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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to _______________
Commission file number 0-9477
------
FIRST COMMERCIAL BANCORP, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-2693725
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
865 Howe Avenue, Sacramento, California 95825
---------------------------------------------
(address of principal executive offices) (Zip Code)
(916) 641-3288
--------------
(Registrant's telephone number, including area code)
----------------------------------------------------------------------
(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 issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class April 30, 1997
----- --------------
Common Stock, $.01 par value 846,127
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 -1-
Consolidated Statements of Income for the three
months ended March 31, 1997 and 1996 -2-
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 -3-
Notes to Consolidated Financial Statements -4-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -6-
PART II OTHER INFORMATION
Item 6. Exhibits -11-
Signatures -12-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST COMMERCIAL BANCORP, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks................................................ $ 6,377 9,410
Federal funds sold..................................................... 7,500 11,500
-------- --------
Total cash and cash equivalents.................................. 13,877 20,910
-------- --------
Investment securities - available for sale, at fair value.................. 49,136 38,229
Loans:
Commercial and financial................................................ 32,973 32,756
Real estate construction and development................................ 15,578 13,807
Real estate mortgage.................................................... 36,780 39,103
Consumer and installment................................................ 7,869 9,244
-------- --------
Total loans...................................................... 93,200 94,910
Unearned discount........................................................ (422) (413)
Allowance for possible loan losses....................................... (4,726) (4,597)
-------- --------
Net loans........................................................ 88,052 89,900
-------- --------
Bank premises and equipment, net of accumulated depreciation............... 1,840 1,894
Accrued interest receivable................................................ 1,333 1,197
Other real estate owned.................................................... 364 192
Other assets............................................................... 683 711
-------- --------
Total assets..................................................... $ 155,285 153,033
======== ========
LIABILITIES
-----------
Deposits:
Demand:
Non-interest bearing................................................ $ 23,742 24,026
Interest bearing.................................................... 16,346 16,956
Savings............................................................... 30,493 30,042
Time:
Time deposits of $100 or more....................................... 10,126 9,284
Other time deposits................................................. 57,905 55,828
-------- ---------
Total deposits................................................... 138,612 136,136
Accrued interest payable................................................... 1,301 1,098
Accrued and other liabilities.............................................. 2,420 2,969
12% convertible debentures................................................. 6,500 6,500
-------- ---------
Total liabilities................................................ 148,833 146,703
-------- ---------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares issued and outstanding..................................... - -
Common stock, $1.25 par value, 10,000,000 shares authorized;
846,127 shares issued and outstanding at March 31, 1997
and December 31, 1996................................................ 1,058 1,058
Capital surplus............................................................ 5,270 5,272
Retained earnings since elimination of accumulated deficit of $30,881,
effective December 31, 1996............................................ 222 -
Net fair value adjustment for securities available for sale................ (98) -
-------- --------
Total stockholders' equity....................................... 6,452 6,330
-------- --------
Total liabilities and stockholders' equity....................... $ 155,285 153,033
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
---- ----
Interest income:
<S> <C> <C>
Interest and fees on loans...................................................... $ 2,260 1,650
Investment securities........................................................... 533 961
Federal funds sold and other.................................................... 181 125
------ ------
Total interest income..................................................... 2,974 2,736
------ ------
Interest expense:
Deposits:
Interest-bearing demand...................................................... 56 90
Savings...................................................................... 221 245
Time deposits of $100 or more................................................ 108 211
Other time deposits.......................................................... 801 773
Other borrowings................................................................. 225 238
------- -------
Total interest expense.................................................... 1,411 1,557
------- -------
Net interest income....................................................... 1,563 1,179
Provision for possible loan losses.................................................. - 600
------- --------
Net interest income after provision for possible loan losses.............. 1,563 579
------- --------
Noninterest income:
Service charges on deposit accounts and customer service fees................ 160 217
Other income................................................................. 56 20
------- --------
