST MARGIN
<CAPTION>
1996 vs. 1995 1995 vs. 1994
Due to Due to Total Due to Due to Total
(in thousands) Rate Volume Change Rate Volume Change
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing balances with
banks $ (8) $ 13 $ 5 $ 31 (128) $ (97)
Federal funds sold and securities
purchased under agreement
to resell (64) 1,523 1,459 429 (1,368) (939)
Securities* 1,130 (3,352) (2,222) 5,338 8,209 13,547
Loans and lease financing* (2,395) 10,992 8,597 8,563 5,802 14,365
- --------------------------------------------------------------------------------------------------
Total Earning Assets $(1,337) $9,176 $7,839 $14,361 $12,515 $26,876
Reserve for possible loan losses
Cash and due from banks
Bank premises and equipment
Other assets
Total Assets
Liabilities and Shareholders' Equity:
NOW $ (241) $ 173 $ (68) $ 271 $ (23) $ 248
Savings deposits (1,161) (87) (1,248) 1,621 (183) 1,438
Money market savings (315) (27) (342) 1,449 (95) 1,354
Time deposits (1,246) 2,696 1,450 5,512 2,847 8,359
- --------------------------------------------------------------------------------------------------
Total Interest-Bearing
Deposits (2,963) 2,755 (208) 8,853 2,546 11,399
Federal funds purchased and
securities sold under agreement
to repurchase (1,707) 328 (1,379) 4,838 3,335 8,173
Other purchased funds (8) 4 (4) (10) 11 1
- --------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities (4,678) 3,087 (1,591) 13,681 5,892 19,573
Demand deposits
Other liabilities
Total Liabilities
Shareholders' Equity
- --------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity
Net Interest Margin $ 3,341 $6,089 $9,430 $ 680 $ 6,623 $ 7,303
==================================================================================================
</TABLE>
<PAGE> 44
QUARTERLY FINANCIAL DATA
1996
(in thousands except per share amounts) First Second Third Fourth
Total interest income $46,962 $49,456 $50,072 $51,041
Total interest expense 15,930 16,677 16,788 17,723
Net interest income 31,032 32,779 33,284 33,318
Provision for loan losses 750 750 750 4,400
Securities transactions - - 1,036 5,085
Other income 9,248 9,354 11,671 14,233
Other expense 23,104 23,525 26,013 29,719
- -----------------------------------------------------------------------------
Income before taxes 16,426 17,858 19,228 18,517
Applicable income taxes 5,801 6,413 6,911 6,388
- -----------------------------------------------------------------------------
Net Income $10,625 $11,445 $12,317 $12,129
=============================================================================
Net Income Per Share $1.33 $1.44 $1.55 $1.52
=============================================================================
1995
(in thousands except 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
=============================================================================
MARKET FOR COMMON STOCK (BID QUOTATIONS)
First Second Third Fourth
1996
High 68 63 65 71
Low 60 59 61 63
1995
High 51 52 64 66
Low 49 49 52 62
Cash Dividend Declared
Per Share
1996 0.50 0.50 0.50 0.50
1995 0.40 0.40 0.40 0.50
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.
<PAGE> 45
BOARD OF DIRECTORS
(Directors are the same for the holding company and the bank.)
Donald B. Abel, Jr.
President, Don Abel Building Supplies, Inc., Juneau
Gary M. Baugh
President, Baugh Construction and Engineering Company, Anchorage
Carl F. Brady, Jr.
Chairman and CEO, Brady & Company, Anchorage
Alec W. Brindle
President, Wards Cove Packing Co., Inc., Seattle
Sharon Burrell
Secretary-Treasurer, Hammer & Wikan, Petersburg
James O. Campbell
Commissioner, Arctic Research Commission, Anchorage
Jeffry J. Cook
Vice President, MAPCO Alaska, Inc., Fairbanks
Patrick S. Cowan
Owner, Birch Ridge Golf Course, Soldotna
Roy Huhndorf
Chairman of the Board,
Cook Inlet Region, Inc., Anchorage
James H. Jansen
President and CEO,
Lynden, Inc., Anchorage
Donald L. Mellish
Chairman, Executive Committee
Emil Notti
Consultant, Juneau
Howard R. Nugent
President, Howdie Homes, Inc., Wasilla
Tennys B. Owens
Owner and President, Artique Ltd., Anchorage
Eugene A. Parrish, Jr.,
Vice President, Holland America Lines, Anchorage
J. Michael Pate
Owner, Pate Insurance Agency, Inc., Homer
Martin R. Pihl
Retired, Forest Product Executive, Ketchikan
Edward F. Randolph
President, Edward F. Randolph Insurance Agency, Inc., Kodiak
Edward B. Rasmuson
Chairman, Board of Directors
Major General John Schaeffer (Retired)
Owner, Schaeffer & Associates, Kotzebue
Michael K. Snowden
President, Service Transfer, Inc., Sitka
Richard Strutz
President
George S. Suddock
Chairman, Alaska National Corp., Anchorage
Richard A. Wien
Chairman and CEO, Florcraft, Inc., Fairbanks
DIRECTORS EMERITI
Elmer E. Rasmuson, Chairman
J.A. Columbus
J.J. Conway
Gordon Hartlieb
John A. Holmberg
Leo Rhode
EXECUTIVE COMMITTEE
Donald L. Mellish, Chairman
Tennys B. Owens
Eugene A. Parrish, Jr.
