Back to GetFilings.com
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, 1998
Commission File Number 0-12885
NBC Capital Corporation
(Exact name of registrant as specified in its charter)
Mississippi 64-0694755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
NBC Plaza, Starkville, Mississippi 39759-1187
(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:
$151,350,000
___________________________
(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 - 5,664,736 shares outstanding as
of December 31, 1998.
Documents incorporated by reference -
Form S-4 filed March 30, 1999 - Part III
Annual report to shareholders for 1998 - Parts II and IV
FORM 10K
INDEX
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for the Company's Common Stock and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results
of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure Matters
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationship and Related Transactions
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
PART I
ITEM 1 - BUSINESS
NBC Capital Corporation
NBC Capital Corporation (the Company) is a bank holding company which
was organized under the laws of the State of Mississippi. On July 2, 1984,
the Company acquired all of the outstanding common stock of the National
Bank of Commerce (NBC), a national banking corporation. For the year ended
December 31, 1998, the Company's subsidiaries accounted for 100% of the
Company's consolidated income and approximately 99% of its consolidated
expenses.
National Bank of Commerce
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. In
1994, the Company acquired NBC of Tuscaloosa (formerly First State Bank
of Tuscaloosa). On December 31, 1998, the Company acquired all the
outstanding common stock of First National Corporation of West Point
("FNC") in exchange for 864,736 shares of the Company's common stock. The
acquisition was accounted for as a pooling of interest. FNC was merged
into the Company and FNC's wholly-owned subsidiary banks, First National
Bank of West Point and National Bank of the South, were merged into NBC.
Concurrently, the Company's subsidiary, NBC of Tuscaloosa, was merged into
NBC (formerly NBC of Mississippi). As a result of the acquisition and
reorganization, NBC was the resulting financial institution. Also, First
National Finance Company, a wholly-owned finance company subsidiary of FNC
became a wholly-owned subsidiary of the Company.
NBC is the largest commercial bank domiciled in the north central
area of the state known as the Golden Triangle. A total of 28 banking
facilities and an operation/administration center serves the communities
of Aberdeen, Amory, Artesia, Brooksville, Columbus, Hamilton, Maben,
Philadelphia, West Point and Starkville. This area extends into six
Mississippi counties with a radius of approximately 65 miles from the home
office in Starkville. The Bank also serves the Tuscaloosa, Alabama, area
with a main office and 5 branch locations.
NBC is 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 1998.
NBC provides a complete line of wholesale and retail services
including mortgage loans and trusts. 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 one year GAP within a tolerance of -5% to 10%
of earning assets. The financial plan calls for a return on assets
of 1.2% - 1.5% and a minimum return on equity of approximately 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 planned for
the near future.
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 1998 and 1997,
its primary activity was limited to its investment in Commerce National
Insurance Company (CNIC) 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.
First National Finance
First National Finance (Finance), a wholly-owned subsidiary of the
Company, 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. Its loan
portfolio totaled approximately $1.6 million at December 31, 1998.
Finance is located in West Point, Mississippi. Finance was acquired as
part of the FNC acquisition previously mentioned.
Competition
NBC and its subsidiaries currently serve six counties and ten
municipalities in North Central Mississippi. Over this same area, the
bank competes directly with approximately 15 competing banking
institutions, numerous credit unions, finance companies, brokerage firms,
mortgage companies and insurance companies. The competing banking
institutions range in asset size from approximately $100 million to in
excess of $6 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 and regional
companies with more resources than the Company and its subsidiaries.
In Tuscaloosa, Alabama, NBC has a main office and five branch
locations. The bank competes with approximately eight other financial
institutions, most of which are larger. The other institutions range in
size from approximately $150 million to $20 billion. Asset size of the
competitive banks depends on whether reference is made to the branch banks
or to their parent bank. In Tuscaloosa, NBC also competes with numerous
credit unions, finance companies, etc., many of which are branches of
nationwide companies.
Supervision and Regulation
The Company and its subsidiary bank 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, 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 of 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 or 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 NBC. Generally, the approval of the OCC 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, 1998, NBC had
available for payment of dividends to the Company, without prior approval
of its regulator, approximately $16 million.