Total noninterest income.................................................. 216 237
------- --------
Noninterest expense:
Salaries and employee benefits............................................... 516 683
Occupancy, net of rental income.............................................. 173 179
Furniture and equipment...................................................... 81 116
Federal Deposit Insurance Corporation premiums............................... 4 114
Postage, printing and supplies............................................... 49 128
Data processing fees......................................................... 91 121
Legal, examination and professional fees..................................... 67 278
Communications................................................................. 35 63
Losses and expenses on foreclosed real estate, net of gains.................... 22 277
Other expenses................................................................. 395 347
------- -------
Total noninterest expense.................................................... 1,433 2,306
------- -------
Income (loss) before income taxes ........................................... 346 (1,490)
Provision (benefit) for income taxes................................................ 124 (330)
------- -------
Net income (loss)............................................................ $ 222 (1,160)
======= =======
Income (loss) per common share...................................................... $ .26 (2.08)
======= =======
Weighted average shares of common stock and common stock
equivalents outstanding 846,127 557,400
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss)................................................................. $ 222 (1,160)
Adjustments to reconcile net income (loss) to net cash:
Depreciation and amortization of bank premises and equipment.................... 61 86
Amortization, net of accretion.................................................. (17) (178)
Provision for possible loan losses.............................................. - 600
(Increase) decrease in accrued interest receivable.............................. (136) 329
Interest accrued on liabilities................................................. 1,411 1,557
Payments of interest on liabilities............................................. (1,208) (1,599)
Provision (benefit) for income taxes............................................ 124 (330)
Other, net ..................................................................... (593) (1,483)
-------- ---------
Net cash provided by (used in) operating activities......................... (136) (2,178)
-------- ---------
Cash flows from investing activities:
Maturities of investment securities............................................... 18,041 37,077
Purchases of investment securities................................................ (29,082) (20,851)
Net (increase) decrease in loans.................................................. 1,459 (8,475)
Recoveries of loans previously charged off........................................ 213 45
Purchases of bank premises and equipment.......................................... (7) (26)
Other investing activities........................................................ 3 (24)
-------- --------
Net cash provided by (used in) investing activities......................... (9,373) 7,746
-------- --------
Cash flows from financing activities:
Increase (decrease) in deposits................................................... 2,476 (10,015)
-------- -------
Net cash provided by (used in) financing activities......................... 2,476 (10,015)
-------- -------
Net increase (decrease) in cash and cash equivalents........................ (7,033) (4,447)
Cash and cash equivalents, beginning of period........................................ 20,910 18,768
-------- --------
Cash and cash equivalents, end of period.............................................. $ 13,877 14,321
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST COMMERCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Commercial Bancorp,
Inc. (FCB) and its sole subsidiary, First Commercial Bank (Bank), are unaudited
and should be read in conjunction with the consolidated financial statements
contained in the 1996 annual report on Form 10-K. In the opinion of management,
all adjustments, consisting of normal recurring accruals considered necessary
for a fair presentation of the results of operations for the interim period
presented herein, have been included. Operating results for the three months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
FCB and the Bank were recapitalized during 1995 and 1996 through a
series of transactions with First Banks, Inc. (First Banks) and an offering of
FCB's common stock to existing common shareholders, other than First Banks. As a
result of these transactions, First Banks' ownership of FCB was 61.46% at March
31, 1997. If the 12% convertible debentures acquired by First Banks as part of
the recapitalization and the related accrued interest, had been converted as of
March 31, 1997, First Banks' ownership of FCB would have increased to 77.48%. As
a result of these transactions, First Banks owns the majority of the voting
securities of FCB and, accordingly, controls the management and policies of FCB
and the election of its directors.
The net income (loss) per share has been computed using the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. In December 1996, FCB implemented a reverse stock
split, whereby each 125 shares of outstanding common stock was converted into
one share of common stock. For consistency, the number of shares referred to
throughout this report on Form 10Q were restated to give effect to the reverse
split.
The Board of Directors of FCB elected to implement an accounting
adjustment referred to as a "quasi-reorganization," effective December 31, 1996.
In accordance with accounting provisions applicable to a quasi-reorganization,
the assets and liabilities of FCB have been adjusted to fair values and the
retained deficit of $30.9 million has been eliminated as of December 31, 1996.
FCB caused the Bank to accomplish a similar quasi-reorganization, also effective
December 31, 1996.
