<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1998
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-10769
National Bancorp of Alaska, Inc.
(Exact name of registrant as specified in its charter)
Delaware 92-0087646
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Northern Lights Boulevard and C Street, Anchorage, AK 99503
(Address of principal executive offices) (Zip Code)
(907) 276-1132
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO___
The registrant has one class of Common Stock, $2.50 par value.
Number of shares outstanding as of May 8, 1998: 31,035,608
<PAGE> 2
Table of Contents
Page
Part I
Item 1 Financial Statements................................3
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of Operations....8
Part II
Item 1 Legal Proceedings...................................13
Item 2 Changes in Securities...............................13
Item 3 Defaults Upon Senior Securities.....................13
Item 4 Submission of Matters to a Vote of Security Holders.13
Item 5 Other Information...................................14
Item 6 Exhibits and Reports on Form 8-K....................14
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<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In Thousands Except Statistics) Three Months Ended March 31
1998 1997
INTEREST INCOME:
Loans & Lease Financing Including Fee $37,117 $35,204
Balances with Banks 8 6
Federal Funds Sold 1,398 131
Investment Securities Including Dividends
U.S. Treasury Securities 2,814 3,143
Obligations of Other U. S. Government
Agencies and Corporation 5,992 5,915
Obligations of States & Political
Subdivisions 113 170
Mortgage and Asset-Backed Securities 2,942 2,498
Other Securities 2,360 2,500
-------------------
TOTAL INTEREST INCOME 52,744 49,567
INTEREST EXPENSE:
Deposits 14,040 12,986
Federal Funds Purchased & Securities Sold
Under Agreement to Repurchase 4,607 4,133
Other Purchased Funds 3 3
-------------------
TOTAL INTEREST EXPENSE 18,650 17,122
-------------------
NET INTEREST INCOME 34,094 32,445
Provision for Loan Losses 1,200 900
-------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 32,894 31,545
OTHER INCOME:
Trust Department Income 672 597
Service Charges on Deposit Accounts 3,289 3,079
Mortgage Loan Servicing Fees 2,404 2,000
Securities Transactions - 148
Gains on limited partnership investments 368 68
Credit Card Service Fees 1,518 1,363
Other 4,157 3,260
-------------------
TOTAL OTHER INCOME 12,408 10,515
OTHER EXPENSE:
Salaries 10,016 9,448
Profit Sharing & Other Employee Benefits 3,219 3,075
Net Occupancy Expense of Bank Premises 2,002 1,845
Furniture & Equipment Expense 2,140 2,259
Other 8,170 7,093
-------------------
TOTAL OTHER EXPENSE 25,547 23,720
-------------------
Income Before Income Taxes 19,755 18,340
Applicable Income Taxes 7,067 6,338
-------------------
NET INCOME $12,688 $12,002
===================
Per Share Statistics
Net Income $ 0.41 $ 0.38
===================
Average Number of Shares Outstanding 31,038,636 31,577,220
(See note to consolidated statements.)
