UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
Commission File Number 0-12885
NBC Capital Corporation
(Exact name of registrant as specified in its charter)
Delaware 64-0694755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
NBC Plaza, Starkville, Mississippi 39759
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(601) 323-1341
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $1 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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to the
Form 10-K. ( X )
Aggregate market value of the voting stock held by nonaffiliates
was approximately:
$48,900,000
___________________________
(based on most recent sale)
Indicate the number of shares outstanding of each of the issuers'
classes of common stock as of the latest practicable date:
Common Stock, $1 par value - 1,200,000 shares outstanding as
of December 31, 1994.
Documents incorporated by reference -
Annual report to shareholders for 1994 - Parts II and IV
Proxy statement dated March 20, 1995 - Part III
PART I
ITEM 1 - BUSINESS
NBC Capital Corporation
NBC Capital Corporation (the Company) is a multi-bank
holding company which was organized under the laws of the State
of Mississippi in 1984 and was reorganized in 1987 under the laws
of the State of Delaware. On July 2, 1984, the Company acquired
all of the outstanding common stock of the National Bank of
Commerce of Mississippi (NBC), a national banking corporation.
On January 1, 1994, the Company acquired 99.2% of the outstanding
common stock of First State Bank of Tuscaloosa, Alabama, a state
chartered bank. For the year ended December 31, 1994, these
financial institutions and their subsidiaries accounted for 100%
of the Company's consolidated income and approximately 99% of its
consolidated expenses.
National Bank of Commerce of Mississippi
NBC was originally formed through a series of mergers which
began in 1972 and concluded on October 1, 1974. In March, 1991,
NBC acquired the assets and assumed the liabilities of the Bank
of Philadelphia, a $75 million institution. NBC operates under
the original Federal Charter granted to the First National Bank
of Monroe County in 1887.
NBC is the largest commercial bank domiciled in the eastern
area of the state known as the Golden Triangle. A total of 25
banking facilities and an operations center serve the communities
of Aberdeen, Amory, Artesia, Brooksville, Columbus, Hamilton,
Maben, Philadelphia and Starkville. This area extends into five
Mississippi counties with a radius of approximately 65 miles from
the home office in Starkville.
During 1994 and 1993, NBC engaged in the general banking
business and activities closely related to banking as authorized
by the banking laws and regulations of the United States. There
were no significant changes in the business activities of NBC
during these years.
NBC provides a complete line of wholesale and retail
services including mortgage loans and trust. The customer base
is well diversified and consists of business, industry,
agriculture, government, education and individual accounts.
Profitability and growth have been consistent throughout the
history of the bank.
NBC utilizes a written Asset/Liability Management Policy
which calls for maintaining the 24 month GAP within a tolerance
of + 5% - 10% of total assets. The financial plan calls for a
return on assets of 1.3% and a minimum return on equity of 10%.
NBC is operated in a conservative fashion while meeting the
needs of the community. There has been no disposition of any
material amounts of assets nor has there been a material change
in the mode of conducting business. No major changes in
operation are provided for the near future.
First State Bank of Tuscaloosa
First State Bank of Tuscaloosa (FSB) was organized in 1968
and is a state bank and operates under the requirements of the
laws of the State of Alabama.
FSB is located in Tuscaloosa, Alabama, a city with a
population of approximately 75,000 people. FSB was acquired by
the Company on January 1, 1994. Management of the Company is of
the opinion that this acquisition will provide for new
opportunities for growth and expansion. Tuscaloosa, Alabama, is
a city that expects future economic development. As an example,
Mercedes recently announced plans for the building of an
automotive plant in the Tuscaloosa area. Management of the
Company believes the acquisition of FSB places the Company in a
position to participate in the economic development.
FSB competes with many other financial institutions in the
Tuscaloosa area, most of which are larger. FSB had total assets
of $67 million at December 31, 1994, and reported net income of
$544 thousand for the year ended December 31, 1994. The bank's
history has been one of moderate growth and average earnings when
compared to its peer group.
FSB is engaged in the general banking business and
activities closely related to banking as authorized by the
banking laws and regulations of its banking regulators, the State
of Alabama and the Federal Deposit Insurance Corporation (FDIC).
FSB provides a complete line of wholesale and retail
services, including mortgage loans. The customer base consists
principally of business, industry and industrial accounts.
The Company intends to operate FSB in a conservative fashion
while meeting the needs of the community.
FSB has adopted the asset/liability management policy of
NBC. The financial plan calls for a return on assets of 1%,
beginning with the year 1995 and a minimum return on equity (net
of goodwill) of 10%.
NBC Service Corporation
NBC Service Corporation (Service) is a wholly-owned
subsidiary of NBC and was formed to provide additional financial
services that otherwise might not be provided by NBC. For the
years 1994 and 1993, its primary activity was limited to its
investment in Commerce National Insurance Company (CNI) of which
Service owns 79%. Commerce National Insurance Company is a
credit life insurance company whose primary source of income is
from premiums on credit life insurance on loans issued by NBC.
Philadelphia Finance Corporation
Philadelphia Finance Corporation (Finance), a wholly-owned
subsidiary of NBC is a finance company that provides lending and
financing services to consumers. It engages in consumer
financing, and its loans are of a smaller amount and a higher
interest rate than that of NBC. Finance has one office located
in Philadelphia, Mississippi.
Competition
NBC and its subsidiaries currently serve five counties and
nine municipalities in North Mississippi. Over this same area,
the bank competes directly with approximately 15 competing
banking institutions, credit unions, finance companies, brokerage
firms, mortgage companies and insurance companies. The
institutions range in asset size of approximately $100 million to
in excess of $3 billion. NBC is the largest bank domiciled in
its immediate service area. Asset size of competitive banks
depends on whether the reference is made to the branch banks or
to their parent banks. Several other competitors are branches or
divisions of nationwide companies with more resources than the
Company and its subsidiaries.
FSB is located in Tuscaloosa, Alabama, and has a main office
and two branch locations. The bank competes with approximately
eight other financial institutions, most of which are larger.
The other institutions range in size from approximately $20
million to $10 billion. Asset size of the competitive banks
depends on whether reference is made to the branch banks or to
their parent bank. FSB also competes with numerous credit
unions, finance companies, etc., many of which are branches of
nationwide companies. The acquisition of FSB by the Company
provides FSB with access to resources, products, and services
previously unavailable, thereby improving its competitive
position.
Supervision and Regulation
The Company is a bank holding company within the meaning of
the Bank Holding Company Act of 1956 (the Act) and is registered
as such with the Board of Governors of the Federal Reserve System
(the Federal Reserve Board). As a bank holding company, the
Company is required to file with the Federal Reserve Board an
annual report and such other information as may be required. The
Federal Reserve Board may also make examinations of the Company.
In addition, the Federal Reserve Board has the authority to
regulate provisions of certain bank holding company debt.
The Act requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before acquiring
substantially all the assets of or direct or indirect ownership
or control of more than 5% of the voting shares of any bank which
is not already majority-owned. The Act also prohibits a bank
holding company, with certain exceptions, from itself engaging in
or acquiring direct or indirect control if more than 5% of the
voting shares of any company engaged in non-banking activities.
One of the principal exceptions to these prohibitions is for
engaging in or acquiring shares of a company engaged in
activities found by the Federal Reserve Board by order or
regulation to be so closely related to banking or managing banks
as to be a proper incident thereto. The Act prohibits the
acquisition by a bank holding company of more than 5% of the
outstanding voting shares of a bank located outside the state in
which the operations of its banking subsidiaries are principally
conducted, unless such an acquisition is specifically authorized
by statute of the state in which the bank to be acquired is
located. The Act and regulations of the Federal Reserve Board
also prohibit a bank holding company and its subsidiaries from
engaging in certain tie-in arrangements in connection with any
extension of credit or provision of any property or services.
Dividends paid by the Company are substantially provided
from dividends from the banking subsidiaries. Generally, the
approval of the bank's regulator is required if the total of all
dividends declared by a bank in any calendar year exceeds the
total of its net profits for that year combined with its retained
net profits of the preceding two years. At December 31, 1994,
the banking subsidiaries had available for payment of dividends
to the Company, without prior approval of their regulator,
approximately $11.4 million.
The Federal Reserve Board, FDIC and Office of the
Comptroller of the Currency (OCC) have established risk-based
capital guidelines for holding companies, such as the Company,
and banks. The Company's strategy related to risk-based capital
is to maintain capital levels which will be sufficient to qualify
the Company's banking subsidiaries for the "well capitalized"
category under the guidelines set forth by the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA).
Maintaining capital ratios at the "well capitalized" level avoids
certain restrictions which, for example, could impact the
Company's banking subsidiaries' FDIC assessment, trust services
and asset/liability management. At December 31, 1994, the tier I
and total capital ratios, respectively, for the Bank were well
above the minimum 6% and 10% levels required to be categorized as
a "well capitalized" insured depository institution.
The FDIC, OCC and Federal Reserve Board have historically
had common capital adequacy guidelines involving minimum (a)
leverage capital and (b) risk-based capital requirements.
The first requirement establishes a minimum ratio of capital
as a percentage of total assets. The FDIC, OCC, and Federal
Reserve Board require institutions to maintain a minimum leverage
ratio of Tier 1 capital (as defined) to total average assets
based on the institution's rating under the regulatory CAMEL
rating system. Institutions with CAMEL ratings of one that are
not anticipating or experiencing significant growth and have
well-diversified risk are required to maintain a minimum leverage
ratio of 3 percent. An additional 100 to 200 basis points are
required for all but these most highly rated institutions.
The second requirement also establishes a minimum ratio of
capital as a percentage of total assets, but gives weight to the
relative risk of each asset. The FDIC, OCC, and Federal Reserve
Bank require institutions to maintain a minimum ratio of Tier 1
capital to risk-weighted assets of 4.0 percent. Banks must also
maintain a minimum ratio of total capital to risk-weighted assets
of 8.0 percent. At December 31, 1994, the Company's Tier 1 and
total capital ratios were 14.6% and 16.2%, respectively.
The operations of NBC and FSB are subject to federal and
state statutes applicable to banks chartered under the banking
laws of the United States and to members of the Federal Reserve
System, and the FDIC. Bank operations are also subject to the
regulations of the OCC, the Board of Governors of the Federal
Reserve System and the FDIC.
The primary supervisory authority of NBC is the OCC, and of
FSB is the FDIC, who regularly examine such areas as reserves,
loans, investments, management practices and other aspects of
bank operations. These examinations are for the protection of
the institution's depositors and not for its shareholders. In
addition to these regular examinations, the institution must
furnish to its regulator quarterly reports containing a full and
accurate statement of its affairs.
Management of the Company is not aware of any new or
proposed regulation or regulatory recommendations that, if
implemented, would have a significant impact upon the financial
condition of the Company and its subsidiaries.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on any
extensions of credit to the bank holding company or any of its
subsidiaries, on investments in stock or other securities thereof
and on the taking of such stock or securities as collateral for
loans to any borrower.
The bank subsidiaries are members of the FDIC and their
deposits are insured as provided by law.
Finance and CNI are subject to regulation by the applicable
state agencies. These agencies set reserve requirements,
reporting standards, and establish regulations, all of which
affect business operations.
Governmental Monetary Policies
As a bank chartered under the laws of the United States, NBC
is a member of the Federal Reserve System. The earnings of NBC
are affected by the fiscal and monetary policies of the Federal
Reserve System which regulates the national money supply in order
to mitigate recessionary and inflationary pressures. The
techniques used by the Federal Reserve System include setting the
reserve requirements of depository institutions and establishing
the discount rate on member bank borrowings. The Federal Reserve
System also conducts open market operations in United States
Government securities.
The policies of the Federal Reserve System and other
regulatory agencies have a direct effect on the amount of bank
loans and deposits, and the interest rates charged and paid
thereon. While the impact these policies may have upon the
future business and earnings of the financial institutions cannot
be accurately predicted, such policies can materially affect the
earnings of commercial banks.
Sources and Availability of Funds
The materials essential to the business of the Company and
its subsidiaries consist primarily of funds derived from deposits
and other borrowing in the financial markets. The availability
of funds is primarily dependent upon the economic policies of the
government, the economy in general and the institution's ability
to compete in the market place.
Seasonability
Neither the Company nor any of its subsidiaries are
dependent upon any seasons.
Dependence Upon A Single Customer
The Company nor any of its subsidiaries are dependent upon a
single customer or very few customers.
Executive Officers
The executive officers of the Company and its bank
subsidiaries, National Bank of Commerce of Mississippi and First
State Bank of Tuscaloosa, as of December 31, 1994, are listed
below. The title indicates a position held in the Company and
the bank subsidiaries.
