ITEM 1. BUSINESS
National Bancorp of Alaska, Inc. (the Corporation) is a Delaware corporation organized on June 21, 1982, and registered as a Bank holding company under the Bank Holding Company Act of 1956.
The Corporation's principal asset is its investment in National Bank of Alaska (the Bank), a wholly-owned subsidiary. Through its subsidiary, the Corporation engages in commercial banking and trust activities.
For additional information concerning the business of National Bancorp of Alaska, Inc. and its subsidiaries, see pages 2 through 18 of National Bancorp of Alaska, Inc.'s 1997 Annual Report to Shareholders (Annual Report), which is incorporated in this Item 1 by reference.
The Bank
The Bank was established as a state-chartered bank in 1916 and converted to a national banking association in 1950.
General Banking Services
The Bank engages in general banking business offering checking accounts, savings accounts, money market accounts, Time Certificates of Deposit, securities sold under agreements to repurchase, Individual Retirement Accounts, commercial loans, home equity loans, unsecured lines of credit, consumer loans, construction and mortgage loans, lease financing, safe deposit services, night depositories, Visa credit cards (Classic and Gold), walk-up and drive-in banking with an international automated teller machine network and other services incidental to serving the banking needs of individuals, corporations, government and quasi-government bodies.
As of December 31, 1997, the Bank's banking operations are conducted from 53 banking offices, 3 loan offices and 64 electronic branches located throughout the state of Alaska, including 15 banking offices and 26 electronic branches in Anchorage.
Trust Services
The Bank's Trust Department offers services to individuals and corporations throughout Alaska including estate planning, settlement of estates, administration of living and testamentary trusts, management of investment agency accounts, custodianships, and administration of employee benefit trusts. The Bank had trust assets of approximately $1,974 million under its supervision as of December 31, 1997.
International Banking
The Bank's International Department offers customer services in connection with international business. The department maintains correspondent relationships with banks located in certain world trade centers, including Tokyo and New York. Transactions handled by this department include cable, wire, and mail transfers of funds, negotiating and advancing funds under export Letters of Credit, buying and selling foreign currencies, handling collection from foreign banks, and financing imports and exports.
An Edge Act subsidiary, National Bank of Alaska International Banking, Corp., has a branch located in Seattle, Washington with its head office in Anchorage, Alaska.
Competition
The Bank competes actively with national and state banks and other financial institutions, including savings and loan associations, savings banks, brokerage houses, money market funds, and credit unions located both in Alaska and other states. The Bank maintains a competitive position by providing convenient service in the branch network located throughout the state and by competitive pricing of the products mentioned above.
Alaska allows out-of-state bank holding companies to acquire banks and domestic bank holding companies located in Alaska. Management is of the opinion that to the extent that out-of-state bank holding companies enter the Alaskan market, the Corporation may encounter intensified competition.
Employment
The Bank employs approximately 1,103 people. Management considers employment relations to be good. None of the Bank's employees are covered by a collective bargaining agreement.
SUPERVISION AND REGULATION
National Bancorp of Alaska, Inc. is a bank holding company subject to regulation under the Bank Holding Company Act of 1956. A bank holding company is required to file with the Federal Reserve Board annual reports and other information regarding the business operations of itself and its subsidiaries and is also subject to examination by the Federal Reserve Board. A bank holding company must obtain Federal Reserve Board approval prior to acquiring, directly and indirectly, ownership or control of any voting shares of any bank if, after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting stock of such bank unless it already owns a majority of the voting stock of such bank. Furthermore, a bank holding company is, with limited exceptions, prohibited from acquiring direct or indirect ownership or control of any voting stock of any company which is not a bank or a bank holding company, and must engage only in the business of banking or managing or controlling banks or furnishing services to or performing services for its subsidiary banks. One of the exceptions to this prohibition is the ownership of shares of a company the activities of which the Federal Reserve Board has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
A bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with the extension of credit or provision of any property or service. Thus, an affiliate may not extend credit, lease, sell property or furnish any services or fix or vary the consideration for these on the condition that (i) the customer must obtain or provide some additional credit, property or service from or to its bank holding company or subsidiaries thereof or (ii) the customer may not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to assure soundness of credit extended.
In approving acquisitions by bank holding companies of banks and companies engaged in the banking-related activities, the Federal Reserve Board considers a number of factors, including the benefit to the public such as greater convenience, increased competition, conflicts of interest, or unsound banking practices. The Federal Reserve Board is also empowered to differentiate between new activities and activities commenced through acquisition of a going concern.