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<PAGE> 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands Except Statistics) Three Months Ended March 31
1998 1997
Net income $12,688 12,002
Other comprehensive income, net of taxes:
Unrealized losses securities:
Unrealized holding losses arising during period (349) (884)
Less: reclassification adjustment for gains
included in net income - 148
----------------
Other comprehensive income (349) (1,032)
----------------
Comprehensive Income $12,339 $10,970
================
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<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
March 31
December 31
(In Thousands Except Statistics) 1998 1997 1997
<S> <C> <C> <C>
ASSETS:
Cash and Due from Banks $ 170,568 $ 124,953 $ 155,849
Interest-Bearing Balances with Banks 185 451 150
Federal Funds Sold 23,000 -- 100,000
Investment Securities:
Obligations of Other U. S. Government
Agencies and Corporations 352,040 330,371 301,178
Obligations of States and Political Subdivisions 11,037 15,211 11,864
Mortgage and Asset-Backed Securities 164,579 144,601 181,218
Other Securities 115,605 119,137 115,202
-------------------------------
Total Investment Securities 643,261 609,320 609,462
(Market Value $648,027 in 1998)
Securities Available for Sale 236,901 231,529 228,739
Net Loans and Lease Financing 1,476,024 1,466,318 1,471,461
Less Reserve for Loan Losses (24,774) (23,524) (24,530)
--------------------------------
Net Loans and Lease Financing Less Reserves 1,451,250 1,442,794 1,446,931
Loans Held for Sale 55,793 22,396 58,304
Premises and Equipment 70,279 70,161 71,037
Limited partnership investments 48,653 36,901 50,408
Other Assets 55,339 58,390 56,186
--------------------------------
Total Assets $2,755,229 $2,596,895 $2,777,066
================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand Deposits $ 550,539 $ 483,488$ 583,184
Interest-Bearing Deposits:
NOW 204,111 166,315 193,474
Savings 285,898 288,721 298,680
Money Market Savings 290,817 288,077 295,088
Time 614,663 564,043 610,915
--------------------------------
Total Interest-Bearing Deposits 1,395,489 1,307,156 1,398,157
--------------------------------
Total Deposits 1,946,028 1,790,644 1,981,341
Federal Funds Purchased 5,935 39,088 2,761
Securities Sold Under Agreement to Repurchase 353,245 343,831 359,865
Other Purchased Funds 116 877 136
Other Liabilities 43,332 41,635 34,082
--------------------------------
Total Liabilities 2,348,656 2,216,075 2,378,185
Shareholders' Equity 1998 1997
----------------------
Common Stock - Par Value 2.50 $10.00 80,000 80,000 80,000
Shares Authorized 40,000,000 10,500,000
Shares Outstanding 32,000,000 8,000,000
Surplus 63,039 63,000 63,000
Undivided Profits 278,718 242,361 269,909
Net Unrealized Holding Gains(Losses) on
Available-for-Sale Securities 2,700 1,373 3,049
Less Treasury Stock at Cost
974,340 on March 31, 1998 and
112,997 Shares on March 31, 1997 (17,884) (5,914) (17,077)
--------------------------------
Total Shareholders' Equity 406,573 380,820 398,881
--------------------------------
Total Liabilities and Shareholders Equity $2,755,229 $2,596,895 $2,777,066
================================
Per Share Statistics
Net Book Value $13.10 $12.07 $12.82
(See note to consolidated statements.) ================================
</TABLE>
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<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands) Three Months Ended March 31 1998 1997
OPERATING ACTIVITIES:
Net Income $ 12,688 $ 12,002
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 1,200 900
Deferred Taxes (1,584) (482)
Depreciation and Amortization 1,979 1,897
Net amortization on Securities (144) 62
Investment Security Transactions (368) (216)
Gain on Loan Sales (287) (82)
Loss on Disposal of Premises and Equipment - 19
Gain on Sale of Other Assets (5) (2)
Net Decrease in Loans Held for Sale 2,798 9,249
Decrease (Increase) in Interest Receivable,
Prepaid Expense, and Other Assets 1,541 (1,365)
Increase in Interest Payable, Accrued
Expenses and Other Liabilities 6,108 3,911
-----------------
Net Cash Provided by Operating Activities 23,926 25,893
INVESTING ACTIVITIES:
Net Decrease in Federal Funds Sold, and Interest
Bearing Deposits with Other Banks 76,965 19,782
Proceeds from Maturities of Securities Held to Maturity 47,261 31,633
Proceeds from Maturities of Securities Available for Sale 16,336 20,000
Proceeds from Sales of Securities Available for Sale - 25,148
Purchases of Securities Held to Maturity (80,927) (44,253)
Purchases of Securities Available for Sale (25,075) (25,000)
Net Increase in Lending Activities (5,597) (19,928)
Proceeds from Sales of Premises and Equipment - 4
Proceeds from Sale of Other Assets 8,028 324
Purchases of Premises, Equipment, and Other Assets (5,914) (6,835)
-----------------
Net Cash Provided by Investing Activities 31,077 875
FINANCING ACTIVITIES:
Net Decrease in Total Deposit (32,167) (79,337)
Net Increase in Short-Term Borrowings (3,466) 18,329
Acquisition of Treasury Stock (2,262) (3,609)
Sale of Treasury Stock 1,493 -
Cash Dividends (3,882) (3,969)
-----------------
Net Cash Used in Financing Activities (40,284) (68,586)
-----------------
Increase (Decrease) in Cash and Cash Equivalents 14,719 (41,818)
Cash and Cash Equivalents at Beginning of Year 155,849 166,771
-----------------
Cash and Cash Equivalents at End of March $170,568 $124,953
=================
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<PAGE> 7
National Bancorp of Alaska
Notes to the Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions and regulations for filing Form
10-Q. Operating results for the three-month period ended March 31, 1998, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
The statements should be read in conjunction with the summary of accounting
policies and notes to the financial statements included in the Registrant's
annual report for the year ended December 31, 1997. In the opinion of
management, all adjustments (consisting of normal recurring accruals necessary
for a fair presentation) have been included.