(2) Transactions with First Banks
The Bank receives services under a management services agreement with
First Banks and a cost sharing agreement with First Bank & Trust, Irvine,
California, a wholly owned subsidiary of First Banks. The management fee
agreement provides that the Bank will compensate First Banks on an hourly basis
for its use of personnel for various functions including internal auditing, loan
review, income tax preparation and assistance, accounting and other management
and administrative services. Hourly rates for such services compare favorably
with those of similar services from unrelated sources, as well as the internal
costs of the Bank personnel which were used previously. The aggregate cost for
such services is more economical than that previously incurred separately by the
Bank.
Because of this affiliation through First Banks and the geographic
proximity of certain of these banking offices, the Bank and First Bank & Trust
share the cost of certain personnel and services used by both banks. This
includes the salaries and benefits of certain loan and administrative personnel.
The banks have entered into a cost sharing agreement for the purpose of
allocating these expenses between them. Expenses associated with loan
origination personnel are allocated based on the relative loan volume between
the banks. Costs of most other personnel are allocated on an hourly basis.
Because this involves distributing essentially fixed costs over a larger asset
base, it allows each bank to receive the benefit of personnel and services at a
reduced cost.
The Bank also entered into a data processing agreement with FirstServ,
Inc., a wholly owned data processing subsidiary of First Banks. Under this
agreement, FirstServ, Inc. provides data processing and item processing to the
Bank. The fees for such services are substantially less than the Bank had
incurred in connection with its previous data processing operation.
<PAGE>
The management services agreement, cost sharing agreement and data
processing agreement are subject to the review and approval of the Bank's
regulatory authorities. Fees paid by the Bank under these agreements totaled
$292,000 and $262,000 for the three months ended March 31, 1997 and 1996,
respectively, and are included in other noninterest expense.
In connection with the recapitalization of FCB, First Banks purchased
convertible debentures of FCB of $1.5 million and $5.0 million on October 31,
1995 and December 28, 1995, respectively. The related interest expense for these
debentures was $213,000 and $216,000 for the three months ended March 31, 1997
and 1996, respectively.
The Bank has $17.3 million and $17.9 million in whole loans and loan
participations outstanding at March 31, 1997 and December 31, 1996,
respectively, that were purchased from banks affiliated with First Banks. In
addition, the Bank has sold $2.3 million and $2.0 million in loan participations
to affiliates at March 31, 1997 and December 31, 1996, respectively. These loans
and loan participations were acquired at interest rates and terms prevailing at
the dates of their purchase and under standards and policies followed by the
Bank.
(3) Regulatory Capital
The Bank is subject to various regulatory capital requirements
administered by federal and state banking agencies. Failure to meet minimum
capital requirements can cause the initiation of certain mandatory--and possibly
additional discretionary--actions by regulators which, if undertaken, could have
a direct material effect on the Bank's financial condition. Under capital
adequacy guidelines and the regulatory framework for Prompt Corrective Action,
the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and regulatory classification are also subject to qualitative judgments by the
regulators about components, risk weighting, and other factors which may effect
regulatory actions.
Quantitative measures established by regulations to ensure capital
adequacy require the Bank to maintain certain minimum ratios. The Bank is
required to maintain a minimum risk-based capital to risk-weighted assets ratio
of 8.0%, with at least 4.0% being "Tier 1" capital (as defined in the
regulations). In addition, a minimum leverage ratio (Tier 1 capital to total
assets) of 3.0% plus an additional cushion of 100 to 200 basis points is
expected. In order to be well capitalized under Prompt Corrective Action
provisions, the Bank is required to maintain a total capital to risk weighted
assets ratio of at least 10%, a Tier 1 to risk weighted assets ratio of at least
6%, and a leverage ratio of at least 5%. As of November 12, 1996, the date of
the most recent notification from the Bank's primary regulator, the Bank was
categorized as adequately capitalized due to the existence of certain regulatory
agreements. As the regulatory agreements were terminated subsequent to November
12, 1996, management believes, as of March 31, 1997 and December 31, 1996, the
Bank is well-capitalized as defined by the FDIC Act.
At March 31, 1997 and December 31, 1996, FCB's and the Bank's capital
ratios were as follows:
Risk-Based Capital Ratios
Total Tier 1 Leverage Ratio
--------------- -------------- --------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
FCB 7.41% 6.95% 6.12% 5.66% 4.27% 4.25%
Bank 14.02 13.13 12.73 11.84 8.85 8.87
===== ===== ===== ===== ==== ====
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
FCB is a registered Sacramento, California-based bank holding company
which reincorporated in Delaware in 1990 and conducts business through the Bank,
a California state-chartered bank. The Bank commenced operations in 1979, and
operates a commercial banking business through its headquarters office and five
branch offices located in Sacramento, Roseville (two branches), San Francisco,
Concord and Campbell, California. At March 31, 1997, FCB had approximately
$155.3 million in total assets, $92.8 million in total loans, net of unearned
discount, $138.6 million in total deposits, and $6.5 million in total
stockholders' equity.