The Federal Reserve Board, FDIC and OCC have established risk-based
capital guidelines for holding companies, such as the Company, and its
subsidiary bank. 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 subsidiary's FDIC assessment, trust
services and asset/liability management. At December 31, 1998, the
Tier 1 and total capital ratios, respectively, of the Company
(consolidated) and NBC (individually) 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, 1998, the Company's Tier 1 and total capital ratios
were 16.6% and 17.9%, 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. The OCC
regulates or monitors virtually all areas of 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 also imposes 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 to 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. NBC may open branches throughout Mississippi
or Alabama with the prior approval of the OCC. In addition, with prior
regulatory approval, the subsidiary bank is able to acquire existing
banking operations in Mississippi and Alabama. Furthermore, federal
legislation permits interstate branching. The law also 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.
On September 29, 1994, the federal government enacted the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the Interstate Banking Act). This Act became effective on September 29,
1995, and permits eligible bank holding companies in any state, with
regulatory approval, to acquire banking organizations in any other state.
Effective June 1, 1997, the Interstate Banking Act allows banks with
different home states to merge, unless a particular state opts out of
the statute. In addition, beginning June 1, 1997, the Interstate
Banking Act permitted national and state banks to establish de novo
branches in another state if there is a law in that state which applies
equally to all banks and expressly permits all out-of-state banks to
establish such branches.
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 often 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.
A subsidiary bank of a bank holding company is subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or its subsidiary, 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 subsidiary is a member of the FDIC and its deposits are
insured as provided by law.
CNIC is subject to regulation by the applicable state agencies.
These agencies set reserve requirements, reporting standards, and
establish regulations, all of which affect business operations.
The Company's common stock is registered with the SEC under the
Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Consequently, the Company is
subject to the information, proxy solicitation, insider trading, and other
restrictions and requirements of the SEC under the Exchange Act.
Recent Regulatory Developments
Legislation is pending in the Congress that would allow bank
holding companies to engage in a wider range of nonbanking activities,
including greater authority to engage in securities and insurance
activities. The expanded powers generally would be available to a bank
holding company only if the bank holding company and its bank subsidiaries
remain well-capitalized and well-managed. Additionally, the legislation is
being considered that would eliminate the federal thrift charter and merge
the FDIC's Bank Insurance Fund ("BIF") and Savings Association Insurance
Fund ("SAIF"). At this time, the Company is unable to predict whether the
proposed legislaton will be enacted and, therefore, is unable to predict
the impact such legislation may have on the operations of the Company and
the Bank.
Governmental Monetary Policies
As a bank chartered under the laws of the United States, NBC is a
member of the Federal Reserve System. Its earnings 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
borrowings 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
Neither 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 subsidiary,
NBC, are listed below. The title indicates a position held in the
Company and the bank.
Name and Title Age Five Year Experience
_____________________________ ___ ____________________________________
L. F. Mallory, Jr. 56 Chairman of the Board and Chief
Chairman and Chief Executive Executive Officer, NBC Capital
Officer, NBC Capital Corporation and NBC
Corporation and NBC
Bobby Harper 57 Chairman of Executive Committe, NBC
Chairman of the Executive Capital Corporation and President,
Committee, NBC Capital NBC, Columbus Banking Center
Corporation and Executive
Vice President, Banking
Center Administration, NBC
Hunter M. Gholson 66 Secretary of NBC Capital Corporation
Secretary and NBC
Mark A. Abernathy 42 Executive Vice President and Chief
President and Chief Operating Officer, NBC Capital
Operating Officer, NBC Corporation and NBC. Prior to
Capital Corporation and NBC joining NBC in 1994, he was Consumer
Regional Executive Officer of Nations
Bank, Nashville, Tennessee.