J. Michael Pate
Edward B. Rasmuson
Richard Strutz
NATIONAL BANCORP OF ALASKA, INC. OFFICERS
Edward B. Rasmuson, Chairman of the Board
Richard Strutz, President
Terry S. Kipp, Secretary
Kathleen Soderberg, Treasurer
Gary Dalton, Controller
NATIONAL BANK OF ALASKA OFFICERS
Senior Administration
Donald L. Mellish, Chairman/Executive Committee
Edward B. Rasmuson, Chairman of the Board
Richard Strutz, President
Gary Dalton, EVP
Kathleen Soderberg, EVP
Terry S. Kipp, SVP
Branch Administration
Nancy Ashwill, SVP
Peter Crandall, SVP
James Lund, SVP
Michael McCormack, SVP
Loan Supervision
James L. Cloud, SVP
William Granger, SVP/Loan Administration
James G. O'Connell, SVP/Commercial Lending
Jim C. Payne, SVP/Branch Lending
Lucille Stietz, SVP/Mortgage Lending
(retired 12/96)
Accounting
Thomas Mason, VP/Controller
Auditing
James Kemp, SVP/Auditor
Debra E. Shannon, VP/Auditing Manager
Rick McCrorie, VP/Compliance Officer
Debbie Dahl-Amundson, VP/Loan Review Manager
Buildings and Properties
Arvin Miller, VP/Manager
Cash Management Services
Mary Perez, AVP/Manager
Central Customer Service
Cathy Karr, VP/Manager
Kate Kraft, VP
Central Loan Servicing
Cheryl Henry, VP/Manager
Commercial Loans
Jerry K. Weaver, SVP/Manager
Pita Benz, VP
Lawrence J. Cooper, VP
Jack Moad, VP
Jo-Li Sellin, VP
David Swalling, VP
R. Brent Ulmer, VP
David Hamilton, VP/Small Business Center Manager
Commercial Real Estate
Jan K. Sieberts, SVP/Manager
Jan Hood, VP
Jim Pefanis, VP
JoAnn Rodamaker, VP
Commercial Special Credit Services
James Brinker, VP/Manager
Gerard Diemer, VP
Linda Lester, VP
Community Development
Janie Leask, VP/Manager
Consumer Loans
Paul Harris, SVP
Sharon Engle, VP/Consumer Loans Manager
Anne Habza, VP/Visa Manager
Joyce Haney, VP
<PAGE> 46
Consumer Special Credit Services
Bev Gunson, VP/Manager
Corporate Relations
Benjamin A. Barrera, VP/Manager
Electronic Banking
Robert Tannahill, VP/Manager
Judith Panke, VP
Escrow Services
Jackie Zuspan, AVP/Manager
Fairbanks Loans (Cushman)
Bart LeBon, VP
Michael A. Smith, VP
Human Resources
Catherine Richter, VP/Manager
Investments
Mary Wladkowski, VP/Manager
Investment Services
JoEllen Weatherholt, VP/Manager
Marketing
Cathleen J. Keyes, SVP/Manager
Jeri L. Walters, VP
Mortgage Loan Production
Judy Kemplen, VP/Manager
Lorna Gleason, VP
Mortgage Loans - Fairbanks
Mickey Gibson, AVP/Manager
Mortgage Loans - Kenai Peninsula
Darby Hobson, AVP/Manager
Mortgage Loans - Ketchikan
Gwennyth Byrd, VP
Mortgage Loans - Southeast
Karen King, VP/Manager
Mortgage Loan Servicing
Amber Hutchens, VP/Manager
NBA Leasing Corporation
Ken Oato, VP/Manager
NBA International Banking Corporation
Steve Hasegawa, SVP/Manager (retired 10/96)
Seung Choi, VP
Operations
Anna Rice, SVP
Patricia Shipley, VP/Cashier
Vivian Cloud, VP
Susan Ferrell, VP
Debra Scheele, VP
JoAnn Shore, VP
Louise Bourcier, VP
Residential Construction
James McCormack, VP/Manager
Trust
Roderick R. Shipley, SVP/Manager
Sharyn Andel, VP
David Dobbs, VP
John Stine, VP/Trust Operations Manager
