As filed with the Securities and Exchange Commission on
September 20, 1996
Registration No. 333----
--------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
------------
FIRST COMMERCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 6711 71-0540166
(State or other jurisdiction (Primary Standard I.R.S. Employer
of incorporation or Industrial Classi- Identification
organization) fication Code No.) No.)
400 West Capitol Avenue, Little Rock, Arkansas 72201
(501) 371-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Barnett Grace, Chairman of the Board
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
(501) 371-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493
-----------------
Approximate date of commencement of proposed sale of the
securities to the public: Upon the effective date of each of
the mergers described in this registration statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box. ___
<PAGE>
----------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------
Proposed
Title of Each Proposed Maximum
Class of Maximum Aggregate Amount of
Securities to Amount to be Offering Price Offering Registra-
be Registered Registered Per Unit Price tion Fee
----------------------------------------------------------------
Common Stock,
par value $3.00
per share 174,492(1) $16.008 $2,793,27.94 $963.20(1)
Common Stock,
par value $3.00
per share 241,171(2) $15.698 $3,785,902.36 $1,305.48(2)
TOTAL 415,663 -- $6,579,170.30 $2,268.68
----------
(1) 174,492 shares are being offered in exchange for 172,500
shares of common stock of City National Bank, Whitehouse,
Texas ("CNB Stock"). The filing fee for this portion of the
offering is calculated pursuant to Rule 457(f)(2) on the basis
of the book value, as of August 31, 1996, of 172,500 shares of
CNB Stock to be received by the registrant pursuant to the
merger described in this registration statement. On that
date, the book value of such common stock was $16.19 per
share.
(2) 241,171 shares are being offered in exchange for 230,000
shares of common stock of Security National Bank, Nacogdoches,
Texas ("SNB Stock"). The filing fee for this portion of the
offering is calculated pursuant to Rule 457(f)(2) on the basis
of the book value, as of August 31, 1996, of 230,000 shares of
SNB Stock to be received by the registrant pursuant to the
merger described in this registration statement. On that
date, the book value of such common stock was $16.46 per
share.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
FIRST COMMERCIAL CORPORATION
Cross-Reference Sheet
for
Registration Statement on Form S-4
Item Captions in Proxy
Number Caption Statement/Prospectus
1. Forepart of Registration Facing Page,
Cross-
Statement and Outside Front Reference Sheet,
Cover Page of Prospectus Prospectus Cover
Page
2. Inside Front and Outside Back A v a i l a b l e
Cover Pages of Prospectus Information,
Incorporation of
Certain Documents
by Reference,
Table
of Contents
3. Risk Factors, Ratio of Earnings Summary
to Fixed Charges and Other
Information
4. Terms of the Transaction The City National
Bank Transaction,
The Security
National Bank
Transaction,
Information
Concerning
First Commercial,
Comparative Rights
of Shareholders
5. Pro Forma Financial Information Unaudited Pro
Forma
Combined Financial
Information
6. Material Contacts with the Not Applicable
Company Being Acquired
7. Additional Information Required Not Applicable
for Reoffering by Persons and
Parties Deemed to be Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
<PAGE>
10. Information with Respect to S-3 Information
Registrants Concerning
First Commercial
11. Incorporation of Certain Informa- Information Con-
tion by Reference cerning First
Commercial
12. Information with Respect to S-2 Not Applicable
or S-3 Registrants
13. Incorporation of Certain Informa- Not Applicable
tion by Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-3 or
S-2 Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to Information Con-
Companies Other Than S-3 or cerning City
S-2 Companies National Bank,
Financial
Statements of
City National Bank,
Information
Concerning
Security National
Bank,
Financial State-
ments of Security
National Bank
18. Information if Proxies, Consents Summary, The City
or Authorizations are to be Bank Transaction,
Solicited The Security
National Bank
Transaction,
Information
Concerning City
National
Bank, Information
Concerning Security
National Bank,
Information
Concerning First
Commercial
19. Information if Proxies, Consents Not Applicable
or Authorizations are Not to be
Solicited or in an Exchange Offer
<PAGE>
[City National Bank Letterhead]
Dear Stockholder:
A Special Meeting of the Stockholders of City National Bank
("CNB") will be held on -------, 1996, at ----- a.m., local
time, at ----------------, Whitehouse, Texas.
The purpose of the meeting is to ask you to approve the merger
(the "Merger") of CNB with and into Tyler Bank and Trust,
N.A., Tyler, Texas, a wholly-owned subsidiary of First
Commercial Corporation, Little Rock, Arkansas ("First
Commercial"). The Merger is subject, among other things, to
the approval of the holders of at least two-thirds (2/3) of
the shares of common stock of CNB ("CNB Stock"). If the
Merger is consummated, each holder of CNB Stock will receive
1.01155 shares of First Commercial common stock (with cash
payments in lieu of fractional shares) for each outstanding
share of CNB Stock held at the effective date of the Merger.
CITY NATIONAL BANK'S BOARD OF DIRECTORS AND MANAGEMENT
RECOMMEND APPROVAL OF THE MERGER.
Enclosed with this letter are a Notice of Special Meeting, a
Proxy Form and return envelope and a Joint Proxy
Statement/Prospectus, which contains a detailed description of
the entire transaction. Please read the enclosed material
carefully. Because your vote is important, we urge you to
complete, date, sign and return the Proxy Form in the enclosed
envelope.
Sincerely,
Whitehouse, Texas
----------, 1996
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
To The Stockholders of City National Bank:
Notice is hereby given that a Special Meeting of the
Stockholders of City National Bank ("CNB") will be held on ---
----, 1996, at ----- a.m., local time, at -----------------,
Whitehouse, Texas, for the following purposes:
1. To consider and act upon a proposal to approve
a plan of merger providing for the merger (the
"Merger") of CNB with and into Tyler Bank and
Trust, N.A., Tyler, Texas ("TBT"), a wholly-
owned subsidiary of First Commercial
Corporation, Little Rock, Arkansas ("First
Commercial"), as a result of which each
outstanding share of common stock of CNB ("CNB
Stock") will be converted into 1.01155 shares
of First Commercial common stock (with cash
payments in lieu of fractional shares). Such
approval, if voted, shall be deemed to
constitute the ratification, confirmation and
approval of the execution and delivery by CNB
of the Plan and Agreement of Merger Among First
Commercial, TBT and CNB dated May 9, 1996
("Agreement").
2. To transact such other business as may properly
be brought before the Special Meeting or at any
adjournment thereof.
Information regarding the matters to be acted upon at the
meeting is contained in the accompanying Joint Proxy
Statement/Prospectus.
Consummation of the Merger is conditioned upon approval by the
holders of at least two-thirds (2/3) of the outstanding shares
of CNB Stock. Only those holders of CNB Stock of record at
the close of business on ----------, 1996, are entitled to
notice of, and to vote at, the Special Meeting and any
adjournment thereof.
Dissenting shareholders who comply with the procedural
requirements of 12 U.S.C. Section 215a(b), (c) and (d) will be
entitled to receive payment of the cash value of their shares
if the Merger is approved.
<PAGE>
Your vote is important regardless of the number of shares you
own. Whether or not you plan to attend the Special Meeting,
please mark, date and sign the enclosed Proxy and return it
promptly.
By Order of the Board of Directors
----------------------------
Secretary
Whitehouse, Texas
-----------, 1996
<PAGE>
[Security National Bank Letterhead]
Dear Stockholder:
A Special Meeting of the Stockholders of Security National
Bank ("SNB") will be held on ----------, 1996, at ---- a.m.,
local time, at --------------------, Nacogdoches, Texas.
The purpose of the meeting is to ask you to approve the merger
(the "Merger") of SNB with and into Stone Fort National Bank,
Nacogdoches, Texas, a wholly-owned subsidiary of First
Commercial Corporation, Little Rock, Arkansas ("First
Commercial"). The Merger is subject, among other things, to
the approval of the holders of at least two-thirds (2/3) of
the shares of common stock of SNB ("SNB Stock"). If the
Merger is consummated, each holder of SNB Stock will receive
1.04857 shares of First Commercial common stock (with cash
payments in lieu of fractional shares) for each outstanding
share of SNB Stock held at the effective date of the Merger.
SECURITY NATIONAL BANK'S BOARD OF DIRECTORS AND MANAGEMENT
RECOMMEND APPROVAL OF THE MERGER.
Enclosed with this letter are a Notice of Special Meeting, a
Proxy Form and return envelope and a Joint Proxy
Statement/Prospectus, which contains a detailed description of
the entire transaction. Please read the enclosed material
carefully. Because your vote is important, we urge you to
complete, date, sign and return the Proxy Form in the enclosed
envelope.
Sincerely,
Nacogdoches, Texas
---------, 1996
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------
To The Stockholders of Security National Bank:
Notice is hereby given that a Special Meeting of the
Stockholders of Security National Bank ("SNB") will be held on
--------, 1996, at ---- a.m., local time, at ------------,
Nacogdoches, Texas, for the following purposes:
1. To consider and act upon a proposal to approve
a plan of merger providing for the merger (the
"Merger") of SNB with and into Stone Fort
National Bank, Nacogdoches, Texas ("Stone
Fort"), a wholly-owned subsidiary of First
Commercial Corporation, Little Rock, Arkansas
("First Commercial"), as a result of which each
outstanding share of common stock of SNB ("SNB
Stock") will be converted into 1.04857 shares
of First Commercial common stock (with cash
payments in lieu of fractional shares). Such
approval, if voted, shall be deemed to
constitute the ratification, confirmation and
approval of the execution and delivery by SNB
of the Plan and Agreement of Merger Among First
Commercial, Stone Fort and SNB dated June 28,
1996 ("Agreement").
2. To transact such other business as may properly
be brought before the Special Meeting or at any
adjournment thereof.
Information regarding the matters to be acted upon at the
meeting is contained in the accompanying Joint Proxy
Statement/Prospectus.
Consummation of the Merger is conditioned upon approval by the
holders of at least two-thirds (2/3) of the outstanding shares
of SNB Stock. Only those holders of SNB Stock of record at
the close of business on -----------, 1996, are entitled to
notice of, and to vote at, the Special Meeting and any
adjournment thereof.
Dissenting shareholders who comply with the procedural
requirements of 12 U.S.C. Section 215a(b), (c) and (d) will be
entitled to receive payment of the cash value of their shares
if the Merger is approved.
<PAGE>
Your vote is important regardless of the number of shares you
own. Whether or not you plan to attend the Special Meeting,
please mark, date and sign the enclosed Proxy and return it
promptly.
By Order of the Board of Directors
-----------------------------------
Secretary
Nacogdoches, Texas
---------, 1996
<PAGE>
Information contained herein is subject to completion or
amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers
to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any
State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such State.
Subject to Completion
September 19, 1996
JOINT PROXY STATEMENT/PROSPECTUS
PROSPECTUS FOR
FIRST COMMERCIAL CORPORATION
415,663 Shares
Common Stock
($3.00 par value per share)
JOINT PROXY STATEMENT FOR
CITY NATIONAL BANK, WHITEHOUSE, TEXAS
AND
SECURITY NATIONAL BANK, NACOGDOCHES, TEXAS
First Commercial Corporation ("First Commercial") has filed a
registration statement pursuant to the Securities Act of 1933,
as amended, covering a maximum of 415,663 shares of First
Commercial Common Stock, $3.00 par value per share (the "First
Commercial Stock"). 174,492 shares of the First Commercial
Stock are being offered in connection with a proposed
transaction in which City National Bank, Whitehouse, Texas
("CNB"), will be merged into Tyler Bank and Trust, N.A.,
Tyler, Texas ("TBT"), a wholly-owned subsidiary of First
Commercial. The remaining 241,171 shares of the First
Commercial Stock are being offered in connection with a
proposed transaction in which Security National Bank,
Nacogdoches, Texas ("SNB"), will be merged into Stone Fort
National Bank, Nacogdoches, Texas ("Stone Fort"), a wholly-
owned subsidiary of First Commercial. This document
constitutes a proxy statement for each of CNB and SNB in
connection with the proposed transactions described herein and
a prospectus of First Commercial with respect to the offering
of its shares of common stock.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any
representation not contained in this Prospectus and, if given
or made, such information or representation should not be
relied upon as having been authorized. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer
to purchase, the securities offered hereby, or the
solicitation of a proxy, in any jurisdiction in which, or to
any person to whom, it is unlawful to make such offer or
solicitation of an offer or proxy solicitation. Neither the
delivery of this Prospectus nor any distribution of the
securities offered hereby shall, under any circumstances,
create an implication that there has been no change in the
affairs of First Commercial, CNB or SNB since the date hereof.
The date of this Joint Proxy Statement/Prospectus is -------,
1996.
<PAGE>
AVAILABLE INFORMATION
First Commercial is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other
information concerning First Commercial may be inspected and
copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the
Commission: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Additionally, such material may be accessed
at the Commission's Web site (http://www.sec.gov).
First Commercial has filed with the Commission a registration
statement on Form S-4 (herein, together with all amendments
and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended. This Joint
Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
-----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AS IS MORE FULLY SET FORTH UNDER "INFORMATION CONCERNING FIRST
COMMERCIAL" ELSEWHERE HEREIN, THIS JOINT PROXY
STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. FIRST
COMMERCIAL HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON TO WHOM A COPY OF THIS JOINT PROXY STATEMENT/PROSPECTUS
HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS RELATING TO
FIRST COMMERCIAL THAT HAVE BEEN INCORPORATED BY REFERENCE
HEREIN, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN.
REQUESTS FOR DOCUMENTS SHOULD BE DIRECTED TO J. LYNN WRIGHT,
CHIEF FINANCIAL OFFICER, FIRST COMMERCIAL CORPORATION, POST
OFFICE BOX 1471, LITTLE ROCK, ARKANSAS 72203, TELEPHONE (501)
371-7000. IN ORDER TO INSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [5 business days
prior to meeting date] ----------, 1996.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE i
INTRODUCTION iv
SUMMARY iv
The Companies iv
The CNB Transaction v
The SNB Transaction vi
Regulatory Approval vii
Dissenting Stockholders viii
Federal Income Tax Consequences viii
Selected Financial Data - First Commercial ix
Comparative Per Share Data x
THE CITY NATIONAL BANK TRANSACTION 1
General 1
The CNB Special Meeting 1
Shares Entitled to Vote; Vote Required 1
Solicitation, Voting and Revocation of Proxies 2
The CNB Merger 2
THE SECURITY NATIONAL BANK TRANSACTION 11
General 11
The SNB Special Meeting 11
Shares Entitled to Vote; Vote Required 12
Solicitation, Voting and Revocation of Proxies 12
The SNB Merger 13
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 22
INFORMATION CONCERNING CITY NATIONAL BANK 37
Business of CNB 37
CNB Stock 37
Selected Financial Data - City National Bank 40
Management's Discussion and Analysis or Plan
of Operation 41
INFORMATION CONCERNING SECURITY NATIONAL BANK 44
Business of SNB 44
SNB Stock 45
Selected Financial Data - Security National Bank 47
Management's Discussion and Analysis or Plan
of Operation 48
Results of Operations 48
Capital Resources, Liquidity, and Financil Condition 53
INFORMATION CONCERNING FIRST COMMERCIAL 62
Information Incorporated by Reference 62
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS 63
General 63
Authorized and Issued Shares 63
Dividends 63
Voting Rights 64
Preemptive Rights 67
Indemnification of Directors and Officers and
Limitation of Director Liability 67
Filling Vacancies on the Board of Directors 68
Nomination of Director Candidates and Advance
Notice of Matters to be Brought Before an
Annual Meeting by Stockholders 69
Fair Price Provision 70
LEGAL OPINIONS 72
EXPERTS 72
FINANCIAL STATEMENTS OF CITY NATIONAL BANK F-CNB-1
FINANCIAL STATEMENTS OF SECURITY NATIONAL BANK F-SNB-1
Appendix A - 12 USC 215a(b), (c) and (d)
<PAGE>
INTRODUCTION
This Joint Proxy Statement/Prospectus describes and submits
for the respective votes of the stockholders of City National
Bank, Whitehouse, Texas, and Security National Bank,
Nacogdoches, Texas (1) the proposed merger of City National
Bank into Tyler Bank & Trust, N.A., Tyler, Texas and (2) the
proposed merger of Security National Bank into Stone Fort
National Bank, Nacogdoches, Texas. A summary of the City
National Bank merger begins on page v and a more detailed
description beings on page 1. A summary of the Security
National Bank merger beings on page vi and a more detailed
description begins on page 11. Pro forma combined financial
statements depicting the effect of the two mergers are
presented beginning on page 23. The two mergers are separate
transactions, and either may proceed without the other.
SUMMARY
The following summary of the proposed transactions is
qualified in its entirety by the more detailed information
appearing elsewhere herein and in the appendices hereto.
The Companies
First Commercial Corporation
First Commercial Corporation ("First Commercial") is the
largest multi-bank holding company headquartered in Arkansas,
with its corporate offices located in Little Rock. The
Company offers a broad range of bank and bank-related services
through 15 commercial banking institutions in Arkansas, seven
institutions in the State of Texas, one institution in each of
the States of Louisiana and Tennessee, and a 50% interest in a
commercial banking institution in Oklahoma. In addition,
subsidiaries of the Company provide trust services and
investment services, offer first mortgage loans and perform
mortgage loan servicing operations. First Commercial is
incorporated under the laws of the State of Arkansas. The
executive offices of the Company are located at 400 West
Capitol Avenue, Little Rock, Arkansas 72201, telephone number:
(501) 371-7000. See "Information Concerning First
Commercial."
Tyler Bank and Trust, N.A., Tyler, Texas
Tyler Bank and Trust, N.A. ("TBT") is a wholly-owned national
banking subsidiary of First Commercial headquartered in Tyler,
Texas. TBT is the third largest bank in Tyler, Texas with one
full service branch and three ATM locations. TBT offers a
large number of bank and bank-related services and is the
leading mortgage and residential construction lender in Smith
County. TBT has two wholly owned subsidiaries: Commercial
Capital
<PAGE>
Funding, Inc., located in Dallas, Texas, which provides
operating capital to moderate and small businesses by
factoring accounts receivable, and Aircraft Financing, Inc.,
located in Tyler, Texas, which provides financing for the
purchase of various types of aircraft at the consumer,
commercial, wholesale and retail levels. TBT's principal
office is located at 100 East Ferguson, Tyler, Texas 75702,
telephone number: (903) 595-1941.
Stone Fort National Bank, Nacogdoches, Texas
Stone Fort National Bank ("Stone Fort") is a wholly-owned
national banking subsidiary of First Commercial headquartered
in Nacogdoches, Texas. First Commercial acquired Stone Fort
from Texas Commerce Bancshares in November 1993. Stone Fort's
principal office is located at 300 E. Main, Nacogdoches, Texas
75961, telephone number: (409) 564-4624.
City National Bank, Whitehouse, Texas
City National Bank ("CNB") is a national banking association
headquartered in Whitehouse, Texas. CNB provides consumer and
commercial lending for the Whitehouse and southeast Tyler
communities. CNB has branches located in Gresham, the Lake
Palestine area, the West Loop in Tyler and Gentry Parkway in
Tyler. CNB's principal office is located at 1125 Highway 110
North, Whitehouse, Texas 75791, telephone number: (903)839-
6000. As of June 30, 1996, CNB had total assets of
$40,408,000, total deposits of $37,420,000, and total
stockholders' equity of $2,655,000. See "Information
Concerning City National Bank."
Security National Bank, Nacogdoches, Texas
Security National Bank ("SNB") is a national banking
association organized in 1980 under the laws of the United
States of America and is headquartered in Nacogdoches, Texas,
where it owns its banking facility located at 3000 University
Drive, Nacogdoches, Texas 75963-2018, telephone number:
(409)560-2265. SNB engages in a general, full-service
commercial and consumer banking business. As of June 30,
1996, SNB had total assets of $36,919,000, total deposits of
$32,945,000, and total stockholders' equity of $3,683,000 (or
approximately 9.98% of total assets). See "Information
Concerning Security National Bank."
The CNB Transaction
The CNB Merger
Stockholders of CNB are being asked to consider and vote upon
a proposal to approve the merger of CNB with and into TBT (the
"CNB Merger") pursuant to the terms of a Plan and Agreement of
Merger Among First Commercial, TBT and CNB dated May 9, 1996
(the "CNB Agreement"). Under the terms of the CNB Agreement,
<PAGE>
each outstanding share of CNB Stock will be converted into a
right to receive 1.01155 shares of common stock, $3.00 par
value per share, of First Commercial (the "First Commercial
Stock"). Cash will be paid by First Commercial in lieu of
issuing fractional shares. The First Commercial Stock and
cash to be delivered to the CNB Stockholders are hereinafter
referred to as the "CNB Merger Consideration." CNB will have
the right to terminate the CNB Agreement in the event the
price of a share of First Commercial Common Stock drops below
$26.669 per share for a period of time. See "The City
National Bank Transaction - The CNB Special Meeting."
The CNB Special Meeting
A special meeting of the stockholders of CNB (the "CNB Special
Meeting") will be held on --------, 1996, at the time and
place set forth in the accompanying Notice of Special Meeting
of Stockholders. Only record holders of the Common Stock,
$5.00 par value per share, of CNB (the "CNB Stock"), on ------
-, 1996 are entitled to notice of and to vote at the Special
Meeting. On that date there were 172,500 shares of CNB Stock
outstanding, each of which is entitled to one vote at the CNB
Special Meeting.
Vote Required
The affirmative vote of the holders of at least two-thirds of
the outstanding shares of CNB Stock is required to approve the
CNB Agreement. Directors, executive officers and their
affiliates who own or control approximately 91% of the
outstanding shares of CNB Stock entitled to vote at the CNB
Special Meeting have indicated that they will vote in favor of
the CNB Merger. See "The City National Bank Transaction -
Shares Entitled to Vote; Vote Required."
First Commercial, as the sole stockholder of TBT, will vote to
approve the CNB Merger.
Reasons for the CNB Merger
The Boards of Directors of First Commercial, TBT and CNB have
unanimously determined that the CNB Merger, pursuant to the
terms of the CNB Agreement, is desirable and in the best
interest of each organization and its respective stockholders.
The Board of Directors of CNB has recommended that CNB
Stockholders vote for the approval, ratification and
confirmation of the Merger. See "The City National Bank
Transaction - The CNB Merger."
<PAGE>
The SNB Transaction
The SNB Merger
Stockholders of SNB are being asked to consider and vote upon
a proposal to approve the merger of SNB with and into Stone
Fort (the "SNB Merger") pursuant to the terms of a Plan and
Agreement of Merger Among First Commercial, Stone Fort and SNB
dated June 28, 1996 (the "SNB Agreement"). Under the terms of
the SNB Agreement, each outstanding share of SNB Stock will be
converted into a right to receive 1.04857 shares of common
stock, $3.00 par value per share, of First Commercial (the
"First Commercial Stock"). Cash will be paid by First
Commercial in lieu of issuing fractional shares. The First
Commercial Stock and cash to be delivered to the SNB
Stockholders are hereinafter referred to as the "SNB Merger
Consideration." SNB will have the right to terminate the SNB
Agreement if the price of a share of First Commercial Stock
drops below $26.1375 per share for a period of time and if
First Commercial does not agree to amend the SNB Agreement so
that the SNB Merger Consideration will include a number of
shares of First Commercial Stock having a market value equal
to $6,303,600. See "The Security National Bank Transaction -
The SNB Special Meeting."
The SNB Special Meeting
A special meeting of the stockholders of SNB (the "SNB Special
Meeting") will be held on ---------, 1996, at the time and
place set forth in the accompanying Notice of Special Meeting
of Stockholders. Only record holders of the Common Stock,
$5.00 par value per share, of SNB (the "SNB Stock"), on ------
-, 1996 are entitled to notice of and to vote at the SNB
Special Meeting. On that date there were 230,000 shares of
SNB Stock outstanding, each of which is entitled to one vote
at the SNB Special Meeting.
Vote Required
The affirmative vote of the holders of at least two-thirds of
the outstanding shares of SNB Stock is required to approve the
SNB Agreement. Directors, executive officers and their
affiliates who own or control approximately 30.13% of the
outstanding shares of SNB Stock entitled to vote at the SNB
Special Meeting have indicated that they will vote in favor of
the SNB Merger. See "The Security National Bank Transaction -
Shares Entitled to Vote; Vote Required."
<PAGE>
First Commercial, as the sole stockholder of Stone Fort, will
vote to approve the SNB Merger.
Reasons for the SNB Merger
The Boards of Directors of First Commercial, Stone Fort and
SNB have determined that the SNB Merger, pursuant to the terms
of the SNB Agreement, is desirable and in the best interest of
each organization and its respective stockholders.
The Board of Directors of SNB has recommended that SNB
Stockholders vote for the approval, ratification and
confirmation of the Merger. See "The Security National Bank
Transaction - The SNB Merger."
Regulatory Approval
Consummation of each of the CNB Merger and the SNB Merger
requires the prior approval of the Office of the Comptroller
of the Currency of the United States (the "OCC") and the Texas
Department of Banking. Applications for such regulatory
approval for the CNB Merger were filed on July 18, 1996 and
June 14, 1996, respectively, and applications for such
regulatory approval for the SNB Merger were filed on September
11, 1996 and July 17, 1996, respectively. The Texas
Department of Banking has approved the CNB Merger and the SNB
Merger. See "The City National Bank Transaction - The CNB
Merger" and "The Security National Bank Transaction - The SNB
Merger."
Dissenting Stockholders
Stockholders of CNB and SNB who comply with the specific
procedures set forth in 12 U.S.C. 215a(b), (c) and (d), which
are described elsewhere herein, will have the right to dissent
from the CNB Merger and SNB Merger, respectively, in which
event, if such merger is consummated, they may be entitled to
receive in cash the fair value of their shares of CNB Stock
and SNB Stock, respectively. See "The City National Bank
Transaction - The CNB Merger" and "The Security National Bank
Transaction - The SNB Merger."
Federal Income Tax Consequences
Each of the CNB Merger and the SNB Merger will qualify as a
tax-free corporate reorganization for federal income tax
purposes if it satisfies the specific requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury regulations promulgated thereunder and pertinent
judicial decisions. The most important of these requirements
is that: (i) no stock of TBT or Stone Fort may be used in the
transactions; (ii) substantially all of the properties of CNB
and SNB, respectively, must be acquired by TBT and Stone Fort,
respectively, in connection with each merger; and (iii) the
stockholders of each of CNB and SNB must maintain a
"continuity
<PAGE>
of interest" in First Commercial after each merger. Based
upon the representation that these requirements will be
satisfied in connection with the transaction, and subject to
certain other assumptions and representations set forth in its
opinion, Friday, Eldredge & Clark, special tax counsel to
First Commercial, will render its opinion to the effect that,
among other things, no taxable gain or loss will be recognized
for federal income tax purposes by the stockholders of either
CNB or SNB solely upon receipt of the First Commercial Stock
in exchange for their shares of CNB Stock or SNB Stock in
connection with each merger. See "The City National Bank
Transaction - The CNB Merger" and "The Security National Bank
Transaction - The SNB Merger."
<PAGE>
Selected Financial Data - First Commercial
The following selected financial data should be read in conjunction with
the more detailed information and financial statements, including the notes
thereto, set forth in this document and incorporated herein by reference.
See "Information Concerning First Commercial."
<TABLE>
FIRST COMMERCIAL CONSOLIDATED SELECTED FINANCIAL DATA
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Six Months Ended June 30 <F1> Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Period Ended:
Net Interest Income $ 105,718 $ 87,423 $ 184,550 $ 159,445 $ 144,574 $ 133,408 $ 119,056
Provision for Possible
Loan and Lease Losses 3,125 1,259 3,059 (3,092) 4,416 8,941 9,992
Net Income 32,583 26,417 56,910 50,308 45,965 39,967 33,961
Per Common Share
Data: <F2>
Net Income 1.19 1.01 2.17 1.96 1.74 1.52 1.35
Cash Dividends .42 .38 .78 .67 .54 .42 .36
Book Value 16.36 14.31 15.81 13.49 12.66 11.18 10.23
Average Assets 5,202,754 4,498,053 4,652,368 4,235,586 3,812,409 3,313,162 2,997,988
Average Common Equity 445,832 367,668 378,807 337,557 310,252 271,598 229,975
Average Total Equity 445,832 367,668 378,807 339,244 320,872 282,218 239,460
Ratios(%)
Return on:
Average Assets 1.26 1.18 1.22 1.19 1.21 1.21 1.13
Average Common Equity 14.74 14.49 15.02 14.87 14.43 14.27 14.30
Average Total Equity
to Average Assets 8.57 8.17 8.14 8.01 8.42 8.52 7.99
<FN>
<F1>
The unaudited operating results for First Commercial for the six months ended June 30, 1996 and 1995,
in the opinion of First Commercial management, included all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation. Interim results for the six months ended June 30, 1996,
are not necessarily indicative of results for the full year 1996.
</FN>
<FN>
<F2>
All per share data has been restated to reflect the 10% stock dividend declared July 1992, the 3 for 2 stock split
in the form of a stock dividend declared November 1993, the 5% stock dividend declared November 1994, and
the 7% stock dividend declared November 1995.
</FN>
</TABLE>
<PAGE>
Comparative Per Share Data
Information presented below may not be indicative of the results that
actually would have occurred if the combination had been in effect
on the dates indicated or indicative of future results.
<TABLE>
<CAPTION>
Six Months Ended June 30, <F1> Years Ended December 31,
--------------------------- --------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings Per Common Share (before the
cumulative effect of a change in
accounting principle common share):
Historical:
First Commercial <F2> 1.19 1.01 2.17 1.96 1.74
CNB 1.17 0.79 1.54 2.05 2.38
SNB 1.15 0.86 1.89 1.83 2.26
Pro Forma - First Commercial 1.19 1.01 2.16 1.96 1.75
Pro Forma Equivalent Share Basis -
CNB/SNB(3 1.23 1.04 2.23 2.02 1.80
Cash Dividends Per Common Share:
Historical:
First Commercial <F2> 0.42 0.38 0.78 0.67
CNB 0 0 0 0.25 0.54
SNB 0.30 0.30 0.60 0.60 0
Pro Forma - First Commercial 0.42 0.37 0.77 0.66 0.45
Pro Forma Equivalent Share Basis - 0.53
CNB/SNB(3) 0.43 0.38 0.80 0.68 0.55
Book Value Per Common Share (period
end):
Historical: 16.36 --- 15.81 --- ---
First Commercial <F2> 15.39 --- 14.39 --- ---
CNB 16.02 --- 15.46 --- ---
SNB 16.34 --- 15.79 --- ---
Pro Forma - First Commercial
Pro Forma Equivalent Share Basis - 16.87 --- 16.31 --- ---
CNCB/SNB <F3>
<FN>
<F1> The unaudited operating results for First Commercial, CNB and SNB for
the six months ended June 30, 1996 and 1995, in the opinion of First
Commercial, CNB and SNB management, included all adjustments
(consisting solely of normal recurring adjustments) necessary for
a fair presentation. Interim results for the six months ended
June 30, 1996, are not necessarily indicative of results for the
full year 1996.
</FN>
<FN>
<F2> All First Commercial Corporation historical and pro forma per share
data has been restated to reflect the 3 for 2 stock split in the
form of a stock dividend declared November 1993, the 5% stock dividend
declared November 1994, and the 7% stock dividend declared November
1995.
</FN>
<FN>
<F3> The pro forma equivalent share amounts are computed by multiplying
First Commercial's pro forma share information by 1.0327.
</FN>
</TABLE>
<PAGE>
THE CITY NATIONAL BANK TRANSACTION
Information in this section relates to the merger of City
National Bank, Whitehouse, Texas ("CNB") into Tyler Bank and
Trust, N.A., Tyler, Texas ("TBT"), a wholly-owned national
banking association of First Commercial Corporation ("First
Commercial") (the "CNB Merger"). For a discussion of the
Security National Bank Merger, see the information contained
under the heading "The Security National Bank Transaction."
General
This Joint Proxy Statement/Prospectus is furnished to the
stockholders of CNB in connection with the solicitation of
proxies on behalf of its Board of Directors for use at a
special meeting of stockholders of CNB (the "CNB Special
Meeting") to be held on the date and at the time and place
specified in the accompanying Notice of Special Meeting of
Stockholders or any adjournment thereof.
CNB and First Commercial each have supplied all information
included herein with respect to itself.
This Joint Proxy Statement/Prospectus was first mailed to
shareholders of CNB on -----------, 1996.
The CNB Special Meeting
The purpose of the CNB Special Meeting is to consider and vote
upon a proposal to approve the CNB Merger pursuant to the
terms of a Plan and Agreement of Merger among First
Commercial, TBT and CNB dated May 9, 1996 (the "CNB
Agreement"). Under the terms of the CNB Agreement, each
outstanding share of common stock of CNB, $5.00 par value per
share (the "CNB Stock"), will be canceled and converted into
the right to receive 1.01155 shares of First Commercial common
stock, $3.00 par value per share (the "First Commercial
Stock"), with cash payment due in lieu of any fractional
shares. The First Commercial Stock and cash in lieu of
fractional shares to be delivered to CNB stockholders are
hereinafter referred to as the "CNB Merger Consideration."
See "The City National Bank Transaction - The CNB Merger."
CNB may terminate the Agreement if the average of the bid and
asked prices of a share of First Commercial Stock as reported
on the Nasdaq National Market for the twenty business days
preceding the Closing Date, based on the average of such
prices as calculated for each such day, shall be less than
$26.669 per share. The average of the bid and asked price of
a share of the First Commercial Stock on _________, 1996, was
$_____.
Shares Entitled to Vote; Vote Required
Only holders of record of the CNB Stock at the close of
<PAGE>
business on ------, 1996 (the "CNB Record Date") are entitled
to notice of and to vote at the CNB Special Meeting. On that
date, the number of outstanding shares of the CNB Stock was
172,500, each of which is entitled to one vote on each matter
to come before the CNB Special Meeting. Under national
banking laws approval of the CNB Merger requires the
affirmative vote of the holders of at least two-thirds (2/3)
of the outstanding shares of CNB Stock. Abstentions will not
be counted as affirmative votes. Directors, executive
officers and their affiliates who own or control approximately
91% of the outstanding shares of CNB Stock entitled to vote
have indicated that they will vote in favor of the CNB Merger.
Solicitation, Voting and Revocation of Proxies
In addition to soliciting proxies by mail, directors, officers
and employees of CNB, without receiving additional
compensation therefor, may solicit proxies by telephone and in
person. Arrangements will also be made with brokerage firms
and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of CNB Stock,
and CNB will reimburse such parties for reasonable out-of-
pocket expenses incurred in connection therewith. The cost of
soliciting proxies is being paid by CNB.
The proxies that accompany this Joint Proxy
Statement/Prospectus permit each holder of CNB Stock on the
CNB Record Date to vote on all matters that come before the
CNB Special Meeting. When a stockholder specifies his choice
on the proxy with respect to a matter being voted upon, the
shares represented by the proxy will be voted in accordance
with such specification. If no such specification is made,
the shares will be voted in favor of approval of the CNB
Merger. A proxy may be revoked by (i) giving written notice
of revocation at any time before its exercise to Nancy Duress,
Secretary, P.O. Box 710, Whitehouse, Texas 75791, (ii)
executing and delivering to Nancy Duress at any time before
its exercise a proxy bearing a subsequent date or (iii)
attending the CNB Special Meeting and voting in person.
The Board of Directors of CNB is not aware of any business to
be acted upon at the CNB Special Meeting other than
consideration of the CNB Merger. If, however, other proper
matters are brought before the CNB Special Meeting, or any
adjournments thereof, the persons appointed as proxies will
have discretion
<PAGE>
to vote or abstain from voting thereon according to their best
judgment.
The CNB Merger
General
On June 18, 1996, and July 24, 1996, the Boards of Directors
of First Commercial and CNB, respectively, each approved the
CNB Agreement. The description of the CNB Agreement herein
does not purport to be complete and is qualified in its
entirety by reference to the CNB Agreement, which is made an
exhibit to the Registration Statement of which this Joint
Proxy Statement/Prospectus is a part and is incorporated
herein by reference.
Under the CNB Agreement, CNB will be merged into TBT, and each
share of CNB Stock outstanding on the Effective Date, as
defined herein, will be converted into the right to receive
1.01155 shares of First Commercial Stock. The exchange ratio
was based upon historical and projected earnings of CNB, the
amounts of CNB assets and liabilities, and the market value of
First Commercial Stock. Projected earnings were based
primarily on historical trends.
First Commercial is an Arkansas corporation and a multi-bank
holding company registered under the Bank Holding Company Act
of 1956, as amended ("BHCA"). CNB and TBT are each national
banking associations operating under the laws of the United
States of America.
Stockholders of CNB will exchange their stock certificates for
new certificates evidencing shares of First Commercial Stock.
After the CNB Merger, and until so exchanged, the shares of
CNB Stock will represent the right to receive the number of
shares of First Commercial Stock into which such shares of CNB
Stock will be converted. See "Distribution of First
Commercial Stock Certificates" below.
Reasons for the CNB Merger
Several factors were important in the CNB Board's decision to
pursue this opportunity for a merger with First Commercial's
subsidiary, TBT. First, based on the market price of First
Commercial's Stock at the time the negotiations began, it was
apparent that the value of the proposed transaction was in the
best interest of shareholders. A second important
consideration of the Board of Directors was that First
Commercial's Stock prices are quoted on the Nasdaq National
Market and there is apparently sufficient market volume in the
stock to afford shareholders of CNB an opportunity for
liquidity. A third important consideration was First
Commercial's sound record of dividend payout. A fourth and
extremely important consideration in the decision was the
financial soundness of First Commercial. <PAGE>
Based on the financial information provided CNB directors
concerning the financial performance of First Commercial over
the preceding two years, it was apparent that First Commercial
met or exceeded all soundness criteria comparable with its
peer group. Additionally, its profitability performance had
been at or above levels of peer financial institutions. A
fifth important consideration was the general environment of
the commercial banking industry in this country and the
substantially enhanced activity of merger and acquisition
opportunities in the industry.
In summary, the Board of Directors of CNB believes that the
proposed CNB Merger is in the best interests of its
shareholders.
Federal Income Tax Consequences
The following is a discussion of certain of the material
federal income tax considerations in connection with the CNB
Merger and the tax opinion of Friday, Eldredge & Clark,
special tax counsel to First Commercial.
The CNB Merger will qualify as a tax-free corporate
reorganization for federal income tax purposes under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code, as
amended (the "Code"), if it satisfies the specific
requirements of the Code, the regulations promulgated
thereunder, and pertinent judicial decisions. The most
important of these requirements is that (i) no stock of TBT
may be used in the transaction, (ii) substantially all of the
properties of CNB must be acquired by TBT in connection with
the CNB Merger (the "Substantially All Test"), and (iii) the
stockholders of CNB must, collectively as a group, maintain a
"continuity of interest" in First Commercial after the CNB
Merger (the "Continuity of Interest Test").
The merger transaction does not contemplate the use of any
stock of TBT in the transaction, and, accordingly, this
requirement should be satisfied. For private letter ruling
purposes, the Internal Revenue Service ("IRS") generally
regards the Substantially All Test to be satisfied if at least
90% of the fair market value of CNB's net assets and at least
70% of the fair market value of CNB's gross assets held by CNB
immediately prior to the transaction are acquired in
connection with the CNB Merger. Management of CNB and TBT
believe that this test will be satisfied in connection with
the transaction contemplated by the CNB Merger. The IRS
takes the position that the Continuity of Interest Test will
be satisfied if the former CNB stockholders receive, in the
CNB Merger, a number of shares of First Commercial Stock
having a value, as of the Effective Date (as defined herein),
equal to at least fifty percent (50%) of the value of all the
outstanding stock of CNB as of such date. In general, this
requires the stockholders of CNB to
<PAGE>
collectively surrender at least 50% of their CNB Stock in
exchange for First Commercial Stock in the CNB Merger. In
addition, in order for the Continuity of Interest Test to be
satisfied, this 50% continuity of stock ownership generally
must be maintained for a meaningful period of time following
the CNB Merger. Moreover, at the time of the CNB Merger,
there can be no plan or intention on the part of the
shareholders of CNB to collectively dispose of an amount of
the First Commercial Stock that would cause the 50% continuity
of stock ownership requirement to not be satisfied.
Accordingly, assuming the Substantially All Test and
Continuity of Interest Test are satisfied, and provided other
specific requirements contained in the Code, the regulations
promulgated thereunder, and pertinent judicial decisions are
met, the transaction should qualify as a tax-free corporate
reorganization for federal income tax purposes pursuant to the
provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
If the CNB Merger qualifies as a tax-free corporate
reorganization, the material federal income tax consequences
of the CNB Merger will be as follows: (i) no material gain
or loss will be recognized by CNB, First Commercial or TBT as
a result of the CNB Merger; (ii) no gain or loss will be
recognized by the shareholders of CNB upon the receipt of
First Commercial Stock solely in exchange for their shares of
CNB Stock in connection with the CNB Merger; (iii) the tax
basis of the shares of First Commercial stock received by the
shareholders of CNB in the CNB Merger will, in each instance,
be the same as the basis of the shares of CNB Stock
surrendered in exchange therefor; (iv) the holding period of
the shares of First Commercial Stock received by the
shareholders of CNB in the CNB Merger will, in each instance,
include the holding period of the shares of CNB Stock
exchanged therefor, provided that the shares of CNB Stock were
held as capital assets on the date of the CNB Merger; and (v)
the payment of cash to shareholders of CNB in lieu of issuing
fractional shares of First Commercial Stock will be treated as
if the fractional shares were distributed as part of the
exchange and then redeemed by First Commercial for cash, and
any such payments will be treated as having been received by
the shareholder as a distribution in redemption of the
fractional share interest, subject to provisions of Section
302 of the Code.
Shareholders of CNB who exercise dissenters rights and receive
cash for their shares of CNB Stock will be treated as having
received such cash as a distribution in redemption of such
shareholder's CNB Stock, subject to the conditions and
limitations of Section 302 of the Code.
If the CNB Merger does not qualify as a tax-free corporate
reorganization, the transaction will be treated for federal
income tax purposes as a taxable purchase by First Commercial
of
<PAGE>
the CNB Stock. In such event, the CNB Merger will constitute
a taxable transaction to the shareholders of CNB and possibly
also a taxable transaction to TBT. In such event, gain or
loss will be recognized by the shareholders of CNB to the
extent of the difference between (i) the fair market value, on
the Effective Date, of the shares of First Commercial Stock
received in connection with the CNB Merger, and (ii) the
adjusted basis of the shares of CNB Stock surrendered in the
transaction. The fair market value of the First Commercial
Stock on the Effective Date may be determined on the basis of
the average high and low selling prices of such stock on the
day of the transaction. If the transaction does not qualify
for tax-free reorganization treatment, (i) the holding period
for the shares of First Commercial Stock to be received by the
shareholders of CNB will commence on the day following the
date of the transaction; (ii) gain or loss would likely be
recognized by CNB on the transfer of its assets to TBT to the
extent of the difference between the fair market value of the
assets and the adjusted basis of the assets in the hands of
CNB on the Effective Date and (iii) the holding period for the
assets of CNB to be received by TBT would likely commence on
the date following the transaction.
The foregoing discussion is limited to matters pertaining to
federal income tax law. Moreover, because of the complexity
of federal, state and local tax laws, the tax consequences to
any particular shareholder may be affected by matters not
pertaining to the CNB Merger. Accordingly, it is recommended
that each shareholder of CNB consult his own personal tax
advisor concerning the specific federal, state and local
income tax consequences of the CNB Merger.
Rights of Dissenting CNB Stockholders
Pursuant to 12 U.S.C. Section 215, any holder of record of CNB
Stock who objects to the proposed CNB Merger and who fully complies
with all of the provisions of Section 215 (but not otherwise)
shall be entitled to demand and receive payment for all (but
not less than all) of his shares of CNB Stock if the CNB
Merger is consummated.
Any shareholder of CNB who objects to the CNB Merger and
desires to receive payment for his CNB Stock:
1. Must file a written objection to the CNB Merger with
CNB either prior to the CNB Special Meeting or at the CNB
Special Meeting, but before the vote is taken, or he must vote
against approval of the CNB Merger at the CNB Special Meeting;
AND
2. Must file with TBT a written notice of his election
to dissent within thirty (30) days after the date of
consummation of the CNB Merger, and the notice of dissent must
contain the shareholder's full name and address, the number of
shares of CNB Stock held by him, and a demand for payment of
the value of his shares; AND
<PAGE>
3. Must concurrently with the giving of the notice
referred to in subparagraph 2 above submit his certificates
for CNB Stock to Dana Gregory, Secretary of TBT, for notation
thereon of the shareholder's election to dissent.
Any notices required to be given to CNB should be forwarded to
City National Bank, 1125 Highway 110 North, Whitehouse, Texas
75791, to the attention of Nancy Duress, Secretary.
Any notices required to be given to TBT should be forwarded to
Tyler Bank and Trust, 100 East Ferguson, Tyler, Texas 75702,
to the attention of Dana Gregory, Secretary.
If the CNB Merger is approved, TBT will promptly mail by
certified mail to each shareholder who has complied with the
conditions above written notice of such approval, addressed to
the shareholder at such address as he has furnished CNB in
writing, or if none, at the shareholder's address as it
appears on the records of CNB. Within thirty (30) days after
the date of consummation of the CNB Merger, the shareholder
must make the written election to dissent and demand for
payment described in subparagraph 2 above.
The value of the shares of CNB Stock held by dissenting
shareholders shall be ascertained, as of the Effective Date of
the CNB Merger, by an appraisal made by a committee of three
persons, composed of (a) one selected by the vote of the
holders of the majority of the CNB Stock, the owners of which
are entitled to payment in cash, (b) one selected by the
directors of TBT, and (c) one selected by the two so selected.
The valuation agreed upon by any two of the three appraisers
shall govern. If the value so fixed shall not be satisfactory
to any dissenting shareholder who has requested payment, such
shareholder may, within five (5) days after being notified of
the appraised value of the shares, appeal to the Comptroller
of the Currency of the United States of America (the "OCC"),
which shall cause a reappraisal to be made, which shall be
final and binding as to the value of the shares.
If within ninety (90) days from the date of consummation of
the CNB Merger for any reason one or more of the appraisers is
not selected or the appraisers fail to determine the value of
the shares of CNB Stock, the OCC shall upon written request of
any interested party cause an appraisal to be made, which
shall be final and binding on all parties. The expenses of
the OCC in making the reappraisal or the appraisal, as the
case may be, shall be paid by TBT. The value of the shares
ascertained shall be promptly paid to the dissenting
shareholders by TBT. Within thirty (30) days after payment has
been made to all dissenting shareholders, as provided in
Section 215a of Title 12 of the United States Code, the shares
of First Commercial Stock that would have been delivered to
such dissenting shareholders had they not requested payment
shall be sold by First Commercial at an advertised public
auction, unless some other method of sale
<PAGE>
is approved by the OCC, and First Commercial shall have the
right to purchase any of such shares at such public auction,
if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty (30) days thereafter to
such person or persons and at such price, not less than par,
as First Commercial's Board of Directors by resolution may
determine. If the shares are sold at public auction at a
price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to
such shareholders.
If holders of more than 17,250 shares of CNB Stock perfect
their dissenters' rights, CNB, First Commercial and TBT may
elect not to consummate the CNB Merger, in which event the
dissenters' rights described in this section would terminate.
However, it is the intent of management of First Commercial to
accommodate those CNB shareholders electing to dissent to the
extent that funds may be obtained or financing may be arranged
to purchase their shares and to the extent that such
accommodation does not create tax, accounting or regulatory
obstacles.
The foregoing does not purport to be a complete statement of
the provisions of Section 215a of Title 12 of the United
States Code, and it is qualified in its entirety by reference
to such provisions, which are reproduced in full as Appendix A
to this Joint Proxy Statement/Prospectus.
Upon compliance with the statutory procedures, dissenting
shareholders will not have any rights as shareholders of CNB
or of First Commercial, including, among other things, the
right to receive dividends or the right to vote on matters
submitted for shareholder consideration.
Conditions of the CNB Merger
Consummation of the CNB Merger is conditioned upon the
occurrence of certain events on or prior to the Effective Date
including, among other things, the following: (i) approval of
the CNB Merger by the stockholders of CNB; (ii) confirmation
by First Commercial and CNB of the truth of their respective
representations and warranties and compliance with their
respective covenants as set forth in the CNB Agreement; (iii)
the absence of any court or governmental proceeding undertaken
or threatened to restrain, enjoin, prohibit, or obtain damages
for the transaction contemplated by the CNB Agreement which,
in the opinion of either First Commercial or CNB, would make
the consummation of the CNB Merger inadvisable; (iv) the
absence of any suit, action or proceedings pending or
threatened against First Commercial or CNB or any of each
other's officers or directors which, if successful, would, in
the reasonable judgment of CNB or First Commercial,
respectively, have a material adverse effect on the financial
condition of First Commercial or CNB, respectively; (v)
receipt by First Commercial and CNB of letters, as considered
necessary, from each other's independent certified public
accountants relating to certain financial statements and
information of the other and an opinion <PAGE>
from Ernst & Young that the pooling of interests method of
accounting applies to the CNB Merger; (vi) receipt by First
Commercial and CNB of certain opinions from CNB's and First
Commercial's counsel, respectively; (vii) receipt by First
Commercial from affiliates of CNB of an agreement restricting
disposition of First Commercial Stock for a certain period of
time; (viii) receipt by First Commercial and CNB of an opinion
from tax counsel addressing the tax consequences of the
contemplated CNB Merger; and (ix) the absence of any material
adverse change in the financial condition, business or
operations of either First Commercial or CNB.
All of these conditions are expected to be met.
Any of the conditions set forth above may be waived at the
discretion of the respective institutions except as otherwise
provided by law. However, neither First Commercial nor CNB
will waive any condition if such waiver, in the judgment of
its respective Board of Directors, would result in materially
adverse consequences to it or its stockholders.
Regulatory Approval
Consummation of the CNB Merger requires the prior written
approval of the OCC and the Texas Department of Banking.
Applications for such approval were filed on July 18, 1996 and
June 14, 1996, respectively. The Texas Department of Banking
has approved the CNB Merger.
Although no assurance can be provided, First Commercial and
CNB currently expect the CNB Merger to be consummated on or
before December 31, 1996. See "Termination of the CNB Merger"
below.
Termination of the CNB Merger
The CNB Agreement provides that it may be terminated, whether
before or after shareholder approval, by mutual consent of the
Boards of Directors of First Commercial and CNB at any time
before the Closing (as defined in the CNB Agreement). Either
First Commercial or CNB, at its option, may terminate the CNB
Agreement (unless such terminating party has breached a
covenant under the CNB Agreement) if the Closing Date shall
not have occurred on or before December 31, 1996.
Either First Commercial or CNB may terminate the Agreement if
any of the conditions precedent to its obligation to
consummate the CNB Merger have not been met at or prior to the
Closing, or if it shall have discovered a material breach by
the other party of any representation, warranty or agreement
contained in the CNB Agreement that has not been cured within
twenty (20) days of the time that written notice of such
breach is received by such other party. See "Conditions of
the CNB Merger" above.
Effective Date
<PAGE>
The CNB Agreement provides that the CNB Merger shall become
effective at the time and on the date specified in the
approval of merger issued by the OCC (the "CNB Effective
Date"). Although no assurance can be given, the CNB Effective
Date is expected to be on or before December 31, 1996.
Distribution of First Commercial Stock Certificates
After the CNB Effective Date, each holder of certificates
previously evidencing shares of CNB Stock will be required to
surrender such certificates for transfer and cancellation.
Upon surrender each holder will receive certificate(s)
representing the number of shares of First Commercial Common
Stock which the holders of such shares of CNB Stock will have
the right to receive (except for any fractional share
interests as described below in "Fractional Shares"), together
with any dividends which have been declared on such shares of
First Commercial Common Stock and to which such holders are
entitled.
Holders of CNB Stock on the CNB Effective Date shall be
entitled to receive dividends declared by First Commercial
subsequent to the CNB Effective Date, but payment of such
dividends will not be required of First Commercial until such
persons have delivered their certificates representing shares
of CNB Stock in exchange for certificates representing shares
of First Commercial Stock.
As soon as practicable after consummation of the CNB Merger,
transmittal forms will be sent to stockholders of CNB for use
in forwarding to First Commercial's transfer agent
certificates previously evidencing CNB Stock for surrender and
exchange for certificates evidencing First Commercial Stock.
Until so surrendered, certificates formerly evidencing CNB
Stock will be deemed for all corporate purposes (except for
payment of dividends to CNB stockholders which may be withheld
pending exchange of certificates) to evidence the right to
receive the number of whole shares of First Commercial Stock
and the right to receive cash in lieu of fractional shares
which the holder thereof would be entitled to receive upon
surrender. Stockholders of CNB are requested not to submit
stock certificates for exchange until they have received
written instructions to do so.
If outstanding certificates for shares of CNB Stock are not
surrendered, or if payment for them is not claimed prior to
such date on which such payment would otherwise escheat to or
become the property of any governmental unit or agency, the
unclaimed item shall, to the extent permitted by the abandoned
property and/or any other applicable law, become the property
of First Commercial (and to the extent not in its possession
shall be paid over to it), free and clear of all claims or
interests of any person previously entitled to such items.
Notwithstanding the foregoing, neither First Commercial's
transfer agent nor any party to the CNB Merger shall be liable
to any holder of CNB
<PAGE>
Stock for any amount paid to any governmental unit or agency
having jurisdiction of such unclaimed items pursuant to the
abandoned property or other applicable law of such
jurisdiction.
Fractional Shares
No fractional shares of First Commercial Stock will be issued
for shares of CNB Stock. In lieu of fractional interests,
First Commercial shall pay to such persons who would otherwise
receive fractional shares cash in an amount equal to the
market value of such fractional shares determined on the basis
that one share of First Commercial Common Stock shall have a
value equal to the average of the bid and asked prices of
First Commercial Common Stock on the Closing Date. See
"Federal Income Tax Consequences" above.
Dilution
Each common stockholder of CNB who exchanges his stock will
receive a voting interest exactly in proportion to his
relative voting common stock interest in relation to other CNB
stockholders before the combination is effected. Each share
of CNB Stock presently held by CNB stockholders will represent
less of a percentage voting interest in the total number of
outstanding shares of First Commercial (subsequent to the CNB
Merger) than it now represents as a percentage of the total
outstanding shares of CNB.
Accounting Treatment
The CNB Merger will be accounted for as a pooling of interests
under generally accepted accounting principles. The assets
and liabilities of CNB will be reflected in the consolidated
financial statements of First Commercial at their book value
as reflected in CNB's financial statements. Expenses incurred
in connection with the CNB Merger will be considered as an
expense of First Commercial.
A condition of consummating the CNB Merger is that First
Commercial receive an opinion from Ernst & Young LLP that the
pooling of interests method of accounting applies to the CNB
Merger. Management of First Commercial expects this condition
to be met.
Registration of First Commercial Common Stock Under the
Securities Act
The shares of First Commercial Stock to be issued to CNB
stockholders in the CNB Merger have been registered under the
Securities Act of 1933, as amended (the "Securities Act"),
thereby allowing such shares to be freely traded without
restriction by persons who will not be "affiliates" of First
Commercial and who were not affiliates of CNB, as that term is
defined in the Securities Act.
<PAGE>
Directors and certain officers and stockholders of CNB may be
deemed to be "affiliates" of CNB within the meaning of the
Securities Act. Accordingly, resales by such persons of any
shares of First Commercial Stock received by them in the CNB
Merger are restricted and may be made only if such stock is
registered under the Securities Act or an exemption from the
registration requirements of the Securities Act is available.
All such persons should carefully consider the limitations
imposed by Rules 144 and 145 promulgated under the Securities
Act ("Rule 144" and "Rule 145") prior to effecting any resales
of such First Commercial Stock.
Pursuant to Rule 145, the sale of First Commercial Stock held
by those persons who are affiliates of CNB will be subject to
certain restrictions. For two years following the Effective
Date, such persons may sell the First Commercial Stock only if
(i) First Commercial has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), during the preceding
twelve months, (ii) such First Commercial Stock is sold in
"brokers' transactions" as that term is defined in Section
4(4) of the Securities Act, (iii) the person selling such
First Commercial Stock does not solicit or arrange for the
solicitation of orders to buy such First Commercial Stock in
anticipation of or in connection with such transaction nor
make any payment in connection with the offer or sale of such
First Commercial Stock to any person other than the broker who
executes the order to sell, and (iv) sales made by such person
within the preceding three months do not exceed 1% of the
outstanding shares of that class. Shares of the First
Commercial Stock held for more than two years but less than
three years after the CNB Effective Date may be sold freely if
First Commercial is in compliance with the above discussed
Exchange Act reporting requirements. Once the shares of First
Commercial Stock have been held for three years from the CNB
Effective Date, they may be sold free from the restrictions of
Rules 144 and 145.
It is a condition of First Commercial's obligation to
consummate the CNB Merger that First Commercial shall have
received an agreement in form and substance satisfactory to
it, executed and delivered by each holder of CNB Stock who is
determined to be an affiliate of CNB, providing, among other
things, that such holder (i) will not sell, transfer or in any
way reduce his risk with respect to his shares of First
Commercial Stock until such time as First Commercial shall
have published financial results covering at least 30 days of
post-Merger combined operations, (ii) has no present intent to
sell, transfer or otherwise dispose of any of his shares of
First Commercial Stock and (iii) will not sell, transfer or
otherwise dispose of more than fifty percent (50%) of his
shares of First Commercial Stock for a period of at least one
(1) year following the Closing.
