<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-25160
ALABAMA NATIONAL BANCORPORATION
-------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 63-1114426
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
1927 FIRST AVENUE NORTH, BIRMINGHAM, ALABAMA 35203-4009
-------------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (205) 583-3654
--------------
NONE
----
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
----- ----------------------------
Common Stock, $1.00 Par Value 6,200,418
<PAGE> 2
INDEX
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION PAGE
- ----------------------------- ----
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated statements of condition
June 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated statements of income
Three month periods ended June 30, 1996 and 1995;
Six month periods ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated statements of cash flows
Six month periods ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to the unaudited consolidated financial statements
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
- --------------------------
Item 4. Submission of Matters to a Vote of Security-Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(In thousands)
<S> <C> <C>
ASSETS
Cash and due from banks .................................................... $ 32,544 $ 37,288
Interest-bearing deposits in other banks ................................... 951 11,168
Investment securities (estimated market values of $74,334 and $55,860) .... 75,120 55,847
Securities available for sale .............................................. 70,935 87,867
Trading securities ........................................................ 1,813 4,402
Federal funds sold and securities purchased under agreements to resell .... 26,969 37,320
Loans ...................................................................... 551,173 536,110
Unearned income ............................................................ (2,035) (2,133)
-------- --------
Loans, net of unearned income .............................................. 549,138 533,977
Allowance for loan losses .................................................. (8,811) (8,640)
-------- --------
Net loans................................................................... 540,327 525,337
Property, equipment and leasehold improvements, net ........................ 19,334 18,802
Intangible assets .......................................................... 7,407 7,595
Other assets ............................................................... 16,513 20,948
-------- --------
Totals ..................................................................... $791,913 $806,574
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Noninterest bearing ..................................................... $ 99,797 $106,570
Interest bearing ....................................................... 543,580 540,044
-------- --------
Total deposits ............................................................. 643,377 646,614
Federal funds purchased and securities sold under agreements to repurchase.. 42,703 58,921
Treasury tax and loan account .............................................. 4,275 2,432
Short-term borrowings ...................................................... 32,150 21,280
Accrued expenses and other liabilities ..................................... 10,491 21,413
Capital lease obligations .................................................. 313 324
-------- --------
Total liabilities .......................................................... 733,309 750,984
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $1 par; authorized 10,000,000 shares;
issued 6,566,968 shares ............................................... 6,567 6,567
Additional paid-in capital ................................................. 51,923 51,923
Retained earnings .......................................................... 5,788 2,267
Treasury stock, 366,550 shares at cost ..................................... (5,023) (5,023)
Unearned restricted stock .................................................. (232) (278)
Unrealized gain (loss) on available for sale securities, net of taxes ...... (419) 134
-------- --------
Total stockholders' equity ................................................. 58,604 55,590
-------- --------
Totals ..................................................................... $791,913 $806,574
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the three months
ended June 30,
-----------------
1996 1995
------- ------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans ........................................ $12,536 $6,826
Interest on securities ............................................ 2,423 1,332
Interest on deposits in other banks ............................... 75 -
Interest on trading securities .................................... 45 -
Interest on federal funds sold and securities purchased under
agreements to resell ............................................ 390 333
------- ------
Total interest income ................................................. 15,469 8,491
INTEREST EXPENSE:
Interest on deposits .............................................. 5,827 3,777
Interest on federal funds purchased and securities sold under
agreements to repurchase ........................................ 888 382
Interest on long and short-term borrowings ........................ 514 212
------- ------
Total interest expense ................................................ 7,229 4,371
------- ------
Net interest income ................................................... 8,240 4,120
Provision for loan losses ............................................. 53 -
------- ------
Net interest income after provision for loan losses ................... 8,187 4,120
NONINTEREST INCOME:
Securities gains .................................................. 3 -
Gain on sale of assets and deposits ............................... 323 -
Service charges on deposit accounts ............................... 864 348
Investment services ............................................... 1,796 544
Trust income ...................................................... 380 300
Other ............................................................. 513 178
------- ------
Total noninterest income .............................................. 3,879 1,370
</TABLE>
4
<PAGE> 5
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the three months
ended June 30,
------------------
1996 1995
------ ------
<S> <C> <C>
NONINTEREST EXPENSE:
Salaries and employee benefits ................................................ 5,637 2,248
Occupancy and equipment expenses .............................................. 1,057 569
Other ......................................................................... 2,514 1,207
------ ------
Total noninterest expense ..................................................... 9,208 4,024
------ ------
Income before provision for income taxes and
minority interest in earnings of consolidated
subsidiaries ................................................................. 2,858 1,466
Provision for (benefit from) income taxes ..................................... 964 (222)
------ ------
Income before minority interest in earnings of
consolidated subsidiaries .................................................... 1,894 1,688
Minority interest in earnings of consolidated
subsidiaries ................................................................. 8 253
------ ------
Net income .................................................................... $1,886 $1,435
====== ======
Net income per common share ................................................... $ 0.30 $ 0.56
====== ======
Weighted average common and common equivalent
shares outstanding ........................................................... 6,372 2,562
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the six months
ended June 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans ................................................ $25,021 $13,384
Interest on securities .................................................... 4,668 2,638
Interest on deposits in other banks ....................................... 188 -
Interest on trading securities ............................................ 124 -
Interest on federal funds sold and securities purchased under
agreements to resell .................................................... 1,016 432
------- -------