Note B - Stock Split
On March 17, 1998, the Corporation declared a four-for-one stock split. The
stock split was effective on April 27, 1998. Prior year earnings and net book
value are restated for subsequent stock splits.
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<PAGE> 8
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations
National Bancorp of Alaska (the Corporation) recorded earnings of $12.7 million
in the first quarter of 1998 compared to $12.0 million for the first quarter of
1997. Earnings per share were $0.41 as of March 31, 1998 up 8% from the $0.38
earned through March 31, 1997 restated to reflect subsequent four-for-one stock
split declared on March 17, 1998 and issued on April 27, 1998.
Return on average assets using annualized income from operations plus year-to-
date net security gains and nonrecurring loan loss recoveries was 1.86% for the
three-month period ended March 31, 1998, compared to 1.87% for the three-month
period ended March 31, 1997. The annualized return on average stockholders'
equity was 12.66% for the first three months of 1998.
Net interest income increased $1,349,000 after the provision for loan losses
during the first three months of 1998 compared to the same period during the
previous year. The increase is due to increased loan activity. Interest on
earning assets increased $3.2 million from the first quarter of 1997 to the
first quarter of 1998, while interest expense increased $1.5 million.
The provision for loan loss was $1,200,000 at March 31, 1998, compared to a
provision for loan losses $900,000 at March 31, 1997. The reserve for loan
loss was 1.68% of outstanding loans at March 31, 1998 and 1.60% at March 31,
1997 and 1.67% at December 31, 1997. Nonperforming assets, defined as other
real estate owned, nonaccrual loans, restructured loans, and loans past due 90
days and still accruing, as a percentage of total loans and other real estate
owned increased to 1.01% at March 31, 1998 from 1.00% at March 31, 1997, and
decreased from 1.08% at December 31, 1997.
Non-interest income increased $1,893,000 for the first quarter from the same
period in 1997. Non-interest expense increased by $1,827,000 over the first
quarter one year ago. Increases include $712,000 in personnel and benefits
expenses and $1,077,000 in other expense.
-8-
<PAGE> 9
Material Changes in Financial Condition
Total assets at March 31, 1998, were $2,755,229,000 an increase of 6.1% or $158
million from the same period one year earlier, and an decrease of $22 million
or 0.8% from December 31, 1997. Investment securities have increased by $34
million over the first quarter of 1997. Loans and leases and loans held for
sale have increased $43 million over the same period in 1997. Total deposits
have increased by $155 million from March 31, 1997, and decreased by $35
million from December 31, 1997.
Liquidity
The Corporation maintains sufficient excess liquidity to satisfy contractual
liabilities, meet withdrawal requirements of depositors, fund operations, and
provide for customers' credit needs. Management knows of no demand,
commitments, or events that would result in liquidity changing in a material
amount.