Name and Title Age Five Year Experience
________________________ ___ __________________________________
L. F. Mallory, Jr. 52 Chairman of the Board and
Chairman, President President, NBC Capital
and Chief Executive Corporation and NBC of
Officer Mississippi
Bobby Harper 53 Chairman of Executive Committe,
Chairman of the NBC Capital Corporation and NBC
Executive Committee of Mississippi, and President,
NBC of Mississippi, Columbus
Banking Center
Hunter M. Gholson 62 Secretary of NBC Capital
Secretary Corporation and NBC of
Mississippi
Mark A. Abernathy 38 Prior to joining NBC in 1994, he
Executive Vice was Consumer Regional Executive
President and Chief Officer of Nations Bank,
Operating Officer, Nashville, Tennessee
NBC Capital
Corporation and NBC
of Mississippi
Mrs. Martha W. Taylor 53 Treasurer and Assistant Secretary,
Treasurer and NBC Capital Corporation, and
Assistant Secretary, Executive Vice President and
NBC Capital Chief Financial Officer, NBC of
Corporation and Mississippi
Executive Vice
President and Chief
Financial officer,
NBC of Mississippi
Carl M. Holloway 48 Vice President, NBC Capital
Vice President, NBC Corporation and Executive
Capital Corporation, Vice President, NBC of
and Executive Vice Mississippi
President, NBC of
Mississippi
Joel C. Clements 47 Vice President, NBC Capital
Vice President, NBC Corporation and Executive
Capital Corporation Vice President, NBC of
and Executive Vice Mississippi
President, NBC of
Mississippi
Clifton B. Fowler 46 Vice President, NBC Capital
Vice President, NBC Corporation and President,
Capital Corporation NBC of Mississippi, Starkville
and President, NBC Banking Center
of Mississippi, Has held current position since
Starkville Banking November, 1990. Prior to
Center joining NBC was with Trustmark
National Bank.
Thomas J. Prince, Jr. 53 Vice President, NBC Capital
Vice President, NBC Corporation and President, NBC
Capital Corporation of Mississippi, Aberdeen
and President, NBC of Banking Center
Mississippi, Aberdeen
Banking Center
Kenneth A. Madison 62 Vice President, NBC Capital
Vice President, NBC Corporation, and President, NBC
Capital Corporation of Mississippi, Philadelphia
and President, NBC of Banking Center.
Mississippi, Has held current position since
Philadelphia Banking March, 1991. Prior to joining
Center NBC was President and C/E/O of
Bank of Philadelphia,
Philadelphia, Mississippi
Thomas P. Hester 61 President and other positions of
President, First First State Bank of Tuscaloosa
State Bank of
Tuscaloosa
Rex D. Poole 57 Vice President, NBC Capital
Vice President, NBC Corporation and Senior Vice
Capital Corporation President and Trust Officer,
and Senior Vice NBC of Mississippi
President and Trust
Officer, NBC of
Mississippi
Donald J. Bugea, Jr. 41 Senior Vice President and
Senior Vice President Investment Officer, NBC of
and Investment Mississippi
Officer, NBC of Has held current position since
Mississippi January, 1992. Prior to joining
NBC was Senior Vice President
and Cashier, NBC of Baton Rouge,
Louisiana
Terrence Y. Dewitt 33 Executive Vice President and other
Executive Vice positions of First State Bank of
President, First Tuscaloosa
State Bank of
Tuscaloosa
Personnel
At December 31, 1994, NBC and FSB had 317 full-time
employees. The Company, Service and CNI had no employees at
December 31, 1994. The finance company had three employees.
ITEM 2 - PROPERTIES
The Company, Service and CNI owned no properties at December
31, 1994.
The following listing describes the locations and general
character of the Bank-owned properties:
Approximate
Office Space
Type Location (Square Feet)
________________________ ______________________ ______________
NBC of Mississippi:
Main Office Starkville, Mississippi 35,000
University Branch Starkville, Mississippi 1,485
Motor Branch Starkville, Mississippi 2,000
82 Branch Starkville, Mississippi 2,077
Operations Center Starkville, Mississippi 16,500
Starkville Crossing Starkville, Mississippi 2,000
Main Office Columbus, Mississippi 36,000
North Columbus Branch Columbus, Mississippi 1,440
Fairlane Branch Columbus, Mississippi 2,400
Gardner Blvd. Branch Columbus, Mississippi 1,156
Bluecutt Road Branch Columbus, Mississippi 3,200
Main Office Aberdeen, Mississippi 11,026
Maple Street Branch Aberdeen, Mississippi 998
Highway 45 North Branch Aberdeen, Mississippi 1,205
Main Office Amory, Mississippi 8,550
Medical and Industrial
Center Branch Amory, Mississippi 950
Main Office Artesia, Mississippi 1,500
Main Office Brooksville, Mississippi 3,000
Main Office Hamilton, Mississippi 1,800
Main Office Maben, Mississippi 4,000
Main Office Philadelphia, Mississippi 6,000
Northside Branch Philadelphia, Mississippi 300
Courtside Branch Philadelphia, Mississippi 400
Southside Branch Philadelphia, Mississippi 450
Operations Center Philadelphia, Mississippi 6,600
First State Bank of
Tuscaloosa:
Main Office Tuscaloosa, Alabama 6,400
Northport Branch Tuscaloosa, Alabama 3,018
University Branch Tuscaloosa, Alabama 2,480
Finance operates out of NBC's building located in
Philadelphia, Mississippi.
In the opinion of management, all properties are in good
condition and are adequate to meet the needs of the communities
they serve.
ITEM 3 - LEGAL PROCEEDINGS
There are no pending proceedings of a material nature to
which the Company, NBC, FSB, Service, Finance, or CNI is a party.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) The information titled "Market Information" and
contained on Page 30 of the Company's annual report to
shareholders for the year 1994 is incorporated herein by
reference in response to this item and included in this report as
Exhibit 13.a.
(b) At December 31, 1994, the Company had approximately
1,760 security holders.
(c) Dividends on common stock were declared semiannually in
June and December of the years reported and totaled as follows:
December 31,
1994 1993
___________ ___________
Dividends declared, $1.75 per share $ - $ 2,099,552
Dividends declared, $2.05 per share 2,460,000 -
___________ ___________
$ 2,460,000 $ 2,099,552
=========== ===========
ITEM 6 - SELECTED FINANCIAL DATA
The information titled "Selected Financial Data" and
contained on Page 30 of the Company's annual report to the
shareholders for the year 1994 is incorporated herein by
reference in response to this item and included in this report as
Exhibit 13.b.
SUPPLEMENTAL STATISTICAL INFORMATION
I. Distribution of Assets, Liabilities, and Stockholders'
Equity; Interest Rates and Interest Differential
A. Average balance sheets (consolidated):
(In Thousands)
1994 1993 1992
Assets ________ ________ ________
Cash and due from banks $ 19,515 $ 14,557 $ 15,277
Securities:
Taxable 120,870 127,822 147,273
Non-taxable 57,649 49,743 38,849
________ ________ ________
Total securities 178,519 177,565 186,122
Federal funds sold and
securities purchased under
agreement to resell 4,882 4,909 4,067
Loans, net of unearned
interest 306,702 240,509 219,975
Less reserve for loan losses 5,488 3,805 2,838
________ ________ ________
Net loans 301,214 236,704 217,137
Other assets 23,582 15,711 12,778
________ ________ ________
Total Assets $527,712 $449,446 $435,381
======== ======== ========
Liabilities and
Stockholders' Equity
Deposits:
Noninterest-bearing $ 65,010 $ 49,718 $ 42,417
Interest-bearing 386,000 332,731 340,318
________ ________ ________
Total deposits 451,010 382,449 382,735
Federal funds purchased and
securities sold under
agreement to repurchase 5,557 516 1,212
Borrowed funds 13,367 11,922 1,700
Other liabilities 5,111 6,223 5,373
________ ________ ________
Total liabilities 475,045 401,110 391,020
Stockholders' equity 52,667 48,336 44,361
________ ________ ________
Total Liabilities and
Stockholders' Equity $527,712 $449,446 $435,381
======== ======== ========
B. Analysis of Net Interest Earnings
The table below shows, for the periods indicated, an
analysis of net interest earnings, including the average
amount of interest-earning assets and interest-bearing
liabilities outstanding during the period, the interest
earned or paid on such amounts, the average yields/rates
paid and the net yield on interest-earning assets:
($ In Thousands)
Average Balance
1994 1993 1992
________ ________ ________
EARNING ASSETS
Net loans $301,214 $236,704 $217,137
Federal funds sold and securities
purchased under agreement to resell 4,882 4,909 4,067
Securities:
Taxable 120,870 127,822 147,273
Nontaxable 57,649 49,743 38,849
________ ________ ________
Totals 484,615 419,178 407,326
________ ________ ________
INTEREST-BEARING LIABILITIES
Interest-bearing deposits 386,000 332,731 340,318
Borrowed funds and federal funds
purchased and securities sold
under agreement to repurchase 18,924 12,438 2,912
________ ________ ________
Totals 404,924 345,169 343,230
________ ________ ________
Net Amounts $ 79,691 $ 74,009 $ 64,096
======== ======== ========
($ In Thousands) Yields Earned
Interest for the Year and
Ended December 31, Rates Paid (%)
_______________________ ______________
1994 1993 1992 1994 1993 1992
_______ _______ _______ ____ ____ ____
EARNING ASSETS
Net loans $25,217 $19,097 $18,817 8.37 8.07 8.67
Federal funds sold and
securities purchased
under agreement to
resell 258 144 132 5.28 2.93 3.25
Securities:
Taxable 7,231 8,095 10,661 5.98 6.33 7.24
Nontaxable 3,107 2,942 2,685 5.39 5.91 6.91
_______ _______ _______
Totals 35,813 30,278 32,295 7.39 7.22 7.93
_______ _______ _______
INTEREST-BEARING
LIABILITIES
Interest-bearing deposits 12,747 10,866 13,791 3.30 3.27 4.05
Borrowed funds and federal
funds purchased and
securities sold under
agreement to repurchase 798 674 92 4.22 5.42 3.16
_______ _______ _______
Totals 13,545 11,540 13,883 3.35 3.34 4.04
_______ _______ _______
Net Amounts $22,268 $18,738 $18,412
======= ======= =======
Net yield on earning assets 4.59 4.47 4.52
(1) Interest and yields on tax-exempt obligations are not on a
fully taxable equivalent basis.
(2) For the purpose of these computations, nonaccruing loans are
included in the average loan balances outstanding.
C. Increase (Decrease) in Interest Income and Interest
Expense
The following table analyzes the changes in both the rate
and volume components of net interest revenue:
(In Thousands) (In Thousands)
1994 Over 1993 1993 Over 1992
____________________ __________________________
Change Due To: Change Due To:
____________________ __________________________
Total Rate Volume Total Rate Volume
______ ______ ______ ________ ________ ________
EARNING ASSETS
Net loans $6,120 $ 734 $5,386 $ 280 $ (924) $ 1,204
Federal funds
sold and
securities
purchased under
agreement to
resell 114 115 (1) 12 (11) 23
Securities:
Taxable (864) (435) (429) (2,566) (1,252) (1,314)
Nontaxable 165 (205) 370 257 (270) 527
______ _______ ______ ________ ________ ________
Totals $5,535 $ 209 $5,326 $(2,017) $(2,457) $ 440
====== ======= ====== ======== ======== ========
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits $1,881 $ 102 $1,779 $(2,925) $(2,621) $ (304)
Interest on
borrowed funds
and federal
funds purchased
and securities
sold under
agreement to
repurchase 124 (91) 215 582 104 478
______ _______ ______ ________ ________ _______
Totals $2,005 $ 11 $1,994 $(2,343) $(2,517) $ 174
====== ======= ====== ======== ======== =======
NOTE: (1) Change in volume is the change in volume times the
previous year's rate.
(2) Change in rate is the change in rate times the previous
year's balance.
(3) The change in interest due to both rate and volume has
been allocated to volume and rate changes in proportion
to the relationship of the absolute dollar amounts of
change to each.
II. INVESTMENT PORTFOLIO
A. The following tables presents the book values of securities as
of the dates indicated:
(In Thousands)
December 31,
____________________________
1994 1993 1992
________ ________ ________
U. S. Treasury $ 23,907 $ 11,359 $ 17,540
U. S. Government agencies and
mortgage-backed securities 76,779 93,157 121,460
States and political
subdivisions 70,917 56,333 40,571
Other 4,543 4,196 5,019
________ ________ ________
Total book value $176,146 $165,045 $184,590
======== ======== ========
B. The following table sets forth the maturities of investment and
mortgage-backed securities (book values) at December 31, 1994,
and the weighted average yield of such securities:
($ In Thousands)
Weighted Average Yield
_________________________________________
0-1 Yield 1-5 Yield 5-10 Yield
Year (%) Years (%) Years (%)
_______ _____ _______ _____ _______ _____
Securities:
U. S. Treasury $11,133 5.4% $12,774 5.6% $ - -
U. S. Government
agencies 3,803 6.2% 8,798 6.0% 1,601 9.5%
States and
political
subdivisions 8,078 4.7% 27,447 5.1% 12,214 6.5%
Other 327 8.7% 262 7.6 496 6.5%
_______ _______ _______
Total $23,341 $49,281 $14,311
======= ======= =======
10+ Yield
Years (%)
_______ _____
States and political
subdivisions $23,179 6.3%
Other 3,458 5.6%
_______
Total $26,637
=======
Book Yield
Value (%)
_______ _____
Mortgage-backed
securities $62,576 6.6%
=======
NOTE: Interest and yields on tax-exempt obligations are not on
a taxable equivalent basis.
