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, 1995
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:
$54,800,000
___________________________
(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, 1995.
Documents incorporated by reference -
Annual report to shareholders for 1995 - Parts II and IV
Proxy statement dated March 18, 1996 - 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, 1995, 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 1995 and 1994, 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 provides for new opportunities
for growth and expansion. Tuscaloosa, Alabama, is a city that
expects future economic development. As an example, Mercedes is
building 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 $78 million at December 31, 1995, and reported net income of
$616 thousand for the year ended December 31, 1995. 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 individual accounts.
The Company operates 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% 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 1995 and 1994, 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 $5 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 $15 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 and its subsidiaries are subject to state and
federal banking laws and regulations which impose specific
requirements or restrictions on and provide for general
regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended to
protect depositors, not shareholders. To the extent that the
following summary describes statutory or regulatory provisions,
it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business
and prospects of the Company. Beginning with the enactment of
the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") and following with Federal Deposit Insurance
Corporation Improvement Act (FDICIA), which was enacted in 1991,
numerous additional regulatory requirements have been placed on
the banking industry in the past five years, and additional
changes have been proposed. The operations of the Company and
its subsidiaries may be affected by legislative changes and the
policies of various regulatory authorities. The Company is
unable to predict the nature or the extent of the effect on its
business and earnings that fiscal or monetary policies, economic
control, or new federal or state legislation may have in the
future.
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 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.
As a bank holding company, the Company is required to give
the Federal Reserve prior written notice of any purchase or
redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with
the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of the
Company's consolidated net worth. The Federal Reserve may
disapprove such a purchase or redemption if it determines that
the proposal constitutes an unsafe or unsound practice, would
violate any law, regulation, Federal Reserve order or directive
or any condition imposed by, or written agreement with, the
Federal Reserve.
In accordance with Federal Reserve Board policy, the Company
is expected to act as a source of financial strength to the
subsidiaries. The Federal Reserve Board may require a bank
holding company to terminate any activity or relinquish control
of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve Board's determination that such
activity or control constitutes a serious risk to the financial
soundness of stability of any subsidiary depository institution
of the bank holding company. Further, federal bank regulatory
authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the
agency determines that divestiture may aid the depository
institution's financial condition.
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, 1995,
the banking subsidiaries had available for payment of dividends
to the Company, without prior approval of their regulator,
approximately $4.7 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 capital-based regulatory framework contains five
categories of compliance with regulatory capital requirements,
including "well capitalized," adequately capitalized,"
undercapitalized," significantly undercapitalized," and
critically undercapitalized." 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
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, 1995,
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:
(a) 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.
(b) 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, 1995, the
Company's Tier 1 and total capital ratios were 15.4% and 16.6%,
respectively.
Under these guidelines, banks' and bank holding companies'
assets are given risk-weights of 0%, 20%, 50%, or 100%. In
addition, certain off-balance sheet items are given credit
conversion factors to convert them to asset equivalent amounts to
which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are
assigned to the 100% risk category, except for first mortgage
loans fully secured by residential property and, under certain
circumstances, residential construction loans, both of which
carry a 50% rating. Most investment securities are assigned to
the 20% category, except for municipal or state revenue bonds,
which have a 50% rating, and direct obligations of or obligations
guaranteed by the United States Treasury or United States
Government agencies, which have a 0% rating.
The primary supervisory authority of NBC is the OCC, and of
FSB is the FDIC. The OCC and FDIC regulate or monitor virtually
all areas of the Bank's operations, including security devices
and procedures, adequacy of capitalization and loss reserves,
loans, investments, borrowings, deposits, mergers, issuances of
securities, payment of dividends, interest rates payable on
deposits, interest rates or fees chargeable on loans,
establishment of branches, corporate reorganizations, maintenance
of books and records, and adequacy of staff training to carry on
safe lending and deposit gathering practices. The OCC and FDIC
also impose limitations on the aggregate investment in real
estate, bank premises, and furniture and fixtures. In addition
to regular examinations, the institution must furnish to its
regulator quarterly reports containing a full and accurate
statement of its affairs.
Banks are subject to the provisions of Section 23A of the
Federal Reserve Act, which place limits on the amount of loans or
extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to
third parties collateralized by the securities or obligations of
affiliates. The aggregate of all covered transactions is limited
in amount, as to any one affiliate, to 10% of the bank's capital
and surplus and, as to all affiliates combined, to 20% of the
bank's capital and surplus. Furthermore, within the foregoing
limitations as to amount, each covered transaction must meet
specified collateral requirements. Compliance is also required
with certain provisions designed to avoid the taking of low
quality assets.
Banks are also subject to the provisions of Section 23B of
the Federal Reserve Act which, among other things, prohibit an
institution from engaging in certain transactions with certain
affiliates unless the transactions are on terms substantially the
same, or at least as favorable to such institution or its
subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject
is certain restrictions on extensions of credit to executive
officers, directors, certain principal shareholders, and their
related interests. Such extensions of credit (i) must be made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with third parties and (ii) must not involve more
than the normal risk of repayment or present other unfavorable
features.
National banks are required by the National Bank Act to
adhere to branch office banking law, the Bank may open branches
throughout Mississippi with the prior approval of the OCC. In
addition, with prior regulatory approval, the Bank is able to
acquire existing banking operations in Mississippi. Furthermore,
federal legislation has recently been passed which permits
interstate branching. The new law permits out of state
acquisitions by bank holding companies (subject to veto by new
state law), interstate branching by banks if allowed by state
law, interstate merging by banks, and de novo branching by
national banks if allowed by state law.
The Community Reinvestment Act requires that, in connection
with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the
OCC shall evaluate the record of the financial institutions in
meeting the credit needs of their local communities, including
low and moderate income neighborhoods, consistent with the safe
and sound operation of those institutions. These factors are
also considered in evaluating mergers, acquisitions, and
applications to open a branch or facility.
Interest and certain other charges collected or contracted
by Banks are subject to state usuary laws and certain federal
laws concerning interest rates. The loan operations are also
subject to certain federal laws applicable to credit
transactions, such as the federal Truth-In-Lending Act, governing
disclosures of credit terms to consumer borrowers; the Home
Mortgage Disclosure Act of 1975, requiring financial institutions
to provide information to enable the public and public officials
to determine whether a financial institution will be fulfilling
its obligation to help meet the housing needs of the community it
serves; the Equal Credit Opportunity Act, prohibiting
discrimination on the basis of race, creed or other prohibited
factors in extending credit; the Fair Credit Reporting Act of
1978, governing the use and provision of information to credit
reporting agencies; the Fair Debt Collection Act, governing the
manner in which consumer debts may be collected by collection
agencies; and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such
federal laws. The deposit operations also are subject to the
Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of
financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve Board to implement
that act, which governs automatic deposits to and withdrawals
from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other
electronic banking services.
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, 1995, 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. 53 Chairman of the Board and
Chairman, President President, NBC Capital
and Chief Executive Corporation and NBC of
Officer Mississippi
Bobby Harper 54 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 63 Secretary of NBC Capital
Secretary Corporation and NBC of
Mississippi
Mark A. Abernathy 39 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 54 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 49 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 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
Clifton B. Fowler 47 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. 54 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 63 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 62 President and other positions of
President, First First State Bank of Tuscaloosa
State Bank of
Tuscaloosa
Rex D. Poole 58 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. 42 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 34 Executive Vice President and other
Executive Vice positions of First State Bank of
President, First Tuscaloosa
State Bank of
Tuscaloosa
Personnel
At December 31, 1995, NBC and FSB had 318 full-time
employees. The Company, Service and CNI had no employees at
December 31, 1995. The finance company had three employees.