THE SECURITY NATIONAL BANK TRANSACTION
<PAGE>
Information in this section relates to the merger of Security
National Bank, Nacogdoches, Texas ("SNB") into Stone Fort
National Bank, Nacogdoches, Texas ("Stone Fort"), a wholly-
owned subsidiary of First Commercial Corporation ("First
Commercial") (the "SNB Merger"). For a discussion of the City
National Bank Merger, see the information above contained
under the heading "The City National Bank Transaction."
General
This Joint Proxy Statement/Prospectus is furnished to the
stockholders of SNB in connection with the solicitation of
proxies on behalf of its Board of Directors for use at a
special meeting of stockholders of SNB (the "SNB Special
Meeting") to be held on the date and at the time and place
specified in the accompanying Notice of Special Meeting of
Stockholders or any adjournment thereof.
SNB and First Commercial each have supplied all information
included herein with respect to itself.
This Joint Proxy Statement/Prospectus was first mailed to
shareholders of SNB on ------------, 1996.
The SNB Special Meeting
The purpose of the SNB Special Meeting is to consider and vote
upon a proposal to approve the SNB Merger pursuant to the
terms of a Plan and Agreement of Merger among First
Commercial, Stone Fort and SNB dated June 28, 1996 (the "SNB
Agreement"). Under the terms of the SNB Agreement, each
outstanding share of common stock of SNB, $5.00 par value per
share (the "SNB Stock"), will be canceled and converted into
the right to receive 1.04857 shares of First Commercial common
stock, $3.00 par value per share (the "First Commercial
Stock"), with cash payment due in lieu of any fractional
shares. The First Commercial Stock and cash in lieu of
fractional shares to be delivered to SNB stockholders are
hereinafter referred to as the "SNB Merger Consideration."
See "The Security National Bank Transaction - The SNB Merger."
SNB may terminate the SNB Agreement if the average of the bid
and asked prices of the First Commercial Stock as reported on
the Nasdaq National Market for the twenty business days
preceding the Closing Date, based on the average of such
prices as calculated for each such day, shall be less than
$26.1375 per share. SNB may not, however, terminate the SNB
Agreement if First Commercial agrees to amend and restate the
SNB Agreement to provide that the First Commercial Stock
portion of the SNB Merger Consideration shall be that number
of shares having an aggregate market value closest to, but not
exceeding, $6,303,600, based on the average of the bid and
asked prices for a share of First Commercial Stock reported on
the Nasdaq National Market as of the close of business on each
of the
<PAGE>
twenty (20) days immediately preceding the date SNB would
otherwise have elected to terminate the SNB Agreement. The
average of the bid and asked price of a share of the First
Commercial Stock on ---------, 1996, was $-------.
Shares Entitled to Vote; Vote Required
Only holders of record of the SNB Stock at the close of
business on -----------, 1996 (the "SNB Record Date") are
entitled to notice of and to vote at the SNB Special Meeting.
On that date, the number of outstanding shares of the SNB
Stock was 230,000, each of which is entitled to one vote on
each matter to come before the SNB Special Meeting. Under
national banking laws approval of the SNB Merger requires the
affirmative vote of the holders of at least two-thirds (2/3)
of the outstanding shares of SNB Stock. Abstentions will not
be counted as affirmative votes. Directors, executive
officers and their affiliates who own or control approximately
30.13% of the outstanding shares of SNB Stock entitled to vote
have indicated that they will vote in favor of the SNB Merger.
Solicitation, Voting and Revocation of Proxies
In addition to soliciting proxies by mail, directors, officers
and employees of SNB, without receiving additional
compensation therefor, may solicit proxies by telephone and in
person. The cost of soliciting proxies is being paid by SNB.
The proxies that accompany this Joint Proxy
Statement/Prospectus permit each holder of SNB Stock on the
SNB Record Date to vote on all matters that come before the
SNB Special Meeting. When a stockholder specifies his choice
on the proxy with respect to a matter being voted upon, the
shares represented by the proxy will be voted in accordance
with such specification. If no such specification is made,
the shares will be voted in favor of approval of the SNB
Merger. A proxy may be revoked by (i) giving written notice
of revocation at any time before its exercise to Michael C.
Haas at 3000 University Drive, Nacogdoches, Texas 75963-2018,
(ii) executing and delivering to Michael C. Haas at any time
before its exercise a proxy bearing a subsequent date or (iii)
attending the Special Meeting and voting in person.
The Board of Directors of SNB is not aware of any business to
be acted upon at the SNB Special Meeting other than
consideration of the SNB Merger. If, however, other proper
matters are brought before the SNB Special Meeting, or any
adjournments thereof, the persons appointed as proxies will
have discretion to vote or abstain from voting thereon
according to their best judgment.
The SNB Merger
General
<PAGE>
On June 18, 1996, and June 12, 1996, the Boards of Directors
of First Commercial and SNB, respectively, each approved the
SNB Agreement. The description of the SNB Agreement herein
does not purport to be complete and is qualified in its
entirety by reference to the SNB Agreement, which is made an
exhibit to the Registration Statement of which this Joint
Proxy Statement/Prospectus is a part and is incorporated
herein by reference.
Under the SNB Agreement, SNB will be merged into Stone Fort,
and each share of SNB Stock outstanding on the Effective Date,
as defined herein, will be converted into the right to receive
1.04857 shares of First Commercial Stock. The exchange ratio
was based upon historical and projected earnings of SNB, the
amounts of SNB assets and liabilities, and the market value of
First Commercial Stock. Projected earnings were based
primarily on historical trends.
The SNB Agreement was the result of arm's-length negotiations
between representatives of First Commercial and SNB. SNB's
Board of Directors believes the terms of the SNB Merger are
fair.
First Commercial is an Arkansas corporation and a multi-bank
holding company registered under the Bank Holding Company Act
of 1956, as amended ("BHCA"). SNB and Stone Fort are each
national banking associations operating under the laws of the
United States of America.
Stockholders of SNB will exchange their stock certificates for
new certificates evidencing shares of First Commercial Stock.
After the SNB Merger, and until so exchanged, the shares of
SNB Stock will represent the right to receive the number of
shares of First Commercial Stock into which such shares of SNB
Stock will be converted. See "The Security National Bank
Transaction - The SNB Merger."
Reasons for the SNB Merger
Several factors were important in the SNB Board's decision to
pursue this opportunity for a merger with First Commercial's
subsidiary, Stone Fort. First, based on the market price of
First Commercial's Stock at the time the negotiations began,
it was apparent that the value of the proposed transaction was
in the best interest of shareholders. A second important
consideration of the Board of Directors was that First
Commercial's Stock prices are quoted on the Nasdaq National
Market and there is apparently sufficient market volume in the
stock to afford shareholders of SNB an opportunity for
liquidity. A third important consideration was First
Commercial's sound record of dividend payout. A fourth and
extremely important consideration in the decision was the
financial soundness of First Commercial. Based on the
financial information provided SNB directors concerning the
financial
<PAGE>
performance of First Commercial over the preceding two years,
it was apparent that First Commercial met or exceeded all
soundness criteria comparable with its peer group.
Additionally, its profitability performance had been at or
above levels of peer financial institutions. A fifth
important consideration was the general environment of the
commercial banking industry in this country and the
substantially enhanced activity of merger and acquisition
opportunities in the industry. Finally, the combined
resources of the two companies will allow them to offer an
even greater array of products and services to meet those
needs.
In summary, the Board of Directors of SNB believes that the
proposed SNB Merger is in the best interests of its
shareholders.
Federal Income Tax Consequences
The following is a discussion of certain of the material
federal income tax considerations in connection with the SNB
Merger and the tax opinion of Friday, Eldredge & Clark,
special tax counsel to First Commercial.
The SNB Merger will qualify as a tax-free corporate
reorganization for federal income tax purposes under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code, as
amended (the "Code"), if it satisfies the specific
requirements of the Code, the regulations promulgated
thereunder, and pertinent judicial decisions. The most
important of these requirements is that (i) no stock of Stone
Fort may be used in the transaction, (ii) substantially all of
the properties of SNB must be acquired by Stone Fort in
connection with the SNB Merger (the "Substantially All Test"),
and (iii) the stockholders of SNB must, collectively as a
group, maintain a "continuity of interest" in First Commercial
after the SNB Merger (the "Continuity of Interest Test").
The merger transaction does not contemplate the use of any
stock of Stone Fort in the transaction, and, accordingly, this
requirement should be satisfied. For private letter ruling
purposes, the Internal Revenue Service ("IRS") generally
regards the Substantially All Test to be satisfied if at least
90% of the fair market value of SNB's net assets and at least
70% of the fair market value of SNB's gross assets held by SNB
immediately prior to the transaction are acquired in
connection with the SNB Merger. Management of SNB and Stone
Fort believe that this test will be satisfied in connection
with the transaction contemplated by the SNB Merger. The IRS
takes the position that the Continuity of Interest Test will
be satisfied if the former SNB stockholders receive, in the
SNB Merger, a number of shares of First Commercial Stock
having a value, as of the Effective Date (as defined herein),
equal to at least fifty percent (50%) of the value of all the
outstanding stock of SNB
<PAGE>
as of such date. In general, this requires the stockholders
of SNB to collectively surrender at least 50% of their SNB
Stock in exchange for First Commercial Stock in the SNB
Merger. In addition, in order for the Continuity of Interest
Test to be satisfied, this 50% continuity of stock ownership
generally must be maintained for a meaningful period of time
following the SNB Merger. Moreover, at the time of the SNB
Merger, there can be no plan or intention on the part of the
shareholders of SNB to collectively dispose of an amount of
the First Commercial Stock that would cause the 50% continuity
of stock ownership requirement to not be satisfied.
Accordingly, assuming the Substantially All Test and
Continuity of Interest Test are satisfied, and provided other
specific requirements contained in the Code, the regulations
promulgated thereunder, and pertinent judicial decisions are
met, the transaction should qualify as a tax-free corporate
reorganization for federal income tax purposes pursuant to the
provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
If the SNB Merger qualifies as a tax-free corporate
reorganization, the material federal income tax consequences
of the SNB Merger will be as follows: (i) no material gain
or loss will be recognized by SNB, First Commercial or Stone
Fort as a result of the SNB Merger; (ii) no gain or loss will
be recognized by the shareholders of SNB upon the receipt of
First Commercial Stock solely in exchange for their shares of
SNB Stock in connection with the SNB Merger; (iii) the tax
basis of the shares of First Commercial stock received by the
shareholders of SNB in the SNB Merger will, in each instance,
be the same as the basis of the shares of SNB Stock
surrendered in exchange therefor; (iv) the holding period of
the shares of First Commercial Stock received by the
shareholders of SNB in the SNB Merger will, in each instance,
include the holding period of the shares of SNB Stock
exchanged therefor, provided that the shares of SNB Stock were
held as capital assets on the date of the SNB Merger; and (v)
the payment of cash to shareholders of SNB in lieu of issuing
fractional shares of First Commercial Stock will be treated as
if the fractional shares were distributed as part of the
exchange and then redeemed by First Commercial for cash, and
any such payments will be treated as having been received by
the shareholder as a distribution in redemption of the
fractional share interest, subject to provisions of Section
302 of the Code.
Shareholders of SNB who exercise dissenters rights and receive
cash for their shares of SNB Stock will be treated as having
received such cash as a distribution in redemption of such
shareholder's SNB Stock, subject to the conditions and
limitations of Section 302 of the Code.
<PAGE>
If the SNB Merger does not qualify as a tax-free corporate
reorganization, the transaction will be treated for federal
income tax purposes as a taxable purchase by First Commercial
of the SNB Stock. In such event, the SNB Merger will
constitute a taxable transaction to the shareholders of SNB
and possibly also a taxable transaction to Stone Fort. In
such event, gain or loss will be recognized by the
shareholders of SNB to the extent of the difference between
(i) the fair market value, on the Effective Date, of the
shares of First Commercial Stock received in connection with
the SNB Merger, and (ii) the adjusted basis of the shares of
SNB Stock surrendered in the transaction. The fair market
value of the First Commercial Stock on the Effective Date may
be determined on the basis of the average high and low selling
prices of such stock on the day of the transaction. If the
transaction does not qualify for tax-free reorganization
treatment, (i) the holding period for the shares of First
Commercial Stock to be received by the shareholders of SNB
will commence on the day following the date of the
transaction; (ii) gain or loss would likely be recognized by
SNB on the transfer of its assets to Stone Fort to the extent
of the difference between the fair market value of the assets
and the adjusted basis of the assets in the hands of SNB on
the Effective Date and (iii) the holding period for the assets
of SNB to be received by Stone Fort would likely commence on
the date following the transaction.
The foregoing discussion is limited to matters pertaining to
federal income tax law. Moreover, because of the complexity
of federal, state and local tax laws, the tax consequences to
any particular shareholder may be affected by matters not
pertaining to the SNB Merger. Accordingly, it is recommended
that each shareholder of SNB consult his own personal tax
advisor concerning the specific federal, state and local
income tax consequences of the SNB Merger.
Rights of Dissenting SNB Stockholders
Pursuant to 12 U.S.C. Section 215, any holder of record of SNB
Stock who objects to the proposed SNB Merger and who fully complies
with all of the provisions of Section 215 (but not otherwise)
shall be entitled to demand and receive payment for all (but
not less than all) of his shares of SNB Stock if the SNB
Merger is consummated.
Any shareholder of SNB who objects to the SNB Merger and
desires to receive payment for his SNB Stock:
1. Must file a written objection to the SNB Merger with
SNB either prior to the SNB Special Meeting or at the SNB
Special Meeting, but before the vote is taken, or he must vote
against approval of the SNB Merger at the SNB Special Meeting;
AND
<PAGE>
2. Must file with Stone Fort a written notice of his
election to dissent within thirty (30) days after the date of
consummation of the SNB Merger, and the notice of dissent must
contain the shareholder's full name and address, the number of
shares of SNB Stock held by him, and a demand for payment of
the value of his shares; AND
3. Must concurrently with the giving of the notice
referred to in subparagraph 2 above submit his certificates
for SNB Stock to Lynn Mills, Secretary of Stone Fort, for
notation thereon of the shareholder's election to dissent.
Any notices required to be given to SNB should be forwarded to
Security National Bank, 3000 University Drive, Nacogdoches,
Texas 75963-2018, to the attention of Michael C. Haas,
President.
Any notices required to be given to Stone Fort should be
forwarded to Stone Fort National Bank, 300 E. Main,
Nacogdoches, Texas 75961, to the attention of Lynn Mills,
Secretary.
If the SNB Merger is approved, Stone Fort will promptly mail
by certified mail to each shareholder who has complied with
the conditions above written notice of such approval,
addressed to the shareholder at such address as he has
furnished SNB in writing, or if none, at the shareholder's
address as it appears on the records of SNB. Within thirty
(30) days after the date of consummation of the SNB Merger,
the shareholder must make the written election to dissent and
demand for payment described in subparagraph 2 above.
The value of the shares of SNB Stock held by dissenting
shareholders shall be ascertained, as of the Effective Date of
the SNB Merger, by an appraisal made by a committee of three
persons, composed of (a) one selected by the vote of the
holders of the majority of the SNB Stock, the owners of which
are entitled to payment in cash, (b) one selected by the
directors of Stone Fort, and (c) one selected by the two so
selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested
payment, such shareholder may, within five (5) days after
being notified of the appraised value of the shares, appeal to
the OCC, which shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares.
If within ninety (90) days from the date of consummation of
the SNB Merger for any reason one or more of the appraisers is
not selected or the appraisers fail to determine the value of
the shares of SNB Stock, the OCC shall upon written request of
any interested party cause an appraisal to be made, which
shall be final and binding on all parties. The expenses of
the OCC in making the reappraisal or the appraisal, as the
case may be, shall be paid by Stone Fort. The value of the
shares ascertained shall be promptly paid to the dissenting
shareholders by Stone Fort. Within thirty (30) days after
payment has been made to all dissenting shareholders, as
provided in Section 215a of Title 12 of the United States
Code, the shares of First Commercial Stock that would have
been delivered to such dissenting shareholders had they not
requested
<PAGE>
payment shall be sold by First Commercial at an advertised
public auction, unless some other method of sale is approved
by the OCC, and First Commercial shall have the right to
purchase any of such shares at such public auction, if it is
the highest bidder therefor, for the purpose of reselling such
shares within thirty (30) days thereafter to such person or
persons and at such price, not less than par, as First
Commercial's Board of Directors by resolution may determine.
If the shares are sold at public auction at a price greater
than the amount paid to the dissenting shareholders, the
excess in such sale price shall be paid to such shareholders.
If holders of more than 23,000 shares of SNB Stock perfect
their dissenters' rights, SNB, First Commercial and Stone Fort
may elect not to consummate the SNB Merger, in which event the
dissenters' rights described in this section would terminate.
However, it is the intent of management of First Commercial to
accommodate those SNB shareholders electing to dissent to the
extent that funds may be obtained or financing may be arranged
to purchase their shares and to the extent that such
accommodation does not create tax, accounting or regulatory
obstacles.
The foregoing does not purport to be a complete statement of
the provisions of Section 215a of Title 12 of the United
States Code, and it is qualified in its entirety by reference
to such provisions, which are reproduced in full as Appendix A
to this Joint Proxy Statement/Prospectus.
Upon compliance with the statutory procedures, dissenting
shareholders will not have any rights as shareholders of SNB
or of First Commercial, including, among other things, the
right to receive dividends or the right to vote on matters
submitted for shareholder consideration.
Conditions of the SNB Merger
Consummation of the SNB Merger is conditioned upon the
occurrence of certain events on or prior to the Effective Date
including, among other things, the following: (i) approval of
the SNB Merger by the stockholders of SNB; (ii) confirmation
by First Commercial and SNB of the truth of their respective
representations and warranties and compliance with their
respective covenants as set forth in the SNB Agreement; (iii)
the absence of any court or governmental proceeding undertaken
or threatened to restrain, enjoin, prohibit, or obtain damages
for the transaction contemplated by the SNB Agreement which,
in the opinion of either First Commercial or SNB, would make
the consummation of the SNB Merger inadvisable; (iv) the
absence of any suit, action or proceedings pending or
threatened against First Commercial or SNB or any of each
other's officers or directors which, if successful, would, in
the reasonable judgment of SNB or First Commercial,
respectively, have a
<PAGE>
material adverse effect on the financial condition of First
Commercial or SNB, respectively; (v) receipt by First
Commercial and SNB of letters, as considered necessary, from
each other's independent certified public accountants relating
to certain financial statements and information of the other
and an opinion from Ernst & Young LLP that the pooling of
interests method of accounting applies to the SNB Merger; (vi)
receipt by First Commercial and SNB of certain opinions from
SNB's and First Commercial's counsel, respectively; (vii)
receipt by First Commercial from affiliates of SNB of an
agreement restricting disposition of First Commercial Stock
for a certain period of time; (viii) receipt by First
Commercial and SNB of an opinion from tax counsel addressing
the tax consequences of the contemplated SNB Merger; and (ix)
the absence of any material adverse change in the financial
condition, business or operations of either First Commercial
or SNB.
All of these conditions are expected to be met.
Any of the conditions set forth above may be waived at the
discretion of the respective institutions except as otherwise
provided by law. However, neither First Commercial nor SNB
will waive any condition if such waiver, in the judgment of
its respective Board of Directors, would result in materially
adverse consequences to it or its stockholders.
Regulatory Approval
Consummation of the SNB Merger requires the prior written
approval of the OCC and the Texas Department of Banking.
Applications for such approval were filed on September 11,
1996 and July 17, 1996, respectively. The Texas Department of
Banking has approved the SNB Merger.
Although no assurance can be provided, First Commercial and
SNB currently expect the SNB Merger to be consummated on or
before December 31, 1996. See "Termination of the SNB Merger"
below.
Termination of the SNB Merger
The SNB Agreement provides that it may be terminated, whether
before or after shareholder approval, by mutual consent of the
Boards of Directors of First Commercial and SNB at any time
before the Closing (as defined in the SNB Agreement). Either
First Commercial or SNB, at its option, may terminate the SNB
Agreement (unless such terminating party has breached a
covenant under the SNB Agreement) if the Closing Date shall
not have occurred on or before December 31, 1996.
<PAGE>
Either First Commercial or SNB may terminate the Agreement if
any of the conditions precedent to its obligation to
consummate the SNB Merger have not been met at or prior to the
Closing, or if it shall have discovered a material breach by
the other party of any representation, warranty or agreement
contained in the SNB Agreement that has not been cured within
twenty (20) days of the time that written notice of such
breach was received by such other party. See "Conditions of
the SNB Merger" above.
Effective Date
The SNB Agreement provides that the SNB Merger shall become
effective at the time and on the date specified in the
approval of merger issued by the OCC (the "SNB Effective
Date"). Although no assurance can be given, the SNB Effective
Date is expected to be on or before December 31, 1996.
Distribution of First Commercial Stock Certificates
After the SNB Effective Date, each holder of certificates
previously evidencing shares of SNB Stock will be required to
surrender such certificates for transfer and cancellation.
Upon surrender each holder will receive certificate(s)
representing the number of shares of First Commercial Stock
which the holders of such shares of SNB Stock will have the
right to receive (except for any fractional share interests as
described below in "Fractional Shares"), together with any
dividends which have been declared on such shares of First
Commercial Stock and to which such holders are entitled.
Holders of SNB Stock on the SNB Effective Date shall be
entitled to receive dividends declared by First Commercial
subsequent to the SNB Effective Date, but payment of such
dividends will not be required of First Commercial until such
persons have delivered their certificates representing shares
of SNB Stock in exchange for certificates representing shares
of First Commercial Stock.
As soon as practicable after consummation of the SNB Merger,
transmittal forms will be sent to stockholders of SNB for use
in forwarding to First Commercial's transfer agent
certificates previously evidencing SNB Stock for surrender and
exchange for certificates evidencing First Commercial Stock.
Until so surrendered, certificates formerly evidencing SNB
Stock will be deemed for all corporate purposes (except for
payment of dividends to SNB stockholders which may be withheld
pending exchange of certificates) to evidence the right to
receive the number of whole shares of First Commercial Stock
and the right to receive cash in lieu of fractional shares
which the holder thereof would be entitled to receive upon
surrender. Stockholders of SNB are requested not to submit
stock certificates for exchange until they have received
written instructions to do so.
<PAGE>
If outstanding certificates for shares of SNB Stock are not
surrendered, or if payment for them is not claimed prior to
such date on which such payment would otherwise escheat to or
become the property of any governmental unit or agency, the
unclaimed item shall, to the extent permitted by the abandoned
property and/or any other applicable law, become the property
of First Commercial (and to the extent not in its possession
shall be paid over to it), free and clear of all claims or
interests of any person previously entitled to such items.
Notwithstanding the foregoing, neither First Commercial's
transfer agent nor any party to the SNB Merger shall be liable
to any holder of SNB Stock for any amount paid to any
governmental unit or agency having jurisdiction of such
unclaimed items pursuant to the abandoned property or other
applicable law of such jurisdiction.
Fractional Shares
No fractional shares of First Commercial Stock will be issued
for shares of SNB Stock. In lieu of fractional interests,
First Commercial shall pay to such persons who would otherwise
receive fractional shares cash in an amount equal to the
market value of such fractional shares determined on the basis
that one share of First Commercial Stock shall have a value
equal to the average of the bid and asked prices of First
Commercial Stock on the Closing Date. See "Federal Income Tax
Consequences" above.
Dilution
Each common stockholder of SNB who exchanges his stock will
receive a voting interest exactly in proportion to his
relative voting common stock interest in relation to other SNB
stockholders before the combination is effected. Each share
of SNB Stock presently held by SNB stockholders will represent
less of a percentage voting interest in the total number of
outstanding shares of First Commercial (subsequent to the SNB
Merger) than it now represents as a percentage of the total
outstanding shares of SNB.
Accounting Treatment
The SNB Merger will be accounted for as a pooling of interests
under generally accepted accounting principles. The assets
and liabilities of SNB will be reflected in the consolidated
financial statements of First Commercial at their book value
as reflected in SNB's financial statements. Expenses incurred
in connection with the SNB Merger will be considered as an
expense of First Commercial.
A condition of consummating the SNB Merger is that First
Commercial receive an opinion from Ernst & Young LLP that the
pooling of interests method of accounting applies to the SNB
Merger. Management of First Commercial expects this condition
to be met.
<PAGE>
Registration of First Commercial Stock Under the Securities
Act
The shares of First Commercial Stock to be issued to SNB
stockholders in the SNB Merger have been registered under the
Securities Act of 1933, as amended (the "Securities Act"),
thereby allowing such shares to be freely traded without
restriction by persons who will not be "affiliates" of First
Commercial and who were not affiliates of SNB, as that term is
defined in the Securities Act.
Directors and certain officers and stockholders of SNB may be
deemed to be "affiliates" of SNB within the meaning of the
Securities Act. Accordingly, resales by such persons of any
shares of First Commercial Stock received by them in the SNB
Merger are restricted and may be made only if such stock is
registered under the Securities Act or an exemption from the
registration requirements of the Securities Act is available.
All such persons should carefully consider the limitations
imposed by Rules 144 and 145 promulgated under the Securities
Act ("Rule 144" and "Rule 145") prior to effecting any resales
of such First Commercial Stock.
Pursuant to Rule 145, the sale of First Commercial Stock held
by those persons who are affiliates of SNB will be subject to
certain restrictions. For two years following the Effective
Date, such persons may sell the First Commercial Stock only if
(i) First Commercial has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), during the preceding
twelve months, (ii) such First Commercial Stock is sold in
"brokers' transactions" as that term is defined in Section
4(4) of the Securities Act, (iii) the person selling such
First Commercial Stock does not solicit or arrange for the
solicitation of orders to buy such First Commercial Stock in
anticipation of or in connection with such transaction nor
make any payment in connection with the offer or sale of such
First Commercial Stock to any person other than the broker who
executes the order to sell, and (iv) sales made by such person
within the preceding three months do not exceed 1% of the
outstanding shares of that class. Shares of the First
Commercial Stock held for more than two years but less than
three years after the SNB Effective Date may be sold freely if
First Commercial is in compliance with the above discussed
Exchange Act reporting requirements. Once the shares of First
Commercial Stock have been held for three years from the SNB
Effective Date, they may be sold free from the restrictions of
Rules 144 and 145.
<PAGE>
It is a condition of First Commercial's obligation to
consummate the SNB Merger that First Commercial shall have
received an agreement in form and substance satisfactory to
it, executed and delivered by each holder of SNB Stock who is
determined to be an affiliate of SNB, providing, among other
things, that such holder (i) will not sell, transfer or in any
way reduce his risk with respect to his shares of First
Commercial Stock until such time as First Commercial shall
have published financial results covering at least 30 days of
post-Merger combined operations, (ii) has no present intent to
sell, transfer or otherwise dispose of any of his shares of
First Commercial Stock and (iii) will not sell, transfer or
otherwise dispose of more than fifty percent (50%) of his
shares of First Commercial Common Stock for a period of at
least one (1) year following the Closing.
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheets as
of December 31, 1995 and June 30, 1996 and unaudited pro forma
combined statements of income for the three years ended
December 31, 1995 and for the six month periods ended June 30,
1996 and 1995 give effect to the following transactions:
As described herein, on May 9, 1996, First Commercial entered
into a definitive agreement with TBT and CNB, whereby CNB will
be merged with and into TBT, a subsidiary of First Commercial.
The transaction will be effected through an exchange of
174,492 shares of First Commercial common stock for all of the
outstanding shares of CNB. The consummation of the merger
requires the prior approval of the OCC and the Texas
Department of Banking. The merger will be accounted for as a
pooling of interests.
As further described herein, on June 28, 1996, First
Commercial entered into a definitive agreement with Stone Fort
and SNB, whereby SNB will be merged with and into Stone Fort,
a subsidiary of First Commercial. This transaction will be
effected through an exchange of 241,171 shares of First
Commercial common stock for all of the outstanding shares of
SNB. The consummation of the merger requires the prior
approval of the OCC and the Texas Department of Banking. This
merger will also be accounted for as a pooling of interests.
The following unaudited pro forma financial information is not
necessarily indicative of the results of operation of First
Commercial as if the acquisition had occurred on January 1,
1993.
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
June 30, 1996
(Unaudited)
<CAPTION>
Pending
--------------
(Dollars in Thousands) First Commercial CNB SNB Pro forma
Corporation (Pooling) (Pooling) Adjustment Pro forma
<F1> <F2> <F3> <F4>
------------ -------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $291,109 $3,187 $1,934 $296,230
Investment securities held-to-maturity 336,529 9,987 346,516
Investment securities available-for-sale 1,015,985 2,111 6,079 1,024,175
Trading account securities 556 556
Short-term investments 78,124 1,771 35 79,930
Loans, net 3,168,239 30,238 16,478 3,214,955
Premises and equipment, net 103,957 2,396 1,939 108,292
Other assets 226,892 705 467 228,065
---------- ------- ------- ----------
$5,221,391 $40,408 $36,920 $5,298,719
========== ======= ======= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $867,225 $7,372 $4,982 $879,579
Interest bearing 3,671,072 30,048 27,963 3,729,083
---------- ------- ------ ----------
Total deposits 4,538,297 37,420 32,945 4,608,662
Short-term borrowings 169,851 169,851
Other liabilities 59,769 333 291 60,393
Long-term debt 6,098 6,098
---------- ------- ------- ----------
Total liabilities 4,774,015 37,753 33,236 4,845,004
---------- ------- ------- ----------
<PAGE>
Stockholders' equity:
Common stock 82,168 863 1,150 (766) <F5> 83,415
Surplus 195,381 862 1,150 766 <F5> 198,159
Retained earnings 175,445 976 1,463 177,884
Unrealized net gains (losses) on available-
for-sale securities, net of income (4,221) (46) (79) (4,346)
Treasury stock (1,397) (1,397)
---------- ------- ------- ----------
Total stockholders' equity 447,376 2,655 3,683 453,715
---------- ------- ------- ----------
$5,221,391 $40,408 $36,920 $5,298,719
========== ======= ======= ==========
<FN>
<F1> Represents historical balance sheet of First Commercial Corporation.
</FN>
<FN>
<F2> Represents historical balance sheet of City National Bank.
</FN>
<FN>
<F3> Represents historical balance sheet of Security National Bank.
</FN>
<FN>
<F4> Represents pro forma combined balances, as if these pooling transactions had occurred
on or prior to June 30, 1996.
</FN>
<FN>
<F5> This entry reflects the actual amount of First Commercial Corporation common stock to
be outstanding after the acquisition of City National Bank and Security National Bank.
</FN>
</TABLE>
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
December 31, 1995
(Unaudited)
<CAPTION>
Pending
(Dollars in Thousands) First Commercial CNB SNB Pro forma
Corporation (Pooling) (Pooling) Adjustment Pro forma
<F1> <F2> <F3> <F4>
---------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $432,117 $2,233 $4,929 $439,279
Investment securities held-to-maturity 351,415 8,305 359,720
Investment securities available-for-sale 973,129 2,357 6,824 982,310
Trading account securities 449 449
Short-term investments 108,181 2,491 225 110,897
Loans, net 3,164,221 29,376 16,685 3,210,282
Premises and equipment, net 106,665 2,293 1,975 110,933
Other assets 224,763 785 472 226,020
---------- ------- ------- ----------
$5,360,940 $39,535 $39,415 $5,439,890
========== ======= ======= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $1,018,181 $6,709 $6,712 $1,031,602
Interest bearing 3,612,360 30,072 28,810 3,671,242
---------- ------ ------ ----------
Total deposits 4,630,541 36,781 35,522 4,702,844
Short-term borrowings 235,378 235,378
Other liabilities 55,592 272 338 56,202
Long-term debt 7,170 7,170
---------- ------ ------ ----------
Total liabilities 4,928,681 37,053 35,860 5,001,594
---------- ------ ------ ----------
<PAGE>
Stockholders' equity:
Common stock 82,030 863 1,150 (766) <F5> 83,277
Surplus 195,019 862 1,150 766 <F5> 197,797
Retained earnings 154,356 774 1,267 156,397
Unrealized net gains (losses) on
available-for-sale securities, net
of income tax 854 (17) (12) 825
Total stockholders' equity 432,259 2,482 3,555 438,296
---------- ------- ------- ----------
$5,360,940 $39,535 $39,415 $5,439,890
========== ======= ======= ==========
<FN>
<F1> Represents historical balance sheet of First Commercial Corporation.
</FN>
<FN>
<F2> Represents historical balance sheet of City National Bank.
</FN>
<FN>
<F3> Represents historical balance sheet of Security National Bank.
</FN>
<FN>
<F4> Represents pro forma combined balances, as if these pooling
transactions had occurred on or prior to December 31, 1995.
</FN>
<FN>
<F5> This entry reflects the actual amount of First Commercial Corporation
common stock to be outstanding after the acquisition of City National
Bank and Security National Bank.
</FN>
</TABLE>
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 1996
(Unaudited)
(In thousands except for per share data.)
Pending
First
Commercial CNB SNB Pro
Corporation (Pooling) (Pooling) forma
<F1> <F2> <F3> <F4>
-------- ------ ------ ------
Interest income $184,227 $1,629 $1,366 $187,222
Interest expense 78,509 646 619 79,774
------- ----- ----- -------
Net interest income 105,718 983 747 107,448
Provision for possible loan
and lease losses 3,125 92 (56) 3,161
Net interest income after
provision for possible loan
and lease losses 102,593 891 803 104,287
Other operating income 51,418 346 275 52,039
Other operating expenses 103,761 955 694 105,410
-------- ----- ----- --------
Income before income taxes 50,250 282 384 50,916
Income tax expense (benefit) 17,667 80 119 17,866
-------- ----- ----- --------
Net income $32,583 $202 $265 $33,050
======== ===== ===== =======
Average common shares
outstanding during period 27,343,316 172,500 230,000 27,758,979
Net income per common share $1.19 $1.17 $1.15 $1.19
<F1> Represents historical income statement of First Commercial Corporation.
<F2> Represents historical income statement of City National Bank.
<F3> Represents historical income statement of Security National Bank.
<F4> Represents pro forma results as if these pooling transactions had
occurred on or prior to June 30, 1996.
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 1995
(Unaudited)
(In thousands except for per share data.)
Pending
First
Commercial CNB SNB Pro
Corporation Pooling Pooling Forma
<F1> <F2> <F3> <F4>
--------- ------ ----- ------
Interest income $152,180 $1,377 $1,203 $154,760
Interest expense 64,757 588 522 65,867
------- ------ ------ --------
Net interest income 87,423 789 681 88,893
Provision for possible loan
and lease losses 1,259 40 (6) 1,293
Net interest income after
provision for possible loan
and lease losses 86,164 749 687 87,600
Other operating income 31,469 313 254 32,036
Other operating expenses 78,016 881 658 79,555
------- ----- ----- -------
Income before income taxes 39,617 181 283 40,081
Income tax expense (benefit) 13,200 44 86 13,330
------- ----- ----- -------
Net income $26,417 $137 $197 $26,751
======= ===== ===== =======
Average common shares
outstanding during period <F5> 26,141,512 172,500 230,000 26,557,175
Net income per common share $1.01 $0.79 $0.86 $1.01
<F1> Represents historical income statement of First Commercial Corporation.
<F2> Represents historical income statement of City National Bank.
<F3> Represents historical income statement of Security National Bank.
<F4> Represents pro forma results as if these pooling transactions had
occurred on or prior to June 30, 1995.
<F5> Average shares outstanding for First Commercial Corporation and pro
forma combined have been restated to reflect the 7% stock dividend
declared November 1995.
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1995
(Unaudited)
(In thousands except for per share data.)
Pending
First
Commercial CNB SNB Pro
Corporation (Pooling) (Pooling) forma
<F1> <F2> <F3> <F4>
-------- ------ ------ -----
Interest income $322,182 $2,924 $2,541 $327,647
Interest expense 137,632 1,270 1,121 140,023
-------- ------ ------ --------
Net interest income 184,550 1,654 1,420 187,624
Provision for possible loan
and lease losses 3,059 100 (21) 3,138
Net interest income after
provision for possible loan
and lease losses 181,491 1,554 1,441 184,486
Other operating income 73,988 656 519 75,163
Other operating expenses 170,306 1,822 1,335 173,463
------- ----- ----- -------
Income before income taxes 85,173 388 625 86,186
Income tax expense (benefit) 28,263 123 190 28,576
------- ----- ----- -------
Net income $56,910 $265 $435 $57,610
======= ===== ===== =======
Average common shares
outstanding during period 26,221,023 172,500 230,000 26,636,686
Net income per common share $2.17 $1.54 $1.89 $2.16
<F1> Represents historical income statement of First Commercial Corporation.
<F2> Represents historical income statement of City National Bank.
<F3> Represents historical income statement of Security National Bank.
<F4> Represents pro forma results as if these pooling transactions had
occurred on or prior to December 31, 1995.
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1994
(Unaudited)
(In thousands except for per share data.)
Pending
First
Commercial CNB SNB Pro
Corporation (Pooling) (Pooling) forma
<F1> <F2> <F3> <F4>
--------- ----- ------ -----
Interest income $257,751 $2,380 $2,265 $262,396
Interest expense 98,306 724 898 99,928
-------- ------ ------ --------
Net interest income 159,445 1,656 1,367 162,468
Provision for possible loan
and lease lossess (3,092) 120 (44) (3,016)
Net interest income after
provision for possible loan
and lease losses 162,537 1,536 1,411 165,484
Other operating income 68,652 477 550 69,679
Other operating expenses 156,875 1,492 1,355 159,722
------- ------ ------ --------
Income before income taxes 74,314 521 606 75,441
Income tax expense (benefit) 24,006 167 185 24,358
------- ------ ------ --------
Net income $50,308 $354 $421 $51,083
======= ====== ====== ========
Preferred stock dividend 129 129
Income applicable to common
shares $50,179 $354 $421 $50,954
Average common shares
outstanding during period <F5> 25,607,960 172,500 230,000 26,023,623
Net income per common share $1.96 $2.05 $1.83 $1.96
<F1> Represents historical income statement of First Commercial Corporation.
<F2> Represents historical income statement of City National Bank.
<F3> Represents historical income statement of Security National Bank.
<F4> Represents pro forma results as if these pooling transactions had
occurred on or prior to December 31, 1994.
<F5> Average shares outstanding for First Commercial Corporation and pro
forma combined have been restated to reflect the 7% stock dividend
declared November 1995.
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1993
(Unaudited)
(In thousands except for per share data.)
Pending
First
Commercial CNB SNB Pro
Corporation (Pooling) (Pooling) forma
<F1> <F2> <F3> <F4>
--------- ------ ------- -----
Interest income $234,995 $2,148 $2,242 $239,385
Interest expense 90,421 646 892 91,959
-------- ------ ------ --------
Net interest income 144,574 1,502 1,350 147,426
Provision for possible loan
and lease losses 4,416 54 5 4,475
Net interest income after
provision for possible loan
and lease losses 140,158 1,448 1,345 142,951
Other operating income 58,957 448 591 59,996
Other operating expenses 135,191 1,438 1,245 137,874
-------- ------ ------ --------
Income before income taxes 63,924 458 691 65,073
Income tax expense (benefit) 17,959 48 219 18,226
-------- ------ ------ --------
Net income before cumulative
effect of a change in
accounting principle 45,965 410 472 46,847
Cumulative effect on prior
years of adopting FAS 109 47 47
------- ----- ----- -------
Net income $45,965 $410 $519 $46,894
======= ===== ===== =======
Preferred stock dividend 1,210 1,210
Income applicable to common
shares $44,755 $410 $519 $45,684
======= ===== ===== =======
Average common shares
outstanding during period <F5> 25,714,354 172,500 230,000 26,130,017
Net income per common share $1.74 $2.38 $2.26 $1.75
<PAGE>
<F1> Represents historical income statement of First Commercial Corporation.
<F2> Represents historical income statement of City National Bank.
<F3> Represents historical income statement of Security National Bank.
<F4> Represents pro forma results as if these pooling transactions had
occurred on or prior to December 31, 1993.
<F5> Average shares outstanding for First Commercial Corporation and pro
forma combined have been restated to reflect the 5% stock dividend
declared November 1994 and the 7% stock dividend declared November 1995.
<PAGE>
INFORMATION CONCERNING CITY NATIONAL BANK
Business of CNB
CNB was organized as a national banking association on June
24, 1985, and provides consumer and commercial lending for the
Whitehouse and southeast Tyler communities. The Bank has
branches located in Gresham, the Lake Palestine area, the West
Loop in Tyler and Gentry Parkway in Tyler. CNB's principal
office is located at 1125 Highway 110 North, Whitehouse, Texas
75791, telephone number: (903)839-6000.
CNB Stock
General
As of July 31, 1996, there were 172,500 outstanding shares of
CNB Stock. The approximate number of holders of CNB Stock on
that date was 75. There is no established public trading
market for shares of CNB Stock.
On May 8, 1996, the date preceding the announcement of the CNB
Merger, there was no independent basis for establishing a per
share cash market price for CNB Stock. Book value of CNB
Stock equaled $15.33 per share on that date.
CNB's dividends for the six month period ended June 30, 1996
and the last two fiscal years are as follows:
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Dividend
Dividend Dividend Dividend Dividend
Declared
1996:
Per share $ 0 $ 0 $ - $ - $ -
Total Declared 0 0 - - -
1995:
Per share $ 0 $ 0 $ 0 $ 0 $ 0
Total Declared 0 0 0 0 0
1994
Per share $ .25 $ 0 $ 0 $ 0 $ .25
Total Declared 43,125 0 0 0 43,125
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of July 31, 1996, the
identity and total number of shares of CNB Common Stock owned
by persons known by management of CNB to own more than five
percent (5%) of the total outstanding shares.
<PAGE>
First Commercial
Common Stock to
CNB Common Stock be Owned Upon
Name and Address of Beneficially Owned Consummation of
Beneficial Owner on , 1996 the Merger
% of % of
Shares Class Shares Class
Nancy Duress 12,522(1) 7.26 12,666 *
P.O. Box 1046
Whitehouse, TX 75791
D.W. Hamilton 16,173 9.38 16,359 *
P.O. Box 516
Whitehouse, TX 75791
Ray Howard 30,874(2) 17.90 31,230 *
P.O. Box 176
Whitehouse, TX 75791
John B. McDonald 33,633 19.50 34,021 *
P.O. Box 39
Troup, TX 75789
Jess Odom 25,466(3) 14.76 25,760 *
16027 County Line Road
Troup, TX 75789
Clyde Weaver 19,220 11.14 19,442 *
208 Ackertap
Whitehouse, TX 75791
*Denotes less than 1%
(1) 200 shares are held by Mrs. Duress's husband.
(2) 4,000 shares are owned jointly by Mr. Howard and his
wife, and 26,874 are owned by the Ray Howard Company, of
which Mr. Howard serves as President.
(3) These shares are held jointly with his wife.
Security Ownership of Management
The following table sets forth the beneficial ownership of
shares of CNB Common Stock by each director of CNB and by all
directors and executive officers of CNB as a group as of July
31, 1996. The number of shares shown as being beneficially
owned by each director are those over which he or she has
either sole or shared voting and/or investment powers.
<PAGE>
First Commercial
Common Stock to
CNB Common Stock be Owned Upon
Beneficially Owned Consummation of
Name of Directors on , 1996 the Merger
% of % of
Shares Class Shares Class
Nancy Duress 12,522(1) 7.26 12,666 *
D.W. Hamilton 16,173 9.38 16,359 *
Ray Howard 30,874(2) 17.90 31,230 *
John B. McDonald 33,633 19.50 34,021 *
Jess Odom 25,466(3) 14.76 25,760 *
Tom Tatum 8,401(4) 4.87 8,498 *
Ray Terry 8,026(5) 4.65 8,118 *
Clyde Weaver 19,220 11.14 19,442 *
All Directors and Exe-
cutive Officers as a
Group (a total of 14
individuals) 156,474 90.71 158,281 *
*Denotes less than 1%
(1) 200 shares are held by Mrs. Duress's husband.
(2) 4,000 shares are owned jointly by Mr. Howard and his
wife, and 26,874 shares are owned by the Ray Howard
Company, of which Mr. Howard serves as President.
(3) These shares are held jointly with his wife.
(4) 459 shares are held by Mr. Tatum's wife.
(5) 275 shares are held by Terry's Plant Farm, a company of
which Mr. Terry serves as President.
<PAGE>
<TABLE>
Selected Financial Data - City National Bank
The following selected financial data should be read in conjunction with
the financial statements, including the notes thereto, set forth in this
document. See "Consolidated Financial Statements of CNB."
CITY NATIONAL BANK
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Six Months Ended June 30, <F1> Year Ended December 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operating Results:
Net Interest Income $ 983 $ 789 $ 1,654 $ 1,656 $ 1,502 $1,216 $871
Provision for Possible
Loan and Lease Losses 92 40 100 120 54 20 0
Net Income 202 137 265 354 410 476 303
Period End Balance Sheet Data:
Total Assets 40,408 37,265 39,535 32,879 30,047 24,042 21,750
Total Deposits 37,420 34,570 36,781 28,548 27,983 22,408 20,583
Shareholders' Equity 2,655 2,371 2,482 2,234 1,923 1,513 1,037
Per Common Share Data:
Net Income 1.17 .79 1.54 2.05 2.38 2.76 1.76
Cash Dividends 0 0 0 .25 0 0 0
Book Value 15.39 13.74 14.39 12.95 11.15 8.77 6.01
<FN>
<F1>
The unaudited operating results for CNB for the six months ended June 30, 1996 and 1995, in the
opinion of CNB management, included all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation. Interim results for the six months ended June 30, 1996,
are not necessarily indicative of results for the full year 1996.
</FN>
</TABLE>
<PAGE>
Management's Discussion and Analysis or Plan of Operation
The following discussion provides certain information
concerning CNB's financial condition and results of
operations. For a more complete understanding of the
following discussion, reference should be made to the
financial statements of CNB and related notes thereto
presented elsewhere in this Joint Proxy Statement/Prospectus.
Financial Condition - June 30, 1996 Compared with June 30,
1995
Throughout the preceding twelve months CNB management
concentrated its efforts toward increasing the size of CNB.
Deposits increased by $2,879,679 or 8.24%. This deposit
growth was used to fund an additional $2,589,908 in loans
(9.26% increase). During this time period, dividends were not
paid, thereby creating a $329,970 or a 13.92% increase in
stockholders' equity. Risk weighted assets totaled
$31,414,000 at June 30, 1996 with a capital to risk weighted
asset ratio of 9.61%. CNB concluded the first six months of
1996 with a return on assets of 1.00% and a return on equity
of 15.54%.
Statement of Income - Six Months Ended June 30, 1996 Compared
with June 30, 1995
Net income for the first six months of 1996 was $202,039
compared to $136,586 for the same period in 1995. Net
interest margin was strengthened by increased loan volume with
minimal negative impact from increased deposits. An eighty
basis point increase in loan yield was the primary stimulus
for a $252,457 increase in total interest income contrasting
with a ten basis point increase in deposit rates for a $58,452
increase in interest expense. Net interest margin improved by
$194,005.
CNB increased its loan loss provision from $40,000 for the
first six months of 1995 to $92,000 for the same period in
1996. As a result of the expansion of CNB's facilities in
1995 and 1994, occupancy expense increased by $61,880.
Finally, the loss on sale of assets created a $13,069 negative
impact on other income in 1996.
1995 Compared to 1994
1995 was a period of excellent growth for CNB. Loans
increased by $4,383,638 or 17.34%, deposits increased by
$8,233,224 or 28.84% and total assets increased by $6,697,345
or 20.37%. The increase in loans and deposits was prompted by
CNB expanding its facilities - building, furniture and
fixtures increased by $675,570 or 41.78%. Dividends were not
paid in 1995, which created a $264,517 or 11.84% increase in
stockholders' equity. In addition to the increase in loans,
the deposit growth was used to eliminate $1,855,000 in
borrowings and increase short term investments by $1,716,749.
CNB concluded the year with a return on assets of .72% and a
return on equity of 11.17%, both of which decreased from 1994.
<PAGE>
Net income for 1995 was $264,517 compared to $354,363 in 1994.
The $543,356 increase in interest income was offset by a
$545,803 increase in interest expense creating a flat net
interest margin. The $1,421,912 increase in demand deposits
yielded a $126,852 increase in deposit fee income. The
increase in other income resulted mainly from losses on sale
of assets sustained in 1994.
The primary negative impact on earnings was the $186,953
(73.64%) increase in occupancy and equipment costs. Interim
earnings suffered from CNB's expansion.
1994 compared to 1993
1994 was a period of above average growth for CNB. Assets
increased by $2,831,343 or 9.42%. Deposits remained
relatively flat with a $565,112 or 2.02% increase; however,
loan growth had a substantial $4,739,403 or 23.07% increase.
Minimal deposit growth required the use of short-term
investments and borrowings to fund loans. Short term
investments decreased by $2,953,000 or 79.23% and borrowings
increased by $1,855,000. CNB used a portion of its resources
for expansion by adding approximately $400,000 to building and
equipment. Return on assets and return on equity were of
1.14% and 16.99%, respectively.
Net income fell by $55,776 or 13.60% from 1993 to $354,363.
The increase in loan volume strengthened the net interest
margin by $153,370 or 10.21%. Although total deposit growth
was minimal, demand deposits increased by $1,031,633 or 24.24%
resulting in a $51,808 or 14.22% increase in deposit fee
income. Other income fell sharply by $22,799 or 27.22% due to
the loss on sale of assets of $27,398.
Non interest expense increased by $119,655 or 8.02% which was
evenly distributed among the major expense categories.
Salaries increased by $45,694 or 8.08%, occupancy expense
increased by $35,066 or 16.03% and all other expenses
increased by $38,895 or 5.50%. The provision for federal
income taxes increased by $118,500 or 244.33%.
Allowance for Loan Losses
A summary of the changes in the allowance for loan losses for
each of the past two years, including loan loss experience by
major category, is presented below.
<PAGE>
Six Months Ended
June 30
1996 1995
Balance at beginning of period $292,000 $278,000
Amounts charged-off:
Commercial 16,000 31,000
Real estate mortgage 0 0
Consumer 68,000 22,000
Total loans charged-off 84,000 53,000
Recoveries on amounts previously
charged-off:
Commercial 9,000 3,000
Real estate mortgage 0 0
Consumer 8,000 12,000
Total recoveries 17,000 15,000
Net charge-offs 67,000 38,000
Provision for loan losses 92,000 40,000
Balance at end of period $317,000 $280,000
======== ========
Ratio of net charge-offs
during the period to average
loans outstanding during the
period .37% .39%
The allowance for loan losses is established through a
provision for loan losses charged to expenses. The allowance
represents an amount which, in management s judgment, will be
adequate to absorb probable losses on existing loans that may
become uncollectible. The adequacy of the allowance for loan
losses is determined on an ongoing basis by means of an
analysis of the overall quality of the loan portfolio, the
historical loan loss experience of the bank, loan delinquency
trends and the economic conditions within the trade area.
Also, additional allocations are made to the allowance based
on specially identified potential loss situations. These
potential loss situations are identified by an internal loan
review function reporting directly to CNB s Board of
Directors, as well as by the account officers evaluation of
their portfolios.
The tables below set forth an allocation of the allowance for
loan losses according to the categories of loans indicated and
a percentage distribution of the allowance allocation. In
making the allocation, consideration was given to such factors
as management s evaluation of risk in each category, current
economic conditions and charge-off experience. The following
allocation does not indicate the unavailability of any portion
of the allowance for loan losses to absorb losses in any loan
category.
<PAGE>
Allocation of Allowance for loan losses
June 30
1996 1995
Commercial $134,000 $129,000
Real Estate 53,000 50,000
Consumer 130,000 101,000
Total $317,000 $280,000
======== ========
Percentage Distribution of Allowance for Loan Losses and
Categories of Loans as Percent of Gross Loans at June 30
1996 1995
Allowance Loans Allowance
Loans
Commercial 42.42% 22.14% 45.96%
28.62%
Real Estate 16.71 45.75 18.02
41.75
Consumer 40.87 32.11 36.02
29.63
100.00% 100.00% 100.00%
100.00%
====== ====== ======
======
<PAGE>
Nonaccrual and Past Due Loans
It is the policy of CNB to place loans greater than ninety
days past due on nonaccrual status, unless the lending officer
can provide sufficient evidence supporting probable collection
within the near future. All loans greater than one hundred
and twenty days past due are placed on nonaccrual. At the
discretion of the lending officer, some loans past due less
than ninety days may be placed on nonaccrual.
As of June 30, 1996 and 1995, there was approximately $165 and
$135 thousand, respectively, in nonaccrual loans and $224 and
$26 thousand, respectively, in accruing loans contractually
past due 90 days or more as to principal or interest payments.
INFORMATION CONCERNING SECURITY NATIONAL BANK
Business of SNB
SNB was organized as a national banking association on
December 15, 1980 under the laws of the United States of
America and is headquartered in Nacogdoches, Texas, where it
owns its banking facility located at 3000 University Drive,
Nacogdoches, Texas 75963-2018, telephone number: (409)560-
2265. SNB engages in a general, full-service commercial and
consumer banking business. As of June 30, 1996, SNB had total
assets of approximately $36,919,000, total deposits of
approximately $32,945,000, and total stockholders' equity of
approximately $3,683,000 (or approximately 9.98% of total
assets).
SNB Stock
General
As of June 30, 1996, there were 230,000 outstanding shares of
SNB Stock. The approximate number of holders of SNB Stock on
that date was 300. There is no established public trading
market for shares of SNB Stock.
On June 27, 1996, the date preceding the announcement of the
SNB Merger, there was no independent basis for establishing a
per share cash market price for SNB Stock. Book value of SNB
Stock equaled $16.01 per share on that date.
SNB's dividends for the six month period ended June 30, 1996
and the last two fiscal years are as follows:
<PAGE>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter
Dividend
Dividend Dividend Dividend Dividend
Declared
1996:
Per share $ .15 $ .15 $ - $ - $ .30
Total Declared 34,500 34,500 - - 69,000
1995:
Per share $ .15 $ .15 $ .15 $ .15 $ .60
Total Declared 34,500 34,500 34,500 34,500 138,000
1994:
Per share $ .15 $ .15 $ .15 $ .15 $ .60
Total Declared 34,500 34,500 34,500 34,500 138,000
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of June 30, 1996, the
identity and total number of shares of SNB Common Stock owned
by persons known by management of SNB to own more than five
percent (5%) of the total outstanding shares.
First Commercial
Common Stock to
SNB Common Stock be Owned Upon
Name and Address of Beneficially Owned Consummation of
Beneficial Owner on June 30, 1996(1) the Merger
------------------- ------------------- -----------------
% of % of
Shares Class Shares Class
------ ----- ------ -----
Joan Cason Smith 14,620 6.36 15,330 *
Route 13, Box 8100
Nacogdoches, TX 75961
Paul H. Smith 20,914 9.09 21,929 *
P.O. Box 630808
Nacogdoches, TX 75963-0808
Commercial National Bank 14,557 6.33 15,264 *
P.O. Box 630847
Nacogdoches, TX 75963-0847
Maxine Jones Children's 14,880 6.47 15,602 *
Trust
Route 1, Box 41-A
Cushing, TX 75760
*Denotes less than 1%
(1) As of June 30, 1996, there were 230,000 shares of SNB
Stock outstanding.
<PAGE>
Security Ownership of Management
The following table sets forth the beneficial ownership of
shares of SNB Common Stock by each director and executive
officer of SNB and by all directors and executive officers of
SNB as a group as of June 30, 1996. The number of shares
shown as being beneficially owned by each director are those
over which he or she has either sole or shared voting and/or
investment powers.
First Commercial
Common Stock to
Name of Directors SNB Common Stock be Owned Upon
and Executive Beneficially Owned Consummation of
Officers on June 30, 1996(1) the Merger
----------------- -------------------- ----------------
% of % of
Shares Class Shares Class
------ ----- ------ -----
Donald Alexander 2,436 1.06 2,554 *
Bob DeWitt 7,754 3.37 8,130 *
Michael C. Haas 4,473 1.94 4,690 *
R. Gerald Jones(2) 3,800 1.65 3,984 *
Bob McKnight 6,504 2.83 6,819 *
Bill Pederson, Jr. 4,899 2.13 5,136 *
Frank Sisco 1,336 .58 1,400 *
Joan Cason Smith 14,620 6.36 15,330 *
Paul H. Smith 20,914 9.09 21,929 *
Thomas J. Stanly 7,127 3.10 7,473 *
All Directors and Exe- 70,691 30.74 74,124 *
cutive Officers (14)
as a Group
*Denotes less than 1%
(1) As of June 30, 1996, there were 230,000 shares of SNB
Stock outstanding.
(2) Includes 3,500 shares held by Pineywoods Investment
Company, a corporation controlled by Mr. Jones.
<PAGE>
<TABLE>
Selected Financial Data - Security National Bank
The following selected financial data should be read in
conjunction with the financial statements, including the notes
thereto, set forth in this document. See "Consolidated Financial
Statements of SNB."
SECURITY NATIONAL BANK
(In thousands, except per share data)
(Unaudited)
<CAPTION> Six Months Ended June 30,
<F1> Year Ended December 31,
---------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operating Results:
Net Interest Income 747 681 1,420 1,367 1,350 1,210 1,011
Provision for Possible
Loan and Lease Losses (56) (6) (21) (44) 5 28 176
Net Income 265 197 435 421 519 510 162
Period End Balance Sheet
Data:
Total Assets 36,920 36,079 39,415 35,679 38,289 34,785 31,506
Total Deposits 32,945 32,476 35,522 32,295 34,921 31,977 29,178
Long-Term Debt -0- -0- -0- -0- -0- -0- -0-
Shareholders' Equity 3,683 3,369 3,555 3,101 2,987 2,571 2,118
Per Common Share Data:
Net Income 1.15 .86 1.89 1.83 2.26 2.22 .70
Cash Dividends .30 .30 .60 .60 .45 .45 -0-
Book Value 16.02 14.65 15.46 13.48 12.99 11.18 9.21
<FN>
<F1>
The unaudited operating results for SNB for the six months ended June 30, 1996 and 1995,
in the opinion of SNB management, included all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation. Interim results for the six months ended June 30,
1996, are not necessarily indicative of results for the full year 1996.
