<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 June 30, 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 August 7, 1998: 30,967,406
<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 13
Item 6 Exhibits and Reports on Form 8-K 13
<PAGE> 3
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
THREE MONTHS SIX MONTHS
(In Thousands Except Statistics) ENDED JUNE 30 ENDED JUNE 30
<S> <C> <C> <C> <C>
INTEREST INCOME: 1998 1997 1998 1997
Loans & Lease Financing Including Fee $39,282 $37,928 $76,399 $73,132
Balances with Banks 8 9 16 15
Federal Funds Sold and Securities Purchased
Under Agreement to Resell 291 32 1,689 163
Investment Securities Including Dividends
U.S. Treasury Securities 2,475 2,969 5,289 6,112
Obligations of Other U. S. Government
Agencies and Corporation 6,552 5,791 12,544 11,706
Obligations of States & Political
Subdivisions 156 157 269 327
Mortgage and Asset Backed Securities 3,099 2,515 6,041 5,013
Other Securities 2,301 2,459 4,661 4,959
-------------------------------------------
TOTAL INTEREST INCOME 54,164 51,860 106,908 101,427
INTEREST EXPENSE:
Deposits 13,865 13,192 27,905 26,178
Federal Funds Purchased & Securities Sold
Under Agreement to Repurchase 4,697 4,776 9,304 8,909
Other Purchased Funds 2 6 5 9
-------------------------------------------
TOTAL INTEREST EXPENSE 18,564 17,974 37,214 35,096
-------------------------------------------
NET INTEREST INCOME 35,600 33,886 69,694 66,331
Provision for Loan Losses 1,200 900 2,400 1,800
-------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 34,400 32,986 67,294 64,531
OTHER INCOME:
Trust Department Income 741 580 1,413 1,177
Service Charges on Deposit Accounts 3,455 3,234 6,744 6,313
Loan Servicing Fees 2,368 2,064 4,772 4,064
Securities Transactions 390 171 390 319
Gains on Limited Partnership Investment 2,585 239 2,953 307
Credit Card Service Fees 1,736 1,823 3,254 3,186
Other 5,150 3,520 9,307 6,780
-------------------------------------------
TOTAL OTHER INCOME 16,425 11,631 28,833 22,146
OTHER EXPENSE:
Salaries 10,392 9,627 20,408 19,075
Profit Sharing & Other Employee Benefits 3,367 3,109 6,586 6,184
Net Occupancy Expense of Bank Premises 1,904 1,868 3,906 3,713
Furniture & Equipment Expense 2,307 2,315 4,447 4,574
Other 9,051 7,697 17,221 14,790
-------------------------------------------
TOTAL OTHER EXPENSE 27,021 24,616 52,568 48,336
Income Before Income Taxes 23,804 20,001 43,559 38,341
Applicable Income Taxes 8,792 6,999 15,859 13,337
-------------------------------------------
NET INCOME $15,012 $13,002 $27,700 $25,004
===========================================
Per Share Statistics
Net Income $0.48 $0.41 $0.89 $0.79
===========================================
Average Number of Shares Outstanding 31,033,075 31,495,264 31,035,841 31,536,016
(See note to consolidated statements.)