The Bank is subject to regulation and supervision, of which regular bank examinations are a part, by the Office of the Comptroller of the Currently (OCC). The Bank is also a member of the Federal Deposit Insurance Corporation (FDIC), which currently insures the deposits of each member bank to a maximum of $100,000 per depositor. For this protection, each bank pays a semiannual statutory assessment and is subject to the rules and regulations of the FDIC. The Corporation is an "affiliate" of the Bank, which imposes restrictions on loans by the Bank to the Corporation, on investments by the Bank in the stock or securities of the Corporation and on the use of such stock or securities as collateral security for loans by the Bank to any borrower. The Corporation is also subject to certain restrictions with respect to engaging in the business of issuing, flotation, underwriting, public sale and distribution of securities.
The ability of the Corporation to pay dividends will largely depend upon the amount of dividends declared by the Bank and any subsequently acquired companies. Approval of the OCC will be required for any dividend to the Corporation by the Bank, if the total of all dividends, including any proposed dividend, declared by the Bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. In the event that the Bank were to experience either significant loan losses or rapid growth of loans or deposits, the Corporation, as the sole shareholder, could be compelled by bank regulatory authorities to invest additional capital.
Statistical Disclosure
The information as required by the Securities and Exchange Commission's Guide 3 - - Statistical Disclosure by Bank Holding Companies is incorporated herein by reference to the Registrant's 1997 Annual Report to Shareholders.
Description Annual Report Page Numbers
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rate and Interest Differential:
A. and B. Average Balance Sheet Combined with an Analysis of Net Interest Earnings.................. 44-45
C. Analysis of Changes in Net Interest Income due to rate and volume...................... 45
II. Investment Portfolio:
A. Book Value of Investments.......................... 38
B. Weighted Average Yield............................. 38
III. Loan Portfolio:
A. Types of Loans for Each Reported Period............ 39
B. Maturities and Sensitivity to Changes in Interest Rates..................................... 39
C. Risk Elements...................................... 40
IV. Summary of Loan Loss Experience:
A. Analysis of Allowances for Loan Loss Experience.................................... 41
V. Deposits:
A. Average Balance by Type............................ 42
B. Large TCD Maturities - Over $100,000............... 39
VI. Return on Equity and Assets Selected Ratios for Each Reported Period...................... 43
VII. Short-Term Borrowings......................................... 42
III. Loan Portfolio
C. Risk Elements.
Potential Problem Loans
At December 31, 1997, an additional $66,366,000 in loans are being closely monitored by management. These loans are not included in any category of non- performing loans. However, management has concern about the borrowers' abilities to comply with their present loan repayment terms. These loans are reviewed monthly to assess any change in collectability.
Foreign Outstandings
There were no foreign outstandings to individual countries as of December 31, 1997.
IV. Summary of Loan Loss Experience:
B. Allocation of the Allowance for Loan Losses:
Allocation of Reserves To Loan Categories _____________________________ Loan Category As a % % of Total Amount of of Total Loans Reserves Reserves (000's) December 31, 1997 Commercial and Industrial 37.1% 9.1% $2,235 Real Estate Construction 2.3 0.1 13 Real Estate Long-Term 33.5 1.4 350 Installment 22.7 31.4 7,707 Nontaxable 3.5 - - Lease Financing 0.9 0.2 44 Unallocated - 57.8 14,181 ------------------------------------------ 100.0% 100.0% $24,530
December 31, 1996 Commercial and Industrial 34.8% 1.4% $329 Real Estate Construction 2.4 - 5 Real Estate Long-Term 32.0 0.7 150 Installment 26.3 24.8 5,708 Nontaxable 3.8 - - Lease Financing 0.7 - - Unallocated - 73.1 16,810 ------------------------------------------ 100.0% 100.0% $23,002
December 31, 1995 Commercial and Industrial 35.5% 2.2% $468 Real Estate Construction 1.9 - 3 Real Estate Long-Term 31.9 1.2 267 Installment 25.0 15.3 3,288 Nontaxable 4.8 0.4 81 Lease Financing 0.9 - - Unallocated - 80.9 17,422 ------------------------------------------ 100.0% 100.0% $21,529
December 31, 1994 Commercial and Industrial 35.9% 5.4% $1,035 Real Estate Construction 1.8 0.9 165 Real Estate Long-Term 33.9 2.3 442 Installment 22.1 13.8 2,664 Nontaxable 5.5 0.8 152 Lease Financing 0.8 - - Unallocated - 76.8 14,768 ------------------------------------------ 100.0% 100.0% $19,226
December 31, 1993 Commercial and Industrial 37.9% 21.3% $3,704 Real Estate Construction 2.6 0.2 35 Real Estate Long-Term 33.9 13.0 2,271 Installment 18.2 6.9 1,195 Nontaxable 6.5 3.4 587 Lease Financing 0.9 - - Unallocated - 55.2 9,616 ------------------------------------------ 100.0% 100.0% $17,408
ITEM 2.