</FN>
</TABLE>
<PAGE>
Management's Discussion and Analysis or Plan of Operation
The following discussion provides certain information
regarding the financial condition and results of operations of
SNB. This discussion should be read in conjunction with the
SNB's Financial Statements and Notes to Financial Statements
presented elsewhere in this Joint Proxy Statement/Prospectus.
See "Index to SNB Financial Statements."
Results of Operations
General
The earnings of SNB depend primarily on SNB's net interest
income (i.e., the difference between the income earned on
SNB's loans and investments and the interest paid on its
deposits and other borrowed funds). Among the factors
affecting net interest income are the type, volume, and
quality of SNB's assets, the type and volume of its deposits
and other borrowed funds, and the relative sensitivity of its
interest-bearing liabilities to changes in market interest
rates.
SNB's income is also affected by fees it receives from other
banking services, by its provision for loan losses and by the
level of its operating expenses. All aspects of SNB's
operations are affected by general market, economic, and
competitive conditions.
SNB reported net income of $264,882 for the six months ended
June 30, 1996, an increase from net income of $197,298 for the
six months ended June 30, 1995. Pretax income was $384,294
for the six months ended June 30, 1996, a $101,497 increase
from the $282,797 earned during the six months ended June 30,
1995. SNB had net income of $434,640 for the year ended
December 31, 1995, $421,138 for the year ended December 31,
1994, and $519,433 for the year ended December 31, 1993.
Changes occurring in the major components of SNB's income
statement for such periods are discussed below.
Net Interest Income
Net interest income is the primary source of income for SNB
and represents the amount by which interest and fees generated
by earning assets exceed the cost of funds, primarily interest
paid to SNB's depositors on interest-bearing accounts. Net
interest income was $747,697 for the six months ended June 30,
1996, a 9.76% increase from the net interest income of
$681,214 for the six months ended June 30, 1995. Average
rates earned on interest-bearing assets increased from 7.77%
as of June 30, 1995 to 8.19% as of June 30, 1996.
Average loans, net of unearned discount of $16,836,431 for the
six months ended June 30, 1996 increased 3.66% over average
loans of $16,241,907 for the same period in 1995. Average
deposits for the six months ended June 30, 1996 were
$33,854,219, an increase of 4.84% of average deposits of
$32,290,888 for the same period in 1995.
<PAGE>
For the year ended December 31, 1995, net interest income
increased $52,519, or 3.84%, over the year ended December 31,
1994. Net interest income increased $17,653 in 1994, or
1.31%, over 1993 net interest income of $1,349,606. The
increase of $52,519 from 1994 to 1995 was primarily due to
increased interest rates on loans and the implementation of a
new loan product called the "Cash Flow Manager System." Under
the Cash Flow Manager System, SNB provides a loan based on a
customer's accounts receivable, maintaining billing and
collection controls over the receivables, and applying a
certain percentage of collections to the balance of the loan.
The portion of the increase of net interest income from 1994
to 1995 attributed to the new Cash Flow Manager System product
was $25,779. The increase of $17,653 from 1993 to 1994 was
primarily due to increased interest rates on loans.
The following table sets forth for the periods indicated an
analysis of net interest income by each major category of
interest-earning assets and interest-bearing liabilities. The
rates earned and paid on each major type of asset and
liability account are set forth beside the average level in
the account for the period, and the average yields on all
interest-bearing liabilities are also summarized, for the six
months ended June 30, 1996 and 1995.
<TABLE>
Analysis of Net Interest Income
<CAPTION>
Six Months Ended June 30,
------------------------------
1996 1995
------ ------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----- ----- ----- ----- ----- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $16,985 $897 10.56% $16,395 $767 9.36%
Securities - Held to Maturity 7,753 215 5.55% 5,895 167 5.67%
Securities - Available for Sale 6,295 191 6.07% 7,007 224 6.39%
Federal Funds Sold 175 5 5.71% 502 14 5.58%
Interest-bearing deposits
in banks 2,194 59 5.38% 1,178 31 5.26%
------- ----- ----- ------ ---- -----
Total interest-bearing assets/ 33,402 1,367 8.19% 30,977 1,203 7.77%
interest income/average yield
Non-interest earning assets:
Cash and due from banks 2,278 2,509
Other assets 2,385 2,384
Allowance for loan losses (149) (153)
-------- -------
TOTAL $37,916 $35,717
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW, money market, and savings $11,154 $158 2.83% 11,058 $159 2.88%
Certificates of deposit 17,249 457 5.30% 15,844 362 4.57%
Other borrowings 179 4 4.47% 12 1 16.67%
------- ---- ---- ------ --- -----
Total interest-bearing liabilites/ 28,582 619 4.33% 26,914 522 3.88%
interest expense/ rate
<PAGE>
Noninterest-bearing demand deposits 5,451 5,388
Other liabilities 226 182
------ ------
Total liabilities 34,259 32,484
Stockholders' equity 3,657 3,233
------- ------
TOTAL $37,916 $35,717
======= =======
Net interest income $748 $681
==== ====
Net yield on interest-earning 3.85% 3.89%
assets (annualized) ===== =====
</TABLE>
<PAGE>
The rates earned and paid on each major type of asset and
liability account are set forth beside the average level in the
account for the period, and the average yields on all interest-
bearing liabilities are also summarized, for the previous three
calendar years.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
------ ------ ------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------ ---- ------- ------- ---- ----- ----- ---
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $16,437 $1,629 9.91% $16,300 $1,385 8.50% $16,456 $1,331 8.09%
Investment securities 13,248 801 6.05% 13,920 790 5.68% 12,937 833 6.44%
Federal funds sold 423 24 5.67% 946 44 4.65% 1,183 37 3.13%
Interest-bearing deposits 1,519 87 5.73% 1,039 46 4.43% 1,229 41 3.34%
in banks
------ ----- ----- ------ ----- ----- ----- ----- -----
Total interest-bearing 31,627 2,541 8.03% 32,205 2,265 7.03% 31,805 2,242 7.05%
assets/interest
income/average
yield
Non-interest earning
assets:
Cash and due from banks 2,543 2,420 2,095
Other assets 2,361 2,202 1,965
Allowance for loan losses (150) (175) (273)
------- -------- --------
TOTAL $36,381 $36,652 $35,592
======= ======= =======
<PAGE>
LIABILITIES & STOCKHOLDERS'
EQUITY
Interest-bearing
liabilities:
NOW, money market, $10,924 $ 314 2.87% $11,349 $ 315 2.78% $11,183 $296 2.65%
and savings
Certificates of deposit 16,347 806 4.93% 15,695 582 3.71% 15,899 596 3.75%
Other borrowings 6 1 16.67% 24 1 4.17% 0 0 0.00%
------ ----- ----- ------ --- ----- ------
Total interest- 27,277 1,121 4.11% 27,068 898 3.32% 27,082 892 3.29%
bearing liabilities/
interest expense/rate
Noninterest-bearing demand 5,549 6,227 5,524
deposits
Other liabilities 198 217 191
------ ------- -------
Total liabilities 33,024 33,512 32,797
Stockholders' equity 3,357 3,140 2,795
------- ------- -------
TOTAL $36,381 $36,652 $35,592
======= ======= =======
Net interest income $1,420 $1,367 $1,350
====== ====== ======
Net yield on interest- 3.92% 3.72% 3.76%
earning assets ===== ===== =====
(annualized)
</TABLE>
<PAGE>
The following table sets forth for the periods indicated a
summary of the changes in interest earned and interest paid
resulting from changes in volume and rate.
<TABLE>
<CAPTION>
Change From Six Months Ended Change From Year Ended Change From Year Ended
June 30, 1995 To Six Months December 31, 1994 To Year December 31, 1993 To Year
Ended June 30, 1996 Ended December 31, 1995 Ended December 31, 1994
----------------------------- --------------------------- ----------------------------
Total Attributed To Total Attributed To Total Attributed To
Change Volume Rate Mix Change Volume Rate Mix Change Volume Rate Mix
------- ------ ---- --- ------ ------ ---- ---
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $130 $58 $111 $(39) $244 $14 $232 $(2) $54 $(14) $66 $2
Securities 14 46 (38) 6 11 (41) 49 3 (43) 55 (106) 8
Federal funds sold (9) (14) 0 5 (20) (30) 4 6 7 (11) 14 4
Interest-bearing 28 36 (8) 0 41 27 20 (6) 5 (8) 11 2
deposits in banks
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net increase (decrease) $163 $126 $65 $(28) $276 $(30) $305 $1 $23 $22 $(15) $16
in interest income
==== ==== ==== ===== ==== ===== ==== ==== ==== ===== ===== ====
Interest Expense:
Savings and $(1) $7 $(4) $(4) $(1) $(12) $10 $1 $19 $4 $14 $1
transaction
Certificates 94 48 64 (18) 224 32 200 (8) (14) (8) (7) 1
of deposit
Other borrowings 4 8 (22) 18 0 (3) 1 2 1 1 1 (1)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----- ----- ----
Net increase (decrease) $97 $63 $38 $(4) $223 $17 $211 $(5) $6 $(3) $8 $1
in interest expense
==== ==== ==== ===== ==== ==== ==== ==== ==== ===== ===== ====
</TABLE>
<PAGE>
Provision for Loan Losses
SNB allowance for loan losses is established through charges
to operating income in the form of the provision for loan
losses. Actual loan losses or recoveries of loan losses are
charged or credited directly to the allowance for loan losses.
No additions were made to the allowance for loan losses for
the six months ended June 30, 1996 or 1995, due to significant
recoveries on loans that had been written off in earlier
years. The recoveries resulted in credits of $55,716 and
$5,823 being recorded for the six months ended June 30, 1996
and 1995, respectively.
Similarly, no additions were made to the allowance for loan
losses for the year ended December 31, 1995 or 1994, due to
significant recoveries on loans that had been written off in
earlier years. The recoveries resulted in credits of $21,163
and $43,752 being recorded for the years ended December 31,
1995 and 1994, respectively.
The allowance for loan losses expressed as a percentage of
outstanding loans, net of unearned interest, was 0.89% and
0.97% as of June 30, 1996 and 1995, respectively. This
decrease in percentage from 1995 to 1996 is the result of an
improved local economy.
For the years ended December 31, 1993, 1994, and 1995, total
nonaccrual, past due greater than 90 days, and restructured
loans decreased from $523,000 to $151,000 to $141,000,
respectively. The allowance for loan losses expressed as a
percentage of outstanding loans, net of unearned interest was
0.81%, 0.86%, and 1.10% as of December 31, 1995, 1994, and
1993, respectively.
Non-interest Income
Non-interest income, which includes, among other things,
service charges and fees, increased 8.43% from $253,673 for
the six months ended June 30, 1995 to $275,068 for the six
months ended June 30, 1996. The increase was attributable
primarily to an increase in transaction account service
charges.
Non-interest income increased 2.20% from $507,383 to $518,563
for the years ended December 31, 1994 and 1995, respectively.
This increase of $11,180 was attributable primarily to an
increase in transaction account service charges. Non-interest
income increased 1.76%, from $498,599 for the year ended
December 31, 1993, to $507,383 for the year ended December 31,
1994. This small increase was primarily the result of lower
transaction account service charges and an increase in the
gain on sale of assets.
Operating Expenses
<PAGE>
Non-interest expenses include expenses which SNB incurs in the
normal course of operations such as employee compensation and
benefits, occupancy expense, data processing charges, FDIC
insurance premiums, communication expense, professional fees,
advertising, supplies, and depreciation of the building and
equipment. These expenses increased $36,274, or 5.51%, from
$657,913 for the six months ended June 30, 1995 to $694,187
for the six months ended June 30, 1996. The net increase in
non-interest expense was primarily the result of an increase
of $19,421 in salaries and benefits, an increase of $23,017 in
professional fees, an increase of $19,655 in fees relating to
the implementation of the "Cash Flow Manager System," and a
decrease of $35,112 in FDIC insurance premiums.
Operating expenses decreased $20,404, or 1.51%, from
$1,355,149 for the year ended December 31, 1994 to $1,334,745
for the year ended December 31, 1995. This decrease was
primarily the result of the sum of an increase of $47,032 in
salaries and benefits, a decrease of $37,863 in FDIC insurance
premiums, and a decrease of $41,586 in expenses attributed to
the maintenance of foreclosed real estate.
Operating expenses increased $110,390, or 8.87%, from
$1,244,759 for the year ended December 31, 1993 to $1,355,149
for the year ended December 31, 1994. This increase was
primarily the result of the sum of an increase of $50,823 in
salaries and benefits, an increase of $15,970 in occupancy
expense, and an increase of $25,740 in equipment and
depreciation expenses.
Federal Income Taxes
In 1993, SNB adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (FAS 109). As
permitted under the new rules, prior years' financial
statements have not been restated. The cumulative effect of
adopting FAS 109 as of January 1, 1993 was an increase in
income of $47,174.
The provision for income taxes for the six month period ended
June 30, 1996 was $119,412, compared to a provision of $85,499
for the same period in 1995. SNB's provision for federal
income taxes was $190,119 and $184,588 for the years ended
December 31, 1995 and 1994, respectively. As of December 31,
1995, SNB had no net operating loss carryforwards nor
investment and minimum tax credit carryovers for federal
income tax purposes.
Deferred federal income taxes result primarily from the use of
the cash basis of accounting, accelerated depreciation, and
the "direct write-off" method in accounting for bad debts for
income tax purposes. The net deferred federal income tax
liability was $63,773 and $43,998 at June 30, 1996 and 1995,
respectively. At December 31, 1995, SNB carried a net
deferred federal income tax liability of $75,759; at December
31, 1994, SNB carried a net deferred federal income tax asset
of $30,236; and at December 31, 1993, SNB carried a net
deferred federal income tax liability of $61,339.
<PAGE>
SNB's provision for federal income taxes was $219,152 for
1993. For 1992, federal income taxes of $166,458 were totally
offset by a net operating loss carryforward, leaving $7,660 in
losses which were carried forward to 1993. The net operating
loss carryforward was eliminated in 1993 by offsetting taxable
income.
Capital Resources, Liquidity, and Financial Condition
Capital Resources
The OCC has adopted risk-based and leverage capital measures
to assist in the assessment of the capital adequacy of the
banks it regulates. The principal objectives of the risk-
based measures are to (i) make regulatory capital requirements
more sensitive to differences in risk profiles among financial
institutions; (ii) factor off-balance sheet exposures into the
assessment of capital adequacy; (iii) minimize disincentives
to holding liquid, low-risk assets; and (iv) achieve greater
consistency in the evaluation of the capital adequacy of
financial institutions.
The risk-based capital guidelines include both a definition of
capital and a framework for calculating risk weighted assets
by assigning assets and off-balance sheet items to broad risk
categories. A financial institutions's risk-based capital
ratio is calculated by dividing its qualifying capital (the
numerator of the ratio) by its risk weighted assets (the
denominator).
The risk-based capital ratio focuses principally on broad
categories of credit risk. The risk-based ratio does not,
however, incorporate other factors that can affect a bank's
financial condition. These factors include overall interest
rate exposure, liquidity, funding and market risks, the
quality and level of earnings, investment or loan portfolio
concentrations, the quality of loans and investments, the
effectiveness of loan and investment policies, and
management's ability to monitor and control financial and
operating risks.
SNB is a national bank, and as such, its qualifying total
capital consists of two types of capital components: "core
capital elements" (comprising Tier 1 capital) and
"supplementary capital elements" (comprising Tier 2 capital).
Certain assets are deducted from a financial institution's
capital for the purpose of calculating the risk-based capital
ratio.
Assets and credit equivalent amounts of off-balance sheet
items are assigned to one of four risk categories, according
to certain criteria. The aggregate dollar value of the amount
in each category is then multiplied by the risk weight
associated with that category. The resulting weighted values
from each of the risk categories are added together, and this
sum is the financial institution's total risk weighted assets
that comprise the denominator of the risk-based capital ratio.
Assets deducted from a bank's capital in determining the
numerator of
<PAGE>
the risk-based capital ratio are not included as part of the
financial institution's risk weighted assets.
Risk-weights for off-balance sheet items are determined by a
two-step process. First, the "credit equivalent amount" of
off-balance sheet items is determined, in most cases by
multiplying the off-balance sheet items by a credit conversion
factor. Second, in most cases, the credit equivalent amount
is assigned to the appropriate risk category according to
designated criteria.
National banks are required to maintain a minimum risk-based
capital ratio of total capital (after deductions) to risk
weighted assets of 8%. In general, 50% of this ratio must
consist of Tier 1 capital. Certain restrictions and
limitations also apply regarding the calculation of Tier 1
capital. Tier 2 capital elements that are not used as part of
Tier 1 capital generally will qualify for inclusion in a
financial institution's capital base up to a maximum of 100%
of the financial institution's Tier 1 capital. As of June 30,
1996, SNB's Tier 1 risk-based capital ratio was 18.65%.
In addition, the OCC has promulgated capital leverage
guidelines designed to supplement the risk-based capital
guidelines. The principal objective of the leverage ratio is
to address the extent to which a financial institution could
leverage its equity capital base. The OCC requires national
banks to meet a minimum leverage capital requirement of Tier 1
capital to total assets of not less than 3% for a bank that is
not anticipating or experiencing significant growth and is
highly rated (i.e., a composite rating of 1 on a scale of 1 to
5). Banks that the OCC determines are anticipating or
experiencing significant growth or that are not highly rated
must meet a minimum leverage ratio of 3% plus an additional
cushion of at least 100 to 200 basis points. SNB's leverage
ratio was 9.85% as of June 30, 1996, 9.45% as of March 31,
1996, and 9.37% as of December 31, 1995.
Liquidity
SNB's asset and liability management policy is intended to
maintain adequate liquidity and thereby enhance its ability to
raise funds to support asset growth, meet deposit withdrawals
and lending needs, maintain reserve requirements, and
otherwise sustain operations. SNB accomplishes this through
management of the maturities of its interest earning assets
and interest-bearing liabilities. Liquidity is monitored
daily and overall interest rate risk is assessed through
reports showing both sensitivity ratios and existing dollar
"gap" data. SNB believes its present position to be adequate
to meet its current and foreseeable liquidity needs.
The liquidity of SNB is maintained in the form of readily
marketable securities, demand deposits with commercial banks,
vault cash, and federal funds sold. While the minimum
liquidity requirement for banks is determined by federal bank
regulatory agencies as a percentage of deposit liabilities,
SNB's management monitors liquidity requirements as warranted
by interest rate trends, changes in the economy, and the
scheduled
<PAGE>
maturity and interest rate sensitivity of the investment and
loan portfolios, deposits, and anticipated loan fundings. In
addition to the liquidity provided by the foregoing, SNB has
correspondent relationships with other institutions with
available unsecured lines of credit to purchase overnight
funds totalling $1,000,000 should additional liquidity be
needed. These lines are subject to restrictions such as the
financial strength of SNB and the lender's ability to
facilitate the credit.
On December 31, 1993, SNB adopted the provisions of FAS 115.
The opening balance of shareholders' equity was increased by
$188,457 to reflect the net unrealized holding gains, net of
tax, on securities classified as available for sale which were
previously carried at amortized cost. As of June 30, 1996,
SNB's available-for-sale portfolio account totalled $6,079,389
out of a total security portfolio of $14,162,676.
Average non-interest bearing demand deposits were $5,451,000
for the period ended June 30, 1996, compared to $5,388,000 as
of June 30, 1995, an increase of $63,000. Average non-
interest bearing demand deposits were $5,549,000 as of
December 31, 1995, a decrease of $678,000 over the average
balance as of December 31, 1994 of $6,227,000. Average
interest bearing deposits were $27,271,000 as of December 31,
1995 compared to $27,044,000 as of December 31, 1994 and
$27,082,000 as of December 31, 1993.
Net cash generated by operating activities was $472,348,
$475,677, and $652,295 as of the end of 1995, 1994 and 1993,
respectively. Proceeds from principal paydowns and maturities
of investment securities were $3,183,055, $2,273,431 and
$3,197,199, for the same periods. Sales of loans were
immaterial for 1995 through 1993. SNB utilized these funds to
originate loans and purchase investment securities. Loans
originated, net of principal collected, were $(110,098) and
$22,959 in 1995 and 1994, respectively.
Funds utilized for the purchase of bank premises and equipment
were $110,679, $530,759, and $83,125 during 1995, 1994, and
1993, respectively.
<PAGE>
<PAGE>
The following table shows interest sensitivity gaps for these
different intervals as of June 30, 1996.
<TABLE>
<CAPTION>
Estimated Period of Repricing
(dollars in thousands)
-------------------------------------------------------------------
Floating One Day to Over Three Over Six Over One Total
Three to Six Months to Year
Months Months One Year
------ --------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest Sensitive Assets ("ISA")
Loans
Loans at Fixed Rates $1,926 $630 $464 $3,530 $6,550
Loans at Floating Rates 586 5 14 13 9,601 10,219
Securities
Securities at Fixed 631 1,005 562 8,887 11,085
Rates
Securities at Floating 2,998 2,998
Rates
Federal Funds Sold 35 35
Interest Bearing Deposits 1,706 99 99 1,904
in Banks ------ ------ ------ ------ ------- -------
TOTAL Interest Sensitive Assets $2,327 $5,659 $1,649 $1,039 $22,117 $32,791
====== ====== ====== ====== ======= =======
Interest Sensitive Liabilities ("ISL")
Interest Bearing Deposits
NOW Accounts $5,638 $5,638
Savings Accounts 1,567 1,567
Money Market 3,603 3,603
Accounts
Certificates 5,481 3,675 4,876 3,124 17,156
of Deposit
------ ------ ------ ------ ------ ------
Total Deposits 0 16,289 3,675 4,876 3,124 27,964
Other Interest Sensitive 0 0 0 0 0 0
Liabilities ------ ------ ------ ------ ------ -------
TOTAL Interest Sensitive Liabilites $0 $16,289 $3,675 $4,876 $3,124 $27,964
====== ======= ====== ====== ====== =======
PERIODIC GAP $2,327 $(10,630) $(2,026) $(3,837) $18,993 $4,827
====== ========= ======= ======== ======= =======
CUMULATIVE GAP $2,327 $(8,303) $(10,329) $(14,166) 4,827
====== ========= ========= ========= =======
PERIODIC GAP TO TOTAL INTEREST 7.10% -32.42% -6.18% -11.70% 57.92%
SENSITIVE ASSETS ======= ========= ========= ========= ========
</TABLE>
<PAGE>
Investment Securities
Set forth is a distribution of SNB's investment securities by
contractual maturity dates at June 30, 1996 (mortgage-backed
securities are classified in the period of final maturity):
<TABLE>
<CAPTION>
(dollars in thousands)
Within One After One But Maturing After Ten
Year Within Five After Five But Years
Years Within Ten Years
Amount Average Amount Average Amount Average Amount Average Total
Yield Yield Yield Yield Amount
------ ------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities being held to
maturity:
U.S. Treasury -- -- $3,500 5.77% -- -- -- -- $3,500
U.S. Agency -- -- 1,500 5.26% -- -- -- -- 1,500
State and municipal -- -- -- -- $263 5.40% $1,090 5.22% 1,353
Mortgage-backed $190 8.24% 1,540 5.11% -- -- -- -- 1,730
----- ------ ------ ------ ----- ------ ------ ----- ------
Total securities being held $190 8.24% $6,540 5.50% $263 5.40% $1,090 5.22% $8,083
to maturity ===== ====== ====== ====== ===== ====== ====== ===== ======
Securities available for
sale:
U.S. Treasury $2,000 6.96% $1,000 6.02% -- -- -- -- $3,000
U.S. Agency -- -- 898 4.63% -- -- -- -- 898
State and municipal -- -- -- -- -- -- -- -- 0
Mortgage-backed -- -- -- -- -- -- $2,223 5.83% 2,223
------ ----- ------ ----- ------ ------ ------ ----- ------
Total securities available $2,000 6.96% $1,898 5.36% $0 $2,223 5.83% $6,121
for sale ====== ===== ====== ===== ====== ====== ====== ===== ======
</TABLE>
<PAGE>
Deposits
The daily average balances and average rates paid by category of
deposit at the dates shown are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
As of As of As of
June 30, 1996 December 31, 1995 December 31, 1994
Amount Average Amount Average Amount Average
Rate Rate Rate
------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Demand $5,451 -- $5,549 -- $6,228 --
NOW accounts 5,689 2.71% 5,123 2.75% 5,822 2.66%
Money market 3,874 2.99% 4,291 3.01% 4,045 2.99%
Savings 1,591 2.89% 1,510 2.91% 1,482 2.70%
Certificates of 17,249 5.29% 16,347 4.94% 15,695 3.70%
Deposit ------- ----- ------- ----- ------- -----
$33,854 3.63% $32,820 3.42% $33,272 2.70%
======= ===== ======= ===== ======= =====
</TABLE>
<PAGE>
The scheduled maturities of certificates of deposit in
denominations of $100,000 or more at June 30, 1996 and December
31, 1995, including public funds, are shown below:
(Dollars in Thousands)
June 30, December 31,
1996 1995
------- -----------
Due in three months or less $1,341 $1,224
Due in over three months to 1,504 1,917
six months
Due in over six months to 1,412 1,007
twelve months
Due in over twelve months 871 770
------ ------
Total $5,128 $4,918
====== ======
<PAGE>
Loans
The following table classifies SNB's loans according to type as
of the dates shown:
(Dollars in Thousands)
June 30, December 31, December 31,
1996 1995 1994
-------- ----------- -----------
Real estate development $385 $479 $422
Real estate one-to-four family 5,884 6,368 6,799
residential mortgages
Real estate commercial 2,133 2,242 2,468
Real estate other 2,232 1,689 1,295
------ ----- ------
Total real estate 10,634 10,778 10,984
Installment 1,383 1,290 1,264
Commercial 4,311 4,681 4,572
Other loans 441 201 0
------ ------ ------
16,769 16,950 16,820
Less unearned discounts (143) (128) (123)
Less allowance for loan losses (148) (137) (144)
------- ------- -------
Total $16,478 $16,685 $16,553
======= ======= =======
<PAGE>
Total loans, net of unearned income and allowance for possible
loan losses, increased 0.80% in 1995 from 1994 levels. At
June 30, 1996, total loans, net of unearned income and
allowance for possible loan losses, decreased from year-end
1995 levels by 1.24%.
As of June 30, 1996, fixed rate loans aggregated $6,550,261,
which consisted in part of loans totaling $3,020,398 which
mature within one year, and loans totaling $2,276,256 which
mature within one to five years. Commercial and real estate
loans with a fixed rate and maturing within one year at June
30, 1996, totaled $2,442,052 while those with a fixed rate and
maturing within one to five years totaled $969,157. Real
estate construction loans with a fixed rate and maturing
within one year at December 31, 1995, totaled $433,314, and
there were no real estate construction loans with a fixed rate
and maturing after one year.
Allowance for Loan Losses and Risk Elements
The provision for loan losses represents a determination by
SNB's management of the amount necessary to be charged to
operating income and transferred to the allowance for loan
losses to maintain a level which it considers adequate in
relation to the risk of future losses inherent in the loan
portfolio. It is SNB's policy to provide for exposure to
losses of specifically identified credits and a general
allowance for the remainder of the loan portfolio, and, while
it is also SNB's policy to charge off in the current period
those loans in which a loss is deemed to exist, risks of
future losses also exist which cannot be quantified precisely
or attributed to particular loans or classes of loans.
<PAGE>
In assessing the adequacy of its allowance for loan losses,
management relies predominantly on its ongoing review of the
loan portfolio, which is undertaken both to ascertain whether
there are probable losses which must be charged off and to
assess the risk characteristics of significant individual
loans and of the portfolio in the aggregate This review takes
into consideration the judgments of the responsible lending
officer, the senior credit officer, the CEO, the loan review
officer and the Board of Directors, and also those of bank
regulatory agencies that review the loan portfolio as part of
their regular examinations of SNB.
In evaluating the allowance for loan losses, management also
considers SNB's loan loss experience, the amount of past due
and non-performing loans, current and anticipated economic
conditions, and other appropriate information. The allowance
for loan losses also reflects an analysis of the risks
associated with each class of loans.
The allowance for loan losses at June 30, 1996 was $148,172,
compared to $136,905 at December 31, 1995, and $143,922 at
December 31, 1994. Management believes the allowance for loan
losses to be adequate as of the date presented.
<PAGE>
(Dollars in Thousands)
As of and for the As of and for the
six months ended year ended
June 30, December 31,
1996 1995 1994
------ ------ ------
Balance at beginning of period $137 $144 $184
Charge-Offs
Commercial 10 29
Real estate-
mortgage
Real estate-
construction
Installment 3 9 8
Other
----- ----- -----
Total 3 19 37
Charge-Offs ----- ----- -----
Recoveries:
Commercial 65 28 19
Real estate- 1 11
mortgage
Real estate-
construction
Installment 5 4 11
Other
----- ----- -----
Total 70 33 41
Recoveries
----- ----- -----
Net Charge-Offs (67) (14) (4)
Provision charged to expense (56) (21) (44)
----- ----- -----
Balance at end of period $148 $137 $144
===== ===== =====
Net charge-offs (recoveries) -0.40% -0.09% -0.02%
as a percentage of average
loans (annualized to 1996) ===== ===== =====
Non-Accrual, Past Due, and Restructured Loans
The following is an analysis of non-performing assets as of the
dates shown:
(Dollars in Thousands)
As of and for the As of and for the
six months ended years ended
June 30, December 31,
1996 1995 1994
-------- ------ ------
Loans accounted for on a non- $114 $129 $142
accrual basis
Accruing loans which are 96 12 11
contractually past due
90 days or more as to
principal or interest
payments
Troubled debt restructuring
----- ----- -----
Total $210 $141 $153
===== ===== =====
Interest income included in $6 $1 $0
net income for the period
Foregone interest on non- $10 $16 $30
accrual loans ===== ===== =====
The accrual of interest on a loan is discontinued when, in the
opinion of management (based upon such criteria as default in
payment, decline of cash flow, bankruptcy and other financial
conditions which could result in default), the borrower's
financial condition is such that the collection of interest is
doubtful. Management believes the risks in these loans to be
significant as there may be some portion of the principal
which will become uncollectible. As of June 30, 1996, loans
totalling $114,134 or 0.68% of total net loans outstanding,
were on a non-accrual basis, therefore, no income was being
recognized.
Placing a loan on non-accrual status has a two-fold impact on
net interest income. First, it generally causes an immediate
charge against earnings with respect to that particular loan.
Second, it eliminates future interest earnings with respect to
that particular loan. Interest on such loans is not
recognized until all of the principal is collected or until
the loan is returned to a performing status.
<PAGE>
Non-accrual loans decreased by $14,667 from $128,801 at
December 31, 1995 to $114,134 at June 30, 1996. This decrease
is attributed to continuing collection efforts on the impaired
loans. Non-accrual loans decreased by $13,803 from $142,604
at December 31, 1994 to $128,801 at December 31, 1995. This
decrease is attributed to continuing collection efforts on the
impaired loans. The anticipated amounts of charge-offs by
category during the next full year of operations are as
follows:
Dollars in Thousands
-------------
Commercial $10
Real estate - mortgage 0
Real estate - construction 0
Installment 9
Other loans 0
Overdrafts 24
-----
Total $43
=====
<PAGE>
Return on Equity and Assets
The return on equity and return on assets for the periods shown
below are as follows:
As of and for the As of and for the
six months ended years ended
June 30, December 31,
1996 1995 1994
-------- ------ ------
Return on Average Assets 1.40% 1.20% 1.15%
====== ====== ======
Return on Average Equity 14.49% 12.96% 13.41%
====== ====== ======
Equity to Assets Ratio 9.65% 9.23% 8.57%
====== ====== ======
Dividend Payout Ratio (1) 26.04% 31.72% 32.78%
====== ====== ======
(1) Computed as dividends declared divided by net income.
<PAGE>
INFORMATION CONCERNING FIRST COMMERCIAL
Information Incorporated by Reference
The following documents, or the indicated portions thereof,
have been filed by First Commercial with the Commission under
the Exchange Act and are incorporated by reference in this
Joint Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the year ended
December 31, 1995, as amended by Form 10-K/A filed
June 28, 1996;
2. Proxy Statement for annual meeting of stockholders
held April 16, 1996;
3. Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996;
4. Current Reports on Form 8-K dated March 13, 1996 and
June 21, 1996;
5. Form 10-C filed January 9, 1996;
6. The description of the Company's common Stock
contained in the Registration Statement on Form 10
filed April 30, 1981 and any amendment or report
filed for the purpose of updating such description;
and
7. Registration Statement on Form 8-A for the preferred
share purchase rights as filed on January 9, 1991.
In addition, all other reports filed by First Commercial under
the Exchange Act between the date of this Joint Proxy
Statement/Prospectus and the date of the CNB Special Meeting
and the SNB Special Meeting, respectively, are incorporated
herein by reference from date of filing. Any statement
contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which is
also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this Joint Proxy Statement/Prospectus. See "Incorporation of
Certain Documents by Reference" for information with respect
to securing copies of documents incorporated by reference in
this Joint Proxy Statement/Prospectus.
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
General
If the stockholders of CNB and SNB approve the CNB Merger and
the SNB Merger, respectively, and if each Merger is
subsequently consummated, stockholders of CNB and SNB, other
than those exercising dissenters' rights, will become
stockholders of First Commercial. The rights of stockholders
of First Commercial will be governed by and be subject to the
Arkansas Business Corporation Act of 1987 and First
Commercial's Second Amended and Restated Articles of
Incorporation, as amended ("First Commercial's Articles").
The following is a brief summary of certain of the principal
differences between the rights of the stockholders of First
Commercial and the rights of the stockholders of each of CNB
and SNB.
Authorized and Issued Shares
First Commercial's Articles authorize the Corporation to issue
a maximum of 50,000,000 shares of common stock, $3.00 par
value per share, of which 27,188,547 shares are outstanding,
and 400,000 shares of preferred stock, $1.00 par value per
share, of which no shares are outstanding.
CNB's Articles of Association authorize it to issue a maximum
of 187,500 shares of common stock, $5.00 par value per share,
of which 172,500 shares are issued and outstanding.
SNB is authorized by its Articles of Association to issue a
maximum of 250,000 shares of common stock, $5.00 par value per
share, of which 230,000 shares are issued and outstanding.
Federal banking laws provide, with certain exceptions, that
the capital stock of either CNB or SNB may be sold only for
cash consideration and that any issuance of capital stock must
be approved by the OCC and by the vote of the holders of two-
thirds of the outstanding bank stock. On the other hand, the
issuance of stock by First Commercial will not be subject to
regulatory or shareholder approval, and such stock may be
issued for cash, property or services rendered.
First Commercial has the ability to issue and sell its common
stock through public offerings or private placements. Private
placements may be used to dilute the stock ownership of
persons seeking to acquire control of First Commercial.
Dilution would occur because the person's percentage ownership
of First Commercial would be reduced. It should be recognized
that private placements would dilute the stock ownership of
all shareholders, not just those seeking to acquire control.
At this time, however, First Commercial has no plans to issue
additional shares or privately place any such shares, except
for shares of common stock to be issued in connection with ---
----------.
<PAGE>
Dividends
The payment of dividends by each of CNB and SNB is subject to
various conditions and restrictions which are set forth in
applicable federal banking laws. Among other things, the
approval of the OCC is required if the total of all dividends
declared by a bank in any calendar year will exceed the total
of its net profits of that year combined with its retained net
profits of the preceding two years. In addition, a bank may
increase its capital stock through the payment of a stock
dividend only after obtaining the approval of the OCC and the
holders of at least two-thirds of the outstanding bank stock.
If the CNB Merger and SNB Merger are approved, the foregoing
restrictions will continue to apply to dividends paid by
either Bank to First Commercial. However, the payment of
dividends by First Commercial to its shareholders (including
the former shareholders of CNB and SNB) will be subject to the
Arkansas Business Corporation Act of 1987. The Arkansas
Business Corporation Act of 1987 provides, among other things,
that dividends may be paid in cash, property or shares of
company stock, unless the dividend payment would render the
company insolvent.
Voting Rights
General
Holders of First Commercial Common Stock are entitled to one
vote for each share held on all matters on which holders of
Common Stock are entitled to vote. Stockholders of CNB Stock
and SNB Stock also are entitled to one vote for each share
held on all matters brought to a vote.
Generally, under federal banking laws, action on a matter
presented to the shareholders of a bank is approved if a
majority of the shares represented at a meeting are voted in
favor of the action, provided that a quorum of shares is
represented at the meeting. The Arkansas Business Corporation
Act of 1987 provides that if a quorum exists, action on a
matter presented to shareholders will be approved if the votes
cast favoring the action exceed the votes cast opposing the
action. Accordingly, under the Arkansas Business Corporation
Act of 1987, matters can be approved by shareholders of First
Commercial by less than a majority of the shares represented
at a meeting, if any shares represented at the meeting are not
voted.
Under First Commercial's Articles, the Board of Directors of
First Commercial is authorized to issue preferred stock. In
the event a series of preferred stock is issued, the holders
of such preferred stock shall be entitled to vote on the
election of two directors in the event of a default in
preference dividends on the preferred stock and shall have
such other voting rights as may be prescribed by First
Commercial's Board of Directors in the articles of amendment
creating such series of preferred
<PAGE>
stock, which articles of amendment may be adopted by the Board
of Directors without further stockholder action.
Voting Requirements for Extraordinary Corporate Matters
For CNB and SNB, the affirmative vote of two-thirds of the
outstanding shares of bank stock is required by the federal
Bank Merger Act to approve a merger or consolidation.
The corporate law governing First Commercial generally
requires the affirmative vote of the holders of a majority of
the votes entitled to be cast to approve mergers,
consolidations, sales of all or substantially all of the
corporation's assets, or voluntary dissolution. First
Commercial's Articles provide that if a transaction is
contemplated with an "Interested Stockholder" of First
Commercial, as defined in the fair price provision discussed
below, the transaction must be approved by the holders of at
least 80% of the votes entitled to be cast. If, on the other
hand, the transaction is approved by a majority of
disinterested directors or if the price paid to all
stockholders in connection with the transaction meets certain
standards of fairness set forth in the fair price provision,
the 80% vote requirement does not apply.
Voting for Election of Directors
Stockholders of CNB and stockholders of SNB are entitled to
cumulate votes when electing directors for their respective
banks. A stockholder entitled to vote for the election of
directors may vote the number of shares owned for as many
candidates as a stockholder is entitled to elect, or the
stockholder may cumulate his votes and distribute them among
any candidate or candidates as he sees fit. Such cumulative
voting rights afford minority stockholders some assurance of
representation on a bank's board of directors. Under the law
governing First Commercial, however, cumulative voting is
authorized only if affirmatively stated in a corporation's
articles of incorporation. First Commercial's Articles do not
grant cumulative voting rights. Accordingly, any stockholder
who obtains a majority of the outstanding shares of First
Commercial Common Stock will have the power to elect all
directors.
The directors of each of CNB and SNB are elected for a term of
one year. Pursuant to First Commercial's Articles, its board
of directors is divided into three classes of approximately
equal size. Such a board is referred to as a classified or
staggered board of directors. Each director of First
Commercial is elected for a term of three years, and the terms
are staggered in such a way that approximately one-third of
the terms expire at each annual meeting. The staggering of
terms of directors has the potential effect of increasing the
difficulty of changing the composition of First Commercial's
Board of Directors to the extent that at least two annual
meetings, rather than one, will be required in order for First
Commercial stockholders to effect a change in the majority
control of its Board of Directors.
<PAGE>
Amendment of Articles of Incorporation
Amendments to the Articles of Association of either CNB or SNB
must be approved by a majority of the outstanding shares
entitled to vote thereon. Amendments to First Commercial's
Articles are deemed approved if the number of votes cast in
favor of the amendment exceed the votes cast against the
amendment, provided that a quorum of those entitled to vote is
represented at the meeting; provided, however, if the
amendment creates dissenters' rights for a voting group, the
amendment must be approved by a majority of the votes entitled
to be cast by such voting group. The reduced voting
requirement for stockholder approval may make stockholder
approval for amendments to First Commercial's Articles easier
to obtain and thus more difficult for minority stockholders to
defeat. However, First Commercial's Articles do require the
approval of at least 80% of the shares entitled to vote with
regard to the amendment, modification or repeal of provisions
dealing with a classified Board of Directors, advance notice
from stockholders of nominations for election of First
Commercial Directors, the filling of vacancies on the First
Commercial Board of Directors, removal of First Commercial
Directors, action of stockholders without a meeting, and an
amendment of parallel provisions in First Commercial's Bylaws.
First Commercial's Board of Directors has the power to amend
First Commercial's Articles with respect to matters of a
routine nature without shareholder approval. Such types of
amendment include those: (i) to change each issued and
unissued authorized share of an outstanding class into a
greater number of whole shares if only shares of that class
are outstanding; (ii) to change the corporate name in limited
fashion; or (iii) to adopt any other amendment allowed to be
adopted without shareholder approval under the corporate law
governing First Commercial.
First Commercial stockholders, to the extent they comply with
the appropriate dissenting stockholder provisions, obtain
certain rights when amendments are approved that (i) alter or
abolish a preferential right of the shares; (ii) create, alter
or abolish a right in respect of redemption; (iii) alter or
abolish preemptive rights; (iv) exclude or limit the rights of
shares to vote on any matter or cumulative voting rights; or
(v) reduce the number of shares of any holder to a fractional
share if such fractional share is to be acquired for cash.
Amendment of Bylaws
Stockholders of CNB and SNB have the power to amend the Bylaws
of their respective banks. Stockholders of First Commercial
have the power to amend the Bylaws of First Commercial with
the exception that Bylaw provisions relating to the nomination
of directors by stockholders, notice from stockholders of
matters to be brought before an annual meeting by
stockholders, special meetings, the taking of action by
stockholders without a meeting, the number, election and terms
of directors, the
<PAGE>
removal of directors, and the filling of vacancies may be
amended or appealed only with the consent of the holders of at
least 80% of the First Commercial Common Stock entitled to
vote.
Removal of Directors
Stockholders of CNB and SNB may remove a director, either with
or without cause, by a vote of the majority of the shares
entitled to vote at an election of directors. The
stockholders of First Commercial may remove a director for
cause only.
Preemptive Rights
Shareholders of CNB have preemptive rights, meaning that upon
a proposed sale by CNB of additional shares of bank stock,
shareholders of that bank have the right to acquire such
shares in proportion to their present holdings of bank stock
upon terms no less favorable than those of the proposed sale.
Stockholders of First Commercial Common Stock and SNB Common
Stock do not have preemptive rights.
Indemnification of Directors and Officers and Limitation of
Director Liability
The Arkansas Business Corporation Act of 1987 contains
detailed provisions for indemnification of directors and
officers of Arkansas corporations against expenses, judgments,
fines and settlements incurred by them in connection with
litigation. Article Twelfth of First Commercial's Articles
provides for mandatory indemnification of the directors and
executive officers of First Commercial to the fullest extent
legally permissible under the provisions of the Arkansas
Business Corporation Act of 1987. The Articles of Association
of each of CNB and SNB merely provide that each bank may
indemnify a director, officer, or employee in such situations.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or persons controlling First Commercial pursuant to the
foregoing provisions, First Commercial has been informed that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
Article Eleventh of First Commercial's Articles provides that
to the fullest extent permitted by the Arkansas Business
Corporation Act of 1987 no director of First Commercial shall
be personally liable to First Commercial or its stockholders
for monetary damages for or with respect to any acts or
omissions in the performance of his duties. These provisions
do not extend protection to directors for claims by third
parties, but only eliminate personal liability of a director
to First Commercial or its stockholders for monetary damages
for a breach of his fiduciary duty as a director. A director
is personally liable
<PAGE>
for monetary damages to First Commercial or its stockholders
(i) for breach of a duty of loyalty to First Commercial or its
stockholders, (ii) for an act of omission not in good faith or
involving intentional misconduct or a knowing violation of
law, (iii) for the payment of unlawful dividends or unlawful
stock repurchases or redemptions in violation of Arkansas law,
or (iv) for a transaction in which the director received an
improper personal benefit. The provisions do not eliminate or
limit the liability of a director arising in connection with
causes of action brought under federal or state securities
laws or under federal or state banking laws. Furthermore,
since these director liability provisions only eliminate money
damage awards, they do not affect the availability of
equitable relief, such as an injunction or rescission
(although in a given situation such relief may not be
available or as effective as personal liability for monetary
damages). The provisions do not eliminate or limit liability
for acts or omissions by an officer or employee of First
Commercial, even though such person may also be a director, if
the act or omission in question was performed by such person
while acting in a capacity other than that of a director.
Under certain circumstances, the director liability provisions
of First Commercial's Articles could have an anti-takeover
effect with respect to First Commercial. Because of the
decreased likelihood of being held accountable for monetary
damages for a breach of fiduciary duty as directors, the
directors of First Commercial may have a greater tendency to
reject takeover proposals benefiting stockholders of First
Commercial which the directors might have accepted absent such
statutory protection provided by First Commercial's Articles.
SNB's Articles of Association do not provide for any
limitations on the liability of an SNB director to the Bank or
to its stockholders. Article TWELFTH of CNB's Articles
provides that to the fullest extent not prohibited by law, no
director of CNB shall be personally liable to the Bank or any
of its shareholders for monetary damages for an act or
omission in the director's capacity as a director. Such
provision does not
<PAGE>
eliminate or limit the liability of a director for:
1. A breach of his duty of loyalty to the Bank or its
shareholders;
2. An act or omission not in good faith or that
involved intentional misconduct or a knowing violation of the
law;
3. A transaction from which he received an improper
benefit;
4. An act or omission for which the liability of a
director is expressly provided for by statute; or
5. An act related to an unlawful stock repurchase or
payment of a dividend.
Filling Vacancies on the Board of Directors
Under the Articles of Association of each of CNB and SNB,
vacancies on the banks' respective Boards of Directors may be
filled by the remaining members of the Board. Under the
corporate law governing First Commercial, and as provided in
First Commercial's Articles, vacancies on its board of
directors shall be filled solely by the affirmative vote of a
majority of the remaining directors then in office. This
provision precludes the holder of a majority of First
Commercial Stock from removing incumbent directors and
simultaneously gaining control of the Board of Directors by
filling the vacancies created by removal with his own
nominees.
Nomination of Director Candidates and Advance Notice of
Matters to be Brought Before an Annual Meeting by Stockholders
First Commercial's Articles provide that nominations for the
election of directors and placement of matters before the
stockholders at an annual meeting must be made as provided by
the First Commercial Bylaws. The pertinent bylaw provisions
provide that stockholders intending to nominate director
candidates for election must deliver written notice thereof to
the Secretary of First Commercial not later than (i) with
respect to an election to be held at an annual meeting of
stockholders, ninety (90) days prior to the anniversary date
of the immediately preceding annual meeting of stockholders,
and (ii) with respect to an election to be held at a special
meeting of stockholders, the close of business on the tenth
day following the date on which notice of such meeting is
first given to stockholders. The Bylaws further provide that
the notice shall set forth certain information concerning such
stockholder and his nominee(s), including their names and
addresses, a representation that the stockholder is entitled
to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons
specified in the notice, a description of all arrangements or
understandings
<PAGE>
between the stockholder and each nominee, such other
information as would be required to be included in a proxy
statement soliciting proxies for the election of the nominees
of such stockholder and the consent of each nominee to serve
as a director of First Commercial if so elected.
The First Commercial Bylaws further provide that for business
properly to be brought before an annual meeting by a
stockholder, the stockholder must deliver written notice of
such matter to the Secretary of First Commercial not less than
ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders and the
notice must set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief
description of the business, (ii) the name and address of the
stockholder proposing such business, (iii) the class and
number of shares of First Commercial beneficially owned by the
stockholder, and (iv) any material interest of the stockholder
in such business.
The advance notice requirements, by regulating stockholder
nominations and matters to be brought before an annual meeting
by stockholders, afford the board of directors of First
Commercial the opportunity to consider the qualifications of
proposed nominees and the importance of matters proposed to be
brought before an annual meeting and to the extent deemed
necessary or desirable by the Board, inform stockholders about
the qualifications of nominees and issues important to the
consideration of matters brought before an annual meeting.
There is the chance that these provisions may discourage or
deter a third party from conducting a solicitation of proxies
to elect its own slate of directors or to adopt a matter which
serves its own interest, without regard to whether such might
be harmful or beneficial to First Commercial and its
stockholders.
The Articles of Association of each of CNB and SNB provide
that in order for shareholders to nominate individuals for
election to the Board of Directors such nomination must be in
writing and must be delivered or mailed to the President of
the respective bank and to the OCC not less than fourteen (14)
nor more than fifty (50) days prior to any meeting of
stockholders called for the election of directors; provided,
however, that if less than twenty-one (21) days notice of the
meeting is given to stockholders, such nomination shall be
mailed or delivered not later than the close of business on
the seventh (7th) day following the day on which notice of the
meeting was mailed. Such notice must contain the following
information: (i) the name and address of the proposed nominee;
(ii) the principal occupation of the nominee; (iii) the total
number of shares of capital stock of the bank that will be
voted for the nominee; (iv) the name and residence address of
the notifying shareholder; and (v) the number of shares of
capital stock of the bank owned by the notifying shareholder.
Fair Price Provision
The following summary of the fair price provision in First
Commercial's Articles (the "Fair Price Provision") is
qualified in its entirety by reference to the Fair Price
Provision found in Article Eighth of First Commercial's
Articles, which appear as an exhibit to the Registration
Statement of which this Joint
Proxy Statement/Prospectus is a part.
<PAGE>
First Commercial's Articles require approval by holders of
eighty percent (80%) of the votes entitled to be cast as a
condition for mergers and certain other business combinations
(as hereinafter more fully defined, "Business Combination")
involving First Commercial and any person or group holding
five percent (5%) or more of the First Commercial Stock (an
"Interested Shareholder"), unless the transaction is approved
by a majority of the members of the First Commercial Board who
are unaffiliated with the Interested Shareholder and who were
directors before the Interested Shareholder became an
Interested Shareholder ("Disinterested Directors"), or certain
minimum price and procedural requirements are met.
A Business Combination includes (a) a merger or consolidation
of First Commercial with an Interested Shareholder, (b) the
sale or other disposition by First Commercial or a subsidiary
of assets of $10,000,000 or more if an Interested Shareholder
is a party to the transaction, (c) the issuance of stock or
other securities of First Commercial or of a subsidiary to a
person that, immediately prior to such issuance, is an
Interested Shareholder in exchange for cash or property of
$10,000,000 or more, (d) the adoption of any plan or proposal
for the liquidation or dissolution of First Commercial
proposed by or on behalf of an Interested Shareholder, or (e)
any reclassification of securities, recapitalization, merger
with a subsidiary or other transaction which has the effect,
directly or indirectly, of increasing the proportionate shares
of the outstanding stock of any class of First Commercial or a
subsidiary owned by an Interested Shareholder.
The 80% affirmative stockholder vote contemplated by the Fair
Price Provision is not required if (1) the transaction is
approved by a majority of the Disinterested Directors or (2)
all of the various minimum price criteria and procedural
requirements are satisfied.
The minimum price criteria referred to above require that when
cash or other consideration is being paid to First Commercial
stockholders in connection with a Business Combination, the
consideration to be paid would be required to be either cash
or the same type of consideration used by the Interested
Shareholder in acquiring the largest portion of its common
stock prior to the first public announcement of the terms of
the proposed Business Combination. In the case of payments to
First
<PAGE>
Commercial stockholders, the per share fair market value of
such payments would have to be at least equal in value to the
higher of (i) the highest per share price paid by an
Interested Shareholder in acquiring any shares during the two
years prior to announcement of the Business Combination or in
the transaction in which it became an Interested Shareholder
(whichever is higher) or (ii) the fair market value per share
of common stock on the date of the announcement of the
Business Combination or on the date on which the Interested
Shareholder became an Interested Shareholder (whichever is
higher), in either case appropriately adjusted for any stock
dividend, stock split or combination of shares.
The Fair Price Provision provides that a vote of the holders
of eighty percent (80%) or more of the votes entitled to be
cast by the holders of First Commercial Common Stock is
required in order to amend, alter or repeal, or adopt any
provisions inconsistent with, the Fair Price Provision.
Because of the higher percentage requirement for stockholder
approval of any Business Combination not meeting the price and
procedural requirements described above, and the possibility
of having to pay a higher price than would otherwise be the
case to other stockholders in such a Business Combination, it
may become more costly for a purchaser to acquire control of
First Commercial. The Fair Price Provision may therefore
decrease the likelihood that a tender offer will be made for
less than 80% of the voting power of First Commercial Common
Stock and, as a result, may adversely affect those
stockholders who would desire to participate in such a tender
offer. The Fair Price Provision also has the effect of giving
veto power to the holders of a minority of the voting power of
First Commercial Common Stock with respect to a Business
Combination that is opposed by the Board of Directors but
which a majority of the stockholders may believe to be
desirable and beneficial. In addition, since only the
disinterested directors will have the authority to eliminate
the 80% stockholder vote required for a Business Combination,
the Fair Price Provision may have the effect of insulating
current management against the possibility of removal in the
event of a takeover bid.
LEGAL OPINIONS
The validity of the shares of First Commercial Common Stock
offered hereby will be passed upon for First Commercial by
Friday, Eldredge & Clark, Little Rock, Arkansas. Legal
opinions relating to tax matters will be furnished by Friday,
Eldredge & Clark, special tax counsel to First Commercial.
Certain legal matters will be passed upon for CNB by Thomas T.
Tatum, and for SNB by Zelesky, Cornelius, Hallmark, Roper &
Hicks L.L.P.
<PAGE>
EXPERTS
Security National Bank
The financial statements of SNB for the years ended December
31, 1995, 1994 and 1993 are included and incorporated herein
by reference in reliance upon the reports of Ken Rogers &
Associates, Ltd., independent certified public accountants,
which is included and incorporated herein by reference, and
upon the authority of said firm as experts in accounting and
auditing.
First Commercial
The consolidated financial statements of First Commercial at
December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995 incorporated by reference
in First Commercial's Annual Report (Form 10-K) for the year
ended December 31, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports
thereon and incorporated by reference herein which, as to the
year 1993, are based in part on the report of KPMG Peat
Marwick LLP, independent auditors. The financial statements
referred to above are included in reliance upon such reports
given upon the authority of such firms as experts in
accounting and auditing.