Average yield on floating rate securities was determined
using the current yield.
C. Investment securities in excess of 10% of stockholders'
equity.
At December 31, 1994, there were no securities from any
issues in excess of 10% of stockholders' equity.
III. LOAN PORTFOLIO
A. Type of loans
The amount of loans outstanding by type at the indicated dates
are shown in the following table:
(In Thousands)
December 31,
____________________________________________
Type 1994 1993 1992 1991 1990
_________________ ________ ________ ________ ________ ________
Commercial,
financial and
agriculture $ 51,541 $ 35,177 $ 33,814 $ 37,970 $ 37,257
Real estate -
construction 12,372 2,777 3,491 3,439 3,721
Real estate -
mortgage 178,391 140,162 123,535 113,019 87,867
Installment
loans to
individuals 79,961 73,756 66,211 61,340 53,568
Other 5,297 5,654 5,522 9,308 4,517
________ ________ ________ ________ ________
Total loans 327,562 257,526 232,573 225,076 186,930
Unearned interest (4,031) (5,597) (5,600) (6,404) (5,453)
________ ________ ________ ________ ________
$323,531 $251,929 $226,973 $218,672 $181,477
======== ======== ======== ======== ========
B. Maturities and sensitivities of loans to changes in
interest rates:
(In Thousands)
December 31, 1994
_________________________________
Maturing
________________________
Within 1-5 Over
Type 1 Year Years 5 Years Total
____________________________ ________ _______ _______ ________
Commercial, financial and
agricultural $ 40,150 $ 9,535 $ 1,856 $ 51,541
Real estate - construction 11,667 705 - 12,372
Other loans, excluding real
estate - mortgage and
installment loans 5,297 - - 5,297
________ _______ _______ ________
$ 57,114 $10,240 $ 1,856 $ 69,210
======== ======= ======= ========
Loans with: (1)
Predetermined interest
rates $ 33,585 $89,743 $20,802 $144,130
Floating interest rates 181,784 248 3 182,035
________ _______ _______ ________
$215,369 $89,991 $20,805 $326,165
======== ======= ======= ========
(1) Excludes nonaccrual loans of $1,397.
C. Nonperforming loans
1. The following tables states the aggregate amount of loans
which were nonperforming in nature:
(In Thousands )
December 31,
__________________________________
Type 1994 1993 1992 1991 1990
_______________________ ______ ______ ______ ______ ______
Loans accounted for on
a nonaccrual basis $1,397 $1,451 $1,442 $ 987 $ 162
====== ====== ====== ====== ======
Accruing loans past due
90 days or more $ 601 $ 484 $ 794 $1,469 $ 481
====== ====== ====== ====== ======
Renegotiated "troubled"
debt $ 306 $ 853 $ 632 $ 100 $ 39
====== ====== ====== ====== ======
2. There were no loan concentrations in excess of 10%
of total loans at December 31, 1994.
3. There were no outstanding foreign loans at December
31, 1994.
4. Loans classified for regulatory purposes or for
internal credit review purposes that have not been
disclosed in the above table do not represent or
result from trends or uncertainties that management
expects will materially impact the financial
condition of the Company or its subsidiary banks, or
their future operating results, liquidity, or
capital resources.
5. If all nonaccrual loans had been current throughout
their terms, interest income would have not been
significantly different for the years ended 1994,
1993, and 1992.
6. Management stringently monitors loans that are
classified as nonperforming. Nonperforming loans
include nonaccrual loans, loans past due 90 days or
more, and loans renegotiated or restructured because
of a debtor's financial difficulties. Loans are
generally placed on nonaccrual status if any of the
following events occur: 1) the classification of a
loan as nonaccrual internally or regulatory
examiners, 2) delinquency on principal for 90 days
or more unless management is in the process of
collection, 3) a balance remains after repossession
of collateral, 4) notification of bankruptcy, or 5)
management's judgment that nonaccrual is appropriate.
7. At December 31, 1994, management was not aware of
any potential problem loans not previously disclosed.
D. Other interest-bearing assets
There were no other interest-bearing non-performing
assets at December 31, 1994.
VI. Summary of Loan Loss Experience
A. An analysis of the loan loss experience for the periods
indicated is as follows:
($ In Thousands)
December 31,
_______________________________________
1994 1993 1992 1991 1990
______ ______ ______ _______ ______
Beginning balance $4,450 $3,204 $2,796 $ 2,127 $1,924
______ ______ ______ _______ ______
Charge-offs:
Domestic:
Commercial,
financial and
agricultural (78) (151) (743) (1,030) (110)
Real estate (239) (80) (413) (454) (335)
Installment
loans and
other (392) (427) (822) (1,751) (323)
______ ______ ______ _______ _______
Total charge-offs (709) (658) (1,978) (3,235) (768)
______ ______ ______ _______ _______
Recoveries:
Domestic:
Commercial,
financial and
agricultural 48 122 79 66 66
Real estate 25 31 97 14 101
Installment
loans and
other 177 116 181 123 129
______ ______ ______ _______ _______
Total recoveries 250 269 357 203 296
______ ______ ______ _______ _______
Net charge-offs (459) (389) (1,621) (3,032) (472)
______ ______ ______ _______ _______
Reserve of
acquired bank 494 - - 2,090 -
Provision charged
to operations 1,234 1,635 2,029 1,611 675
______ ______ ______ _______ _______
Ending balance $5,719 $4,450 $3,204 $ 2,796 $ 2,127
====== ====== ====== ======= =======
Ratio of net
charge-offs to
average loans
outstanding .15 .13 .75 1.45 .29
Ratio of reserve
for loan losses
to loans out-
standing at year
end 1.77 1.77 1.41 1.28 1.17
B. Determination of Reserve for Loan Losses
The information contained in Note A-4 to the financial
statements of the annual report to shareholders is
incorporated herein by reference and included in this
report as Exhibit 13.d.
C. Loans and Risk Descriptions
Real Estate Loans
NBC and FSB originate loans secured by commercial real
estate, one-to-four family residential properties, and
multi-family dwelling units (5 or more units). At
December 31, 1994, these loans totaled $173 million or
approximately 53% of the loan portfolio.
NBC and FSB originate commercial real estate loans up
to 80% of the appraised value. Currently, it is the
philosophy to originate these loans only to selected
known borrowers and on properties in the market area.
Of primary concern in commercial real estate lending is
the borrower's credit worthiness and the feasibility and
cash flow potential of the project. To monitor cash
flows of borrowers, annual financial statements are
obtained from the borrower and loan guarantors, if any.
Although many banks have had significant losses in
commercial real estate lending, NBC and FSB have
sustained few losses, and those losses were not
significant relative to the size of the entire
commercial real estate loan portfolio at the time.
NBC and FSB originate loans secured by first and junior
liens on one-to-four family residences in their lending
areas. Typically, such loans are single family homes
that serve as the primary residence of the borrower.
Generally, these loans are originated in amounts up to
80% of the appraised value or selling price of the property.
In the past, very few losses from these types of loans
have been experienced.
Loans for multi-family (5 or more) residential
properties are generally secured by apartment buildings.
Loans secured by income properties are generally larger
and involve greater risk than residential loans because
payments are often dependent on the successful operation
or management of the properties. As a result, these
types of loans may be more sensitive to adverse
conditions in the real estate market or the economy.
Cash flow and financial statements are obtained from the
borrowers and any guarantors. Also, rent rolls are
often obtained.
Consumer and Other Loans
NBC and FSB offer consumer loans in the form of home
improvement loans, mobile home loans, automobile loans
and unsecured personal loans. These loans totalled $80
million or 24% of total loans at December 31, 1994.
Consumer loans are originated in order to provide a wide
range of financial services to customers and because the
terms and normally higher interest rates on such loans
help maintain a profitable spread between the average
loan yield and the cost of funds.
In connection with consumer loan applications, the
borrower's income statement and credit bureau report
are reviewed. In addition, the relationship of the loan
to the value of the collateral is considered. All
automobile loan applications are reviewed, as well as
the value of the unit which secured the loan.
NBC and FSB intend to continue to emphasize the
origination of consumer loans. Management believes that
its loan loss experience in connection with its consumer
loan portfolio is favorable in comparison to industry
averages.
NBC and FSB make commercial business loans on both a
secured and unsecured basis with terms which generally
do not exceed five years. Nonreal estate commercial
loans primarily consist of short-term loans for working
capital purposes, inventories, seasonal loans, lines of
credit and equipment loans. A personal guaranty of
payment by the principals of any borrowing entity is
often required and the financial statements and income
tax returns of the entity and its guarantors are
reviewed. At December 31, 1994, NBC and FSB's
commercial business loans represented approximately 15%
of its total loan portfolio.
D. For the year 1995, losses for all loan categories, as a
percentage of average loans, are expected to approximate
that of 1994.
V. Deposits
($ In Thousands)
1994 1993 1992
_____________ _____________ _____________
Amount Rate Amount Rate Amount Rate
________ ____ ________ ____ ________ ____
A. Average deposits
Domestic:
Noninterest-
bearing
deposits $ 65,010 - $ 49,718 - $ 42,417 -
Interest-bearing
demand deposits 141,988 2.3% 108,167 2.5% 100,282 3.1%
Savings deposits 30,717 2.5% 27,862 2.8% 22,523 3.5%
Time deposits 213,295 4.0% 196,702 3.7% 217,513 5.0%
Foreign N/A N/A N/A
________ ________ ________
Total $451,010 $382,449 $382,735
======== ======== ========
B. Other categories
None
C. Foreign deposits
Not material
D. Time certificate of deposit of $100,000 or more and
maturities at December 31, 1994:
(In
Thousands)
3 Months 6 Months
3 Months Through Through Over
Total Or Less 6 Months 12 Months 12 Months
_______ ________ __________ _________ _________
Time
certificates
of deposit
of $100,000
or more $56,990 $ 31,868 $ 11,654 $ 4,421 $ 9,047
======= ======== ========== ========= =========
E. Foreign office time deposits of $100,000 or more
Not applicable
VI. Return on Equity and Assets
The following financial ratios are presented for analytical
purposes:
December 31,
________________
1994 1993 1992
____ ____ ____
Return on assets (net income divided by total
average assets) 1.4 1.4 1.3
Return on equity (net income divided by average
equity) 13.6 13.1 13.0
Dividend payout ratio (dividends per share
divided by net income per share) 34.4 33.1 36.7
Equity to asset ratio (average equity divided
by average total assets) 10.0 10.8 10.2
VII. Short-term borrowings
Treasury
Tax
Federal And
Funds Loan Note
Purchased Payable
___________ __________
Balance at December 31, 1994 $17,800,000 $1,473,792
Weighted average interest rate at
December 31, 1994 5.60% 4.90%
Maximum amount outstanding at any
month end for the year 1994 17,800,000 2,165,426
Average amount outstanding during
the year 1994 915,890 1,250,690
Weighted average interest rate
during the year 5.02% 3.60%
For the years prior to 1994, the Company had no short-term
borrowings in excess of 30% of stockholders' equity.
VIII. Capital adequacy data
Total capital of the Company as a percentage of total
adjusted assets was as follows:
($ In Thousands)
December 31,
__________________
1994 1993
________ ________
Total assets $545,405 $452,357
Allowance for loan losses 5,719 4,450
________ ________
Total adjusted assets $551,124 $456,807
======== ========
Total stockholders' equity
(excluding unrealized loss) $ 54,438 $ 49,760
Allowance for loan losses 5,719 4,450
Other components of capital - -
________ ________
Total primary capital 60,157 54,210
Total secondary capital - -
________ ________
Total capital $ 60,157 $ 54,210
======== ========
Ratio of total capital to total
adjusted assets 10.9 11.9
In 1989, the Federal Reserve Board (FRB) issued new capital
guidelines which redefine capital as Tier 1 and Tier 2
(total) capital. The capital requirements are based upon
the credit risk associated with an institution's assets,
both recorded and unrecorded. Tier 1 and total capital as
a percentage of "risk weighted assets" at December 31, 1994
and 1993, are as follows:
December 31,
______________
1994 1993
______ ______
Tier 1 capital percentage 14.8% 17.5%
Total capital percentage 16.1% 18.7%
The Company's capital ratios exceed the minimum capital
requirements at December 31, 1994, and management expects
this to continue.