Robert Whittenberg, VP
Michael Walton, VP
ANCHORAGE BRANCHES
Commercial Branch
Kristi Schafer, AC/Manager
Dimond Branch
Sarah Kipp, AVP/Manager
Dimond Mall Branch
Nichole Smith, AC/Manager
Eagle River Branch
Pam Sievers, AVP/Manager
Fifth Avenue Branch
Judy L. Ferguson, VP/Manager
510 L Street Branch
(Under jurisdiction of Fourth Avenue Branch)
Fourth Avenue Branch
Matthew Fitzgerald, AVP/Manager
Frontier Branch
(Under jurisdiction of Russian Jack Branch)
Huffman Branch
Mary Webb, VP/Manager
Main Branch
Daniel Keyes, VP/Manager
Minnesota-Benson Branch
Jennifer McClure, AVP/Manager
Northway Mall Branch
Karin Johnson, AC/Manager
Russian Jack Branch
Nancy Gillies, VP/Manager
Sand Lake Branch
Launi Lee, AC/Manager
Sears Mall Branch
Kathy Hagedorn, AVP/Manager
Spenard Branch
Amelia Penrose, AVP/Manager
MAT-SU VALLEY BRANCHES
Palmer Branch
Takao Tsukada, AVP/Manager
Wasilla Branch
Annette Olejniczak, VP/Manager
Cottonwood Creek Branch, Wasilla
Michelle Rodekohr, AC/Manager
FAIRBANKS BRANCHES
Bentley Mall Branch
Jami Spears, AC/Manager
College Branch
William J. Green, VP/Business Development
Vicki Kennebec, AVP/Manager
Linda Winters, VP
Cushman Branch
Deborah Kimmell, AVP/Manager
Gaffney Branch
Robin Ridlington, AC/Manager
North Pole Branch
R. Oscar Calvillo, AVP/Manager
KENAI PENINSULA BRANCHES
Homer Branch
John Hoyt, VP/Manager
Kenai Branch
Ron Linegar, VP/Manager
Lake Street Branch, Homer
Mary Covey, AC/Manager
Seward Branch
Lori A. Draper, AVP/Manager
Soldotna Branch
Kurt R. Eriksson, VP/Manager
SOUTHEAST BRANCHES
Glacier Valley Branch, Juneau
Deborah K. Zenger, VP/Manager
Juneau Branch
Roy L. Kyle, VP/Manager
Ketchikan Branch
John Scoblic, VP/Manager
Lemon Creek Branch, Juneau
Natasha von Imhof, AC/Manager
<PAGE> 47
Metlakatla Branch
Charlene M. Brendible, AC/Manager
Petersburg Branch
J. Bond Stewart, VP/Manager
Prince of Wales Branch
Sean Riggan, AC/Manager
Shoreline Branch, Ketchikan
Pierre Kaptanian, AC/Manager
Sitka Branch
Gregory West, AVP/Manager
Skagway Branch
Kelly Roper, AVP/Manager
Tongass Branch, Ketchikan
Lori Freeman-Konoske, AVP/Manager
Wrangell Branch
Thomas Saville, AVP/Manager
OTHER STATEWIDE BRANCHES
Barrow Branch
Joe Everhart, VP/Manager
Bethel Branch
D. Heath Cox, AC/Manager
Cordova Branch
Jon K. Stavig, AVP/Manager
Delta Junction Branch
Dave Durham, AC/Manager
Dillingham Branch
Julie Woodworth, VP/Manager
Glennallen Branch
Ken Olmstead, AC/Manager
King Salmon Branch
Charles Munk, AVP/Manager
Kotzebue Branch
Alex Navarro, AC/Manager
Kodiak Branch
James Brenner, VP/Manager
Mill Bay Branch, Kodiak
Josefina Barber, AVP/Manager
Nome Branch
Mitch Erickson, AVP/Manager
Valdez Branch
Jacquelyn K. Robb, AVP/Manager
COMMUNITY AGENTS
Sally Kookesh, Angoon
Marilyn Savage, Fort Yukon
Connie Demientieff, Holy Cross
Bay Johnson, St. Mary's
Zoe Ivanoff, Unalakleet
NORTHLAND CREDIT
John Higgins, General Manager
NORTHLAND MORTGAGE COMPANY
Donald Shepherd, President
SEATTLE OFFICES
NBA International Banking Corp.