Capital Resources
Shareholders' equity increased by $7.7 million from December 31, 1996, to
$406.6 million at March 31, 1998. Federal regulatory agencies have established
capital adequacy guidelines setting a minimum for Tier 1, total capital and
leverage ratios which were 4%, 8% and 3%, respectively. The Corporation's and
National Bank of Alaska's ratios are as follows:
March 31 December 31
1998 1997 1997
Tier 1 Risk Based Capital Ratio
National Bancorp of Alaska, Inc. 18.73% 18.77% 18.58%
National Bank of Alaska 12.52 13.31 12.37
Total Risk Based Capital Ratio
National Bancorp of Alaska, Inc. 19.88% 19.93% 19.73%
National Bank of Alaska 13.75 14.55 13.60
Leverage Ratio
National Bancorp of Alaska 14.80% 14.71% 14.12%
National Bank of Alaska 9.57 10.14 9.18
-9-
<PAGE> 10
Statistical Disclosures
The information as requested by the Securities and Exchange Commission of
selected
Guide 3-Statistical Disclosure by Bank Holding Companies as follows:
III. Loan Portfolio
C. Risk Elements
Nonperforming Assets
March 31 December 31
(In Thousands) 1998 1997 1997
Nonaccrual
Commercial and industrial $ 6,616 $3,618 $ 5,342
Real estate construction 323 166 323
Real estate long-term 4,763 4,070 4,298
Other 651 35 76
--------------------------
Total 12,353 7,889 10,039
--------------------------
Restructured Loans
Real estate construction - 83 -
Real estate long-term 89 94 90
--------------------------
Total 89 177 90
--------------------------
Accruing loans past due 90 days or more 2,201 6,161 5,627
--------------------------
Other real estate owned 208 396 150
--------------------------
Total nonperforming assets $14,851 $14,623 $15,906
Nonperforming assets as a percentage
of loans and leases and other real
estate owned at end of period 1.01% 1.00% 1.08%
Potential Problem Loans
At March 31, 1997, an additional $57,113,000 in loans are being closely
monitored by management. These loans are not include in any category of non-
performing loans. However, management has concern about the borrower's
abilities to comply with their present loan repayment terms. These loans are
reviewed monthly to assess any change in collectability.
-10-
<PAGE> 11
IV. Summary of Loan Loss Experience
A: Analysis of Reserve for Loan Loss
(In Thousands) March 31, 1998 December 31, 1997
Balance January 1 $24,530 $23,002
Provision charged to operations 1,200 5,400
Recoveries on loans previously charged off 1,002 3,333
Less loans charged off (1,958) (7,205)
-------------------------
Balance at end of period $24,774 $24,530
=========================
Composition of Loan Charge Off and Recoveries
Loans Charged Off:
Commercial loans and leases $ 642 $ 2,063
Real estate construction - -
Real estate long-term 54 97
Consumer 1,027 4,047
Visa 235 998
------------------------
Total Charge Offs 1,958 7,205
------------------------
Recoveries:
Commercial loans and leases 84 793
Real estate construction 2 131
Real estate long-term 465 364
Consumer 390 1,851
Visa 61 194
------------------------
Total Recoveries 1,002 3,333
------------------------
Net Charge Offs $ 956 $ 3,872
========================
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<PAGE> 12
B. Allocation of the Allowance for Loan Loss
Allocation of Reserves
To Loan Categories
--------------------------
Loan Category As a % % of Total Amount of
of Total Loans Reserve Reserves(000's)
March 31, 1998
Commercial and Industrial 38.4% 17.6% $ 4,342
Real Estate Construction 2.4 - 8
Real Estate Long Term 32.6 1.3 327
Installment 22.6 33.4 8,274
Nontaxable 3.2 - 1
Lease Financing 0.8 1.2 300
Unallocated - 46.5 11,522
------------------------------------
100.0% 100.0% $24,774
December 31, 1997
Commercial and Industrial 37.1% 9.1% $ 2,235
Real Estate Construction 2.3 0.1 13
Real Estate Long Term 33.5 1.4 350
Installment 22.7 31.4 7,707
Nontaxable 3.5 - -
Lease Financing 0.9 0.2 44
Unallocated - 57.8 14,181
------------------------------------
100.0% 100.0% $24,530
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<PAGE> 13
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Not applicable.
Item 2: Changes in Securities
Not applicable.
Item 3: Defaults Upon Senior Securities
Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held in Anchorage on March 17,
1998. At that time shareholders elected 24 Directors to the Board.
All Directors stand for election annually.