<PAGE>
FINANCIAL STATEMENTS OF CITY NATIONAL BANK
INDEX TO FINANCIAL STATEMENTS OF CNB
Page
Balance Sheets for June 30, 1996 and 1995 (unaudited)
Statements of Income for the Six Months Ended June 30, 1996
and 1995 (unaudited)
Balance Sheets for December 31, 1995 and 1994 (unaudited)
Statements of Income for the Years Ended December 31, 1995
and 1994 (unaudited)
Balance Sheets for December 31, 1994 and 1993 (unaudited)
Statements of Income for the Years Ended December 31,
1994 and 1993 (unaudited)
Statements of Cash Flows for the Six Months Ended June 30,
1996 and 1995 and for the Years Ended December 31, 1995,
1994 and 1993 (unaudited)
<PAGE>
City National Bank
Balance Sheets
Unaudited
June 30,
----------
1996 1995
------- -------
Assets
---------
Cash and Due from Banks 3,187,066 2,950,651
Short Term Investments 1,771,000 1,121,251
Investment Securities 2,110,576 2,556,358
Real Estate Loans 13,979,723 11,674,479
Commercial Loans 6,764,128 8,003,382
Consumer Loans and Other 10,432,899 8,942,145
Unearned Discount (620,736) (654,900)
---------- ----------
Total Loans 30,555,014 27,965,106
Reserve for Loan Losses (316,810) (279,922)
Building 1,922,321 1,879,518
Furniture and Fixtures 473,679 459,570
Bank Auto 0 13,556
--------- ---------
Total Fixed Assets 2,396,000 2,352,644
Other Assets 705,410 598,984
Total Assets 40,408,256 37,265,072
========== ==========
Liabilities
-------------
Non Interest Bearing Demand 7,371,639 6,557,251
Interest Bearing Demand 11,268,276 11,746,553
Savings 3,137,723 3,227,156
Certificates of Deposit 15,642,133 13,039,132
---------- ----------
Total Deposits 37,419,771 34,570,092
Borrowed Funds 0 0
Other Liabilities 333,649 324,114
---------- ----------
Total Liabilities 37,753,420 34,894,206
---------- ----------
<PAGE>
Common Stock 862,500 862,500
Surplus 862,500 862,500
Undivided Profits 975,836 645,866
Unrealized losses (46,000) 0
---------- ----------
Total Equity 2,654,836 2,370,866
---------- ----------
Total Liabilities and Equity 40,408,256 37,265,072
========== ==========
<PAGE>
City National Bank
Statements of Income
Unaudited
Six Months Ended June 30,
1996 1995
------ ------
Net Income
------------
Interest Income on Securities 116,098 132,750
Interest Income on Loans 1,460,418 1,195,030
Loan Fee Income 52,459 48,738
--------- ---------
Total Interest Income 1,628,975 1,376,518
Interest Expense 646,167 587,715
--------- ---------
Net Interest Income 982,808 788,803
Deposit Fee Income 309,417 245,959
Other Income 36,963 67,151
--------- ---------
Total Income 1,329,188 1,101,913
Salaries and Benefits 397,901 355,682
Occupancy Expense 241,988 180,108
All Other Expenses 407,260 385,537
--------- ---------
Total Expenses 1,047,149 921,327
--------- ---------
Net Income Before FIT 282,039 180,586
Federal Income Tax Provision 80,000 44,000
--------- ---------
Net Income After Taxes 202,039 136,586
========= =========
<PAGE>
City National Bank
Balance Sheets
Unaudited
December 31,
------------
1995 1994
------ --------
Assets
-------------
Cash and Due from Banks 2,232,512 2,263,118
Short Term Investments 2,491,000 774,251
Investment Securities 2,357,173 2,655,303
Real Estate Loans 12,935,132 9,928,944
Commercial Loans 8,080,734 7,596,676
Consumer Loans and Other 9,291,714 8,386,478
Unearned Discount (639,642) (627,798)
---------- ----------
Total Loans 29,667,938 25,284,300
Reserve for Loan Losses (291,748) (278,214)
Building 1,877,794 1,378,444
Furniture and Fixtures 414,744 238,524
Bank Auto 0 15,847
---------- ---------
Total Fixed Assets 2,292,538 1,632,815
Other Assets 785,445 546,940
---------- ----------
Total Assets 39,534,858 32,878,513
========== ==========
Liabilities
-------------
Non Interest Bearing Demand 6,709,097 5,287,185
Interest Bearing Demand 12,340,583 11,224,325
Savings 3,205,331 2,956,734
Certificates of Deposit 14,526,108 9,079,651
---------- ----------
Total Deposits 36,781,119 28,547,895
<PAGE>
Borrowed Funds 0 1,855,000
Other Liabilities 271,942 241,338
---------- ----------
Total Liabilities 37,053,061 30,644,233
Common Stock 862,500 862,500
Surplus 862,500 862,500
Undivided Profits 773,797 509,280
Unrealized Gain (Losses) (17,000) 0
Total Equity 2,481,797 2,234,280
---------- ---------
Total Liabilities and Equity 39,535,858 32,878,513
========== ==========
<PAGE>
City National Bank
Statements of Income
Unaudited
Year ended December 31,
1995 1994
------ ------
Net Income
------------
Interest Income on Securities 259,054 209,572
Interest Income on Loans 2,566,025 2,071,099
Loan Fee Income 98,470 99,522
--------- ---------
Total Interest Income 2,923,549 2,380,193
Interest Expense 1,270,238 724,435
--------- ---------
Net Interest Income 1,653,311 1,655,758
Deposit Fee Income 543,092 416,240
Other Income 112,737 60,960
--------- ---------
Total Income 2,309,140 2,132,958
Salaries and Benefits 737,607 611,095
Occupancy Expense 440,819 253,866
All Other Expenses 743,497 746,634
--------- ---------
Total Expenses 1,921,923 1,611,595
--------- ---------
Net Income Before FIT 387,217 521,363
Federal Income Tax Provision 122,700 167,000
Net Income After Taxes 264,517 354,363
========= =========
<PAGE>
City National Bank
Balance Sheets
Unaudited
December 31,
--------------
1994 1993
Assets -------- --------
--------------
Cash and Due from Banks 2,263,118 1,904,690
Short Term Investments 774,251 3,727,251
Investment Securities 2,655,303 2,170,813
Real Estate Loans 9,928,944 8,835,786
Commercial Loans 7,596,676 6,624,651
Consumer Loans and Other 8,386,478 5,680,620
Unearned Discount (627,798) (596,160)
---------- ----------
Total Loans 25,284,300 20,544,897
Reserve for Loan Losses (278,214) (291,529)
Building 1,378,444 1,098,327
Furniture and Fixtures 238,524 124,006
Bank Auto 15,847 20,430
---------- ----------
Total Fixed Assets 1,632,815 1,242,763
Other Assets 546,940 748,285
---------- ----------
Total Assets 32,878,513 30,047,170
========== ==========
Liabilities
-----------------
Non Interest Bearing Demand 5,287,185 4,255,552
Interest Bearing Demand 11,224,325 14,336,001
Savings 2,956,734 2,076,355
Certificates of Deposit 9,079,651 7,314,875
---------- ----------
Total Deposits 28,547,895 27,982,783
Borrowed Funds 1,855,000 0
Other Liabilities 241,338 141,344
---------- ----------
Total Liabilities 30,644,233 28,124,127
---------- ----------
<PAGE>
Common Stock 862,500 862,500
Surplus 862,500 862,500
Undivided Profits 509,280 198,043
Unrealized Gains (Losses) 0 0
Total Equity 2,234,280 1,923,043
Total Liabilities and Equity 32,878,513 30,047,170
========== ==========
<PAGE>
City National Bank
Statements of Income
Unaudited
Year Ended December 31,
------------------------
1994 1995
------ ------
Net Income
----------------
Interest Income on Securities 209,572 237,589
Interest Income on Loans 2,071,099 1,826,646
Loan Fee Income 99,522 83,865
--------- --------
Total Interest Income 2,380,193 2,148,100
Interest Expense 724,435 645,712
Net Interest Income 1,655,758 1,502,388
Deposit Fee Income 416,240 364,432
Other Income 60,960 83,759
--------- ---------
Total Income 2,132,958 1,950,579
Salaries and Benefits 611,095 565,401
Occupancy Expense 253,866 218,800
All Other Expenses 746,634 707,739
Total Expenses 1,611,595 1,491,940
--------- ---------
Net Income Before FIT 521,363 458,639
Federal Income Tax Provision 167,000 48,500
--------- ---------
Net Income After Taxes 354,363 410,139
========= =========
<PAGE>
<TABLE>
City National Bank
Statements of Cash Flows
(000's)
<CAPTION>
Unaudited
-----------
Six Months Ended
June 30, Year Ended December 31,
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income 202 137 265 354 410
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 69 37 132 70 64
Increase (decrease) in loan loss reserve 25 2 14 (13) 18
Increase (decrease) in taxes payable (59) 23 133 49 58
Decrease (increase) in interest receivable (71) (19) (57) (41) 10
Increase (decrease) in interest payable (1) 35 33 20 (9)
Decrease (increase) in prepaid and other assets 62 (72) (170) 5 (1)
Increase (decrease) in accrued expenses 91 20 (111) 31 (8)
----- ----- ----- ----- -----
Net cash provided by operating activities 318 163 239 475 542
Investing Activities
Proceeds from maturing investment securities 200 0 400 165 400
Paydowns on investment securitites 45 104 260 4 44
Purchases of investment securities 0 0 (400) (654) (660)
Decrease (increase) in Fed Funds sold 720 (347) (1,717) 2,953 (1,163)
Decrease (increase) in loans (887) (2,681) (4,384) (4,739) (4,202)
Fixed asset purchases (172) (757) (792) (460) (150)
Proceeds from sale of fixed assets 0 0 0 0 0
Purchase of other real estate owned 0 0 (14) 237 0
Proceeds from sale of other real estate owned 91 39 0 0 246
----- ----- ----- ----- -----
Net cash used in investing activities (3) (3,642) (6,647) (2,494) (5,485)
Financing Activities
Dividends paid 0 0 0 (43) 0
Increase (decrease) in deposits 639 6,022 8,233 565 5,574
Increase (decrease) in short-term borrowings 0 (1,855) (1,855) 1,855 0
----- ----- ----- ----- -----
Net cash provided by financing activities 63 4,167 6,378 2,377 5,574
Net increase (decrease) in cash and cash equivalents 954 688 (30) 358 631
Cash and cash equivalents at beginning of period 2,233 2,263 2,263 1,905 1,274
Cash and cash equivalents at end of period 3,187 2,951 2,233 2,263 1,905
===== ===== ===== ===== =====
</TABLE>
<PAGE>
FINANCIAL STATEMENTS OF SECURITY NATIONAL BANK
INDEX TO FINANCIAL STATEMENTS OF SNB
Page
1. Auditors' Reports regarding the December 31, 1995
and 1994 SNB Financial Statements
2. SNB Balance Sheet as of December 31, 1995 and 1994
3. SNB Statements of Income for the Years Ended
December 31, 1995, 1994, and 1993
4. SNB Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1994, and 1993
5. SNB Statement of Cash Flows for the Year Ended
December 31, 1995, 1994 and 1993
6. Notes to SNB Financial Statements
7. SNB Balance Sheet for the Six Months Ended
June 30, 1996 and 1995
8. SNB Statements of Income for the Six Months Ended
June 30, 1996 and 1995
9. SNB Statement of Changes in Stockholders' Equity for
the Six Months Ended June 30, 1996 and 1995
(unaudited)
10. SNB Statement of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 (unaudited)
11. Notes to Unaudited Financial Statements
<PAGE>
SECURITY NATIONAL BANK
Compiled Financial Statements
For The Six Months Ended
June 30, 1996 and 1995
<PAGE>
SECURITY NATIONAL BANK
Compiled Financial Statements
For The Six Months Ended
June 30, 1996 and 1995
Page
Accountant's Compilation Report . . . . . . . . . 1
Statements of Condition . . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . 3
Statements of Changes in Stockholders' Equity . . . 4
Statements of Cash Flows . . . . . . . . . . . . . 5
Notes to Compiled Financial Statements . . . . . 6-17
<PAGE>
KEN ROGERS & ASSOCIATES, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
A LIMITED LIABILITY COMPANY
1329 N. University Drive, Nacogdoches, Texas 75961
409-564-8186
Ken Rogers, CPA (Retired)
Gary Johnson, CPA
Michael Halls, CPA
Terre McLemore, CPA
Kenneth Rodrigues, CPA
August 13, 1996
To the Directors
Security National Bank
Nacogdoches, Texas
We have compiled the accompanying statements of condition of
Security National Bank (a Texas corporation) as of June 30, 1996
and 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for the six months then
ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management.
We have not audited or reviewed the accompanying financial
statements and, accordingly, do not express an opinion or any
other form of assurance on them.
KEN ROGERS & ASSOCIATES, LTD.
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF CONDITION
June 30,
1996 1995
------ ------
ASSETS
Cash and due from banks $1,934,531 $2,817,310
Interest-bearing deposits with banks 1,903,657 1,017,576
Federal funds sold 35,000 1,230,000
Securities available for sale 6,079,389 6,981,742
Securities being held to maturity 8,083,287 5,830,960
Loans, net of allowance for credit
losses of $148,172 and $156,092,
respectively 16,477,521 15,861,055
Property and equipment 1,938,738 1,936,254
Accrued interest receivable 341,682 282,401
Foreclosed real estate, net of allowance
of $14,640 and $14,640, respectively 73,941 81,141
Other assets 51,963 40,608
----------- -----------
Total Assets $36,919,709 $36,079,047
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand and savings $15,789,320 $16,458,624
Other time 17,156,091 16,017,858
---------- ----------
Total deposits 32,945,411 32,476,482
Accrued interest payable 100,274 107,953
Other liabilities 190,705 125,416
---------- ----------
Total Liabilities 33,236,390 32,709,851
========== =========
<PAGE>
Stockholders' Equity:
Common stock, 250,000 shares at $5 par
value authorized; 230,000 shares
issued; and 230,000 shares outstanding 1,150,000 1,150,000
Capital surplus 1,150,000 1,150,000
Retained earnings 1,462,993 1,098,769
Net unrealized appreciation (depreciation)
on securities available for sale, net of
tax benefit of $41,044 and $15,235,
respectively (79,674) (29,573)
Total stockholders' equity 3,683,319 3,369,196
----------- -----------
Total Liabilities and Stockholders' Equity $36,919,709 $36,079,047
=========== ===========
See accountant's compilation report and accompanying notes.
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF INCOME
For the Six Months Ended June 30, 1996 and 1995
June 30, June 30,
1996 1995
------ ------
Interest and dividend income:
Interest and fees on loans $897,249 $766,729
Interest on U.S. Treasury obligations 189,064 125,961
Interest on U.S. government agency 178,682 232,105
obligations
Interest on state and political 35,668 31,074
subdivision obligations
Dividends on restricted equity 2,286 2,123
securities
Interest on federal funds sold 4,771 14,303
Interest on deposits with banks 58,668 31,064
--------- ---------
Total interest and dividend income 1,366,388 1,203,359
========= =========
Interest expense:
Interest on deposits 614,382 521,700
Interest on federal funds purchased 0 445
Interest on securities sold under 4,309 0
repurchase agreements
-------- -------
Total interest expense 618,691 522,145
-------- -------
Net interest income 747,697 681,214
Benefit (provision) for credit losses 55,716 5,823
------- -------
Net interest income after provision for 803,413 687,037
credit losses ======= =======
Other income:
Service charges 262,950 240,738
Net realized gains on sales of
securities available for sale 0 0
Other income 12,118 12,935
------- -------
Total other income 275,068 253,673
======= =======
<PAGE>
Other expenses:
Salaries and employee benefits 323,656 304,234
Occupancy expense 31,920 38,791
Equipment expense 75,360 70,560
Federal deposit insurance premiums 1,000 36,112
Other operating expenses 262,251 208,216
-------- -------
Total other expenses 694,187 657,913
-------- --------
Income before income taxes 384,294 282,797
Income tax expense 119,412 85,499
-------- --------
Net income $264,882 $197,298
======== ========
Net income per share of common stock $1.15 $0.86
======== =======
Average number of shares outstanding 230,000 230,000
======== ========
See accountant's compilation report and accompanying notes.
<PAGE>
<TABLE>
SECURITY NATIONAL BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1996 and 1995
<F1>
<CAPTION>
Unrealized
Appreciation Total
Common Capital Retained (Depreciation) Stockholders's
Stock Surplus Earnings in Value Equity
------- ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $1,150,000 $1,150,000 $970,471 $(169,198) $3,101,273
Net income for six months
ended June 30, 1995 197,298 197,298
Cash dividends declared - $0.30
per share (69,000) (69,000)
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes of $71,927 139,625 139,625
---------- ---------- ---------- ---------- ----------
Balance at June 30, 1995 $1,150,000 $1,150,000 $1,098,769 $(29,573) $3,369,196
========== ========== ========== ========== ==========
Balance at December 31, 1995 $1,150,000 $1,150,000 $1,267,111 $(11,825) $3,555,286
Net income for six months
ended June 30, 1996 264,882 264,882
Cash dividends declared - $0.30
per share (69,000) (69,000)
Net change in unrealized
appreciation (depreciation)
on securities available for
sale, net of tax benefit (67,849) (67,849)
of $34,952
---------- ---------- ---------- ----------- ----------
Balance at June 30, 1996 $1,150,000 $1,150,000 $1,462,993 $(79,674) $3,683,319
========== ========== ========== =========== ==========
<FN>
<F1>
See accountant's compilation report and accompanying notes.
</FN>
</TABLE>
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
June 30, June 30,
1996 1995
------ ------
Cash flows from operating activities:
Net income $264,882 $197,298
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 53,487 47,051
Provision for credit losses (55,716) (5,823)
Net realized gains on securities
available for sale 0 0
Net loss (gain) on sale of other real
estate 0 (5,300)
Amortization of bond premiums 13,196 14,759
Accretion of bond discounts (3,292) (3,012)
(Increase) decrease in interest
receivable (3,156) 10,369
(Increase) decrease in other assets 8,045 30,607
Increase (decrease) in interest
payable (8,962) 25,330
Increase (decrease) in other (3,235) (146,782)
-------- --------
Total adjustments 367 (32,801)
-------- --------
Net cash provided (used) by operating
activities 265,249 164,497
======= =======
Cash flows from investing activities:
Net decrease (increase) in interest
bearing deposits with banks 146,093 (309,785)
Net decrease (increase) in federal
funds sold 190,000 (790,000)
Purchases of securities available for
sale 0 (1,012,500)
Principal paydowns of securities
available for sale 139,803 141,705
Proceeds from maturities of securities
available for sale 500,000 1,500,000
Purchase of securities being held to
maturity (1,990,938) 0
Principal paydowns of securities being
held to maturity 154,777 116,328
<PAGE>
Proceeds from maturities of securities
being held to maturity 0 0
Net decrease (increase) in loans 262,901 698,213
Purchases of properties and equipment (16,594) (19,998)
Proceeds from disposal of other real
estate 0 28,910
--------- ---------
Net cash provided (used) by investing
activities (613,958) 352,873
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in customer (2,576,621) 181,237
deposits
Payments of dividends (69,000) (69,000)
--------- ---------
Net cash provided (used) by investing
activities (2,645,621) 112,237
--------- ---------
Net increase (decrease) in cash and due from
from banks (2,994,330) 629,607
Cash and due from banks at January 1 4,928,861 2,187,703
---------- ----------
Cash and due from banks at June 30 $1,934,531 $2,817,310
========== ==========
Interest paid $627,653 $496,815
========== =========
Income taxes paid $58,720 $171,194
========== =========
See accountant's compilation report and accompanying notes.
<PAGE>
SECURITY NATIONAL BANK
NOTES TO COMPILED FINANCIAL STATEMENTS
June 30, 1996 and 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Security National Bank
(the Bank) conform to generally accepted accounting principles
and the general practices within the banking industry.
Cash Equivalents - For the purpose of presentation in the
Statements of Cash Flows, cash and cash equivalents are defined
as those amounts included in the statement of condition caption
"Cash and due from banks."
Investments in Securities - The Bank's investments in
securities are classified into three categories and accounted
for as follows:
Trading Securities - Government bonds held principally for
resale in the near term are classified as trading
securities and recorded at their fair values. Unrealized
gains and losses on trading securities are included in
other income. The Bank did not have any trading
securities at any time during the six months ended June
30, 1996 or 1995.
Securities Being Held to Maturity - Bonds, notes, and
debentures for which the Bank has the positive intent and
ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest
income using the interest method over the period to
maturity.
Securities Available for Sale - Bonds, notes, debentures, and
certain equity securities not classified as trading
securities nor as securities to be held to maturity are
classified as securities available for sale. These
securities are presented in the statement of condition at
their fair value.
Declines in the fair value of individual securities being held
to maturity and securities available for sale below their cost
that are other than temporary are accounted for as a write-down
of the individual securities to their fair value. Any related
write-downs are included in earnings as realized losses.
Unrealized holding gains and losses, net of tax, on securities
available for sale are reported as a net amount in a separate
component of stockholders' equity, until realized. Gains and
losses on the sale of securities available for sale are
determined using the specific-identification method.
See accountant's compilation report.
<PAGE>
Loans Receivable - Loans receivable for which management has
the intent and ability to hold for the foreseeable future or
until maturity or payoff are reported at their outstanding
unpaid principal balances reduced by any charge-offs or
specific valuation accounts and net of any deferred fees or
costs on originated loans, or unamortized premiums or discounts
on purchased loans.
Loan origination fees and certain direct origination costs are
not capitalized and recognized as an adjustment of the yield on
the related loan. Instead, they are recognized as revenue when
collected or when the loan is originated. The difference
between this immediate recognition method and the
capitalization method required by generally accepted accounting
principles is not material to these financial statements.
The allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries). Management's
periodic evaluation of the adequacy of the allowance is based
on the Bank's past loan loss experience, known and inherent
risks in the loan portfolio, adverse situations that may affect
the borrower's ability to repay, the estimated value of any
underlying collateral, and current economic conditions.
For impairment recognized in accordance with FASB Statement No.
114, the entire change in present value of expected cash flows
is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the
amount of bad debt expense that otherwise would be reported.
Property and Equipment - Land is carried at cost. Bank
premises, furniture, and equipment are carried at cost, less
accumulated depreciation. Depreciation is computed using the
straight-line method and is charged to operations over the
estimated useful lives of the assets. Buildings are
depreciated over 40 years, equipment over 3 to 10 years, and
vehicles over 5 years. Maintenance and repairs of property and
equipment are charged to operations; however, major
improvements are capitalized. Upon retirement, sale, or other
disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and gain or loss
is included in operations.
Foreclosed Real Estate - Real estate properties acquired
through, or in lieu of, loan foreclosure are initially recorded
at fair value at the date of foreclosure establishing a new
cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the
lower of (1) cost or (2) fair value minus estimated costs to
sell. Revenue and expenses from operations and additions to
the valuation allowance are included in loss on foreclosed real
estate. Foreclosed assets are not depreciated.
See accountant's compilation report.
<PAGE>
Financial Instruments - In the ordinary course of business, the
Bank has entered into off balance sheet financial instruments
consisting of commitments to extend credit and standby letters
of credit. Such financial instruments are recorded in the
financial statements when they are funded or related fees are
incurred or received.
Fair Values of Financial Instruments - The following methods
and assumptions were used by the Bank in estimating fair values
of financial instruments as disclosed herein:
Cash and due from banks - The carrying amounts of cash and
short-term instruments approximate their fair value.
Securities being held to maturity and securities available
for sale - Fair values for investment securities,
excluding restricted equity securities, are based on
quoted market prices. The carrying values of restricted
equity securities approximate fair values.
Loans receivable - For variable-rate loans that reprice
frequently and have no significant change in credit risk,
fair values are based on carrying values. Fair values for
other loans are estimated based on discounted cash flow
analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated
using discounted cash flow analyses or underlying
collateral values, where applicable.
Deposit liabilities - The fair values disclosed for demand
deposits are, by definition, equal to the amount payable
on demand at the reporting date (that is, their carrying
amounts). The carrying amounts of variable-rate, fixed-
term money market accounts and certificates of deposit
(CDs) approximate their fair values at the reporting date.
Fair values for fixed-rate CDs are estimated using a
discounted cash flow calculation that applies interest
rates currently being offered on CDs to a schedule of
aggregated expected monthly maturities.
Accrued interest receivable and payable - The carrying
amounts of accrued interest approximate their fair values.
Off balance sheet instruments - Fair values for off balance
sheet lending commitments are based on fees currently
charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the
counterparties' credit standing.
<PAGE>
Interest Income on Loans - Interest on loans is accrued and
credited to income based on the principal amount outstanding.
The accrual of interest on loans is discontinued when, in the
opinion of management, there is an indication that the borrower
may be unable to meet payments as they become due. Upon such
discontinuance, all unpaid accrued interest is reversed. The
Bank recognizes interest income on these loans as customer
payments are made, and only after all of the outstanding
principal has been collected.
Income Taxes - Deferred tax assets and liabilities are
reflected at currently enacted income tax rates applicable to
the period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes. Provisions
for income taxes are based on amounts reported in the
statements of income (after exclusion of non-taxable income
such as interest on state and municipal securities) and include
deferred taxes on temporary differences in the recognition of
income and expense for tax and financial statement purposes.
Items of deferral include differences related to the allowance
for loan losses, allowance for losses on foreclosed real
estate, accumulated depreciation, loans not accruing interest,
and the use of the cash basis of accounting for tax purposes.
The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are
recovered or settled.
Net Income Per Share of Common Stock - Net income per share of
common stock is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the
period, after giving retroactive effect to stock dividends, if
any.
Restrictions on Cash and Due From Banks - The Bank is required
to maintain reserve balances in cash with Federal Reserve
Banks. The total of those reserve balances was approximately
$142,000 at June 30, 1996.
Use of Estimates - Management uses estimates and assumptions in
preparing these financial statements. Those estimates and
assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
See accountant's compilation report.
<PAGE>
SECURITY NATIONAL BANK
NOTES TO COMPILED FINANCIAL STATEMENTS
June 30, 1996 and 1995
INVESTMENT AND MORTGAGE-BACKED SECURITIES
The following tables reflect the amortized cost and estimated
fair values of debt, equity, and mortgage-backed securities
held at June 30, 1996 and 1995. In addition, gross unrealized
gains and gross unrealized losses are disclosed as of June 30,
1996 and 1995.
Securities Available for Sale
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------ ------- -------- -------
June 30, 1996
U.S. Treasury
obligations $2,999,528 $8,317 $5,970 $3,001,875
U.S. Agency
obligations 898,789 0 51,102 847,687
State and municipal
obligations 0 0 0 0
Mortgage-backed
securities 2,222,791 0 71,964 2,150,827
Restricted equity
securities 79,000 0 0 79,000
---------- -------- -------- ----------
Totals $6,200,108 $8,317 $129,036 $6,079,389
========== ======== ======== ==========
June 30, 1995
U.S. Treasury
obligations $3,003,586 $40,398 $0 $3,043,984
U.S. Agency
obligations 1,398,731 2,858 58,651 1,342,938
State and municipal
obligations 0 0 0 0
Mortgage-backed
securities 2,545,233 0 29,413 2,515,820
Restricted equity
securities 79,000 0 0 79,000
---------- -------- -------- ----------
Totals $7,026,550 $43,256 $88,064 $6,981,742
========== ======== ======== ==========
<PAGE>
Securities Being Held to Maturity
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------- -------- -------- -----
June 30, 1996
U.S. Treasury
obligations $3,500,475 $0 $115,084 $3,385,391
U.S. Agency
obligations 1,500,000 0 66,250 1,433,750
State and municipal
obligations 1,352,429 553 23,169 1,329,813
Mortgage-backed
securities 1,730,383 499 43,242 1,687,640
---------- ------ -------- ----------
Totals $8,083,287 $1,052 $247,745 $7,836,594
========== ====== ======== ==========
June 30, 1995
U.S. Treasury
obligations $506,029 $1,705 $0 $507,734
U.S. Agency
obligations 1,995,744 5,506 50,000 1,951,250
State and municipal
obligations 1,175,191 0 23,846 1,151,345
Mortgage-backed
securities 2,153,996 3,899 57,769 2,100,126
---------- ------- -------- ----------
Totals $5,830,960 $11,110 $131,615 $5,710,455
========== ======= ======== ==========
<PAGE>
Proceeds from the sale of securities available for sale were $-0-
and $-0- for the six months ended June 30, 1996 and 1995,
respectively. Gross realized gains from the sale of securities
available for sale were $-0- and $-0- for the six months ended
June 30, 1996 and 1995, respectively, and gross realized losses
from the sale of securities available for sale were $-0- and $-0-
for the six months ended June 30, 1996 and 1995, respectively.
The amortized cost and estimated fair value of debt securities
at June 30, 1996 by contractual maturity are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations.
Available for Sale Being Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
------ ----- ------ -----
Due in one year or less $1,999,964 $2,008,281 $0 $0
Due after one through five years 1,898,353 1,841,281 5,000,475 4,819,141
Due after five through ten years 0 0 262,861 261,647
Due after ten years 0 0 1,089,568 1,068,166
Mortgage-backed securities 2,222,791 2,150,827 1,730,383 1,687,640
---------- ---------- ---------- ----------
Total $6,121,108 $6,000,389 $8,083,287 $7,836,594
========== ========== ========== ==========
Securities carried at approximately $2,354,250 and $1,880,223
at June 30, 1996 and 1995, respectively, were pledged to secure
deposits and for other purposes required or permitted by law.
See accountant's compilation report.
<PAGE>
LOANS
Loans at June 30, 1996 and 1995 are summarized as follows:
June 30, June 30,
1996 1995
------ ------
Commercial and agricultural $5,482,144 $3,334,643
Real estate construction 384,668 396,660
Commercial real estate 2,535,904 3,172,583
Residential real estate 5,883,712 6,511,119
Consumer 2,453,320 2,714,123
Overdrafts 29,052 19,835
---------- ----------
Subtotal 16,768,800 16,148,963
Less - unearned interest (143,107) (131,816)
Less - allowance to credit loss (148,172) (156,092)
Net loans receivable $16,477,521 $15,861,055
=========== ===========
An analysis of the change in the allowance for credit losses follows:
June 30, June 30,
1996 1995
------ ------
Balance at January 1 $136,905 $143,922
Loans charged off (3,161) (5,691)
Recoveries 70,144 23,684
Provision (benefit) for loan losses (55,716) (5,823)
-------- --------
Balance at December 31 $148,172 $156,092
======== ========
<PAGE>
An analysis of impaired loans is summarized as follows:
June 30, June 30,
1996 1995
------ ------
Impaired loans for which an allowance
has been provided $111,530 $145,375
Impaired loans for which no allowance
has been provided 2,604 107
Total loans determined to be impaired $114,134 $145,482
Allowance provided for impaired
loans, included in the allowance
for loan losses $20,238 $31,794
Loans to employees totaled $393,529 and $381,152 at June 30,
1996 and 1995, respectively. Non-accruing loans (principally
real estate loans) totaled $114,134 and $145,482 at June 30,
1996 and 1995, respectively, which had the effect of reducing
income $10,130 and $20,278, respectively. All non-accruing
loans are considered to be impaired.
See accountant's compilation report.
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996 and 1995 consisted of:
June 30, June 30,
1996 1995
------ ------
Land $521,563 $521,563
Buildings 1,370,009 1,370,009
Furniture and equipment 1,001,190 918,326
Vehicles 36,778 28,436
--------- ---------
Total cost 2,929,540 2,838,334
Accumulated depreciation (990,802) (902,080)
--------- ---------
Net book value $1,938,738 $1,936,254
========== ==========
Depreciation expense totaled $53,487 and $47,051 for the six
months ended June 30, 1996 and 1995, respectively.
FORECLOSED REAL ESTATE
A comparative summary of activity on foreclosed real estate
(previously called other real estate) is as follows:
June 30, June 30,
1996 1995
------ ------
Balance at January 1 $88,581 $124,691
Acquired in settlement of loans 0 0
Sales and other dispositions 0 (28,910)
------- --------
Balance at June 30 $88,581 $95,781
Activity in the allowance for losses for foreclosed real estate
is as follows:
June 30, June 30,
1996 1995
------ ------
Balance at January 1 $14,640 $19,940
Provision charged to income 0 0
Charge-offs, net of recoveries 0 (5,300)
------- -------
Balance at June 30 $14,640 $14,640
======= =======
See accountant's compilation report.
<PAGE>
DEPOSITS
Components of deposits included in the statement of condition
at June 30, 1996 and 1995 were as follows:
June 30, June 30,
1996 1995
Demand and savings:
Demand deposits $4,982,079 $5,541,231
Passbook savings 1,567,344 1,483,439
NOW accounts 5,637,299 5,138,228
Money market accounts 3,602,598 4,295,726
---------- ----------
15,789,320 16,458,624
========== ==========
Other time:
Certificates of deposit of
$100,000, or more 4,627,304 3,909,235
Open account time deposits of
$100,000 or more 500,000 500,000
Other time deposits 12,028,787 11,608,623
---------- ----------
17,156,091 16,017,858
---------- ----------
Total deposits $32,945,411 $32,476,482
=========== ===========
The maturity distribution of other time deposits at June 30, 1996
was as follows:
Within one year $14,032,848
One to two years 1,453,468
Two to three years 282,854
Three to four years 768,522
Four to five years 618,399
-----------
Total other time deposits $17,156,091
===========
See accountant's compilation report.
<PAGE>
STOCKHOLDERS' EQUITY
The Bank is subject to certain restrictions on the amount of
dividends that it may declare without prior regulatory
approval. At June 30, 1996, approximately $926,710 of retained
earnings were available for dividend declaration without prior
regulatory approval.
The Bank is also subject to various regulatory capital
requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial
statements. The regulations require the Bank to maintain a
minimum risk-based capital ratio of 8 percent and a minimum
leverage ratio of 3 percent. The Bank's risk-based capital
ratio was approximately 19.40% and 17.60% at June 30, 1996 and
1995, respectively, and its leverage ratio was approximately
9.85% and 9.33% at June 30, 1996 and 1995, respectively.
See accountant's compilation report.
<PAGE>
FINANCIAL INSTRUMENTS, COMMITMENTS, AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in
the statement of condition. The contract or notional amounts
of those instruments reflect the extent of involvement the Bank
has in those particular financial instruments.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument
for commitments to extend credit and standby letters of credit
is represented by the contractual or notional amount of those
instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for
instruments that are reflected on the statement of condition.
Contract or Notional
Amount
-------------
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $1,420,779
Standby letters of credit $12,850
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a case-
by-case basis. The amount of collateral obtained, if it is
deemed necessary by the Bank upon extension of credit, is based
on management's credit evaluation. The collateral held varies
but may include accounts receivable, inventory, property,
equipment, and commercial properties.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public
and private arrangements in which the customer has guaranteed
payment to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending loans to customers.
See accountant's compilation report.
<PAGE>
The Bank has not incurred any losses on its commitments in
either the six months ended June 30, 1996 or 1995. The Bank
primarily serves customers located in the East Texas area. As
such, the Bank's loans, commitments, and standby letters of
credit have been granted to customers in that area.
In the normal course of business, the Bank is involved in
various legal proceedings. Management has concluded, based
upon advice of counsel, that the result of these proceedings
will not have a material effect on the Bank's financial
condition or results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments
were as follows, at June 30, 1996:
Carrying Fair
Amount Value
------ -------
Financial assets:
Cash and due from banks $1,934,531 $1,934,531
Interest bearing deposits with banks 1,903,657 1.902,657
Federal funds sold 35,000 35,000
Securities available for sale 6,079,389 6,079,389
Securities being held to maturity 8,083,287 7,836,594
Loans receivable 16,477,521 16,501,521
Accrued interest receivable 341,682 341,682
Financial liabilities:
Deposit liabilities 32,945,411 32,980,000
Accrued interest payable 100,274 100,274
Off statement of condition assets
(liabilities):
Commitments to extend credit 1,420,779 0
Standby letters of credit 12,850 200
See accountant's compilation report.
<PAGE>
INCOME TAXES
The provision for income taxes consisted of the following for
the six months ended June 30, 1996 and 1995:
June 30, June 30,
1996 1995
------ ------
Currently payable:
Federal $96,446 $83,193
State 0 0
------- -------
Total current expense 96,446 83,193
------- -------
Deferred:
Federal 22,966 2,306
State 0 0
Total deferred expense 22,966 2,306
------- ------
Total income tax expense $119,412 $85,499
======== =======
The provision for federal income tax is less than that computed
by applying the federal statutory rate of 34% in 1996 and 1995,
as indicated in the following analysis:
June 30, June 30,
1996 1995
------ ------
Income tax, at 34% $130,660 $96,151
Increase (decrease) resulting from:
Effect of tax-exempt income (13,726) (12,869)
Nondeductible expenses 2,478 2,217
-------- -------
Total income tax expense $119,412 $85,499
======== =======
See accountant's compilation report.
<PAGE>
The components of the deferred income tax asset included in
other assets are as follows:
June 30, June 30,
1996 1995
------ ------
Deferred tax asset:
Federal $167,831 $144,579
State 0 0
Less - valuation allowance 0 0
------- -------
167,831 144,579
======= =======
Deferred tax liability:
Federal (231,604) (188,577)
State 0 0
(231,604) (188,577)
-------- --------
Net deferred tax asset (liability) $(63,773) $(43,998)
======== ========
The tax effects of each type of significant item that gave rise
to deferred taxes are:
June 30, June 30,
1996 1995
------ ------
Allowance for credit losses $50,378 $53,071
Depreciation (112,586) (85,936)
Valuation of foreclosed real estate 4,978 6,780
Use of cash basis of accounting (70,450) (51,759)
Loans on non-accrual status 22,863 18,611
Unrealized (gain) or loss on
securities available for sale 41,044 15,235
-------- --------
Balance at December 31 $(63,773) $(43,998)
======== ========
PROFIT SHARING PLAN
The Bank has a profit sharing plan covering substantially all
full-time employees. Employees are eligible to participate
after completion of one year of service. The Bank's
contribution to the plan for the six months ended June 30, 1996
and 1995 was $13,020 and $12,990, respectively.
See accountant's compilation report.
<PAGE>
RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its executive
officers, directors, significant shareholders, and their
affiliates (related parties). In the opinion of management,
such transactions were made in the ordinary course of business
on substantially the same terms and conditions, including
interest rates and collateral, as those prevailing at the same
time for comparable transactions with other customers, and did
not involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such
related parties was $294,373 and $209,323 at June 30, 1996 and
1995, respectively. Deposits owed to such related parties
consisted of $615,804 and $781,278 at June 30, 1996 and 1995,
respectively.
SECURITIES SOLD UNDER REPURCHASE AGREEMENT
During the six months ended June 30, 1996, the Bank entered
into daily agreements to repurchase securities previously sold.
The agreements specified an interest rate of 4.75%, with total
daily balances ranging from $161,000 to $5,000,000. The Bank
pledged securities as collateral for the days that the
agreements were in effect. Total interest expense for these
agreements was $4,309. There were no outstanding agreements at
either June 30, 1996 or June 30, 1995.
COMMITMENTS AND CONTINGENCIES
Substantially all of the Bank's loans, commitments, and
commercial and standby letters of credit have been granted to
customers in the Bank's market area. Almost all such
customers are depositors of the Bank. The concentrations of
credit by type of loan are set forth above. The distribution
of commitments to extend credit approximates the distribution
of loans outstanding. Standby letters of credit were granted
primarily to commercial borrowers. The Bank, as a matter of
policy, does not extend credit to any single borrower or group
of related borrowers in excess of the legal lending limit.
Certain cash balances deposited with correspondent banks are
usually in excess of insurance coverage provided by the Federal
Deposit Insurance Corporation (FDIC). Management has assessed
the viability of correspondent banks and feels these risks are
minimal.
See accountant's compilation report.
<PAGE>
SECURITY NATIONAL BANK
AUDIT REPORT
December 31, 1995 and 1994
<PAGE>
SECURITY NATIONAL BANK
AUDITED FINANCIAL STATEMENTS
For the Years Ended December 31, 1995 and 1994
TABLE OF CONTENTS
Page
Independent Auditor's Report . . . . . . . . . . 1
Statements of Condition . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . 3
Statements of Changes in Stockholders' Equity . . 4
Statements of Cash Flows . . . . . . . . . . . . 5
Notes to the Financial Statements . . . . . . 6-17
<PAGE>
KEN ROGERS & ASSOCIATES, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
A LIMITED LIABILITY COMPANY
1329 N. University Drive, Nacogdoches, Texas 75961
409-564-8186
Ken Rogers, CPA (Retired)
Gary Johnson, CPA
Michael Halls, CPA
Terre McLemore, CPA
Kenneth Rodrigues, CPA
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Security National Bank
Nacogdoches, Texas
We have audited the accompanying statements of condition of
Security National Bank (the Bank) as of December 31, 1995 and
1994, and the related statements of income, changes in
stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Security National Bank as of December 31, 1995
and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles.
KEN ROGERS & ASSOCIATES, LTD.
January 26, 1996
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF CONDITION
December 31,
1995 1994
------ ------
ASSETS
Cash and due from banks $4,928,861 $2,187,703
Interest-bearing deposits with banks 2,049,750 707,791
Federal funds sold 225,000 440,000
Securities available for sale 6,824,306 7,404,108
Securities to be held to maturity 6,254,717 5,954,322
Loans, net of allowance for credit losses
of $136,905 and $143,922, respectively 16,684,706 16,553,445
Property and equipment 1,975,631 1,963,307
Accrued interest receivable 338,526 292,770
Foreclosed real estate, net of allowance
of $14,640 and $19,940, respectively 73,941 104,751
Other assets 60,008 71,215
----------- -----------
Total Assets $39,415,446 $35,679,412
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand and savings $18,716,671 $16,393,661
Other time 16,805,361 15,901,584
---------- ----------
Total deposits 35,522,032 32,295,245
Accrued interest payable 109,236 82,623
Other liabilities 228,892 200,271
---------- ----------
Total Liabilities 35,860,160 32,578,139
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Stockholders' Equity:
Common stock, 250,000 shares at $5 par
value authorized; 230,000 shares
issued; and 230,000 shares outstanding 1,150,000 1,150,000
Capital surplus 1,150,000 1,150,000
Retained earnings 1,267,111 970,471
Net unrealized appreciation (depreciation)
on securities available for sale, net of
tax of $6,092 and $87,162, respectively (11,825) (169,198)
--------- ---------
Total stockholders' equity 3,555,286 3,101,273
---------- ----------
Total Liabilities and Stockholders' Equity $39,415,446 $35,679,412
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF INCOME
For the Years Ended December 31, 1995 and 1994
1995 1994
------ ------
Interest income:
Interest and fees on loans $1,628,986 $1,384,886
Interest on U.S. Treasury obligations 285,539 312,708
Interest on U.S. government agency obligations 444,547 416,338
Interest on state and political subdivision
obligations 66,308 57,303
Interest on restricted equity securities 4,362 4,140
Interest on federal funds sold 24,099 44,151
Interest on deposits with banks 87,454 45,780
--------- ---------
Total interest income 2,541,295 2,265,306
--------- ---------
Interest expense:
Interest on deposits 1,121,517 898,047
Total interest expense 1,121,517 898,047
Net interest income 1,419,778 1,367,259
Provision for credit losses 21,163 43,752
--------- ---------
Net interest income after provision for
credit losses 1,440,941 1,411,011
--------- ---------
Other income:
Service charges 481,189 486,766
Net realized gains on sales of securities
available for sale 0 42,481
Other income 37,374 20,617
-------- --------
Total other income 518,563 549,864
-------- -------
Other expenses:
Salaries and employee benefits 643,543 596,511
Occupancy expense 70,201 72,462
Equipment expense 147,923 181,760
Federal deposit insurance premiums 37,110 74,973
Other operating expenses 435,968 429,443
--------- ---------
Total other expenses 1,334,745 1,355,149
--------- ---------
Income before income taxes 624,759 605,726
Income tax expense 190,119 184,588
--------- ---------
Net income $434,640 $421,138
========= =========
Net income per share of common stock $1.89 $1.83
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SECURITY NATIONAL BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995 and 1994
<F1>
<CAPTION>
Unrealized
Appreciation Total
Common Capital Retained (Depreciation) Stockholders'
Stock Surplus Earnings in Value Equity
------- ------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $1,150,000 $1,150,000 $687,333 $0 $2,987,333
Net income for 1994 421,138 421,138
Cash dividends declared -
$0.60 per share (138,000) (138,000)
Change in accounting
principle for unrealized
gain (loss) on securities
available for sale as of
January 1, 1994 188,457 188,457
Net change in unrealized
appreciation (depreciation)
on securities avalaible for
sale, net of taxes of
$184,247 (357,655) (357,655)
---------- --------- --------- --------- ----------
Balance at December 31, 1994 1,150,000 1,150,000 970,471 (169,198) 3,101,273
---------- --------- --------- --------- ----------
Net income for 1995 434,640 434,640
Cash dividends declared -
$0.60 per share (138,000) (138,000)
Net change in unrealized
appreciation (depreciation)
on securities avalaible for
sale, net of taxes of
$81,070 157,373 157,373
---------- ---------- ---------- -------- ----------
Balance at December 31, 1995 $1,150,000 $1,150,000 $1,267,111 $(11,825) $3,555,286
========== ========== ========== ========= ==========
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 and 1994
1995 1994
------ ------
Cash flows from operating activities:
Net income $434,640 $421,138
--------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 98,355 78,547
Provision for credit losses (21,163) (43,752)
Net realized gains on securities
available for sale 0 (39,976)
Net loss (gain) on sale of other real
estate (5,300) 15,977
Amortization of bond premiums 31,344 52,192
Accretion of bond discounts (5,143) (6,363)
(Increase) decrease in interest receivable (45,756) 41,037
(Increase) decrease in other assets (69,863) 53,718
Increase (decrease) in interest payable 26,614 9,377
Increase (decrease) in other liabilities 28,620 (106,218)
-------- --------
Total adjustments 37,708 54,539
-------- --------
Net cash provided (used) by operating
activities 472,348 475,677
-------- --------
Cash flows from investing activities:
Net decrease (increase) in interest
bearing deposits with banks (1,341,959) (106,665)
Net decrease (increase) in federal
funds sold 215,000 330,000
Purchases of securities available for sale (1,510,469) (1,133,151)
Proceeds from sales of securities available
for sale 0 2,056,677
Proceeds from maturities of securities
available for sale 2,318,511 1,608,206
Purchase of securities to be held to
maturity (1,180,937) (998,281)
Proceeds from maturities of securities
to be held to maturity 864,544 665,225
Net decrease (increase) in loans (110,098) 22,959
Purchases of properties and equipment (110,679) (530,759)
Proceeds from disposal of other real estate 36,110 30,253
--------- ---------
Net cash provided (used) by investing
activities (819,977) 1,944,464
--------- ---------
<PAGE>
Cash flows from financing activities:
Net increase (decrease) in customer deposits 3,226,787 (2,626,222)
Payments of dividends (138,000) (138,000)
--------- ---------
Net cash provided (used) by investing
activities 3,088,787 (2,764,222)
--------- ---------
Net increase (decrease) in cash and due
from banks 2,741,158 (344,081)
Cash and due from banks at January 1 2,187,703 2,531,784
---------- ----------
Cash and due from banks at December 31 $4,928,861 $2,187,703
========== ==========
Interest paid $1,094,903 $888,670
========== ==========
Income taxes paid $265,694 $224,487
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SECURITY NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Security National
Bank (the Bank) conform to generally accepted accounting
principles and the general practices within the banking
industry.
Cash Equivalents - For the purpose of presentation in the
Statements of Cash Flows, cash and cash equivalents are
defined as those amounts included in the statement of
condition caption "Cash and due from banks."
Investments in Securities - The Bank's investments in
securities are classified into three categories and
accounted for as follows:
Trading Securities - Government bonds held principally
for resale in the near term are classified as trading
securities and recorded at their fair values.
Unrealized gains and losses on trading securities are
included in other income. The Bank did not have any
trading securities at any time in 1995 or 1994.
Securities Being Held to Maturity - Bonds, notes, and
debentures for which the Bank has the positive intent
and ability to hold to maturity are reported at cost,
adjusted for premiums and discounts that are recognized
in interest income using the interest method over the
period to maturity.
Securities Available for Sale - Bonds, notes, debentures,
and certain equity securities not classified as trading
securities nor as securities to be held to maturity are
classified as securities available for sale. These
securities are presented in the statement of condition
at their fair value.
Declines in the fair value of individual securities being
held to maturity and securities available for sale below
their cost that are other than temporary are accounted for
as a write-down of the individual securities to their fair
value. Any related write-downs are included in earnings as
realized losses. Unrealized holding gains and losses, net
of tax, on securities available for sale are reported as a
net amount in a separate component of stockholders' equity,
until realized. Gains and losses on the sale of securities
available for sale are determined using the specific-
identification method.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Loans Receivable - Loans receivable for which management has
the intent and ability to hold for the foreseeable future or
until maturity or payoff are reported at their outstanding
unpaid principal balances reduced by any charge-offs or
specific valuation accounts and net of any deferred fees or
costs on originated loans, or unamortized premiums or
discounts on purchased loans.
Loan origination fees and certain direct origination costs
are not capitalized and recognized as an adjustment of the
yield on the related loan. Instead, they are recognized as
revenue or expense, as the case may be. The difference
between this immediate recognition method and the
capitalization method required by generally accepted
accounting principles is not material to these financial
statements.
The allowance for loan losses is increased by charges to
income and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the
allowance is based on the Bank's past loan loss experience,
known and inherent risks in the loan portfolio, adverse
situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, and
current economic conditions.
For impairment recognized in accordance with FASB Statement
No. 114, the entire change in present value of expected cash
flows is reported as bad debt expense in the same manner in
which impairment initially was recognized or as a reduction
in the amount of bad debt expense that otherwise would be
reported.
Property and Equipment - Land is carried at cost. Bank
premises, furniture, and equipment are carried at cost, less
accumulated depreciation. Depreciation is computed using
the straight-line method and is charged to operations over
the estimated useful lives of the assets. Buildings are
depreciated over 40 years, equipment over 3 to 10 years, and
vehicles over 5 years. Maintenance and repairs of property
and equipment are charged to operations; however, major
improvements are capitalized. Upon retirement, sale, or
other disposition of property and equipment, the cost and
accumulated depreciation are eliminated from the accounts,
and gain or loss is included in operations.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Foreclosed Real Estate - Real estate properties acquired
through, or in lieu of, loan foreclosure are initially
recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure,
valuations are periodically performed by management and the
real estate is carried at the lower of (1) cost or (2) fair
value minus estimated costs to sell. Revenue and expenses
from operations and additions to the valuation allowance are
included in loss on foreclosed real estate. Foreclosed
assets are not depreciated.
Financial Instruments - In the ordinary course of business,
the Bank has entered into off balance sheet financial
instruments consisting of commitments to extend credit,
commitments under credit card arrangements, and standby
letters of credit. Such financial instruments are recorded
in the financial statements when they are funded or related
fees are incurred or received.
Fair Values of Financial Instruments - The following methods
and assumptions were used by the Bank in estimating fair
values of financial instruments as disclosed herein:
Cash and due from banks - The carrying amounts of cash
and short-term instruments approximate their fair
value.
Securities being held to maturity and securities
available for sale - Fair values for investment
securities, excluding restricted equity securities, are
based on quoted market prices. The carrying values of
restricted equity securities approximate fair values.
Loans receivable - For variable-rate loans that reprice
frequently and have no significant change in credit
risk, fair values are based on carrying values. Fair
values for other loans are estimated based on
discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow
analyses or underlying collateral values, where
applicable.
Deposit liabilities - The fair values disclosed for
demand deposits are, by definition, equal to the amount
payable on demand at the reporting date (that is, their
carrying amounts). The carrying amounts of variable-
rate, fixed-term money market accounts and certificates
of deposit (CDs) approximate their fair values at the
reporting date. Fair values for fixed-rate CDs are
estimated using a discounted cash flow calculation that
applies interest rates currently being offered on CDs
to a schedule of aggregated expected monthly
maturities.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Accrued interest receivable and payable - The carrying
amounts of accrued interest approximate their fair
values.
Off balance sheet instruments - Fair values for off
balance sheet lending commitments are based on fees
currently charged to enter into similar agreements,
taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Interest Income on Loans - Interest on loans is accrued and
credited to income based on the principal amount
outstanding. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an
indication that the borrower may be unable to meet payments
as they become due. Upon such discontuance, all unpaid
accrued interest is reversed. The Bank recognizes interest
income on these loans as customer payments are made, and
only after all of the outstanding principal has been
collected.
Income Taxes - Deferred tax assets and liabilities are
reflected at currently enacted income tax rates applicable
to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision
for income taxes. Provisions for income taxes are based on
amounts reported in the statements of income (after
exclusion of non-taxable income such as interest on state
and municipal securities) and include deferred taxes on
temporary differences in the recognition of income and
expense for tax and financial statement purposes. Items of
deferral include differences related to the allowance for
loan losses, allowance for losses on foreclosed real estate,
accumulated depreciation, loans not accruing interest, and
the use of the cash basis of accounting for tax purposes.
The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will
either be taxable or deductible when the assets and
liabilities are recovered or settled.
Net Income Per Share of Common Stock - Net income per share
of common stock is computed by dividing net income by the
weighted average number of shares of common stock
outstanding during the period, after giving retroactive
effect to stock dividends, if any.
Restrictions on Cash and Due From Banks - The Bank is
required to maintain reserve balances in cash with Federal
Reserve Reserve Banks. The total of those reserve balances
was approximately $119,000 at December 31, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
INVESTMENT AND MORTGAGE-BACKED SECURITIES
The following tables reflect the amortized cost and
estimated fair values of debt, equity, and mortgage-backed
securities held at December 31, 1995 and 1994. In addition,
gross unrealized gains and gross unrealized losses are
disclosed as of December 31, 1995 and 1994.
Securities Available for Sale
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------- ------ -------- -----
December 31, 1995:
U.S. Treasury
obligations $3,499,394 $39,200 $0 $3,538,594
U.S. Agency
obligations 898,627 0 34,909 863,718
State and municipal
obligations 0 0 0 0
Mortgage-backed
securities 2,365,202 0 22,208 2,342,994
Restricted equity
securities 79,000 0 0 79,000
---------- -------- -------- ----------
Totals $6,842,223 $39,200 $57,117 $6,824,306
December 31, 1994
U.S. Treasury
obligations $3,502,969 $0 $5,158 $3,497,811
U.S. Agency
obligations 1,398,843 0 116,718 1,282,125
State and municipal
obligations 0 0 0 0
Mortgage-backed
securities 2,689,656 0 134,484 2,555,172
Restricted equity
securities 69,000 0 0 69,000
--------- -------- -------- ----------
Totals $7,660,468 $0 $256,360 $7,404,108
========== ======== ======== ==========
<PAGE>
Securities Being Held to Maturity
Amortized Unrealized Unrealize Fair
Cost Gains Losses Value
------ ------ ------ -------
December 31, 1995:
U.S. Treasury
obligations $1,510,642 $13,499 $0 $1,524,141
U.S. Agency
obligations 1,500,000 0 25,938 1,474,062
State and municipal
obligations 1,351,310 19,553 7,905 1,362,958
Mortgage-backed
securities 1,892,765 2,441 24,709 1,870,497
---------- -------- -------- ----------
Totals $6,254,717 $35,493 $58,552 $6,231,658
========== ======== ======== ==========
December 31, 1994
U.S. Treasury
obligations $506,769 $0 $33,800 $472,969
U.S. Agency
obligations 1,995,181 0 164,556 1,830,625
State and municipal
obligations 1,174,072 0 102,072 1,072,000
Mortgage-backed
securities 2,278,300 0 151,188 2,127,112
---------- -------- ------- ----------
Totals $5,954,322 $0 $451,616 $5,502,706
========== ======== ======== ==========
<PAGE>
Proceeds from the sale of securities available for sale were
$-0- and $2,056,677 for 1995 and 1994, respectively. Gross
realized gains from the sale of securities available for
sale were $-0- and $39,977 for 1995 and 1994, respectively,
and gross realized losses from the sale of securities
available for sale were $-0- and $-0- for 1995 and 1994,
respectively.
The amortized cost and estimated fair value of debt
securities at December 31, 1995 by contractual maturity are
shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right
to call or prepay obligations.
Available for Sale Being Held to
Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
------ ----- ------ -----
Due in one year or less $1,999,276 $2,019,687 $0 $0
Due after one through
five years 2,398,745 2,382,625 3,010,642 2,998,203
Due after five through
ten years 0 0 262,472 267,553
Due after ten years 0 0 1,088,838 1,095,405
Mortgage-backed
securities 2,365,202 2,342,994 1,892,765 1,870,497
---------- ---------- ---------- ----------
Total $6,763,223 $6,745,306 $6,254,717 $6,231,658
========== ========== ========== ==========
Securities carried at approximately $2,253,249 and
$1,855,749 at December 31, 1995 and 1994, respectively, were
pledged to secure deposits and for other purposes required
or permitted by law.
<PAGE>
LOANS
Loans at December 31, 1995 and 1994 are summarized as follows:
1995 1994
------ ------
Commercial and agricultural $4,910,544 $3,761,394
Real estate construction 479,457 421,795
Commercial real estate 2,656,712 2,905,829
Residential real estate 6,368,312 6,798,910
Consumer 2,515,929 2,890,211
Overdrafts 18,853 42,436
---------- ----------
Subtotal 16,949,807 16,820,575
Less - unearned interest 128,196 (123,208)
Less - allowance to credit losses 136,905 (143,922)
----------- -----------
Net loans receivable $16,684,706 $16,553,445
=========== ===========
An analysis of the change in the allowance for credit losses follows:
1995 1994
------ ------
Balance at January 1 $143,922 $184,266
Loans charged off (18,770) (37,157)
Recoveries 32,916 40,565
Provision for loan losses (21,163) (43,752)
-------- -------
Balance at December 31 $136,905 $143,922
======== ========
<PAGE>
Impairment of loans has been recognized in conformity with
FASB Statement No. 114. An analysis of impaired loans is
summarized as follows:
1995 1994
------ ------
Impaired loans for which an allowance
has been provided $119,806 $142,499
Impaired loans for which no allowance
has been provided 8,995 105
-------- --------
Total loans determined to be imparied $128,801 $142,604
======== ========
Allowance provided for impaired loans,
included in the allowance for loan
losses $22,166 $18,081
======== ========
Loans to employees totaled $380,652 and $376,652 at December
31, 1995 and 1994, respectively.
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consisted of:
1995 1994
------ ------
Land $521,563 $521,563
Buildings 1,370,009 1,370,009
Furniture and equipment 984,597 900,239
Vehicles 36,778 28,436
--------- ---------
Total cost 2,912,947 2,820,247
Accumulated depreciation (937,316) (856,940)
---------- ----------
Net book value $1,975,631 $1,963,307
========== ==========
Depreciation expense totaled $98,355 and $78,547 for 1995
and 1994, respectively.
FORECLOSED REAL ESTATE
A comparative summary of activity on foreclosed real estate (previously
called other real estate) is as follows:
1995 1994
------ ------
Balance at January 1 $124,691 $118,273
Acquired in settlement of loans 0 33,348
Sales and other dispositions (36,110) (26,930)
-------- --------
Balance at December 31 $88,581 $124,691
======== ========
Activity in the allowance for losses for foreclosed real estate
is as follows:
1995 1994
------ ------
Balance at January 1 $19,940 $0
Provision charged to income 0 26,417
Charge-offs, net of recoveries (5,300) (6,477)
------- -------
Balance at December 31 $14,640 $19,940
======= =======
<PAGE>
DEPOSITS
Components of deposits included in the statement of condition at
December 31, 1995 and 1994 were as follows:
1995 1994
Demand and savings:
Demand deposits $6,711,707 $5,173,725
Passbook savings 1,478,463 1,491,057
NOW accounts 5,729,552 5,281,753
Money market accounts 4,796,949 4,447,126
---------- ----------
18,716,671 16,393,661
========== ==========
Other time:
Certificates of deposit of
$100,000, or more 4,417,730 4,102,910
Open account time deposits of
$100,000 or more 500,000 500,000
Other time deposits 11,887,631 11,298,674
---------- ----------
16,805,361 15,901,584
---------- ----------
Total deposits $35,522,032 $32,295,245
=========== ===========
STOCKHOLDERS' EQUITY
The Bank is subject to certain restrictions on the amount of
dividends that it may declare without prior regulatory
approval. At December 31, 1995, approximately $995,710 of
retained earnings were available for dividend declaration
without prior regulatory approval.