Through the Bank, FCB offers a broad range of commercial and personal
banking services including certificate of deposit accounts, individual
retirement and other time deposit accounts, checking and other demand deposit
accounts, interest checking accounts, savings accounts and money market
accounts. Loans include commercial, financial, agricultural, real estate
construction and development, residential real estate and consumer and
installment loans. Other financial services include automatic teller machines
and safe deposit boxes.
General
FCB reported losses from operations for each of the three years ended
December 31, 1995 and the three months ended March 31, 1996. As a result of
these losses, FCB and the Bank had been placed under the terms of certain
regulatory agreements which placed significant restrictions on their operations,
including the payment of dividends. Through the recapitalization of FCB and the
Bank, the attainment of profitable operations subsequent to March 31, 1996 and
numerous other actions which have been taken by FCB and the Bank, the regulatory
agreements have been terminated, and, accordingly, FCB and the Bank no longer
operate under these restrictions.
Financial Condition
FCB's total assets increased by $2.3 million to $155.3 million at March
31, 1997 from $153.0 million at December 31, 1996. The increase is attributable
to investment securities, which increased by $10.9 million, substantially offset
by a $7.0 million decrease in cash and cash equivalents. The overall growth in
total assets was funded by deposits, which increased by $2.5 million to $138.6
million from $136.1 million at March 31, 1997 and December 31, 1996,
respectively.
Results of Operations
Net Income
Net income for the three months ended March 31, 1997 was $222,000, in
comparison to a net loss of $1.16 million for the same period in 1996. The
improved earnings are attributable to the recapitalization of FCB and the Bank,
the increase in net interest income, the significant improvement in asset
quality and the overall reduction in noninterest expense. The substantial
reduction in nonperforming assets contributed to the earnings improvement by
eliminating the need for an additional provision for possible loan losses. In
addition, this reduction in nonperforming assets has curtailed the costs of
collecting such problem assets.
Net Interest Income
Net interest income was $1.56 million, or 4.24% of average
interest-earning assets, for the three months ended March 31, 1997, in
comparison $1.18 million or 3.11% for the same period in 1996. Interest and fees
earned on the loan portfolio are the primary source of interest income of FCB.
The improved net interest income for the three month period ended March 31,
1997, in comparison to the same period in 1996, has resulted from the rebuilding
of the loan portfolio, the reduction in the level of nonperforming assets and
the reduced cost and reliance on time deposits of $100,000 or more. Total
average loans, net of unearned discount, were $92.8 million and $74.4 million at
March 31, 1997 and 1996, respectively.
<PAGE>
The following table sets forth certain information relating to FCB's
average balance sheet, and reflects the average yield earned on interest-earning
assets, the average cost of interest-bearing liabilities and the resulting net
interest income for the three months ended March 31:
<TABLE>
<CAPTION>
1997 1996
-------------------------- ----------------------------
Interest Interest
Average income/ Yield/ Average income/ Yield/
balance expense rate balance expense rate
(dollars expressed in thousands)
Assets
------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans......................................... $ 92,803 2,260 9.74% $ 74,405 1,650 8.92%
Investment securities......................... 40,286 533 5.29 68,796 961 5.62
Federal funds sold and other.................. 14,323 181 5.05 9,423 125 5.34
------- ------ -------- -----
Total interest-earning assets........... 147,412 2,974 8.07 152,624 2,736 7.21
----- -------- -----
Nonearning assets................................ 5,595 9,790
------- --------
Total assets............................ $ 153,007 $ 162,414
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing demand deposits.............. $ 16,318 56 1.37% $ 19,429 90 1.85%
Savings deposits.............................. 30,201 221 2.93 35,718 245 2.74
Time deposits of $100 or more................. 8,393 108 5.15 14,923 211 5.69
Other time deposits........................... 59,106 801 5.42 54,736 773 5.64
------ ----- ------- -----
Total interest-bearing deposits......... 114,018 1,186 4.16 124,806 1,319 4.25
Notes payable and other.......................... 7,116 225 12.65 7,319 238 13.01
------- ----- ------- -----
Total interest-bearing liabilities.. 121,134 1,411 4.66 132,125 1,557 4.74
----- -----
Noninterest-bearing liabilities:
Demand deposits............................... 21,932 25,058
Other liabilities............................. 3,482 2,216
------- -------
Total liabilities....................... 146,548 159,399
Stockholders' equity............................. 6,459 3,015
------- -------
Total liabilities and
stockholders' equity.......... $ 153,007 $ 162,414
======= =======
Net interest income..................... 1,563 1,179
===== =====
Net interest margin..................... 4.24% 3.11%
===== =====
</TABLE>
Provision for Possible Loan Losses
Improved asset quality has resulted in eliminating the need for a
provision for possible loan losses for the three months ended March 31, 1997,
compared to $600,000 for the same period in 1996. Tables summarizing
nonperforming assets, past due loans and loan loss experience are presented
under "--Lending and Credit Management" of this Form 10-Q.