ITEM 2. PROPERTIES
The Bank's main banking office is at its headquarters building, which is located at Northern Lights Boulevard and C Street, Anchorage, Alaska.
In addition to its headquarters building, the Bank owns 40 of its banking offices (including four which are subject to ground leases) and leases 79 other banking and loan offices under agreements expiring between 1997 and 2031.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
For information concerning legal proceedings, see Note 10 of "Notes to Financial Statements" at page 30 of the Annual Report, which is incorporated herein by reference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
For information concerning market for the registrant's common equity and related stockholder matters, reference is made to page 46 of the Annual Report, which is incorporated herein by reference.
The above-referenced schedule shows the high and low bid quotations of the Corporation's stock as reported by the National Association of Securities Dealers Automated Quotations System (NASDAQ). National Bancorp of Alaska, Inc. common stock is traded in the over-the-counter market. Such over-the-counter market quotations reflect interdealer prices, without retail markup, markdown, or commission and may not necessarily represent actual transactions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the prior ten years is incorporated herein by reference on pages 20-21 of the Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For management's discussion and analysis of financial condition and results of operations see "Management Discussion and Analysis" at pages 36 through 45, and the Chairman's message to shareholders on page 2 of the Annual Report, which are incorporated herein by reference.
Item 7A
Item 7A Interest Rate Sensitivity December 31, 1997
The table below provides information about the Corporation's material financial instruments that are sensitive to changes in interest rates, including earning asset and deposit liabilities. For all non-amortizing financial instruments other than variable rate instruments, cash flows and weighted average rates are based on contractual maturity dates and rates. For investment securities subject to prepayment, the table presents principal cash flows based on recent prepayment rates. For variable rate financial instruments, cash flows and weighted average rates are based on the earliest repricing opportunity. For amortizing loans cash flows are based on scheduled amortization of principal payments and contractual maturity dates. Interest bearing demand and saving accounts with no stated maturity, which reprice at management's discretion, are included in the first year category.
A discussion of the Corporation's exposure to interest rate sensitivity and how the risk is managed is included in the annual report on page 38.
Nonperforming Assets
Other real estate owned decreased from $326,000 at December 31, 1996 to $150,000 at December 31, 1997. Assets with a book value of $536,000 were sold.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and the consolidated financial statements and notes to consolidated financial statements on pages 22 through 35 of the Annual Report are incorporated herein by reference.
The quarterly financial data on page 46 of the Annual Report is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGE IN ACCOUNTANTS
Not Applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning directors and executive officers of National Bancorp of Alaska, Inc., see "Election of Directors" at pages 1 through 5 of the Proxy Statement for the March 17, 1998, Annual Meeting of Shareholders, which is incorporated herein by reference.
The following table sets forth the executive officers of the Bank, all of whom serve at the discretion of the Board, their ages and their positions with the Bank:
Served as an Positions and Offices Currently Executive Officer Name Age Held with Bank Since - ------------------------------------------------------------------------------ Donald L. Mellish 70 Chairman of the Executive Committee 1964 Edward B. Rasmuson 57 Chairman of the Board of Directors 1972 Richard Strutz 47 President 1985 Kathleen Soderberg 49 Executive Vice President and Treasurer 1982 Gary Dalton 43 Executive Vice President 1988 James Cloud 44 Executive Vice President 1997
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to pages 8 through 11 of the Proxy Statement for the March 17, 1998, Annual Meeting of Shareholders, which is incorporated herein by reference for information concerning management remuneration and transactions.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information concerning the Corporation's security ownership by certain beneficial owners and management, reference is made to pages 1 through 10 of the Proxy Statement, which is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related transactions, see page 11 of the Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS FORM 8-K
(a) The following documents are filed as part of the report:
1. Financial Statements
The following consolidated financial statements of National Bancorp of Alaska, Inc. and its subsidiaries and report of independent auditors are incorporated in Item 8 by reference from the 1997 Annual Report to Shareholders. Page number references are to the Annual Report:
National Bancorp of Alaska and subsidiaries: Page
Consolidated Statements of Condition December 31, 1997 and 1996.............................. 23
Consolidated Statements of Income Years ended December 31, 1997, 1996, and 1995........... 22
Consolidated Statements of Cash Flows Years ended December 31, 1997, 1996, and 1995........... 24
Consolidated Statements of Changes in Shareholders' Equity Years ended December 31, 1997, 1996, and 1995.... 25
Notes to Consolidated Financial Statements.............. 25-35
Report of Independent Auditors.......................... 35
2. Financial Statement Schedules
All schedules are omitted because they are not applicable, not material or because the information is included in the financial statements or the notes thereto.