IX. Interest Sensitivity Analysis
The following table reflects the year-end position of the
Company's interest-earning assets and interest-bearing
liabilities which can either reprice or mature within the
designated time period. The interest rate sensitivity gaps
can vary from day-to-day and are not necessarily a
reflection of the future. In addition, certain assets and
liabilities within the same designated time period may
nonetheless reprice at different times and at different
levels.
($ In Thousands)
December 31, 1994
_______________________________________
Interest Sensitive Within (Cumulative)
_______________________________________
Total of
Interest-
Within Within Within Earning
3 Months 12 Months 5 Years Assets
________ _________ ________ ________
Interest-earning assets:
Loans $183,033 $ 233,894 $283,231 $327,562
Investment and mortgage-
backed securities 13,426 36,355 138,163 176,146
Federal funds sold 2,500 2,500 2,500 2,500
________ _________ ________ ________
Totals $198,959 $ 272,929 $423,894 $506,208
======== ========= ======== ========
Interest-bearing
liabilities:
Deposits $211,094 $ 291,724 $331,469 $388,301
======== ========= ======== ========
Sensitivity gap:
Dollar amount $(12,135) $ (18,795) $ 92,425
Percent of total
interest-earning
assets (2.4%) (3.7%) 18.3%
The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities
are "interest rate sensitive" and by monitoring an
institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a
specific time period if it will mature or reprice within
that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-
earning assets anticipated, based upon certain assumptions,
to mature or reprice within that time period. A gap is
considered positive when the amount of interest rate
sensitive assets maturing within a specific time frame
exceeds the amount of interest rate sensitive liabilities
maturing within that same time frame. During a period of
falling interest rates, a negative gap would tend to result
in an increase in net interest income while a positive gap
would tend to adversely affect net interest income. In a
rising interest rate environment, an institution with a
positive gap would generally be expected, absent the
effects of other factors, to experience a greater increase
in the yield of its assets relative to the costs of its
liabilities and thus an increase in the institution's net
interest income would result whereas an institution with a
negative gap could experience the opposite results.
At December 31, 1994, total interest-earning assets
maturing or repricing within one year was less than
interest-bearing liabilities maturing or repricing within
the same time period by $19 million, representing a
negative cumulative one year gap of 3.7% of earning assets.
Management of the Company believes this is the proper
position in the current interest rate environment.
Banking regulators have recently issued advisories
concerning the management of interest rate risk (IRR). The
regulators consider that effective interest rate management
is an essential component of safe and sound banking
practices. To monitor its IRR, the Company's risk
management practices include (a) Risk Management, (b) Risk
Monitoring and (c) Risk Control.
Risk Management consists of a system in which a measurement
is taken of the amount of earnings at risk when interest
rates change. The Company does this by first preparing a
"base strategy" which is the position of the bank and its
forecasted earnings based upon the current interest rate
environment or, most likely, interest rate environment.
The IRR is then measured based upon hypothetical changes in
interest rates by measuring the impact such a change will
have on the "base strategy."
Risk monitoring consists of evaluating the "base strategy"
and the assumptions used in its development based upon the
current interest rate environment. This evaluation is
performed quarterly by management or more often in a
rapidly changing interest rate situation.
Risk control is utilized based upon the setting of
guidelines as to the tolerance for interest rate exposure.
These guidelines are set by senior management and approved
by a committee.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information contained on Pages 28 and 29 of the Company's
1994 annual report to shareholders is incorporated herein by
reference in response to this item and included in this report as
Exhibit 13.c.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company,
together with the report thereon of T. E. Lott & Company,
independent accountants, are set forth on Pages 9 - 27 of the
Company's 1994 annual report to shareholders which is
incorporated herein by reference and included in this report as
Exhibit 13.d.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Reference is made to the material under the captions,
"Election of Directors", "Executive Compensation and Other
Information," of the Company's proxy statement which is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
Reference is made to the caption, "Executive Compensation and
Other Information" Pages 9 - 13 of the proxy statement which is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to Page 3 and Pages 5 - 8 of the Company's
proxy statement which is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Page 15, "Other Information" of the
Company's proxy statement which is incorporated herein by
reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The consolidated financial statements for the years ended
December 31, 1994 and 1993, together with the report of
T. E. Lott & Company, independent accountants, dated
January 26, 1994, appearing on Pages 9 - 27 of the 1994
annual report to shareholders, are attached as Exhibit
13.d. to this Form 10K Annual Report.
2. Financial Statement Schedules
Schedules not included have been omitted because they are
not applicable or the required information is shown in
the financial statements or notes thereto.
3. Exhibits:
1. - 2. None
3. Articles of Incorporation and By-Laws:
(Reference is made to Exhibits 3.1 and 3.2 of
the Company's Registration Statement on Form S-
14 filed on April 5, 1984, with the Securities
and Exchange Commission.)
4. - 9. None
10.1 Acquisition agreement between National Bank of
Commerce of Mississippi and Bank of
Philadelphia filed as an exhibit to Form 8K in
October, 1990.
Purchase agreement between NBC Capital
Corporation and Charter Holding Company, Inc.
filed as an exhibit to Form 8K in August, 1993.
11. - 12. None
13. Annual report to shareholders - deemed filed
herewith only to the extent it is incorporated
elsewhere herein.
13.a. Market for Company's common stock - Page 30 of
the annual report to stockholders.
13.b. Selected Financial Data - Page 30 of the annual
report to stockholders.
13.c. Management's discussion and analysis of
financial condition and results of operations -
Pages 28 - 29 of the annual report to
stockholders.
13.d. Consolidated financial statements - Pages 9 -
27 of the annual report to stockholders.
14. - 21. None
22. Subsidiaries of Company
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1994.
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.
NBC CAPITAL CORPORATION
(Registrant)
S/L. F. Mallory, Jr.
By __________________________
L. F. Mallory, Jr.
Chairman, President and
Chief Executive Officer
S/Martha W. Taylor
By __________________________
Martha W. Taylor
Treasurer and Assistant
Secretary
(Chief Financial and
Accounting 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 capacity and on
the dates indicated.
S/Henry Weiss S/Andrew C. Puckett
____________________________ ___________________________
(Director) (Director)
S/Thomas J. Prince S/J. Nutie Dowdle
____________________________ ___________________________
(Director) (Director)
S/Bobby Harper S/Sammy J. Smith
____________________________ ___________________________
(Director) (Director)
S/Clifton B. Fowler S/Edith D. Millsaps
____________________________ ___________________________
(Director) (Director)
S/Carl M. Holloway S/Robert S. Jones
____________________________ ___________________________
(Director) (Director)
S/Mark A. Abernathy S/L. F. Mallory, Jr.
__________________________ ___________________________
(Director) (Director)
S/Allen Puckett, III
____________________________
(Director)
Date: March 28, 1995
EXHIBIT 13.a.
MARKET INFORMATION
Common Stock
The Company's common stock is traded primarily in Monroe,
Lowndes, Clay, Oktibbeha, Neshoba, and Noxubee Counties in
Mississippi and Tuscaloosa County in Alabama. Market prices are
the estimates of management based on transactions of which they
had knowledge. Quarterly high and low sale prices are not
available; however, the approximate ranges in which the stock
traded were between $46.00 and $61.00 during 1993 and $61.00 and
$73.00 during 1994. Dividends were declared semi-annually in
June and December of each of the years reported.
EXHIBIT 13.b.
SELECTED FINANCIAL DATA
Years Ended December 31,
________________________________________________________________
1994 1993 1992 1991 1990
____________ ____________ ____________ ____________ ____________
INCOME DATA
Interest and
fees on
loans $ 25,216,740 $ 19,097,106 $ 18,816,616 $ 22,074,827 $17,914,007
Interest and
dividends on
investment
securities 10,338,962 11,036,898 13,346,320 14,142,167 13,061,637
Other interest
income 257,671 143,759 132,378 452,276 649,731
____________ ____________ ____________ ____________ ____________
Total
interest
income 35,813,373 30,277,763 32,295,314 36,669,270 31,625,375
Interest
expense 13,545,475 11,540,090 13,882,619 20,244,741 18,839,777
____________ ____________ ____________ ____________ ____________
Net interest
income 22,267,898 18,737,673 18,412,695 16,424,529 12,785,598
Provision for
loan losses 1,234,024 1,634,960 2,028,689 1,610,863 75,000
____________ ____________ ____________ ____________ ____________
Net interest
income
after
provision
for loan
losses 21,033,874 17,102,713 16,384,006 14,813,666 12,110,598
____________ ____________ ____________ ____________ ____________
Service
charges on
deposit
accounts 3,329,928 2,606,042 2,616,082 2,616,933 2,136,523
Other income 2,394,711 2,756,746 2,648,656 1,939,655 1,864,127
____________ ____________ ____________ ____________ ____________
Total
noninterest
income 5,724,639 5,362,788 5,264,738 4,556,588 4,000,650
____________ ____________ ____________ ____________ ____________
Salaries and
employee
benefits 9,608,105 8,404,911 7,755,953 7,023,512 5,740,767
Occupancy and
equipment
expense 2,237,060 1,836,524 1,829,379 1,739,552 1,651,212
Other
expenses 5,428,709 4,469,271 4,702,472 4,104,497 3,099,241
____________ ____________ ____________ ____________ ____________
Total non-
interest
expense 17,273,874 14,710,706 14,287,804 12,867,561 10,491,220
____________ ____________ ____________ ____________ ____________
Income before
income taxes
and
cumulative
effect of
a change in
accounting
principle 9,484,639 7,754,795 7,360,940 6,502,693 5,620,028
Income taxes 2,346,397 1,588,508 1,610,869 1,331,232 1,107,480
Cumulative
effect
(benefit)
of change
in
accounting
principle - (174,160) - - -
____________ ____________ ____________ ____________ ____________
Net Income $ 7,138,242 $ 6,340,447 $ 5,750,071 $ 5,171,461 $ 4,512,548
============ ============ ============ ============ ============
PER SHARE
DATA (1)
Net income $5.95 $5.28 $4.79 $4.31 $3.76
Dividends 2.05 1.75 1.76 1.31 1.15
FINANCIAL
DATA
Shares
outstanding 1,200,000 1,200,000 1,082,425 1,082,425 1,082,425
Total assets $545,404,537 $452,356,731 $444,406,921 $437,860,541 $363,365,188
Net loans $317,812,315 $247,479,066 $223,768,751 $215,875,112 $179,349,780
Total
deposits $455,761,308 $383,484,153 $379,949,418 $387,299,507 $316,811,146
Total
stockholders'
equity $ 51,654,561 $ 49,759,895 $ 45,516,867 $ 41,877,525 $ 38,275,580
(1) Per share data has been adjusted retroactively for a 1993 stock
dividend.
EXHIBIT 13.c.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is intended to further explain
financial information outlined in the accompanying five year
listing of selected financial data. Information contained in
this data summary depicts selected totals from the company's
balance sheet and operating results for the past five years.
Your attention is also directed to management's letter to
shareholders at the beginning of this Annual Report. This letter
further explains significant changes that occurred in the
company's operation during the past year.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total assets of the company have increased 50.1% over the
past five years. Significant asset growth can be noted in 1991
(20.5%) and 1994 (20.6%) reflecting the company's acquisition of
the Bank of Philadelphia in 1991 and First State Bank in
Tuscaloosa, Alabama in 1994. Excluding these acquisitions, asset
growth has been somewhat modest as generally low levels of
interest rates have tended to reduce balance sheet gains. With
the exception of 1992, the company has experienced solid loan
growth with 1991 and 1994 totals again being influenced by the
aforementioned acquisitions. The more modest loan increases in
1992 reflect the reduced level of economic activity that existed
in the company's markets throughout most of that year. Excluding
1991 loan charge-offs from the former Bank of Philadelphia
portfolio, loan losses have been modest. Net charge-offs for
1993 and 1994 were an excellent .16% and .14% respectively of net
loans outstanding.
Deposits have increased 43.9% over the past five years, an
average of 8.8% per year. Large contributions to the company's
deposit gains are again reflected from the Bank of Philadelphia
and First State Bank acquisitions in 1991 and 1994. Excluding
deposits generated through these acquisitions, deposit growth has
been extremely modest during the years noted in the summary as
generally declining levels of interest rates and non-deposit
investment alternatives tended to attract deposits away from
commercial banks. Management also adopted a strategy during this
period of bidding less aggressively for volatile public fund
deposits which caused a decline, particularly in 1992, in this
deposit source. Over each of the years noted in the summary,
management has been committed to attracting deposits at an
interest cost that would assure the maintenance of proper
interest margins for the company. Management also felt it could
improve profits by allowing loans to grow at a faster pace than
deposits.
Shareholders' equity, as it relates to assets, represented
an obvious strength of the company in each of the past five
years. Shareholders' equity has grown 35.0% over this period.