The Bank is also subject to various regulatory capital
requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial
statements. The regulations require the Bank to maintain a
minimum risk-based capital ratio of 8 percent and a minimum
leverage ratio of 3 percent. The Bank's risk-based capital
ratio was approximately 17.04% and 17.91% at December 31,
1995 and 1994, respectively, and its leverage ratio was
approximately 9.05% and 9.10% at December 31, 1995 and 1994,
respectively.
<PAGE>
FINANCIAL INSTRUMENTS, COMMITMENTS, AND CONTINGENCIES
The Bank is a party to financial instruments with off-
balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial
instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the statement of condition. The contract or
notional amounts of those instruments reflect the extent of
involvement the Bank has in those particular financial
instruments.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit is represented by the contractual or
notional amount of those instruments. The Bank uses the
same credit policies in making commitments and conditional
obligations as it does for instruments that are reflected on
the statement of condition.
Contract or
Notional
Amount
--------
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $2,723,935
Standby letters of credit $13,500
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral obtained, if it is deemed necessary by the Bank
upon extension of credit, is based on management's credit
evaluation. The collateral held varies but may include
accounts receivable, inventory, property, equipment, and
commercial properties.
Standby letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to
support public and private arrangements in which the
customer has guaranteed payment to a third party. The
credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to
customers.
<PAGE>
The Bank has not incurred any losses on its commitments in
either 1995 or 1994. The Bank primarily serves customers
located in the East Texas area. As such, the Bank's loans,
commitments, and standby letters of credit have been granted
to customers in that area.
In the normal course of business, the Bank is involved in
various legal proceedings. Management has concluded, based
upon advice of counsel, that the result of these proceedings
will not have a material effect on the Bank's financial
condition or results of operations.
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments were as
follows, at December 31, 1995:
Carrying Fair
Amount Value
------ -------
Financial assets:
Cash and due from banks $4,928,861 $4,928,861
Interest bearing deposits with banks 2,049,750 2,049,750
Federal funds sold 225,000 225,000
Securities available for sale 6,824,306 6,824,306
Securities being held to maturity 6,254,717 6,231,658
Loans receivable 16,684,706 16,721,701
Accrued interest receivable 338,526 338,526
Financial liabilities:
Deposit liabilities 35,522,032 35,547,031
Accrued interest payable 109,237 109,237
Off statement of condition assets
(liabilities):
Commitments to extend credit 0
Standby letters of credit 200
INCOME TAXES
The provision for income taxes consisted of the following
for the years ended December 31, 1995 and 1994:
1995 1994
------ ------
Currently payable:
Federal $165,195 $189,000
State 0 0
-------- --------
Total current expense 165,195 189,000
======== ========
Deferred:
Federal 24,924 (4,412)
State 0 0
-------- -------
Total deferred expense 24,924 (4,412)
-------- --------
Total income tax expense $190,119 $184,588
======== ========
<PAGE>
The provision for federal income tax is less than that computed by
applying the federal statutory rate of 34% in 1995 and 1994, as
indicated in the following analysis:
1995 1994
------ ------
Statutory rate 34.0% 34.0%
Increase (decrease) resulting from:
Effect of tax-exempt income -4.3% -4.1%
Nondeductible expenses 0.7% 0.6%
Other 0.0% 0.0%
----- -----
30.4% 30.5%
===== =====
The components of the deferred income tax asset included in other
assets are as follows:
1995 1994
------ ------
Deferred tax asset:
Federal $149,519 $219,800
State 0 0
Less - valuation allowance 0 0
------- -------
149,519 219,800
Deferred tax liability:
Federal (225,278) (189,565)
State 0 0
------- -------
(225,278) (189,565)
------- -------
Net deferred tax asset (liability) $(75,759) $30,235
======== =======
<PAGE>
The tax effects of each type of significant item that gave rise to
deferred taxes are:
1995 1994
------ ------
Allowance for credit losses $46,548 $59,490
Depreciation (106,904) (85,937)
Valuation of foreclosed real estate 4,978 6,780
Use of cash basis of accounting (49,835) (55,871)
Loans on non-accrual status 23,362 18,611
Unrealized (gain) or loss on
securities available for sale 6,092 87,162
-------- -------
Balance at December 31 $(75,759) $30,235
======== =======
PROFIT SHARING PLAN
The Bank has a profit sharing plan covering substantially
all full-time employees. Employees are eligible to
participate after completion of one year of service. The
Bank's contribution to the plan for the year ended December
31, 1995 and 1994 was $26,040 and $21,700, respectively.
RELATED PARTY TRANSACTIONS
The Bank has entered into transactions with its executive
officers, directors, significant shareholders, and their
affiliates (related parties). In the opinion of management,
such transactions were made in the ordinary course of
business on substantially the same terms and conditions,
including interest rates and collateral, as those prevailing
at the same time for comparable transactions with other
customers, and did not involve more than normal credit risk
or present other unfavorable features. The aggregate amount
of loans to such related parties was $164,287 and $271,055
at December 31, 1995 and 1994, respectively. Deposits owed
to such related parties consisted of $857,873 and $1,108,831
at December 31, 1995 and 1994, respectively.
<PAGE>
COMMITMENTS AND CONTINGENCIES
Substantially all of the Bank's loans, commitments, and
commercial and standby letters of credit have been granted
to customers in the Bank's market area. Almost all such
customers are depositors of the Bank. The concentrations of
credit by type of loan are set forth above. The
distribution of commitments to extend credit approximates
the distribution of loans outstanding. Standby letters of
credit were granted primarily to commercial borrowers. The
Bank, as a matter of policy, does not extend credit to any
single borrower or group of related borrowers in excess of
the legal lending limit.
Certain cash balances deposited with correspondent banks are
usually in excess of insurance coverage provided by the
Federal Deposit Insurance Corporation (FDIC). Management
has assessed the viability of correspondent banks and feels
these risks are minimal.
<PAGE>
SECURITY NATIONAL BANK
AUDITED FINANCIAL STATEMENTS
December 31, 1994
<PAGE>
TABLE OF CONTENTS
PAGE NO.
Independent Auditor's Report . . . . . . . . . . . . . 1
Balance Sheets . . . . . . . . . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . . . . 3
Statements of Changes in Stockholders' Equity . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . 5-6
Notes to Financial Statements . . . . . . . . . . . . . 7-13
<PAGE>
KEN ROGERS & ASSOCIATES, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
A LIMITED LIABILITY COMPANY
1329 N. University Drive, Nacogdoches, Texas 75961
409-564-8186
Ken Rogers, CPA (retired)
Gary Johnson, CPA
Michael Halls, CPA
Terre McLemore, CPA
Kenneth Rodrigues, CPA
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Security National Bank
Nacogdoches, Texas
We have audited the accompanying balance sheets of Security
National Bank as of December 31, 1994 and 1993, and
the related statements of income, changes in stockholders'
equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Security National Bank as of December 31, 1994
and 1993, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted
accounting principles.
As discussed in the notes to the financial statements, the
Bank changed its method of accounting for investment
securities in 1994 as required by the provisions of Statement
of Financial Accounting Standards No. 115.
KEN ROGERS & ASSOCIATES, LTD.
Certified Public Accountants
January 13, 1995
<PAGE>
SECURITY NATIONAL
BANK
BALANCE SHEETS
December 31,
1994 1993
------- ------
ASSETS
Cash and due from banks $2,187,703 $2,531,784
Interest-bearing deposits in banks 707,791 601,126
Investment securities (Approximate market
value of $16,053,065, respectively) 15,819,319
Securities held-to-maturity (fair value
of $5,502,706, respectively) 5,954,322
Securities available-for-sale, at fair value 7,404,108
Loans, less allowance for loan losses of
$143,922 and $184,266, respectively 16,553,445 16,566,000
Federal funds sold 440,000 770,000
Bank premises and equipment, net 1,963,307 1,511,095
Accrued interest receivable 292,770 333,807
Other real estate owned 104,751 117,633
Other assets 71,215 37,771
----------- -----------
Total assets $35,679,412 $38,288,535
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand and savings $16,393,661 $18,873,409
Other time 15,901,584 16,048,058
---------- ----------
Total deposits 32,295,245 34,921,467
Accrued interest payable 82,623 73,246
Other liabilities 200,271 306,489
---------- ----------
Total liabilities 32,578,139 35,301,202
----------- ----------
<PAGE>
STOCKHOLDERS' EQUITY
Common stock, par value $5, 250,000 shares
authorized, 230,000 shares issued and 1,150,000 1,150,000
outstanding
Certified surplus 1,150,000 1,150,000
Retained earnings (deficit) 970,471 687,333
Unrealized gain (loss) on securities available
for sale, net of applicable income taxes (169,198)
----------- ----------
Total stockholders' equity 3,101,273 2,987,333
----------- -----------
Total liabilities and stockholders' equity $35,679,412 $38,288,535
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SECURITY NATIONAL
BANK
STATEMENTS OF INCOME
For the Year Ended
December 31,
1994 1993
------ ------
Interest income:
Interest and fees on loans $1,384,886 $1,331,564
Interest on investment securities:
Obligations of U.S. Treasury 312,708 459,771
Obligations of U.S. government agencies 416,338 344,410
Obligations of states and political 57,303 24,350
subdivisions
Other securities 4,140 4,140
Interest on federal funds sold 44,151 36,945
Interest on deposits in banks 45,780 40,557
---------- ----------
Total interest income 2,265,306 2,241,737
---------- ----------
Interest expense on deposits 898,047 892,131
---------- ----------
Net interest income 1,367,259 1,349,606
Provision for loan losses (43,752) 4,542
---------- ----------
Net interest income after provision for loan 1,411,011 1,345,064
losses
Other income:
Service charges and fees 486,766 484,154
Gain (loss) on sale of assets 42,481 92,507
Other 20,617 14,445
--------- ----------
Total other income 549,864 591,106
--------- ----------
<PAGE>
Other expenses:
Salaries 497,056 447,472
Employee benefits 99,455 98,216
Occupancy expenses 72,462 56,492
Equipment expenses 112,735 86,995
Federal insurance premiums 74,973 78,418
Data processing expenses 69,025 102,140
Other operating expenses 429,443 375,026
--------- ---------
Total other expenses 1,355,149 1,244,759
--------- ---------
Income before income tax 605,726 691,411
Income tax expense 184,588 219,152
--------- ---------
Net income before cumulative effect of a
change in accounting principle 421,138 472,259
--------- ---------
Cumulative effect on prior years of changing
to FASB Statement 109, "Accounting for Income 47,174
Taxes" --------- ---------
Net Income $421,138 $519,433
========= =========
Net income per share of common stock $1.83 $2.26
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SECURITY NATIONAL BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1994 and 1993
<F1>
<CAPTION>
Unrealized
Gain
(Loss) on
Securities
Available for
Sale, Net of
Retained Applicable Total
Common Certified Earnings Deferred Stockholders'
Stock Surplus (Deficit) Income Taxes Equity
--------- --------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $1,150,000 $1,150,000 $271,400 $0 $2,571,400
Net Income 519,433 519,433
Dividends (103,500) (103,500)
---------- --------- -------- -------- ---------
Balance, December 31, 1993 1,150,000 1,150,000 687,333 0 2,987,333
---------- --------- -------- -------- ---------
Net income 421,138 421,138
Dividends (138,000) (138,000)
Change in accounting principle:
Unrealized gain (loss) on
securities available for sale
at January 1, 1994 188,457 188,457
Change in unrealized gain (loss)
on securities available for sale,
net of deferred income taxes (357,655) (357,655)
---------- ---------- -------- --------- ----------
Balance, December 31, 1994 $1,150,000 $1,150,000 $970,471 ($169,198) $3,101,273
========== ========== ======== ======== ==========
<FN>
<F1>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
SECURITY NATIONAL BANK
STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
1994 1993
------ ------
Cash flows from operating activities:
Net income (loss) $421,138 $519,433
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 78,547 63,574
Provision for credit losses (43,752) 4,542
Net gain on sale of investment (39,976) (79,645)
securities
Net loss on sale of other real estate 15,977 (12,862)
Amortization of bond premiums 52,192 55,974
Accretion of bond discounts (6,363) (15,437)
(Increase) decrease in interest 41,037 835
receivable
(Increase) decrease in other assets 53,718 (3,379)
Increase (decrease) in interest payable 9,377 8,275
Increase (decrease) in other liabilities (60,218) 133,985
Increase (decrease) in dividends payable (23,000) (23,000)
------- -------
Net cash provided by operating activities 498,677 652,295
------- -------
Cash flows from investing activities:
Net decrease (increase) in interest-bearing
deposits with banks (106,665) 400,309
Net decrease (increase) in federal funds sold 330,000 305,000
Purchase of investment securities (7,545,056)
Purchase of available-for-sale securities (1,133,151)
Proceeds from sales of available-for-sale 2,056,677
securities
Purchase of held-to-maturity securities (998,281)
Proceeds from sales of investment securities 943,991
Proceeds from maturities of investment 3,197,199
securities
Proceeds from maturities of 1,608,206
available-for-sale securities
Proceeds from maturities of held-to-maturity 665,225
securities
Net decrease (increase) in loans to customers 22,959 (601,782)
Purchase of banking premises and equipment (530,759) (83,125)
Proceeds from sales of property and equipment
Proceeds from disposal of other real estate 30,253 127,752
--------- ---------
Net cash provided by investing activities 1,944,464 (3,255,712)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in customer deposits (2,626,222) 2,944,950
Payment of dividends (161,000) (80,500)
--------- ---------
Net cash provided by financing activities (2,787,222) 2,864,450
--------- ---------
Net increase (decrease) in cash and due from (344,081) 261,033
banks
Cash and due from banks at beginning of year 2,531,784 2,270,751
-------- ---------
Cash and due from banks at end of year $2,187,703 $2,531,784
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SECURITY NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Security National Bank conform
to generally accepted accounting principles and the general practices
within the banking industry.
Investment Securities - Debt securities that management has the
ability and intent to hold to maturity are classified as held-to-maturity
and carried at cost, adjusted for amortization of premium and accretion
of discounts using methods approximating the interest method. Other
marketable securities are classified as available-for-sale and are carried
at fair value. Unrealized gains and losses on securities available-for-sale
are recognized as direct increases or decreases in stockholders' equity.
Cost of securities sold is recognized using the specific identification
method.
Allowance for Credit Losses - The allowance is maintained at a level
adequate to absorb probable losses.
Management determines the adequacy of the allowance based upon reviews
of individual credits, recent loss experience, current economic conditions,
the risk characteristics of the various categories of loans, and other
pertinent factors. Credits deemed uncollectible are charged to the allowance.
Provisions for credit losses and recoveries on loans previously charged off
are added to the allowance.
Property and Equipment - Property and equipment are stated at cost,
less accumulated depreciation.
Depreciation is computed principally by the straight-line method and
charged to operations over the estimated useful lives of the assets.
Buildings are depreciated over 40 years, equipment over 3 to 10
years, and vehicles over 5 years. A salvage value is computed on fixed
assets which is 25% for buildings, 10% for equipment, and 15% for vehicles.
Maintenance and repairs of property and equipment are charged to operations,
and major improvements are capitalized. Upon retirement, sale, or other
disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and gain or loss is included
in operations.
Other Real Estate Owned - Other real estate owned includes property
acquired through foreclosure or forgiveness of debt. These properties are
carried at the lower of cost or current appraisal. Losses from the
acquisition of property in full or partial satisfaction of debt are treated
as credit losses. Routine holding costs, subsequent declines in value,
and gains or losses on disposition are included in other expense.
<PAGE>
Interest Income on Loans - Interest on loans is accrued and credited to
income based on the principal amount outstanding. The accrual of interest
on loans is discontinued when, in the opinion of management, there is an
indication that the borrower may be unable to meet payments as they
become due. Upon such discontinuance, all unpaid accrued interest is
reversed.
Loan Origination Fees and Costs - Loan origination fees and certain
direct origination costs are not capitalized and recognized as an
adjustment of the yield on the related loan. Instead, they are recognized
as revenue or expense, as the case may be, and the difference between
this immediate recognition method and the capitalization method required
by generally accepted accounting principles is not material to these
financial statements.
Profit Sharing Plan - The Bank has a noncontributory profit sharing
plan that covers all eligible employees. The annual contribution to the
plan is determined by the Board of Directors, but cannot exceed amounts
allowable as a deduction for federal income tax purposes.
Off Balance Sheet Financial Instruments - In the ordinary course of
business the Bank has entered into off balance sheet financial instruments
consisting of commitments to extend credit, commercial letters of credit,
and standby letters of credit. Such financial instruments are recorded in
the financial statements when they become payable.
Income Taxes - Provisions for income taxes are based on amounts reported
in the statements of income (after exclusion of non-taxable income such as
interest on state and municipal securities) and include deferred taxes on
temporary differences in the recognition of income and expense for tax and
financial statement purposes. Items of deferral include differences related
to the allowance for loan losses, allowances for losses on foreclosed real
estate, accumulated depreciation, loans not accruing interest, and the use
of the cash basis of accounting for income tax purposes.
The deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
Net Income Per Share of Common Stock - Net income per share of common stock
is computed by dividing net income by the weighted average number of shares
of common stock outstanding during the period, after giving retroactive
effect to stock dividends, if any.
Cash and Cash Equivalents - For the purpose of presentation in the
Statements of Cash Flows, cash and cash equivalents are defined as those
amounts included in the balance sheet caption "Cash and Due from Banks."
For 1994, the Bank paid interest and income taxes of $888,670 and $224,487,
respectively. For 1993, the Bank paid interest and income taxes of $900,406
and $250, respectively.
Restrictions on Cash and Due From Banks - The Bank is required to maintain
reserve balances in cash with Federal Reserve Banks. The total of those
reserve balances was approximately $160,000 at December 31, 1994.
<PAGE>
INVESTMENT SECURITIES
The carrying amounts of investment securities as shown in the balance sheets
of the Bank and their approximate market values at December 31 were as
follows:
December 31, 1993
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ------- -------- -------
Obligations of U.S. $6,543,350 $288,940 $0 $6,832,29
Treasury
Obligations of U.S. Govt. 2,397,977 0 66,146 2,331,831
agencies
Municipals 533,280 29,130 562,410
Pass-through instruments 6,275,712 26,145 44,323 6,257,534
Other securities 69,000 69,000
----------- --------- --------- -----------
Total $15,819,319 $344,215 $110,469 $16,053,065
=========== ======== ======== ===========
December 31, 1994
Securities held-to-maturity: Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------ -------- -------- -------
Obligations of U.S. $506,769 $0 $33,800 $472,969
Treasury
Obligations of U.S. Govt. 1,995,181 0 164,556 1,830,625
agencies
Municipals 1,174,072 0 102,072 1,072,000
Pass-through instruments 2,278,300 0 151,188 2,127,112
---------- -------- -------- ---------
Total $5,954,322 $0 $451,616 $5,502,706
========== ======== ======== ==========
Securities available-for-sale:
December 31, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------- -------- -------- -------
Obligations of U.S $3,502,969 $0 $5,158 $3,497,811
Treasury
Obligations of U.S. Govt. 1,398,843 0 116,718 1,282,125
agencies
Municipals 0 0 0 0
Pass-through instruments 2,689,656 0 134,484 2,555,172
Other securities 69,000 0 0 69,000
---------- -------- -------- ---------
Total $7,660,468 $0 $256,360 $7,404,108
========== ======== ======== ==========
<PAGE>
The following is a summary of maturities of securities held-to-maturity and
available-for-sale as of December 31, 1994.
Securities Securities
held-to-maturity available-for-sale
------------------ --------------------
Amortized Fair Amortized Market
Cost Value Cost Value
------- ----- ------- -------
Amounts maturing in:
One year or less $0 $0 $2,000,442 $2,001,874
After one through five 3,824,587 3,568,913 2,003,068 1,995,624
years
After five through ten 955,663 861,793 0 0
years
After ten years 1,174,072 1,072,000 0 0
Variable rate 0 0 3,587,958 3,337,610
Other 0 0 69,000 69,000
---------- ---------- --------- ---------
Total $5,954,322 $5,502,706 $7,660,468 $7,404,108
========== ========== ========== ==========
During 1994, the Bank sold securities available-for-sale for total proceeds
of approximately $2,056,677 resulting in gross realized gain of
approximately $39,977. During 1993, the Bank sold securities for total
proceeds of approximately $943,991 resulting in gross realized gains of
approximately $79,645.
Assets, principally securities, with a carrying amount of approximately
$1,855,749 at December 31, 1994 were pledged to secure public deposits
as required or permitted by law.
<PAGE>
LOANS
The components of loans in the balance sheets were as follows:
1994 1993
------ ------
Real estate - construction $436,794 $522,500
Real estate - other 11,246,104 11,317,394
Commercial 3,831,512 3,746,841
Installment 1,263,729 1,281,098
Overdrafts 42,436 19,105
---------- ----------
16,820,575 16,886,938
Less - unearned interest (123,208) (136,672)
Less - allowance for loan losses (143,922) (184,266)
---------- -----------
$16,553,445 $16,566,000
=========== ===========
Nonaccruing loans (principally real estate loans) totaled $42,499 and
$327,351 at December 31, 1994 and 1993, respectively, which had the effect
of reducing income by $54,738 and $51,822 for 1994 and 1993, respectively.
Loans to employees totaled $376,652 and $385,024 at December 31, 1994
and 1993, respectively.
ALLOWANCE FOR CREDIT LOSSES
An analysis of the change in the allowance for credit losses follows:
1994 1993
------ ------
Balance at January 1 $184,266 $352,590
Provision charged to expenses (43,752) 4,542
Credits charged off (37,157) (187,117)
Recoveries 40,565 14,251
-------- --------
Balance December 31 $143,922 $184,266
======== ========
<PAGE>
PROPERTY AND EQUIPMENT
Components of property and equipment included in the balance sheets at
December 31, 1994 and 1993 were as follows:
1994 1993
------ ------
Cost:
Land $ 521,563 $ 226,000
Bank premises 1,370,009 1,367,622
Furniture and equipment 900,239 667,430
Leasehold improvements 28,436 28,436
--------- ---------
Total cost 2,820,247 2,289,488
Less accumulated depreciation (856,940) (778,393)
--------- ---------
Net book value $1,963,307 $1,511,095
Depreciation expense amounted to $78,547 and $63,574 for 1994 and 1993,
respectively.
EMPLOYEE BENEFITS
The Bank has a profit sharing plan in effect for substantially all
full-time employees, which was effective on January 1, 1984. Employees
are eligible to participate after completion of one year of service.
Employee benefits expense includes $21,700 in 1994, and $18,680 in 1993,
for the plan. Contributions under the plan are made at the discretion
of the Board of Directors.
CHANGES IN ACCOUNTING PRINCIPLE
The Bank implemented FASB 115, Accounting for Certain Investments in
Debt and Equity Securities for years beginning January 1, 1994. FASB 115
requires that investments in certain debt and equity securities be
classified as either available-for-sale, held-to-maturity, or trading
securities. The effects of implementing FASB 115 are reflected in the
statement of changes in stockholders' equity.
<PAGE>
DEPOSITS
Components of deposits included in the balance sheets at December 31,
1994 and 1993 were as follows:
1994 1993
------ ------
Demand and savings
Demand deposits $5,173,725 $6,000,989
Passbook savings 1,491,057 1,429,852
NOW accounts 5,281,753 7,522,897
Money market accounts 4,447,126 3,919,672
---------- ----------
Total demand and savings 16,393,661 18,873,410
Other time
Certificates of deposit of 4,102,910 3,923,491
$100,000 or more
Open account time deposits of 500,000 500,000
$100,000 or more
Other time deposits 11,298,674 11,624,566
---------- ----------
Total other time 15,901,584 16,048,057
---------- ----------
Total deposits $32,295,245 $34,921,467
=========== ===========
INCOME TAXES
The provision for income taxes consisted of the following:
1994 1993
------ ------
Currently payable:
Federal $189,000 $112,306
State 0 0
------- -------
189,000 112,306
------- -------
Deferred federal (4,412) 106,846
------- -------
Net income tax expense $184,588 $219,152
======== ========
<PAGE>
The provision for federal income taxes is less than that computed by
applying the federal statutory rate of 34% in 1994, and 1993, as
indicated in the following analysis:
1994 1993
------ ------
Tax based on statutory rate of 34% $205,947 $235,079
Effect of tax-exempt income (24,902) (12,177)
Contribution carryforwards realized (1,340)
Nondeductible expenses 3,543 1,355
Other Items (3,765)
------- -------
Total income tax expense $184,588 $219,152
======== ========
The components of deferred income taxes were principally related to the
allowance for credit losses, to depreciation, and to the use of the cash
basis of accounting for tax purposes.
The net deferred tax liabilities in the accompanying statements of
financial condition include the following captions:
1994 1993
------ ------
Deferred tax assets $219,800 $115,814
Deferred tax liabilities (189,565) (177,153)
------- -------
Net deferred tax assets (liabilities) $30,235 ($61,339)
======= =======
Effective January 1, 1993, the Bank adopted Statement of Financial
Accounting Standards (SFAS) Statement No. 109, "Accounting for Income
Taxes." The cumulative effect of the change in accounting principle
is included in determining net income for 1993.
State income tax consists of the earnings tax portion of the Texas
franchise tax. It is computed as the excess of 4.5% of state taxable
earnings over the capital tax portion of the franchise tax. State
taxable earnings is federal taxable income, adjusted for interest
earned on U.S. obligations, executive officer salaries, and director
fees. For 1994 and 1993, there was no state income tax because the
interest earned on U.S. obligations reduced the state taxable income
below zero. Consequently, the amount paid for the Texas franchise tax
represented the capital tax and is included with other expenses in the
accompanying statements of income.
<PAGE>
RELATED PARTIES
The Bank has entered into transactions with its executive officers,
directors, significant shareholders, and their affiliates (related
parties). Such transactions were made in the ordinary course of business
on substantially the same terms and conditions, including interest rates
and collateral, as those prevailing at the same time for comparable
transactions with other customers, and did not, in the opinion of
management, involve more than normal credit risk or present other
unfavorable features. The aggregate amount of loans to such related
parties was $271,055 and $442,801 at December 31, 1994 and 1993,
respectively. Deposits owed to related parties consisted of $1,108,831
and $732,115 at December 31, 1994 and 1993, respectively.
CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the Bank's
market area. Almost all such customers are depositors of the Bank.
The concentrations of credit by type of loan are set forth above.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding.
Commercial and standby letters of credit were granted primarily to
commercial borrowers. The Bank, as a matter of policy, does not extend
credit to any single borrower or group of related borrowers in excess of
the legal lending limit.
CONTINGENT LIABILITIES AND COMMITMENTS
The Bank's financial statements do not reflect various commitments and
contingent liabilities which arise in the normal course of business and
which involve elements of credit risk, interest rate risk, and liquidity
risk. These commitments and contingent liabilities are commitments to
extend credit, commercial letters of credit and standby letters of credit.
The Bank's commitments and contingent liabilities at December 31, 1994,
include $954,683 for commitments to extend credit, and $16,500 for
standby letters of credit.
Commitments to extend credit, commercial letters of credit, and standby
letters of credit all include exposure to some credit loss in the event
of nonperformance of the customer. The Bank's credit policies and
procedures for credit commitments and financial guarantees are the same
as those for extension of credit that are recorded on the statements of
condition. Because these instruments have fixed maturity dates, and
because many of them expire without being drawn upon, they do not
generally present any significant liquidity risk to the Bank. The Bank
has not incurred any losses on its commitments in either 1994 or 1993.
Certain cash balances deposited with correspondent banks are usually in
excess of insurance coverage provided by the Federal Deposit Insurance
Corporation (FDIC). Management has assessed the viability of correspondent
banks and feels these risks are minimal.
<PAGE>
REGULATORY MATTERS
New banking regulations have been issued requiring maintenance of minimum
capital levels based on asset risk. These risk-based capital requirements
were effective December 31, 1993, and require a minimum risk-based capital
ratio of 8 percent and a minimum leverage ratio of 3 percent. The Bank's
risk-based capital ratio at December 31, 1994 and 1993, was approximately
17.91 and 16.02 percent and its leverage ratio was approximately 9.10 and
7.76 percent, respectively.
<PAGE>
Ch. 2 Consolidation and Merger 12 Section 215a
Section 215a MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL
BANKS
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings by
the necessary majorities of the shareholders of each
association or State bank participating in the plan of merger,
and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank
to be merged into the receiving association who has voted
against such merger at the meeting of the association or bank
of which he is a stockholder, or has given notice in writing
at or prior to such meeting to the presiding officer that he
dissents from the plan of merger, shall be entitled to receive
the value of the shares so held by him when such merger shall
be approved by the Comptroller upon written request made to
the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the
surrender of his stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder
shall be ascertained, as of the effective date of the merger,
by an appraisal made by a committee of three persons, composed
of (1) one selected by the vote of the holders of the majority
of the stock, the owners of which are entitled to payment in
cash; (2) one selected by the directors of the receiving
association; and (3) one selected by the two so selected. The
valuation agreed upon by any two of the three appraisers shall
govern. If the value so fixed shall not be satisfactory to
any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who
shall cause a reappraisal to be made which shall be final and
binding as to the value of the shares of the appellant.
(d) Application to shareholders of merging associations:
appraisal by Comptroller; expenses of receiving
association; sale and resale of shares; State appraisal
and merger law
If, within ninety days from the date of consummation of
the merger, for any reason one or more of the appraisers is
not selected as herein provided, or the appraisers fail to
determine the value of such shares, the Comptroller shall upon
written request of any interested party cause an appraisal to
be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the
appraisal, as the case may be, shall be paid by the receiving
association. The value of the shares ascertained shall be
promptly paid to the dissenting shareholders by the receiving
association. The shares of stock of the receiving association
which would have
<PAGE>
been delivered to such dissenting shareholders had they not
requested payment shall be sold by the receiving association
at an advertised public auction, and the receiving association
shall have the right to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the
purpose of reselling such shares within thirty days thereafter
to such person or persons and at such price not less than par
as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholders, the excess in such
sale price shall be paid to such dissenting shareholders. The
appraisal of such shares of stock in any State bank shall be
determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such
provision is made in the State law; and no such merger shall
be in contravention of the law of the State under which such
bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a
bank or association being merged into the receiving
association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 4-27-850 of the Arkansas Business Corporation Act
contains detailed provisions for indemnification of directors
and officers of Arkansas corporations against expenses,
judgments, fines and settlements in connection with
litigation. Article TWELFTH of First Commercial's Second
Amended and Restated Articles of Incorporation, as amended,
provides for indemnification of the directors and executive
officers of First Commercial to the fullest extent legally
permissible under the relevant provisions of the Arkansas
Business Corporation Act. Additionally, the Company has in
place directors' and officers' liability insurance coverage.
Item 21. Exhibits and Financial Statement Schedules.
Number Description
------ -----------
2.1 Plan and Agreement of Merger among First
Commercial Corporation, Tyler Bank and
Trust, N.A., Tyler, Texas and City
National Bank, Whitehouse, Texas.
2.2 Plan and Agreement of Merger among First
Commercial Corporation, Stone Fort
National Bank, Nacogdoches, Texas and
Security National Bank, Nacogdoches,
Texas.
* 4.1 First Commercial's Second Amended and
Restated Articles of Incorporation, as
amended (incorporated by reference to
Exhibit 3(i) to Form 10-Q for the
quarterly period ended June 30, 1996.
* 4.2 First Commercial's By-Laws as currently in
effect (incorporated by reference to
Exhibit 3(d) to Form 10-K for the fiscal
year ended December 31, 1991, as amended,
in 0-9676).
* 4.3 Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8-K dated
September 18, 1990, in 0-9676).
5 Opinion and Consent of Friday, Eldredge &
Clark.
<PAGE>
8 Opinions and Consents of Friday, Eldredge
& Clark regarding certain tax matters.
23.1 Consent of Friday, Eldredge & Clark
(included in Exhibits 5 and 8 to this
Registration Statement).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Ken Rogers & Associates, LTD.
24 Powers of Attorney.
99 Forms of Proxy.
------------
*Incorporated herein by reference as indicated.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, unless the
information required to be included in such post-
effective amendment is contained in a periodic report
filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 and
incorporated herein by reference;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this registration statement,
unless the information required to be included in such
post-effective amendment is contained in a periodic
report filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 and
incorporated herein by reference. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
<PAGE>
the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
4. That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
5. That prior to any public reoffering of the
securities registered hereunder through the use of a
prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for
by Form S-4 with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for
by the other Items of Form S-4.
6. That every prospectus (i) that is filed pursuant to
paragraph (5) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such
amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
<PAGE>
7. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions referred to in Item 20
above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
8. To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
9. To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the registration statement, when it became
effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Little Rock, State of Arkansas, on
the 19th day of September, 1996.
FIRST COMMERCIAL CORPORATION
/s/ J. Lynn Wright
J. Lynn Wright
Chief Financial Officer
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following
persons in the capacities indicated on the 19th day of
September, 1996.
* Chairman of the Board, Chief
Barnett Grace Executive Officer, President and
Director
(Principal Executive Officer)
/s/ J. Lynn Wright Chief Financial Officer
J. Lynn Wright (Principal Financial and
Accounting Officer)
* Director
John W. Allison
* Director
Truman Arnold
* Director
William H. Bowen
Director
Peggy Clark
* Director
Robert G. Cress
<PAGE>
Director
Cecil W. Cupp, Jr.
* Director
Frank D. Hickingbotham
* Director
Walter E. Hussman, Jr.
* Director
Frederick E. Joyce, M.D.
* Director
Jack G. Justus
* Director
William M. Lemley
* Director
Michael W. Murphy
* Director
Sam C. Sowell
* Director
Paul D. Tilley
*By: /s/ Edwin P. Henry
Edwin P. Henry
Attorney-in-Fact
Edwin P. Henry, by signing his name hereto, does sign this
document on behalf of each of the persons indicated above
pursuant to powers of attorney duly executed by such persons,
filed or to be filed with the Securities and Exchange
Commission as supplemental information.
<PAGE>
INDEX TO EXHIBITS
Index
Number Description
2.1 Plan and Agreement of Merger among First
Commercial Corporation, Tyler Bank and
Trust, N.A., Tyler, Texas and City
National Bank, Whitehouse, Texas.
2.2 Plan and Agreement of Merger among First
Commercial Corporation, Stone Fort
National Bank, Nacogdoches, Texas and
Security National Bank, Nacogdoches,
Texas.
* 4.1 First Commercial's Second Amended and
Restated Articles of Incorporation, as
amended (incorporated by reference to
Exhibit 3(i) to Form 10-Q for the
quarterly period ended June 30, 1996.
* 4.2 First Commercial's By-Laws as currently in
effect (incorporated by reference to
Exhibit 3(d) to Form 10-K for the fiscal
year ended December 31, 1991, as amended,
in 0-9676).
* 4.3 Rights Agreement (incorporated by
reference to Exhibit 4 to Form 8-K dated
September 18, 1990, in 0-9676).
5 Opinion and Consent of Friday, Eldredge &
Clark.
8 Opinions and Consents of Friday, Eldredge
& Clark regarding certain tax matters.
23.1 Consent of Friday, Eldredge & Clark
(included in Exhibits 5 and 8 to this
Registration Statement).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Ken Rogers & Associates, LTD.
24 Powers of Attorney.
99 Forms of Proxy.
------------
*Incorporated herein by reference as indicated.
EXHIBIT 2.1
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST COMMERCIAL CORPORATION;
TYLER BANK AND TRUST, N.A., TYLER TEXAS;
AND
CITY NATIONAL BANK, WHITEHOUSE, TEXAS
Providing for the merger of
City National Bank, Whitehouse, Texas
with and into
Tyler Bank and Trust, N.A., Tyler, Texas
Under the Charter and Charter Number and Title of
"Tyler Bank and Trust, N.A., Tyler, Texas"
Date: May 9, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE PLAN OF MERGER
Section 1.01. Tyler Bank and Trust, N.A. . . . . . . . . . 2
Section 1.02. The Merger . . . . . . . . . . . . . . . . . 2
Section 1.03. Effect of the Merger . . . . . . . . . . . . 2
Section 1.04. Consummation of the Merger . . . . . . . . . 3
Section 1.05. Articles of Association; Bylaws;
Directors and Officers . . . . . . . . . . . 3
Section 1.06. Merger Consideration; Conversion
of Securities; Rights of Dissenting
Shareholders . . . . . . . . . . . . . . . . 3
Section 1.07. Exchange of Certificates . . . . . . . . . . 4
Section 1.08. Rights of CNB Shareholders to Dividends . . 5
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of CNB . . . 5
(a) Authority for Transaction . . . . . . . 5
(b) Organization and Capitalization . . . 6
(c) Financial Statements . . . . . . . . 6
(d) Dividends . . . . . . . . . . . . . . 7
(e) Loans . . . . . . . . . . . . . . . . 7
(f) Taxes . . . . . . . . . . . . . . . . 7
(g) Litigation and Regulatory Matters . . 8
(h) Compliance . . . . . . . . . . . . . 8
(i) Properties and Other Assets . . . . . 8
(j) Agreement Does Not Violate Other
Instruments . . . . . . . . . . . . . 9
(k) Insurance and Fidelity Bonds . . . . 10
(l) Retirement Plans . . . . . . . . . . 11
(m) Employee Relations . . . . . . . . . 12
(n) No Material Events . . . . . . . . . 12
(o) Liabilities . . . . . . . . . . . . . 13
(p) Marketability of Securities . . . . . 13
(q) Interested Party Transactions . . . . 14
(r) Material Contracts . . . . . . . . . 14
(s) Environmental Matters . . . . . . . . 15
(t) Property Sites Owned by CNB . . . . . 16
(u) Representations Not Misleading . . . 16
Section 3.02. Representations and Warranties of First
Commercial . . . . . . . . . . . . . . . . . 16
(a) Organization and Capitalization of First
Commercial . . . . . . . . . . . . . 16
(b) Organization of TBT . . . . . . . . 17
(c) Authority for Transaction . . . . . . 17
<PAGE>
(d) Agreements Do Not Violate
Other Instruments . . . . . . . . . . 17
(e) Representations Not Misleading . . . 18
(f) Financial Statements . . . . . . . . 18
(g) Litigation and Regulatory Matters . . 19
(h) Compliance . . . . . . . . . . . . . 19
(i) No Material Events . . . . . . . . . 20
(j) Taxes . . . . . . . . . . . . . . . . 20
(k) Insurance . . . . . . . . . . . . . . 20
(l) ERISA Plans . . . . . . . . . . . . . 20
(m) Employee Relations . . . . . . . . . 21
(n) Properties and Other Assets . . . . . 21
(o) Environmental Matters . . . . . . . . 21
ARTICLE IV
COVENANTS
Section 4.01. Covenants of CNB . . . . . . . . . . . . . . 21
(a) Approval of Transaction and Consents 21
(b) Access to Corporate Records . . . . . 22
(c) Monthly Financial Statements . . . . 22
(d) Closing Financial Statements . . . . 22
(e) Conduct of Business . . . . . . . . . 23
(f) Cooperation and Furnishing
Information . . . . . . . . . . . . . . . 24
(g) Related Party Transactions . . . . . 24
(h) Notice of Changes . . . . . . . . . . 24
(i) Limit on CNB's Attorneys' Fees . . . 24
(j) Completion and Delivery of CNB Disclosure
Statement . . . . . . . . . . . . . . 24
Section 4.02. Covenants of First Commercial . . . . . . . 25
(a) Consents and Approvals . . . . . . . 25
(b) Quarterly Reports; Current Reports . 25
(c) Conduct of Business . . . . . . . . . 25
(d) Notice of Changes . . . . . . . . . . 26
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of First
Commercial . . . . . . . . . . . . . . . . . 26
(a) Performance of Covenants . . . . . . 26
(b) Representations True at Closing . . . 26
(c) Changes in Financial Condition . . . 26
(d) Certified Resolutions . . . . . . . . 26
(e) Government Approvals; Other Consents 27
(f) No Injunction . . . . . . . . . . . . 27
(g) Litigation . . . . . . . . . . . . . 27
(h) No Misstatements or Omissions . . . . 27
(i) Opinion of CNB's Counsel . . . . . . 27
(j) Financial Confirmation . . . . . . . 27
(k) Audit of CNB Financial Statements . . 28
(l) Title Opinion . . . . . . . . . . . . 28
<PAGE>
(m) Pooling of Interests Opinion . . . . 28
(n) Delivery of Continuity of Interest Letters
28
(o) Tax Opinion . . . . . . . . . . . . . 29
(p) Due Diligence Review . . . . . . . . 29
Section 5.02. Conditions Precedent to Obligation of CNB . 29
(a) Performance of Covenants . . . . . . 29
(b) Representations True at Closing . . . 29
(c) Changes in Financial Condition . . . 30
(d) Certified Resolutions . . . . . . . . 30
(e) No Injunction . . . . . . . . . . . . 30
(f) No Misstatements or Omissions . . . . 30
(g) Opinion of First Commercial's Counsel 30
(h) Tax Opinion . . . . . . . . . . . . . 31
(i) Securities Registration Opinion . . . 31
(j) No Adverse Change in Market Price
for First Commercial Stock . . . . . 31
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination . . . . . . . . . 31
Section 6.02. Termination by Mutual Agreement . . . . . . 33
Section 6.03. Effect of Termination for Non-Willful Breach 33
Section 6.04. Effect of Termination for Willful Breach . . 33
Section 6.05. Enforcement Expenses . . . . . . . . . . . 33
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers . . . . . . . . . . . . . . . . . . 33
Section 7.02. Expenses . . . . . . . . . . . . . . . . . . 33
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements . . . . . . . . . . . . . . . 34
Section 8.02. Notices . . . . . . . . . . . . . . . . . . 34
Section 8.03. Binding Effect . . . . . . . . . . . . . . . 34
Section 8.04. Headings . . . . . . . . . . . . . . . . . . 34
Section 8.05. Counterparts . . . . . . . . . . . . . . . . 35
Section 8.06. Integration of Agreement . . . . . . . . . . 35
Section 8.07. Amendments; Waivers . . . . . . . . . . . . 35
Section 8.08. Governing Law . . . . . . . . . . . . . . . 35
Section 8.09. Incorporation by Reference . . . . . . . . . 35
Section 8.10. Confidentiality of Information . . . . . . . 35
Section 8.11. No Assignment . . . . . . . . . . . . . . . 35
Section 8.12. Severability . . . . . . . . . . . . . . . . 35
Section 8.13. Survival of Representations and Warranties . 36
<PAGE>
List of Exhibits:
A Form of Opinion of Tom Tatum, Attorney-at-Law (Delivered
Pursuant to Section 5.01(i))
B Form of Opinion of Friday, Eldredge & Clark (Delivered
Pursuant to Section 5.02(g)
<PAGE>
DEFINITIONS
Acquisition . . . . . . . . . . . . . . . . . . . . . . . 23
CNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CNB Audit . . . . . . . . . . . . . . . . . . . . . . . . 28
CNB Balance Sheet . . . . . . . . . . . . . . . . . . . 7
CNB Disclosure Statement . . . . . . . . . . . . . . . . 6
CNB Financial Statements . . . . . . . . . . . . . . . 6
CNB Stock . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . 3
Closing Financial Statements . . . . . . . . . . . . . . 23
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Dissenting Shares . . . . . . . . . . . . . . . . . . . . 3
Effective Time . . . . . . . . . . . . . . . . . . . . . 3
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 8
First Commercial . . . . . . . . . . . . . . . . . . . . 1
First Commercial Banks . . . . . . . . . . . . . . . . . 18
First Commercial Financial Statements . . . . . . . . . . 18
First Commercial Stock . . . . . . . . . . . . . . . . . 1
Insurance Policies . . . . . . . . . . . . . . . . . . . 10
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . 4
Monthly Financial Statements . . . . . . . . . . . . . . 22
Pension Plan . . . . . . . . . . . . . . . . . . . . . . 11
Plan . . . . . . . . . . . . . . . . . . . . . . . . . 11
SFAS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Surviving Bank . . . . . . . . . . . . . . . . . . . . . 2
TBT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
<PAGE>
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST COMMERCIAL CORPORATION;
TYLER BANK AND TRUST, N.A., TYLER TEXAS;
AND
CITY NATIONAL BANK, WHITEHOUSE, TEXAS
Providing for the merger of
City National Bank, Whitehouse, Texas
with and into
Tyler Bank and Trust, N.A., Tyler, Texas
Under the Charter and Charter Number and Title of
"Tyler Bank and Trust, N.A., Tyler, Texas"
This PLAN AND AGREEMENT OF MERGER is made as of this 9th
day of May, 1996, among FIRST COMMERCIAL CORPORATION, an
Arkansas corporation having its principal office in Little
Rock, Arkansas ("First Commercial"), TYLER BANK AND TRUST,
N.A., Tyler, Texas, a national banking association organized
under the laws of the United States of America and subsidiary
of First Commercial having its principal office in Tyler,
Texas ("TBT"), and CITY NATIONAL BANK, Whitehouse, Texas, a
national banking association organized under the laws of the
United States of America having its principal office in
Whitehouse, Texas ("CNB").
W I T N E S S E T H:
WHEREAS, for good and sound reasons germane to the
business of the parties hereto, the Boards of Directors of
First Commercial, TBT and CNB have each determined that it
would be in the best interests of such corporations and banks,
their respective shareholders, subsidiaries and customers and
the communities they serve for CNB to be merged with and into
TBT, with the stockholders of CNB receiving shares of common
stock of First Commercial, par value $3.00 per share ("First
Commercial Stock") in exchange for the outstanding shares of
common stock of CNB, par value $5.00 per share ("CNB Stock"),
owned by the stockholders of CNB (the "Merger"); and
WHEREAS, the Boards of Directors of First Commercial, TBT
and CNB have, or will have prior to consummation of the
transactions contemplated hereby, adopted resolutions
approving the Merger upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of these premises and
the mutual promises, representations, covenants and actions
hereinafter set forth, the parties hereto, each intending to
be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
THE PLAN OF MERGER
Section 1.01. Tyler Bank and Trust, N.A.. TBT is a
duly organized national banking association and currently is
an indirect subsidiary of First Commercial but will be, prior
to consummation of the Merger, a wholly-owned direct
subsidiary of First Commercial. First Commercial shall not
permit TBT to conduct any business operations that would
impair or adversely affect the consummation of the Merger.
Prior to consummation of the Merger, First Commercial shall,
and shall cause TBT to, take all necessary and appropriate
action to ratify, approve and adopt this Agreement and to
undertake the performance of all the terms and conditions of
this Agreement to be performed by TBT.
Section 1.02. The Merger. At the Effective Time (as
defined in Section 1.04 hereof) in accordance with this
Agreement and the provisions of the Act of November 7, 1918,
as amended (12 U.S.C. Section 215a), CNB shall be merged with
and into TBT pursuant to this Agreement, the separate
existence of CNB shall cease, and TBT shall continue as the
surviving national banking association under the corporate
name it possesses immediately prior to the Effective Time.
TBT hereinafter may sometimes be referred to as the "Surviving
Bank." The business of the Surviving Bank shall be that of a
national banking association, and the business shall be
conducted at its main office, which shall be located at 100
East Ferguson, Tyler, Texas 75702. The authorized capital
stock and the number of shares of outstanding capital stock of
TBT immediately prior to the Merger shall be the same for TBT
following the Merger.
Section 1.03. Effect of the Merger. At and from and
after the Effective Time the effect of the Merger shall be
that (i) the Surviving Bank shall possess all the rights,
privileges and franchises possessed by each of TBT and CNB,
(ii) all of the property and assets of whatsoever kind or
description of each of TBT and CNB, and all debts due on
whatever account to any of them, including subscriptions for
shares or other choses in action belonging to any of them,
shall be taken and be deemed to be transferred to, and vested
in, the Surviving Bank without further act or deed, and (iii)
the Surviving Bank shall be responsible for all of the
liabilities and obligations of each of TBT and CNB, as
provided by applicable law, in the same manner as if the
Surviving Bank had itself incurred such liabilities or
obligations; but the liabilities of TBT and CNB, or of their
shareholders, directors or officers, shall not be affected,
nor shall the rights of the creditors thereof, or of any
persons dealing with such corporations be impaired by the
Merger, and any claim existing, or action or proceeding
pending, by or against either of TBT or CNB may be prosecuted
to judgment as if the Merger had not taken place, or the
Surviving Bank may be proceeded against, or substituted, in
place of TBT or CNB, as the case may be.
<PAGE>
Section 1.04. Consummation of the Merger. The Merger
shall become effective at the time specified in an approval of
merger issued by the Comptroller of the Currency of the United
States. A closing (the "Closing") will be held on the date of
the effective time specified in the approval of merger issued
by the Comptroller of the Currency of the United States,
subject to the fulfillment of each condition set forth in
Article V herein ("Closing Date"). The parties hereto will
use their best efforts to accomplish the Closing before
December 31, 1996. The "Effective Time" shall be 5:00 p.m.,
Little Rock time, on the Closing Date. The Closing will take
place on the Closing Date at the offices of Friday, Eldredge &
Clark in Little Rock, Arkansas, or at such other mutually
agreeable place.
Section 1.05. Articles of Association; Bylaws; Directors
and Officers. The Articles of Association of TBT, as in
effect immediately prior to the Effective Time, shall be the
Articles of Association of the Surviving Bank after the
Effective Time until thereafter amended as provided therein
and under national banking laws. The Bylaws of TBT, as in
effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Bank after the Effective Time until
thereafter amended as provided therein and under national
banking laws. The directors and officers of TBT immediately
prior to the Effective Time shall be the directors and
officers of the Surviving Bank after the Effective Time until
their successors are elected and qualified; additionally, Jess
Odom, who currently serves on the Board of Directors of CNB,
will serve as a director after the Effective Time until his
successor is elected and qualified; others currently serving
on the CNB Board may also serve as directors of the Surviving
Bank, however the identity of such individuals has not yet
been determined.
Section 1.06. Merger Consideration; Conversion of
Securities; Rights of Dissenting Shareholders. At the
Effective Time, by virtue of the Merger and without any action
on the part of First Commercial, TBT, CNB or the holders of
any of the securities of such corporations or banks:
(a) Each share of CNB Stock issued and outstanding
immediately prior to the Effective Time (other than shares as
to which dissenters' rights have been perfected and not
withdrawn or otherwise forfeited under 12 U.S.C. Section
215a(b), (c) and (d) ("Dissenting Shares")) shall be canceled
and extinguished and be converted into the right to receive
that number of shares of First Commercial Stock equal to the
result obtained by dividing (Y) 174,492 (the number of shares
of First Commercial Stock to be issued in the Merger), subject
to adjustment as hereinafter provided, by (Z) the number of
outstanding shares of CNB Stock on the Closing Date (such
consideration, as well as any payment due in lieu of
fractional shares of First Commercial Stock as hereinafter
provided being herein referred to as the "Merger
Consideration"); provided, however, that in the event
<PAGE>
after the date hereof the shares of First Commercial Stock at
any time outstanding shall be subdivided, by reclassification,
recapitalization, stock dividend, or otherwise, into a greater
number of shares without the actual receipt by First
Commercial of consideration (at least equal to book value) for
the additional number of shares so issued, or the number of
shares of First Commercial Stock at any time outstanding shall
be reduced, by reclassification, recapitalization, reduction
of capital stock, or otherwise, or the outstanding shares of
First Commercial Stock shall be reclassified or changed other
than in such manner, then the number of shares of First
Commercial Stock to be issued in the Merger shall be adjusted
up or down, as appropriate.
(b) No fractional shares of First Commercial Stock shall
be issued as part of the Merger, and in lieu of fractional
shares, First Commercial shall pay a sum in cash equal to the
value of any such fractional share of First Commercial Stock
to which any holder of CNB Stock shall be entitled determined
on the basis of the last reported sales price on the Closing
Date for shares of First Commercial Stock on the Nasdaq
National Market.
(c) At and after the Effective Time, there shall be no
transfers on the stock transfer books of CNB with respect to
shares of CNB Stock issued and outstanding immediately prior
to the Effective Time. If, after the Effective Time,
certificates formerly representing shares of CNB Stock are
presented to First Commercial or its transfer agent, they
shall be canceled and exchanged for the Merger Consideration
as provided in Section 1.07 following, subject to applicable
law in the case of Dissenting Shares.
(d) The rights of holders of Dissenting Shares shall be
governed by 12 U.S.C. Section 215a(b), (c) and (d).
Section 1.07. Exchange of Certificates. From and after
the Effective Time, all certificates representing shares of
CNB Stock, with the exception of certificates representing
Dissenting Shares or shares of CNB Stock held by First
Commercial, shall represent the right to receive shares of
First Commercial Stock on the basis set forth above, and the
right to receive cash in lieu of fractional shares in exchange
therefor, upon the terms and conditions of this Agreement,
subject to applicable abandoned property, escheat and similar
laws. Upon delivery of certificates representing shares of
CNB Stock to the transfer agent of First Commercial, First
Commercial shall cause the transfer agent to issue
certificates representing the requisite number of shares of
First Commercial Stock for each share of CNB Stock represented
by the certificates therefor properly delivered, and First
Commercial shall pay by certified or cashier's check the
amount entitled to be received in lieu of fractional shares.
Notwithstanding the foregoing, neither First Commercial's
transfer agent nor any party hereto shall be liable <PAGE>
to a holder of shares of CNB Stock for any of the Merger
Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
Section 1.08. Rights of CNB Shareholders to Dividends.
Holders of CNB Stock on the Closing Date shall be entitled to
receive, subject to applicable abandoned property, escheat and
similar laws, payment of dividends declared by First
Commercial on or subsequent to the Closing Date, but delivery
of payment of such dividends will not be required of First
Commercial until such persons have delivered their
certificates representing shares of CNB Stock in exchange for
certificates representing shares of First Commercial Stock in
accordance with the provisions of Section 1.07 above.
Notwithstanding the foregoing, First Commercial shall not be
liable to a holder of shares of CNB Stock for any such
dividends delivered to a public official pursuant to any
abandoned property, escheat and similar laws.
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval. The shareholders
owning at least two-thirds of the capital stock outstanding of
CNB and the sole shareholder of TBT shall approve the Merger
in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of CNB. No
representations or warranties are made by any director,
officer, employee or shareholder of CNB as an individual. CNB
represents and warrants to First Commercial the following,
each of which representations and warranties shall be mutual
and continuing and shall be true as of the date of this
Agreement and on the Closing Date:
(a) Authority for Transaction. The Board of Directors
of CNB has duly approved this Agreement and the transactions
contemplated hereby, and upon the execution of this Agreement
by a duly authorized officer of CNB and the approval of this
Agreement and such transactions by the stockholders of CNB and
the appropriate regulatory authorities, this Agreement will
constitute the valid and binding obligation of CNB enforceable
in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time
in effect which affect creditors' rights generally and by
legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable
remedies which are available only in the discretion of the
court. CNB has full corporate
<PAGE>
power, authority and legal right to enter into this Agreement
and, upon approval thereof by its stockholders and by
appropriate regulatory authorities, to consummate the
transactions contemplated hereby.
(b) Organization and Capitalization.
(i) CNB has delivered to First Commercial complete
and correct copies of the Articles of Association, and all
amendments thereto, and Bylaws of CNB as in effect on the date
hereof. CNB is a national banking association duly organized
and validly existing in good standing under the laws of the
United States of America, with full corporate power and
authority to carry on its business as and where it is now
being conducted and to own and lease its properties and assets
in the places where such properties and assets are now or will
be owned or leased. As of the date of this Agreement, the
authorized capital stock of CNB consists of 187,500 shares of
CNB Stock, of which 172,500 shares are issued and outstanding.
All such issued and outstanding shares of CNB Stock have been
fully paid, are validly authorized and duly issued and are
non-assessable, and such shares of CNB Stock have not been
issued in violation of any preemptive rights of stockholders.
There shall be 172,500 shares of CNB Stock outstanding at the
Closing; and such shares shall be delivered to First
Commercial free of any liens or other encumbrances. Except as
set forth in Schedule 3.01(b) to the disclosure statement
delivered by CNB pursuant to Section 4.01(j) hereof (the "CNB
Disclosure Statement"), CNB does not have outstanding any
subscriptions, options or other arrangements or commitments
obligating it to issue or dispose of, and it is not obligated
to issue, any shares of CNB Stock or other securities.
(ii) CNB has no direct or indirect subsidiary.
(c) Financial Statements. CNB has delivered to First
Commercial the following financial statements: the
consolidated balance sheets of CNB as of December 31, 1995 and
1994, together with the consolidated statements of income,
stockholders' equity and cash flow of CNB for the periods then
ended, accompanied by the notes thereto for each of such
years, and the financial statements of CNB dated March 31,
1996 (collectively, the "CNB Financial Statements").
Contemporaneously with its execution and delivery hereof, CNB
will also deliver to First Commercial copies of all of the
periodic reports filed by CNB with banking regulators and
agencies since January 1, 1994. The CNB Financial Statements
were prepared from the books and records of CNB and fairly
present the financial condition, results of operations and
changes in capital accounts and undivided profits of CNB at
the dates and for the periods to which they relate and were
prepared in accordance with generally accepted accounting
principles and general practices within the banking industry
consistently applied. Except as set forth in Schedule 3.01(c)
to the CNB Disclosure Statement, there are no material
<PAGE>
obligations or liabilities of CNB, whether absolute, accrued
or contingent (including, without limitation, unfunded
obligations under employee benefit plans or arrangements or
liabilities for federal, state, local or foreign taxes or
assessments) which, in accordance with generally accepted
accounting principles, were required to be reflected or
disclosed in the CNB Financial
Statements and which were not so reflected or disclosed
therein.
(d) Dividends. Since December 31, 1995, no dividend has
been declared or paid on any equity securities of CNB, nor has
CNB purchased or redeemed any of its equity securities, except
as disclosed in Schedule 3.01(d) to the CNB Disclosure
Statement.