Total interest income ......................................................... 31,017 16,454
INTEREST EXPENSE:
Interest on deposits ...................................................... 12,011 7,084
Interest on federal funds purchased and securities sold under
agreements to repurchase ................................................ 1,819 732
Interest on long and short-term borrowings ................................ 989 418
------- -------
Total interest expense ........................................................ 14,819 8,234
------- -------
Net interest income ........................................................... 16,198 8,220
Provision for loan losses ..................................................... 200 -
------- -------
Net interest income after provision for loan losses ........................... 15,998 8,220
NONINTEREST INCOME:
Securities gains .......................................................... 34 -
Gain on sale of assets and deposits ....................................... 323 -
Service charges on deposit accounts ....................................... 1,686 689
Investment services ....................................................... 4,141 655
Trust income .............................................................. 710 576
Other ..................................................................... 1,041 330
------- -------
Total noninterest income ...................................................... 7,935 2,250
</TABLE>
6
<PAGE> 7
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the six months
ended June 30,
-------------------
1996 1995
------- ------
<S> <C> <C>
NONINTEREST EXPENSE:
Salaries and employee benefits ................................................ 10,693 4,109
Occupancy and equipment expenses .............................................. 2,112 1,131
Other ......................................................................... 4,679 2,185
------- ------
Total noninterest expense ..................................................... 17,484 7,425
------- ------
Income before provision for income taxes and
minority interest in earnings of consolidated
subsidiaries ................................................................. 6,449 3,045
Provision for income taxes .................................................... 2,301 110
------- ------
Income before minority interest in earnings of
consolidated subsidiaries .................................................... 4,148 2,935
Minority interest in earnings of consolidated
subsidiaries ................................................................. 10 442
------- ------
Net income .................................................................... 4,138 2,493
Less cash dividends on preferred stock ........................................ - 79
------- ------
Net income available for common shares ........................................ $ 4,138 $2,414
======= ======
Net income per common share ................................................... $ 0.65 $ 0.94
======= ======
Weighted average common and common equivalent
shares outstanding ........................................................... 6,379 2,562
======= ======
</TABLE>
7
<PAGE> 8
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For the six months
ended June 30,
---------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Net cash provided by (used in) operating activities ........................ $ 1,864 $ (85)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities ......................................... (22,626) (4,759)
Proceeds from maturities of investment securities .......................... 3,294 1,919
Purchases of securities available for sale ................................. (21,425) -
Proceeds from sale of securities available for sale ........................ 953 -
Proceeds from maturities of securities available for sale .................. 35,967 -
Net decrease in interest-bearing deposits in other banks ................... 10,217 -
Net (increase) decrease in federal funds sold and securities purchased
under agreements to resell ............................................... 10,351 (10,005)
Net increase in loans ...................................................... (15,224) (23,025)
Purchases of property, equipment and leasehold improvements ................ (1,343) (574)
Proceeds from sale of property, equipment and leasehold improvements ....... 185 -
Proceeds from sale of life insurance policy ................................ 250 -
Proceeds from sale of banking offices, net of $8,226 cash paid ............. 274 -
Proceeds from sale of other real estate owned .............................. 119 321
-------- --------
Net cash provided by (used in) investing activities ........................ 992 (36,123)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits ................................................... 5,033 26,310
Sale of deposits ........................................................... (8,500) -
Increase (decrease) in federal funds purchased, securities sold under
agreements to repurchase, and treasury tax and loan account .............. (14,375) 7,803
Net increase in short-term borrowings and capital lease obligations ........ 10,859 2,541
Dividends on common stock .................................................. (617) -
Dividends on preferred stock ............................................... - (79)
Retirement of preferred stock .............................................. - (2,500)
-------- --------
Net cash provided by (used in) financing activities ........................ (7,600) 34,075
-------- --------
Decrease in cash and cash equivalents ...................................... (4,744) (2,133)
Cash and cash equivalents, beginning of period ............................. 37,288 18,268
-------- --------
Cash and cash equivalents, end of period ................................... $ 32,544 $ 16,135
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ..................................................... $ 15,075 $ 7,871
======== ========
Cash paid for income taxes ................................................. $ 2,358 $ 118
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Acquisition of collateral in satisfaction of loans ......................... $ 70 $ 1,238
======== ========
Adjustment to market value of other real estate owned ...................... $ 15 $ -
======== ========
Adjustment to market value of securities available for sale,
net of deferred income taxes ............................................. $ 553 $ 1,191
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
<PAGE> 9
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 1996 are subject to year-end audit and are not necessarily indicative
of the results of operations to be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in Form 10-K, Annual Report under the Securities
Exchange Act of 1934, for the year ended December 31, 1995.
NOTE B - COMMITMENT AND CONTINGENCIES
The Company's subsidiary banks make loan commitments and incur contingent
liabilities in the normal course of business which are not reflected in the
consolidated statements of condition.
NOTE C - RECENTLY ISSUED PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
("Statement 121") which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company adopted
Statement 121 effective January 1, 1996. The adoption of Statement 121 did not
have a material effect on the Company's unaudited consolidated financial
statements.
In May 1995, the FASB issued Statement of Financial Accounting Standards No.
122 "Accounting for Mortgage Servicing Rights, an Amendment of FASB No. 65,"
("Statement 122"). Statement 122 requires companies that originate mortgage
loans to capitalize the cost of mortgage servicing rights separate from the
cost of originating the loan when a definitive plan to sell those loans and
retain the mortgage servicing rights exist. Prior to the adoption of Statement
122 only mortgage servicing rights that are purchased from other parties are
capitalized and recorded as an asset. Therefore, Statement 122 eliminates the
accounting inconsistencies that existed between mortgage servicing rights that
are derived from loan origination activities and those acquired through
purchase transactions. Statement 122 also requires that capitalized mortgage
servicing rights be assessed for impairment based on the fair value of those
rights. The Company adopted Statement 122 effective January 1, 1996, with no
material effect on the Company's unaudited consolidated financial statements.