The modest 3.8% gain in 1994 takes into account unrealized losses
on "Available for Sale Securities" of $2,783,576 as required to
be reported under FASB 115. The 9.5% equity to asset
relationship at the end of 1994 continues to rank the company
quite high relative to its national and state peers.
Net income has maintained consistent growth over the past
five years. Earnings have increased 58.2% over this period.
Earnings increases were 11.2% during 1992, 10.3% in 1993, and
12.6% in 1994. Return on average assets (ROA), a primary measure
of earnings strength, has exceeded 1.2% in each of the years
noted. ROA was 1.3% in 1992 and 1.4% in 1993 and 1994. Earnings
per share have also grown in each of the past five years,
increasing from $3.76 in 1990 to $5.95 in 1994. Regular cash
dividends have been increased in each of the years noted in the
summary. A special $.25 per share cash dividend was paid in 1992
in recognition of the company's strong earnings and equity
positions. Also, a 10.86% stock dividend was declared in
September 1993. Per share data in the accompanying five year
summary has been adjusted to reflect retroactively the 10.86%
1993 stock dividend.
Net interest income (NII) has also registered increases in
each of the five years in the summary. NII is the primary source
of earnings for the company. It represents income generated by
earning assets less the interest expense of funding those assets.
Over the past five years, NII has increased 74.2%, with an 18.8%
gain recorded in 1994. Changes in NII can be broken down into
two components, the change in average earning assets (volume
component) and the change in the net interest margin (rate
component). During 1994, average earning assets increased $79.2
million or 19.0%. Net interest margin for the year increased to
4.61% from 4.50% in 1993.
As can be determined from these components of change, 1994's
improvement in NII resulted primarily from an increase in average
earning assets assisted by an improving margin. Net interest
margin represents the difference between yields on earning assets
and rates paid on interest bearing liabilities. Although rates
paid on deposits increased during 1994, yields on earning assets
increased by a slightly greater amount, thus increasing net
interest margin. The growth of the company's loan portfolio
during 1994 represented the key earning asset increase which
allowed for an increase in net interest income for the year.
The company has also maintained a consistent and disciplined
asset/liability management policy during each of the years noted
in the summary. This policy focuses on interest rate risk and
rate sensitivity. The primary objective of rate sensitivity
management is to maintain net interest income growth while
reducing exposure to adverse fluctuations in rates. The company
utilizes an Asset/Liability Management Committee which evaluates
the analyses of the company's pricing, maturities, growth, and
mix strategies in an effort to make informed decisions that will
increase income and limit interest rate risk. The committee also
uses simulation modeling as a guide for its decision-making.
Due to the potential volatility of interest rates, NBC's
goal is to stabilize the net interest margin by maintaining a
neutral rate sensitive position. When market rates fluctuate, an
asset's interest rate tends to change to a somewhat greater
extent than does a liability's. Consequently, we believe a
neutral position is achieved when rate sensitive liabilities
exceed rate sensitive assets by no more than 5%.
At December 31, 1994 the company's balance sheet reflected
$18.8 million more in rate sensitive liabilities than assets that
were scheduled to reprice within one year. This would be
considered essentially a neutral rate sensitive position.
Although management feels that rates are likely to move slightly
higher during the first half of 1995 before leveling out and
declining during the latter part of the year, this neutral
position would appear to place the company in a low interest rate
risk posture.
The company's Provision for Loan Losses is utilized to
replenish its Reserve for Loan and Lease Losses on its balance
sheet. With strong earnings performances in each of the years
contained in the summary, management has attempted to increase
the reserve in proportion to loans outstanding. The reserve in
1994 totalled $5,719,110 or 1.8% of net loans. This reserve
amount represents an increase of 168.8% over 1990's reserve which
equated to 1.2% of net loans. Management considers the present
reserve amount entirely sufficient to protect against potential
future loan losses.
Non-interest income and non-interest expense totals each
reflect the impact of the Bank of Philadelphia and First State
Bank of Tuscaloosa acquisitions. Non-interest income includes
various service charges, fees and commissions collected by the
company; non-interest expense represents ordinary overhead
expenses to include salaries, bonuses, and benefits. The 1994
non-interest expense total includes $641,786 in expenses
attributable to the amortization of goodwill associated with the
First State Bank acquisition and intentional bond losses taken in
December 1994 to free up a portion of the portfolio to reinvest
at higher available yields. Finally, it is important to note
that the company maintains a formal salary administration
program which considers extensive comparative salary data and
other indexes supplied by a leading outside consulting firm.
This data is utilized to assure that salaries are in line and
competitive to comparable jobs in the marketplace. Incentive
bonuses are expensed in each of the years noted and are paid to
company employees based on the attainment of predetermined profit
goals.
Growth in the company's income tax expense generally
parallels income gains. High quality, tax free municipal bonds
are added to the portfolio as deemed prudent in an effort to
minimize tax liabilities. However, the ability to significantly
reduce income tax expenses through this investment choice is
limited by the Alternative Minimum Tax Provision and the
company's normal liquidity and balance sheet structure
requirements. The company received a $174,160 tax benefit for
1993 resulting from a change in accounting principles regarding
deferred income taxes. The company's effective tax rate was
20.5% in 1993 and 24.7% in 1994.
LIQUIDITY, ASSET/LIABILITY MANAGEMENT
Liquidity may be defined as the ability of the company to
meet cash flow requirements created by decreases in deposits
and/or other sources of funds or increases in loan demand. The
company has experienced no problem with liquidity over any of the
years noted and anticipates that all liquidity requirements will
be met comfortably in the foreseeable future. The company's
traditional sources of funds from deposit increases, maturing
loans and investments, and earnings have allowed it to
consistently generate sufficient funds for liquidity needs. The
company has utilized the Federal Home Loan Bank as a source of
funding for fixed rate, term loan commitments. At the end of
1994 the company had outstanding to the Federal Home Loan Bank
$10.9 million which is scheduled to mature over the next 3-5
years. The company expects normal loan and other cash flows to
allow it to retire these funding lines with no adverse effect on
liquidity.
As mentioned previously, the company maintains a strict
asset/liability policy. The adherence to such a policy has an
obvious material effect on the structure of the company's balance
sheet, and, to a degree, on its liquidity positions.
CAPITAL
Retained earnings have served as the company's exclusive
source of capital growth over the five years noted in the
financial summary. Shareholders' equity, as stated previously,
has grown consistently over this period and relates most
favorably to the company's assets.
Current regulatory requirements call for a basic leverage
ratio of 5.0% for a bank to be considered as "well capitalized."
At the end of 1994, NBC maintained a 9.8% leverage ratio which
obviously allowed it to significantly exceed the ratio required
for a "well capitalized" institution.
As an additional means of comparison, it is noted that
regulatory authorities have become increasingly interested in
evaluating a financial institution's capital against its assets
which have been risk weighted (high risk assets would require a
higher capital allotment, lower risk assets a lower capital
allotment). In this context, a "well capitalized" bank is
required to have a Tier 1 risk based capital ratio (excludes
reserve for loan losses) of 6.0% and a total risk based capital
ratio (includes reserve for loan losses) of 10.0%. At the end
of 1994, the company had a Tier 1 ratio of 14.8% and a total risk
based ratio of 16.1%, once again placing the company well above
the level required for a "well capitalized" institution.
The company's capital position obviously exceeds regulatory
requirements, even for "well capitalized" institutions. As noted
previously, equity capital for the company has increased 35.0%
since 1990 to a level of $51,654,561. Management considers this
level of capital to be entirely sufficient to support the needs
of the company.
EXHIBIT 13.d.
CONSOLIDATED FINANCIAL STATEMENTS
NBC CAPITAL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
DECEMBER 31, 1994 AND 1993
REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
NBC Capital Corporation
We have audited the accompanying consolidated balance sheets of
NBC Capital Corporation and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1994. 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits 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 our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
present fairly, in all material respects, the consolidated
financial position of NBC Capital Corporation and subsidiaries as
of December 31, 1994 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note B to the consolidated financial statements,
the Corporation and its subsidiaries changed their method of
accounting for securities as of January 1, 1994, and their method
of accounting for income taxes as of January 1, 1993.
T. E. Lott & Company
Columbus, Mississippi
January 26, 1995
NBC CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS 1994 1993
____________ ____________
Cash and due from banks $ 21,678,520 $ 15,982,750
Interest-bearing deposits with banks 375,488 426,320
Federal funds sold 2,500,000 5,000,000
Securities (Note D) 176,146,121 165,045,011
Loans, net of reserve for loan losses
of $5,719,110 in 1994 and $4,450,355
in 1993 (Note E) 317,812,315 247,479,066
Interest receivable 4,490,010 3,385,504
Premises and equipment (Note F) 12,404,886 10,337,700
Other real estate 667,487 313,544
Intangible assets (Note C) 2,992,364 -
Other assets 6,337,346 4,386,836
____________ ____________
$545,404,537 $452,356,731
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 67,460,056 $ 54,086,572
Interest-bearing deposits, $100,000
or more 57,058,634 49,065,812
Other interest-bearing deposits 331,242,618 280,331,769
____________ ____________
Total deposit 455,761,308 383,484,153
Interest payable 1,671,377 1,327,410
Borrowed funds (Note G) 30,159,563 14,631,632
Other liabilities 6,157,728 3,153,641
____________ ____________
Total liabilities 493,749,976 402,596,836
____________ ____________
Commitments and contingent
liabilities (Note M)
Stockholders' equity (Notes J
and L):
Common stock - $1 par value,
authorized 3,000,000 shares,
issued and outstanding
1,200,000 shares 1,200,000 1,200,000
Surplus 33,002,133 33,002,133
Undivided profits 20,236,004 15,557,762
Net unrealized loss on available-
for-sale securities, net of tax
of $1,432,459 (2,783,576) -
____________ ____________
51,654,561 49,759,895
____________ ____________
$545,404,537 $452,356,731
============ ============
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
___________ ___________ ___________
INTEREST INCOME
Interest and fees on
loans $25,216,740 $19,097,106 $18,816,616
Interest and dividends
on securities:
Taxable interest and
dividends 7,231,495 8,098,995 10,664,869
Tax-exempt interest 3,107,467 2,937,903 2,681,451
Other 257,671 143,759 132,378
___________ ___________ ___________
35,813,373 30,277,763 32,295,314
___________ ___________ ___________
INTEREST EXPENSE
Interest on time deposits
of $100,000 or more 2,366,527 2,035,334 2,850,665
Interest on other
deposits 10,380,965 8,830,175 10,939,595
Interest on borrowed
funds 797,983 674,581 92,359
___________ ___________ ___________
13,545,475 11,540,090 13,882,619
___________ ___________ ___________
Net interest income 22,267,898 18,737,673 18,412,695
Provision for loan losses
(Note E) 1,234,024 1,634,960 2,028,689
Net interest income
after provision for
loan losses 21,033,874 17,102,713 16,384,006
___________ ___________ ___________
OTHER INCOME
Service charges on
deposit accounts 3,329,928 2,606,042 2,616,082
Other service charges and
fees 1,597,220 1,602,936 1,267,276
Trust Department income 751,079 703,184 555,324
Securities (losses)
gains, net (155,887) 21,511 387,365
Other 202,299 429,115 438,691
___________ ___________ ___________
5,724,639 5,362,788 5,264,738
OTHER EXPENSE
Salaries 7,851,474 6,860,580 6,349,496
Employee benefits
(Note I) 1,756,631 1,544,331 1,406,457
Net occupancy expense 1,322,977 1,104,930 1,117,262
Furniture and equipment
expense 914,083 731,594 712,117
Deposit insurance
premiums 991,642 857,275 871,438
Other 4,437,067 3,611,996 3,831,034
___________ ___________ ___________
17,273,874 14,710,706 14,287,804
___________ ___________ ___________
Income before income
taxes and the
cumulative effect of
a change in accounting
principle 9,484,639 7,754,795 7,360,940
Income taxes (Note H) 2,346,397 1,588,508 1,610,869
___________ ___________ ___________
Income before the
cumulative effect
of a change in
accounting principle 7,138,242 6,166,287 5,750,071
Cumulative effect
(benefit) of a change
in accounting for
income taxes (Note B) - (174,160) -
___________ ___________ ___________
Net income $ 7,138,242 $ 6,340,447 $ 5,750,071
=========== =========== ===========
Per common share
amounts:
Net income before
cumulative effect
of accounting
change $ 5.95 $ 5.13 $ 4.79
Cumulative effect
of accounting
change - .15 -
___________ ___________ ___________
Net income $ 5.95 $ 5.28 $ 4.79
=========== =========== ===========
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Net
Unrealized
Gain(Loss)
On
Available-
Common Undivided For-Sale
Stock Surplus Profits Securities Total
__________ ___________ ___________ ___________ ___________
Balance,
January 1,
1992 $1,082,425 $33,000,000 $ 7,795,100 $ - $41,877,525
Net income
for 1992 - - 5,750,071 - 5,750,071
Cash
dividends
declared,
$1.76 per
share - - (2,110,729) - (2,110,729)
__________ ___________ ___________ ___________ ___________
Balance,
December 31,
1992 1,082,425 33,000,000 11,434,442 - 45,516,867