Richard Haston 52 Executive Vice President, CFO, and
Executive Vice President, Treasurer, NBC Capital Corporation,
CFO, and Treasurer, NBC and Executive Vice President and
Capital Corporation and Chief Financial Officer, NBC, since
Executive Vice President October 1, 1996; Executive Vice
and Chief Financial Officer, President and Chief Financial Officer
NBC of Legacy Securities Corp., Memphis,
Tennessee, April, 1996 - September,
1996; President and Chief Financial
Officer of Calibre Financial Group,
Inc., Memphis, Tennessee, June, 1993 -
March, 1996
Tommy M. Tomlinson 51 Executive Vice President and Senior
Vice President, NBC Capital Lender, NBC
Corporation and Executive
Vice President, Credit
Administration, NBC
Clifton B. Fowler 50 Vice President, NBC Capital
Vice President, NBC Capital Corporation and President, NBC,
Corporation and President, Starkville Banking Center
NBC, Starkville Banking
Center
Thomas J. Prince, Jr. 57 Vice President, NBC Capital
Vice President, NBC Capital Corporation and President, NBC,
Corporation and Executive Aberdeen Banking Center
Vice President, Division
Manager of Consumer Finance,
NBC
John Davis 43 Senior Vice President and Trust
Vice President, NBC Capital Officer, NBC
Corporation and Senior Vice
President and Trust Officer,
NBC
Donald J. Bugea, Jr. 45 Vice President, NBC Capital
Vice President, NBC Capital Corporation and Executive Vice
Corporation and Executive President and Investment
Vice President and Investment Officer, NBC
Officer, NBC
Personnel
At December 31, 1998, NBC had 383 full-time employees. Finance had
3 full-time employees. The Company, Service and CNIC had no employees at
December 31, 1998.
ITEM 2 - PROPERTIES
The Company, Service and CNIC owned no properties at December 31,
1998. Finance operates out of a leased office building.
The following listing describes the locations and general character of
the Bank-owned properties:
Approximate
Office Space
Type Location (Square Feet)
______________________________ _________________________ _____________
NBC:
Main Office Starkville, Mississippi 35,000
University Branch Starkville, Mississippi 1,485
Motor Branch Starkville, Mississippi 2,000
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
Southside Branch Philadelphia, Mississippi 450
Westside Branch Philadelphia, Mississippi 3,250
Main Office Tuscaloosa, Alabama 6,400
Northport Branch Tuscaloosa, Alabama 3,018
University Branch Tuscaloosa, Alabama 2,480
North Tuscaloosa Branch Tuscaloosa, Alabama 3,250
Greensboro Branch Tuscaloosa, Alabama 11,000
Highway 69 South Branch Tuscaloosa, Alabama 2,000
Main Office West Point, Mississippi 18,000
Administrative Building West Point, Mississippi 1,200
East Main Branch West Point, Mississippi 1,900
Highway 45 South Branch West Point, Mississippi 1,520
Highway 45 North Branch West Point, Mississippi 825
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, Finance, Service, or CNIC 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 25 of the Company's annual report to shareholders for the year
1998 is incorporated herein by reference in response to this item and
included in this report as Exhibit 13.a.
(b) At December 31, 1998, the Company had approximately 2,274 security
holders.
(c) Dividends on common stock were declared semiannually in June and
December of the years reported and totaled as follows:
December 31,
______________________
1998 1997
__________ __________
Dividends declared, $.69 per share $3,907,242 $ -
Dividends declared, $.63 per share - 3,555,592
__________ __________
$3,907,242 $3,555,592
========== ==========
ITEM 6 - SELECTED FINANCIAL DATA
The information titled "Selected Financial Data" and contained on
Page 5 of the Company's annual report to the shareholders for the year
1998 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):
The following table presents, for the years indicated, condensed
daily average balance sheet information.