9
<PAGE> 10
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE D-MERGERS AND ACQUISITIONS
On December 29, 1995, Alabama National BanCorporation ("ANB") merged ("the
Merger") with National Commerce Corporation ("NCC") and Commerce Bankshares,
Inc. ("CBS") (collectively the "Company"). The Merger was accomplished by
converting each share of NCC stock into 348.14 shares of ANB stock and each
share of CBS stock into 7.0435 shares of ANB stock for a total of 3,106,981
shares (or 50.1%) of the Company stock. The Merger was accounted for as a
"reverse acquisition," whereby NCC is deemed to have acquired ANB for financial
reporting purposes. However, ANB remains the continuing legal entity and
registrant for Securities and Exchange Commission filing purposes. Consistent
with the reverse acquisition accounting treatment, the historical financial
statements of the Company presented for the three months and the six months
ended June 30, 1995 are actually only the consolidated financial statements of
NCC and differ from the consolidated financial statements of ANB as previously
reported. The operations of ANB are included in the financial statements from
the date of the Merger. The historical stockholders' equity of NCC prior to
the Merger is retroactively restated for the equivalent number of shares
received in the Merger after giving effect to any difference in par value of
ANB's and NCC's stock by an offset to paid-in capital.
The purchase price, determined by the ANB common stock average closing price
for the month of March 1995, prior to the announcement of the Merger plus
direct acquisition costs, was allocated to the ANB assets and liabilities
acquired based on their fair market value at the date of acquisition. The
excess of the purchase price over the fair market value of net assets acquired
is being amortized on a straight line basis over twenty five years. The ANB
assets purchased and liabilities assumed (at fair market values) as of December
29, 1995 were as follows (in thousands):
<TABLE>
<S> <C>
Cash, due from banks, interest-bearing deposits with other
banks, and federal funds sold . . . . . . . . . . . . . . . . . $ 27,788
Securities available for sale . . . . . . . . . . . . . . . . . . . . . 27,821
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 19,954
Loans, net of unearned income and allowance for loan losses . . . . . . 204,485
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . 11,734
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,423
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,354
Deposits assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . (253,611)
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . (20,217)
----------
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,731
==========
</TABLE>
The following pro forma consolidated results of operations for the three and
the six months ended June 30, 1995, are presented as if the Merger had occurred
on January 1, 1995.
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
------------- ------------
June 30, 1995
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Net interest income .................................... $7,446 $14,841
Provision for loan losses .............................. 59 121
Noninterest income ..................................... 2,188 3,736
Noninterest expense .................................... 6,785 12,883
Provision for income taxes ............................. 196 877
Net income ............................................. 2,594 4,696
Earnings per common and common equivalent share ........ $ .41 $ .74
</TABLE>
10
<PAGE> 11
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE D-MERGERS AND ACQUISITIONS (CONTINUED)
Historical financial information of Alabama National BanCorporation and its
subsidiaries prior to the Merger described above is as follows:
<TABLE>
<CAPTION>
December 29, 1995 June 30, 1995
----------------- -------------
(In thousands)
<S> <C> <C>
Statement of Condition Data
Investment securities ................................. $ 19,877 $ 33,848
Securities available for sale ......................... 27,821 17,900
Loans, net ............................................ 202,762 192,356
Total assets .......................................... 298,683 287,397
Total deposits ........................................ 253,611 255,379
Stockholders# equity .................................. 26,994 32,018
<CAPTION>
For the three For the six
months ended months ended
------------- ------------
June 30, 1995
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Statement of Income Data
Net interest income ................................... $3,575 $7,118
Provision for loan losses ............................. 59 121
Noninterest income .................................... 821 1,492
Noninterest expense ................................... 2,730 5,394
Net income ............................................ 1,087 2,215
Net income per common share ........................... $ .31 $ .61
</TABLE>
CBS was formed on April 4, 1995 to succeed as owner of all the interest of
National Bank of Commerce of Birmingham ("NBC"), a consolidated subsidiary of
NCC. CBS, a bank and thrift holding company, was formed primarily to
accomplish the acquisition of Talladega Federal Savings and Loan Association
(TFSLA). On July 20, 1995, CBS issued 600,125 shares of its common stock to
NCC and 95,126 shares of its common stock to the individual stockholders of NBC
in exchange for all the common stock of NBC and became a consolidated
subsidiary of NCC. Also, on August 1, 1995, CBS acquired all of the stock of
TFSLA for $1,703,000 in cash. This acquisition was accounted for under the
purchase method; accordingly, the purchase price was allocated to the assets
and liabilities based on their fair values. No goodwill was recorded.
At the date of acquisition, TFSLA had assets of $34,982,000 and equity of
$1,813,000. The results of operations of TFSLA are included in NCC's results
of operations beginning August 1, 1995. TFSLA was merged with Citizens Bank of
Talladega, another subsidiary of the Company on December 29, 1995.
The TFSLA assets purchased and liabilities assumed as of August 1, 1995 were as
follows (in thousands):
<TABLE>
<S> <C>
Cash, due from banks, interest-bearing deposits with other
banks, and federal funds sold . . . . . . . . . . . . . . . . . $ 4,815
Securities available for sale . . . . . . . . . . . . . . . . . . . . . 334
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 5,583
Loans, net of unearned income and allowance for loan losses . . . . . . 16,757
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . 528
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,028
Deposits assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,956)
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . (386)
--------
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,703
========
</TABLE>
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following is a discussion and analysis of the consolidated financial
condition of the Company at June 30, 1996, and the results of its operations
for the three and six month periods ended June 30, 1996 and 1995. On December
29, 1995, Alabama National BanCorporation ("ANB") merged ("the Merger") with
National Commerce Corporation ("NCC") and Commerce Bankshares, Inc. ("CBS")
(collectively the "Company"). The Merger was accomplished, among other things,
by converting each share of NCC stock into 348.14 shares of ANB stock and each
share of CBS stock into 7.0435 shares of ANB stock for a total of 3,106,981
shares (or 50.1%) of the Company stock. The Merger was accounted for as a
"reverse acquisition," whereby NCC is deemed to have acquired ANB for financial
reporting purposes. However, ANB remains the continuing legal entity and
registrant for Securities and Exchange Commission filing purposes. Consistent
with the reverse acquisition accounting treatment, the historical financial
statements of the Company presented for the three and six month periods ended
June 30, 1995, are the consolidated financial statements of NCC and differ from
the consolidated financial statements of ANB previously reported. The results
of operations of ANB are included in the financial statements from the date of
the Merger. (See Note D to the Company's unaudited consolidated financial
statements.)