ITEM 2 - PROPERTIES
The Company, Service and CNI owned no properties at December 31,
1995.
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 1995 is incorporated herein by
reference in response to this item and included in this report as
Exhibit 13.a.
(b) At December 31, 1995, the Company had approximately 1,799
security holders.
(c) Dividends on common stock were declared semiannually in
June and December of the years reported and totaled as follows:
December 31,
1995 1994
___________ ___________
Dividends declared, $2.40 per share $ 2,880,000 $ -
Dividends declared, $2.05 per share - 2,460,000
___________ ___________
$ 2,880,000 $ 2,460,000
=========== ===========
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 1995 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)
1995 1994 1993
Assets ________ ________ ________
Cash and due from banks $ 20,406 $ 19,515 $ 14,557
Securities:
Taxable 115,574 120,870 127,822
Non-taxable 68,934 57,649 49,743
________ ________ ________
Total securities 184,508 178,519 177,565
Federal funds sold and
securities purchased under
agreement to resell 6,809 4,882 4,909
Loans, net of unearned
interest 338,631 306,702 240,509
Less reserve for loan losses 6,136 5,488 3,805
________ ________ ________
Net loans 332,495 301,214 236,704
Other assets 26,483 23,582 15,711
________ ________ ________
Total Assets $570,701 $527,712 $449,446
======== ======== ========
Liabilities and
Stockholders' Equity
Deposits:
Noninterest-bearing $ 69,058 $ 65,010 $ 49,718
Interest-bearing 422,451 386,000 332,731
________ ________ ________
Total deposits 491,509 451,010 382,449
Federal funds purchased and
securities sold under
agreement to repurchase 2,185 5,557 516
Borrowed funds 11,670 13,367 11,922
Other liabilities 6,601 5,111 6,223
________ ________ ________
Total liabilities 511,965 475,045 401,110
Stockholders' equity 58,736 52,667 48,336
________ ________ ________
Total Liabilities and
Stockholders' Equity $570,701 $527,712 $449,446
======== ======== ========
B. Analysis of Net Interest Earnings
The table below shows, for the periods indicated, an analysis of
net interest earnings, including the average amount of
interest-earning assets and interest-bearing liabilities
outstanding during the period, the interest earned or paid
on such amounts, the average yields/rates paid and the net
yield on interest-earning assets:
($ In Thousands)
Average Balance
1995 1994 1993
________ ________ ________
EARNING ASSETS
Net loans $332,495 $301,214 $236,704
Federal funds sold and securities
purchased under agreement to resell 6,809 4,882 4,909
Securities:
Taxable 115,574 120,870 127,822
Nontaxable 68,934 57,649 49,743
________ ________ ________
Totals 523,812 484,615 419,178
________ ________ ________
INTEREST-BEARING LIABILITIES
Interest-bearing deposits 422,451 386,000 332,731
Borrowed funds and federal funds
purchased and securities sold
under agreement to repurchase 13,855 18,924 12,438
________ ________ ________
Totals 436,306 404,924 345,169
________ ________ ________
Net Amounts $ 87,506 $ 79,691 $ 74,009
======== ======== ========
($ In Thousands) Yields Earned
Interest for the Year and
Ended December 31, Rates Paid (%)
_______________________ ______________
1995 1994 1993 1995 1994 1993
_______ _______ _______ ____ ____ ____
EARNING ASSETS
Net loans $30,731 $25,217 $19,097 9.24 8.37 8.07
Federal funds sold and
securities purchased
under agreement to
resell 446 258 144 6.55 5.28 2.93
Securities:
Taxable 7,233 7,231 8,095 6.26 5.98 6.33
Nontaxable 3,840 3,107 2,942 5.57 5.39 5.91
_______ _______ _______
Totals 42,250 35,813 30,278 8.06 7.39 7.22
_______ _______ _______
INTEREST-BEARING
LIABILITIES
Interest-bearing deposits 17,906 12,747 10,866 4.24 3.30 3.27
Borrowed funds and federal
funds purchased and
securities sold under
agreement to repurchase 779 798 674 5.62 4.22 5.42
_______ _______ _______
Totals 18,685 13,545 11,540 4.28 3.35 3.34
_______ _______ _______
Net Amounts $23,565 $22,268 $18,738
======= ======= =======
Net yield on earning assets 4.50 4.59 4.47
(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)
1995 Over 1994 1994 Over 1993
____________________ ____________________
Change Due To: Change Due To:
____________________ ____________________
Total Rate Volume Total Rate Volume
______ ______ ______ ______ ______ ______
EARNING ASSETS
Net loans $5,514 $2,757 $2,757 $6,120 $ 734 $5,386
Federal funds
sold and
securities
purchased under
agreement to
resell 188 71 117 114 115 (1)
Securities:
Taxable 2 32 (30) (864) (435) (429)
Nontaxable 733 107 626 165 (205) 370
______ ______ ______ ______ ______ ______
Totals $6,437 $2,967 $3,470 $5,535 $ 209 $5,326
====== ====== ====== ====== ====== ======
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits $5,159 $3,874 $1,285 $1,881 $ 102 $1,779
Interest on
borrowed funds
and federal
funds purchased
and securities
sold under
agreement to
repurchase (19) 80 (99) 124 (91) 215
______ ______ ______ ______ ______ ______
Totals $5,140 $3,954 $1,186 $2,005 $ 11 $1,994
====== ====== ====== ====== ====== ======
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,
____________________________
1995 1994 1993
________ ________ ________
U. S. Treasury $ 26,039 $ 23,907 $ 11,359
U. S. Government agencies and
mortgage-backed securities 81,300 76,779 93,157
States and political
subdivisions 66,950 70,917 56,333
Other 5,054 4,543 4,196
________ ________ ________
Total book value $179,343 $176,146 $165,045
======== ======== ========
B. The following table sets forth the maturities of investment and
mortgage-backed securities (book values) at December 31, 1995,
and the weighted average yield of such securities:
($ In Thousands)
Weighted Average Yield
_________________________________________
0-1 Yield 1-5 Yield 5-10 Yield
Year (%) Years (%) Years (%)
_______ _____ _______ _____ _______ _____
Securities:
U. S. Treasury $ 8,528 5.0% $17,402 6.4% $ 109 7.5%
U. S. Government
agencies 5,061 5.6% 20,732 6.7% 49 6.7%
States and
political
subdivisions 5,158 5.8% 29,403 4.9% 9,200 6.6%
Other - - 1,021 6.4% 310 6.7%
_______ _______ _______
Total $18,747 $68,558 $ 9,668
======= ======= =======
10+ Yield
Years (%)
_______ _____
States and political
subdivisions $23,189 6.3%
Other 3,723 5.6%
_______
Total $26,912
=======
Book Yield
Value (%)
_______ _____
Mortgage-backed
securities $55,458 6.2%
=======
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, 1995, 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 1995 1994 1993 1992 1991
_________________ ________ ________ ________ ________ ________
Commercial,
financial and
agriculture $ 56,219 $ 51,541 $ 35,177 $ 33,814 $ 37,970
Real estate -
construction 11,892 12,372 2,777 3,491 3,439
Real estate -
mortgage 193,686 178,391 140,162 123,535 113,019
Installment
loans to
individuals 83,281 79,961 73,756 66,211 61,340
Other 5,989 5,297 5,654 5,522 9,308
________ ________ ________ ________ ________
Total loans 351,067 327,562 257,526 232,573 225,076
Unearned interest (2,649) (4,031) (5,597) (5,600) (6,404)
________ ________ ________ ________ ________
$348,418 $323,531 $251,929 $226,973 $218,672
======== ======== ======== ======== ========
B. Maturities and sensitivities of loans to changes in interest rates:
(In Thousands)
December 31, 1995
_________________________________
Maturing
________________________
Within 1-5 Over
Type 1 Year Years 5 Years Total
____________________________ ________ _______ _______ ________
Commercial, financial and
agricultural $ 48,588 $ 6,790 $ 841 $ 56,219
Real estate - construction 11,385 507 - 11,892
Other loans, excluding real
estate - mortgage and
installment loans 5,520 469 - 5,989
________ _______ _______ ________
$ 65,493 $ 7,766 $ 841 $ 74,100
======== ======= ======= ========
Loans with: (1)
Predetermined interest
rates $ 37,152 $97,090 $18,056 $152,298
Floating interest rates 196,464 270 6 196,740
________ _______ _______ ________
$233,616 $97,360 $18,062 $349,038
======== ======= ======= ========
(1) Excludes nonaccrual loans of $2,028.