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands Except Statistics)
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Net income $15,012 $13,002 $27,700 $25,004
Other comprehensive income, net of taxes:
Unrealized losses securities:
Unrealized holding gains (losses) arising
during period 348 966 (1) 82
Less: reclassification adjustment for gains
included in net income (390) (171) (390) (319)
-------------------------------------------
Other comprehensive income (loss) (42) 795 (391) (237)
-------------------------------------------
Comprehensive Income $14,970 $13,797 $27,309 $24,767
===========================================
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CONDITION (Unaudited)
June 30
December 31
<S> <C> <C> <C>
(In Thousands Except Statistics) 1998 1997 1997
ASSETS:
Cash and Due from Banks $ 176,242 $ 140,932 $ 155,849
Interest-Bearing Balances with Banks 22 2,500 150
Federal Funds Sold and Securities Purchases under
agreement to resell -- 50,260 100,000
Investment Securities:
Obligations of Other U. S. Government
Agencies and Corporations 338,699 304,069 301,178
Obligations of States and Political Subdivisions 19,165 14,436 11,864
Mortgage and Asset-Backed Securities 184,836 139,793 181,218
Other Securities 113,987 114,460 115,202
----------------------------------
Total Investment Securities 656,687 572,758 609,462
(Market Value $662,433 in 1998)
Securities Available for Sale 222,602 223,488 228,739
Loans and Lease Financing 1,501,921 1,466,057 1,471,461
Reserve for Loan Losses (25,758) (23,478) (24,530)
----------------------------------
Net loans and Lease Financing 1,476,163 1,442,579 1,446,931
Loans Held For Sale 112,230 85,730 58,304
Premises and Equipment 69,753 69,630 71,037
Limited partnership investments 56,204 42,174 50,408
Other Assets 55,941 56,880 56,186
----------------------------------
Total Assets $2,825,844 $2,686,931 $2,777,066
==================================
LIABILITIES AND SHAREHOLDERS EQUITY:
Demand Deposits $ 585,627 $ 573,259 $ 583,184
Interest-Bearing Deposits:
NOW 187,932 173,744 193,474
Savings 278,978 277,679 298,680
Money Market Savings 279,071 291,622 295,088
Time 606,297 584,365 610,915
----------------------------------
Total Interest-Bearing Deposits 1,352,278 1,327,410 1,398,157
----------------------------------
Total Deposits 1,937,905 1,900,669 1,981,341
Federal Funds Purchased 44,609 2,976 2,761
Securities Sold Under Agreement to Repurchase 388,465 352,883 359,865
Other Purchased Funds 79 4,404 136
Other Liabilities 37,755 36,786 34,082
----------------------------------
Total Liabilities 2,408,813 2,297,718 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
Capital Surplus 63,082 63,000 63,000
Retained Earnings 289,074 251,429 269,909
Net Unrealized Holding Losses on
Available-For-Sale Securities 2,658 2,168 3,049
Treasury Stock at Cost (970,722 Shares on June 30,
1998 and 132,997 Shares on June 30, 1997 (17,783) (7,384) (17,077)
---------------------------------
Total Shareholders Equity 417,031 389,213 398,881
----------------------------------
Total Liabilities and Shareholders Equity $2,825,844 $2,686,931 $2,777,066
==================================
Per Share Statistics
Net Book Value $13.44 $12.37 $12.85
(See note to consolidated statements.) ==================================
</TABLE>
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands) Six Months Ended June 30 1998 1997
OPERATING ACTIVITIES:
Net Income $ 27,700 $ 25,004
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 2,400 1,800
Deferred Tax Credit (1,073) (1,505)
Depreciation and Amortization 3,969 3,814
Net Amortization on Securities (316) (178)
Gain on Security and Limited Partnership Transactions (3,343) (626)
Gain on Loan Sales (484) (140)
Loss (Gain) on Disposal of Premises and Equipment (379) 10
Gain on Disposal of Other Assets (17) (36)
Net Increase in Loans Held for Sale (53,442) (4,027)
Decrease (Increase) in Interest Receivable,
Prepaid Expense, and Other Assets 1,081 (2,593)
Increase in Interest Payable, Accrued
Expenses and Other Liabilities 133 2,078
-----------------
Net cash Provided by (Used in) Operating Activities (23,771) 23,601
INVESTING ACTIVITIES:
Net Decrease (Increase) in Federal Funds Sold
and Interest Bearing Deposits with Other Banks 100,128 (32,527)
Proceeds from Maturities of Securities Held to Maturity 113,512 71,374
Proceeds from Maturities of Securities Available for Sale 28,210 34,125
Proceeds from Sales of Securities Available for Sale 2,885 25,148
Purchases of Securities Held to Maturity (160,572) (46,427)
Purchase of Securities Available for Sale (25,075) (30,344)
Net Increase in Lending Activities (31,962) (70,613)
Proceeds from Sale of Premises and Equipment 1,103 39
Proceeds from Sale of Other Assets 12,355 1,624
Purchases of Premises, Equipment, and Other Assets (17,449) (15,365)
-----------------
Net Cash Provided by (Used in) Investing Activities 23,135 (62,966)
FINANCING ACTIVITIES:
Net Increase (Decrease) in Total Deposit (40,975) 31,722
Net Increase (Decrease) in Short-Term Borrowings 70,391 (5,204)
Acquisition of Treasury Stock (2,457) (5,079)
Proceed from Sale of Treasury Stock 1,832 --
Cash Dividends (7,762) (7,913)
-----------------
Net Cash Provided by Financing Activities 21,029 13,526
-----------------
Increase (Decrease) in Cash and Cash Equivalents 20,393 (25,839)
Cash and Cash Equivalents at Beginning of Year 155,849 166,771
-----------------
Cash and Cash Equivalents at End of June $176,242 $140,932
=================
<PAGE> 7
National Bancorp of Alaska
Notes to the Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statement have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions and regulations for filing Form
10-Q. Operating results for the six-month period ended June 30, 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.