This information should be read in conjunction with the Company's unaudited
consolidated financial statements and related notes appearing elsewhere in this
report and Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
PERFORMANCE OVERVIEW
The Company's net income was $1.886 million for the second quarter of 1996 (the
"1996 quarter") compared to $1.435 million for the second quarter of 1995 (the
"1995 quarter"). Net income for the six month period ended June 30, 1996 (the
"1996 six months") was $4.138 million compared to $2.493 million for the six
months ended June 30, 1995 (the "1995 six months"). Net income per common
share for the 1996 and 1995 quarters was $.30 and $.56, respectively. For the
1996 six months, net income per common share was $.65 compared to $.94 for the
1995 six months. The Company has approximately 3.8 million more common shares
outstanding for the 1996 quarter and the 1996 six months as a result of the
Merger.
During the 1996 quarter, the Company absorbed an after tax charge of
approximately $567,000 ($.09 per common share) as the result of termination of
employment contracts with James A. Taylor, former Chairman and CEO of the
Company. Excluding this charge, the per common share net income of the Company
would have been $.38 and $.74, respectively for the 1996 quarter and the 1996
six months.
The principal reason for the increase in net income for the 1996 quarter and
the 1996 six months is the Merger. The improvement in 1996 net earnings
through June 30 is attributable to an increased interest margin and increased
noninterest income, a reduced minority interest in the earnings of consolidated
subsidiaries; less an increase in the provision for loan losses, noninterest
expense and income taxes.
The return on average assets for the Company was 1.04% for the 1996 six months
compared to 1.24% for the 1995 six months. The return on average stockholders'
equity decreased for the 1996 six months to 14.48%, as compared to 19.89% for
the 1995 six months. Book value per share at June 30, 1996 was $9.45, an
increase of $.48 from year end 1995. Tangible book value per share at June 30,
1996 was $8.26, an increase of $.52 from year end 1995. The Company paid a
$.10 cash dividend on common shares in the 1996 six months.
NET INCOME
12
<PAGE> 13
The largest component of the Company's net income is its net interest income,
which is the difference between the income earned on assets and the interest
paid on deposits and borrowing used to support such assets. As a result of the
Merger, average earning assets for the 1996 six months increased by
approximately $285.5 million and average interest-bearing liabilities
increased by approximately $256.9 million. The Company's net interest income
benefited from the faster growth of average earning assets than average
interest-bearing liabilities. The average taxable equivalent rates earned on
assets were 8.52% for the 1996 six months compared to 8.70% for the 1995 six
months. The average rates paid on interest-bearing liabilities were 4.71% for
the 1996 six months compared to 5.12% for the 1995 six months. The net
interest margin for the 1996 six months was 4.41% compared to 4.31% for the
1995 six months.
13
<PAGE> 14
The following table depicts, on a taxable equivalent basis for the 1996 and
1995 six months, certain information related to the Company's average balance
sheet and its average yields on assets and average costs of liabilities. Such
yields or costs are derived by dividing income or expense by the average daily
balance of the associated assets or liabilities.
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------
1996 1995
------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans (1) (3) ........................................... $535,515 $25,046 9.35% $288,516 $13,541 9.39%
Securities:
Taxable ................................................ 135,649 4,260 6.28 78,319 2,625 6.70
Tax exempt ............................................. 14,850 618 8.32 - - -
Cash balances in other banks ............................ 6,733 188 5.58 - - -
Funds sold .............................................. 37,252 1,016 5.45 14,440 432 5.98
Trading account securities .............................. 3,878 124 6.40 392 13 6.63
-------- ------- -------- -------
Total earning assets (2) ............................ 733,877 31,252 8.52 381,667 16,611 8.70
-------- ------- -------- -------
Cash and due from banks ................................... 27,265 13,962
Premises and equipment .................................... 19,267 6,103
Other assets .............................................. 22,087 6,192
Allowance for loan losses ................................. (8,682) (4,839)
-------- --------
Total assets ....................................... $793,814 $403,085
======== ========
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction accounts ................... $78,493 $1,024 2.61 $28,778 $441 3.06
Savings and money market deposits ....................... 192,919 3,592 3.72 119,699 2,720 4.54
Time deposits ........................................... 258,105 7,395 5.73 134,695 3,923 5.83
Funds purchased ......................................... 69,403 1,819 5.24 26,261 732 5.57
Other short-term borrowings ............................. 29,948 974 6.50 11,835 402 6.79
Long-term debt .......................................... 318 15 9.43 340 16 9.41
-------- ------- -------- -------
Total interest-bearing liabilities ................. 629,186 14,819 4.71 321,608 8,234 5.12
-------- ------- ---- -------- ------- ----
Demand deposits ........................................... 95,555 48,401
Accrued interest and other liabilities .................... 11,932 8,006
Stockholders' equity ...................................... 57,141 25,070
-------- --------
Total liabilities and stockholders' equity ............ $793,814 $403,085
======== ========
Net interest spread ....................................... 3.81% 3.58%
==== ====
Net interest income/margin on
a taxable equivalent basis .............................. 16,433 4.48% 8,377 4.39%
==== ====
Tax equivalent adjustment ................................. 235 157
------- -------
Net interest income/margin ................................ $16,198 4.41% $8,220 4.31%
======= ==== ======= ====
</TABLE>
- --------------------------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Tax equivalent adjustments are based on an assumed tax rate of 34%, and do
not give effect to the disallowance for Federal income tax purposes of
interest expense related to certain tax exempt assets.