C. Nonperforming loans
1. The following tables states the aggregate amount of loans
which were nonperforming in nature:
( In Thousands )
December 31,
__________________________________
Type 1995 1994 1993 1992 1991
_______________________ ______ ______ ______ ______ ______
Loans accounted for on
a nonaccrual basis $2,028 $1,397 $1,451 $1,442 $ 987
====== ====== ====== ====== ======
Accruing loans past due
90 days or more $ 447 $ 601 $ 484 $ 794 $1,469
====== ====== ====== ====== ======
Renegotiated "troubled"
debt $ 390 $ 306 $ 853 $ 632 $ 100
====== ====== ====== ====== ======
2. There were no loan concentrations in excess of 10% of total
loans at December 31, 1995.
3. There were no outstanding foreign loans at December 31, 1995.
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 1995, 1994, and 1993.
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, 1995, 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, 1995.
IV. Summary of Loan Loss Experience
A. An analysis of the loan loss experience for the periods
indicated is as follows:
($ In Thousands)
December 31,
________________________________________
1995 1994 1993 1992 1991
______ ______ ______ _______ _______
Beginning balance $5,719 $4,450 $3,204 $ 2,796 $ 2,127
______ ______ ______ _______ _______
Charge-offs:
Domestic:
Commercial,
financial and
agricultural (237) (78) (151) (743) (1,030)
Real estate (109) (239) (80) (413) (454)
Installment
loans and
other (422) (392) (427) (822) (1,751)
______ ______ ______ _______ _______
Total charge-offs (768) (709) (658) (1,978) (3,235)
______ ______ ______ _______ _______
Recoveries:
Domestic:
Commercial,
financial and
agricultural 54 48 122 79 66
Real estate 40 25 31 97 14
Installment
loans and
other 209 177 116 181 123
______ ______ ______ _______ _______
Total recoveries 303 250 269 357 203
______ ______ ______ _______ _______
Net charge-off (465) (459) (389) (1,621) (3,032)
______ ______ ______ _______ _______
Reserve of
acquired bank - 494 - - 2,090
Provision charged
to operations 1,165 1,234 1,635 2,029 1,611
______ ______ ______ _______ _______
Ending balance $6,419 $5,719 $4,450 $ 3,204 $ 2,796
====== ====== ====== ======= =======
Ratio of net
charge-offs to
average loans
outstanding .14 .15 .13 .75 1.45
Ratio of reserve
for loan losses
to loans out-
standing at year
end 1.84 1.77 1.77 1.41 1.28
B. Determination of Reserve for Loan Losses
The information contained in Note A-6 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, 1995, these loans totaled $212 million or
approximately 60% 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 $83
million or 24% of total loans at December 31, 1995.
Consumer loans are originated in order to provide a wide
range of financial services to customers and because the
terms and normally higher interest rates on such loans
help maintain a profitable spread between the average
loan yield and the cost of funds.
In connection with consumer loan applications, the
borrower's income statement and credit bureau report
are reviewed. In addition, the relationship of the loan
to the value of the collateral is considered. All
automobile loan applications are reviewed, as well as
the value of the unit which secured the loan.
NBC and FSB intend to continue to emphasize the
origination of consumer loans. Management believes that
its loan loss experience in connection with its consumer
loan portfolio is favorable in comparison to industry
averages.
NBC and FSB make commercial business loans on both a
secured and unsecured basis with terms which generally
do not exceed five years. Nonreal estate commercial
loans primarily consist of short-term loans for working
capital purposes, inventories, seasonal loans, lines of
credit and equipment loans. A personal guaranty of
payment by the principals of any borrowing entity is
often required and the financial statements and income
tax returns of the entity and its guarantors are
reviewed. At December 31, 1995, NBC and FSB's
commercial business loans represented approximately 13%
of its total loan portfolio.
D. For the year 1996, losses for all loan categories, as a
percentage of average loans, are expected to approximate
that of 1995.
V. Deposits
($ In Thousands)
1995 1994 1993
_____________ _____________ _____________
Amount Rate Amount Rate Amount Rate
________ ____ ________ ____ ________ ____
A. Average deposits
Domestic:
Noninterest-
bearing
deposits $ 69,058 - $ 65,010 - $ 49,718 -
Interest-
bearing demand
deposits (1) 156,657 3.1% 141,988 2.3% 108,167 2.5%
Savings deposits 32,122 2.5% 30,717 2.5% 27,862 2.8%
Time deposits 233,672 5.3% 213,295 4.0% 196,702 3.7%
Foreign N/A N/A N/A
________ ________ ________
Total $491,509 $451,010 $382,449
======== ======== ========
(1) Includes Money Market accounts
B. Other categories
None
C. Foreign deposits
Not material
D. Time certificate of deposit of $100,000 or more and
maturities at December 31, 1995:
(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 $67,526 $ 33,304 $ 11,212 $ 17,212 $ 5,798
======= ======== ========== ========= =========
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,
________________
1995 1994 1993
____ ____ ____
Return on assets (net income divided by total
average assets) 1.4 1.4 1.4
Return on equity (net income divided by average
equity) 13.3 13.6 13.1
Dividend payout ratio (dividends per share
divided by net income per share) 36.9 34.4 33.1
Equity to asset ratio (average equity divided
by average total assets) 10.3 10.0 10.8
VII. Short-term borrowings
Treasury
Tax
Federal And
Funds Loan Note
Purchased Payable
___________ __________
Balance at December 31, 1994 $17,800,000 $1,473,792
Weighted average interest rate at
December 31, 1994 5.60% 4.90%
Maximum amount outstanding at any
month end for the year 1994 17,800,000 2,165,426
Average amount outstanding during
the year 1994 915,890 1,250,690
Weighted average interest rate
during the year 5.02% 3.60%
For 1995, the Company and its subsidiaries had no short-term
borrowings in excess of 30% of stockholders' equity.