3. Exhibits
(3) Articles of incorporation and bylaws are incorporated herein by reference to Exhibit (3) to Registration on Form S-14, File No. 2-78795 dated August 11, 1982.
(4) Instruments defining the rights of security holders - specimen of stock certificate to be issued by the Registrant (as amended to date) is incorporated herein by reference to Exhibit (4) to Registration on Form S-14, File No. 2-78795 dated August 11, 1982.
(13) Annual Report to shareholders for the year ended December 31, 1997.
(21) Subsidiaries of the registrant are as follows:
Business Name State Incorporated
National Bank of Alaska and subsidiaries Alaska
National Bank of Alaska Leasing Corporation Alaska
NBA Advertising, Inc. Alaska
NBA International Banking Corporation Washington
Alaska Bankcard Center, Inc. Alaska
NBA Mortgage Corporation Delaware
Northland Credit Corporation Alaska
NB Aviation, Inc. Delaware
(22) There were no matters submitted to a vote of security holders during the fourth quarter of 1997.
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were two 8-K reports filed during the quarter ended December 31, 1997. They are as follows:
The October 3, 1997 8-K reported the increase of the authorization to repurchase stock from 300,000 to 500,000 shares. No financial statements were included.
The October 24, 1997 8-K reported the revised intention to ask the shareholders to amend National Bancorp of Alaska certificate to 42 million shares to allow for a four-for-one stock split rather than the two-for-one split previously announced. The shareholders will be asked to vote at the annual meeting on March 17, 1998. No financial statements were included.
(c) Exhibits - See list of exhibits set forth above at Item 14(a)3.
(d) Financial Statement Schedules
Schedules required to be filed in response to this portion of Item 14 are listed above in Item 14(a)2.
Report of independent auditors for Form 10-K for the year ended December 31, 1997, is incorporated herein by reference in Item 14(a)1.
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.
NATIONAL BANCORP OF ALASKA, INC.
March 17, 1998 By /s/Edward B. Rasmuson Date Edward B. Rasmuson, Chairman of the Board and Director (Principal Executive 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 capacities and on the dates indicated:
March 17, 1998 /s/Edward B. Rasmuson Date Edward B. Rasmuson, Chairman of the Board and Director (Principal Executive Officer)
March 17, 1998 /s/Richard Strutz Date Richard Strutz, President and Director (Principal Financial Officer)
March 17, 1998 /s/Gary Dalton Date Gary Dalton, Senior Vice President (Principal Accounting Officer)
March 17, 1998 /s/Donald B. Abel, Jr. Date Donald B. Able, Director
March 17, 1998 /s/Gary M. Baugh Date Gary M. Baugh, Director
March 17, 1998 /s/Carl F. Brady, Jr. Date Carl F. Brady, Jr., Director
March 17, 1998 /s/Alec W. Brindle Date Alec W. Brindle, Director
March 17, 1998 /s/James O. Campbell Date James O. Campbell, Director
March 17, 1998 /s/Patrick S. Cowan Date Patrick S. Cowan, Director
March 17, 1998 /s/Roy Huhndorf Date Roy Huhndorf, Director
March 17, 1998 /s/James H. Jansen Date James H. Jansen, Director
March 17, 1998 /s/Donald L. Mellish Date Donald L. Mellish, Director
March 17, 1998 /s/Emil Notti Date Emil Notti, Director
March 17, 1998 /s/Howard R. Nugent Date Howard R. Nugent, Director
March 17, 1998 /s/Tennys B. Owens Date Tennys B. Owens, Director
March 17, 1998 /s/Eugene A. Parrish Date Eugene a. Parrish, Director
March 17, 1998 /s/Michael Pate, Date Michael Pate, Director
March 17, 1998 /s/Martin R. Pihl, Date Michael Pate, Director
March 17, 1998 /s/Edward F. Randolph Date Edward F. Randolph, Director
March 17, 1998 /s/Major General John Schaeffer Date Major General John Schaefer(Ret.) Director
March 17, 1998 /s/Michael K. Snowden Date Michael K. Snowden, Director
March 17, 1998 /s/George S. Suddock Date George S. Suddock, Director
March 17, 1998 /s/Richard A. Wien Date Richard A. Wien, Director
March 17, 1998 /s/Sharon Wikan Date Sharon Wikan, Director