(3) Fees in the amount of $720,000 and $295,000 are included in interest and
fees on loans for the six months ended June 30, 1996 and 1995,
respectively.
14
<PAGE> 15
The following table sets forth, on a taxable equivalent basis, the effect which
varying levels of earning assets and interest-bearing liabilities and the
applicable rates had on changes in net interest income from the 1996 six months
compared to the 1995 six months. For the purposes of this table, changes which
are not solely attributable to volume or rate are allocated to volume and rate
on a pro rata basis.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1996 COMPARED TO 1995
VARIANCE DUE TO
------------------------------
VOLUME YIELD/RATE TOTAL
------ ---------- -----
<S> <C> <C> <C>
EARNING ASSETS:
Loans .................................................... $11,563 $ (58) $11,505
Securities:
Taxable ................................................ 1,809 (174) 1,635
Tax exempt ............................................. 618 - 618
Cash balances in other banks ............................. 188 - 188
Funds sold ............................................... 625 (41) 584
Trading account securities ............................... 111 - 111
------- ----- -------
Total interest income ............................... 14,914 (273) 14,641
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts .................... 657 (74) 583
Savings and money market deposits ........................ 1,430 (558) 872
Time deposits ............................................ 3,540 (68) 3,472
Funds purchased .......................................... 1,132 (45) 1,087
Other short-term borrowings .............................. 590 (18) 572
Long-term debt ........................................... (1) - (1)
======= ===== =======
Total interest expense .............................. 7,348 (763) 6,585
------- ----- -------
Net interest income on a taxable
equivalent basis .................................. $ 7,566 $ 490 8,056
======= ===== =======
Taxable equivalent adjustment ............................ (78)
-------
Net interest income ...................................... $ 7,978
=======
</TABLE>
15
<PAGE> 16
Net revenue from earning assets during the 1996 six months increased $8.0
million or 97.1%, over the corresponding period in 1995. Approximately 94% of
this increase came from volume, principally from the Merger.
The provision for loan losses represents a charge to current earnings necessary
to maintain the allowance for loan losses at an appropriate level based on
management's analysis of the potential risk in the loan portfolio. The amount
of the provision is a function of the level of loans outstanding, the level of
nonperforming loans, historical loan loss experience, the amount of loan losses
actually charged against the allowance during a given period and current and
anticipated economic conditions. The provision for loan losses was $53,000 for
the 1996 quarter, while no provision was made during the 1995 quarter.
Recoveries exceeded charge-offs by $217,000 for the 1996 quarter compared to
net recoveries of $21,000 for the same period of 1995. The provision for loan
losses was $200,000 for the 1996 six months, compared with no provision for the
1995 six months. Charge-offs exceeded recoveries by $29,000 for the 1996 six
months, compared to net charge-offs of $293,000 for the 1995 six months. The
allowance for loan losses as a percentage of outstanding loans, net of unearned
income was 1.60% at June 30, 1996, compared to 1.62% at December 31, 1995.
Because of the inherent uncertainty of assumptions made during the assessment
process, there can be no assurance that loan losses in future periods will not
exceed the allowance for loan losses or that additional allocations to the
allowance will not be required. See Asset Quality.
Noninterest income for the 1996 quarter was $3.9 million, compared to $1.4
million for the 1995 quarter. For the 1996 six months noninterest income
increased to $7.9 million, compared to $2.3 million for the 1995 six months.
Gain on the sale of assets and deposits of $323,000 during the 1996 quarter and
the 1996 six months resulted from the sale of a branch and the deposits at that
branch of $274,000, the sale of other real estate of $28,000 and the sale of
loans of $21,000. Service charges on deposits for the 1996 quarter were
$864,000, compared with $348,000 for the 1995 quarter. For the 1996 six
months, service charges were $1.7 million, compared with $689,000 for the 1995
six months. For both 1996 periods, substantially all of the increase in
service charges came from the banks acquired in the Merger. Continued
increased activity in the investment services division resulted in a $1.3
million increase in the 1996 quarter over the same period in 1995 and a $3.5
million increase in the 1996 six months, when compared to the 1995 six months.
Management anticipates this increased activity to continue, but is unable to
predict the impact on the future results of operations. A slowdown was
experienced in the 1996 quarter. Trust fees increased $80,000 in the 1996
quarter compared to the 1995 quarter and increased $134,000 for the 1996 six
months, when compared with the 1995 six months. Other noninterest income
increased $335,000 in the 1996 quarter when compared to the 1995 quarter and
increased $711,000 for the 1996 six months when compared with the 1995 six
months. $57,000 of this increase in the 1996 quarter and $265,000 of this
increase in the 1996 six months came from banks acquired in the Merger.
Miscellaneous charges by NBC Securities, Inc., a subsidiary of the Company,
accounted for $159,000 of the increase for the 1996 quarter and $186,000
increase for the 1996 six months. The 1996 quarter and 1996 six months
includes an $80,000 recovery from a settlement with a third-party financial
institution.
Noninterest expense was $9.2 million for the 1996 quarter, compared to $4.0
million for the 1995 quarter. For the 1996 six months, noninterest expense was
$17.5 million, a $10.1 million increase over the 1995 six months. Salaries and
employee benefits increased to $5.6 million for the 1996 quarter, compared to
$2.2 million for the 1995 quarter. For the 1996 six months, salaries and
employee benefits increased to $10.7 million from $4.1 million in the 1995 six
months. The increase in the 1996 quarter were principally the result of (1).