VIII. Capital adequacy data
Total capital of the Company as a percentage of total adjusted
assets was as follows:
($ In Thousands)
December 31,
__________________
1995 1994
________ ________
Total assets $576,215 $545,405
Allowance for loan losses 6,419 5,719
________ ________
Total adjusted assets $582,634 $551,124
======== ========
Total stockholders' equity
(excluding unrealized loss) $ 59,366 $ 54,438
Allowance for loan losses 6,419 5,719
Other components of capital - -
________ ________
Total primary capital 65,785 60,157
Total secondary capital - -
________ ________
Total capital $ 65,785 $ 60,157
======== ========
Ratio of total capital to total
adjusted assets 11.3 10.9
Tier 1 and total capital as a percentage of "risk-weighted"
assets at December 31, 1995 and 1994, are as follows:
December 31,
______________
1995 1994
______ ______
Tier 1 capital percentage 15.4% 14.8%
Total capital percentage 16.6% 16.1%
The Company's capital ratios exceed the minimum capital
requirements at December 31, 1995, 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, 1995
_______________________________________
Interest Sensitive Within (Cumulative)
_______________________________________
Total of
Interest-
Within Within Within Earning
3 Months 12 Months 5 Years Assets
________ _________ ________ ________
Interest-earning assets:
Loans $179,148 $ 244,360 $331,979 $351,067
Investment and mortgage-
backed securities 15,515 45,875 147,697 179,343
Federal funds sold and
other 4,401 4,401 4,401 4,401
________ _________ ________ ________
Totals $199,064 $ 294,636 $484,077 $534,811
======== ========= ======== ========
Interest-bearing
liabilities:
Deposits and
borrowed funds $208,841 $ 323,937 $436,012 $436,448
======== ========= ======== ========
Sensitivity gap:
Dollar amount $ (9,777) $ (29,301) $ 48,065
Percent of total
interest-earning
assets (4.9%) (10.0%) 9.9%
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, 1995, 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 $29 million (cumulative),
representing a negative cumulative one year gap of 10% 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 and monitored by
an Asset/Liability Management Committee.
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 the board of directors.
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
1995 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 1995 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 8 - 14 of the proxy statement which is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Reference is made to Pages 2 - 8 of the Company's proxy
statement which is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Pages 13 - 14, "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, 1995 and 1994, together with the report of
T. E. Lott & Company, independent accountants, dated
January 17, 1996, appearing on Pages 9 - 27 of the 1995
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, 1995.
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/Mark A. Abernathy S/Bobby Harper
____________________________ ___________________________
(Director) (Director)
S/Carl M. Holloway S/J. Nutie Dowdle
____________________________ ___________________________
(Director) (Director)
S/Clifton B. Fowler S/Allen B. Puckett, III
____________________________ ___________________________
(Director) (Director)
S/Edith D. Millsaps S/Thomas J. Prince
____________________________ ___________________________
(Director) (Director)
S/William Ward S/R. D. Miller
____________________________ ___________________________
(Director) (Director)
S/Sammy J. Smith S/L. F. Mallory, Jr.
____________________________ ___________________________
(Director) (Director)
S/Henry Weiss
____________________________
(Director)
Date: March 27, 1996
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 $61.00 and $73.00 during 1994 and $71.50 and
$81.00 during 1995. 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,
________________________________________________________________
1995 1994 1993 1992 1991
____________ ____________ ____________ ____________ ____________
INCOME DATA
Interest and
fees on
loans $ 30,730,631 $ 25,216,740 $ 19,097,106 $ 18,816,616 $ 22,074,827
Interest and
dividends on
investment
securities 11,072,491 10,338,962 11,036,898 13,346,320 14,142,167
Other interest
income 446,455 257,671 143,759 132,378 452,276
____________ ____________ ____________ ____________ ____________
Total
interest
income 42,249,577 35,813,373 30,277,763 32,295,314 36,669,270
Interest
expense 18,684,733 13,545,475 11,540,090 13,882,619 20,244,741
____________ ____________ ____________ ____________ ____________
Net interest
income 23,564,844 22,267,898 18,737,673 18,412,695 16,424,529
Provision for
loan losses 1,165,000 1,234,024 1,634,960 2,028,689 1,610,863
____________ ____________ ____________ ____________ ____________
Net interest
income
after
provision
for loan
losses 22,399,844 21,033,874 17,102,713 16,384,006 14,813,666
____________ ____________ ____________ ____________ ____________
Service
charges on
deposit
accounts 3,382,570 3,329,928 2,606,042 2,616,082 2,616,933
Other income 2,480,667 2,394,711 2,756,746 2,648,656 1,939,655
____________ ____________ ____________ ____________ ____________
Total
noninterest
income 5,863,237 5,724,639 5,362,788 5,264,738 4,556,588
____________ ____________ ____________ ____________ ____________
Salaries and
employee
benefits 10,278,758 9,608,105 8,404,911 7,755,953 7,023,512
Occupancy and
equipment
expense 2,467,351 2,237,060 1,836,524 1,829,379 1,739,552
Other
expenses 5,278,434 5,428,709 4,469,271 4,702,472 4,104,497
____________ ____________ ____________ ____________ ____________
Total non-
interest
expense 18,024,543 17,273,874 14,710,706 14,287,804 12,867,561
____________ ____________ ____________ ____________ ____________
Income before
income taxes
and
cumulative
effect of
a change in
accounting
principle 10,238,538 9,484,639 7,754,795 7,360,940 6,502,693
Income taxes 2,430,643 2,346,397 1,588,508 1,610,869 1,331,232
Cumulative
effect
(benefit)
of change
in
accounting
principle - (174,160) - -
____________ ____________ ____________ ____________ ____________
Net Income $ 7,807,895 $ 7,138,242 $ 6,340,447 $ 5,750,071 $ 5,171,461
============ ============ ============ ============ ============
PER SHARE
DATA (1)
Net income $6.51 $5.95 $5.28 $4.79 $4.31
Dividends 2.40 2.05 1.75 1.76 1.31
FINANCIAL
DATA
Shares
outstanding 1,200,000 1,200,000 1,200,000 1,082,425 1,082,425
Total assets $576,215,391 $545,404,537 $452,356,731 $444,406,921 $437,860,541
Net loans $341,998,215 $317,812,315 $247,479,066 $223,768,751 $215,875,112
Total
deposits $496,783,232 $455,761,308 $383,484,153 $379,949,418 $387,299,507
Total
stockholders'
equity $ 60,272,268 $ 51,654,561 $ 49,759,895 $ 45,516,867 $ 41,877,525
(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 58.6% over the past
five years. The 20.6% growth in 1994 reflects the company's
acquisition of First State Bank in Tuscaloosa, Alabama. The 5.6% asset
growth in 1995 is somewhat misleading considering the $17.8 million
federal funds which were purchased at the end of 1994 to accommodate
large purchases of municipal securities. These federal fund purchases
tended to inflate the company's balance sheet for a brief period at the
end of 1994, thus causing 1995's asset growth percentage to be somewhat
misleading. The modest levels of asset growth in 1992 and 1993 may be
attributed to generally low levels of interest rates which tended to
reduce balance sheet gains. With the exception of 1992, the company
has experienced solid loan growth. The lower level of loan growth in
1992 reflects the reduced level of economic activity that existed in
the company's markets throughout most of that year. Excluding 1991
loan losses from the acquired Bank of Philadelphia portfolio, loan
losses have been low. Net charge-offs for 1995 and 1994 respectively
were .14% of net loans outstanding in each year.
Deposits have increased 56.8% over the past five years. The
18.9% increase in deposits during 1994 is also attributable to the
First State Bank of Tuscaloosa acquisition. Deposit growth was
essentially stagnant during the 1991-93 period as the generally low
level of interest rates and increased non-bank competition for deposits
made deposit increases hard to attain. Also, during the 1991-93
period, management employed a strategy of bidding less competitively
for volatile public fund deposits which created a decline, particularly
in 1992, in this deposit source. Management has always been committed
to attracting deposits at an interest cost which would assure the
maintenance of proper interest margins for the company. Management has
also felt that it could improve profits by allowing loans to grow at a
faster pace than deposits. This practice was modified somewhat during
1995 as loans reached a more optimum level relative to outstanding
deposits.
Shareholders' equity, particularly as it relates to assets, has
represented a consistent strength of the company throughout the years
noted in the summary data. Shareholders' equity has increased 57.5%
over the past five years. Shareholders' equity in 1994 reflected
unrealized losses on "Available for Sale Securities" of $2,783,576 and
unrealized gains on "Available for Sale Securities" of $906,236 in
1995, as required to be reported under FASB 115.