Votes for Votes Withheld
Director Director from Director
-----------------------------------------------------------
Donald B. Abel, Jr. 7,529,392 9,898
Gary M. Baugh 7,529,372 9,918
Carl F. Brady, Jr. 7,529,332 9,858
Alec W. Brindle 7,529,086 10,204
James O. Campbell 7,526,824 12,466
Jeffry J. Cook 7,529,392 9,898
Patrick S. Cowan 7,528,646 10,644
Roy Huhndorf 7,528,152 11,138
James H. Jansen 7,529,392 9,898
Donald L. Mellish 7,529,392 9,898
Emil R. Notti 7,355,651 183,639
Howard R. Nugent 7,528,404 10,886
Tennys B. Owens 7,529,100 10,190
Eugene A. Parrish, Jr. 7,529,392 9,898
J. Michael Pate 7,529,392 9,898
Martin R. Pihl 7,529,392 9,898
Edward F. Randolph 7,528,073 11,217
Edward B. Rasmuson 7,529,392 9,898
Maj. Gen. John Schaeffer (Ret.) 7,491,155 48,135
Michael K. Snowden 7,529,392 9,898
Richard J. Strutz 7,529,342 9,948
George S. Suddock 7,529,392 9,898
Richard A. Wien 7,529,150 10,140
Sharon Wikan 7,527,848 11,442
A total of 7,539,290 votes were presented in proxy and in person.
Absent or no proxy votes amounted to 217,125.
The shareholders also approved an amendment to the Company's
Certificate of Incorporation to increase the total number of shares of
common stock that the Company has authority to issue to 40 million,
with a $2.50 par value per share.
For Against Abstain Non Voted Total
7,444,425 31,266 13,800 49,799 7,539,290
The shareholders also approved an amendment to the Company's Certificate
of Incorporation to effect a four-for-one stock split.
For Against Abstain Non Voted Total
7,478,877 3,388 7,226 49,799 7,539,290
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<PAGE> 14
Item 5: Other Information
Not applicable.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
There was one Form 8-K during the quarter ended March 31, 1998.
On March 17, 1998, a Form 8-K reported the quarterly dividend of
$0.50 per share. Also reported was the increase of authorized
shares from 10.5 million to 40 million and the four-for-one
stock split. The dividend is on shares prior to the stock split
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL BANCORP OF ALASKA, INC.
May 8, 1998 /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman
of the Board
May 8, 1998 /s/Richard Strutz
Date Richard Strutz, President
May 8, 1998 /s/Gary Dalton
Date Gary Dalton, Executive Vice
President and Controller
(Principal Accounting Officer)
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 170,568
<INT-BEARING-DEPOSITS> 185
<FED-FUNDS-SOLD> 23,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 236,901
<INVESTMENTS-CARRYING> 643,261
<INVESTMENTS-MARKET> 648,027
<LOANS> 1,476,024
<ALLOWANCE> 24,774
<TOTAL-ASSETS> 2,755,229
<DEPOSITS> 1,946,028
<SHORT-TERM> 359,296
<LIABILITIES-OTHER> 43,332
<LONG-TERM> 0
<COMMON> 406,573
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 2,755,229
<INTEREST-LOAN> 37,117
<INTEREST-INVEST> 14,221
<INTEREST-OTHER> 1,406
<INTEREST-TOTAL> 52,744
<INTEREST-DEPOSIT> 14,040
<INTEREST-EXPENSE> 18,650
<INTEREST-INCOME-NET> 34,094
<LOAN-LOSSES> 1,200
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 25,547
<INCOME-PRETAX> 19,755
<INCOME-PRE-EXTRAORDINARY> 12,688
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,688
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 0
<LOANS-NON> 12,353
<LOANS-PAST> 2,201
<LOANS-TROUBLED> 89
<LOANS-PROBLEM> 57,113
<ALLOWANCE-OPEN> 24,530
<CHARGE-OFFS> 1,958
<RECOVERIES> 1,002
<ALLOWANCE-CLOSE> 24,774
<ALLOWANCE-DOMESTIC> 13,252
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,522
</TABLE>