$1.3 million in salaries and employee benefits of the banks acquired in the
Merger, (2). a $525,000 charge in connection with the settlement of employee
contracts with James A. Taylor, former Chairman and CEO of the Company, (3). a
$422,000 charge in connection with the termination of one of the subsidiary
bank presidents, and (4). increased salaries and employee benefits of the
investment services division resulting from increased activity totaling
approximately $946,000. The increase in salaries and employee benefits for the
1996 six months were principally the result of (1). $2.9 million in salaries
and employee benefits of the banks acquired in the Merger, (2). the $525,000
and $422,000 charges discussed above and (3). increased salaries and employee
benefits of the investment services division of approximately $2.4 million.
Occupancy and equipment expense increased to $1.1 million in the 1996 quarter,
compared to $569,000 in the 1995 quarter. Approximately $418,000 of this
increase came from the banks acquired in the Merger. For the 1996 six months,
occupancy and equipment expenses increased to $2.1 million compared to $1.1
million for the same period on 1995. Approximately $850,000 of this increase
came from banks acquired in the Merger. Other noninterest expense increased to
$2.5 million in the 1996 quarter, compared with $1.2 million in the 1995
quarter. Approximately $935,000 came from banks acquired in the Merger and a
$375,000 charge came from settlement of the employee contracts with Mr. Taylor.
Other noninterest expense increased $4.7 million in the 1996 six months from
$2.2 million in the 1995 six months. Approximately $1.9 million came from the
banks acquired in the Merger and a $375,000 charge came from the settlement of
the employee contracts with Mr. Taylor.
16
<PAGE> 17
Income tax expense was $964,000 for the 1996 quarter compared to a benefit of
$222,000 for the 1995 quarter. For the 1996 six months, income tax expense was
$2.3 million, compared to $110,000 for the 1995 six months. The principal
reason for these increases was NCC's utilization of its loss carryforwards and
credit carry forwards in the year ended December 31, 1995. The effective tax
rates the 1996 quarter and the 1996 six months were 33.7% and 35.7%,
respectively.
EARNING ASSETS
Loans comprised the largest single category of the Company's earning assets on
June 30, 1996. Loans, net of unearned income were $549.1 million or 69.3% of
total assets at June 30, 1996, compared to $534.0 million or 66.2% at December
31, 1995. Loans grew $15.1 million or 2.8% during the 1996 six months.
Investment securities increased $19.3 million in the 1996 six months.
Purchases of investment securities totaled $22.6 million and maturities and
calls of investment securities totaled $3.3 million.
Securities available for sale decreased $16.9 million in the 1996 six months.
Purchases of available for sale securities totaled $21.4 million and sales,
maturities and calls of available for sale securities totaled $36.9 million.
Overall investment securities and securities available for sale increased $2.3
million during the 1996 six months. Trading accounts securities decreased $2.6
million during the 1996 six months. The trading account securities are
securities owned by the Company prior to delivery to the Company's customers.
It is the policy of the Company to limit positions in such securities to reduce
its exposure to market and interest rate changes . Federal funds sold and
securities purchased under agreements to resell totaled $27.0 million at June
30, 1996 compared to $37.3 at December 31, 1995, a decrease of $10.3 million.
Interest-bearing deposits in other banks at June 30, 1996 were $1.0 million
compared to $11.2 million at December 31, 1995. Approximately $8.5 million of
this reduction in interest-bearing deposits at other banks was used to fund the
sale of deposits by a subsidiary bank.
DEPOSITS AND OTHER FUNDING SOURCES
Deposits decreased $3.2 million from year-end 1995, to $643.4 million at June
30, 1996. One of the subsidiary banks sold a branch and its deposits, which
totaled $8.5 million. Additionally, one customer used escrow funds at another
subsidiary bank totaling $9.4 million. Excluding these two transactions,
deposits grew approximately $14.7 million.
Federal funds purchased and securities sold under agreements to repurchase
totaled $42.7 million at June 30, 1996 an decrease of $16.2 million from
December 31, 1995. The Treasury tax and loan account increased to $4.3 million
at June 30, 1996, compared with $2.4 million at December 31, 1995. Short-term
borrowings at June 30, 1996 totaled $32.2 million and consisted of $19.2
million in borrowings by the Company from an independent bank and $13.0 million
in borrowings by a subsidiary bank from the Federal Home Loan Bank.
The Company's only long-term debt at June 30, 1996 was capital lease
obligations which decreased $11,000 during the 1996 six months.
ASSET QUALITY
Nonperforming loans are comprised of loans past due 90 days or more and still
accruing interest, loans accounted for on a nonaccrual basis and loans on which
the terms have been restructured to provide a reduction or deferral of interest
or principal because of a deterioration in the financial position of the
borrower. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that the collection of
interest is doubtful. A delinquent loan is generally placed on nonaccrual
status when it becomes 90 days or more past due. When a loan is placed on
nonaccrual status, all interest which has been accrued on the loan but remains
unpaid is reversed and deducted from earnings as a reduction of reported
interest income. No additional interest is accrued on the loan balance until
the collection of both principal and interest becomes reasonably certain. When
a problem loan is finally resolved, there may ultimately be an actual writedown
or charge-off of the principal balance of the loan which would necessitate
additional charges to earnings.
17
<PAGE> 18
At June 30, 1996, nonperforming assets totaled $2.7 million, a decrease of
$131,000 from December 31, 1995. Nonperforming assets as a percentage of loans
plus other real estate was .50% at June 30, 1996 compared to .54% at December
31,1995.
NONPERFORMING ASSETS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C>
Nonaccrual loans ............................................... $1,528 $1,243
Restructured loans ............................................. 841 891
Loans past due 90 days or more and still accruing .............. - 121
------ ------
Total nonperforming loans ................................. 2,369 2,255
Other real estate owned ........................................ 380 625
------ ------
Total nonperforming assets ................................ $2,749 $2,880
====== ======
Nonperforming assets to period-end loans and
foreclosed real estate ................................... 0.50% 0.54%
Allowance for loan losses to period-end
nonperforming assets ...................................... 320.52 300.00
Net charge-offs (recoveries) to average loans (1)............... 0.01 (0.04)
</TABLE>
- ---------------------
(1) Annualized for the six months ended June 30, 1996.