Net income has maintained consistent growth in each of the five
years reported. Earnings have increased 73.0% over the past five
years. Earnings increases were 10.3% in 1993, 12.6% in 1994, and 9.4%
in 1995. Return on average assets (ROA), a primary measure of earnings
strength, has exceeded 1.2% in each of the years noted. ROA has been
1.4% in 1993, 1994 and 1995. Earnings per share have also grown in
each of the past five years, increasing from $4.31 in 1991 to $6.51 in
1995. Regular cash dividends have been increased in each of the five
years outlined in the summary.
Special cash dividends of $.25 and $.15 per share in 1992 and
1995 respectively were paid 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), the primary source of earnings for the
company, has increased in each of the five years in the summary. This
income component represents income generated from earning assets less
the interest expense of funding those assets. NII increased 18.8% in
1994 and 5.8% in 1995. The reduced increase in 1995 is attributable to
the company's being less aggressive in passing reduced asset yields
onto the deposit side of the balance sheet since these deposits were
needed to fund increasing loan demand. Changes in NII can be divided
into two components, the change in average earning assets (volume
component) and the change in the net interest margin (rate component).
During 1995, average earning assets increased $35.5 million or 7.4%.
Net interest margin for the year decreased to 4.57% from 4.61% in 1994.
As can be determined from these components of change, 1995's
improvement in NII resulted exclusively from an increase in average
earning assets. Net interest margin represents the difference between
yields on earning assets and rates paid on interest bearing
liabilities. Although rates paid on deposits declined during 1995,
yields on earning assets declined at a slightly greater amount, thus
reducing net interest margin. As noted, the growth of the company's
loan portfolio during 1995 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 interest income growth while reducing exposure to adverse
fluctuations in rates. The company utilizes an Asset/Liability
Management Committee which evaluates and analyzes the company's
pricing, maturities, growth, and balance sheet mix strategies in an
effort to make informed decisions that will increase income and limit
interest rate risk. The committee uses simulation modeling as a guide
for its decision-making. Modeling techniques are also utilized to
forecast changes in net income and the economic value of equity under
assumed fluctuations in interest rate levels.
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. At year-end 1995, the company's balance sheet
reflected $19.0 million more in rate sensitive liabilities than assets
that were scheduled to reprice within one year. This represents 3.8%
of total assets which would be considered an essentially neutral rate
sensitive position. Although management feels that rates are likely to
move slightly lower during the first half of 1996 before leveling out,
this neutral position would appear to place the company in a low
interest rate risk posture. We have never believed that speculation on
the change of interest rate levels warranted moving the company from a
neutral position in its rate sensitive asset/liability relationships.
Although earnings could be enhanced if predictions are correct, they
also could be put at significant risk if a neutral position is
deliberately avoided and interest rates move against predictions.
The company's Provision for Loan and Lease Losses is utilized to
replenish its Reserve for Loan and Lease Losses on its balance sheet.
The reserve is maintained at a level deemed adequate by the Board of
Directors after evaluation of the risk exposure contained in the
company's loan portfolio. The reserve amount maintained is deemed
entirely adequate to cover exposure within the company's loan
portfolio. The reserve has increased 201.8% over the past five years
or from 1.19% of net loans in 1990 to 1.8% in 1995.
Non-interest income and non-interest expense totals each reflect
the impact of the acquisitions of the Bank of Philadelphia in 1991 and
First State Bank of Tuscaloosa in 1994. 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
good will 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. Non-interest
expense in 1995 increased 4.3% with new personnel adding to salary and
benefit costs; reductions in BIF (Bank Insurance Fund) premiums reduced
the expense. Finally, it is noted 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
were 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.
Large purchases of municipal securities in December 1994 and January
1995 assisted in reducing the company's effective tax rate. 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 in 1993
resulting from a change in accounting principles regarding deferred
income taxes. The company's effective tax rate was 24.7% in 1994 and
23.7% in 1995.
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. It is pointed out that the company experienced fewer periods of
excess liquidity during 1995 as loan volume continued to grow, and the
company's loan/deposit ratio reached its desired 70% level. The
company has utilized the Federal Home Loan Bank as a source of funding
for fixed rate, term loan commitments. At the end of 1995 the company
had outstanding to the Federal Home Loan Bank $9.6 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 management 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 1995, NBC maintained a 9.91% 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 1995, the company had a Tier 1 ratio of 15.4% and a total risk based
capital ratio of 16.6%, 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 57.5% since
1990 to a level of $60,272,268. 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, 1995 AND 1994
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, 1995 and 1994,
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, 1995. 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, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
T. E. Lott & Company
Columbus, Mississippi
January 17, 1996
NBC CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
____________ ____________
Cash and due from banks $ 23,992,273 $ 21,678,520
Interest-bearing deposits with banks 800,843 375,488
Federal funds sold 3,600,000 2,500,000
Securities (Note D) 179,343,452 176,146,121
Loans, net of reserve for loan losses of
$6,419,570 in 1995 and $5,719,110 in
1994 (Note E) 341,998,215 317,812,315
Interest receivable 5,519,350 4,490,010
Premises and equipment (Note F) 12,660,850 12,404,886
Other real estate 117,500 667,487
Intangible assets (Note C) 2,806,519 2,992,364
Other assets 5,376,389 6,337,346
____________ ____________
$576,215,391 $545,404,537
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 70,360,220 $ 67,460,056
Interest-bearing deposits, $100,000
or more 67,526,490 57,058,634
Other interest-bearing deposits 358,896,522 331,242,618
____________ ____________
Total deposits 496,783,232 455,761,308
Interest payable 2,346,144 1,671,377
Borrowed funds (Note G) 10,025,939 30,159,563
Other liabilities 6,787,808 6,157,728
____________ ____________
Total liabilities 515,943,123 493,749,976
____________ ____________
Commitments and contingent liabilities
(Note L)
Stockholders' equity (Note K):
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 25,163,899 20,236,004
Net unrealized gain (loss) on
available-for-sale securities,
net of tax of $468,360 in 1995
and $1,432,067 in 1994 906,236 (2,783,576)
____________ ____________
60,272,268 51,654,561
____________ ____________
$576,215,391 $545,404,537
============ ============
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
___________ ___________ ___________
INTEREST INCOME
Interest and fees on loans $30,730,631 $25,216,740 $19,097,106
Interest and dividends on
securities:
Taxable interest and
dividends 7,232,827 7,231,495 8,098,995
Tax-exempt interest 3,839,664 3,107,467 2,937,903
Other 446,455 257,671 143,759
___________ ___________ ___________
42,249,577 35,813,373 30,277,763
___________ ___________ ___________
INTEREST EXPENSE
Interest on time deposits of
$100,000 or more 3,418,128 2,366,527 2,035,334
Interest on other deposits 14,488,121 10,380,965 8,830,175
Interest on borrowed funds 778,484 797,983 674,581
___________ ___________ ___________
18,684,733 13,545,475 11,540,090
___________ ___________ ___________
Net interest income 23,564,844 22,267,898 18,737,673
Provision for loan losses
(Note E) 1,165,000 1,234,024 1,634,960
