UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended September 30, 2000.
Commission File Number 2-89900
NBC CAPITAL CORPORATION
(Exact name of registrant as specified in its charter.)
Mississippi 64-0694775
(State of other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
NBC Plaza, P. O. Box 1187, Starkville, Mississippi 39760
(Address of principal executive offices) (Zip Code)
Registrants's telephone number, including area code: (662) 323-1341
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $1 Par Value - 7,175,427 shares as of September 30, 2000.
PART I - FINANCIAL INFORMATION
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME FOR
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
2000 1999
_______ _______
INTEREST INCOME:
Interest and Fees on Loans $42,466 $38,935
Interest And Dividends On Investment
Securities 10,393 9,166
Other Interest Income 739 2,009
_______ _______
Total Interest Income 53,598 50,110
INTEREST EXPENSE:
Interest on Deposit 22,924 21,327
Interest on Borrowed Funds 2,556 1,741
_______ _______
Total Interest Expense 25,480 23,068
_______ _______
Net Interest Income 28,118 27,042
Provision for Loan Losses 1,047 1,729
_______ _______
Net Interest Income After Provision for
Loan Losses 27,071 25,313
_______ _______
NON-INTEREST INCOME:
Income from Fiduciary Activities 1,128 990
Service Charge on Deposit Accounts 3,954 3,658
Insurance Commission and Fee Income 2,469 2,355
Other Non-Interest Income 2,947 2,630
_______ _______
Total Non-Interest Income 10,498 9,633
Gains (Losses) on Securities (20) 37
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 12,132 12,945
Expense of Premises and Fixed Assets 3,392 3,407
Other Non-Interest Expense 6,941 9,053
_______ _______
Total Non-Interest Expense 22,465 25,405
_______ _______
Income Before Income Taxes 15,084 9,578
Income Taxes 4,213 1,978
_______ _______
NET INCOME $10,871 $ 7,600
======= =======
Net Earnings Per Share:
Basic $ 1.51 $ 1.05
Diluted $ 1.51 $ 1.05
NBC CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME FOR
QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
2000 1999
_______ _______
INTEREST INCOME:
Interest and Fees on Loans $14,570 $12,805
Interest And Dividends On Investment Securities 3,565 3,544
Other Interest Income 270 569
_______ _______
Total Interest Income 18,405 16,918
INTEREST EXPENSE:
Interest on Deposit 8,213 7,029
Interest on Borrowed Funds 838 728
_______ _______
Total Interest Expense 9,051 7,757
_______ _______
Net Interest Income 9,354 9,161
Provision for Loan Losses 282 1,099
_______ _______
Net Interest Income After Provision for
Loan Losses 9,072 8,062
_______ _______
NON-INTEREST INCOME:
Income from Fiduciary Activities 376 330
Service Charge on Deposit Accounts 1,333 1,247
Insurance Commission and Fee Income 785 719
Other Non-Interest Income 945 975
_______ _______
Total Non-Interest Income 3,439 3,271
Gains (Losses) on Securities 0 20
_______ _______
NON-INTEREST EXPENSE:
Salaries and Employee Benefits 4,356 4,764
Expense of Premises and Fixed Assets 1,164 1,164
Other Non-Interest Expense 2,441 4,271
_______ _______
Total Non-Interest Expense 7,961 10,199
_______ _______
Income Before Income Taxes 4,550 1,154
Income Taxes 1,182 105
_______ _______
NET INCOME $ 3,368 $ 1,049
======= =======
Net Earnings Per Share
Basic $ 0.47 $ 0.15
======= =======
Diluted $ 0.47 $ 0.15
======= =======
NBC CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
Sep. 30, 2000 Dec. 31, 1999
________ ________
(Unaudited) (Audited)
ASSETS:
Cash and Balances Due From Banks:
Noninterest -Bearing Balances $ 29,763 $ 80,288
Interest-bearing Balances 2,238 1,895
________ ________
Total Cash and Due From Banks 32,001 82,183
Held-To-Maturity Securities (Market value of
$52,989 at September 30, 2000 and $31,406
at December 31, 1999) 50,425 29,824
Available-For-Sale Securities 197,911 200,456
________ ________
Total Securities 248,336 230,280
Federal Funds Sold and Securities Purchased
Under Agreement to Resell 6,871 201
Loans 637,118 623,751
Less: Reserve for Loan Losses (9,948) (10,194)
________ ________
Net Loans 627,170 613,557
Bank Premises and Equipment (Net) 16,692 16,757
Interest Receivable 9,752 8,847
Other Assets 22,661 21,745
________ ________
TOTAL ASSETS $963,483 $973,570
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-Interest Bearing $ 93,724 $ 92,506
Interest Bearing Deposits 683,935 660,304