(e) Loans. CNB has delivered to First Commercial a
complete and correct copy of CNB's most current written
policies relating to the making, collection, classification
and charge off of loans and other evidence of indebtedness.
CNB has no loans or other evidences of indebtedness in its
loan portfolio that (i) are considered nonperforming or have
been placed on a nonaccrual status in accordance with the
policies of CNB; (ii) are classified by CNB as other loans
especially mentioned, substandard, doubtful, or loss loans;
(iii) are sixty (60) days or more past due; (iv) are in excess
of $50,000 principal amount for any such loans individually
and have been renegotiated as to payment terms or collateral
because of credit risks associated with such loans; or (v) to
its knowledge are subject to any defenses, offsets or
counterclaims that may be asserted against the present holder
thereof, except in each case as disclosed in Schedule 3.01(e)
to the CNB Disclosure Statement.
(f) Taxes. CNB has timely filed returns for all
federal, state and local taxes of CNB to the extent such
filings and payments were required to be made prior to the
date of this Agreement. Such returns are true and correct in
all material respects. CNB has not had any tax deficiencies
proposed or assessed against it nor has CNB executed any
waiver of or extended the statute of limitations on the audit
of any tax return or the assessment or collection of any tax.
To its knowledge, all taxes which CNB is required by law to
pay, and governmental charges levied or assessed against the
property or the business of CNB, have been paid in full, other
than taxes or charges the payment of which is not yet due or
which, if due, are not yet delinquent or are being contested
in good faith or have not been finally determined. Except as
has been indicated to First Commercial in the CNB Disclosure
Statement, the amount to be set up as accruals for taxes on
the December 31, 1995, balance sheet for CNB ("CNB Balance
Sheet") is sufficient in all material respects for the payment
of all unpaid taxes and governmental charges of all kinds,
applicable to the property or <PAGE>
business of CNB for the period ended on December 31, 1995, and
all periods prior thereto. Except as disclosed in Schedule
3.01(f) to the CNB Disclosure Statement, no tax returns or
reports of CNB have been audited by the Internal Revenue
Service or any state taxing authority within the past five
years.
(g) Litigation and Regulatory Matters. CNB has
disclosed in Schedule 3.01(g) to the CNB Disclosure Statement
all material actions, suits, proceedings and investigations
pending or threatened in writing against or affecting CNB or
any property or rights of CNB, or its officers or directors
(in their capacity as such) at law or in equity, or before or
by any court or other governmental instrumentality. Except to
the extent so disclosed in Schedule 3.01(g) to the CNB
Disclosure Statement, none of such actions, suits, proceedings
or investigations, either (i) involves a claim for an amount
exceeding the amount recoverable under any applicable
insurance policies, subject to the deductible amounts under
such policies, (ii) resulted or would result, if adversely
determined, in any material adverse change in the business,
operations, prospects or assets or the condition, financial or
otherwise, of CNB or (iii) would prevent the CNB stockholders
from approving and consummating the transactions contemplated
herein. Except as so disclosed in Schedule 3.01(g) to the CNB
Disclosure Statement, CNB is not subject to any continuing
court or administrative order, writ, injunction, decree,
agreement, memorandum or letter applicable specifically to it
or to its business, property or employees, and is not in
default with respect to any material order, writ, injunction,
decree, agreement, memorandum or letter of any court or other
governmental instrumentality.
(h) Compliance. To the best of its knowledge, CNB has
complied in all material respects with, and CNB is not in
default in any material respect under, any law, ordinance,
requirement, rule, regulation or order applicable to its
business or to the assets owned, used or occupied by it
(including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), licensing
requirements with respect to its personnel and all federal and
state consumer credit laws, rules and regulations), and CNB
has filed with the proper authorities all statements and
reports required by the laws, regulations, licensing
requirements and orders to which it or any of its employees
(because of their activities on behalf of CNB) are subject,
and CNB possesses all licenses, franchises, permits and
governmental authorizations necessary to conduct its business
in the manner in which and in the jurisdictions and places
where such business is now conducted.
(i) Properties and Other Assets. CNB has good and
indefeasible fee simple title to, or, as the case may be,
valid and subsisting leasehold interests in, all its
properties, interests in properties and other assets, real and
personal, (i) reflected on the CNB Balance Sheet (except for
capitalized lease
<PAGE>
properties) or (ii) acquired since the date thereof, except
to the extent such properties and assets are or were
thereafter disposed of for fair value in the ordinary course
of business. Except as set forth in Schedule 3.01(i) to the
CNB Disclosure Statement, all such properties and assets are
free and clear of all liens, charges and encumbrances, except
(i) those set forth or reflected in the CNB Balance Sheet (ii)
liens for taxes not yet due and payable or being contested in
good faith and (iii) defects in title and liens, charges and
encumbrances, if any, as do not materially detract from the
value, or materially interfere with the present or proposed
use, of the property or asset subject thereto or affected
thereby or as do not otherwise materially impair business
operations of CNB. The operation of the properties and
business of CNB in the manner in which it is now operated does
not violate any zoning ordinances or municipal regulations in
such a way as could, if such ordinances or regulations were
enforced, result in any material impairment of the uses of its
properties for the purposes for which they are now operated.
Except as set forth in Schedule 3.01(i) to the CNB Disclosure
Statement, no asset included in the CNB Balance Sheet was
valued in excess of its original cost less accumulated
depreciation or, in the case of investment securities and
loans purchased at a discount or premium, in excess of
original cost, adjusted for amortization of premiums or
accretion of discounts, with the exception of securities
classified as available for sale in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 115, which are
carried at fair market value. There are no (i) patents,
trademarks, trade names or copyrights or applications therefor
owned by or registered in the name of CNB, or in which CNB has
rights, which have not been disclosed in the CNB Disclosure
Statement (other than rights held by CNB as a secured party in
the ordinary course of its lending business), (ii) license
agreements to which CNB is a party, either as a licensor or
licensee, with respect to any patents, trademarks, tradenames
or copyrights which have not been disclosed in the CNB
Disclosure Statement or (iii) claims that in the conduct of
its business, as now conducted, CNB is infringing on any
patents, trademarks, trade names or copyrights of others which
have not been disclosed in the CNB Disclosure Statement. CNB
has obtained all necessary permits and certificates for the
use and occupancy of the real estate owned, leased or used by
it and the improvements thereon and systems therein, and such
use and occupancy is in full compliance with all federal,
state and local laws, rules and regulations. To the best of
CNB's knowledge, no material fact or condition exists which
would result in the termination or impairment in the
furnishing of any water, sewer, gas, electricity, telephone,
drainage or other services and equipment to the real estate
owned, leased or used by CNB.
(j) Agreement Does Not Violate Other Instruments.
Subject to obtaining any required consents and approvals
(which consents and approvals are disclosed in Schedule
3.01(j) to the CNB
<PAGE>
Disclosure Statement and which CNB will use its reasonable
best efforts to obtain prior to Closing), the execution and
delivery of this Agreement by CNB does not, and the
consummation of the transactions contemplated hereby will not,
to the best of CNB's knowledge, (i) violate any provision of
the Articles of Association or Bylaws of CNB, as in effect
immediately prior to the execution hereof, (ii) violate any
provision of, or result in any breach or termination of, or
constitute a default under, or constitute an event which with
notice or lapse of time, or both, would become a default
under, or result in the creation of any material lien,
security interest, charge or encumbrance upon any property of
CNB under, any material lease, indenture, or other agreement
or instrument to which CNB is a party or by which CNB may be
bound or affected or under which CNB receives benefits, (iii)
violate any law, rule, regulation, order, writ, injunction or
decree or administrative memorandum, agreement or letter
applicable to CNB or (iv) result in the loss or material
adverse modification of any license, franchise, permit or
other authorization granted to or otherwise held by CNB.
(k) Insurance and Fidelity Bonds.
(i) CNB carries fire, liability and other insurance
with respect to its property and business in such amounts and
against such risks as is customary, usual and prudent for a
company of its size and as its management reasonably believes
to be adequate for the business conducted by it. Schedule
3.01(k) to the CNB Disclosure Statement sets forth a complete
and accurate schedule, including the type of policy, policy
number, the limits of coverage, the insurance carrier, the
insurance agent or broker and the expiration date, of all
insurance policies, letters of credit, performance bonds and
fidelity bonds at any time held by, for the benefit of, or
issued to CNB and now in force (collectively, the "Insurance
Policies"). Except as disclosed in Schedule 3.01(k) to the
CNB Disclosure Statement, CNB has not forfeited or waived any
claim under any Insurance Policy and CNB has, to the best of
its knowledge, fully complied with the material terms and
conditions thereof. Schedule 3.01(k) to the CNB Disclosure
Statement sets forth all property damage and personal injury
claims asserted against CNB during the past five (5) years, or
otherwise still pending. Except as otherwise set forth in
Schedule 3.01(k) to the CNB Disclosure Statement, all of such
claims have been or are being defended by insurance carriers
without reservation and are or will be covered by the
Insurance Policies. CNB has not received a notification from
any insurance carrier denying or disputing any claim made by
it, denying or disputing any coverage for any such claim,
denying or disputing the amount of any claim, or regarding the
possible termination, cancellation or amendment of or premium
increases with respect to any of the Insurance Policies. CNB
does not have any claims pending or anticipated against any of
the insurance carriers under any of such Insurance Policies
and there has been no actual or alleged occurrence of any kind
which may give rise to any such claim.
<PAGE>
(ii) Since January 1, 1991, CNB has continuously
maintained fidelity bonds insuring it against acts of
dishonesty by its employees in such amounts as is deemed
prudent by management. Since January 1, 1991, there have been
no claims under such bonds, except as disclosed in Schedule
3.01(k) to the CNB Disclosure Statement, and CNB is not aware
of any facts that would form the basis of a claim under such
bonds.
(l) Retirement Plans. CNB has disclosed in Schedule
3.01(l) to the CNB Disclosure Statement each employee benefit
plan (as defined in Section 3(3) of ERISA) or other plan
maintained for its employees or under which any one of them
has any present or future liability (each a "Plan"), and true
and complete copies of all Plans will be delivered to First
Commercial, together with the most recent Internal Revenue
Service determination letters, annual reports (Form 5500
Series) and accompanying schedules, summary plan descriptions,
certified financial statements (if available) and actuarial
reports related thereto, within five (5) business days
following the execution and delivery hereof by CNB. With
respect to each Plan for which an annual report has been
filed, no material adverse change has occurred with respect to
the matters covered by the annual report since the date
thereof, except as has been disclosed in writing to First
Commercial. There are no unfunded vested benefits under any
Plan which are subject to the vesting and funding standards of
ERISA, and none of the Plans is a multiemployer plan within
the meaning of Section 3(37) of ERISA. Each of the Plans
covered by ERISA (i) has been operated in all material
respects in accordance with ERISA, (ii) has not engaged in any
"prohibited transaction" (as such term is defined in Section
4975 of the Internal Revenue Code of 1986, as amended (the
"Code") or in Section 406 of ERISA) which would result in a
material penalty, and (iii) has met the minimum funding
standards of Section 412 of the Code, if applicable. Each of
the Plans which is an employee pension benefit plan (as
defined in Section 3(2) of ERISA) ("Pension Plan") that is
intended to "qualify" under Section 401(a) of the Code, is
qualified within the meaning of Section 401 (a) of the Code,
except as heretofore disclosed in writing to First Commercial,
and a favorable determination letter has been issued by the
Internal Revenue Service with respect to each such qualified
Pension Plan. No Pension Plan has been amended since issuance
of the most recent determination letter by the Internal
Revenue Service with respect thereto, except as disclosed in
Schedule 3.01(l) to the CNB Disclosure Statement. Each
Pension Plan has been administered in accordance with Section
401(a) of the Code, where applicable. No Reportable Event
(within the meaning of Section 4043 of ERISA) has occurred
with respect to any Plan which would result in material
liability to CNB. Since the enactment of ERISA, CNB has not
completely or partially terminated any employee pension
benefit plan or withdrawn from any multiemployer pension plan.
No proceeding by the Pension
<PAGE>
Benefit Guaranty Corporation has been instituted or threatened
to terminate, pursuant to Subtitle C of Title IV of ERISA, any
Plan. There is no suit, action or proceeding pending or
threatened against or affecting or likely to have a material
adverse impact on any Plan. One or more of the Plans may be
covered by the Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA"). If so, each such plan has been operated
in, and is in, compliance with COBRA. All notices required to
be given under COBRA have been timely and properly given in
accordance with COBRA, and the rules and regulations
promulgated thereunder, and no employee, former employee or
"qualified beneficiary" (as defined in COBRA) has any claim or
contingent claim against CNB for failure to comply with COBRA
or the rules and regulations promulgated thereunder. Schedule
3.01(l) to the CNB Disclosure Statement lists all persons
currently eligible for benefits under COBRA.
(m) Employee Relations.
(i) No employee of CNB is a party to a collective
bargaining agreement. There are no pending or threatened
labor disputes with any of the employees of CNB. Schedule
3.01(m) to the CNB Disclosure Statement discloses the names of
all personnel employed by CNB whose total annual compensation
(including bonuses and the like) from CNB exceeds Twenty-Five
Thousand Dollars ($25,000) and the total annual compensation
of each. CNB has no knowledge of any facts that would
indicate that any employee will not continue in his current
employment, subject to normal turnover, except as disclosed in
Schedule 3.01(m) to the CNB Disclosure Statement.
(ii) CNB has not entered into or agreed to enter
into any employment agreement or covenant not to compete
agreement, granted or agreed to grant any increase in the
wages, salaries or other compensation of any of its employees
or directors, paid or agreed to pay any bonus to any of its
employees, directly or indirectly paid or made a commitment to
pay any severance or termination payment to any of its
employees or entered into or agreed to enter into any
consulting agreement or other agreement for the purchase of
services, except as disclosed in Schedule 3.01(m) to the CNB
Disclosure Statement.
(n) No Material Events. Except as disclosed in Schedule
3.01(n) to the CNB Disclosure Statement, or in the cases of
clauses (i), (ii), (iii) and (iv) below, except for
transactions in the ordinary course of business consistent
with past practices, since December 31, 1995, CNB has not (i)
incurred or become subject to, or agreed to incur or become
subject to, any material obligation or liability, absolute or
contingent; (ii) discharged or satisfied or agreed to
discharge or satisfy any lien or encumbrance or paid any
obligation or liability, absolute or contingent; (iii)
canceled or agreed to cancel any material debts or claims or
waived any material right; (iv) made or permitted or agreed to
make or permit any material amendment
<PAGE>
or termination of any material contract, lease, arrangement,
license or other instrument to which it is a party; (v) made
any material change in its method of accounting; (vi) made any
material capital expenditures or entered into commitments
therefor; (vii) made or agreed to make any loan or loans to
any one person that would cause such person to have
outstanding loans from CNB exceeding in the aggregate One
Hundred Thousand Dollars ($100,000) (The term "person," for
purposes of this clause, shall include, in addition to an
individual, the persons specified in Rule 144(a)(2) under the
Securities Act of 1933.); (viii) purchased or sold or agreed
to purchase or sell any tax-exempt bonds; (ix) made, renewed
or extended or agreed to make, renew or extend any
nonadjustable rate loans with maturities exceeding sixty (60)
months; (x) repossessed or purchased in a foreclosure action
any personal or real property in an amount exceeding $25,000;
(xi) charged any loan to the reserve for loan and lease losses
or established any special allocation thereto; (xii) sold or
transferred or agreed to sell or transfer any loans or other
real estate owned; (xiii) mortgaged or pledged any of its
material assets, tangible or intangible, or permitted any of
its material assets, tangible or intangible, to become
subjected to any lien, charge or other encumbrance (other than
liens for real estate taxes not yet due and payable and
mechanics', materialmen's and similar liens imposed by statute
that are being contested in good faith); (xiv) sold, assigned
or transferred any material asset or property of any nature
whatsoever, whether real, personal or mixed, tangible or
intangible; or (xv) made any material change in its business
or operations or entered into any other material transaction.
(o) Liabilities. The liabilities on the CNB Balance
Sheet consist solely of obligations and liabilities incurred
by CNB in the ordinary and regular course of its business. As
of December 31, 1995, CNB had no material and adverse
liabilities or obligations of any nature whatsoever,
including, without limitation, fixed or contingent, accrued,
absolute, matured or unmatured, or any "loss contingencies"
considered "probable" or "reasonably estimable" within the
meaning of the Financial Accounting Standards Board's SFAS No.
5, which were not recorded on the CNB Balance Sheet. CNB is
not obligated to make any material investment, directly or
indirectly, in any person, corporation, association,
partnership, joint venture, trust or other entity, except for
investments in investment securities and other evidences of
indebtedness made in the ordinary course of business
consistent with past practices.
(p) Marketability of Securities. Except for pledges to
secure public and trust deposits and repurchase agreements,
which are disclosed in Schedule 3.01(p) to the CNB Disclosure
Statement, none of the investments reflected in the CNB
Balance Sheet under the heading "Investment Securities" and
none of the investments made since such date is subject to any
"investment" or other restriction, whether contractual or
statutory, which
<PAGE>
materially impairs the ability of the holder thereof to freely
dispose of such investment in the open market at any time.
(q) Interested Party Transactions. Except as set forth
in Schedule 3.01(q) to the CNB Disclosure Statement, CNB is
not a party to, and none of its property is bound or affected
by, nor does CNB receive benefits under, any written or oral
or express or implied contract or other arrangement in which a
material interest is held by an officer or director of CNB or
any "associate" of any such officer or director, as that term
is defined in Rule 14a-1 under the Securities Exchange Act of
1934, as amended, which is not on substantially the same terms
(including, without limitation, in the case of lending
transactions, interest rates, maturity schedule and
collateral) as those prevailing at the time for comparable
transactions with unrelated parties or which involves more
than normal risk of collectibility or which involves other
unfavorable features. Schedule 3.01(q) to the CNB Disclosure
Statement contains (i) a list of all amounts paid or to be
paid by CNB to, or received or to be received by CNB from, any
officer or director of CNB or any "associate" of any such
officer or director during the current and the last fiscal
year for products or services, not including employee
services, and (ii) a description of all loans from CNB to any
of such persons outstanding at any time after January 1, 1991.
(r) Material Contracts. Schedule 3.01(r) to the CNB
Disclosure Statement contains a list of all written, and a
brief description of all oral, material contracts, agreements,
leases, commitments, licenses, instruments or obligations not
listed in another exhibit hereto to which CNB is a party or by
which any of its assets is bound. CNB is not a party to, and
none of its property is bound or affected by, and CNB does not
receive benefits under, any written or oral or express or
implied contract or other arrangement which is not in the
ordinary course of business consistent with its past
practices, except as has been disclosed in Schedule 3.01(r) to
the CNB Disclosure Statement. CNB has, in all material
respects, performed all of the obligations required to be
performed by it to date and it is not in default in any
material respect under any material contract, lease, insurance
policy, commitment or arrangement to which it is a party or by
which it or its property may be bound or affected or under
which it or its property receives benefits, and there has not
occurred any event which with the lapse of time or giving of
notice or both would constitute such a default. All such
contracts, leases, insurance policies and other instruments
are in full force and effect, are binding obligations of the
respective parties thereto in accordance with their terms,
except that the enforceability of such obligations may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws from time to time in effect
that affect creditors' rights generally and by legal and
equitable limitations on the availability of injunctive
relief, specific performance and other equitable
<PAGE>
remedies which are available only in the discretion of the
court, and there are no defenses, offsets or counterclaims
thereto which may be made by any party thereto other than CNB,
and CNB has not waived any substantial rights thereunder. CNB
is not a party to or otherwise bound by any contract,
agreement, plan, lease, license, commitment or undertaking
which is materially adverse, materially onerous, or materially
harmful to any material aspect of the business or prospects of
CNB.
(s) Environmental Matters. To the best of CNB's
knowledge, except as disclosed in Schedule 3.01(s) to the CNB
Disclosure Statement, none of the properties owned by CNB
contains hazardous materials, waste or substances that cannot
be easily removed and cleaned up, and, in the case of
asbestos, completely abated. For purposes of this provision,
a hazardous material, waste or substance is deemed easily
removed and cleaned up, and, in the case of asbestos,
completely abated, if the cost of such removal, clean-up,
remediation, restoration of natural resources, or abatement
does not exceed Fifty Thousand Dollars ($50,000) in the
aggregate and if such removal, clean-up, remediation,
restoration of natural resources, or abatement does not
materially interfere with the day-to-day operations of CNB.
Except as disclosed in Schedule 3.01(s) to the CNB Disclosure
Statement, CNB has no knowledge that any of the outstanding
loans of CNB are secured by properties that contain hazardous
materials, wastes, or substances that cannot be removed and
cleaned up, and, in the case of asbestos, completely abated,
at an expense not exceeding ten percent (10%) of the fair
market value of such properties. As used herein, "hazardous
substance" or "hazardous material" means substances subject to
reporting under Title III of the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, or the Resource Conservation and Recovery Act, as
amended; petroleum; petroleum products; substances regulated
by the Toxic Substance Control Act, as amended; substances
regulated by the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended; or any hazardous, toxic, or
dangerous waste, substance, or material defined as such in the
above-referenced Acts, or any federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability standards of
conduct concerning any hazardous, toxic or dangerous waste,
substance, or material as now or at any time hereafter in
effect. To CNB's knowledge, it has not loaned money against
the securities or assets of any company or other association
that it knows has failed to obtain all permits, licenses,
approvals, and other authorizations that are required under
federal, state and local laws and regulations relating to
emissions, discharges, wetlands, releases, or threatened
releases of pollutants, contaminants or hazardous or toxic
materials or waste into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, release, discharge,
<PAGE>
emission, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or
waste. To CNB's knowledge, it has not loaned money against
the securities or assets of any company or other association,
and it has not at any time owned property, that is presently
or that CNB has knowledge may in the future potentially be
subject to any claim, action, suit, proceeding, hearing,
investigation, injunction, notice of violation, consent
administrative order, or penalty arising out of or relating to
the manufacture, presence, processing, distribution, use,
treatment, release, discharge, emission, storage, disposal,
transport or handling of any pollutant, contaminant, or
hazardous or toxic material or waste.
(t) Property Sites Owned by CNB. Set forth on Schedule
3.01(t) is a complete and accurate list of locations
(identified by address, owner/operator, type of facilities
located on the property, and period of time owned, leased or
used by CNB) of all real estate that CNB presently owns or
leases.
(u) Representations Not Misleading. No representation
or warranty by CNB in this Agreement or in any exhibit
attached hereto or in the CNB Disclosure Statement, nor any
statement or disclosure furnished to First Commercial by or on
behalf of CNB under and pursuant to this Agreement, knowingly
contains or will knowingly contain any untrue statement of a
material fact or knowingly omits or will knowingly omit to
state a material fact necessary to make the statements
contained herein or therein not misleading.
Section 3.02. Representations and Warranties of First
Commercial. No representations or warranties are made by any
director, officer, employee or shareholder of First Commercial
as an individual. First Commercial represents and warrants to
CNB, for itself and on behalf of TBT, the following, each of
which representations and warranties shall be mutual and
continuing and shall be true as of the date of this Agreement
and on the Closing Date:
(a) Organization and Capitalization of First Commercial.
First Commercial has delivered to CNB complete and correct
copies of the Second Amended and Restated Articles of
Incorporation, as amended, and Bylaws of First Commercial as
in effect on the date of such delivery. First Commercial is
an Arkansas corporation duly organized and validly existing
and in good standing under the laws of Arkansas, with full
corporate power and authority to carry on its business as and
where conducted and to own and lease its properties and assets
in the places where such properties and assets are now or will
be owned or leased. As of the date of this Agreement, the
authorized capital stock of First Commercial consists of
34,000,000 shares of First Commercial Common Stock, of which
27,315,448 shares are outstanding, and 400,000 shares of
preferred stock, each $1.00 par value, of which no shares are
outstanding. All issued and
<PAGE>
outstanding shares of First Commercial Common Stock are, and
all shares of First Commercial Common Stock to be issued to
the stockholders pursuant to this Agreement will be, validly
authorized, duly issued, fully paid and nonassessable shares
of First Commercial Common Stock, and such shares have not
been, or will not be, issued in violation of any preemptive
rights of stockholders. Except as described in the financial
information provided to CNB by First Commercial, First
Commercial does not have outstanding any subscriptions,
options or other arrangements or commitments obligating First
Commercial to issue or dispose of, and it is not obligated to
issue, any shares of First Commercial Common Stock or other
securities. Since April 1, 1996, no dividends have been
declared or paid on any equity securities of First Commercial,
nor has First Commercial purchased or redeemed any of its
equity securities, except, in both instances, as disclosed in
the First Commercial Financial Statements (as hereinafter
defined) or in writing to CNB.
(b) Organization of TBT. First Commercial has delivered
to CNB complete and correct copies of the Articles of
Association and Bylaws of TBT, as in effect on the date of
such delivery. TBT is a national banking association duly
organized and validly existing and in good standing under the
laws of the United States of America, with full corporate
power and authority to carry on its business as and where
conducted and to own or lease properties and assets in the
places where such properties or assets are now owned or
leased.
(c) Authority for Transaction. The Boards of Directors
of First Commercial and TBT have, or will have prior to
consummation of the transactions contemplated hereby, approved
this Agreement and the transactions contemplated hereby, and
this Agreement constitutes the valid and binding obligation of
First Commercial and TBT enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws from time to time in effect which affect
creditors' rights generally and by legal and equitable
limitations on the availability of injunctive relief, specific
performance and other equitable remedies which are available
only in the discretion of the court. First Commercial and TBT
have full corporate power and authority and legal right to
execute and deliver this Agreement and, upon approval thereof
by the necessary regulatory authorities, to consummate the
transactions contemplated hereby. First Commercial agrees
that it will vote the stock of TBT in favor of this Agreement
and the transactions contemplated hereby.
(d) Agreements Do Not Violate Other Instruments.
Subject to obtaining any required consents and approvals
(which consents and approvals have been disclosed in writing
to CNB and which will be obtained by First Commercial and TBT
prior to Closing) the execution and delivery of this Agreement
by First Commercial does not, and the consummation of the
transactions contemplated
<PAGE>
by this Agreement will not, (i) violate any provision of the
Second Amended and Restated Articles of Incorporation, as
amended, or Bylaws of First Commercial or the Articles of
Association or Bylaws of TBT, (ii) violate any provision of,
or result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or
lapse of time, or both, would become a default under, any
material lease, indenture or other agreement (written or oral)
or other instrument to which First Commercial or TBT is a
party or by which First Commercial or TBT may be bound or
affected, (iii) violate any material law, rule, regulation,
order, writ, injunction or decree or administrative
memorandum, agreement or letter to which First Commercial or
TBT is a party or by which First Commercial or TBT may be
bound or affected, or (iv) result in the material loss or
material adverse modification of any material license,
franchise, permit or other authorization granted to or held by
First Commercial or TBT.
(e) Representations Not Misleading. No representation
or warranty by First Commercial in or required by this
Agreement, nor any statement, exhibit or disclosure furnished
to CNB by or on behalf of First Commercial under and pursuant
to this Agreement, knowingly contains or will knowingly
contain any untrue statement of a material fact or knowingly
omits or will knowingly omit to state a material fact
necessary to make the statements contained herein or therein
not misleading.
(f) Financial Statements. First Commercial has
delivered to CNB the following financial statements: the
consolidated balance sheets of First Commercial as of December
31, 1995 and 1994, together with the consolidated statements
of income, stockholders' equity and cash flow of First
Commercial for the periods then ended, accompanied by the
notes thereto, and an unqualified audit report of Ernst &
Young for such years (the "First Commercial Financial
Statements"). First Commercial has also made available to CNB
copies of all periodic reports and proxy statements filed by
First Commercial with the Securities and Exchange Commission
since January 1, 1994, and copies of all of the periodic
public reports filed by the banking subsidiaries of First
Commercial (the "First Commercial Banks") with the Arkansas
State Bank Department, the Office of the Comptroller of the
Currency or the Federal Deposit Insurance Corporation since
January 1, 1995. The First Commercial Financial Statements
are complete and correct and have been prepared from the books
and records of First Commercial and the First Commercial
Banks, which accurately and fairly reflect the transactions
and dispositions of assets of First Commercial and the First
Commercial Banks and fairly present the financial condition,
results of operations and changes in capital accounts and
undivided profits of First Commercial and the First Commercial
Banks at their respective dates and for the periods to which
they relate except as may be disclosed in writing to CNB. The
First Commercial Financial Statements were prepared in
accordance with generally accepted accounting principles and
<PAGE>
general practices within the banking industry consistently
applied. There are no material obligations or liabilities of
First Commercial or the First Commercial Banks, whether
absolute, accrued or contingent (including, without
limitation, unfunded obligations under employee benefit plans
or arrangements or liabilities for federal, state, local or
foreign taxes or assessments) which, in accordance with
generally accepted accounting principles, were required to be
reflected or disclosed in the First Commercial Financial
Statements and which are not so reflected or disclosed
therein, except as disclosed in writing to CNB. The
allowances for loan losses of the First Commercial Banks, as
reflected in the First Commercial Financial Statements, are
adequate as determined by generally accepted accounting
principles.
(g) Litigation and Regulatory Matters. First Commercial
and the First Commercial Banks have disclosed in writing to
CNB all material actions, suits, proceedings and
investigations pending or, to the knowledge of First
Commercial or any First Commercial Bank, threatened against or
affecting First Commercial or any First Commercial Bank or any
property or rights of First Commercial or any First Commercial
Bank, or their respective officers or directors (in their
capacity as such) at law or in equity, or before or by any
court or other governmental instrumentality. Except to the
extent so disclosed to CNB, none of such actions, suits,
proceedings or investigations, in the opinion of First
Commercial and the First Commercial Banks, either (i) involves
a claim for an amount exceeding the amount recoverable by
First Commercial or any First Commercial Bank under any
applicable insurance policies, subject to the deductible
amounts under such policies, (ii) resulted or will result, if
adversely determined, in any material adverse change in the
business, operations, prospects or assets or the condition,
financial or otherwise, of First Commercial or any First
Commercial Bank or (iii) would prevent First Commercial, as
the sole shareholder of TBT, from approving and consummating
the transactions contemplated herein. Except as so disclosed
to CNB, neither First Commercial nor any First Commercial Bank
is subject to any continuing court or administrative order,
writ, injunction or decree, applicable specifically to it or
to its business, property or employees, and neither First
Commercial nor any First Commercial Bank is in default with
respect to any order, writ, injunction or decree of any court
or other governmental instrumentality.
(h) Compliance. To the best of their knowledge, First
Commercial and the First Commercial Banks have complied in all
material respects with, and they are not in default in any
material respect under, any law, ordinance, requirement, rule,
regulation or order applicable to their businesses or to the
assets owned, used or occupied by them, and First Commercial
and the First Commercial Banks possess all licenses,
franchises, permits and governmental authorizations necessary
to conduct
<PAGE>
their respective businesses in the manner in which and in the
jurisdictions and places where such businesses are now
conducted.
(i) No Material Events. Except as reflected in the
First Commercial Financial Statements or as may be disclosed
in writing to CNB and except for transactions in the ordinary
course of business consistent with past practices of First
Commercial, since December 31, 1995, First Commercial has not
experienced any material adverse changes in the condition
(financial or otherwise) of its properties, assets,
liabilities, business, operations or prospects.
(j) Taxes. First Commercial and the First Commercial
Banks have timely filed returns for all federal, state and
local taxes of First Commercial and the First Commercial Banks
to the extent such filings and payments were required prior to
the date of this Agreement, and such returns are true and
correct in all material respects. Neither First Commercial
nor the First Commercial Banks has had any tax deficiencies
proposed or assessed against them and neither First Commercial
nor the First Commercial Banks has executed any waiver of or
extended the statute of limitations on the audit of any tax
return or the assessment or collection of any tax. All taxes
and governmental charges levied or assessed against the
property or the business of First Commercial or the First
Commercial Banks have been paid in full, other than taxes or
charges the payment of which is not yet due or which, if due,
is not yet delinquent or is being contested in good faith or
has not been finally determined. Except as indicated in
writing to CNB, the amount to be set up as accruals for taxes
on the December 31, 1995, balance sheet for First Commercial
is sufficient in all material respects for the payment of all
unpaid taxes and governmental charges of all kinds, applicable
to the property or business of First Commercial and the First
Commercial Banks for the period ended on December 31, 1995,
and all periods prior thereto.
(k) Insurance. During each of the past three calendar
years First Commercial and its properties have been insured
for customary risks, all with limits, deductibles, and
exclusions as are customary in the banking industry. Such
insurance protection continues in effect, and First Commercial
is not aware of any facts or events relating to its operations
or financial condition which reasonably can be expected to
increase materially the premiums or reduce the coverage under
any of such policies, except as has been indicated in writing
to CNB.
(l) ERISA Plans. No ERISA Plans of First Commercial,
nor any trustee, administrator or fiduciary thereof, has
engaged in a "prohibited transaction," as such term is defined
in Section 4974 of the Code or Title I of ERISA, which could
subject the ERISA Plans, or any of them, or any trustee,
administrator, or fiduciary thereof, or any party dealing with
the ERISA Plans, or any such trust, to any material tax or
penalty on prohibited
<PAGE>
transactions imposed by Section 4975 of the Code or liability
under Title I of ERISA. The execution and delivery of this
Agreement and consummation of the transactions contemplated
herein will not involve any transaction prohibited by ERISA or
by Section 4975 of the Code. None of the ERISA Plans of First
Commercial has been terminated nor have any proceedings to
terminate such plans been instituted, nor have there been any
"reportable events," as that term is defined in Section 4043
of ERISA, since the effective date of ERISA that have not
already been reported by the filing of appropriate Form 5500
in accordance with ERISA requirements.
(m) Employee Relations. Neither First Commercial nor
the First Commercial Banks has agreements with any labor or
other organization representing employees for collective
bargaining or other labor relations purposes.
(n) Properties and Other Assets. First Commercial and
the First Commercial Banks have good and marketable fee simple
title to, or, as the case may be, valid and enforceable
leasehold interest in, all their respective properties,
interests in properties and other assets, real and personal,
(i) reflected on the First Commercial Financial Statements or
(ii) acquired since the date thereof, except to the extent
such properties and assets are or were thereafter disposed of
for fair value in the ordinary course of business. All such
properties and assets are free and clear of all liens, charges
and encumbrances, except (X) those set forth or reflected in
the First Commercial Financial Statements, (Y) liens for taxes
not yet due and payable or being contested in good faith and
(Z) defects in title and liens, charges and encumbrances, if
any, as do not materially detract from the value, or
materially interfere with the present or proposed use, of the
property or assets subject thereto or affected thereby or as
do not otherwise materially impair business operations of
either First Commercial or the First Commercial Banks.
(o) Environmental Matters. To the best of its knowledge
and except as identified in writing to CNB, neither First
Commercial nor any of its subsidiaries has any present or past
environmental condition under which First Commercial has or
may become materially liable to any person or by reason of
which any First Commercial assets may be subjected to any
material lien, or by reason of which First Commercial may
materially violate any environmental law or order.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of CNB. CNB hereby covenants and
agrees that between the date hereof and the Effective Date:
(a) Approval of Transaction and Consents. CNB will
submit this Agreement and the transactions contemplated hereby
to its
<PAGE>
shareholders for their approval, and CNB will recommend
approval of this Agreement and such transactions, with
shareholder approval to be evidenced by written consent or by
the vote of the requisite number of its shareholders at a
meeting thereof to be duly called, properly noticed and held
as soon as practicable. CNB shall use its best efforts to
obtain all licenses, approvals and consents of any federal,
state or other regulatory agency having jurisdiction and of
any other party to the extent that such licenses, approvals or
consents are required of CNB to effect the Merger and the
transactions contemplated hereby, or are required pursuant to
Section 3.01(j) hereof.
(b) Access to Corporate Records. To the extent
permitted by law, until the Closing Date, CNB will upon
reasonable notice afford to First Commercial and its
employees, agents and representatives, including its
accountants, Ernst & Young LLP, reasonable access during
normal business hours to all of the offices, property,
documents, contracts, books and records of CNB and such
additional information with respect to the business affairs
and properties of CNB as First Commercial from time to time
may reasonably request. CNB will make their stock transfer
records available to the extent necessary to effectuate the
intent of this Agreement. Upon the request of First
Commercial, CNB will furnish abstracts of title or title
insurance policies to real property owned (other than other
real estate owned) or leased by CNB, current as of a date at
or after the acquisition of ownership or possession thereof,
as applicable, and copies of any unrecorded leases to which
either is a party.
(c) Monthly Financial Statements. CNB shall promptly
provide First Commercial with copies of all the monthly
financial statements for CNB ("Monthly Financial Statements")
for each of the monthly periods ending between the date of
this Agreement and the Closing Date. The Monthly Financial
Statements shall be accompanied by a certificate of the
President or Chief Financial Officer of CNB to the effect that
the Monthly Financial Statements fairly reflect in all
material respects the transactions and dispositions of assets
of CNB and the financial condition and results of operations
of CNB at the dates and for the periods to which they relate,
subject to normal year-end audit adjustments. In addition,
the Monthly Financial Statements shall be prepared in
accordance with generally accepted accounting principles and
general practices within the banking industry consistently
applied, except as otherwise set forth in the President's or
Chief Financial Officer's certificates. CNB shall also
promptly provide to First Commercial copies of all reports and
correspondence filed by CNB during such period with banking
regulators and agencies or received by CNB from same to the
extent permitted by law.
(d) Closing Financial Statements. At the Closing, CNB
shall deliver to First Commercial a balance sheet and
statement of income of CNB dated as of the last day of the
month
<PAGE>
immediately preceding the month in which the Closing occurs
(the "Closing Financial Statements"), which shall be certified
by the President or Chief Financial Officer of CNB as being
true and correct in all material respects and as fairly
reflecting in all material respects the financial condition
and results of operations of CNB at the date and for the
period to which they relate, except as specifically disclosed
in the President's or Chief Financial Officer's certificates.
(e) Conduct of Business. CNB shall conduct its business
in the ordinary course so as to maintain its properties and
business and to preserve its business organization and the
goodwill of its employees, depositors, customers and others
having dealings with it and to maintain its books and records
in the usual, ordinary and normal course. Without the prior
written consent of First Commercial, CNB shall not (i) declare
or distribute any cash or stock dividend, authorize a stock
split, or authorize, issue or make any distribution of its
capital stock or any security convertible into or exercisable
for CNB Stock or pledge or otherwise encumber any of its
capital stock or any security convertible into or exercisable
for CNB Stock; (ii) open or acquire any new branch office;
(iii) make any direct or indirect redemption, purchase or
other acquisition of any of its capital stock; (iv) except in
the ordinary course of its business, incur any liability or
obligation, make any commitment or disbursement, acquire or
dispose of any property or asset, make any contract or
agreement, subject any of its properties or assets to any
lien, claim, charge, option or encumbrance or engage in any
transaction; (v) except in the ordinary course of its
business, increase or decrease the rate of compensation of any
director or employee or enter into any agreement to increase
or decrease the rate of compensation of any director or
employee; (vi) create or modify any pension or profit sharing
plan, bonus, deferred compensation, death benefit, or
retirement plan, or the level of benefits under any such plan
or increase or decrease any severance or termination pay
benefit or any other fringe benefit; (vii) amend its articles
of association or bylaws except as may be necessary to carry
out this Agreement or as required by law; or (viii) directly
or indirectly encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or
group (other than First Commercial or an affiliate of First
Commercial) concerning any merger, sale of assets, sale of
shares of capital stock or similar transaction involving CNB
(an "Acquisition"). CNB represents that as of the date hereof
it has ceased all prior activities, and it has no present
intention to engage in activities, of the type contemplated by
clause
<PAGE>
(viii) with respect to an Acquisition (other than with First
Commercial or an affiliate of First Commercial). CNB shall
advise First Commercial in writing of (X) the institution of
any litigation or proceedings of any kind whatsoever against
CNB, (Y) the happening of any event which would have a
material adverse effect on the financial condition, business,
prospects or affairs of CNB, and (Z) the occurrence of any
event that would cause any of the representations or
warranties set forth in Section 3.01 hereof to be inaccurate
if made as of a date subsequent to such activity or
transaction. Without the prior written consent of First
Commercial, CNB shall not engage in any activity or enter into
any transaction that would cause any of the representations or
warranties set forth in Section 3.01(n)(v), (vi), (xiii),
(xiv), (xv), (xvi) or (xvii) hereof to be inaccurate if made
as of a date subsequent to such activity or transaction and
CNB shall conduct its business in such a manner as to maintain
the accuracy thereof. CNB will not do anything or fail to do
anything that would cause a breach of or default in any other
contract, agreement, commitment or obligation to which CNB is
a party or by which it may be bound.
(f) Cooperation and Furnishing Information. CNB agrees
to cooperate with First Commercial in furnishing such
information concerning the business and affairs of CNB as is
reasonably necessary or requested by First Commercial in order
to prepare and file any application for regulatory or
government approvals required for consummation of the
transactions contemplated by this Agreement. All such
information shall be true and correct in all material respects
and shall not omit any material fact necessary to make such
information not misleading.
(g) Related Party Transactions. Without the prior
written consent of First Commercial, CNB shall not enter into
any transaction, other than those in the ordinary course of
business, with any of its officers, directors or any of such
person's associates, or with any five percent (5%) or more
shareholder of CNB or any of such person's associates, or with
any business of which an officer or director of CNB is an
officer, director, employee or ten percent (10%) or more
equity owner.
(h) Notice of Changes. Until the Closing Date, CNB
shall give First Commercial prompt written notice of (i) the
occurrence of any event or the failure of any event to occur
that results in a breach by CNB of any representation or
warranty contained herein or a failure by CNB to comply with
any covenant, condition or agreement contained herein, or (ii)
any change to, or any inaccuracies in, any information or data
previously given or made available to First Commercial
pursuant to this Agreement.
(i) Limit on CNB's Attorneys' Fees. CNB agrees that any
fees and expenses it will pay to attorneys in connection with
this Agreement and the transactions contemplated herein shall
not exceed $25,000.00.
<PAGE>
(j) Completion and Delivery of CNB Disclosure Statement.
CNB shall have completed and delivered to First Commercial the
CNB Disclosure Statement on or before the date of execution of
this Agreement. The information contained in the CNB
Disclosure Statement delivered pursuant to this Agreement
shall constitute representations and warranties of CNB
pursuant to Section 3.01 of this Agreement, which shall be
continuing and shall be true as of the date of this Agreement
and on the Closing Date. Pursuant to Section 4.01(h), CNB
shall give First Commercial prompt written notice of any
inaccuracies in any information or data set forth in the CNB
Disclosure Statement or of the occurrence of any event or the
failure of any event to occur which results in any change in
the information and data set forth in the CNB Disclosure
Statement. Any such inaccuracy or change in the information
or data set forth in the CNB Disclosure Statement shall
constitute a failure of the conditions precedent set forth in
Section 5.01(b) of this Agreement, unless waived by First
Commercial.
Section 4.02. Covenants of First Commercial. First
Commercial, on behalf of itself and TBT, hereby covenants and
agrees that between the date hereof and the Closing Date:
(a) Consents and Approvals. First Commercial and TBT
agree to cooperate with CNB in furnishing such information
concerning the business and affairs of First Commercial and
TBT and their directors and officers as is reasonably
necessary or requested in order to prepare and file such
applications for approvals required to be obtained by CNB in
connection with carrying out the transactions contemplated by
this Agreement. First Commercial will use its best efforts to
obtain all licenses, approvals and consents of any federal,
state or other regulatory agency having jurisdiction and of
any other party to the extent that such licenses, approvals or
consents are required to effect the transactions contemplated
hereby, or are required pursuant to Section 3.02(d) hereof.
All such information shall be true and correct in all material
respects and shall not omit any material fact necessary to
make such information not misleading.
(b) Quarterly Reports; Current Reports. First
Commercial shall promptly provide CNB with copies of all
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed by First Commercial with the Securities and Exchange
Commission between the date of this Agreement and the Closing
Date.
(c) Conduct of Business. First Commercial will, and
will cause TBT to, conduct its business so as to maintain its
corporate existence in good standing, preserve its business
organization and the goodwill of its employees, depositors,
customers and others having dealings with it and comply with
all material obligations and duties imposed on it by all laws,
<PAGE>
governmental regulations, rules and ordinances, and judicial
orders, judgments and decrees applicable to it, its business
or properties. First Commercial will, and will cause TBT to,
maintain its books and records in the usual, ordinary and
normal course. First Commercial will promptly advise CNB in
writing of (i) the institution of any material litigation
against First Commercial or its subsidiaries and (ii) the
happening of any event that would have a material adverse
effect on the financial condition, business or affairs of
First Commercial.
(d) Notice of Changes. Until the Closing Date, First
Commercial will give CNB prompt written notice of (i) the
occurrence of any event or the failure of any event to occur
that results in a breach of any representation or warranty by
First Commercial or a failure by First Commercial to comply
with any covenant, condition or agreement contained herein, or
(ii) any other changes to, or any inaccuracies in, any data
previously given or made available to CNB pursuant to this
Agreement.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of
First Commercial. The obligation of First Commercial to
consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by First
Commercial, in its sole and absolute discretion:
(a) Performance of Covenants. Each of the acts and
undertakings of CNB to be performed on or before the Closing
Date shall have been performed in all material respects and
the President of CNB shall have executed and delivered to
First Commercial a certificate, dated as of the Closing Date,
to the effect that the foregoing condition has been fulfilled.
(b) Representations True at Closing. The
representations and warranties made by CNB herein shall be
true and correct in all material respects on the Closing Date
hereunder with the same force and effect as though such
representations and warranties had been made on and as of such
time (except that such representations and warranties may be
untrue or incorrect as a result of actions or transactions
contemplated or permitted by this Agreement or actions or
transactions of CNB made with the written consent of First
Commercial), and the President of CNB shall have executed and
delivered to First Commercial a certificate, dated as of the
Closing Date, to the effect that the foregoing condition has
been fulfilled.
(c) Changes in Financial Condition. Since December 31,
1995, there shall not have occurred any material adverse
change
<PAGE>
in the assets, financial condition, operations, business or
prospects of CNB, taken as a whole, regardless of the cause.
(d) Certified Resolutions. CNB shall furnish to First
Commercial certified copies of resolutions duly adopted by the
Board of Directors and the shareholders of CNB authorizing the
Merger.
(e) Government Approvals; Other Consents. First
Commercial shall have received in form and substance
satisfactory to First Commercial and its counsel all necessary
federal and state governmental and regulatory approvals for
the transactions contemplated by this Agreement (including,
but not limited to, the Office of the Comptroller of the
Currency and the Texas Department of Banking, if required),
and CNB shall have received any and all consents required
pursuant to Section 3.01(j) hereof.
(f) No Injunction. No proceeding shall have been
instituted or threatened before any court, governmental agency
or legislative body to enjoin, restrain or prohibit, or to
obtain substantial damages in respect of, or which is related
to or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, which, in the reasonable
judgment of First Commercial, would make it inadvisable to
consummate such transactions.
(g) Litigation. On the Closing Date, there shall not be
pending or threatened against CNB or its officers or directors
in their capacity as such, any suit, action or proceeding
which, if successful, would have a material adverse effect on
the financial condition, operations, business or prospects of
CNB.
(h) No Misstatements or Omissions. First Commercial
shall not have discovered in any of the information provided
by CNB that is contained in any application or report to any
governmental agency or authority relating to the transactions
contemplated by this Agreement any untrue statement of a
material fact or any omission to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(i) Opinion of CNB's Counsel. An opinion of Counsel for
CNB, dated the Closing Date, in substantially the form
attached hereto as Exhibit A, shall have been delivered to
First Commercial. In rendering the opinions contained
therein, such counsel may rely as to factual matters upon
certificates of one or more officers of CNB and of public
officials and, as to litigation in which such counsel is not
counsel, on opinions of counsel handling such litigation,
copies of which opinions shall be delivered to First
Commercial.
(j) Financial Confirmation. The President or Chief
<PAGE>
Financial Officer of CNB shall have furnished to First
Commercial a certificate, dated the Closing Date, in form and
substance satisfactory to First Commercial, to the effect that
nothing has come to his attention that would indicate that (a)
during the period from December 31, 1995, to the Closing Date
there was any change in the capitalization of CNB, other than
as described in or contemplated by this Agreement, (b) any
material adjustments need to be made to the financial
statements for the period ending at the end of the most recent
month prior to the Closing Date in order for them to be in
conformity with generally accepted accounting principles
applied on a consistent basis with that of prior periods, or
(c) since December 31, 1995, there has occurred or there is
threatened to occur a matter that would have a material
adverse effect on the business, financial condition,
operations, results of operations or prospects of CNB.
(k) Audit of CNB Financial Statements. First Commercial
shall have the right to conduct, at its sole expense, an audit
of the CNB Financial Statements to the extent First Commercial
shall deem necessary (the "CNB Audit"). The CNB Audit shall
not have indicated any matter that may have a material adverse
effect on the business, financial condition, operations,
results of operations or prospects of CNB or that may
materially impair the contemplated benefits to First
Commercial of the transactions contemplated by this Agreement.
(l) Title Opinion. First Commercial shall have received
in form and substance satisfactory to its counsel an
attorney's opinion and/or title policy or policies issued by a
title insurance company acceptable to First Commercial
relating to all of the real property, except for other real
estate owned or leased by CNB or any CNB subsidiary.
(m) Pooling of Interests Opinion. Ernst & Young LLP,
certified public accountants, shall have delivered to First
Commercial, dated the Closing Date and satisfactory in form
and substance to First Commercial and its counsel, an opinion
to the effect that the transactions contemplated by this
Agreement shall be recorded on the books and records of First
Commercial and shall be reported in the financial statements
of First Commercial by the pooling of interest method of
accounting under generally accepted accounting principles, as
defined in APB Opinion No. 16, together with such additional
letters of assurance regarding the financial condition of CNB
as First Commercial shall reasonably request.
(n) Delivery of Continuity of Interest Letters.
(i) Each shareholder of CNB who is an executive
officer, director, or beneficial owner of ten percent (10%) or
more of CNB Stock shall have delivered to First Commercial a
letter representing and warranting that he will not sell,
transfer or in any way reduce his risk with respect to the
First <PAGE>
Commercial Stock received in connection with the Merger until
such time as First Commercial shall have published financial
results covering at least thirty (30) days of post-transaction
combined operations.
(ii) Each shareholder of CNB who is the beneficial
owner of five percent (5%) or more of CNB Stock shall have
delivered to First Commercial a letter representing and
warranting that (or, if such shareholder is delivering a
letter pursuant to Section 5.01(n)(i) above, include a
statement in such letter to the effect that) he has no present
intent to sell, transfer or otherwise dispose of any of the
First Commercial Stock to be received by him in connection
with the Merger nor will he sell, transfer or otherwise
dispose of more than fifty percent (50%) of such stock for a
period of at least one (1) year following the Closing.
(o) Tax Opinion. First Commercial shall have received a
favorable opinion of Friday, Eldredge & Clark, its counsel, to
the effect that the transactions contemplated herein will be
treated for federal income tax purposes as a tax-free
corporate reorganization within the meaning of Section
368(a)(1)(A) of the Code. The parties agree to utilize their
reasonable best efforts to consummate the transaction
described herein in a manner which will qualify as a tax-free
corporate reorganization within the meaning of the foregoing
provisions.
(p) Due Diligence Review. A comprehensive review of the
assets, books and records of CNB by First Commercial and its
counsel or agents shall not have indicated any matter that may
have a material adverse effect on the business, financial
condition, operations, results of operations or prospects of
CNB or that may materially impair the contemplated benefits to
First Commercial of the transactions contemplated by this
Agreement.
Section 5.02. Conditions Precedent to Obligation of CNB.
The obligation of CNB to consummate the transactions
contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every
one of the following conditions, all or any of which may be
waived, in whole or in part, by CNB in its sole and absolute
discretion:
(a) Performance of Covenants. Each of the acts and
undertakings of First Commercial and TBT to be performed on or
before the Closing Date shall have been duly performed, and an
authorized officer of First Commercial and TBT shall have
executed and delivered to CNB a certificate, dated as of the
Closing Date, to the effect that this condition has been
fulfilled.
(b) Representations True at Closing. The
representations and warranties made by First Commercial and
TBT pursuant to and
<PAGE>
in this Agreement shall be true and correct in all material
respects on the date hereof and shall be true and correct in
all material respects on the Closing Date hereunder with the
same force and effect as though such representations and
warranties had been made on and as of such time (except that
such representations and warranties may be untrue or incorrect
as a result of actions or transactions contemplated or
permitted by this Agreement or actions or transactions of
First Commercial made with the written consent of CNB), and an
authorized officer of First Commercial and TBT shall have
executed and delivered to CNB a certificate, dated as of the
Closing Date, to the effect that this condition has been
fulfilled.
(c) Changes in Financial Condition. Since December 31,
1995, there shall not have occurred any material adverse
change in the assets, financial condition, operations,
business or prospects of First Commercial and the First
Commercial Banks, taken as a whole, regardless of the cause.
(d) Certified Resolutions. First Commercial and TBT
shall have furnished to CNB a certified copy of resolutions
duly adopted by the Boards of Directors and stockholders, if
applicable, of First Commercial and TBT authorizing the
transactions contemplated by this Agreement.
(e) No Injunction. No action, proceeding, regulation or
legislation shall have been instituted or threatened before
any court, governmental agency or legislative body to enjoin,
restrain or prohibit, or to obtain substantial damages in
respect of, or which is related to or arises out of, this
Agreement or the consummation of the transactions contemplated
hereby, which, in the reasonable judgment of CNB, would make
it inadvisable to consummate such transactions (it being
understood and agreed that a written request by governmental
authorities for information with respect to this Agreement or
the transactions contemplated herein may not be deemed by CNB
to be a threat of material litigation or proceeding,
regardless of whether such request is received before or after
execution of this Agreement). CNB shall have received all
necessary federal and state governmental and regulatory
approvals for the transaction contemplated by this Agreement.
(f) No Misstatements or Omissions. CNB shall not have
discovered in any certificate or information furnished to CNB
hereunder or in any application or report to any governmental
agency or authority relating to the transactions contemplated
by this Agreement any untrue statement of a material fact or
any omission to state a material fact necessary in order to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading, and
such fact shall be certified to CNB by First Commercial.
(g) Opinion of First Commercial's Counsel. An opinion
of
<PAGE>
Friday, Eldredge & Clark, counsel for First Commercial and
TBT, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit B, shall have been delivered to
CNB. In rendering the opinions contained therein, such
counsel may rely as to factual matters upon certificates of
officers of First Commercial and its subsidiaries and of
public officials and, as to litigation in which they are not
counsel, on opinions of counsel handling such litigation,
copies of which opinions shall be delivered to CNB.
(h) Tax Opinion. CNB shall have received a favorable
opinion of Friday, Eldredge & Clark, counsel to First
Commercial, to the effect that the transactions contemplated
herein will be treated for federal income tax purposes as a
tax-free corporate reorganization within the meaning of
Section 368(a)(1)(A) of the Code. The parties agree to
utilize their reasonable best efforts to consummate the
transaction described herein in a manner which will qualify as
a tax-free corporate reorganization within the meaning of the
foregoing provisions.
(i) Securities Registration Opinion. CNB shall have
received an opinion of Friday, Eldredge & Clark, counsel to
First Commercial, to the effect that the shares of First
Commercial Stock issued to the shareholders of CNB pursuant to
this Agreement have been registered with the Securities and
Exchange Commission pursuant to Section 5 of the Securities
Act of 1933, as amended (the "Act"), and may be sold or
transferred by the shareholders of CNB without further
registration under Section 5 of the Act, except as may
otherwise be provided by Rules 144 and 145 promulgated under
the Act and the terms of the continuity of interest letters to
be delivered by certain shareholders of CNB pursuant to
Section 5.01(n) of this Agreement.
(j) No Adverse Change in Market Price for First
Commercial Stock. The average of the bid and asked prices of
First Commercial Stock on the Nasdaq National Market for the
twenty (20) business days preceding the Closing Date, based on
the average of such prices as calculated for each such date,
shall not be less than eighty-five percent (85%) of the
average of the bid and asked price on the date hereof, subject
to such adjustment as provided in Section 1.06 hereof.
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination. This Agreement
may be terminated and abandoned at any time prior to the
Closing, whether before or after approval of the Merger by
First Commercial or by the stockholders of CNB, upon the
occurrence of any of the following by written notice from
First Commercial to
<PAGE>
CNB (authorized by the Boards of Directors of First Commercial
and TBT), or by written notice from CNB to First Commercial
and TBT (authorized by the Board of Directors of CNB), as the
case may be:
(a) If any condition to the obligations of First
Commercial set forth in Section 5.01 is not satisfied at the
time or times contemplated thereby and such condition is not
waived by First Commercial or if any condition to the
obligations of CNB as set forth in Section 5.02 is not
satisfied at the time or times contemplated thereby and such
condition is not waived by CNB, it being understood that each
party's right to terminate under this Section 6.01(a) shall
relate only to conditions to that party's obligations;
(b) In the event of a material breach by the other
of any representation, warranty or agreement contained in this
Agreement that is not cured within 20 days of the time that
written notice of such breach is received by such other party
from the party giving notice (except that any such notice
shall not have the effect of extending the time for
termination set forth in Section 6.01(c) hereof);
(c) By either CNB or First Commercial if the
Closing Date shall not have occurred, for reasons other than a
breach of this Agreement by the party seeking termination, on
or before December 31, 1996, or such later date agreed to in
writing by the parties; or
(d) By First Commercial if there shall have been
any action taken, or any statute, rule or regulation proposed
or enacted, by any federal, state or foreign government or
governmental or administrative agency that would (i) render
First Commercial unable to satisfy its obligations hereunder,
(ii) in the sole, but reasonable, judgment of First
Commercial, prohibit or delay for four months after the
decision to terminate, or longer, consummation of the
transactions contemplated by this Agreement, or (iii)
materially impair the contemplated benefits to First
Commercial of the transactions contemplated by this Agreement
by limiting the location at which or manner in which First
Commercial presently conducts its business or by requiring
First Commercial, TBT or CNB to undertake any material changes
in personnel, organizational structure, internal controls,
accounting systems, operations or policies, or otherwise.