___________ ___________ ___________
Net interest income after
provision for loan losses 22,399,844 21,033,874 17,102,713
___________ ___________ ___________
OTHER INCOME
Service charges on deposit
accounts 3,382,570 3,329,928 2,606,042
Other service charges and
fees 1,663,310 1,597,220 1,602,936
Trust Department income 846,296 751,079 703,184
Securities (losses) gains,
net (185,523) (155,887) 21,511
Other 156,584 202,299 429,115
___________ ___________ ___________
5,863,237 5,724,639 5,362,788
___________ ___________ ___________
OTHER EXPENSE
Salaries 8,428,133 7,851,474 6,860,580
Employee benefits (Note I) 1,850,625 1,756,631 1,544,331
Net occupancy expense 1,380,148 1,322,977 1,104,930
Furniture and equipment
expense 1,087,203 914,083 731,594
Deposit insurance premiums 525,744 991,642 857,275
Other 4,752,690 4,437,067 3,611,996
___________ ___________ ___________
18,024,543 17,273,874 14,710,706
___________ ___________ ___________
Income before income taxes
and the cumulative effect
of a change in accounting
principle 10,238,538 9,484,639 7,754,795
Income taxes (Note H) 2,430,643 2,346,397 1,588,508
___________ ___________ ___________
Income before the cumulative
effect of a change in
accounting principle 7,807,895 7,138,242 6,166,287
Cumulative effect (benefit)
of a change in accounting
for income taxes (Note B) - - (174,160)
___________ ___________ ___________
Net income $ 7,807,895 $ 7,138,242 $ 6,340,447
=========== =========== ===========
Per common share amounts:
Net income before
cumulative effect of
accounting change $ 6.51 $ 5.95 $ 5.13
Cumulative effect of
accounting change - - .15
___________ ___________ ___________
Net income $ 6.51 $ 5.95 $ 5.28
=========== =========== ===========
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Net
Unrealized
Gain (Loss)
On
Available-
Common Undivided For-Sale
Stock Surplus Profits Securities Total
___________ ___________ ___________ ___________ ___________
Balance,
January 1,
1993 $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
securi-
ties, 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
Net income
for 1995 - - 7,807,895 - 7,807,895
Cash
dividends
declared,
$2.40 per
share - - (2,880,000) - (2,880,000)
Net change
in
unrealized
gain (loss)
on
available-
for-sale
securities,
net of tax - - - 3,689,812 3,689,812
__________ ___________ ___________ ___________ ___________
Balance,
December
31, 1995 $1,200,000 $33,002,133 $25,163,899 $ 906,236 $60,272,268
========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
___________ ___________ ___________
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 7,807,895 $ 7,138,242 $ 6,340,447
Adjustments to reconcile net
income to net cash:
Cumulative effect of
accounting change - - (174,160)
Depreciation and
amortization 1,376,515 1,276,023 859,972
Deferred income taxes
(credits) (189,616) (286,884) (567,772)
Provision for loan losses 1,165,000 1,234,024 1,634,960
FHLB stock dividend (111,000) (76,900) (54,400)
Losses (gains) on sale of
securities 185,523 155,887 (21,511)
Deferred credits (105,214) (47,919) (19,524)
(Increase) decrease in
interest receivable (1,029,340) (622,506) 78,888
Increase in other assets (348,734) (216,860) (1,199,642)
Increase (decrease) in
interest payable 674,767 192,967 (17,492)
Increase in other
liabilities 210,552 26,387 116,517
___________ ___________ ___________
Net cash provided by
operating activities 9,636,348 8,772,461 6,976,283
___________ ___________ ___________
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 (38,095,497) (60,225,100) -
Proceeds from sales of
available-for-sale securities 11,451,366 21,990,387 -
Proceeds from maturities and
calls of available-for-sale
securities 30,728,981 57,044,849 -
Purchases of securities to be
held-to-maturity (1,746,435) (21,904,571) -
Proceeds from maturities and
calls of held-to-maturity
securities 24,580 - -
Proceeds from maturities and
calls of securities - - 26,571,575
Proceeds from sale of
securities - - 40,648,869
Purchases of securities - - (47,599,881)
Increase in loans (25,245,686) (30,830,314) (25,325,751)
Additions to premises and
equipment (1,318,849) (801,146) (1,668,821)
___________ ___________ ___________
Net cash used in investing
activities (24,201,540) (36,908,928) (7,374,009)
___________ ___________ ___________
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase in deposits 41,021,924 17,149,474 3,534,735
Sale of fractional shares - - 2,133
Dividends paid on common stock (2,484,000) (396,000) (2,099,552)
Net increase (decrease) in
borrowed funds (20,133,624) 14,527,931 131,632
___________ ___________ ___________
Net cash provided by financing
activities 18,404,300 31,281,405 1,568,948
___________ ___________ ___________
Net increase in cash and cash
equivalents 3,839,108 3,144,938 1,171,222
Cash and cash equivalents at
beginning of year 24,554,008 21,409,070 20,237,848
___________ ___________ ___________
Cash and cash equivalents at
end of year $28,393,116 $24,554,008 $21,409,070
=========== =========== ===========
The accompanying notes are an integral part of these statements.
NBC CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
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 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.
Beginning with 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
consolidated financial statements.
2. Nature of Operations
The Corporation is a multi-bank holding company. Its primary asset
is its investment in its subsidiary banks. NBC and First State
Bank provide full banking services, including trust services. NBC
operates under a national bank charter and is subject to regulation
of the Office of the Comptroller of the Currency. The area served
by NBC is the North Central region of Mississippi with locations in
nine communities. First State Bank is a state chartered bank and
is subject to regulation of the Federal Deposit Insurance
Corporation and the State of Alabama. First State Bank serves the
Tuscaloosa, Alabama area. The primary asset of NBC Service
Corporation is its investment in Commerce National Insurance
Company, a life insurance company. Philadelphia Finance
Corporation is a finance company with an office located in
Philadelphia, Mississippi.
3. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
4. 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, 1995 and 1994.
5. 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 specifically determined
to be impaired. 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.
6. 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. Reserves for any impaired loans are generally
determined based on collateral values. 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.
7. 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.
8. 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.
9. 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 was $185,845 and $182,625 for 1995 and 1994,
respectively.
10. 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.
11. Trust Assets
Assets of the Trust Department, other than cash on deposit, are not
included in the accompanying balance sheets, since such items are
not assets of the bank.
12. 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,
"Employers' 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
2,109 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.
13. 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.
14. 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.
15. 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.
NOTE B - ACCOUNTING CHANGE
Financial Accounting Standards Board (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, 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.
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 year ended
December 31, 1993, as though First State Bank had been acquired on
January 1, 1993, follow:
1993
___________
Interest and other income $40,456,364
Net income 6,742,340
Net income per common share $5.62
NOTE D - SECURITIES
Securities at December 31, 1995 and 1994, consisted of
available-for-sale securities with a carrying amount of
$147,270,286 and $145,794,809, respectively, and securities
to be held-to-maturity with a carrying amount of $32,073,166 and
$30,351,312, respectively. The amortized cost, gross unrealized
gains, gross unrealized losses and estimated fair value of these
securities are as follows:
December 31, 1995
__________________________________________________
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
____________ __________ __________ ____________
Available-for-sale
securities:
U. S. Treasury
securities $ 25,732,454 $ 334,508 $ 27,708 $ 26,039,254
Obligations of
other U. S.