<PAGE> 8
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations
National Bancorp of Alaska (the Corporation) recorded earnings of $15.0 million
in the second quarter of 1998 compared to $13.0 million for the second quarter
of 1997. Earnings per share for the second quarter were $0.48 as of June 30,
1998 up 17% from the $0.41 earned for the second quarter as of June 30, 1997.
Return on average assets using annualized income from operations plus year-to-
date net security gains was 1.97% for the six-month period ended June 30, 1998,
compared to 1.92% for the six-month period ended June 30, 1997. The annualized
return on average stockholders' equity was 13.27% for the first six months of
1998.
Net interest income increased $2,763,000 after the provision for loan loss
recoveries during the first six months of 1998 compared to the same period
during the previous year. Interest on earning assets increased $5.5 million
from the first six months of 1997 to the first six months of 1998, while
interest expense increased $2.1 million.
The provision for loan loss was $2,400,000 through June 30, 1998, compared to a
provision for loan loss of $1,800,000 at June 30, 1997. The reserve for loan
loss was 1.71% of outstanding loans at June 30, 1998 and 1.60% at June 30, 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
decreased to 0.85% at June 30, 1998 from 0.93% at June 30, 1997, and decreased
from 1.08% at December 31, 1997.
Non-interest income increased $6,687,000 for the first six months of 1998 over
the same period in 1997 mainly due to increased investment gains and income
from loan servicing fees. Non-interest expense increased by $4,232,000 over
the first six months of 1997. Increases include $1,735,000 in personnel and
benefits expenses due to increased mortgage lending activity and increased
profit sharing, a result of increased earnings.
<PAGE> 9
Material Changes in Financial Condition
Total assets at June 30, 1998, were $2,825,844,000 an increase of 5.2% or
$138,913,000 from the same period one year earlier, and an increase of
$48,778,000 or 1.8% from December 31, 1997. Investment securities have
increased by $83.9 million over the second quarter of 1997. Loans, leases and
loans held for sale have increased $62.4 million over the same period in 1997.
Total deposits have increased by $37,236,000 from June 30, 1997, and decreased
by $43,436,000 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 $18.1 million from December 31, 1997, to $417
million at June 30, 1998. Federal regulatory agencies have established capital
adequacy guidelines setting a minimum for leverage and risk based capital
ratios. These minimum and the Corporation's ratios are as follows:
June 30 December 31
1998 1997 1997
Tier 1 Risk Based Capital Ratio
National Bancorp of Alaska, Inc. 18.93% 18.52% 18.58%
National Bank of Alaska 12.42 12.76 12.37
Total Risk Based Capital Ratio
National Bancorp of Alaska, Inc. 20.11% 19.64% 19.73%
National Bank of Alaska 13.66 13.96 13.60
Leverage Ratio
National Bancorp of Alaska 15.07% 14.71% 14.12%
National Bank of Alaska 9.52 9.89 9.18
<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
June 30 December 31
(In Thousands) 1998 1997 1997
Nonaccrual
Commercial and industrial $4,753 $5,867 $ 5,342
Real estate construction 323 220 323
Real estate long-term 4,713 4,604 4,298
Other 583 104 76
--------------------------
Total 10,372 10,795 10,039
Restructured Loans
Real estate construction - 80 -
Real estate long-term - 93 90
--------------------------
Total - 173 90
Accruing loans past due 90 days or more 1,985 2,336 5,627
--------------------------
Other real estate owned 461 270 150
--------------------------
Total nonperforming assets $12,818 $13,574 $15,906
Nonperforming assets as a percentage
of loans and leases and other real
estate owned at end of period 0.85% 0.93% 1.08%
Potential Problem Loans
At June 30, 1998, an additional $54,431,000 in loans are being closely
monitored by management. These loans are not include in any category of non-
performing loans. However, management has concern about the borrow's abilities
to comply with their present loan repayment terms. These loans are reviewed
monthly to assess any change in collectability.