(In Thousands)
Assets 1998 1997 1996
________ ________ ________
Cash and due from banks $ 28,483 $ 32,056 $ 29,888
Securities:
Taxable 107,872 123,874 126,652
Non-taxable 103,961 76,785 76,208
________ ________ ________
Total securities 211,833 200,659 202,860
Federal funds sold and other
interest-bearing assets 33,272 16,720 7,717
Loans, net of unearned interest 479,817 465,777 431,199
Less reserve for loan losses 8,463 7,756 7,322
________ ________ ________
Net loans 471,354 458,020 423,877
Other assets 26,064 33,391 32,514
________ ________ ________
Total Assets $771,006 $740,846 $696,856
======== ======== ========
(In Thousands)
Liabilities and 1998 1997 1996
Stockholders' Equity ________ ________ ________
Deposits:
Noninterest-bearing $ 85,878 $ 80,486 $ 79,328
Interest-bearing 555,253 534,953 513,022
________ ________ ________
Total deposits 641,131 615,439 592,350
Federal funds purchased and
securities sold under
agreement to repurchase 12,936 14,743 5,236
Borrowed funds 19,649 21,068 15,494
Other liabilities 11,001 9,327 9,660
________ ________ ________
Total liabilities 684,717 660,577 622,740
Stockholders' equity 86,289 80,269 74,116
________ ________ ________
Total Liabilities and
Stockholders' Equity $771,006 $740,846 $696,856
======== ======== ========
B. Analysis of Net Interest Earnings
The table below shows, for the periods indicated, an analysis of
net interest earnings, including the average amount of interest-
earning assets and interest-bearing liabilities outstanding during
the period, the interest earned or paid on such amounts, the
average yields/rates paid and the net yield on interest-earning
assets:
($ In Thousands)
Average Balance
____________________________
1998 1997 1996
________ ________ ________
EARNING ASSETS
Net loans $471,354 $458,020 $423,878
Federal funds sold and
other interest-bearing
assets 33,272 16,720 7,717
Securities:
Taxable 107,872 123,874 126,652
Nontaxable 103,961 76,785 76,208
________ ________ ________
Totals 716,459 675,399 634,455
________ ________ ________
INTEREST-BEARING LIABILITIES
Interest-bearing deposits 555,253 534,953 513,022
Borrowed funds, federal funds
purchased and securities sold
under agreement to repurchase 33,383 35,811 20,730
________ ________ ________
Totals 588,636 570,764 533,752
________ ________ ________
Net Amounts $127,823 $104,635 $100,703
======== ======== ========
($ In Thousands) Yields Earned
Interest for the Year And
Ended December 31, Rates Paid (%)
_______________________ ______________
1998 1997 1996 1998 1997 1996
_______ _______ _______ ____ ____ ____
EARNING ASSETS
Net loans $44,558 $43,792 $39,747 9.45 9.56 9.38
Federal funds sold and
other interest-bearing
assets 1,217 982 478 3.66 5.86 6.12
Securities:
Taxable 5,996 7,933 8,179 5.56 6.40 6.46
Nontaxable 5,620 4,122 4,261 5.41 5.37 5.59
_______ _______ _______ ____ ____ ____
Totals 57,391 56,829 52,665 8.01 8.41 8.30
($ In Thousands) Yields Earned
Interest for the Year And
Ended December 31, Rates Paid (%)
_______________________ ______________
1998 1997 1996 1998 1997 1996
_______ _______ _______ ____ ____ ____
INTEREST-BEARING
LIABILITIES
Interest-bearing
deposits $24,691 $23,822 $22,052 4.45 4.45 4.30
Borrowed funds, federal
funds purchased and
securities sold under
agreement to repurchase 1,822 1,877 1,040 5.46 5.24 5.02
_______ _______ _______ ____ ____ ____
Totals 26,513 25,699 23,092 4.50 4.50 4.33
_______ _______ _______
Net interest income $30,878 $31,130 $29,573
======= ======= =======
Net yield on earning assets 4.31 4.60 4.65
(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.
(3) Interest income on loans includes related fees.