________ ________
Total Deposits 777,659 752,810
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 15,693 28,666
Other Borrowed Funds 35,879 66,857
Interest Payable 3,513 2,813
Other Liabilities 13,677 11,173
________ ________
TOTAL LIABILITIES 846,421 862,319
________ ________
Shareholders' Equity:
Common Stock $1 par Value, Authorized
10,000,000 shares, Issued 7,212,662 7,213 7,213
Surplus and Undivided Profits 112,641 107,255
Accumulated Other Comprehensive Income (1,750) (2,638)
Treasury Stock, at cost (1,042) (579)
________ ________
TOTAL SHAREHOLDERS' EQUITY 117,062 111,251
________ ________
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $963,483 $973,570
======== ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
2000 1999
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 10,871 $ 7,600
Adjustments to Reconcile Net Income
to Net Cash
Depreciation and Amortization 1,760 1,764
Deferred Income Taxes (Credits) 38 (1,578)
Provision for Loan Losses 1,047 1,729
Loss (Gain) on Sale of Securities 20 (37)
(Increase) Decrease in Interest
Receivable (905) 624
(Increase) Decrease in Other Assets (2,076) (3,002)
Increase (Decrease) in Interest
Payable 700 (35)
Increase (Decrease) in Other
Liabilities 2,504 (1,064)
________ ________
Net Cash Provided by Operating Activities 13,959 6,001
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Securities 12,575 30,009
Proceeds from Sale of Securities 1,826 12,333
Purchase of Securities (31,132) (56,167)
(Increase) Decrease in Loans (14,660) (16,875)
(Additions) Disposal of Bank Premises
and Equipment (1,285) (1,510)
Other Investing Activities (510) (168)
________ ________
Net Cash Used in Investing Activities (33,186) (32,378)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in Deposits 24,849 (20,020)
Dividend Paid on Common Stock (5,183) (1,020)
Increase (Decrease) in Borrowed Funds (43,951) 26,738
Other Financing Activities 0 0
________ ________
Net Cash Provided by Financing Activities (24,285) 5,698
________ ________
Net Increase (decrease) in Cash and Cash
Equivalents (43,512) (20,679)
Cash and Cash Equivalents at Beginning of
Year 82,384 89,020
________ ________
Cash and Cash Equivalents at End of Period $ 38,872 $ 68,341
======== ========
Interest $ 24,780 $ 23,103
======== ========
Income Taxes $ 3,888 $ 2,838
======== ========
NBC CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements include the
accounts of NBC Capital Corporation (NBC) and its subsidiaries, National
Bank of Commerce and First National Finance Company. All significant
intercompany accounts and transactions have been eliminated. In the normal
decision making process, management makes certain estimates and assumptions
that affect the reported amounts that appear in these statements. Although
management believes that the estimates and assumptions are reasonable and
are based on the best information available, actual results could differ.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with Generally Accepted Accounting
Principles have been condensed or omitted.
In the opinion of management, all adjustments necessary for the fair
presentation of the financial statement presented in this report have been
made. Such adjustments were of a normal recurring nature.
As previously reported, during the quarter ended September 30, 1999, NBC
completed the acquisitions of FFBS Bancorp, Inc., the parent company for
First Federal Bank for Savings and Galloway-Chandler-McKinney Insurance
Agency, Inc. All the outstanding shares of the two companies were acquired
in exchange for shares of the Corporation's common stock.
These acquisitions were accounted for as poolings of interest. As a
result, Generally Accepted Accounting Principles required that the balances
and results of operations of these acquired companies be included in the
Balance Sheets and Statements of Income for NBC from the beginning of the
earliest period reported. Therefore, certain 1999 Financial Statements,
included in this report, have been restated to include balances and results
of Operations for these acquired Companies.
PART I. ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
SEPTEMBER 30, 2000
The following provides a narrative discussion and analysis of significant
changes in the Corporation's results of operations and financial condition.
This discussion should be read in conjunction with the consolidated
financial statements included in this Form 10-Q.