Net income
for 1993 - - 6,340,447 - 6,340,447
Stock
dividend -
117,575
shares of
common stock 117,575 - (117,575) - -
Cash
dividends
declared,
$1.75 per
share - - (2,099,552) - (2,099,552)
Sale of
fractional
shares - 2,133 - - 2,133
Balance,
December 31,
1993 1,200,000 33,002,133 15,557,762 - 49,759,895
Cumulative
effect of
change in
accounting
for
securities
(Note B) - - - 2,066,307 2,066,307
Net income
for 1994 - - 7,138,242 - 7,138,242
Cash
dividends
declared,
$2.05 per
share - - (2,460,000) - (2,460,000)
Net change in
unrealized
gain (loss)
on available-
for-sale
securities,
net of tax - - - (4,849,883) (4,849,883)
__________ ___________ ___________ ___________ ___________
Balance,
December 31,
1994 $1,200,000 $33,002,133 $20,236,004 $(2,783,576) $51,654,561
========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
_____________ _____________ _____________
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 7,138,242 $ 6,340,447 $ 5,750,071
Adjustments to reconcile net
income to net cash:
Cumulative effect of
accounting change - (174,160) -
Depreciation and
amortization 1,276,023 859,972 825,023
Deferred income taxes
(credits) (286,884) (567,772) (286,737)
Provision for loan losses 1,234,024 1,634,960 2,028,689
FHLB stock dividend (76,900) (54,400) -
Losses (gains) on sale of
securities 155,887 (21,511) (387,365)
Deferred credits (47,919) (19,524) (22,973)
(Increase) decrease in
interest receivable (622,506) 78,888 1,027,901
(Increase) decrease in
other assets (216,860) (1,199,642) 1,163,348
Increase (decrease) in
interest payable 192,967 (17,492) (1,142,478)
Increase in other
liabilities 26,387 116,517 950,152
_____________ _____________ ______________
Net cash provided
by operating activities 8,772,461 6,976,283 9,905,631
_____________ _____________ ______________
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash paid in excess of cash
and cash equivalents of
acquired bank (2,183,033) - -
Purchases of available-for-
sale securities (60,225,100) - -
Proceeds from sales of
available-for-sale
securities 21,990,387 - -
Proceeds from maturities
and calls of available-for-
sale securities 57,044,849 - -
Purchases of securities to
be held-to-maturity (21,904,571) - -
Proceeds from maturities and
calls of securities - 26,571,575 55,242,318
Proceeds from sale of
securities - 40,648,869 41,918,047
Purchases of securities - (47,599,881) (91,089,013)
Increase in loans (30,830,314) (25,325,751) (9,899,355)
Additions to premises and
equipment (801,146) (1,668,821) (1,354,053)
_____________ _____________ ______________
Net cash used in investing
activities (36,908,928) (7,374,009) (5,182,056)
_____________ _____________ ______________
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in
deposits 17,149,474 3,534,735 (7,350,089)
Sale of fractional shares - 2,133 -
Dividends paid on common
stock (396,000) (2,099,552) (3,377,166)
Net increase in borrowed
funds 14,527,931 131,632 12,002,627
_____________ _____________ ______________
Net cash provided by
financing activities 31,281,405 1,568,948 1,275,372
_____________ _____________ ______________
Net increase in cash and
cash equivalents 3,144,938 1,171,222 5,998,947
Cash and cash equivalents
at beginning of year 21,409,070 20,237,848 14,238,901
_____________ _____________ ______________
Cash and cash equivalents
at end of year $ 24,554,008 $ 21,409,070 $ 20,237,848
============= ============= =============
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES
NBC Capital Corporation (the "Corporation"), and its subsidiaries,
follow generally accepted accounting principles, including, where
applicable, general practices within the banking industry.
1. Basis of Presentation
The Corporation's consolidated financial statements include the accounts
of the Corporation and the following:
National Bank of Commerce of Mississippi (NBC), a wholly-owned
subsidiary of the Corporation,
NBC Service Corporation, a wholly-owned subsidiary of NBC,
Philadelphia Finance Corporation, a wholly-owned subsidiary of NBC,
and Commerce National Insurance Company, a 79%-owned subsidiary of
NBC Service Corporation.
For the year 1994, the consolidated statements also include the accounts
of the Corporation's 99.2% owned subsidiary, First State Bank of
Tuscaloosa (First State Bank).
Significant intercompany accounts and transactions have been eliminated.
The financial institution subsidiaries (NBC and First State Bank)
account for approximately 99% of the assets included in the 1994
consolidated financial statements.
2. Securities
Investments in securities are classified into three categories and are
accounted for as follows:
Available-for-Sale Securities
Securities classified as available-for-sale are those securities that
are intended to be held for an indefinite period of time, but not
necessarily to maturity. Any decision to sell a security classified
as available-for-sale would be based on various factors, including
movements in interest rates, liquidity needs, security risk assessments,
changes in the mix of assets and liabilities and other similar factors.
These securities are carried at their estimated fair value, and the net
unrealized gain or loss is reported in stockholders' equity, net of tax,
until realized.
Gains and losses on the sale of available-for-sale securities are
determined using the adjusted cost of the specific security sold.
Premiums and discounts are recognized in interest income using the
interest method.
Securities to be Held-to-Maturity
Securities classified as held-to-maturity are those securities for which
there is a positive intent and ability to hold to maturity. These
securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method.
Trading Account Securities
Trading account securities are those securities which are held for the
purpose of selling them at a profit. There were no trading account
securities on hand at December 31, 1994 and 1993.
For years prior to 1994, securities were carried at cost, adjusted for
amortization of premiums and accretion of discounts, computed
principally by the interest method. The adjusted cost of the specific
security sold was used to compute gains or losses.
3. Loans
Loans are carried at the principal amount outstanding, net of unearned
interest. Interest income on installment loans is recognized using a
method which approximates the interest method. Interest income on all
other loans is recognized based on the principal balance outstanding and
the stated rate of the loan.
Loans are generally placed on a nonaccrual status when principal or
interest is past due ninety days, or when payment in full is not
anticipated. When a loan is placed on nonaccrual status, interest
accrued but not received is generally reversed against interest income.
If collectibility is in doubt, cash receipts on nonaccrual loans are
used to reduce principal rather than recorded as interest income.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield on the related
loan.
4. Reserve for Loan Losses
For financial reporting purposes, the provision for loan losses charged
to operations is based upon management's estimations of the amount
necessary to maintain the reserve at an adequate level, considering past
loan loss experience, current economic conditions, credit reviews of the
loan portfolio, changes in the size and character of the loan portfolio
and other factors warranting consideration. Loans are charged against
the reserve for loan losses when management believes that the
collectibility of the principal is unlikely. The reserve is maintained
at a level believed adequate by management to absorb potential loan
losses.
5. Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are determined using
the straight-line method at rates calculated to depreciate or amortize
the cost of assets over their estimated useful lives.
Maintenance and repairs of property and equipment are charged to
operations, and major improvements are capitalized. Upon retirement,
sale, or other disposition of property and equipment, the cost and
accumulated depreciation are eliminated from the accounts, and any gains
or losses are included in operations.
6. Other Real Estate
Other real estate consists of properties acquired through foreclosure
and is recorded at the lower of cost or current appraisal less estimated
costs to sell. Any write-down from the cost to fair value required at
the time of foreclosure is charged to the reserve for loan losses.
Subsequent gains or losses on other real estate are reported in other
operating income or expenses.
7. Intangible Assets
Intangible assets consisting principally of goodwill associated with the
acquisition of First State Bank are being amortized to expense using the
straight-line method over a fifteen year period. Amortization expense
for 1994 was $182,625.
8. Income Taxes
Income taxes are provided for the tax effects of the transactions
reported in the consolidated financial statements and consist of taxes
currently payable, plus deferred taxes related primarily to differences
between the basis of securities, reserve for loan losses, premises and
equipment, other real estate and prepaid or accrued employee benefits
for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax consequences of those differences,
which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
The Corporation and its subsidiaries (except for Commerce National
Insurance Company) file consolidated income tax returns. The
subsidiaries provide for income taxes on a separate return basis and
remit to the Corporation amounts determined to be payable.
9. Trust Assets
Assets of NBC's Trust Department, other than cash on deposit, are not
included in the accompanying balance sheets, since such items are not
assets of NBC.
10. Employee Benefits
NBC maintains a noncontributory defined benefit pension plan covering
substantially all full-time employees. The plan calls for benefits to
be paid to eligible employees at retirement based primarily upon years
of service and compensation. Contributions to the plan reflect benefits
attributed to employees' services to date, as well as services expected
to be earned in the future. The annual pension cost charged to expense
is actuarially determined in accordance with the provisions of Statement
of Financial Accounting No. 87, "Employers' Accounting for Pensions."
NBC and First State Bank provide a deferred compensation arrangement
(401(k) plan) whereby employees contribute a percentage of their
compensation. For employee contributions of five percent or less, NBC
and First State Bank contribute twenty-five percent of the employee's
contribution to the plan.
Employees of NBC and First State Bank participate in a nonleveraged
Employee Stock Option Plan (ESOP) through which common stock of the
Corporation is purchased at its market price for the benefit of
employees. Contributions are made at the discretion of the Board
of Directors and are expensed in the applicable year. The ESOP is
accounted for in accordance with Statement of Position 93-6, "Employer's
Accounting for Employee Stock Ownership Plans."
NBC makes available a deferred income plan to certain employees and
directors. Costs are accrued and charged to expense in amounts
sufficient to equal the present value of benefits due at the
participant's full eligibility date.
The Corporation provides an employee stock benefit plan whereby 1,500
shares of the Corporation's stock have been assigned for the benefit of
certain key employees. Under the terms of the plan, retirement or
similar payments will be equal to the fair market value of the stock
plus all cash dividends paid since the adoption of the agreement.
Compensation expense was recorded at the establishment date based on the
market value of the stock. The difference between any increase or
decrease in the value of the stock is recorded annually as an
adjustment to salaries.
11. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold.
Generally, federal funds are sold for a one-day period.
12. Per Share Data
The computation of per share data is based on 1,200,000 shares
outstanding during each year adjusted retroactively for stock dividends.
13. Off-Balance Sheet Financial Instruments
In the ordinary course of business, the financial institution
subsidiaries enter into off-balance sheet financial instruments
consisting of commitments to extend credit, credit card lines,
commercial and similar letters of credit and commitments to purchase
securities. Such financial instruments are recorded in the financial
statements when they are exercised.
14. Accounting Pronouncements
In May, 1993, the Financial Accounting Standards Board (FASB) issued
Statement No. 114, "Accounting by Creditors for Impairment of a Loan,"
which specifies how allowances for losses related to certain loans
should be determined. The Statement's implementation is required for
years beginning after December 15, 1994. Management does not believe
the adoption of the Statement will materially affect the consolidated
financial position.
In October, 1994, FASB issued Statement No. 119, "Disclosure About
Derivative Financial Instruments and Fair Value of Financial
Instruments." The Statement requires disclosures about derivative
financial instruments which it defines as a futures, forward,
swap, or option contract, or other financial instruments with similar
characteristics. The Statement was effective for years ended after
December 15, 1994. It is the policy of management not to invest
in these types of financial instruments.
15. Reclassification
Certain prior period amounts have been reclassified to conform with the
1994 presentation.
NOTE B - ACCOUNTING CHANGE
FASB Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," was adopted by the Corporation and its subsidiaries
for the year beginning January 1, 1994. The Statement requires that
investments in securities be classified into three categories: held-to-
maturity, trading, and available-for-sale. Net unrealized gains and
losses, net of tax, on available-for-sale securities are reported as a
separate component of stockholders' equity, whereas unrealized gains and
losses on trading securities are included in income. As a result
of adopting the Statement, available-for-sale securities are reported at
their estimated fair value at December 31, 1994, and the resulting
unrealized gain or loss, net of tax, is included in stockholders'
equity. The cumulative effect on stockholders' equity at January 1,
1994, of the accounting change was an increase of $2,066,307, net of the
related deferred income taxes.
Effective January 1, 1993, the Corporation and its subsidiaries adopted
the provisions of FASB Statement No. 109, "Accounting for Income Taxes."
The cumulative effect of adopting Statement No. 109 was to increase 1993
income by $174,160 or $.15 per share. As permitted by the Statement,
prior years' financial statements have not been restated. Statement No.