Net charge-offs for the 1996 six months totaled $29,000. The allowance for
loan losses as a percentage of total loans was 1.60% at June 30,1996 compared
to 1.62% on December 31,1995.
18
<PAGE> 19
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Allowance for loan losses at December 31,1995 . . . . . . . . . . . . . . . . . . . . . $ 8,640
Charge-offs:
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . 477
Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
--------
Total charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730
Recoveries:
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . 557
Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
--------
Total recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
--------
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Provision charged to income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
--------
Allowance for loan losses at June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . $ 8,811
========
</TABLE>
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses and internal credit ratings. Based on this analysis,
management considers the allowance for loan losses at June 30, 1996 to be
adequate to cover possible loan losses in the portfolio as of that date.
However, because of the inherent uncertainty of assumptions made during the
evaluation process, there can be no assurance that loan losses in future
periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
INTEREST RATE SENSITIVITY
The Company monitors and manages the pricing and maturity of its assets and
liabilities in order to diminish the potential adverse impact that changes in
interest rates could have on its net interest income. The principal monitoring
technique employed by the Company is the measurement of the interest
sensitivity "gap," which is the positive or negative dollar difference between
assets and liabilities that are subject to interest rate repricing within a
given period of time. Interest rate sensitivity can be managed by repricing
assets and liabilities, selling securities available for sale, replacing an
asset or liability at maturity or by adjusting the interest rate during the
life of an asset or liability. Managing the amount of assets and liabilities
repricing in this same time interval helps to hedge the risk and minimize the
impact of rising or falling interest rates on net interest income.
The Company evaluates interest sensitivity risk and then formulates guidelines
regarding asset generation and repricing, funding sources and pricing and
off-balance sheet commitments in order to decrease interest sensitivity risk.
The Company uses computer simulations to measure the net income effect of
various interest rate scenarios. The modeling reflects interest rate changes
and the related impact on net income over specified periods of time.
The following table illustrates the Company's interest rate sensitivity at June
30, 1996, assuming relevant assets and liabilities are collected and paid,
respectively, in accordance with their stated maturities.
19
<PAGE> 20
INTEREST SENSITIVITY ANALYSIS
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------------------------------------
AFTER ONE AFTER THREE
THROUGH THROUGH
WITHIN ONE THREE TWELVE WITHIN ONE GREATER THAN
MONTH MONTHS MONTHS YEAR ONE YEAR TOTAL
---------- --------- ------------ ---------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans (1) ..................................... $ 240,200 $ 39,573 $ 82,444 $ 362,217 $185,393 $547,610
Securities (2) ................................ 11,061 1,033 7,935 20,029 124,150 144,179
Interest-bearing deposits in
other banks ................................. 951 - - 951 - 951
Funds sold .................................... 26,969 - - 26,969 - 26,969
--------- --------- --------- --------- -------- ---------
Total earning assets ..................... 279,181 40,606 90,379 410,166 309,543 719,709
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits ........................... 80,665 - - 80,665 - 80,665
Savings deposits .......................... 207,450 - - 207,450 - 207,450
Time deposits (3) ......................... 25,716 47,544 120,418 193,678 61,787 255,465
Funds purchased .............................. 42,703 - - 42,703 - 42,703
Short-term borrowings (4) .................... 36,425 - - 36,425 - 36,425
Long-term debt ............................... 1 4 15 20 293 313
--------- --------- --------- --------- -------- ---------
Total interest-bearing liabilities ........ 392,960 47,548 120,433 560,941 62,080 623,021
--------- --------- --------- --------- -------- ----------
Period gap ....................................... $(113,779) $ (6,942) $ (30,054) $(150,775) $247,463
========= ========= ========= ========= ========
Cumulative gap ................................... $(113,779) $(120,721) $(150,775) $(150,775) $ 96,688 $ 96,688
========= ========= ========= ========= ======== ========
Ratio of cumulative gap to total
earning assets ................................. (15.81)% (16.77)% (20.95)% (20.95)% 13.43%
</TABLE>
- ----------------------------
(1) Excludes nonaccrual loans of $1,528,000.
(2) Excludes investment equity securities of $3,689,000.
(3) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing
(4) Includes treasury, tax and loan account of $4,275,000.
20
<PAGE> 21
The Company generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap and generally would benefit from decreasing
market rates of interest when it is liability sensitive. The Company is
liability sensitive through the one year time frame. However, the Company's
gap analysis is not a precise indicator of its interest sensitivity position.
The analysis presents only a static view of the timing of maturities and
repricing opportunities, without taking into consideration that changes in
interest rates do not affect all assets and liabilities equally. For example,
rates paid on a substantial portion of core deposits may change contractually
within a relatively short time frame, but those rates are viewed by management
as significantly less interest-sensitive than market-based rates such as those
paid on non-core deposits. Accordingly, management believes that a
liability-sensitive gap position is not as indicative of the Company's true
interest sensitivity as it would be for an organization which depends to a
greater extent on purchased funds to support earning assets. Net interest
income may be affected by other significant factors in a given interest rate
environment, including changes in the volume and mix of earning assets and
interest-bearing liabilities.
LIQUIDITY AND CAPITAL ADEQUACY
The Company's net loan to deposit ratio increased to 85.4% at June 30, 1996,
compared to 82.6% at year end 1995. The Company's liquid assets as a
percentage of total deposits were 9.40% at June 30, 1996, compared to 13.3% at
year-end 1995. At June 30, 1996, the Company had unused federal funds lines of
approximately $64.5 million, unused lines at the Federal Home Loan Bank of
$47.2 million and an unused credit line at an independent bank of $3.85
million. Management analyzes the level of off-balance sheet assets such as
unfunded loan commitments and outstanding letters of credit as they relate to
the levels of cash, cash equivalents, liquid investments and available funds
lines in an attempt to minimize the possibility that a potential shortfall will
exist. Based on this analysis, management believes that the Company has
adequate liquidity to meet short-term operating requirements.