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)
1998 Over 1997 1997 Over 1996
_______________________ ______________________
Change Due To: Change Due To:
_______________________ ______________________
Total Rate Volume Total Rate Volume
______ _______ ______ ______ ______ ______
EARNING ASSETS
Net loans $ 766 $ (485) $1,251 $4,045 $ 793 $3,252
Federal funds sold and
other interest-bearing
assets 235 (175) 410 488 (8) 496
Securities:
Taxable (1,937) (979) (958) (246) (68) (178)
Nontaxable 1,498 29 1,469 (139) (172) 33
______ _______ ______ ______ ______ ______
Totals $ 562 $(1,610) $2,172 $4,148 $ 545 $3,603
====== ======= ====== ====== ====== ======
(In Thousands) (In Thousands)
1998 Over 1997 1997 Over 1996
______________________ ______________________
Change Due To: Change Due To:
______________________ ______________________
Total Rate Volume Total Rate Volume
______ ______ ______ ______ ______ ______
INTEREST-BEARING
LIABILITIES
Interest-bearing deposits $ 869 $ - $ 869 $1,770 $ 809 $ 961
Interest on borrowed
funds and federal funds
purchased and securities
sold under agreement to
repurchase (55) 86 (141) 837 49 788
______ ______ ______ ______ ______ ______
Totals $ 814 $ 86 $ 728 $2,607 $ 858 $1,749
====== ====== ====== ====== ====== ======
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 present the book values of securities as of
the dates indicated:
(In Thousands)
December 31,
____________________________
1998 1997 1996
________ ________ ________
U. S. Treasury $ 15,987 $ 32,813 $ 32,665
U. S. Government agencies and
mortgage-backed securities 66,341 80,422 78,473
States and political subdivisions 114,786 89,153 76,657
Other 6,765 6,959 6,070
________ ________ ________
Total book value $203,879 $209,347 $193,865
======== ======== ========
B. The following table sets forth the maturities of investment and
mortgage-backed securities (carrying values) at December 31,
1998, and the weighted average yield of such securities:
($ In Thousands)
Weighted Average Yield
______________________________________________
0 - 1 Yield 1 - 5 Yield 5 - 10 Yield
Year (%) Years (%) Years (%)
_______ _____ _______ _____ _______ _____
Securities:
U. S. Treasury $ 3,289 6.4% $10,592 5.2% $ 2,106 5.6%
U. S. Govern-
ment agencies 11,824 5.8% 10,407 6.5% 8,280 6.8%
States and
political
subdivisions 6,848 5.6% 38,068 5.3% 58,701 5.3%
Other 175 6.8% 2,080 6.2% - -
_______ _______ _______
Total $22,136 $61,147 $69,087
======= ======= =======
10+ Yield
Years (%)
_______ _____
U. S. Govern-
ment agencies $ 885 6.9%
States and
political
subdivisions 11,169 6.1%
Other
(including
equity
securities) 4,510 5.9%
_______
Total $16,564
=======
Book Yield
Value (%)
_______ _____
Mortgage-
backed
securities $34,945 5.9%
=======
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.
The majority of mortgage-backed securities are backed by
U. S. agencies.
C. Investment securities in excess of 10% of stockholders' equity.
At December 31, 1998, there were no securities from any issues
in excess of 10% of stockholders' equity that were not securities
of the U. S. Government or U. S. Government agencies or
corporations
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 1998 1997 1996 1995 1994
______________ ________ ________ ________ ________ ________
Commercial,
financial and
agriculture $ 76,389 $ 76,542 $ 74,318 $ 65,958 $ 57,825
Real estate -
construction 24,284 25,341 24,099 16,761 13,434
Real estate -
mortgage 284,566 269,462 249,801 219,536 195,136
Installment
loans to
individuals 93,538 95,912 100,858 99,878 90,436
Other 7,526 7,155 8,813 6,589 5,495
________ ________ ________ ________ ________
Total loans 486,303 474,412 457,889 408,722 362,326
Unearned
interest (1) (317) (1,123) (3,141) (4,780)
________ ________ ________ ________ ________
$486,302 $474,095 $456,766 $405,581 $357,546
======== ======== ======== ======== ========
B. Maturities and sensitivities of loans to changes in interest
rates:
(In Thousands)
December 31, 1998
____________________________
Maturing or Repricing
____________________________
Within Over
Type 1 Year 1 Year Total
________________________ ________ ________ ________
Commercial, financial
and agricultural $ 43,276 $ 33,113 $ 76,389
Real estate -
construction 13,761 10,523 24,284
Other loans, excluding
real estate - mortgage
and installment loans 2,862 4,664 7,526
________ ________ ________
$ 59,899 $ 48,300 $108,199
======== ======== ========
(In Thousands)
December 31, 1998
____________________________
Maturing or Repricing
____________________________
Within Over
Type 1 Year 1 Year Total
________________________ ________ ________ ________
Loans with: (1)
Predetermined interest
rates $265,991 $ 965 $266,956
Floating interest
rates 171,629 46,791 218,420
________ ________ ________
$437,620 $ 47,756 $485,376
======== ======== ========
(1) Excludes nonaccrual loans of $927.