Loan Production Office
Frederick S. Richard, SVP/Manager
ADVISORY BOARDS
Terry S. Kipp, Chairman
Barrow
Ronald Brower, 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, Curt Morris
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, 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 and Frank Warfel
<PAGE> 48
A NOTE OF SPECIAL THANKS
Deborah G. Klinkhart, Assistant Cashier and Marketing Officer, for the report's
layout and design.
Elaine Junge, Assistant Vice President and Marketing Officer, for editing.
Terry Kipp, Senior Vice President and Catherine Richter, Vice President and
Human Resources Manager for preparing the Officer, Board of Directors and
Advisory Board listings.
Thomas Mason, Vice President and Controller, and Marjorie Williams, Assistant
Vice President and Financial Analyst, for preparing the financial section.
For assistance with preparing the NBA milestones:
Janie Leask, Vice President and Community Development Manager;
Paul Harris, Senior Vice President;
Sharon Engle, Vice President and Consumer Loans Manager;
Anne Habza, Vice President and Visa Manager;
Cheryl Henry, Vice President and Central Loan Servicing Manager;
John Higgins, General Manager, Northland Credit;
JoEllen Weatherholt, Vice President and Investment Services Manager;
Rod Shipley, Senior Vice President and Trust Manager;
Lucille Stietz, Senior Vice President (retired);
Judy Kemplen, Vice President and Mortgage Loan Production Manager and
David Hamilton, Vice President and Small Business Center Manager.
Chris Arend Photography for art direction and photography.
Mark Kelley for photos on page 5 and 12.
John Hyde for the photo on page 10.
Suzon Mejia for editing assistance.
Numerous state agencies, corporations and associations for statistical data and
information.
<PAGE> Inside Back Cover
COMPANY INFORMATION
NATIONAL BANCORP OF ALASKA, INC.
P.O. Box 100600
Anchorage, Alaska 99510-0600
(907) 276-1132
ANNUAL SHAREHOLDERS' MEETING
Tuesday, March 18, 1997, 10:00 a.m.
National Bank of Alaska
301 W. Northern Lights Blvd.
Anchorage, Alaska 99503
TRANSFER AGENT & REGISTRAR
National Bank of Alaska
AUDITORS
Deloitte & Touche LLP
NASDAQ SYMBOL
NBAK
<PAGE> Back Cover
FORM 10-K ANNUAL REPORT
Copies of National Bancorp of Alaska, Inc.'s 1996 annual report to the
Securities and Exchange Commission, Form 10-K, are available upon request from:
Controller, National Bank of Alaska, P.O. Box 100600,
Anchorage, Alaska 99510-0600.
NATIONAL BANCORP OF ALASKA
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 166,771
<INT-BEARING-DEPOSITS> 233
<FED-FUNDS-SOLD> 20,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 253,552
<INVESTMENTS-CARRYING> 596,473
<INVESTMENTS-MARKET> 599,687
<LOANS> 1,446,978
<ALLOWANCE> 23,002
<TOTAL-ASSETS> 2,648,484
<DEPOSITS> 1,867,053
<SHORT-TERM> 365,467
<LIABILITIES-OTHER> 38,561
<LONG-TERM> 0
<COMMON> 377,403
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 2,648,484
<INTEREST-LOAN> 141,178
<INTEREST-INVEST> 54,042
<INTEREST-OTHER> 2,311
<INTEREST-TOTAL> 197,531
<INTEREST-DEPOSIT> 50,205
<INTEREST-EXPENSE> 67,118
<INTEREST-INCOME-NET> 130,413
<LOAN-LOSSES> 6,650
<SECURITIES-GAINS> 6,121
<EXPENSE-OTHER> 102,361
<INCOME-PRETAX> 72,029
<INCOME-PRE-EXTRAORDINARY> 72,029
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,516
<EPS-PRIMARY> 5.84
<EPS-DILUTED> 5.84
<YIELD-ACTUAL> 5.89
<LOANS-NON> 5,493
<LOANS-PAST> 9,945
<LOANS-TROUBLED> 180
<LOANS-PROBLEM> 15,790
<ALLOWANCE-OPEN> 21,529
<CHARGE-OFFS> 7,737
<RECOVERIES> 2,560
<ALLOWANCE-CLOSE> 23,002
<ALLOWANCE-DOMESTIC> 6,192
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16,810
</TABLE>