FCB realized net loan recoveries of $129,000 for the three months
ended March 31, 1997, compared to net loan charge-offs of $184,000 for the same
period in 1996. The allowance for possible loan losses was $4.73 million, or
5.09% of loans, net of unearned discount, as of March 31, 1997, compared to
$4.60 million, or 4.86% of loans, net of unearned discount, as of December 31,
1996.
Noninterest Income
Noninterest income was $216,000 for the three months ended March 31,
1997, compared to $237,000 for the same period in 1996. Noninterest income
consists primarily of service charges on deposit accounts and other related
fees, non-yield related fees and charges and other income.
<PAGE>
Noninterest Expense
Noninterest expense was $1.43 million for the three months ended March
31, 1997 in comparison to $2.31 million for the same period in 1996,
representing a decrease of $873,000 or 38%. This decrease is consistent with the
cost savings anticipated by the data processing conversion and centralization of
various bank operating functions to First Banks' systems completed during 1996
and the decrease in the level of nonperforming assets and related expenses
associated with the collection of those assets
Salaries and employee benefits decreased to $516,000 for the three
months ended March 31, 1997, in comparison to $683,000 for the same period in
1996. The decrease reflects the downsizing of the organization through the
closure of a branch office in August 1996 and the conversion and centralization
of FCB's data processing and various operating functions into First Banks'
systems which commenced in December 1995.
Legal, examination and professional fees decreased to $67,000 from
$278,000 for the three months ended March 31, 1997 and 1996, respectively. This
decrease is attributable to the improved asset quality of the Bank and the
overall coordination of legal and professional fees consistent with the current
structure of FCB. FCB and the Bank utilize outside legal counsel and other
professional services in their management and disposition of nonperforming
assets.
Contributing further to the decrease in noninterest expense was a
reduction in Federal Deposit Insurance Corporation (FDIC) premiums to $4,000
from $114,000 for the three months ended March 31, 1997 and 1996, respectively.
This decrease is consistent with the premium rate reductions instituted by the
FDIC and the improved financial condition of FCB.
Expenses of holding and disposing of foreclosed real estate, net of
gains, totaled $22,000 for the three months ended March 31, 1997 compared to
$277,000 for the same period in 1996. The decrease is attributable to the
reduction in the level of foreclosed real estate.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FCB. Total loans, net of unearned discount, represented 59.7%, and 61.7% of
total assets as of March 31, 1997 and December 31, 1996, respectively. Total
loans, net of unearned discount, were $92.8 million and $94.5 million at March
31, 1997 and December 31, 1996, respectively.
FCB's nonperforming loans, consisting of loans on a nonaccrual status
and loans on which the original terms have been restructured, were $515,000 and
$864,000 at March 31, 1997 and December 31, 1996, respectively.