C. Nonperforming loans
1. The following table states the aggregate amount of loans
which were nonperforming in nature:
(In Thousands)
December 31,
______________________________________
Type 1998 1997 1996 1995 1994
__________________ ______ ______ ______ ______ ______
Loans accounted
for on a
nonaccrual basis $ 927 $2,648 $1,538 $2,142 $1,579
====== ====== ====== ====== ======
Accruing loans
past due 90 days
or more $1,271 $1,077 $1,408 $ 877 $1,232
====== ====== ====== ====== ======
Renegotiated
"troubled" debt $ 298 $ 670 $ 471 $ 390 $ 306
====== ====== ====== ====== ======
2. There were no loan concentrations in excess of 10% of total
loans at December 31, 1998. However, lending activities are
affected by the economic trends within the areas served by
the Company and its subsidiaries. This, in turn, can be
influenced by the areas' larger employers, such as
Missisissippi State University, University of Alabama,
Columbus Air Force Base, and the Mercedes-Benz Automotive
Plant.
3. There were no outstanding foreign loans at December 31,
1998.
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 1998, 1997, and 1996.
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 by 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, 1998, the recorded investment in loans
identified as impaired totaled approximately $1.8 million.
The allowance for loan losses related to these loans approxi-
mated $1.3 million. The average recorded investment in
impaired loans during the year ended December 31, 1998, was
$1.1 million. Total interest recognized on impaired loans
and the amount recognized on a cash basis were not significant.
D. Other interest-bearing assets
There were no other interest-bearing non-performing assets
at December 31, 1998.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. An analysis of the loan loss experience for the periods
indicated is as follows:
($ In Thousands)
December 31,
___________________________________________
1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
Beginning balance $ 7,980 $ 7,526 $ 7,116 $ 6,375 $ 5,125
_______ _______ _______ _______ _______
Charge-offs:
Domestic:
Commercial,
financial and
agricultural (575) (379) (312) (240) (96)
Real estate (451) (145) (114) (130) (244)
Installment
loans and
other (929) (954) (1,223) (516) (476)
_______ _______ _______ _______ _______
Total charge-offs (1,955) (1,478) (1,649) (886) (816)
_______ _______ _______ _______ _______
Recoveries:
Domestic:
Commercial,
financial and
agricultural 124 269 52 56 59
Real estate 76 97 68 53 44
Installment
loans and
other 160 214 262 230 195
_______ _______ _______ _______ _______
Total recoveries 360 580 382 339 298
_______ _______ _______ _______ _______
Net charge-offs (1,595) (898) (1,267) (547) (518)
_______ _______ _______ _______ _______
Reserve of
acquired bank - - - - 494
Reserve of sold
finance company - (125) - - -
Provision charged
to operations 3,187 1,477 1,677 1,288 1,274
_______ _______ _______ _______ _______
Ending balance $ 9,572 $ 7,980 $ 7,526 $ 7,116 $ 6,375
======= ======= ======= ======= =======
Ratio of net
charge-offs to
average loans
outstanding .34 .20 .30 .15 .16
Ratio of reserve
for loan losses
to loans
outstanding at
year end 1.97 1.68 1.65 1.75 1.78
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 originates loans secured by commercial real estate, one-
to-four family residential properties, and multi-family dwelling
units (5 or more units). At December 31, 1998, these loans
totaled $309 million or approximately 60% of the loan portfolio.
NBC originates 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 has
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 originates 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 offers consumer loans in the form of home improvement loans,
mobile home loans, automobile loans and unsecured personal loans.
These loans totaled $77 million or 20% of total loans at
December 31, 1998. Consumer loans are originated in order to
provide a wide range of financial services to customers and
because the terms and normally higher interest rates on such
loans help maintain a profitable spread between the average loan
yield and the cost of funds.