109 requires the liability method be used to calculate deferred income
taxes. Under this method, deferred tax assets and liabilities are
recognized on temporary differences between the financial statement and
tax basis of assets and liabilities using applicable enacted tax rates.
NOTE C - ACQUISITION
On January 1, 1994, the Corporation acquired for cash all of the
outstanding common stock of Charter Holding Company, Inc. (Charter), the
parent holding company of First State Bank. Charter had no business
activity other than its 80% ownership of First State Bank's common stock
and was liquidated after the acquisition. The Corporation subsequently
obtained an additional 19.2% of First State Bank's common stock for cash
bringing its total ownership to 99.2%. The total acquisition cost was
approximately $9.1 million. The excess of the acquisition cost over the
fair value of the net assets acquired (goodwill) is included in
intangible assets in the consolidated financial statements.
The acquisition has been accounted for as a purchase, and the results of
operations of First State Bank since January 1, 1994, are included in
the consolidated financial statements. Unaudited pro forma consolidated
results of operations for the years ended December 31, 1993 and 1992, as
though First State Bank had been acquired on January 1, 1992, follow:
1993 1992
___________ ___________
Interest and other income $40,456,364 $42,510,576
Net income 6,742,340 6,059,550
Income per common share $5.62 $5.05
NOTE D - SECURITIES
Securities at December 31, 1994, consisted of available-for-sale
securities with a carrying amount of $145,794,809, and securities to be
held-to-maturity with a carrying amount of $30,351,312. The amortized
cost, gross unrealized gains, gross unrealized losses and estimated
fair value of these securities at December 31, 1994, are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
____________ __________ __________ ___________
Available-for-sale
securities:
U. S. Treasury securities $ 24,431,287 $ 13,990 $ 538,455 $ 23,906,822
Obligations of other
U. S. Government
agencies 14,715,526 14,718 527,409 14,202,835
Obligations of states and
municipal subdivisions 41,061,022 390,234 885,422 40,565,834
Mortgage-backed
securities 65,228,534 141,446 2,793,864 62,576,116
Equity securities 3,147,000 - - 3,147,000
Other securities 1,473,540 1,577 78,915 1,396,202
____________ __________ __________ ____________
$150,056,909 $ 561,965 $4,824,065 $145,794,809
============ ========== ========== ============
Held-to-maturity
securities:
Obligations of states
and municipal
subdivisions $ 30,351,312 $ 326,253 $ 218,049 $ 30,459,516
============ ========== ========== ============
The scheduled maturities of securities available-for-sale and securities to
be held-to-maturity at December 31, 1994, are as follows:
Available-for-Sale Held-to-Maturity
_________________________ _______________________
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
____________ ____________ ___________ ___________
Due in one year or less $ 23,593,144 $ 23,341,313 $ - $ -
Due after one year through
five years 50,346,552 49,031,058 250,000 257,941
Due after five years
through ten years 6,264,888 6,291,682 8,019,683 8,262,433
Due after ten years 1,152,040 1,096,894 22,081,629 21,939,142
Mortgage-backed
securities and other
securities 68,700,285 66,033,862 - -
____________ ____________ ___________ ___________
$150,056,909 $145,794,809 $30,351,312 $30,459,516
============ ============ =========== ===========
Gross gains of $122,379 and gross losses of $278,266 were realized on
available-for-sale securities in 1994.
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated fair value of securities at December 31, 1993, are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
____________ __________ __________ ____________
U. S. Treasury securities $ 11,359,192 $ 440,648 $ 1,063 $ 11,798,777
Securities of other U. S.
Government agencies 18,993,137 352,939 7,794 19,338,282
Obligations of states and
political subdivisions 56,332,682 2,584,044 175,328 58,741,398
Other securities 4,196,259 48,083 8,016 4,236,326
____________ __________ __________ ____________
Total investment
securities 90,881,270 3,425,714 192,201 94,114,783
Mortgage-backed securities 74,163,741 1,443,145 156,935 75,449,951
____________ __________ __________ ____________
$165,045,011 $4,868,859 $ 349,136 $169,564,734
============ ========== ========== ============
The amortized cost and estimated fair value of securities at December 31,
1993, by contractual maturity, are as follows:
Estimated
Amortized Fair
Cost Market
____________ ____________
Due in one year or less $ 15,307,877 $ 15,603,799
Due after one year through five years 48,685,235 49,879,198
Due after five years through ten years 20,006,685 21,301,853
Due after ten years 3,959,572 4,408,033
Mortgage-backed and other securities 77,085,642 78,371,851
____________ ____________
$165,045,011 $169,564,734
============ ============
Gross gains of $45,014 in 1993, and gross losses of $23,503 were realized
from sales of securities in 1993.
Securities with a carrying value of $99,183,432 and $96,718,000 at
December 31, 1994 and 1993, respectively, were pledged to secure public
and trust deposits and for other purposes as required by law.
Banking regulations define "high-risk mortgage securities" as mortgage
derivative products that are determined through testing to have more
volatility, particularly price volatility, than a benchmark mortgage
pass-through security. It is the policy of NBC and First State Bank
not to invest in "high-risk mortgage securities." If, subsequent to its
purchase, the security through testing is identified as high-risk, the
policy is for the security to be sold. At December 31, 1994, securities
included no "high-risk mortgage securities."
NOTE E - LOANS
Loans outstanding include the following types:
(In Thousands)
December 31,
__________________
1994 1993
________ ________
Commercial, financial and agricultural $ 51,541 $ 35,177
Real estate - construction 12,372 2,777
Real estate - mortgage 178,391 140,162
Installment loans to individuals 79,961 73,756
Other 5,297 5,654
________ ________
327,562 257,526
Unearned interest (4,031) (5,597)
Reserve for loan losses (5,719) (4,450)
________ ________
$317,812 $247,479
======== ========
Loans on which the accrual of interest has been discontinued amounted to
$1,396,781 at December 31, 1994, and $1,450,849 at December 31, 1993.
Restructured loans amounted to approximately $278,000 and $853,000 at
December 31, 1994 and 1993, respectively. The income effect of nonaccrual
loans and restructured loans was not significant for each of the three years
ended December 31, 1994.
At December 31, 1994, there were no commitments to lend additional funds
to debtors whose loans have been modified.
Transactions in the reserve for loan losses are summarized as follows:
Years Ended December 31,
____________________________________
1994 1993 1992
__________ ___________ ___________
Balance at beginning of year $4,450,355 $ 3,203,880 $ 2,796,423
Additions:
Provision for loan losses
charged to operating expense 1,234,024 1,634,960 2,028,689
Recoveries of loans previously
charged off 250,015 269,235 357,165
Reserve applicable to loans of
acquired bank 493,878 - -
__________ ___________ ___________
6,428,272 5,108,075 5,182,277
Deductions:
Loans charged off 709,162 657,720 1,978,397
__________ ___________ ___________
Balance at end of year $5,719,110 $ 4,450,355 $ 3,203,880
========== =========== ===========
NOTE F - PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation and amortization as follows:
Estimated December 31,
Useful Lives ________________________
In Years 1994 1993
____________ ___________ ___________
Premises:
Land - $ 2,345,297 $ 1,920,297
Buildings, construction
and improvements 10 - 50 11,707,628 10,228,544
___________ ___________
14,052,925 12,148,841
Equipment 3 - 10 7,801,508 6,828,830
___________ ___________
21,854,433 18,977,671
Less accumulated depreciation
and amortization 9,449,547 8,639,971
___________ ___________
$12,404,886 $10,337,700
=========== ===========
The amount charged to operating expenses for depreciation was $981,690
for 1994, $848,449 for 1993, and $804,655 for 1992.
NOTE G - BORROWED FUNDS
Borrowed funds are summarized as follows:
December 31,
________________________
1994 1993
___________ ___________
Federal funds purchased $17,800,000 $ -
6.06% note payable to the Federal Home
Loan Bank, due January 1, 1998 3,380,909 3,699,807
4.78% note payable to the Federal Home
Loan Bank, due June 1, 1998 2,126,215 2,685,732
6.63% note payable to the Federal Home
Loan Bank, due January 1, 2000 2,749,921 2,879,093
5.57% note payable to the Federal Home
Loan Bank, due June 1, 2000 2,628,726 2,867,000
Treasury tax and loan note 1,473,792 2,500,000
___________ ___________
$30,159,563 $14,631,632
=========== ===========
Federal funds purchased are generally purchased for a one-day period.
Interest is at the prevailing rate at the date of purchase.
The notes payable to the Federal Home Loan Bank are collateralized by
first mortgage loans, Federal Home Loan Bank capital stock, and amounts
on deposit with the Federal Home Loan Bank.
The treasury tax and loan note generally matures within one to sixty
days from the transaction date. Interest is paid at an adjustable rate
as set by the U. S. Government.
NOTE H - INCOME TAXES
The provision for income taxes including the tax effects of securities
transactions (1994 - $(53,002); 1993 - $7,314; 1992 - $131,704) is as
follows:
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
Current tax expense $2,633,281 $2,156,280 $1,897,606
Deferred tax expense (benefit) (286,884) (567,772) (286,737)
__________ __________ __________
$2,346,397 $1,588,508 $1,610,869
========== ========== ==========
Deferred tax provisions are applicable to the following items:
Years Ended December 31,
_______________________________
1994 1993 1992
_________ _________ _________
Depreciation $ (16,084) $ (1,949) $ 15,468
Loans and reserve for loan
losses (404,902) (596,869) (276,838)
Securities (43,550) 57,370 12,698
Employee benefits (46,874) 55,287 (1,533)
State net operating loss
carryforward 199,400 (88,590) -
Other, net 25,126 6,979 (36,532)
_________ _________ _________
$(286,884) $(567,772) $(286,737)
========= ========= =========
The difference between the total expected tax expense at the federal tax
rate of 34% and the reported income tax expense is as follows:
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
Tax on income before income taxes $3,224,777 $2,636,630 $2,502,720
Increase (decrease) resulting from:
Tax-exempt income (1,060,562) (1,000,263) (922,041)
Goodwill amortization 74,640 - -
Other nondeductible expenses 158,585 84,750 81,393
Tax benefit of small life
insurance company exemption (129,628) (129,432) (117,847)
State income taxes, net of
federal benefit 58,428 - -
Other, net 20,157 (3,177) 66,644
---------- ---------- ----------
$2,346,397 $1,588,508 $1,610,869
========== ========== ==========
For income tax reporting purposes, First State Bank retained its tax
basis for its assets and liabilities. As a result, the amortization of
the goodwill associated with the acquisition of First State Bank is not
deductible.
The components of the net deferred tax asset included in other assets as
of December 31, 1994 and 1993, are as follows:
1994 1993
__________ __________
Deferred tax assets:
Reserve for loan losses $1,485,321 $1,061,379
Employee benefits 376,099 305,531
State net operating loss carryforward 100,000 420,934
Unrealized loss on available-for-sale
securities 1,447,725 -
Other 61,755 10,540
__________ __________
3,470,900 1,798,384
Valuation allowance - loss carryforward - (121,534)
__________ __________
Total deferred tax assets 3,470,900 1,676,850
__________ __________
Deferred tax liabilities:
Premises and equipment (840,535) (532,557)
Deferred loan fees/costs (98,783) (82,300)
Securities (143,747) (133,859)
Loans (169,450) (268,464)
Other (44,600) -
__________ __________
Total deferred tax liabilities (1,297,115) (1,017,180)
__________ __________
Net deferred tax asset $2,173,785 $ 659,670
========== ==========
NOTE I - EMPLOYEE BENEFITS
The following table sets forth the defined benefit plan's funded status
and amounts recognized in the Corporation's consolidated financial
statements at December 31, 1994 and 1993:
1994 1993
__________ __________
Actuarial present value of benefit
obligations:
Accumulated benefit obligation, including
vested benefits of $3,784,057 in 1994 and
$3,825,953 in 1993 $4,278,969 $4,376,107
========== ==========
Projected benefit obligation for service
rendered to date $6,362,307 $6,482,806
Fair value of plan assets 5,605,178 5,910,987
__________ __________
Plan assets less than projected benefit
obligation (757,129) (571,819)
Unrecognized net gain 885,187 659,831
Unrecognized net asset at adoption of
Statement No. 87 being recognized over
employees' average remaining service life (195,422) (227,993)
Unrecognized prior service cost 3,269 3,677
__________ __________
Accrued pension costs $ (64,095) $ (136,304)
========== ==========
Net pension costs included the following components:
Years Ended December 31,
__________________________________
1994 1993 1992
__________ __________ __________
Service costs - benefits earned
during the period $ 406,355 $ 322,976 $ 297,904
Interest cost on projected benefit
obligation 472,230 418,958 398,073
Actual return on plan assets (370,788) (504,637) (310,583)
Net amortization and deferral (245,531) (30,123) (176,452)
__________ __________ __________
$ 262,266 $ 207,174 $ 208,942
========= ========== ==========
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation were 7.5% and 5%, respectively, in 1994
and 1993. The expected long-term rate of return on plan assets was 9.5%
in each of the three years ended December 31, 1994.