<PAGE>
The following is a summary of nonperforming assets and past due loans
at the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(dollars expressed in thousands)
Nonperforming assets:
<S> <C> <C>
Nonperforming loans $ 515 864
Other real estate 364 192
------- --------
Total nonperforming assets $ 879 1,056
======= ========
Loans past due:
Over 30 days to 90 days $ 2,130 831
Over 90 days and still accruing 16 32
------- --------
Total past due loans $ 2,146 863
======= ========
Loans, net of unearned discount $ 92,778 94,497
======= ========
Allowance for possible loan losses to loans 5.09% 4.86%
Nonperforming loans to loans .56 .91
Allowance for possible loan losses to
nonperforming loans 917.67 532.06
Nonperforming assets to loans and foreclosed assets .94 1.12
======== =========
</TABLE>
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each month, the
allowance for possible loan losses is reviewed relative to FCB's internal watch
list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
The following is a summary of the loan loss experience for the three
months ended March 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Allowance for possible loan losses, beginning of period $ 4,597 5,388
Loans charged-off (84) (229)
Recoveries of loans previously charged-off 213 45
----- -----
Net loan recoveries (charge-offs) 129 (184)
----- -----
Provision for possible loan losses - 600
Allowance for possible loan losses, end of period $ 4,726 5,804
===== =====
</TABLE>
Liquidity
The liquidity of FCB and the Bank is the ability to maintain a cash
flow which is adequate to fund operations, service debt obligations and meet
other commitments on a timely basis. The primary sources of funds for liquidity
are derived from customer deposits, loan payments, maturities, sales of
investments and operations. In addition, FCB and the Bank may avail themselves
of more volatile sources of funds through issuance of certificates of deposit in
denominations of $100,000 or more, federal funds borrowed and securities sold
under agreements to repurchase. The aggregate amount of these more volatile
funds was $10.4 million at March 31, 1997 and $10.0 million at December 31,
1996.
<PAGE>
At March 31, 1997, FCB's more volatile sources of funds mature as
follows:
(dollars expressed in
thousands)
Three months or less $ 3,824
Over three months through six months 1,716
Over six months through twelve months 4,209
Over twelve months 683
------
Total $ 10,432
======
Effects of New Accounting Standards
FCB adopted the provisions of SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities (SFAS 125)
prospectively on January 1, 1997. SFAS 125 established accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities.
The standards established by SFAS 125 are based on consistent
applications of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
The implementation of SFAS 125 did not have a material effect on the
consolidated financial position or results of operation of FCB.
In February 1997, the FASB issued SFAS 128, Earnings Per Share (SFAS
128). SFAS 128 supersedes Accounting Principles Board Opinion No. 15, Earnings
Per Share (APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential common stock. SFAS 128 was issued to simplify the computation
of EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
fully diluted EPS with diluted EPS. SFAS 128 also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS Computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. After adoption, all prior-period EPS data presented shall be restated
to conform with SFAS 128.
FCB does not believe the implementation of SFAS 128 will have a
material effect on its computation of earnings per share.
<PAGE>
In February 1997, the FASB issued SFAS 129, Disclosure of Information
about Capital Structure (SFAS 129). SFAS 129 establishes standards for
disclosing information about an entity's capital structure. It applies to all
entities. SFAS 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB 10, Omnibus
Opinion-1966, APB 15 and SFAS No. 47, Disclosure of Long-Term Obligations, for
entities that were subject to the requirements of those standards. SFAS 129
eliminates the exemption of nonpublic entities from certain disclosure
requirements of APB 15 as provided by SFAS No. 21, Suspension of the Reporting
of Earnings per Share and Segment Information by Nonpublic Enterprises. It
supersedes specific disclosure requirements of APB 10, APB 15 and SFAS 47 and
consolidates them in SFAS 129 for ease of retrieval and for greater visibility
to nonpublic entities.
SFAS 129 is effective for financial statements for periods ending after
December 15, 1997. It contains no change in disclosure requirements for entities
that were previously subject to the requirements of APB 10 and 15 and SFAS 47.
PART II - OTHER INFORMATION
Item 6 - Exhibit and Reports on Form 8-K
The exhibit is numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit
Number Description
27 Article 9 - Financial Data Schedule
(EDGAR only)
<PAGE>
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.
FIRST COMMERCIAL BANCORP, INC.
Registrant
Date: May 9, 1997 By: /s/Donald W. Williams
---------------------
Donald W. Williams
Chairman, President
and Chief Executive
Officer
Date: May 9, 1997 By: /s/Allen H. Blake
-----------------
Allen H. Blake
Chief Financial Officer
and Secretary
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