The Company's stockholders' equity increased by $3.0 million to $58.6 million
at June 30, 1996 from December 31, 1995. This increase was attributable to:
<TABLE>
<S> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,138,000
Increase in unrealized losses on securities available for sale, net
of deferred income tax benefits . . . . . . . . . . . . . . . . . . . . . . (553,000)
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . (617,000)
Decrease in unearned restricted stock . . . . . . . . . . . . . . . . . . . 46,000
----------
Net increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,014,000
==========
</TABLE>
A strong capital position is vital to the continued profitability of the
Company because it promotes depositor and investor confidence and provides a
solid foundation for future growth of the organization. The capital of the
Company and its subsidiary banks (the "Banks") exceeded all prescribed
regulatory capital guidelines at June 30, 1996. Under the capital guidelines
of their regulators, the Company and the Banks are currently required to
maintain a minimum risk-based total capital ratio of 8%, with at least 4%
being Tier 1 capital. Tier 1 capital consists of common stockholders' equity,
qualifying perpetual preferred stock and minority interests in equity accounts
of consolidated subsidiaries, less goodwill. In addition, the Company and the
Banks must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total
assets) of at least 3%, but this minimum ratio is increased by 100 to 200 basis
points for other than the highest rated institutions. The following table sets
forth the risk-based and leverage ratios of the Company and each subsidiary
bank at June 30, 1996:
21
<PAGE> 22
<TABLE>
<CAPTION>
TIER 1 RISK TOTAL RISK TIER 1
BASED BASED LEVERAGE
----- ----- --------
<S> <C> <C> <C>
Alabama National BanCorporation 9.30% 10.55% 6.61%
Subsidiary Banks:
National Bank of Commerce.................................... 11.54 12.79 7.96
Alabama Exchange Bank........................................ 13.23 14.48 9.58
Bank of Dadeville............................................ 12.84 13.99 9.74
First National Bank of Ashland............................... 11.89 13.02 7.92
Gulf Bank.................................................... 11.85 13.10 10.32
Citizens Bank of Talladega................................... 14.20 15.45 8.95
St. Clair Federal Savings Bank............................... 10.87 12.12 7.55
Required minimums............................................ 4.00 8.00 4.00
</TABLE>
22
<PAGE> 23
Part II Other Information
Item 4 - Submission of Matters to a Vote of Security-Holders
ANB held its 1996 Annual Meeting on June 6, 1996. At the meeting, the
stockholders of ANB were asked to vote on the four matters, each of which was
described in the Proxy Statement accompanying the Notice of the Meeting and
filed with the Securities and Exchange Commission in accordance with Rule
14a-6. The matters voted on at the meeting and the results of the voting are
described below.
1. Vote on Proposed amendments to the Certificate of Incorporation of
ANB to eliminate the classification of the Board of Directors and to eliminate
the requirement for a super majority vote for the removal of a director and the
approval of certain amendments to ANB's Certificate of Incorporation and By
Laws.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
4,474,527 14,020 1,960 907,733
</TABLE>
2. Election of 13 directors to serve on the ANB Board of Directors
until the next annual meeting.
<TABLE>
<CAPTION>
FOR WITHOLD AUTHORITY
--- -----------------
<S> <C> <C>
James R. Andrews, M.D. 5,393,430 4,810
T. Morris Hackney 5,392,923 5,317
John H. Holcomb III 5,393,930 4,310
John D. Johns 5,393,680 4,560
C. Phillip McWane 5,392,923 5,317
Drayton Nabers, Jr. 5,393,930 4,310
Victor E. Nichol, Jr. 5,393,430 4,810
G. Ruffner Page, Jr. 5,392,930 5,310
W. Stancil Starnes 5,383,630 14,610
William V. Muse, Ph.D. 5,312,600 85,640
Frank W. Whitehead, CPA 5,320,980 77,260
James Mailon Kent, Jr. 5,391,930 6,310
Ronald W. Orso, M.D. 5,393,930 4,310
</TABLE>
23
<PAGE> 24
3. Approval of the Adoption of the Alabama National BanCorporation
Performance Share Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
4,419,414 67,840 3,253 907,733
</TABLE>
4. Approval of the Adoption of the Alabama National BanCorporation
Deferred Compensation Plan for Directors who are not employees of
ANB:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
<S> <C> <C> <C>
4,432,851 48,653 9,003 907,733
</TABLE>
24
<PAGE> 25
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: There is one exhibit required to be filed for the quarter
to which this report applies.
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed one report on Form 8-K for an event occurring April 25, 1996
reporting a change in independent auditors.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements 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.
<TABLE>
<S> <C> <C>
ALABAMA NATIONAL BANCORPORATION
DATE: August 5, 1996 /s/John H. Holcomb, III
-------------- -----------------------
John H. Holcomb, III, its Chairman and Chief Executive Officer
DATE: August 5 1996 /s/Frank W. Whitehead
------------- ---------------------
Frank W. Whitehead, its Executive Vice President, Treasurer
and Chief Financial Officer
</TABLE>
26
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALABAMA NATIONAL BANCORPORATION FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<TOTAL-ASSETS> 791,913
0
0
<COMMON> 6,567
<OTHER-SE> 52,037
<TOTAL-LIABILITY-AND-EQUITY> 791,913
<TOTAL-REVENUES> 38,952
<INCOME-TAX> 2,301
<INCOME-CONTINUING> 4,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,138
<EPS-PRIMARY> .65
<EPS-DILUTED> 0
</TABLE>