In connection with consumer loan applications, the borrower's
income statement and credit bureau report are reviewed. In
addition, the relationship of the loan to the value of the
collateral is considered. All automobile loan applications
are reviewed, as well as the value of the unit which secured
the loan. NBC intends to continue to emphasize the origination
of consumer loans. Management believes that its loan loss
experience in connection with its consumer loan portfolio is
favorable in comparison to industry averages.
NBC makes commercial business loans on both a secured and
unsecured basis with terms which generally do not exceed five
years. Non-real estate commercial loans primarily consist of
short-term loans for working capital purposes, inventories,
seasonal loans, lines of credit and equipment loans. A personal
guaranty of payment by the principals of any borrowing entity is
often required and the financial statements and income tax returns
of the entity and its guarantors are reviewed. At December 31,
1998, NBC's commercial business loans represented approximately
15% of its total loan portfolio.
D. For the year 1999, losses for all loan categories, as a
percentage of average loans, are expected to approximate that
of 1998.
V. DEPOSITS
($ In Thousands)
1998 1997 1996
______________ ______________ ______________
Amount Rate Amount Rate Amount Rate
________ ____ ________ ____ ________ ____
A. Average
deposits:
Domestic:
Noninterest-
bearing
deposits $ 85,878 - $ 80,486 - $ 79,328 -
Interest-
bearing
demand
deposits (1) 192,848 2.6% 172,901 2.9% 182,696 3.0%
Savings
deposits 29,077 2.3% 32,047 2.2% 34,688 2.2%
Time deposits 333,328 5.7% 330,005 5.5% 295,638 5.4%
Foreign N/A N/A N/A
________ ____ ________ ____ ________ ____
Total $641,131 $615,439 $592,350
======== ======== ========
(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, 1998:
(In Thousands)
3 6
Months Months
3 Through Through Over
Months 6 12 12
Total Or Less Months Months Months
_______ _______ _______ _______ _______
Time certificates
of deposit of
$100,000 or more $69,649 $22,748 $12,692 $16,754 $17,455
======= ======= ======= ======= =======
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,
______________________
1998 1997 1996
______ ______ ______
Return on assets (net income divided by
total average assets) 1.1 1.3 1.4
Return on equity (net income divided by
average equity) 9.8 12.4 12.7
Dividend payout ratio (dividends per share
divided by net income per share) 46.0 36.0 34.9
Equity to asset ratio (average equity
divided by average total assets) 11.2 10.8 10.6
VII. SHORT-TERM BORROWINGS
Federal
Funds
Purchased
And
Securities Treasury
Sold Under Tax and
Agreement to Loan Note
Repurchase Payable
____________ ____________
Balance at December 31, 1998 $ 10,463,833 $ 591,817
Weighted average interest rate at
December 31, 1998 4.89% 4.26%
Maximum amount outstanding at any
month end for the year 1998 15,188,036 2,544,408
Average amount outstanding during
the year 1998 12,936,434 1,536,351
Weighted average interest rate during
the year 4.31% 4.88%
VIII. CAPITAL ADEQUACY DATA
Total consolidated capital of the Company was as follows:
($ In Thousands)
December 31,
__________________
1998 1997
________ ________
Total stockholders' equity (excluding
unrealized gain) $ 86,872 $ 82,291
Allowance for loan losses 6,379 6,196
Other components of capital - -
________ ________
Total primary capital 93,251 88,487
Total secondary capital - -
________ ________
Total capital 93,251 88,487
Less intangible assets and other adjustments (2,198) (1,679)
________ ________
Total capital, as defined for regulatory
purposes $ 91,053 $ 86,808
======== ========
Tier 1 and total capital as a percentage of "risk-weighted" assets
at December 31, 1998 and 1997, are as follows:
December 31,
______________
1998 1997
______ ______
Tier 1 capital percentage 16.6% 16.3%
Total capital percentage 17.9% 17.5%
The Company's capital ratios exceed the minimum capital requirements
at December 31, 1998, 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, 1998
______________________________________
Interest Sensitive Within (Cumulative)
______________________________________
Total of
Within Within Within Interest-
3 12 5 Earning
Months Months Years Assets
________ ________ ________ ________
Interest-earning assets:
Loans $201,122 $437,620 $478,207 $486,302
Investment and
mortgage-backed
securities 18,107 43,634 168,393 203,879
Federal funds sold
and other 26,460 26,460 26,460 26,460
________ ________ ________ ________
Totals $245,689 $507,714 $673,060 $716,641
======== ======== ======== ========
Interest-bearing
liabilities:
Deposits and
borrowed funds $165,809 $520,440 $585,583 $586,438
======== ======== ======== ========
Sensitivity gap:
Dollar amount $ 79,880 $(12,726) $ 87,477
Percent of total
interest-earning
assets 23.1% (1.8%) 12.2%
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, 1998, 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 approximately
$12.7 million (cumulative), representing a negative cumulative one
year gap of 1.8% of earning assets. Management of the Company
believes this is the proper position in the current interest rate
environment.