Government
agencies 25,412,659 539,807 110,237 25,842,229
Obligations of
states and
municipal
subdivisions 34,500,845 508,672 132,450 34,877,067
Mortgage-backed
securities 55,151,360 588,052 281,815 55,457,597
Equity securities 3,258,000 - - 3,258,000
Other securities 1,842,219 19,103 65,183 1,796,139
____________ __________ __________ ____________
$145,897,537 $1,990,142 $ 617,393 $147,270,286
============ ========== ========== ============
Held-to-maturity
securities:
Obligations of
states and
municipal
subdivisions $ 32,073,166 $3,160,999 $ - $ 35,234,165
============ ========== ========== ============
December 31, 1994
__________________________________________________
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair 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
============ ========== ========== ============
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
____________ ____________ ___________ ___________
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 are as follows:
December 31, 1995
____________________________________________________
Available-for-Sale Held-to-Maturity
__________________________ ________________________
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
____________ ____________ ___________ ___________
Due in one year
or less $ 18,714,064 $ 18,747,042 $ - $ -
Due after one year
through five
years 64,706,506 65,612,020 2,946,751 3,093,880
Due after five
years through
ten years 2,999,836 3,193,455 6,475,149 7,121,762
Due after ten
years 743,948 737,297 22,651,266 25,018,523
Mortgage-backed
securities
and other
securities 58,733,183 58,980,472 - -
____________ ____________ ___________ ___________
$145,897,537 $147,270,286 $32,073,166 $35,234,165
============ ============ =========== ===========
December 31, 1994
____________________________________________________
Available-for-Sale Held-to-Maturity
__________________________ ________________________
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair 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 $14,761 and $122,379 and gross losses of $200,284 and
$278,266 were realized on available-for-sale securities in 1995 and
1994, respectively.
Securities with a carrying value of $96,913,000 and $99,183,000 at
December 31, 1995 and 1994, 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, 1995 and 1994, securities included no "high-risk
mortgage securities."
NOTE E - LOANS
Loans outstanding include the following types:
(In Thousands)
December 31,
__________________
1995 1994
________ ________
Commercial, financial and agricultural $ 56,219 $ 51,541
Real estate - construction 11,892 12,372
Real estate - mortgage 193,686 178,391
Installment loans to individuals 83,281 79,961
Other 5,989 5,297
________ ________
351,067 327,562
Unearned interest (2,649) (4,031)
Reserve for loan losses (6,420) (5,719)
________ ________
$341,998 $317,812
======== ========
Loans on which the accrual of interest has been discontinued amounted
to $2,027,895 at December 31, 1995, and $1,396,781 at December 31,
1994. Restructured loans amounted to approximately $910,000 and
$278,000 at December 31, 1995 and 1994, respectively. The income
effect of nonaccrual loans and restructured loans was not significant
for each of the three years ended December 31, 1995.
At December 31, 1995, 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,
__________________________________
1995 1994 1993
__________ __________ __________
Balance at beginning of year $5,719,110 $4,450,355 $3,203,880
Additions:
Provision for loan losses
charged to operating expense 1,165,000 1,234,024 1,634,960
Recoveries of loans
previously charged off 303,259 250,015 269,235
Reserve applicable to loans
of acquired bank - 493,878 -
__________ __________ __________
7,187,369 6,428,272 5,108,075
Deductions:
Loans charged off 767,799 709,162 657,720
__________ __________ __________
Balance at end of year $6,419,570 $5,719,110 $4,450,355
========== ========== ==========
At December 31, 1995, NBC and First State Bank had loans amounting
to approximately $1,432,000 that were specifically classified as
impaired. The reserve for loan losses related to impaired loans
amounted to approximately $551,000 at December 31, 1995. Cash
receipts in 1995 on these loans were not significant.
NOTE F - PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation and amortization as follows:
Estimated
Useful December 31,
Lives ________________________
In Years 1995 1994
__________ ___________ ___________
Premises:
Land - $ 2,299,972 $ 2,345,297
Buildings, construction
and improvements 10 - 50 12,318,470 11,707,628
___________ ___________
14,618,442 14,052,925
Equipment 3 - 10 8,397,970 7,801,508
___________ ___________
23,016,412 21,854,433
Less accumulated
depreciation and
amortization 10,355,562 9,449,547
___________ ___________
$12,660,850 $12,404,886
=========== ===========
The amount charged to operating expenses for depreciation was
$1,062,885 for 1995, $981,690 for 1994, and $848,449 for 1993.
NOTE G - BORROWED FUNDS
Borrowed funds are summarized as follows:
December 31,
________________________
1995 1994
___________ ___________
Federal funds purchased $ - $17,800,000
6.06% note payable to the Federal Home
Loan Bank, due January 1, 1998 3,042,140 3,380,909
4.78% note payable to the Federal Home
Loan Bank, due June 1, 1998 1,539,360 2,126,215
6.63% note payable to the Federal
Home Loan Bank, due January 1, 2000 2,611,920 2,749,921
5.57% note payable to the Federal Home
Loan Bank, due June 1, 2000 2,376,835 2,628,726
Treasury tax and loan note 455,684 1,473,792
___________ ___________
$10,025,939 $30,159,563
=========== ===========
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 (1995 - ($69,570); 1994 - ($53,002);
1993 - $7,314) is as follows:
Years Ended December 31,
__________________________________
1995 1994 1993
__________ __________ __________
Current tax expense $2,620,259 $2,633,281 $2,156,280
Deferred tax expense (benefit) (189,616) (286,884) (567,772)
__________ __________ __________
$2,430,643 $2,346,397 $1,588,508
========== ========== ==========
Deferred tax provisions are applicable to the following items:
Years Ended December 31,
__________________________________
1995 1994 1993
__________ __________ __________
Depreciation $ 91,482 $ (16,084) $ (1,949)
Loans and reserve for loan
losses (599,459) (404,902) (596,869)
Securities 90,928 (43,550) 57,370
Employee benefits 103,966 (46,874) 55,287
State net operating loss
carryforward 100,000 199,400 (88,590)
Other, net 23,467 25,126 6,979
__________ __________ __________
$ (189,616) $ (286,884) $ (567,772)
========== ========== ==========
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,
__________________________________
1995 1994 1993
__________ __________ __________
Tax on income before income
taxes $3,481,103 $3,224,777 $2,636,630
Increase (decrease) resulting
from:
Tax-exempt income (1,345,604) (1,060,562) (1,000,263)
Goodwill amortization 75,733 74,640 -
Other nondeductible expenses 190,332 158,585 84,750
Tax benefit of small life
insurance company
exemption (109,644) (129,628) (129,432)
State income taxes, net of
federal benefit 126,060 58,428 -
Other, net 12,663 20,157 (3,177)
__________ __________ __________
$2,430,643 $2,346,397 $1,588,508
========== ========== ==========
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, 1995 and 1994, are as follows:
1995 1994
___________ ___________
Deferred tax assets:
Reserve for loan losses $ 2,016,430 $ 1,485,321
Employee benefits 272,103 376,099
State net operating loss carryforward - 100,000
Unrealized loss on available-for-sale
securities - 1,447,725
Other 51,865 61,755
___________ ___________
Total deferred tax assets 2,340,398 3,470,900
___________ ___________
Deferred tax liabilities:
Premises and equipment (932,017) (840,535)
Deferred loan fees/costs (112,330) (98,783)
Securities (188,600) (143,747)
Unrealized gain on available-for-sale
securities (464,592) -
Loans (101,100) (169,450)
Other (90,675) (44,600)
___________ ___________
Total deferred tax liabilities (1,889,314) (1,297,115)
___________ ___________
Net deferred tax asset $ 451,084 $ 2,173,785
=========== ===========
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, 1995 and 1994:
1995 1994
___________ ___________
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$4,406,220 in 1995 and $3,784,057
in 1994 $ 4,971,473 $ 4,278,969
=========== ===========
Projected benefit obligation for service
rendered to date $ 7,513,552 $ 6,362,307
Fair value of plan assets 6,890,838 5,605,178
___________ ___________
Plan assets less than projected benefit
obligation (622,714) (757,129)
Unrecognized net gain 1,303,292 885,187
Unrecognized net asset at adoption of
Statement No. 87 being recognized over
employees' average remaining service
life (162,851) (195,422)
Unrecognized prior service cost 26,761 3,269
___________ ___________
Prepaid (accrued) pension costs $ 544,488 $ (64,095)
=========== ===========
Net pension costs included the following components:
Years Ended December 31,
____________________________
1995 1994 1993
________ ________ ________
Service costs - benefits earned
during the period $392,933 $406,355 $322,976
Interest cost on projected benefit
obligation 512,274 472,230 418,958
Actual return on plan assets (846,454) (370,788) (504,637)
Net amortization and deferral 246,348 (245,531) (30,123)
________ ________ ________
$305,101 $262,266 $207,174
======== ======== ========
The actuarial assumptions used in determining the actuarial present
value of the projected benefit obligation were as follows:
December 31,
____________________________
Assumption 1995 1994 1993
__________ ________ ________ ________
Weighted average discount rate 7.5% 7.5% 7.5%
Rate of increase in future
compensation levels 5.0% 5.0% 5.0%
Expected long-term rate of return
on plan assets 9.0% 9.5% 9.5%
Contributions to the ESOP amounted to $200,000 in 1995, $187,100 in
1994, and $165,000 in 1993. At December 31, 1995, the plan held
79,955 shares of the Corporation's common stock. Contributions
to the 401(k) plan amounted to $54,886 in 1995, $54,180 in 1994, and
$45,079 in 1993.