(e) By First Commercial if there shall have
occurred:
(i) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the
United States,
<PAGE>
(ii) a commencement of a war or national
calamity involving the United States, or
(iii) a material change in the United States or
any other currency exchange rates or a suspension of, or
limitation on, the markets thereof;
or, in the case of any of the foregoing existing at the time
of this Agreement, a material acceleration or worsening
thereof.
Any party desiring to terminate this Agreement pursuant
to any of the foregoing clauses shall give notice of such
termination to the other party in accordance with Section
8.02.
Section 6.02. Termination by Mutual Agreement. This
Agreement may be terminated and abandoned (whether before or
after approval of the Merger by the shareholder of TBT or by
the stockholders of CNB) by mutual written consent of CNB and
First Commercial and authorized by their respective Boards of
Directors.
Section 6.03. Effect of Termination for Non-Willful
Breach. In the event of termination of this Agreement caused
otherwise than by a willful breach of this Agreement by any of
the parties hereto, this Agreement shall cease and terminate,
the acquisition of CNB as provided herein shall not be
consummated, and none of CNB, First Commercial, or TBT shall
have any liability to any other party under this Agreement of
any nature whatever, provided, however, that the duties of the
parties with respect to confidential information as set forth
in Section 8.10 shall survive any such termination.
Section 6.04. Effect of Termination for Willful Breach.
If termination of this Agreement shall have been caused by
willful breach of this Agreement, then, in addition to other
remedies as may be available at law or equity for breach of
this Agreement, the party so found to have willfully breached
this Agreement shall indemnify the other parties for their
respective costs, fees and expenses of their counsel,
accountants and other experts and advisors, as well as fees
and expenses incident to negotiation, preparation and
execution of this Agreement, and all parties shall be bound by
the confidentiality obligations provided in Section 8.10 of
this Agreement.
Section 6.05. Enforcement Expenses. The prevailing
party in any suit or action to enforce this Agreement or to
obtain any remedy which may be available as a result of a
breach of any representation, warranty or covenant contained
herein prior to Closing shall be entitled to recover its court
costs and reasonable attorneys' fees, including costs and
attorneys' fees on appeal from any such suit or action.
<PAGE>
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers. CNB represents and warrants that
no broker or finder has acted for it in connection with the
execution and delivery of this Agreement or the transactions
contemplated hereby.
Section 7.02. Expenses. Each party hereto will pay all
attorneys' and accountants' fees and all other costs and
expenses incurred by it in connection with this Agreement and
the transactions contemplated hereby, except as provided in
Article VI hereof, and except as limited by Section 4.01(i).
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements. Neither First Commercial
nor CNB will make any press release or other announcement to
the public concerning the transactions contemplated by this
Agreement without the prior written consent of the other
party, except upon the written opinion of counsel to the
effect that public disclosure is required by law.
Section 8.02. Notices. All notices, requests, demands,
and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered or sent
by first class registered or certified mail, postage prepaid,
with return receipt requested, or by recognized overnight
courier as follows:
(a) If to CNB to:
City National Bank
1125 Highway 110 North
Whitehouse, Texas 75791
Attention: Mr. Tom Tatum
(b) If to First Commercial, to:
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
Attention: Mr. J. Lynn Wright
with copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201
<PAGE>
or to such other address as any person may designate in
writing to the other persons at the addresses listed above, in
accordance with this Section 8.02.
Section 8.03. Binding Effect. All of the terms and
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
Section 8.04. Headings. The Article, Section, paragraph
and other headings in this Agreement are inserted solely as a
matter of convenience and for reference and are not a part of
this Agreement.
Section 8.05. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute
one and the same instrument.
Section 8.06. Integration of Agreement. This Agreement,
including the Exhibits hereto, constitutes the entire
understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements,
arrangements or communications, oral or written, between the
parties hereto with respect to the subject matter hereunder.
Section 8.07. Amendments; Waivers. Any of the terms or
conditions of this Agreement may be waived, but only in
writing of the party against which the enforcement of such
waiver is sought, and any such terms or conditions of this
Agreement may be amended or modified in whole or in part at
any time by agreement in writing, executed in the same manner
as this Agreement.
Section 8.08. Governing Law. This Agreement shall be
governed by and construed under the laws of the State of
Arkansas and applicable laws of the United States of America.
Section 8.09. Incorporation by Reference. Any and all
exhibits attached hereto are incorporated herein by reference
thereto as though fully set forth at the point referred to in
this Agreement.
Section 8.10. Confidentiality of Information. Until the
Closing Date, or in the event of termination of this Agreement
without consummation of the transactions contemplated hereby,
First Commercial, TBT and CNB hereby covenant and agree that
each of them and their respective agents shall keep
confidential any information (unless readily ascertainable
from public or published information or sources) obtained from
the other parties or their agents, except for disclosures of
information expressly allowed by such other party. In the
event this Agreement is terminated, then promptly after such
termination
<PAGE>
First Commercial, TBT or CNB (as the case may be) and their
respective agents shall return to the other party hereto all
documents, work papers and other written material obtained
from such other party or its agents in connection with this
Agreement and not theretofore made public (including all
copies thereof).
Section 8.11. No Assignment. Neither this Agreement nor
any rights or obligations of any party hereunder or
thereunder, may be assigned by the parties, by operation of
law or otherwise, except with the written consent of the other
party.
Section 8.12. Severability. If any portion or provision
of this Agreement is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any
jurisdiction, such portion or provision shall be ineffective
as to that jurisdiction to the extent of such invalidity,
illegality or unenforceability, without affecting in any way
the validity or enforceability of the remaining portions or
provisions in such jurisdiction or rendering that or any other
portions or provisions of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
Section 8.13. Survival of Representations and
Warranties. None of the representations, warranties,
obligations, covenants and agreements contained in this
Agreement, or in any instrument or other document delivered
pursuant to this Agreement, shall survive the Closing.
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused this
Agreement to be executed and delivered in counterparts as of
the date first above written.
FIRST COMMERCIAL CORPORATION
By: /s/ J. Lynn Wright
Title: Chief Financial Officer
ATTEST:
/s/ Donna B. Rogers
Secretary
TYLER BANK AND TRUST, N.A.
TYLER, TEXAS
By: /s/ Neil S. West
Title: Chief Executive Officer
ATTEST:
/s/ Dana Gregory
Secretary
CITY NATIONAL BANK,
WHITEHOUSE, TEXAS
By: /s/ Clyde A. Weaver
Title: Chairman of the Board
ATTEST:
/s/ Nancy Duress
Secretary
<PAGE>
EXHIBIT A
Substantive Provisions of CNB's Counsel
The opinion of Tom Tatum, Attorney-at-Law, Counsel for
CNB, shall be dated the Closing Date and shall opine, in
substance, as follows:
1. CNB has been duly organized and is a national
banking association validly existing in good standing under
the laws of the United States of America. CNB has full
corporate power to own its property and assets and to carry on
its business as presently conducted.
2. CNB has full corporate power to execute and deliver
this Agreement. All corporate action of CNB required to duly
authorize and execute this Agreement has been taken. This
Agreement is valid and binding on CNB and is enforceable in
accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and to legal and equitable limitations on the
availability of injunctive relief, specific performance and
other equitable remedies, which are available only in the
discretion of a court.
3. All shares of CNB Stock issued and outstanding as of
the Closing Date are duly authorized, validly issued, fully
paid and not subject to assessment. None of such shares have
been issued in violation of any preemptive rights of
shareholders. To the knowledge of such counsel, CNB has no
outstanding and is not obligated to issue subscriptions,
options or other arrangements or commitments obligating it to
issue or dispose of any shares of its common stock.
4. The consummation of the Merger will not violate any
provision of CNB's Articles of Association or Bylaws, or
violate any provision of, or result in the acceleration of any
material obligation under, any mortgage, loan agreement,
order, judgment, law or decree known to such counsel to which
CNB is a party or by which it is bound, and will not violate
or conflict with any other material restriction of any kind or
character known to such counsel to which CNB is subject.
5. To the knowledge of such counsel, without
independent verification, CNB has all licenses, permits,
approvals and other authorizations from Federal and state
agencies and authorities having jurisdiction in the premises
required in the conduct of its business as presently being
conducted.
6. To the knowledge of such counsel, there is no claim,
action, suit or proceeding pending or threatened against CNB
which, if adversely determined, would have a material adverse
<PAGE>
effect on the business, assets, operations or financial
condition of CNB, taken as a whole, would question the
validity of the Agreement or would prevent, hinder or delay
consummation of the transactions contemplated by the
Agreement.
7. To the best of such counsel's knowledge, CNB is, in
the conduct of its business, in material compliance with all
applicable Federal, state and local laws, statutes, ordinances
and regulations, the failure to comply with which would
materially adversely affect its business or the aggregate
value of its properties or assets.
In rendering such opinions, such counsel may rely as to
factual matters upon certificates of one or more officers of
CNB and of public officials and, as to litigation where they
are not counsel of record, on opinions of counsel handling
such litigation, copies of which opinions shall be delivered
to First Commercial.
<PAGE>
EXHIBIT B
Substantive Provisions of First Commercial
Counsel's Opinion
The opinion of Friday, Eldredge & Clark, Counsel for
First Commercial, shall be dated the Closing Date and shall
opine, in substance, as follows:
1. First Commercial and TBT have been duly organized
and are a corporation and national banking association,
respectively, validly existing in good standing under the laws
of the State of Arkansas and the laws of the United States of
America, respectively. Each of First Commercial and TBT has
full corporate power to own its property and assets and to
carry on its business as presently conducted.
2. All corporate action of First Commercial and TBT
required to effectuate the Merger contemplated by the
Agreement has been taken. The Agreement is valid and binding
on First Commercial and TBT and is enforceable in accordance
with its terms, subject as to the enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally
and to legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable
remedies, which are available only in the discretion of a
court.
3. The consummation of the Merger will not violate any
provision of the Articles of Incorporation or Association or
Bylaws of First Commercial or of TBT or violate any provision
of, or result in the acceleration of any material obligation
under, any mortgage, loan agreement, order, judgment, law or
decree known to such counsel to which First Commercial or TBT
is a party or by which either is bound, and will not violate
or conflict with any other material restriction of any kind or
character known to such counsel to which First Commercial or
TBT is subject.
4. To the knowledge of such counsel, there is no claim,
action, suit or proceeding pending or threatened against First
Commercial or TBT which, if adversely determined, would
question the validity of the Agreement or would prevent,
hinder or delay consummation of the transactions contemplated
by the Agreement.
5. No facts have come to such counsel's attention that
lead them to believe that the Joint Proxy Statement/Prospectus
included within the Registration Statement on Form S-4 filed
in connection with this Agreement (other than the financial
and statistical data contained or incorporated in such Joint
Proxy Statement/Prospectus, as to which such counsel need not
express
<PAGE>
any opinion or belief) contains as of the Closing Date any
untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
6. The shares of First Commercial Stock to be issued to
the shareholders of CNB following the Closing will be fully
paid, validly authorized and duly issued and are not subject
to assessment and are not issued in violation of any
preemptive rights of First Commercial's shareholders. Such
shares have been registered with the Securities and Exchange
Commission pursuant to Section 5 of the Securities Act of
1933, as amended (the "Act"), and may be sold or transferred
by the shareholders of CNB without further registration under
Section 5 of the Act except as may otherwise be provided by
Rules 144 and 145 promulgated under the Act and the terms of
the continuity of interest letters delivered by certain
stockholders of CNB pursuant to Section 5.01(n) of the
Agreement.
In rendering such opinions, such counsel may rely as to
factual matters upon certificates of officers of First
Commercial and of public officials and, as to litigation where
they are not counsel of record, on opinions of counsel
handling such litigation, copies of which opinions shall be
delivered to CNB.
EXHIBIT 2.2
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST COMMERCIAL CORPORATION;
STONE FORT NATIONAL BANK, NACOGDOCHES, TEXAS;
AND
SECURITY NATIONAL BANK, NACOGDOCHES, TEXAS
Providing for the merger of
Security National Bank, Nacogdoches, Texas
with and into
Stone Fort National Bank, Nacogdoches, Texas
Under the Charter and Charter Number and Title of
"Stone Fort National Bank, Nacogdoches, Texas"
Date: June 28, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE PLAN OF MERGER
Section 1.01. Stone Fort National Bank . . . . . . . . . 2
Section 1.02. The Merger . . . . . . . . . . . . . . . . 2
Section 1.03. Effect of the Merger . . . . . . . . . . . 2
Section 1.04. Consummation of the Merger . . . . . . . . 3
Section 1.05. Articles of Association; Bylaws;
Directors and Officers . . . . . . . . . . 3
Section 1.06. Merger Consideration; Conversion of
Securities, Rights of Dissenting
Shareholders . . . . . . . . . . . . . . 3
Section 1.07. Exchange of Certificates . . . . . . . . . 4
Section 1.08. Rights of SNB Shareholders to Dividends . 6
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of SNB . 6
(a) Authority for Transaction . . . . . . . 6
(b) Organization and Capitalization . . . 7
(c) Financial Statements . . . . . . . . 7
(d) Dividends . . . . . . . . . . . . . . 8
(e) Loans . . . . . . . . . . . . . . . . 8
(f) Taxes . . . . . . . . . . . . . . . . 8
(g) Litigation and Regulatory Matters . . 9
(h) Compliance . . . . . . . . . . . . . 9
(i) Properties and Other Assets . . . . . 10
(j) Agreement Does Not Violate Other
Instruments . . . . . . . . . . . . . 11
(k) Insurance and Fidelity Bonds . . . . 11
(l) Retirement Plans . . . . . . . . . . 12
(m) Employee Relations . . . . . . . . . 13
(n) No Material Events . . . . . . . . . 13
(o) Liabilities . . . . . . . . . . . . . 14
(p) Marketability of Securities . . . . . 15
(q) Interested Party Transactions . . . . 15
(r) Material Contracts . . . . . . . . . 15
(s) Environmental Matters . . . . . . . . 16
(t) Property Sites Owned by SNB . . . . . 17
(u) Representations Not Misleading . . . 17
(v) Regulatory Approval . . . . . . . . . 17
<PAGE>
Section 3.02. Representations and Warranties of First
Commercial . . . . . . . . . . . . . . . . 17
(a) Organization and Capitalization of
First Commercial . . . . . . . . . . . 17
(b) Organization of Stone Fort . . . . . 18
(c) Authority for Transaction . . . . . . 18
(d) Agreements Do Not Violate Other
Instruments . . . . . . . . . . . . . 19
(e) Representations Not Misleading . . . 19
(f) Financial Statements . . . . . . . . 19
(g) Litigation and Regulatory Matters . . 20
(h) Compliance . . . . . . . . . . . . . 21
(i) No Material Events . . . . . . . . . 21
(j) Taxes . . . . . . . . . . . . . . . . 21
(k) Insurance . . . . . . . . . . . . . . 21
(l) ERISA Plans . . . . . . . . . . . . . 22
(m) Employee Relations . . . . . . . . . 22
(n) Properties and Other Assets . . . . . 22
(o) Environmental Matters . . . . . . . . 22
(p) Regulatory Approval . . . . . . . . . 23
(q) Availability of First Commercial
Stock . . . . . . . . . . . . . . . . 23
ARTICLE IV
COVENANTS
Section 4.01. Covenants of SNB . . . . . . . . . . . . . 23
(a) Approval of Transaction and Consents 23
(b) Access to Corporate Records . . . . . 23
(c) Monthly Financial Statements . . . . 24
(d) Closing Financial Statements . . . . 24
(e) Conduct of Business . . . . . . . . . 24
(f) Cooperation and Furnishing
Information . . . . . . . . . . . . . 25
(g) Related Party Transactions . . . . . 26
(h) Notice of Changes . . . . . . . . . . 26
(i) Limit on SNB's Attorneys' Fees . . . 26
(j) Completion and Delivery of SNB Disclosure
Statements . . . . . . . . . . . . . 26
(k) Fairness Opinion . . . . . . . . . . 26
Section 4.02. Covenants of First Commercial . . . . . . 26
(a) Consents and Approvals . . . . . . . 27
(b) Quarterly Reports; Current Reports . 27
(c) Conduct of Business . . . . . . . . . 27
(d) Notice of Changes . . . . . . . . . . 27
(e) Registration of the First Commercial
Stock . . . . . . . . . . . . . . . 27
(f) Filings for Regulatory Approval . . . 28
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of First
Commercial . . . . . . . . . . . . . . . . 28
(a) Performance of Covenants . . . . . . 28
(b) Representations True at Closing . . . 28
(c) Changes in Financial Condition . . . 28
(d) Certified Resolutions . . . . . . . . 29
(e) Government Approvals; Other Consents 29
(f) No Injunction . . . . . . . . . . . . 29
(g) Litigation . . . . . . . . . . . . . 29
(h) No Misstatements or Omissions . . . . 29
(i) Opinion of SNB's Counsel . . . . . . 29
(j) Financial Confirmation . . . . . . . 29
(k) Audit of SNB Financial Statements . . 30
(l) Title Opinion . . . . . . . . . . . . 30
(m) Pooling of Interests Opinion . . . . 30
(n) Delivery of Continuity of Interest
Letters . . . . . . . . . . . . . . . 30
(o) Tax Opinion . . . . . . . . . . . . . 31
Section 5.02. Conditions Precedent to Obligation of SNB.
31
(a) Performance of Covenants . . . . . . 31
(b) Representations True at Closing . . . 31
(c) Changes in Financial Condition . . . 32
(d) Certified Resolutions . . . . . . . . 32
(e) No Injunction . . . . . . . . . . . . 32
(f) No Misstatements or Omissions . . . . 32
(g) Opinion of First Commercial's Counsel 32
(h) Tax Opinion . . . . . . . . . . . . . 33
(i) Securities Registration Opinion . . . 33
(j) No Adverse Change in Market Price for
First Commercial Stock . . . . . . . 33
Section 5.03. Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . 33
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination . . . . . . . . 34
Section 6.02. Termination by Mutual Agreement . . . . . 35
Section 6.03. Effect of Termination for Non-Willful Breach
35
Section 6.04. Effect of Termination for Willful Breach . 36
Section 6.05. Enforcement Expenses . . . . . . . . . . . 36
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers . . . . . . . . . . . . . . . . . 36
Section 7.02. Expenses . . . . . . . . . . . . . . . . . 36
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements . . . . . . . . . . . . . . 36
Section 8.02. Notices . . . . . . . . . . . . . . . . . 37
Section 8.03. Binding Effect . . . . . . . . . . . . . . 37
Section 8.04. Headings . . . . . . . . . . . . . . . . . 37
Section 8.05. Counterparts . . . . . . . . . . . . . . . 37
Section 8.06. Integration of Agreement . . . . . . . . . 38
Section 8.07. Amendments; Waivers . . . . . . . . . . . 38
Section 8.08. Governing Law . . . . . . . . . . . . . . 38
Section 8.09. Incorporation by Reference . . . . . . . . 38
Section 8.10. Confidentiality of Information . . . . . . 38
Section 8.11. No Assignment . . . . . . . . . . . . . . 38
Section 8.12. Severability . . . . . . . . . . . . . . . 38
Section 8.13. Survival of Representations and Warranties 39
Section 8.14. Exchange Agreement . . . . . . . . . . . . 39
Section 8.15. Best Good Faith Efforts . . . . . . . . . 39
<PAGE>
List of Exhibits:
A Form of Opinion of Zeleskey, Cornelius, Hallmark, Roper
& Hicks L.L.P. (Delivered Pursuant to Section 5.01(i))
B Form of Opinion of Friday, Eldredge & Clark (Delivered
Pursuant to Section 5.02(g)
<PAGE>
DEFINITIONS
Certificates . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . 3
Closing Financial Statements . . . . . . . . . . . . . . 24
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenting Shares . . . . . . . . . . . . . . . . . . . . 3
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exchange Agreement . . . . . . . . . . . . . . . . . . . 4
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . 5
First Commercial . . . . . . . . . . . . . . . . . . . . 1
First Commercial Banks . . . . . . . . . . . . . . . . . 20
First Commercial Financial Statements . . . . . . . . . . 19
First Commercial Stock . . . . . . . . . . . . . . . . . 1
Insurance Policies . . . . . . . . . . . . . . . . . . . 11
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . 4
Monthly Financial Statements . . . . . . . . . . . . . . 24
Pension Plan . . . . . . . . . . . . . . . . . . . . . . 12
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SFAS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SNB . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SNB Audit . . . . . . . . . . . . . . . . . . . . . . . . 30
SNB Balance Sheet . . . . . . . . . . . . . . . . . . . . 9
SNB Financial Statements . . . . . . . . . . . . . . . . 7
SNB Share . . . . . . . . . . . . . . . . . . . . . . . . 3
SNB Shares . . . . . . . . . . . . . . . . . . . . . . . 3
SNB Stock . . . . . . . . . . . . . . . . . . . . . . . . 1
Stone Fort . . . . . . . . . . . . . . . . . . . . . . . 1
Surviving Bank . . . . . . . . . . . . . . . . . . . . . 2
transfer agent . . . . . . . . . . . . . . . . . . . . . 4
<PAGE>
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST COMMERCIAL CORPORATION;
STONE FORT NATIONAL BANK, NACOGDOCHES, TEXAS;
AND
SECURITY NATIONAL BANK, NACOGDOCHES, TEXAS
Providing for the merger of
Security National Bank, Nacogdoches, Texas
with and into
Stone Fort National Bank, Nacogdoches, Texas
Under the Charter and Charter Number and Title of
"Stone Fort National Bank, Nacogdoches, Texas"
This PLAN AND AGREEMENT OF MERGER is made as of this
28th day of June, 1996, among FIRST COMMERCIAL CORPORATION,
an Arkansas corporation having its principal office in Little
Rock, Arkansas ("First Commercial"), STONE FORT NATIONAL
BANK, Nacogdoches, Texas, a national banking association
organized under the laws of the United States of America and
subsidiary of First Commercial having its principal office in
Nacogdoches, Texas ("Stone Fort"), and SECURITY NATIONAL
BANK, Nacogdoches, Texas, a national banking association
organized under the laws of the United States of America
having its principal office in Nacogdoches, Texas ("SNB").
W I T N E S S E T H:
WHEREAS, for good and sound reasons germane to the
business of the parties hereto, the Boards of Directors of
First Commercial, Stone Fort and SNB have each determined
that it would be in the best interests of such corporations
and banks, their respective shareholders, subsidiaries and
customers and the communities they serve for SNB to be merged
with and into Stone Fort, with the stockholders of SNB
receiving shares of common stock of First Commercial, par
value $3.00 per share ("First Commercial Stock") in exchange
for the outstanding shares of common stock of SNB, par value
$5.00 per share ("SNB Stock"), owned by the stockholders of
SNB (the "Merger"); and
WHEREAS, the Boards of Directors of First Commercial,
Stone Fort and SNB have, or will have prior to consummation
of the transactions contemplated hereby, adopted resolutions
approving the Merger upon the terms and conditions set forth
in this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of these premises and
the mutual promises, representations, covenants and actions
hereinafter set forth, the parties hereto, each intending to
be legally bound hereby, agree as follows:
ARTICLE I
THE PLAN OF MERGER
Section 1.01. Stone Fort National Bank. Stone Fort
is a duly organized national banking association and
currently is an indirect subsidiary of First Commercial but
will be, prior to consummation of the Merger, a wholly-owned
subsidiary of First Commercial. First Commercial shall not
permit Stone Fort to conduct any business operations that
would impair or adversely affect the consummation of the
Merger. Prior to consummation of the Merger, First
Commercial shall, and shall cause Stone Fort to, take all
necessary and appropriate action to ratify, approve and adopt
this Agreement and to undertake the performance of all the
terms and conditions of this Agreement to be performed by
Stone Fort.
Section 1.02. The Merger. At the Effective Time (as
defined in Section 1.04 hereof) in accordance with this
Agreement and the provisions of the Act of November 7, 1918,
as amended (12 U.S.C. Section 215a), SNB shall be merged with
and into Stone Fort pursuant to this Agreement, the separate
existence of SNB shall cease, and Stone Fort shall continue
as the surviving national banking association under the
corporate name it possesses immediately prior to the
Effective Time. Stone Fort hereinafter may sometimes be
referred to as the "Surviving Bank." The business of the
Surviving Bank shall be that of a national banking
association, and the business shall be conducted at its main
office, which shall be located at 300 E. Main Street,
Nacogdoches, Texas 75961. The authorized capital stock and
the number of shares of outstanding capital stock of Stone
Fort immediately prior to the Merger shall be the same for
Stone Fort following the Merger.
Section 1.03. Effect of the Merger. At and from and
after the Effective Time the effect of the Merger shall be
that (i) the Surviving Bank shall possess all the rights,
privileges and franchises possessed by each of Stone Fort and
SNB, (ii) all of the property and assets of whatsoever kind
or description of each of Stone Fort and SNB, and all debts
due on whatever account to any of them, including
subscriptions for shares or other choses in action belonging
to any of them, shall be taken
<PAGE>
and be deemed to be transferred to, and vested in, the
Surviving Bank without further act or deed, and (iii) the
Surviving Bank shall be responsible for all of the
liabilities and obligations of each of Stone Fort and SNB, as
provided by applicable law, in the same manner as if the
Surviving Bank had itself incurred such liabilities or
obligations; but the liabilities of Stone Fort and SNB, or of
their shareholders, directors or officers, shall not be
affected, nor shall the rights of the creditors thereof, or
of any persons dealing with such corporations be impaired by
the Merger, and any claim existing, or action or proceeding
pending, by or against either of Stone Fort or SNB may be
prosecuted to judgment as if the Merger had not taken place,
or the Surviving Bank may be proceeded against, or
substituted, in place of Stone Fort or SNB, as the case may
be.
Section 1.04. Consummation of the Merger. The Merger
shall become effective at the time specified in an approval
of merger issued by the Comptroller of the Currency of the
United States. A closing (the "Closing") will be held on the
date of the effective time specified in the approval of
merger issued by the Comptroller of the Currency of the
United States, subject to the fulfillment of each condition
set forth in Article V herein ("Closing Date"). The parties
hereto will use their best efforts to accomplish the Closing
before December 31, 1996. The "Effective Time" shall be 5:00
p.m., Little Rock time, on the Closing Date. The Closing
will take place on the Closing Date at the offices of Friday,
Eldredge & Clark in Little Rock, Arkansas, or at such other
mutually agreeable place.
Section 1.05. Articles of Association; Bylaws;
Directors and Officers. The Articles of Association of Stone
Fort, as in effect immediately prior to the Effective Time,
shall be the Articles of Association of the Surviving Bank
after the Effective Time until thereafter amended as provided
therein and under national banking laws. The Bylaws of Stone
Fort, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Bank after the Effective
Time until thereafter amended as provided therein and under
national banking laws. The directors and officers of Stone
Fort immediately prior to the Effective Time shall be the
directors and officers of the Surviving Bank after the
Effective Time until their successors are elected and
qualified; additionally, individuals currently serving on the
SNB Board may also serve as directors of the Surviving Bank,
however the identity of such individuals has not yet been
determined.
Section 1.06. Merger Consideration; Conversion of
Securities, Rights of Dissenting Shareholders. At the
Effective Time, by virtue of the Merger and without any
action on the part of First Commercial, Stone Fort, SNB or
the holders of any of the securities of such corporations or
banks:
<PAGE>
(a) Each share of SNB Stock (herein sometimes referred
to as "SNB Share" in the singular and "SNB Shares" in the
plural) issued and outstanding immediately prior to the
Effective Time (other than shares as to which dissenters'
rights have been perfected and not withdrawn or otherwise
forfeited under 12 U.S.C. Section 215a(b), (c) and (d)
("Dissenting Shares")) shall be canceled and extinguished and
be converted into the right to receive that number of shares
of First Commercial Stock equal to the result obtained by
dividing (Y) 241,171 (the number of shares of First
Commercial Stock to be issued in the Merger), subject to
adjustment as hereinafter provided, by (Z) the number of
outstanding shares of SNB Stock on the Closing Date (such
consideration, as well as any payment due in lieu of
fractional shares of First Commercial Stock as hereinafter
provided being herein referred to as the "Merger
Consideration"); provided, however, that in the event after
the date hereof the shares of First Commercial Stock at any
time outstanding shall be subdivided, by reclassification,
recapitalization, stock dividend, or otherwise, into a
greater number of shares without the actual receipt by First
Commercial of consideration (at least equal to book value)
for the additional number of shares so issued, or the number
of shares of First Commercial Stock at any time outstanding
shall be reduced, by reclassification, recapitalization,
reduction of capital stock, or otherwise, or the outstanding
shares of First Commercial Stock shall be reclassified or
changed other than in such manner, then the number of shares
of First Commercial Stock to be issued in the Merger shall be
adjusted up or down, as appropriate.
(b) No fractional shares of First Commercial Stock
shall be issued as part of the Merger, and in lieu of
fractional shares, First Commercial shall pay a sum in cash
equal to the value of any such fractional share of First
Commercial Stock to which any holder of SNB Stock shall be
entitled determined on the basis of the last reported sales
price on the Closing Date for shares of First Commercial
Stock on the Nasdaq National Market.
(c) At and after the Effective Time, there shall be no
transfers on the stock transfer books of SNB with respect to
shares of SNB Stock issued and outstanding immediately prior
to the Effective Time. If, after the Effective Time,
certificates formerly representing shares of SNB Stock are
presented to First Commercial or its transfer agent, they
shall be canceled and exchanged for the Merger Consideration
as provided in Section 1.07 following, subject to applicable
law in the case of Dissenting Shares.
<PAGE>
(d) The rights of holders of Dissenting Shares shall be
governed by 12 U.S.C. Section 215a(b), (c) and (d).
Section 1.07. Exchange of Certificates.
(a) First Commercial shall deposit or cause to be
deposited in trust with First Commercial Trust Company, N.A.
(herein the "transfer agent"), pursuant to an exchange agent
agreement in the form mutually agreeable to First Commercial
and SNB (the "Exchange Agreement"), prior to the Effective
Time, cash in an aggregate amount estimated to be sufficient
to make the cash payments in lieu of fractional shares of
First Commercial Stock pursuant to Section 1.06 hereof and to
make the appropriate cash payments, if any, to holders of
Dissenting Shares (such amounts being hereinafter referred to
as the "Exchange Fund"). The transfer agent shall, pursuant
to irrevocable instructions jointly given by First Commercial
and SNB, promptly make the payments in lieu of fractional
shares out of the Exchange Fund upon surrender of SNB's
Shares in accordance with Section 1.07(b). Payments to
dissenting shareholders shall be made as required by Article
5.12 of the Texas Business Corporation Act. The Exchange
Fund shall not be used for any other purpose, except as
provided in this Agreement.
(b) Promptly after the Effective Time, the transfer
agent shall mail to each record holder of an outstanding
certificate or certificates of SNB Shares which as of the
Effective Time represented SNB Shares (the "Certificates"), a
form letter of transmittal approved by First Commercial and
SNB (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the transfer
agent) and instructions for use in effecting the surrender of
the Certificates for payment therefor. Upon surrender to the
transfer agent of a Certificate, together with such letter of
transmittal duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor cash and
First Commercial Stock in the amount provided in Section
1.06, and such Certificate shall forthwith be canceled.
First Commercial shall provide the transfer agent with
certificates for First Commercial Stock, as requested by the
transfer agent, in the amounts provided in Section 1.06
hereof. No interest will be paid or accrued on the cash
payable upon surrender of the Certificates and no dividend
will be disbursed with respect to the shares of First
Commercial Stock until the holder's SNB Shares are
surrendered in exchange therefor. If payment or delivery of
First Commercial Stock is to be made to a person other than
the person in whose name the
<PAGE>
Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered
shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall
pay any transfer or other taxes required by reason of the
payment and delivery of First Commercial Stock to a person
other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this
Section 1.07, each Certificate (other than Certificates
representing Dissenting Shares) shall represent for all
purposes the right to receive the Merger Consideration
without any interest thereon.
(c) After the Effective Time, the stock transfer ledger
of SNB shall be closed and, as hereinabove provided, there
shall be no transfers on the stock transfer books of SNB of
the SNB Shares which were outstanding immediately prior to
such time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be
promptly presented to the transfer agent and exchanged as
provided in this Section 1.07.
(d) Any portion of the Exchange Fund (including the
proceeds of any investments thereof) that remains unclaimed
by the shareholders of SNB for six months after the Effective
Time shall be paid to First Commercial, and the holders of
SNB Shares not theretofore presented to the transfer agent
shall look to First Commercial only, and not the transfer
agent, for the payment of any Merger Consideration in respect
of such shares.
(e) Notwithstanding the foregoing, neither First
Commercial's transfer agent nor any party hereto shall be
liable to a holder of SNB Shares for any of the Merger
Consideration delivered to a public official pursuant to
applicable abandoned property, escheat, and similar laws.
Section 1.08. Rights of SNB Shareholders to Dividends.
Holders of SNB Stock on the Closing Date shall be entitled to
receive, subject to applicable abandoned property, escheat
and similar laws, payment of dividends declared by First
Commercial on or subsequent to the Closing Date, but delivery
of payment of such dividends will not be required of First
Commercial until such persons have delivered their
certificates representing shares of SNB Stock in exchange for
certificates representing shares of First Commercial Stock in
accordance with the provisions of Section 1.07 above.
Notwithstanding the foregoing, First Commercial shall not be
liable to a holder of shares of SNB Stock for any such
dividends delivered to a public official pursuant to any
abandoned property, escheat and similar laws. <PAGE>
ARTICLE II
APPROVAL OF MERGER
Section 2.01. Shareholder Approval. The shareholders
owning at least two-thirds of the capital stock outstanding
of SNB and the sole shareholder of Stone Fort shall approve
the Merger in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of SNB.
No representations or warranties are made by any director,
officer, employee or shareholder of SNB as an individual.
SNB represents and warrants to First Commercial the
following, each of which representations and warranties shall
be mutual and continuing and shall be true as of the date of
this Agreement and on the Closing Date:
(a) Authority for Transaction. The Board of Directors
of SNB has duly approved this Agreement and the transactions
contemplated hereby, and upon the execution of this Agreement
by a duly authorized officer of SNB and the approval of this
Agreement and such transactions by the stockholders of SNB
and the appropriate regulatory authorities, this Agreement
will constitute the valid and binding obligation of SNB
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from
time to time in effect which affect creditors' rights
generally and by legal and equitable limitations on the
availability of injunctive relief, specific performance and
other equitable remedies which are available only in the
discretion of the court. SNB has full corporate power,
authority and legal right to enter into this Agreement and,
upon approval thereof by its stockholders and by appropriate
regulatory authorities, to consummate the transactions
contemplated hereby.
(b) Organization and Capitalization.
(i) SNB has delivered to First Commercial
complete and correct copies of the Articles of Association,
and all amendments thereto, and Bylaws of SNB as in effect on
the date hereof. SNB is a national banking association duly
organized and validly existing in good standing under the
laws of the United States of America, with full corporate
power and authority to carry on its business as and where it
is now being conducted and to own and lease its properties
and assets in the places where such properties and assets are
now or will be owned
<PAGE>
or leased. As of the date of this Agreement, the authorized
capital stock of SNB consists of 230,000 shares of SNB Stock,
of which 230,000 shares are issued and outstanding. All such
issued and outstanding shares of SNB Stock have been fully
paid, are validly authorized and duly issued and are
non-assessable, and such shares of SNB Stock have not been
issued in violation of any preemptive rights of stockholders.
There shall be 230,000 shares of SNB Stock outstanding at the
Closing, and such shares shall be delivered to First
Commercial free of any liens or other encumbrances. Except
as set forth in Schedule 3.01(b) to the disclosure statement
delivered by SNB pursuant to Section 4.01(j) hereof (the "SNB
Disclosure Statement"), SNB does not have outstanding any
subscriptions, options or other arrangements or commitments
obligating it to issue or dispose of, and it is not obligated
to issue, any shares of SNB Stock or other securities.
(ii) SNB has no direct or indirect subsidiary.
(c) Financial Statements. SNB has delivered to First
Commercial the following financial statements: the balance
sheets of SNB as of December 31, 1995 and 1994, together with
the statements of income, stockholders' equity and cash flow
of SNB for the periods then ended, accompanied by the notes
thereto for each of such years, and the financial statements
of SNB dated March 31, 1996 (collectively, the "SNB Financial
Statements"). Contemporaneously with its execution and
delivery hereof, SNB will also deliver to First Commercial
copies of all of the periodic reports filed by SNB with
banking regulators and agencies since January 1, 1994. The
SNB Financial Statements were prepared from the books and
records of SNB and fairly present the financial condition,
results of operations and changes in capital accounts and
undivided profits of SNB at the dates and for the periods to
which they relate and were prepared in accordance with
generally accepted accounting principles and general
practices within the banking industry consistently applied.
Except as set forth in Schedule 3.01(c) to the SNB Disclosure
Statement, there are no material obligations or liabilities
of SNB, whether absolute, accrued or contingent (including,
without limitation, unfunded obligations under employee
benefit plans or arrangements or liabilities for federal,
state, local or foreign taxes or assessments) which, in
accordance with generally accepted accounting principles,
were required to be reflected or disclosed in the SNB
Financial Statements and which were not so reflected or
disclosed therein.
(d) Dividends. Since December 31, 1995, no dividend
has been declared or paid on any equity securities of SNB,
nor has SNB purchased or redeemed any of its equity
securities, except as disclosed in Schedule 3.01(d) to the
SNB Disclosure Statement.
<PAGE>
(e) Loans. SNB has delivered to First Commercial a
complete and correct copy of SNB's most current written
policies relating to the making, collection, classification
and charge off of loans and other evidence of indebtedness.
SNB has no loans or other evidences of indebtedness in its
loan portfolio that (i) are considered nonperforming or have
been placed on a nonaccrual status in accordance with the
policies of SNB; (ii) are classified by SNB as other loans
especially mentioned, substandard, doubtful, or loss loans;
(iii) are sixty (60) days or more past due; (iv) are in
excess of $50,000 principal amount for any such loans
individually and have been renegotiated as to payment terms
or collateral because of credit risks associated with such
loans; or (v) to its knowledge are subject to any defenses,
offsets or counterclaims that may be asserted against the
present holder thereof, except in each case as disclosed in
Schedule 3.01(e) to the SNB Disclosure Statement.
(f) Taxes. SNB has timely filed returns for all
federal, state and local taxes of SNB to the extent such
filings and payments were required to be made prior to the
date of this Agreement. Such returns are true and correct in
all material respects. Except as provided in Schedule
3.01(f) to the SNB Disclosure Statement, SNB has not had any
tax deficiencies proposed or assessed against it nor has SNB
executed any waiver of or extended the statute of limitations
on the audit of any tax return or the assessment or
collection of any tax. To its knowledge, all taxes which SNB
is required by law to pay, and governmental charges levied or
assessed against the property or the business of SNB, have
been paid in full, other than taxes or charges the payment of
which is not yet due or which, if due, are not yet delinquent
or are being contested in good faith or have not been finally
determined. Except as has been indicated to First Commercial
in the SNB Disclosure Statement, the amount to be set up as
accruals for taxes on the December 31, 1995, balance sheet
for SNB ("SNB Balance Sheet") is sufficient in all material
respects for the payment of all unpaid taxes and governmental
charges of all kinds, applicable to the property or business
of SNB for the period ended on December 31, 1995, and all
periods prior thereto. Except as disclosed in Schedule
3.01(f) to the SNB Disclosure Statement, no tax returns or
reports of SNB have been audited by the Internal Revenue
Service or any state taxing authority within the past five
years.
(g) Litigation and Regulatory Matters. SNB has
disclosed in Schedule 3.01(g) to the SNB Disclosure Statement
all material actions, suits, proceedings and investigations
pending or threatened in writing against or affecting SNB or
any property or rights of SNB, or its officers or directors
(in their capacity as such) at law or in equity, or before or
by any court or other governmental instrumentality. Except
to the extent so disclosed in Schedule 3.01(g) to the SNB
Disclosure Statement, none of such actions, suits,
proceedings or investigations,
<PAGE>
either (i) involves a claim for an amount exceeding the
amount recoverable under any applicable insurance policies,
subject to the deductible amounts under such policies, (ii)
resulted or would result, if adversely determined, in any
material adverse change in the business, operations,
prospects or assets or the condition, financial or otherwise,
of SNB or (iii) would prevent the SNB stockholders from
approving and consummating the transactions contemplated
herein. Except as so disclosed in Schedule 3.01(g) to the
SNB Disclosure Statement, SNB is not subject to any
continuing court or administrative order, writ, injunction,
decree, agreement, memorandum or letter applicable
specifically to it or to its business, property or employees,
and is not in default with respect to any material order,
writ, injunction, decree, agreement, memorandum or letter of
any court or other governmental instrumentality.
(h) Compliance. To the best of its knowledge, SNB has
complied in all material respects with, and SNB is not in
default in any material respect under, any law, ordinance,
requirement, rule, regulation or order applicable to its
business or to the assets owned, used or occupied by it
(including, without limitation, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), licensing
requirements with respect to its personnel and all federal
and state consumer credit laws, rules and regulations), and
SNB has filed with the proper authorities all statements and
reports required by the laws, regulations, licensing
requirements and orders to which it or any of its employees
(because of their activities on behalf of SNB) are subject,
and SNB possesses all licenses, franchises, permits and
governmental authorizations necessary to conduct its business
in the manner in which and in the jurisdictions and places
where such business is now conducted.
(i) Properties and Other Assets. SNB has good and
indefeasible fee simple title to, or, as the case may be,
valid and subsisting leasehold interests in, all its
properties, interests in properties and other assets, real
and personal, (i) reflected on the SNB Balance Sheet (except
for capitalized lease properties) or (ii) acquired since the
date thereof, except to the extent such properties and assets
are or were thereafter disposed of for fair value in the
ordinary course of business. Except as set forth in Schedule
3.01(i) to the SNB Disclosure Statement, all such properties
and assets are free and clear of all liens, charges and
encumbrances, except (i) those set forth or reflected in the
SNB Balance Sheet (ii) liens for taxes not yet due and
payable or being contested in good faith and (iii) defects in
title and liens, charges and encumbrances, if any, as do not
materially detract from the value, or materially interfere
with the present or proposed use, of the property or asset
subject thereto or affected thereby or as do not otherwise
materially impair business operations of SNB. The operation
of the properties and business of SNB in the manner in which
it is now operated does not violate any zoning ordinances or
municipal
<PAGE>
regulations in such a way as could, if such ordinances or
regulations were enforced, result in any material impairment
of the uses of its properties for the purposes for which they
are now operated. Except as set forth in Schedule 3.01(i) to
the SNB Disclosure Statement, no asset included in the SNB
Balance Sheet was valued in excess of its original cost less
accumulated depreciation or, in the case of investment
securities and loans purchased at a discount or premium, in
excess of original cost, adjusted for amortization of
premiums or accretion of discounts, with the exception of
securities classified as available for sale in accordance
with Statement of Financial Accounting Standards ("SFAS") No.
115, which are carried at fair market value. There are no
(i) patents, trademarks, trade names or copyrights or
applications therefor owned by or registered in the name of
SNB, or in which SNB has rights, which have not been
disclosed in the SNB Disclosure Statement (other than rights
held by SNB as a secured party in the ordinary course of its
lending business), (ii) license agreements to which SNB is a
party, either as a licensor or licensee, with respect to any
patents, trademarks, tradenames or copyrights which have not
been disclosed in the SNB Disclosure Statement or (iii)
claims that in the conduct of its business, as now conducted,
SNB is infringing on any patents, trademarks, trade names or
copyrights of others which have not been disclosed in the SNB
Disclosure Statement. SNB has obtained all necessary permits
and certificates for the use and occupancy of the real estate
owned, leased or used by it and the improvements thereon and
systems therein, and such use and occupancy is in full
compliance with all federal, state and local laws, rules and
regulations. To the best of SNB's knowledge, no material
fact or condition exists which would result in the
termination or impairment in the furnishing of any water,
sewer, gas, electricity, telephone, drainage or other
services and equipment to the real estate owned, leased or
used by SNB.
(j) Agreement Does Not Violate Other Instruments.
Subject to obtaining any required consents and approvals
(which consents and approvals are disclosed in Schedule
3.01(j) to the SNB Disclosure Statement and which SNB will
use its reasonable best efforts to obtain prior to Closing),
the execution and delivery of this Agreement by SNB does not,
and the consummation of the transactions contemplated hereby
will not, to the best of SNB's knowledge, (i) violate any
provision of the Articles of Association or Bylaws of SNB, as
in effect immediately prior to the execution hereof, (ii)
violate any provision of, or result in any breach or
termination of, or constitute a default under, or constitute
an event which with notice or lapse of time, or both, would
become a default under, or result in the creation of any
material lien, security interest, charge or encumbrance upon
any property of SNB under, any material lease, indenture, or
other agreement or instrument to which SNB is a party or by
which SNB may be bound or affected or under which SNB
receives benefits, (iii) violate any law, rule, regulation,
order, writ,
<PAGE>
injunction or decree or administrative memorandum, agreement
or letter applicable to SNB or (iv) result in the loss or
material adverse modification of any license, franchise,
permit or other authorization granted to or otherwise held by
SNB.
(k) Insurance and Fidelity Bonds.
(i) SNB carries fire, liability and other
insurance with respect to its property and business in such
amounts and against such risks as is customary, usual and
prudent for a company of its size and as its management
reasonably believes to be adequate for the business conducted
by it. Schedule 3.01(k) to the SNB Disclosure Statement sets
forth a complete and accurate schedule, including the type of
policy, policy number, the limits of coverage, the insurance
carrier, the insurance agent or broker and the expiration
date, of all insurance policies, letters of credit,
performance bonds and fidelity bonds at any time held by, for
the benefit of, or issued to SNB and now in force
(collectively, the "Insurance Policies"). Except as
disclosed in Schedule 3.01(k) to the SNB Disclosure
Statement, SNB has not forfeited or waived any claim under
any Insurance Policy and SNB has, to the best of its
knowledge, fully complied with the material terms and
conditions thereof. Schedule 3.01(k) to the SNB Disclosure
Statement sets forth all property damage and personal injury
claims asserted against SNB during the past five (5) years,
or otherwise still pending. Except as otherwise set forth in
Schedule 3.01(k) to the SNB Disclosure Statement, all of such
claims have been or are being defended by insurance carriers
without reservation and are or will be covered by the
Insurance Policies. SNB has not received a notification from
any insurance carrier denying or disputing any claim made by
it, denying or disputing any coverage for any such claim,
denying or disputing the amount of any claim, or regarding
the possible termination, cancellation or amendment of or
premium increases with respect to any of the Insurance
Policies. SNB does not have any claims pending or
anticipated against any of the insurance carriers under any
of such Insurance Policies and there has been no actual or
alleged occurrence of any kind which may give rise to any
such claim.
(ii) Since January 1, 1991, SNB has continuously
maintained fidelity bonds insuring it against acts of
dishonesty by its employees in such amounts as is deemed
prudent by management. Since January 1, 1991, there have
been no claims under such bonds, except as disclosed in
Schedule 3.01(k) to the SNB Disclosure Statement, and SNB is
not aware of any facts that would form the basis of a claim
under such bonds.
<PAGE>
(l) Retirement Plans. SNB has disclosed in Schedule
3.01(l) to the SNB Disclosure Statement each employee benefit
plan (as defined in Section 3(3) of ERISA) or other plan
maintained for its employees or under which any one of them
has any present or future liability (each a "Plan"), and true
and complete copies of all Plans will be delivered to First
Commercial, together with the most recent Internal Revenue
Service determination letters, annual reports (Form 5500
Series) and accompanying schedules, summary plan
descriptions, certified financial statements (if available)
and actuarial reports related thereto, within five (5)
business days following the execution and delivery hereof by
SNB. With respect to each Plan for which an annual report
has been filed, no material adverse change has occurred with
respect to the matters covered by the annual report since the
date thereof, except as has been disclosed in writing to
First Commercial. There are no unfunded vested benefits
under any Plan which are subject to the vesting and funding
standards of ERISA, and none of the Plans is a multiemployer
plan within the meaning of Section 3(37) of ERISA. Each of
the Plans covered by ERISA (i) has been operated in all
material respects in accordance with ERISA, (ii) has not
engaged in any "prohibited transaction" (as such term is
defined in Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code") or in Section 406 of ERISA) which
would result in a material penalty, and (iii) has met the
minimum funding standards of Section 412 of the Code, if
applicable. Each of the Plans which is an employee pension
benefit plan (as defined in Section 3(2) of ERISA) ("Pension
Plan") that is intended to "qualify" under Section 401(a) of
the Code, is qualified within the meaning of Section 401 (a)
of the Code, except as heretofore disclosed in writing to
First Commercial, and a favorable determination letter has
been issued by the Internal Revenue Service with respect to
each such qualified Pension Plan. No Pension Plan has been
amended since issuance of the most recent determination
letter by the Internal Revenue Service with respect thereto,
except as disclosed in Schedule 3.01(l) to the SNB Disclosure
Statement. Each Pension Plan has been administered in
accordance with Section 401(a) of the Code, where applicable.
No Reportable Event (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Plan which would
result in material liability to SNB. Since the enactment of
ERISA, SNB has not completely or partially terminated any
employee pension benefit plan or withdrawn from any
multiemployer pension plan. No proceeding by the Pension
Benefit Guaranty Corporation has been instituted or
threatened to terminate, pursuant to Subtitle C of Title IV
of ERISA, any Plan. There is no suit, action or proceeding
pending or threatened against or affecting or likely to have
a material
<PAGE>
adverse impact on any Plan. One or more of the Plans may be
covered by the Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA"). If so, each such plan has been operated
in, and is in, compliance with COBRA. All notices required
to be given under COBRA have been timely and properly given
in accordance with COBRA, and the rules and regulations
promulgated thereunder, and no employee, former employee or
"qualified beneficiary" (as defined in COBRA) has any claim
or contingent claim against SNB for failure to comply with
COBRA or the rules and regulations promulgated thereunder.
Schedule 3.01(l) to the SNB Disclosure Statement lists all
persons currently eligible for benefits under COBRA.
(m) Employee Relations.
(i) No employee of SNB is a party to a collective
bargaining agreement. There are no pending or threatened
labor disputes with any of the employees of SNB. Schedule
3.01(m) to the SNB Disclosure Statement discloses the names
of all personnel employed by SNB whose total annual
compensation (including bonuses and the like) from SNB
exceeds Twenty-Five Thousand Dollars ($25,000) and the total
annual compensation of each. SNB has no knowledge of any
facts that would indicate that any employee will not continue
in his current employment, subject to normal turnover, except
as disclosedin Schedule 3.01(m)to the SNBDisclosure Statement.
(ii) SNB has not entered into or agreed to enter
into any employment agreement or covenant not to compete
agreement, granted or agreed to grant any increase in the
wages, salaries or other compensation of any of its employees
or directors, paid or agreed to pay any bonus to any of its
employees, directly or indirectly paid or made a commitment
to pay any severance or termination payment to any of its
employees or entered into or agreed to enter into any
consulting agreement or other agreement for the purchase of
services, except as disclosed in Schedule 3.01(m) to the SNB
Disclosure Statement.
(n) No Material Events. Except as disclosed in
Schedule 3.01(n) to the SNB Disclosure Statement, or in the
cases of clauses (i), (ii), (iii) and (iv) below, except for
transactions in the ordinary course of business consistent
with past practices, since December 31, 1995, SNB has not (i)
incurred or become subject to, or agreed to incur or become
subject to, any material obligation or liability, absolute or
contingent; (ii) discharged or satisfied or agreed to
discharge or satisfy any lien or encumbrance or paid any
obligation or liability, absolute or contingent; (iii)
canceled or agreed to cancel any material debts or claims or
waived any material right; (iv) made or permitted or agreed
to make or permit any material amendment
<PAGE>
or termination of any material contract, lease, arrangement,
license or other instrument to which it is a party; (v) made
any material change in its method of accounting; (vi) made
any material capital expenditures or entered into commitments
therefor; (vii) made or agreed to make any loan or loans to
any one person that would cause such person to have
outstanding loans from SNB exceeding in the aggregate One
Hundred Thousand Dollars ($100,000) (The term "person," for
purposes of this clause, shall include, in addition to an
individual, the persons specified in Rule 144(a)(2) under the
Securities Act of 1933.); (viii) purchased or sold or agreed
to purchase or sell any tax-exempt bonds; (ix) made, renewed
or extended or agreed to make, renew or extend any
nonadjustable rate loans with maturities exceeding sixty (60)
months; (x) repossessed or purchased in a foreclosure action
any personal or real property in an amount exceeding $25,000;
(xi) charged any loan to the reserve for loan and lease
losses or established any special allocation thereto; (xii)
sold or transferred or agreed to sell or transfer any loans
or other real estate owned; (xiii) mortgaged or pledged any
of its material assets, tangible or intangible, or permitted
any of its material assets, tangible or intangible, to become
subjected to any lien, charge or other encumbrance (other
than liens for real estate taxes not yet due and payable and
mechanics', materialmen's and similar liens imposed by
statute that are being contested in good faith); (xiv) sold,
assigned or transferred any material asset or property of any
nature whatsoever, whether real, personal or mixed, tangible
or intangible; or (xv) made any material change in its
business or operations or entered into any other material
transaction.
(o) Liabilities. The liabilities on the SNB Balance
Sheet consist solely of obligations and liabilities incurred
by SNB in the ordinary and regular course of its business.
As of December 31, 1995, SNB had no material and adverse
liabilities or obligations of any nature whatsoever,
including, without limitation, fixed or contingent, accrued,
absolute, matured or unmatured, or any "loss contingencies"
considered "probable" or "reasonably estimable" within the
meaning of the Financial Accounting Standards Board's SFAS
No. 5, which were not recorded on the SNB Balance Sheet. SNB
is not obligated to make any material investment, directly or
indirectly, in any person, corporation, association,
partnership, joint venture, trust or other entity, except for
investments in investment securities and other evidences of
indebtedness made in the ordinary course of business
consistent with past practices.
(p) Marketability of Securities. Except for pledges to
secure public and trust deposits and repurchase agreements,
which are disclosed in Schedule 3.01(p) to the SNB Disclosure
Statement, none of the investments reflected in the SNB
Balance Sheet under the heading "Investment Securities" and
none of the
<PAGE>
investments made since such date is subject to any
"investment" or other restriction, whether contractual or
statutory, which materially impairs the ability of the holder
thereof to freely dispose of such investment in the open
market at any time.
(q) Interested Party Transactions. Except as set forth
in Schedule 3.01(q) to the SNB Disclosure Statement, SNB is
not a party to, and none of its property is bound or affected
by, nor does SNB receive benefits under, any written or oral
or express or implied contract or other arrangement in which
a material interest is held by an officer or director of SNB
or any "associate" of any such officer or director, as that
term is defined in Rule 14a-1 under the Securities Exchange
Act of 1934, as amended, which is not on substantially the
same terms (including, without limitation, in the case of
lending transactions, interest rates, maturity schedule and
collateral) as those prevailing at the time for comparable
transactions with unrelated parties or which involves more
than normal risk of collectibility or which involves other
unfavorable features. Schedule 3.01(q) to the SNB Disclosure
Statement contains (i) a list of all amounts paid or to be
paid by SNB to, or received or to be received by SNB from,
any officer or director of SNB or any "associate" of any such
officer or director during the current and the last fiscal
year for products or services, not including employee
services, and (ii) a description of all loans from SNB to any
of such persons outstanding at any time after January 1,
1991.
(r) Material Contracts. Schedule 3.01(r) to the SNB
Disclosure Statement contains a list of all written, and a
brief description of all oral, material contracts,
agreements, leases, commitments, licenses, instruments or
obligations not listed in another exhibit hereto to which SNB
is a party or by which any of its assets is bound. SNB is
not a party to, and none of its property is bound or affected
by, and SNB does not receive benefits under, any written or
oral or express or implied contract or other arrangement
which is not in the ordinary course of business consistent
with its past practices, except as has been disclosed in
Schedule 3.01(r) to the SNB Disclosure Statement. SNB has,
in all material respects, performed all of the obligations
required to be performed by it to date and it is not in
default in any material respect under any material contract,
lease, insurance policy, commitment or arrangement to which
it is a party or by which it or its property may be bound or
affected or under which it or its property receives benefits,
and there has not occurred any event which with the lapse of
time or giving of notice or both would constitute such a
default. All such contracts, leases, insurance policies and
other instruments are in full force and effect, are binding
obligations of the respective parties thereto in accordance
with their terms, except that the enforceability of such
obligations
<PAGE>
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws from time to
time in effect that affect creditors' rights generally and by
legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable
remedies which are available only in the discretion of the
court, and there are no defenses, offsets or counterclaims
thereto which may be made by any party thereto other than
SNB, and SNB has not waived any substantial rights
thereunder. SNB is not a party to or otherwise bound by any
contract, agreement, plan, lease, license, commitment or
undertaking which is materially adverse, materially onerous,
or materially harmful to any material aspect of the business
or prospects of SNB.