<PAGE> 11
IV. Summary of Loan Loss Experience
A: Analysis of Reserve for Loan Loss
(In Thousands) June 30, 1998 December 31, 1997
Balance January 1 $24,530 $23,002
Provision charged to operations 2,400 5,400
Recoveries on loans previously charged off 3,903 3,333
Less loans charged off (5,075) (7,205)
-------------------------
Balance at end of period $25,758 $24,530
=========================
Composition of Loan Charge Off and Recoveries
Loans Charged Off:
Commercial loans and leases $ 2,474 $ 2,063
Real estate construction - -
Real estate long-term 94 97
Consumer 2,008 4,047
Visa 499 998
-------------------------
Total Charge Offs 5,075 7,205
Recoveries:
Commercial loans and leases 2,362 793
Real estate construction 3 131
Real estate long-term 496 364
Consumer 923 1,851
Visa 119 194
Total Recoveries 3,903 3,333
-------------------------
Net Charge Offs $ 1,172 $ 3,872
=========================
<PAGE> 12
B. Allocation of the Allowance for Loan Loss
Allocation of Reserves
To Loan Categories
Loan Category As a % % of Total Amount of
June 30, 1998 of Total Loans Reserve Reserves(000's)
Commercial and Industrial 39.3% 12.2% $ 3,151
Real Estate Construction 2.8 0.1 32
Real Estate Long Term 31.6 1.2 320
Installment 22.4 30.3 7,793
Nontaxable 3.0 - -
Lease Financing 0.9 1.0 268
Unallocated - 55.2 14,194
------------------------------------
100.0% 100.0% $25,758
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
<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
Not applicable.
Item 5: Other Information
Not applicable.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits: Not Applicable
Exhibit 27. Financial Data Schedule
(b) Not applicable
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL BANCORP OF ALASKA, INC.
August 10, 1998 /s/Edward B. Rasmuson
Date Edward B. Rasmuson, Chairman
of the Board
August 10, 1998 /s/Richard Strutz
Date Richard Strutz, President
August 10, 1998 /s/Gary Dalton
Date Gary Dalton, Executive Vice
President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 176,242
<INT-BEARING-DEPOSITS> 22
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 222,602
<INVESTMENTS-CARRYING> 656,687
<INVESTMENTS-MARKET> 662,433
<LOANS> 1,501,921
<ALLOWANCE> 24,758
<TOTAL-ASSETS> 2,825,844
<DEPOSITS> 1,937,905
<SHORT-TERM> 433,153
<LIABILITIES-OTHER> 37,755
<LONG-TERM> 0
<COMMON> 417,031
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 2,825,844
<INTEREST-LOAN> 76,399
<INTEREST-INVEST> 28,804
<INTEREST-OTHER> 1,705
<INTEREST-TOTAL> 106,908
<INTEREST-DEPOSIT> 27,905
<INTEREST-EXPENSE> 37,214
<INTEREST-INCOME-NET> 69,694
<LOAN-LOSSES> 2,400
<SECURITIES-GAINS> 390
<EXPENSE-OTHER> 52,568
<INCOME-PRETAX> 43,559
<INCOME-PRE-EXTRAORDINARY> 43,559
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,700
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
<YIELD-ACTUAL> 0
<LOANS-NON> 10,372
<LOANS-PAST> 1,985
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 54,431
<ALLOWANCE-OPEN> 24,530
<CHARGE-OFFS> 5,075
<RECOVERIES> 3,903
<ALLOWANCE-CLOSE> 25,758
<ALLOWANCE-DOMESTIC> 11,564
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 14,194
</TABLE>