Certain information included in this discussion contains forward-looking
statements and information that are based on Management's conclusions,
drawn from certain assumptions and information currently available to
Management. The Private Securities Litigation Act of 1995 encourages the
disclosure of forward-looking information by Management by providing safe
harbor for such information. Although management believes that the
expectations reflected in such forward-looking statements are reasonable
and based on Management's best judgements, it can give no assurance that
such expectations will prove to be correct. Such forward-looking
statements are subject to certain risk that assumptions will change and
uncertainties will materialize. Should this happen, then underlying
assumptions may prove to be significantly different and actual results may
vary materially from those anticipated or projected
RESULTS OF OPERATIONS
First three quarters of 2000 compared to the first three quarters of 1999
Earnings for the first three quarters of 2000 grew 43.0% to $10.87 million
or $1.51 per share. This compares to $7.60 million or $1.05 per share for
the first three quarters of 1999. These 2000 totals equate to a 1.5%
return on average assets and a 12.7% return on average equity.
Net interest income for the first three quarters of 2000 was $28.1 million
compared to $27.0 million for 1999. This represents an increase of 4.0%.
This increase resulted in a 6 basis point increase in the net interest
margin and a $27.0 million increase in average earning assets.
The provision for loan losses for the first three quarters of 2000 was $1.0
million compared to $1.7 million for the same period of 1999. This
represents a decrease of 39.4%. A special provision of $784,000 was made
during the third quarter of 1999 resulting from the acquisition of FFBS
Bancorp, Inc., as of August 31, 1999.
Non-interest income grew from $9.6 million in 1999 to $10.5 million in
2000. This 9.0% increase was paced by a 13.9% increase in income from
Fiduciary Activities and a 8.1% increase in income from deposit accounts.
The increase in income from Fiduciary Activities resulted from growth in
the level of assets under management and the increase in income from
service charge on deposit accounts resulted from an overall growth in the
deposit accounts and from improvements in collecting the fees earned on
these accounts. Additionally, other non-interest income increased by
$317,000 or 12.1% while insurance commissions and fee income increased by
$114,000 or 4.8%. The change in other non-interest income is made up of
small changes in several of the accounts included in this category. The
change in insurance commission and fee income relates directly to the
volume of insurance products sold during these periods.
Non-interest expenses decreased 11.8% from $25.4 million to $22.5 million
for the periods reported. This decrease resulted from a 6.3% decrease in
the expenses associated with salaries and employee benefits. This decrease
represents the benefits derived from the successful integration of FFBS
Bancorp and Galloway-Chandler-McKinney Insurance Agency acquired during the
third quarter of 1999. Other non-interest expenses also decreased by
23.3%. This decrease resulted from the decrease in merger related expenses
from 1999 to 2000.
The effective tax rate for the nine month period increased from 20.7% in
1999 to 27.9% in 2000. This increase resulted from restating the 1999
numbers for the acquisitions completed during the third quarter of 1999.
FFBS Bancorp, Inc., incurred heavy merger expenses prior to the completion
of the merger on August 31, 1999 and Galloway-Chandler-McKinney Insurance
Agency was a Sub S corporation prior to the acquisition; therefore, had no
income tax expense to be included in the restatement.
Third quarter of 2000 compared to the third quarter of 1999
Earnings for the third quarter of 2000 increased by 221.1% to $3.37 million
or $.47 per share. This compares to $1.05 million or $.15 per share for the
third quarter of 1999. These 2000 totals equate to a 1.4% return on
average assets and a 11.7% return on average equity for the quarter.
Net interest income for the third quarter of 2000 was $9.35 million
compared to $9.16 million for 1999. This represents an increase of 2.1%.
This increase resulted from a one basis point increase in the net interest
margin and a $51.6 million increase in average earning assets.
The provision for loan losses for the third quarter of 2000 was $282,000
compared to $1,099,000 for the same period of 1999. This represents a
decrease of 74.3%. A special provision of $784,000 was made during the
third quarter of 1999 resulting from the acquisition of FFBS Bancorp, Inc.,
as of August 31, 1999.
Non-interest income grew 5.1% resulting from a 13.9% increase in income
from the Company's Trust and Financial Management activities and a 6.9%
increase in income from deposit accounts. The increase in income from
Fiduciary Activities resulted from growth in the level of assets under
management and the increase in income from service charge on deposit
accounts resulted from an overall growth in deposit accounts and from
improvements in collecting the fees earned on these accounts.
Additionally, other non-interest income decreased by $30,000 or 3.1% while
insurance commissions and fee income increased by $66,000 or 9.2%. The
change in other non-interest income is made up of small changes in several
of the accounts included in this category. The change in insurance
commission and fee income relates directly to the volume of insurance
products sold during these periods.