NOTE J - 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 1995 is summarized as follows:
Loans outstanding at January 1, 1995 $ 9,781,275
New loans 5,918,782
Repayments (8,704,973)
___________
Loans outstanding at December 31, 1995 $ 6,995,084
===========
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 K - 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, 1995, 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, 1995, exceeded
the minimum requirements.
Aggregate cash reserves of $2,202,000 were maintained at December 31,
1995, to satisfy federal regulatory requirements.
NOTE L - 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, and commercial and similar letters of credit.
A summary of commitments and contingent liabilities at December 31,
1995 and 1994, is as follows:
(In Thousands)
Contractual Amount
__________________
1995 1994
________ ________
Commitments to extend credit $ 42,924 $ 43,819
Credit card lines 2,540 2,445
Commercial and similar letters of credit 3,189 3,779
Commitments to extend credit, credit card lines, and 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 1995 or 1994,
nor are any significant losses as a result of these transactions
anticipated.
NOTE M - 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 N - SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended December 31,
1995 1994 1993
___________ ___________ ___________
Cash paid during the year
for:
Interest $18,009,966 $13,352,508 $11,557,582
Income taxes 2,339,441 3,287,937 2,112,058
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 O - FINANCIAL INSTRUMENTS
Disclosures about financial instruments at December 31, 1995 and
1994, 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,
1995 and 1994, the carrying amount of cash and due from banks and
short-term investments was $28,393,116 and $24,554,008, 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.
Carrying Estimated
Date Amount Fair Value
_________________ ____________ ____________
December 31, 1995 $179,343,452 $182,504,451
============ ============
December 31, 1994 $176,146,121 $176,254,325
============ ============
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, 1995 December 31, 1994
___________________ ___________________
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
________ _________ ________ _________
Commercial, financial and
agricultural $ 56,219 $ 55,402 $ 51,541 $ 50,688
Real estate -
construction 11,892 11,675 12,372 12,121
Real estate - mortgage 193,686 190,727 178,391 174,773
Installment loans to
individuals 83,281 81,763 79,961 79,109
Other 5,989 5,879 5,297 5,084
________ _________ ________ ________
351,067 345,446 327,562 321,775
Unearned interest (2,649) (2,649) (4,031) (3,988)
Reserve for loan losses (6,420) - (5,719) -
________ _________ ________ ________
Net Loans $341,998 $ 342,797 $317,812 $317,787
======== ========= ======== ========
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, 1995 December 31, 1994
__________________________ __________________________
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
____________ ____________ ____________ ____________
Noninterest-
bearing
demand $ 70,360,220 $ 70,360,220 $ 67,460,056 $ 67,460,056
Interest-
bearing
demand 78,971,282 78,971,282 71,609,998 71,609,998
Savings and
money
market
accounts 97,946,567 97,946,567 96,914,386 96,914,386
Time
deposits 249,505,163 250,627,159 219,776,868 217,921,072
____________ ____________ ____________ ____________
$496,783,232 $497,905,228 $455,761,308 $453,905,512
============ ============ ============ ============
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, 1995 and
1994, the carrying amounts were $455,684 and $19,273,792,
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, 1995 December 31, 1994
_______________________ __________________________
Carrying Estimated Carrying Estimated
Payable To Amount Fair Value Amount Fair Value
________________ __________ ___________ ____________ ____________
Federal Home
Loan Bank $9,570,255 $ 9,617,026 $ 10,885,771 $ 10,448,108
========== =========== ============ ============
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, 1995 and 1994, these instruments totaled $48,653,000
and $50,043,000, respectively.
NOTE P - CONDENSED PARENT COMPANY STATEMENTS
Balance sheets as of December 31, 1995 and 1994, and statements of
income and cash flows for the years ended December 31, 1995, 1994
and 1993, of NBC Capital Corporation (parent company only) are
presented below:
BALANCE SHEETS
1995 1994
___________ ___________
Assets:
Cash $ 110,344 $ 132,136
Investment in bank subsidiaries 60,295,510 51,626,516
Other assets 2,572,343 2,150,250
___________ ___________
$62,978,197 $53,908,902
=========== ===========
Liabilities and Stockholders' Equity:
Other liabilities $ 2,705,931 $ 2,254,341
Stockholders' equity 60,272,266 51,654,561
___________ ___________
$62,978,197 $53,908,902
=========== ===========
STATEMENTS OF INCOME
Years Ended December 31,
__________________________________
1995 1994 1993
__________ ___________ __________
Income:
Dividends from NBC $2,880,000 $11,706,226 $2,099,552
Expense 89,361 74,053 27,489
__________ ___________ __________
Income before income taxes
and equity in undistributed
earnings of subsidiaries 2,790,639 11,632,173 2,072,063
Income tax benefit 38,075 25,178 9,346
__________ ___________ __________
Income before equity in
undistributed earnings
of subsidiary 2,828,714 11,657,351 2,081,409
Equity in earnings in excess
of dividends 4,979,181 - 4,259,038
Equity in dividends in excess
of earnings - (4,519,109) -
__________ ___________ __________
Net income $7,807,895 $ 7,138,242 $6,340,447
========== =========== ==========
STATEMENTS OF CASH FLOWS
Years Ended December 31,
_____________________________________
1995 1994 1993
___________ ___________ ___________
Cash Flows From
Operating Activities:
Net income $ 7,807,895 $ 7,138,242 $ 6,340,447
Equity in subsidiaries
earnings in excess
of dividends (4,979,181) - (4,259,038)
Equity in subsidiaries
dividends received in
excess of earnings - 2,455,109 -
Net decrease in other
assets and other
liabilities 29,494 11,171 39,033
___________ ___________ ___________
Net cash provided by
operating activities 2,858,208 9,604,522 2,120,442
___________ ___________ ___________
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 (2,880,000) (396,000) (2,099,552)
Sale of fractional shares - - 2,133
___________ ___________ ___________
Net cash used in financing
activities (2,880,000) (396,000) (2,097,419)
___________ ___________ ___________
Net increase (decrease) in
cash and cash equivalents (21,792) 76,555 23,023
Cash and cash equivalents
at beginning of year 132,136 55,581 32,558
___________ ___________ ___________
Cash and cash equivalents
at end of year $ 110,344 $ 132,136 $ 55,581
=========== =========== ===========
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, 1995. 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.
<TABLE> <S> <C>
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Article 9 FDS for 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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0
0
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<NET-INCOME> 7,808
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