Contributions to the ESOP amounted to $187,100 in 1994, and $165,000 in
1993 and 1992. At December 31, 1994, the plan held 75,969 shares of the
Corporation's common stock. Contributions to the 401(k) plan amounted
to $54,180 in 1994, $45,079 in 1993, and $37,228 in 1992.
NOTE J - STOCK DIVIDEND
In 1993, the Corporation declared a stock dividend of 117,575 shares of
common stock. The stock dividend was recorded at the par value of the
stock issued. The estimated value of the stock dividend based upon
trades at the date of the dividend was approximately $6.5 million.
Fractional shares resulting from the stock dividend were sold and the
excess of the sale price over par value was credited to surplus.
NOTE K - RELATED PARTY TRANSACTIONS
In the normal course of business, loans are made to directors and
executive officers and to companies in which they have a significant
ownership interest. In the opinion of management, these loans are made
on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other
parties, and are consistent with sound banking practices and are within
applicable regulatory and lending limitations. The activity in loans to
directors, executive officers, and their affiliates during 1994 is
summarized as follows:
Loans outstanding at January 1, 1994 $ 7,593,059
Loans of bank acquired 1,889,592
New loans 2,857,195
Repayments (2,944,315)
___________
Loans outstanding at December 31, 1994 $ 9,395,531
===========
Also, in the normal course of business NBC and First State Bank entered
into transactions for services with companies and firms whose principals
are directors and stockholders.
NOTE L - REGULATORY MATTERS
Dividends paid by the Corporation are provided from dividends received
from its subsidiary banks. The amount of dividends that can be paid by
banks without prior approval of banking regulators is subject to
maintaining minimum financial standards and capital ratios. The Board of
Directors of each bank may, subject to these regulatory limitations,
declare dividends of so much of the bank's net retained profits as
determined to be expedient.
Banks are required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. At December 31,
1994, banks are required to have a minimum Tier 1 and total capital
ratios of 4.0% and 8.0%, respectively. The actual ratios of NBC and
First State Bank at December 31, 1994, exceeded the minimum requirements.
Aggregate cash reserves of $1,984,000 were maintained at December 31,
1994, to satisfy federal regulatory requirements.
NOTE M - COMMITMENTS AND CONTINGENT LIABILITIES
The consolidated financial statements do not reflect various commitments
and contingent liabilities which arise in the normal course of banking
business and which involve elements of credit risk, interest rate risk,
and liquidity risk. The commitments and contingent liabilities are
commitments to extend credit, credit card lines, commercial and similar
letters of credit. A summary of commitments and contingent liabilities
at December 31, 1994 and 1993, is as follows:
(In Thousands)
Contractual Amount
__________________
1994 1993
_______ _______
Commitments to extend credit $43,819 $28,526
Credit card lines 2,445 1,554
Commercial and similar letters of credit 3,779 565
Commitments to extend credit, credit card lines, commercial and similar
letters of credit include some exposure to credit loss in the event of
nonperformance of the customer. The credit policies and procedures for
such commitments are the same as those used for lending activities.
Because these instruments have fixed maturity dates and because a number
expire without being drawn upon, they generally do not present any
significant liquidity risk. No significant losses on commitments were
incurred in 1994 or 1993, nor are any significant losses as a result of
these transactions anticipated.
NOTE N - CONCENTRATIONS OF CREDIT
Most of the loans, commitments and letters of credit of NBC and First
State Bank have been granted to customers in their market areas.
Generally, such customers are also depositors. Investments in state and
municipal securities also involve governmental entities within the banks'
market areas. The concentrations of credit by type of loan are set forth
in Note E. The distribution of commitments to extend credit approximates
the distribution of loans outstanding. Letters of credit were granted
primarily to commercial borrowers.
NOTE O - SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended December 31,
_____________________________________
1994 1993 1992
___________ ___________ ___________
Cash paid during the year for:
Interest $13,352,508 $11,557,582 $15,025,097
Income taxes 3,287,937 2,112,058 1,308,831
Transactions related to the acquisition of First State Bank during the
year ended December 31, 1994, were as follows:
Fair value of assets acquired other than cash
and cash equivalents $59,421,478
Liabilities assumed 57,238,445
___________
Cash paid in excess of cash and cash equivalents acquired $ 2,183,033
NOTE P - FINANCIAL INSTRUMENTS
Disclosures about financial instruments at December 31, 1994 and 1993,
are presented, as required by FASB Statement No. 107. The Corporation
and its subsidiaries are not holders of derivative financial instruments
as defined by FASB Statement No. 119, nor are there any off-balance sheet
risks associated with these types of instruments. The following
information does not purport to represent the aggregate consolidated fair
value of the Corporation.
The carrying amounts presented are the amounts at which the financial
instruments are reported in the consolidated financial statements.
Cash and Cash Equivalents
The balance sheets carrying amounts for cash and due from banks and
short-term investments (interest-bearing deposits and federal funds sold)
approximate the fair values of such assets. At December 31, 1994 and
1993, the carrying amount of cash and due from banks and short-term
investments was $24,554,008 and $21,409,070, respectively.
Securities
The estimated fair value of securities is based on quoted market prices,
if available. The estimated fair value is based on quoted market prices
of comparable instruments, if quoted market prices are not available.
Estimated
Carrying Fair
Date Amount Value
__________________ ____________ ____________
December 31, 1994 $176,146,121 $176,254,325
============ ============
December 31, 1993 $165,045,011 $169,564,734
============ ============
Loans
For variable rate loans that reprice frequently and entail no significant
changes in credit use, estimated fair values are based on the carrying
amounts. The estimated fair value of all other loans is estimated based
on discounted cash flow analysis using interest rates currently offered
for loans with similar terms.
The carrying amounts and estimated fair value of loans consisted of the
following (in thousands):
December 31, 1994 December 31, 1993
____________________ ____________________
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
_________ _________ _________ _________
Commercial, financial and
agricultural $ 51,541 $ 50,688 $ 35,177 $ 34,601
Real estate -
construction 12,372 12,121 2,777 2,729
Real estate - mortgage 178,391 174,773 140,162 137,306
Installment loans to
individuals 79,961 79,109 73,756 72,507
Other 5,297 5,084 5,654 5,535
_________ _________ _________ _________
327,562 321,775 257,526 252,678
Unearned interest (4,031) (3,988) (5,597) (5,580)
Reserve for loan losses (5,719) - (4,450) -
_________ _________ _________ _________
Net Loans $ 317,812 $ 317,787 $ 247,479 $ 247,098
========= ========= ========= =========
Deposit Liabilities
Fair values of demand deposits and savings accounts are defined by FASB
Statement No. 107 as the amounts payable. The fair value of fixed rate
certificates of deposit is estimated using a discounted cash flow
calculation that applies interest rates currently being offered. The
carrying amount of variable rate certificates of deposit approximates
their fair value at the reporting date.
December 31, 1994 December 31, 1994
__________________________ __________________________
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
____________ ____________ ____________ ____________
Noninterest-
bearing
demand $ 67,460,056 $ 67,460,056 $ 54,086,572 $ 54,086,572
Interest-
bearing
demand 71,609,998 71,609,998 58,558,724 58,558,724
Savings and
money market
accounts 96,914,386 96,914,386 79,460,428 79,460,428
Time deposits 219,776,868 217,921,072 191,378,429 190,042,656
____________ ____________ ____________ ____________
$455,761,308 $453,905,512 $383,484,153 $382,148,380
============ ============ ============ ============
FASB Statement No. 107 prohibits adjustment for any value derived from
the expected retention of deposits for a future time period. That value,
often referred to as a core deposit intangible, is neither included in
the fair value amounts nor recorded as an intangible asset in the
consolidated balance sheets.
Borrowed Funds
The carrying amounts of federal funds purchased and other short-term
borrowings approximate their fair value. At December 31, 1994 and 1993,
the carrying amounts were $19,273,792 and $2,500,000, respectively.
The fair values of long-term borrowings are estimated using discounted
cash flow analysis, based upon NBC's current incremental borrowing rates
for similar types of borrowing arrangements.
December 31, 1994 December 31, 1993
________________________ ________________________
Carrying Estimated Carrying Estimated
Payable To Amount Fair Value Amount Fair Value
__________________ ___________ ___________ ___________ ___________
Federal Home Loan
Bank $10,885,771 $10,448,108 $12,131,632 $12,046,218
=========== =========== =========== ===========
Off-Balance Sheet Financial Instruments
Off-balance sheet financial instruments consist of commitments to extend
credits, letters of credit, credit card lines, etc. Generally, these
instruments have a term of thirty days to one year. Management is of the
opinion the estimated fair value is not significantly different than the
contractual or notational amounts. At December 31, 1994 and 1993, these
instruments totaled $50,043,000 and $30,645,000, respectively.
NOTE Q - CONDENSED PARENT COMPANY STATEMENTS
Balance sheets as of December 31, 1994 and 1993, and statements of income
and cash flows for the years ended December 31, 1994, 1993 and 1992, of
NBC Capital Corporation (parent company only) are presented below:
BALANCE SHEETS
1994 1993
___________ ____________
Assets
Cash $ 132,136 $ 55,581
Investment in bank subsidiaries 51,626,516 49,797,234
Other assets 2,150,250 43,928
___________ ____________
$53,908,902 $49,896,743
=========== ===========
Liabilities and Stockholders' Equity
Other liabilities $ 2,254,341 $ 136,848
Stockholders' equity 51,654,561 49,759,895
___________ ___________
$53,908,902 $49,896,743
=========== ===========
STATEMENTS OF INCOME
Years Ended December 31,
_____________________________________
1994 1993 1992
___________ ___________ ___________
Income
Dividends from NBC $11,706,226 $ 2,099,552 $ 2,110,729
Expense 74,053 27,489 132,138
___________ ___________ ___________
Income before income taxes and
equity in undistributed
earnings of subsidiaries 11,632,173 2,072,063 1,978,591
Income tax benefit 25,178 9,346 44,928
___________ ___________ ___________
Income before equity in
undistributed earnings
of subsidiary 11,657,351 2,081,409 2,023,519
Equity in earnings in excess
of dividends - 4,259,038 3,726,552
Equity in dividends in excess
of earnings (4,519,109) - -
___________ ___________ ___________
Net income $ 7,138,242 $ 6,340,447 $ 5,750,071
=========== =========== ===========
STATEMENTS OF CASH FLOWS
Years Ended December 31,
_____________________________________
1994 1993 1992
___________ ___________ ___________
Cash Flows From Operating
Activities:
Net income $ 7,138,242 $ 6,340,447 $ 5,750,071
Equity in subsidiaries earnings
in excess of dividends - (4,259,038) (3,726,552)
Equity in subsidiaries
dividends received in excess
of earnings 2,455,109 - -
Net decrease in other assets
and other liabilities 11,171 39,033 1,348,762
___________ ___________ ___________
Net cash provided by operating
activities 9,604,522 2,120,442 3,372,281
___________ ___________ ___________
Cash Flows Used in Investing
Activities:
Investment in First State
Bank of Tuscaloosa (9,131,967) - -
___________ ___________ ___________
Cash Flows From Financing
Activities:
Dividends paid on common
stock $ (396,000) $(2,099,552) $(3,377,166)
Sale of fractional shares - 2,133 -
___________ ___________ ___________
Net cash used in financing
activities (396,000) (2,097,419) (3,377,166)
___________ ___________ ___________
Net increase (decrease) in
cash and cash equivalents 76,555 23,023 (4,885)
Cash and cash equivalents at
beginning of year 55,581 32,558 37,443
___________ ___________ ___________
Cash and cash equivalents at
end of year $ 132,136 $ 55,581 $ 32,558
=========== =========== ===========
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
National Bank of Commerce of Mississippi, home office in
Starkville, Mississippi, and incorporated under the national
banking laws of the United States is a wholly-owned subsidiary of
NBC Capital Corp. First State Bank of Tuscaloosa, home office in
Tuscaloosa, Alabama, and incorporated under the state banking
laws of the State of Alabama is a 99.2% owned subsidiary of NBC
Capital Corp. Also, included in the consolidated financial
statements are subsidiaries of the National Bank of Commerce of
Mississippi at December 31, 1994. These were its wholly-owned
subsidiaries, Philadelphia Finance Corporation, NBC Service
Corporation, and Commerce National Insurance Company, which is a
79% owned subsidiary of NBC Service Corporation.
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 21,679
<INT-BEARING-DEPOSITS> 375
<FED-FUNDS-SOLD> 2,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 145,795
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<DEPOSITS> 455,761
<SHORT-TERM> 19,274
<LIABILITIES-OTHER> 7,829
<LONG-TERM> 10,886
<COMMON> 1,200
0
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