Banking regulators have 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 22 - 25 of the Company's 1998
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 6 - 21 of the Company's 1998 annual report to
shareholders which is incorporated herein by reference and included in
this report as Exhibit 13.d.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 NBC
Directors" and "Executive Compensation," of Form S-4, filed March 30, 1999,
which is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
Reference is made to the caption, "Executive Compensation" of Form S-4,
filed March 30, 1999,which is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the caption, "Stock Ownership of Directors,
Officers, and Principal Shareholders," of the Company's Form S-4 filed
March 30, 1999, which is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to, "Certain Relationships and Related Transactions"
of the Company's Form S-4 filed March 30, 1999, 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, 1998 and 1997, together with the report of T. E.
Lott & Company, independent accountants, dated January 27, 1999
(Except for Note R, as to which the date is February 3, 1999),
appearing on Pages 6 - 21 of the 1998 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:
(Incorporated by reference to Exhibit B to NBC
Capital Corporation's Definitive Proxy Statement,
dated March 20, 1998.)
By-Laws:
(Incorporated by reference to Exhibit 3(b) of
Form S-4/A, filed November 4, 1998.)
4. - 9. None
10.1 Definitive Agreement and Plan of Reorganization and
Merger by and between NBC Capital Corporation and First
National Corporation of West Point dated as of July 24,
1998 (incorporated by reference to Exhibit 2.1 of
Form 8-K filed January 15, 1999).
Employment Agreement dated January 31, 1991, between
National Bank of Commerce and L. F. Mallory, Jr., as
previously filed.
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 25 of the
annual report to stockholders.
13.b. Selected Financial Data - Page 5 of the annual report
to stockholders.
13.c. Management's discussion and analysis of financial
condition and results of operations - Pages 22 - 25 of
the annual report to stockholders.
13.d. Consolidated financial statements - Pages 6 - 21 of
the annual report to stockholders.
14. - 20. None
21. Subsidiaries of Company
27. Financial Data Schedule (Electronic Filing Only) -
years ended December 31, 1998, 1997, and 1996
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1998.
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 and Chief Executive Officer
/S/ Richard T. Haston
By _______________________________________
Richard T. Haston
Executive Vice President, CFO, and
Treasurer (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/ David Byars /S/ Mark A. Abernathy
_________________________________ _______________________________
(Director) (Director)
/S/ Sammy J. Smith /S/ Henry S. Weiss
_________________________________ _______________________________
(Director) (Director)
/S/ James C. Galloway, Jr. /S/ Clifton B. Fowler
_________________________________ _______________________________
(Director) (Director)
/S/ H. Stokes Smith /S/ Bobby L. Harper
_________________________________ _______________________________
(Director) (Director)
/S/ Robert L. Calvert, III /S/ Thomas J. Prince
_________________________________ _______________________________
(Director) (Director)
/S/ Ralph E. Pogue /S/ Robert S. Jones
_________________________________ _______________________________
(Director) (Director)
/S/ Edith D. Millsaps /S/ Allen Puckett, III
_________________________________ _______________________________
(Director) (Director)
Date: March 26, 1999