Non-interest expenses decreased 21.9% from $10.2 million to $8.0 million.
This decrease resulted from a 8.6% decrease in the expenses associated with
salaries and employee benefits. This decrease represents the benefits
derived from the successful integration of FFBS Bancorp and
Galloway-Chandler-McKinney Insurance Agency acquired during the third
quarter of 1999. Other non-interest expenses also decreased by 42.8%.
This decrease resulted from the decrease in merger related expenses from
1999 to 2000.
The effective tax rate for the third quarter increased from 9.1% in 1999 to
26.0% in 2000. This increase resulted from restating the 1999 numbers for
the acquisitions completed during the third quarter of 1999. FFBS Bancorp,
Inc., incurred heavy merger expenses during the third quarter 1999,
resulting in a loss for the quarter and Galloway-Chandler-McKinney
Insurance Agency was a Sub S corporation prior to the acquisition;
therefore, had no income tax expense to be included in the restatement.
FINANCIAL CONDITION
The Company's balance sheet shows a decrease in total assets from $974
million to $963 million during the first three quarters of 2000. During
this period, deposits increased by $24.8 million. During this same period,
the Federal Home Loan Bank borrowings and Securities Sold Under Agreements
to Repurchase decreased $31.0 million and $13.0 million, respectively.
These changes resulted in a net decrease in available funds. Also during
this period, Fed Funds Sold increased by $6.7 million, the investment
securities portfolio increased by $18.1 million and net loans increased by
$13.6 million. The major portion of the funds for these changes came from a
redeployment of cash reserves that were on hand at December 31, 1999, in
anticipation of potential customer demand relating to Y2K, which did not
materialize. Loan quality remains good. At the end of the third quarter,
the ratio of non-performing loans to total loans remained low at .54%.
Management is committed to not relaxing its underwriting standards.
Shareholders' equity increased from $111.3 million to $117.0 million during
the first three quarters of 2000. This represented a 5.2% increase. During
this period there was an increase in the market value of the
available-for-sale portion of the investment securities portfolio. This
resulted in the Accumulated Other Comprehensive Income component of
Shareholders' Equity changing from an unrealized loss of $2,638,000 at
December 31, 1999, to an unrealized loss of $1,750,000 at September 30,
2000. Also, during the first three quarters of the year, the Company
declared dividends of approximately $5,183,000.
Upon formation of the Corporation's ESOP, the Corporation was required by
IRS regulations to provide a put option to the plan participants in order
to provide liquidity to the participants who received Corporation common
stock. During the first three quarters of 2000, the Corporation acquired,
as treasury shares, 37,235 shares of its common stock as a result of the
exercise of these put options.
The Company's bank subsidiary is required to maintain a minimum amount of
capital to total risk weighted assets as defined by the banking regulators.
At September 30, 2000, the bank's Tier I, Tier II and Total Capital Ratios
exceeded the well-capitalized standards developed under the referenced
regulatory guidelines.
Dividends paid by the Company are provided from dividends received from the
subsidiary bank. Under the regulations controlling national banks, the
payment of dividends by the bank without prior approval from the
Comptroller of the Currency is limited in amount to the current year's net
profit and the retained net earnings of the two preceding years. At
September 30, 2000, this amounted to approximately $16.9 million. Also,
under regulations controlling national banks, the bank is limited in the
amount it can lend to the Company and such loans are required to be on a
fully secured basis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
National Bank of Commerce is a defendant in a legal action
involving the placement of collateral protection insurance (CPI).
The litigation is a class action brought on behalf of "borrowers
of National Bank of Commerce" who were charged for CPI premiums.
The Bank intends to vigorously defend its position. Because the
ultimate outcome of this legal matter cannot be predicated with
any certainty, management is unable to determine the estimated
loss or costs, if any, related to this litigation and, therefore,
no provision for an anticipated loss has been provided for in the
accompanying financial statements.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Debt
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement re computation of per-share earnings
27 Financial Data Schedule
(b) Form 8-K
None
The financial information furnished herein has not been audited by
independent accountants; however, in the opinion of management, all
adjustments necessary for a fair presentation on the results of operations
for the nine month period ended September 30, 2000, have been included.
Pursuant to the requirements of the Securities and 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
November 8, 2000 /s/ Richard T. Haston
Date Richard T. Haston
Executive Vice President, Chief
Financial Officer and Treasurer