(s) Environmental Matters. To the best of SNB's
knowledge, except as disclosed in Schedule 3.01(s) to the SNB
Disclosure Statement, none of the properties owned by SNB
contains hazardous materials, waste or substances that cannot
be easily removed and cleaned up, and, in the case of
asbestos, completely abated. For purposes of this provision,
a hazardous material, waste or substance is deemed easily
removed and cleaned up, and, in the case of asbestos,
completely abated, if the cost of such removal, clean-up,
remediation, restoration of natural resources, or abatement
does not exceed Fifty Thousand Dollars ($50,000) in the
aggregate and if such removal, clean-up, remediation,
restoration of natural resources, or abatement does not
materially interfere with the day-to-day operations of SNB.
Except as disclosed in Schedule 3.01(s) to the SNB Disclosure
Statement, SNB has no knowledge that any of the outstanding
loans of SNB are secured by properties that contain hazardous
materials, wastes, or substances that cannot be removed and
cleaned up, and, in the case of asbestos, completely abated,
at an expense not exceeding ten percent (10%) of the fair
market value of such properties. As used herein, "hazardous
substance" or "hazardous material" means substances subject
to reporting under Title III of the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, or the Resource Conservation and Recovery Act, as
amended; petroleum; petroleum products; substances regulated
by the Toxic Substance Control Act, as amended; substances
regulated by the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended; or any hazardous, toxic, or
dangerous waste, substance, or material defined as such in
the above-referenced Acts, or any federal, state or local
statute, law, ordinance, code, rule, regulation, order or
decree regulating, relating to, or imposing liability
standards of conduct concerning any hazardous, toxic or
dangerous waste, substance, or material as now or at any time
hereafter in effect. To SNB's knowledge,
<PAGE>
it has not loaned money against the securities or assets of
any company or other association that it knows has failed to
obtain all permits, licenses, approvals, and other
authorizations that are required under federal, state and
local laws and regulations relating to emissions, discharges,
wetlands, releases, or threatened releases of pollutants,
contaminants or hazardous or toxic materials or waste into
ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, release, discharge, emission,
storage, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or waste. To
SNB's knowledge, it has not loaned money against the
securities or assets of any company or other association, and
it has not at any time owned property, that is presently or
that SNB has knowledge may in the future potentially be
subject to any claim, action, suit, proceeding, hearing,
investigation, injunction, notice of violation, consent
administrative order, or penalty arising out of or relating
to the manufacture, presence, processing, distribution, use,
treatment, release, discharge, emission, storage, disposal,
transport or handling of any pollutant, contaminant, or
hazardous or toxic material or waste.
(t) Property Sites Owned by SNB. Set forth on Schedule
3.01(t) is a complete and accurate list of locations
(identified by address, owner/operator, type of facilities
located on the property, and period of time owned, leased or
used by SNB) of all real estate that SNB presently owns or
leases.
(u) Representations Not Misleading. No representation
or warranty by SNB in this Agreement or in any exhibit
attached hereto or in the SNB Disclosure Statement, nor any
statement or disclosure furnished to First Commercial by or
on behalf of SNB under and pursuant to this Agreement,
knowingly contains or will knowingly contain any untrue
statement of a material fact or knowingly omits or will
knowingly omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(v) Regulatory Approval. SNB has no knowledge of
information that would cause it to believe that the approvals
from regulatory authorities, including but not limited to the
Securities and Exchange Commission, necessary to consummate
the transactions contemplated hereby cannot or will not be
obtained in the ordinary course.
Section 3.02. Representations and Warranties of First
Commercial. No representations or warranties are made by any
director, officer, employee or shareholder of First
Commercial
<PAGE>
as an individual. First Commercial represents and warrants
to SNB, for itself and on behalf of Stone Fort, the
following, each of which representations and warranties shall
be mutual and continuing and shall be true as of the date of
this Agreement and on the Closing Date:
(a) Organization and Capitalization of First
Commercial. First Commercial has delivered to SNB complete
and correct copies of the Second Amended and Restated
Articles of Incorporation, as amended, and Bylaws of First
Commercial as in effect on the date of such delivery. First
Commercial is an Arkansas corporation duly organized and
validly existing and in good standing under the laws of
Arkansas, with full corporate power and authority to carry on
its business as and where conducted and to own and lease its
properties and assets in the places where such properties and
assets are now or will be owned or leased. As of the date of
this Agreement, the authorized capital stock of First
Commercial consists of 50,000,000 shares of First Commercial
Common Stock, of which 27,343,953 shares are outstanding, and
400,000 shares of preferred stock, each $1.00 par value, of
which no shares are outstanding. All shares of First
Commercial Common Stock to be issued to the stockholders
pursuant to this Agreement will be registered under the
Securities Act of 1933 and will be validly authorized, duly
issued, fully paid and nonassessable shares of First
Commercial Common Stock, and such shares have not been, or
will not be, issued in violation of any preemptive rights of
stockholders. Except as described in the financial
information provided to SNB by First Commercial, First
Commercial does not have outstanding any subscriptions,
options or other arrangements or commitments obligating First
Commercial to issue or dispose of, and it is not obligated to
issue, any shares of First Commercial Common Stock or other
securities. Since May 21, 1996, no dividends have been
declared or paid on any equity securities of First
Commercial, nor has First Commercial purchased or redeemed
any of its equity securities, except, in both instances, as
disclosed in the First Commercial Financial Statements (as
hereinafter defined) or in writing to SNB.
(b) Organization of Stone Fort. First Commercial has
delivered to SNB complete and correct copies of the Articles
of Association and Bylaws of Stone Fort, as in effect on the
date of such delivery. Stone Fort is a national banking
association duly organized and validly existing and in good
standing under the laws of the United States of America, with
full corporate power and authority to carry on its business
as and where conducted and to own or lease properties and
assets in the places where such properties or assets are now
owned or leased. <PAGE>
(c) Authority for Transaction. The Boards of Directors
of First Commercial and Stone Fort have, or will have prior
to consummation of the transactions contemplated hereby,
approved this Agreement and the transactions contemplated
hereby, and this Agreement constitutes the valid and binding
obligation of First Commercial and Stone Fort enforceable in
accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws from time to
time in effect which affect creditors' rights generally and
by legal and equitable limitations on the availability of
injunctive relief, specific performance and other equitable
remedies which are available only in the discretion of the
court. First Commercial and Stone Fort have full corporate
power and authority and legal right to execute and deliver
this Agreement and, upon approval thereof by the necessary
regulatory authorities, to consummate the transactions
contemplated hereby. First Commercial agrees that it will
vote the stock of Stone Fort in favor of this Agreement and
the transactions contemplated hereby.
(d) Agreements Do Not Violate Other Instruments.
Subject to obtaining any required consents and approvals
(which consents and approvals have been disclosed in writing
to SNB and which will be obtained by First Commercial and
Stone Fort prior to Closing) the execution and delivery of
this Agreement by First Commercial does not, and the
consummation of the transactions contemplated by this
Agreement will not, (i) violate any provision of the Second
Amended and Restated Articles of Incorporation, as amended,
or Bylaws of First Commercial or the Articles of Association
or Bylaws of Stone Fort, (ii) violate any provision of, or
result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or
lapse of time, or both, would become a default under, any
material lease, indenture or other agreement (written or
oral) or other instrument to which First Commercial or Stone
Fort is a party or by which First Commercial or Stone Fort
may be bound or affected, (iii) violate any material law,
rule, regulation, order, writ, injunction or decree or
administrative memorandum, agreement or letter to which First
Commercial or Stone Fort is a party or by which First
Commercial or Stone Fort may be bound or affected, or (iv)
result in the material loss or material adverse modification
of any material license, franchise, permit or other
authorization granted to or held by First Commercial or Stone
Fort.
(e) Representations Not Misleading. No representation
or warranty by First Commercial in or required by this
Agreement, nor any statement, exhibit or disclosure furnished
to SNB by or on behalf of First Commercial under and pursuant
to this Agreement, knowingly contains or will knowingly
contain any
<PAGE>
untrue statement of a material fact or knowingly omits or
will knowingly omit to state a material fact necessary to
make the statements contained herein or therein not
misleading.
(f) Financial Statements. First Commercial has
delivered to SNB the following financial statements: the
consolidated balance sheets of First Commercial as of
December 31, 1995 and 1994, together with the consolidated
statements of income, stockholders' equity and cash flow of
First Commercial for the periods then ended, accompanied by
the notes thereto, and an unqualified audit report of Ernst &
Young LLP for such years (the "First Commercial Financial
Statements"). First Commercial has also made available to
SNB copies of all periodic reports and proxy statements filed
by First Commercial with the Securities and Exchange
Commission since January 1, 1994, and copies of all of the
periodic public reports filed by the banking subsidiaries of
First Commercial (the "First Commercial Banks") with the
Arkansas State Bank Department, the Office of the Comptroller
of the Currency or the Federal Deposit Insurance Corporation
since January 1, 1995. The First Commercial Financial
Statements are complete and correct and have been prepared
from the books and records of First Commercial and the First
Commercial Banks, which accurately and fairly reflect the
transactions and dispositions of assets of First Commercial
and the First Commercial Banks and fairly present the
financial condition, results of operations and changes in
capital accounts and undivided profits of First Commercial
and the First Commercial Banks at their respective dates and
for the periods to which they relate except as may be
disclosed in writing to SNB. The First Commercial Financial
Statements were prepared in accordance with generally
accepted accounting principles and general practices within
the banking industry consistently applied. There are no
material obligations or liabilities of First Commercial or
the First Commercial Banks, whether absolute, accrued or
contingent (including, without limitation, unfunded
obligations under employee benefit plans or arrangements or
liabilities for federal, state, local or foreign taxes or
assessments) which, in accordance with generally accepted
accounting principles, were required to be reflected or
disclosed in the First Commercial Financial Statements and
which are not so reflected or disclosed therein, except as
disclosed in writing to SNB. The allowances for loan losses
of the First Commercial Banks, as reflected in the First
Commercial Financial Statements, are adequate as determined
by generally accepted accounting principles.
(g) Litigation and Regulatory Matters. First
Commercial and the First Commercial Banks have disclosed in
writing to SNB all material actions, suits, proceedings and
investigations pending or, to the knowledge of First
Commercial or any First Commercial Bank, threatened against
or affecting First
<PAGE>
Commercial or any First Commercial Bank or any property or
rights of First Commercial or any First Commercial Bank, or
their respective officers or directors (in their capacity as
such) at law or in equity, or before or by any court or other
governmental instrumentality. Except to the extent so
disclosed to SNB, none of such actions, suits, proceedings or
investigations, in the opinion of First Commercial and the
First Commercial Banks, either (i) involves a claim for an
amount exceeding the amount recoverable by First Commercial
or any First Commercial Bank under any applicable insurance
policies, subject to the deductible amounts under such
policies, (ii) resulted or will result, if adversely
determined, in any material adverse change in the business,
operations, prospects or assets or the condition, financial
or otherwise, of First Commercial or any First Commercial
Bank or (iii) would prevent First Commercial, as the sole
shareholder of Stone Fort, from approving and consummating
the transactions contemplated herein. Except as so disclosed
to SNB, neither First Commercial nor any First Commercial
Bank is subject to any continuing court or administrative
order, writ, injunction or decree, applicable specifically to
it or to its business, property or employees, and neither
First Commercial nor any First Commercial Bank is in default
with respect to any order, writ, injunction or decree of any
court or other governmental instrumentality.
(h) Compliance. To the best of their knowledge, First
Commercial and the First Commercial Banks have complied in
all material respects with, and they are not in default in
any material respect under, any law, ordinance, requirement,
rule, regulation or order applicable to their businesses or
to the assets owned, used or occupied by them, and First
Commercial and the First Commercial Banks possess all
licenses, franchises, permits and governmental authorizations
necessary to conduct their respective businesses in the
manner in which and in the jurisdictions and places where
such businesses are now conducted.
(i) No Material Events. Except as reflected in the
First Commercial Financial Statements or as may be disclosed
in writing to SNB and except for transactions in the ordinary
course of business consistent with past practices of First
Commercial, since December 31, 1995, First Commercial has not
experienced any material adverse changes in the condition
(financial or otherwise) of its properties, assets,
liabilities, business, operations or prospects.
(j) Taxes. First Commercial and the First Commercial
Banks have timely filed returns for all federal, state and
local taxes of First Commercial and the First Commercial
Banks to the extent such filings and payments were required
prior to the date of this Agreement, and such returns are
true and correct in all material respects. Neither First
Commercial nor the First Commercial Banks has had any tax
deficiencies proposed or
<PAGE>
assessed against them and neither First Commercial nor the
First Commercial Banks has executed any waiver of or extended
the statute of limitations on the audit of any tax return or
the assessment or collection of any tax. All taxes and
governmental charges levied or assessed against the property
or the business of First Commercial or the First Commercial
Banks have been paid in full, other than taxes or charges the
payment of which is not yet due or which, if due, is not yet
delinquent or is being contested in good faith or has not
been finally determined. Except as indicated in writing to
SNB, the amount to be set up as accruals for taxes on the
December 31, 1995, balance sheet for First Commercial is
sufficient in all material respects for the payment of all
unpaid taxes and governmental charges of all kinds,
applicable to the property or business of First Commercial
and the First Commercial Banks for the period ended on
December 31, 1995, and all periods prior thereto.
(k) Insurance. During each of the past three calendar
years First Commercial and its properties have been insured
for customary risks, all with limits, deductibles, and
exclusions as are customary in the banking industry. Such
insurance protection continues in effect, and First
Commercial is not aware of any facts or events relating to
its operations or financial condition which reasonably can be
expected to increase materially the premiums or reduce the
coverage under any of such policies, except as has been
indicated in writing to SNB.
(l) ERISA Plans. No ERISA Plans of First Commercial,
nor any trustee, administrator or fiduciary thereof, has
engaged in a "prohibited transaction," as such term is
defined in Section 4974 of the Code or Title I of ERISA,
which could subject the ERISA Plans, or any of them, or any
trustee, administrator, or fiduciary thereof, or any party
dealing with the ERISA Plans, or any such trust, to any
material tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or liability under Title I of ERISA.
The execution and delivery of this Agreement and consummation
of the transactions contemplated herein will not involve any
transaction prohibited by ERISA or by Section 4975 of the
Code. None of the ERISA Plans of First Commercial has been
terminated nor have any proceedings to terminate such plans
been instituted, nor have there been any "reportable events,"
as that term is defined in Section 4043 of ERISA, since the
effective date of ERISA that have not already been reported
by the filing of appropriate Form 5500 in accordance with
ERISA requirements.
(m) Employee Relations. Neither First Commercial nor
the First Commercial Banks has agreements with any labor or
other organization representing employees for collective
bargaining or other labor relations purposes.
<PAGE>
(n) Properties and Other Assets. First Commercial and
the First Commercial Banks have good and marketable fee
simple title to, or, as the case may be, valid and
enforceable leasehold interest in, all their respective
properties, interests in properties and other assets, real
and personal, (i) reflected on the First Commercial Financial
Statements or (ii) acquired since the date thereof, except to
the extent such properties and assets are or were thereafter
disposed of for fair value in the ordinary course of
business. All such properties and assets are free and clear
of all liens, charges and encumbrances, except (X) those set
forth or reflected in the First Commercial Financial
Statements, (Y) liens for taxes not yet due and payable or
being contested in good faith and (Z) defects in title and
liens, charges and encumbrances, if any, as do not materially
detract from the value, or materially interfere with the
present or proposed use, of the property or assets subject
thereto or affected thereby or as do not otherwise materially
impair business operations of either First Commercial or the
First Commercial Banks.
(o) Environmental Matters. To the best of its
knowledge and except as identified in writing to SNB, neither
First Commercial nor any of its subsidiaries has any present
or past environmental condition under which First Commercial
has or may become materially liable to any person or by
reason of which any First Commercial assets may be subjected
to any material lien, or by reason of which First Commercial
may materially violate any environmental law or order.
(p) Regulatory Approval. Neither First Commercial nor
Stone Fort has knowledge of information that would cause it
to believe that the approvals from regulatory authorities,
including but not limited to the Securities and Exchange
Commission, necessary to consummate the transactions
contemplated hereby cannot or will not be obtained in the
ordinary course.
(q) Availability of First Commercial Stock. First
Commercial has available a sufficient number of authorized
and unissued shares of First Commercial Stock to pay the
Merger Consideration, and First Commercial will not take any
action during the term of this Agreement that will cause it
not to have a sufficient number of authorized and unissued
shares of First Commercial Stock to pay the Merger
Consideration.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of SNB. SNB hereby covenants
and agrees that between the date hereof and the Effective
Date:
<PAGE>
(a) Approval of Transaction and Consents. SNB will
submit this Agreement and the transactions contemplated
hereby to its shareholders for their approval, and SNB will
recommend approval of this Agreement and such transactions,
with shareholder approval to be evidenced by written consent
or by the vote of the requisite number of its shareholders at
a meeting thereof to be duly called, properly noticed and
held as soon as practicable. SNB shall use its best efforts
to obtain all licenses, approvals and consents of any
federal, state or other regulatory agency having jurisdiction
and of any other party to the extent that such licenses,
approvals or consents are required of SNB to effect the
Merger and the transactions contemplated hereby, or are
required pursuant to Section 3.01(j) hereof.
(b) Access to Corporate Records. To the extent
permitted by law, until the Closing Date, SNB will upon
reasonable notice afford to First Commercial and its
employees, agents and representatives, including its
accountants, Ernst & Young LLP, reasonable access during
normal business hours to all of the offices, property,
documents, contracts, books and records of SNB and such
additional information with respect to the business affairs
and properties of SNB as First Commercial from time to time
may reasonably request. SNB will make their stock transfer
records available to the extent necessary to effectuate the
intent of this Agreement. Upon the request of First
Commercial, SNB will, to the extent available, furnish
abstracts of title or title insurance policies to real
property owned (other than other real estate owned) or leased
by SNB, current as of a date at or after the acquisition of
ownership or possession thereof, as applicable, and copies of
any unrecorded leases to which either is a party.
(c) Monthly Financial Statements. SNB shall promptly
provide First Commercial with copies of all the monthly
financial statements for SNB ("Monthly Financial Statements")
for each of the monthly periods ending between the date of
this Agreement and the Closing Date. The Monthly Financial
Statements shall be accompanied by a certificate of the
President or Chief Financial Officer of SNB to the effect
that the Monthly Financial Statements fairly reflect in all
material respects the transactions and dispositions of assets
of SNB and the financial condition and results of operations
of SNB at the dates and for the periods to which they relate,
subject to normal year-end audit adjustments. In addition,
the Monthly Financial Statements shall be prepared in
accordance with generally accepted accounting principles and
general practices
<PAGE>
within the banking industry consistently applied, except as
otherwise set forth in the President's or Chief Financial
Officer's certificates. SNB shall also promptly provide to
First Commercial copies of all reports and correspondence
filed by SNB during such period with banking regulators and
agencies or received by SNB from same to the extent permitted
by law.
(d) Closing Financial Statements. At the Closing, SNB
shall deliver to First Commercial a balance sheet and
statement of income of SNB dated as of the last day of the
month immediately preceding the month in which the Closing
occurs (the "Closing Financial Statements"), which shall be
certified by the President or Chief Financial Officer of SNB
as being true and correct in all material respects and as
fairly reflecting in all material respects the financial
condition and results of operations of SNB at the date and
for the period to which they relate, except as specifically
disclosed in the President's or Chief Financial Officer's
certificates.
(e) Conduct of Business. SNB shall conduct its
business in the ordinary course so as to maintain its
properties and business and to preserve its business
organization and the goodwill of its employees, depositors,
customers and others having dealings with it and to maintain
its books and records in the usual, ordinary and normal
course. Without the prior written consent of First
Commercial, SNB shall not (i) declare or distribute any cash
or stock dividend (except in the ordinary course of business
and in keeping with prior practices), authorize a stock
split, or authorize, issue or make any distribution of its
capital stock or any security convertible into or exercisable
for SNB Stock or pledge or otherwise encumber any of its
capital stock or any security convertible into or exercisable
for SNB Stock; (ii) open or acquire any new branch office;
(iii) make any direct or indirect redemption, purchase or
other acquisition of any of its capital stock; (iv) except in
the ordinary course of its business, incur any liability or
obligation, make any commitment or disbursement, acquire or
dispose of any property or asset, make any contract or
agreement, subject any of its properties or assets to any
lien, claim, charge, option or encumbrance or engage in any
transaction; (v) except in the ordinary course of its
business, increase or decrease the rate of compensation of
any director or employee or enter into any agreement to
increase or decrease the rate of compensation of any director
or employee; (vi) create or modify any pension or profit
sharing plan, bonus, deferred compensation, death benefit, or
retirement plan, or the level of benefits under any such plan
or increase or decrease any severance or termination pay
benefit or any other fringe benefit; (vii) amend its articles
of association or bylaws except as may be necessary to carry
out this Agreement or as
<PAGE>
required by law; or (viii) directly or indirectly encourage,
solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group
(other than First Commercial or an affiliate of First
Commercial) concerning any merger, sale of assets, sale of
shares of capital stock or similar transaction involving SNB
(an "Acquisition"). SNB represents that as of the date
hereof it has ceased all prior activities, and it has no
present intention to engage in activities, of the type
contemplated by clause (viii) with respect to an Acquisition
(other than with First Commercial or an affiliate of First
Commercial). SNB shall advise First Commercial in writing of
(X) the institution of any litigation or proceedings of any
kind whatsoever against SNB, (Y) the happening of any event
which would have a material adverse effect on the financial
condition, business, prospects or affairs of SNB, and (Z) the
occurrence of any event that would cause any of the
representations or warranties set forth in Section 3.01
hereof to be inaccurate if made as of a date subsequent to
such activity or transaction. Without the prior written
consent of First Commercial, SNB shall not engage in any
activity or enter into any transaction that would cause any
of the representations or warranties set forth in Section
3.01(n)(v), (vi), (xiii), (xiv), (xv), (xvi) or (xvii) hereof
to be inaccurate if made as of a date subsequent to such
activity or transaction and SNB shall conduct its business in
such a manner as to maintain the accuracy thereof. SNB will
not do anything or fail to do anything that would cause a
breach of or default in any other contract, agreement,
commitment or obligation to which SNB is a party or by which
it may be bound.
(f) Cooperation and Furnishing Information. SNB agrees
to cooperate with First Commercial in furnishing such
information concerning the business and affairs of SNB as is
reasonably necessary or requested by First Commercial in
order to prepare and file any application for regulatory or
government approvals required for consummation of the
transactions contemplated by this Agreement. All such
information shall be true and correct in all material
respects and shall not omit any material fact necessary to
make such information not misleading.
(g) Related Party Transactions. Without the prior
written consent of First Commercial, SNB shall not enter into
any transaction, other than those in the ordinary course of
business, with any of its officers, directors or any of such
person's associates, or with any five percent (5%) or more
shareholder of SNB or any of such person's associates, or
with any business of which an officer or director of SNB is
an
<PAGE>
officer, director, employee or ten percent (10%) or more
equity owner.
(h) Notice of Changes. Until the Closing Date, SNB
shall give First Commercial prompt written notice of (i) the
occurrence of any event or the failure of any event to occur
that results in a breach by SNB of any representation or
warranty contained herein or a failure by SNB to comply with
any covenant, condition or agreement contained herein, or
(ii) any change to, or any inaccuracies in, any information
or data previously given or made available to First
Commercial pursuant to this Agreement.
(i) Limit on SNB's Attorneys' Fees. SNB agrees that
any fees and expenses it will pay to attorneys in connection
with this Agreement and the transactions contemplated herein
shall not exceed $50,000.00.
(j) Completion and Delivery of SNB Disclosure
Statement. SNB shall have completed and delivered to First
Commercial the SNB Disclosure Statement on or before the date
of execution of this Agreement. The information contained in
the SNB Disclosure Statement delivered pursuant to this
Agreement shall constitute representations and warranties of
SNB pursuant to Section 3.01 of this Agreement, which shall
be continuing and shall be true as of the date of this
Agreement and on the Closing Date. Pursuant to Section
4.01(h), SNB shall give First Commercial prompt written
notice of any inaccuracies in any information or data set
forth in the SNB Disclosure Statement or of the occurrence of
any event or the failure of any event to occur which results
in any change in the information and data set forth in the
SNB Disclosure Statement. Any such inaccuracy or change in
the information or data set forth in the SNB Disclosure
Statement shall constitute a failure of the conditions
precedent set forth in Section 5.01(b) of this Agreement,
unless waived by First Commercial.
(k) Fairness Opinion. SNB shall engage or has engaged
Alex Sheshunoff & Co. Investment Banking to render, within
thirty (30) days, an opinion as to the fairness of the terms
of the Merger to the Shareholders of SNB from a financial
point of view. The cost of such fairness opinion shall not,
in any event, exceed $20,000.
Section 4.02. Covenants of First Commercial. First
Commercial, on behalf of itself and Stone Fort, hereby
covenants and agrees that between the date hereof and the
Closing Date:
<PAGE>
(a) Consents and Approvals. First Commercial and Stone
Fort agree to cooperate with SNB in furnishing such
information concerning the business and affairs of First
Commercial and Stone Fort and their directors and officers as
is reasonably necessary or requested in order to prepare and
file such applications for approvals required to be obtained
by SNB in connection with carrying out the transactions
contemplated by this Agreement. First Commercial will use
its best efforts to obtain all licenses, approvals and
consents of any federal, state or other regulatory agency
having jurisdiction and of any other party to the extent that
such licenses, approvals or consents are required to effect
the transactions contemplated hereby, or are required
pursuant to Section 3.02(d) hereof. All such information
shall be true and correct in all material respects and shall
not omit any material fact necessary to make such information
not misleading.
(b) Quarterly Reports; Current Reports. First
Commercial shall promptly provide SNB with copies of all
Quarterly Reports on Form 10-Q and Current Reports on Form
8-K filed by First Commercial with the Securities and
Exchange Commission between the date of this Agreement and
the Closing Date.
(c) Conduct of Business. First Commercial will, and
will cause Stone Fort to, conduct its business so as to
maintain its corporate existence in good standing, preserve
its business organization and the goodwill of its employees,
depositors, customers and others having dealings with it and
comply with all material obligations and duties imposed on it
by all laws, governmental regulations, rules and ordinances,
and judicial orders, judgments and decrees applicable to it,
its business or properties. First Commercial will, and will
cause Stone Fort to, maintain its books and records in the
usual, ordinary and normal course. First Commercial will
promptly advise SNB in writing of (i) the institution of any
material litigation against First Commercial or its
subsidiaries and (ii) the happening of any event that would
have a material adverse effect on the financial condition,
business or affairs of First Commercial.
(d) Notice of Changes. Until the Closing Date, First
Commercial will give SNB prompt written notice of (i) the
occurrence of any event or the failure of any event to occur
that results in a breach of any representation or warranty by
First Commercial or a failure by First Commercial to comply
with any covenant, condition or agreement contained herein,
or (ii) any other changes to, or any inaccuracies in, any
data previously given or made available to SNB pursuant to
this Agreement.
<PAGE>
(e) Registration of the First Commercial Stock. First
Commercial shall file a registration statement on Form S-4
with the Securities and Exchange Commission under the
Securities Act of 1933 covering the shares of First
Commercial Stock to be issued to SNB shareholders in the
Merger. None of the shares of First Commercial Stock to be
issued pursuant to this Agreement will be subject to any
lien, charge, encumbrance, claim, rights of others, mortgage,
pledge, or security interest, and none will be subject to any
agreements or understandings among any persons with respect
to the voting or transfer of such shares of First Commercial
Stock except as contemplated hereby.
(f) Filings for Regulatory Approval. As soon as
reasonably practicable, First Commercial shall file all
notices and applications with the Board of Governors of the
Federal Reserve System, the Office of the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation which
First Commercial deems necessary or appropriate to complete
the transactions contemplated herein, including the Merger of
SNB and Stone Fort. First Commercial will deliver to SNB,
and SNB will deliver to First Commercial, copies of all non-
confidential portions of any such applications.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Obligation of
First Commercial. The obligation of First Commercial to
consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the
Closing Date, of each and every one of the following
conditions, all or any of which may be waived, in whole or in
part, by First Commercial, in its sole and absolute
discretion:
(a) Performance of Covenants. Each of the acts and
undertakings of SNB to be performed on or before the Closing
Date shall have been performed in all material respects and
the President of SNB shall have executed and delivered to
First Commercial a certificate, dated as of the Closing Date,
to the effect that the foregoing condition has been
fulfilled.
(b) Representations True at Closing. The
representations and warranties made by SNB herein shall be
true and correct in all material respects on the Closing Date
hereunder with the same force and effect as though such
representations and warranties had been made on and as of
such time (except that such representations and warranties
may be untrue or incorrect as a result of actions or
transactions contemplated or permitted by this Agreement or
actions or transactions of SNB made with the written consent
of First Commercial), and the President of SNB shall have
executed and delivered to First Commercial a certificate,
dated as of the Closing Date, to the effect that the
foregoing condition has been fulfilled.
<PAGE>
(c) Changes in Financial Condition. Since December 31,
1995, there shall not have occurred any material adverse
change in the assets, financial condition, operations,
business or prospects of SNB, taken as a whole, regardless of
the cause.
(d) Certified Resolutions. SNB shall furnish to First
Commercial certified copies of resolutions duly adopted by
the Board of Directors and the shareholders of SNB
authorizing the Merger.
(e) Government Approvals; Other Consents. First
Commercial shall have received in form and substance
satisfactory to First Commercial and its counsel all
necessary federal and state governmental and regulatory
approvals for the transactions contemplated by this Agreement
(including, but not limited to, the Office of the Comptroller
of the Currency and the Texas Department of Banking, if
required), and SNB shall have received any and all consents
required pursuant to Section 3.01(j) hereof.
(f) No Injunction. No proceeding shall have been
instituted or threatened before any court, governmental
agency or legislative body to enjoin, restrain or prohibit,
or to obtain substantial damages in respect of, or which is
related to or arises out of, this Agreement or the
consummation of the transactions contemplated hereby, which,
in the reasonable judgment of First Commercial, would make it
inadvisable to consummate such transactions.
(g) Litigation. On the Closing Date, there shall not
be pending or threatened against SNB or its officers or
directors in their capacity as such, any suit, action or
proceeding which, if successful, would have a material
adverse effect on the financial condition, operations,
business or prospects of SNB.
(h) No Misstatements or Omissions. First Commercial
shall not have discovered in any of the information provided
by SNB that is contained in any application or report to any
governmental agency or authority relating to the transactions
contemplated by this Agreement any untrue statement of a
material fact or any omission to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(i) Opinion of SNB's Counsel. An opinion of Counsel
for SNB, dated the Closing Date, in substantially the form
attached hereto as Exhibit A, shall have been delivered to
First Commercial. In rendering the opinions contained
therein, such counsel may rely as to factual matters upon
certificates of one or more officers of SNB and of public
officials and, as to litigation in which such counsel is not
counsel, on opinions of counsel handling such litigation,
copies of which opinions shall be delivered to First
Commercial.
<PAGE>
(j) Financial Confirmation. The President or Chief
Financial Officer of SNB shall have furnished to First
Commercial a certificate, dated the Closing Date, in form and
substance satisfactory to First Commercial, to the effect
that nothing has come to his attention that would indicate
that (a) during the period from December 31, 1995, to the
Closing Date there was any change in the capitalization of
SNB, other than as described in or contemplated by this
Agreement, (b) any material adjustments need to be made to
the financial statements for the period ending at the end of
the most recent month prior to the Closing Date in order for
them to be in conformity with generally accepted accounting
principles applied on a consistent basis with that of prior
periods, or (c) since December 31, 1995, there has occurred
or there is threatened to occur a matter that would have a
material adverse effect on the business, financial condition,
operations, results of operations or prospects of SNB.
(k) Audit of SNB Financial Statements. First
Commercial shall have the right to conduct, at its sole
expense, an audit of the SNB Financial Statements to the
extent First Commercial shall deem necessary (the "SNB
Audit"). The SNB Audit shall not have indicated any matter
that may have a material adverse effect on the business,
financial condition, operations, results of operations or
prospects of SNB or that may materially impair the
contemplated benefits to First Commercial of the transactions
contemplated by this Agreement.
(l) Title Opinion. First Commercial, at its cost,
shall have received in form and substance satisfactory to its
counsel an attorney's opinion and/or title policy or policies
issued by a title insurance company acceptable to First
Commercial relating to all of the real property, except for
other real estate owned or leased by SNB or any SNB
subsidiary.
(m) Pooling of Interests Opinion. Ernst & Young LLP,
certified public accountants, shall have delivered to First
Commercial, dated the Closing Date and satisfactory in form
and substance to First Commercial and its counsel, an opinion
to the effect that the transactions contemplated by this
Agreement shall be recorded on the books and records of First
Commercial and shall be reported in the financial statements
of First Commercial by the pooling of interest method of
accounting under generally accepted accounting principles, as
defined in APB Opinion No. 16, together with such additional
letters of assurance regarding the financial condition of SNB
as First Commercial shall reasonably request. First
Commercial, predicated on the terms of this Agreement, has no
reason to believe that such transactions will not be recorded
by the pooling-of-interests method of accounting.
<PAGE>
(n) Delivery of Continuity of Interest Letters.
(i) Each shareholder of SNB who is an executive
officer, director, or beneficial owner of ten percent (10%)
or more of SNB Stock shall have delivered to First Commercial
a letter representing and warranting that he will not sell,
transfer or in any way reduce his risk with respect to the
First Commercial Stock received in connection with the Merger
until such time as First Commercial shall have published
financial results covering at least thirty (30) days of post-
transaction combined operations.
(ii) Each shareholder of SNB who is the beneficial
owner of five percent (5%) or more of SNB Stock shall have
delivered to First Commercial a letter representing and
warranting that (or, if such shareholder is delivering a
letter pursuant to Section 5.01(n)(i) above, include a
statement in such letter to the effect that) he has no
present intent to sell, transfer or otherwise dispose of any
of the First Commercial Stock to be received by him in
connection with the Merger nor will he sell, transfer or
otherwise dispose of more than fifty percent (50%) of such
stock for a period of at least one (1) year following the
Closing.
(o) Tax Opinion. First Commercial shall have received
a favorable opinion of Friday, Eldredge & Clark, its counsel,
to the effect that the transactions contemplated herein will
be treated for federal income tax purposes as a tax-free
corporate reorganization within the meaning of Section
368(a)(1)(A) of the Code. The parties agree to utilize their
reasonable best efforts to consummate the transaction
described herein in a manner which will qualify as a tax-free
corporate reorganization within the meaning of the foregoing
provisions.
Section 5.02. Conditions Precedent to Obligation of
SNB. The obligation of SNB to consummate the transactions
contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and
every one of the following conditions, all or any of which
may be waived, in whole or in part, by SNB in its sole and
absolute discretion:
(a) Performance of Covenants. Each of the acts and
undertakings of First Commercial and Stone Fort to be
performed on or before the Closing Date shall have been duly
performed, and an authorized officer of First Commercial and
Stone Fort shall have executed and delivered to SNB a
certificate, dated as of the Closing Date, to the effect that
this condition has been fulfilled.
<PAGE>
(b) Representations True at Closing. The
representations and warranties made by First Commercial and
Stone Fort pursuant to and in this Agreement shall be true
and correct in all material respects on the date hereof and
shall be true and correct in all material respects on the
Closing Date hereunder with the same force and effect as
though such representations and warranties had been made on
and as of such time (except that such representations and
warranties may be untrue or incorrect as a result of actions
or transactions contemplated or permitted by this Agreement
or actions or transactions of First Commercial made with the
written consent of SNB), and an authorized officer of First
Commercial and Stone Fort shall have executed and delivered
to SNB a certificate, dated as of the Closing Date, to the
effect that this condition has been fulfilled.
(c) Changes in Financial Condition. Since December 31,
1995, there shall not have occurred any material adverse
change in the assets, financial condition, operations,
business or prospects of First Commercial and the First
Commercial Banks, taken as a whole, regardless of the cause.
(d) Certified Resolutions. First Commercial and Stone
Fort shall have furnished to SNB a certified copy of
resolutions duly adopted by the Boards of Directors and
stockholders, if applicable, of First Commercial and Stone
Fort authorizing the transactions contemplated by this
Agreement.
(e) No Injunction. No action, proceeding, regulation
or legislation shall have been instituted or threatened
before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out
of, this Agreement or the consummation of the transactions
contemplated hereby, which, in the reasonable judgment of
SNB, would make it inadvisable to consummate such
transactions (it being understood and agreed that a written
request by governmental authorities for information with
respect to this Agreement or the transactions contemplated
herein may not be deemed by SNB to be a threat of material
litigation or proceeding, regardless of whether such request
is received before or after execution of this Agreement).
SNB shall have received all necessary federal and state
governmental and regulatory approvals for the transaction
contemplated by this Agreement.
(f) No Misstatements or Omissions. SNB shall not have
discovered in any certificate or information furnished to SNB
hereunder or in any application or report to any governmental
agency or authority relating to the transactions contemplated
by this Agreement any untrue statement of a material fact or
any omission to state a material fact necessary in order to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading, and
such fact shall be certified to SNB by First Commercial.
<PAGE>
(g) Opinion of First Commercial's Counsel. An opinion
of Friday, Eldredge & Clark, counsel for First Commercial and
Stone Fort, dated as of the Closing Date, in substantially
the form attached hereto as Exhibit B, shall have been
delivered to SNB. In rendering the opinions contained
therein, such counsel may rely as to factual matters upon
certificates of officers of First Commercial and its
subsidiaries and of public officials and, as to litigation in
which they are not counsel, on opinions of counsel handling
such litigation, copies of which opinions shall be delivered
to SNB.
(h) Tax Opinion. SNB shall have received a favorable
opinion of Friday, Eldredge & Clark, counsel to First
Commercial, to the effect that the transactions contemplated
herein will be treated for federal income tax purposes as a
tax-free corporate reorganization within the meaning of
Section 368(a)(1)(A) of the Code. The parties agree to
utilize their reasonable best efforts to consummate the
transaction described herein in a manner which will qualify
as a tax-free corporate reorganization within the meaning of
the foregoing provisions.
(i) Securities Registration Opinion. SNB shall have
received an opinion of Friday, Eldredge & Clark, counsel to
First Commercial, to the effect that the shares of First
Commercial Stock issued to the shareholders of SNB pursuant
to this Agreement have been registered with the Securities
and Exchange Commission pursuant to Section 5 of the
Securities Act of 1933, as amended (the "Act"), and may be
sold or transferred by the shareholders of SNB without
further registration under Section 5 of the Act, except as
may otherwise be provided by Rules 144 and 145 promulgated
under the Act and the terms of the continuity of interest
letters to be delivered by certain shareholders of SNB
pursuant to Section 5.01(n) of this Agreement.
(j) No Adverse Change in Market Price for First
Commercial Stock. In the event the average of the bid and
asked prices for shares of First Commercial Stock reported on
the Nasdaq National Market as of the close of business on
each of the twenty (20) trading days immediately preceding
the Closing Date shall be less than $26.1375 per share (85%
of the average of the bid and asked prices on the business
day immediately preceding the date of execution of the Merger
Agreement), subject to such adjustment as provided in Section
1.06 hereof, then SNB may elect to terminate this Agreement
in accordance with Section 6.01(f) hereof, unless First
Commercial agrees to amend and restate this Agreement to
provide in Section 1.06(a) that each share of SNB Stock shall
be converted into the right to receive that number of shares
equal to the result obtained by dividing (Y) the number of
whole shares of First Commercial Stock having an aggregate
market value closest to, but not exceeding, $6,303,600, based
on the average of the bid and asked prices for shares of
First Commercial Stock reported on the Nasdaq National <PAGE>
Market as of the close of business on each of the twenty (20)
days immediately preceding the date on which action is taken
by SNB by (Z) the number of shares of SNB Stock outstanding
on the Effective Date. If First Commercial notifies SNB in
writing that First Commercial will agree to so amend and
restate this Agreement, then the Board of Directors of SNB
shall approve a form of amended and restated agreement
incorporating changes consistent herewith and shall authorize
its execution and delivery by officers of SNB.
Section 5.03. Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party
to effect the Merger are subject to the satisfaction or
waiver of the following conditions prior to the Effective
Time:
(a) the approval of the Merger by SNB's shareholders
entitled to vote at the shareholders' meeting; and
(b) a registration statement covering the First
Commercial Stock to be issued in the Merger shall be
effective under the Securities Act of 1933 and any applicable
state securities or "blue sky" acts and no stop order
suspending the effectiveness of such registration statement
shall be in effect and no proceedings for such purpose, or
any proceedings under the Securities and Exchange Commission
(the "SEC") or applicable state securities authorities rules
with respect to the transactions contemplated hereby, shall
be pending before or threatened by the SEC or any applicable
state securities or "blue sky" authorities.
ARTICLE VI
TERMINATION
Section 6.01. Procedure for Termination. This
Agreement may be terminated and abandoned at any time prior
to the Closing, whether before or after approval of the
Merger by First Commercial or by the stockholders of SNB,
upon the occurrence of any of the following by written notice
from First Commercial to SNB (authorized by the Boards of
Directors of First Commercial and Stone Fort), or by written
notice from SNB to First Commercial and Stone Fort
(authorized by the Board of Directors of SNB), as the case
may be:
(a) If any condition to the obligations of First
Commercial set forth in Section 5.01 is not satisfied at the
time or times contemplated thereby and such condition is not
waived by First Commercial or if any condition to the
obligations of SNB as set forth in Section 5.02 is not
satisfied at the time or times contemplated thereby and such
condition is not waived by SNB, it being understood that each
party's right to terminate under this Section 6.01(a) shall
relate only to conditions to that party's obligations;
<PAGE>
(b) In the event of a material breach by the other
of any representation, warranty or agreement contained in
this Agreement that is not cured within 20 days of the time
that written notice of such breach is received by such other
party from the party giving notice (except that any such
notice shall not have the effect of extending the time for
termination set forth in Section 6.01(c) hereof);
(c) By either SNB or First Commercial if the
Closing Date shall not have occurred, for reasons other than
a breach of this Agreement by the party seeking termination,
on or before December 31, 1996, or such later date agreed to
in writing by the parties; or
(d) By First Commercial if there shall have been
any action taken, or any statute, rule or regulation proposed
or enacted, by any federal, state or foreign government or
governmental or administrative agency that would (i) render
First Commercial unable to satisfy its obligations hereunder,
(ii) in the sole, but reasonable, judgment of First
Commercial, prohibit or delay for four months after the
decision to terminate, or longer, consummation of the
transactions contemplated by this Agreement, or (iii)
materially impair the contemplated benefits to First
Commercial of the transactions contemplated by this Agreement
by limiting the location at which or manner in which First
Commercial presently conducts its business or by requiring
First Commercial, Stone Fort or SNB to undertake any material
changes in personnel, organizational structure, internal
controls, accounting systems, operations or policies, or
otherwise.
(e) By First Commercial if there shall have
occurred:
(i) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the
United States,
(ii) a commencement of a war or national
calamity involving the United States, or
(iii) a material change in the United States or
any other currency exchange rates or a suspension of, or
limitation on, the markets thereof;
or, in the case of any of the foregoing existing at the time
of this Agreement, a material acceleration or worsening
thereof.
(f) At the election of SNB upon the occurrence of
the event described in 5.02(j), subject to the right set
forth therein of First Commercial to preclude such election.
<PAGE>
Any party desiring to terminate this Agreement pursuant
to any of the foregoing clauses shall give notice of such
termination to the other party in accordance with Section
8.02.
Section 6.02. Termination by Mutual Agreement. This
Agreement may be terminated and abandoned (whether before or
after approval of the Merger by the shareholder of Stone Fort
or by the stockholders of SNB) by mutual written consent of
SNB and First Commercial and authorized by their respective
Boards of Directors.
Section 6.03. Effect of Termination for Non-Willful
Breach. In the event of termination of this Agreement caused
otherwise than by a willful breach of this Agreement by any
of the parties hereto, this Agreement shall cease and
terminate, the acquisition of SNB as provided herein shall
not be consummated, and none of SNB, First Commercial, or
Stone Fort shall have any liability to any other party under
this Agreement of any nature whatever, provided, however,
that the duties of the parties with respect to confidential
information as set forth in Section 8.10 shall survive any
such termination.
Section 6.04. Effect of Termination for Willful Breach.
If termination of this Agreement shall have been caused by
willful breach of this Agreement, then, in addition to other
remedies as may be available at law or equity for breach of
this Agreement, the party so found to have willfully breached
this Agreement shall indemnify the other parties for their
respective costs, fees and expenses of their counsel,
accountants and other experts and advisors, as well as fees
and expenses incident to negotiation, preparation and
execution of this Agreement, and all parties shall be bound
by the confidentiality obligations provided in Section 8.10
of this Agreement.
Section 6.05. Enforcement Expenses. The prevailing
party in any suit or action to enforce this Agreement or to
obtain any remedy which may be available as a result of a
breach of any representation, warranty or covenant contained
herein prior to Closing shall be entitled to recover its
court costs and reasonable attorneys' fees, including costs
and attorneys' fees on appeal from any such suit or action.
ARTICLE VII
BROKERS AND EXPENSES
Section 7.01. Brokers. SNB represents and warrants
that no broker or finder has acted for it in connection with
the execution and delivery of this Agreement or the
transactions contemplated hereby.
<PAGE>
Section 7.02. Expenses. Each party hereto will pay all
attorneys' and accountants' fees and all other costs and
expenses incurred by it in connection with this Agreement and
the transactions contemplated hereby, except as provided in
Article VI hereof, and except as limited by Section 4.01(i).
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Announcements. Neither First Commercial
nor SNB will make any press release or other announcement to
the public concerning the transactions contemplated by this
Agreement without the prior written consent of the other
party, except upon the written opinion of counsel to the
effect that public disclosure is required by law.
Section 8.02. Notices. All notices, requests, demands,
and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered or sent
by first class registered or certified mail, postage prepaid,
with return receipt requested, or by recognized overnight
courier as follows:
(a) If to SNB to:
Mr. Michael C. Haas, President
Security National Bank
3000 University Drive
P.O. Box 632018
Nacogdoches, Texas 75963-2018
with copy to:
Mr. Jack D. Hicks
Zeleskey, Cornelius, Hallmark, Roper & Hicks, L.L.P.
1616 S. Chestnut
P.O. Box 1728
Lufkin, Texas 75902-1728
(b) If to First Commercial, to:
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
Attention: Mr. J. Lynn Wright
<PAGE>
with copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201
or to such other address as any person may designate in
writing to the other persons at the addresses listed above,
in accordance with this Section 8.02.
Section 8.03. Binding Effect. All of the terms and
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
Section 8.04. Headings. The Article, Section,
paragraph and other headings in this Agreement are inserted
solely as a matter of convenience and for reference and are
not a part of this Agreement.
Section 8.05. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute
one and the same instrument.
Section 8.06. Integration of Agreement. This
Agreement, including the Exhibits hereto, constitutes the
entire understanding of the parties with respect to the
subject matter hereof and supersedes all prior agreements,
arrangements or communications, oral or written, between the
parties hereto with respect to the subject matter hereunder.
Section 8.07. Amendments; Waivers. Any of the terms or
conditions of this Agreement may be waived, but only in
writing of the party against which the enforcement of such
waiver is sought, and any such terms or conditions of this
Agreement may be amended or modified in whole or in part at
any time by agreement in writing, executed in the same manner
as this Agreement.
Section 8.08. Governing Law. This Agreement shall be
governed by and construed under the laws of the State of
Arkansas and applicable laws of the United States of America.
Section 8.09. Incorporation by Reference. Any and all
exhibits attached hereto are incorporated herein by reference
thereto as though fully set forth at the point referred to in
this Agreement.
<PAGE>
Section 8.10. Confidentiality of Information. Until
the Closing Date, or in the event of termination of this
Agreement without consummation of the transactions
contemplated hereby, First Commercial, Stone Fort and SNB
hereby covenant and agree that each of them and their
respective agents shall keep confidential any information
(unless readily ascertainable from public or published
information or sources) obtained from the other parties or
their agents, except for disclosures of information expressly
allowed by such other party. In the event this Agreement is
terminated, then promptly after such termination First
Commercial, Stone Fort or SNB (as the case may be) and their
respective agents shall return to the other party hereto all
documents, work papers and other written material obtained
from such other party or its agents in connection with this
Agreement and not theretofore made public (including all
copies thereof).
Section 8.11. No Assignment. Neither this Agreement
nor any rights or obligations of any party hereunder or
thereunder, may be assigned by the parties, by operation of
law or otherwise, except with the written consent of the
other party.
Section 8.12. Severability. If any portion or
provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or
unenforceable in any jurisdiction, such portion or provision
shall be ineffective as to that jurisdiction to the extent of
such invalidity, illegality or unenforceability, without
affecting in any way the validity or enforceability of the
remaining portions or provisions in such jurisdiction or
rendering that or any other portions or provisions of this
Agreement invalid, illegal or unenforceable in any other
jurisdiction.
Section 8.13. Survival of Representations and
Warranties. None of the representations, warranties,
obligations, covenants and agreements contained in this
Agreement, or in any instrument or other document delivered
pursuant to this Agreement, shall survive the Closing.
Section 8.14. Exchange Agreement. Immediately prior to
the Effective Time, First Commercial, Stone Fort, and SNB
agree to enter into the Exchange Agreement with the transfer
agent, or if the transfer agent refuses to serve as transfer
agent, such other transfer agent as shall be mutually agreed
to by First Commercial and SNB.
Section 8.15. Best Good Faith Efforts. All parties
hereto agree that the parties will use their best good faith
efforts to secure all regulatory approvals necessary to
consummate the Merger and other transactions provided herein
and to satisfy the other conditions to Closing contained
herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused this
Agreement to be executed and delivered in counterparts as of
the date first above written.
FIRST COMMERCIAL CORPORATION
By: /s/ J. Lynn Wright
Title: Chief Financial Officer
ATTEST:
/s/ Donna B. Rogers
Secretary
STONE FORT NATIONAL BANK
NACOGDOCHES, TEXAS
By: /s/ Ron Collins
Title: President and Chief
Executive Officer
ATTEST:
/s/ Lynn Mills
Secretary
SECURITY NATIONAL BANK,
NACOGDOCHES, TEXAS
By: /s/ Bob McKnight
Title: Chairman of the Board
ATTEST:
/s/ Donald Alexander
Secretary
<PAGE>
EXHIBIT A
Substantive Provisions of SNB's Counsel
The opinion of Zeleskey, Cornelius, Hallmark, Roper &
Hicks, L.L.P., Counsel for SNB, shall be dated the Closing
Date and shall opine, in substance, as follows:
1. SNB has been duly organized and is a national
banking association validly existing in good standing under
the laws of the United States of America. SNB has full
corporate power to own its property and assets and to carry
on its business as presently conducted.
2. SNB has full corporate power to execute and deliver
this Agreement. All corporate action of SNB required to duly
authorize and execute this Agreement has been taken. This
Agreement is valid and binding on SNB and is enforceable in
accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and to legal and equitable limitations on
the availability of injunctive relief, specific performance
and other equitable remedies, which are available only in the
discretion of a court.
3. All shares of SNB Stock issued and outstanding as
of the Closing Date are duly authorized, validly issued,
fully paid and not subject to assessment. None of such
shares have been issued in violation of any preemptive rights
of shareholders. To the knowledge of such counsel, SNB has
no outstanding and is not obligated to issue subscriptions,
options or other arrangements or commitments obligating it to
issue or dispose of any shares of its common stock.
4. The consummation of the Merger will not violate any
provision of SNB's Articles of Association or Bylaws, or
violate any provision of, or result in the acceleration of
any material obligation under, any mortgage, loan agreement,
order, judgment, law or decree known to such counsel to which
SNB is a party or by which it is bound, and will not violate
or conflict with any other material restriction of any kind
or character known to such counsel to which SNB is subject.
5. To the knowledge of such counsel, without
independent verification, SNB has all licenses, permits,
approvals and other authorizations from Federal and state
agencies and authorities having jurisdiction in the premises
required in the conduct of its business as presently being
conducted.
<PAGE>
6. To the knowledge of such counsel, there is no
claim, action, suit or proceeding pending or threatened
against SNB which, if adversely determined, would have a
material adverse effect on the business, assets, operations
or financial condition of SNB, taken as a whole, would
question the validity of the Agreement or would prevent,
hinder or delay consummation of the transactions contemplated
by the Agreement.
7. To the best of such counsel's knowledge, SNB is, in
the conduct of its business, in material compliance with all
applicable Federal, state and local laws, statutes,
ordinances and regulations, the failure to comply with which
would materially adversely affect its business or the
aggregate value of its properties or assets.
In rendering such opinions, such counsel may rely as to
factual matters upon certificates of one or more officers of
SNB and of public officials and, as to litigation in which
they are not counsel of record, on opinions of counsel
handling such litigation, copies of which opinions shall be
delivered to First Commercial.
<PAGE>
EXHIBIT B
Substantive Provisions of First Commercial
Counsel's Opinion
The opinion of Friday, Eldredge & Clark, Counsel for
First Commercial, shall be dated the Closing Date and shall
opine, in substance, as follows:
1. First Commercial and Stone Fort have been duly
organized and are a corporation and national banking
association, respectively, validly existing in good standing
under the laws of the State of Arkansas and the laws of the
United States of America, respectively. Each of First
Commercial and Stone Fort has full corporate power to own its
property and assets and to carry on its business as presently
conducted.
2. All corporate action of First Commercial and Stone
Fort required to effectuate the Merger contemplated by the
Agreement has been taken. The Agreement is valid and binding
on First Commercial and Stone Fort and is enforceable in
accordance with its terms, subject as to the enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors'
rights generally and to legal and equitable limitations on
the availability of injunctive relief, specific performance
and other equitable remedies, which are available only in the
discretion of a court.
3. The consummation of the Merger will not violate any
provision of the Articles of Incorporation or Association or
Bylaws of First Commercial or of Stone Fort or violate any
provision of, or result in the acceleration of any material
obligation under, any mortgage, loan agreement, order,
judgment, law or decree known to such counsel to which First
Commercial or Stone Fort is a party or by which either is
bound, and will not violate or conflict with any other
material restriction of any kind or character known to such
counsel to which First Commercial or Stone Fort is subject.
4. To the knowledge of such counsel, there is no
claim, action, suit or proceeding pending or threatened
against First Commercial or Stone Fort which, if adversely
determined, would question the validity of the Agreement or
would prevent, hinder or delay consummation of the
transactions contemplated by the Agreement.
<PAGE>
5. No facts have come to such counsel's attention that
lead them to believe that the Joint Proxy
Statement/Prospectus included within the Registration
Statement on Form S-4 filed in connection with this Agreement
(other than the financial and statistical data contained or
incorporated in such Joint Proxy Statement/Prospectus, as to
which such counsel need not express any opinion or belief)
contains as of the Closing Date any untrue statement of a
material fact or omits to state any material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
6. The shares of First Commercial Stock to be issued
to the shareholders of SNB following the Closing will be
fully paid, validly authorized and duly issued and are not
subject to assessment and are not issued in violation of any
preemptive rights of First Commercial's shareholders. Such
shares have been registered with the Securities and Exchange
Commission pursuant to Section 5 of the Securities Act of
1933, as amended (the "Act"), and may be sold or transferred
by the shareholders of SNB without further registration under
Section 5 of the Act except as may otherwise be provided by
Rules 144 and 145 promulgated under the Act and the terms of
the continuity of interest letters delivered by certain
stockholders of SNB pursuant to Section 5.01(n) of the
Agreement.
In rendering such opinions, such counsel may rely as to
factual matters upon certificates of officers of First
Commercial and of public officials and, as to litigation in
which they are not counsel of record, on opinions of counsel
handling such litigation, copies of which opinions shall be
delivered to SNB.
EXHIBIT 5
FRIDAY, ELDREDGE & CLARK
2000 First Commercial Building
400 West Capitol Avenue
Little Rock, Arkansas 72201-3493
September 19, 1996
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and
Exchange Commission on or about this date by First Commercial
Corporation (the "Company") for registration under the
Securities Act of 1933, as amended (the "Act"), of 415,663
shares of the Company's common stock, $3.00 par value per
share (the "Shares"), to be issued in connection with the
mergers of City National Bank, Whitehouse, Texas, and Security
National Bank, Nacogdoches, Texas with and into certain
subsidiary banks of the Company.
It is our opinion that all action necessary to register
the Shares under the Act will have been taken when:
a. The Registration Statement shall have become
effective in accordance with the applicable provisions of the
Act; and
b. Appropriate action shall have been taken by the
Board of Directors of the Company for the purpose of
authorizing the registration of the Shares.
It is our further opinion that the Shares will be, upon
issuance pursuant to the terms of the agreements governing the
aforementioned mergers, validly authorized, validly issued,
fully paid and non-assessable. This opinion does not pass
upon the matter of compliance with "Blue Sky" laws or similar
laws relating to the sale or distribution of the Shares.
We are members of the Arkansas Bar and do not hold
ourselves out as experts on the laws of any other State.
We hereby consent to the use of this opinion as an
exhibit to the Registration Statement, as it may be amended,
and consent to such references to our firm as are made
therein.
Very truly yours,
/s/ FRIDAY, ELDREDGE & CLARK
FRIDAY, ELDREDGE & CLARK
JCR/bb
EXHIBIT 8
FRIDAY, ELDREDGE & CLARK
2000 First Commercial Building
400 West Capitol Avenue
Little Rock, Arkansas 72201-3493
September 19, 1996
Barnett Grace, Chairman of the Board
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
---------------------------
Clyde A. Weaver, Chairman of the Board
City National Bank
1125 Highway 110 North
Whitehouse, Texas 75791
Re: Merger of City National Bank, Whitehouse, Texas, with and
into Tyler Bank and Trust, N.A., Tyler, Texas, a
subsidiary of First Commercial Corporation
Gentlemen:
You have asked for our opinion regarding certain federal
income tax consequences in connection with the proposed merger
of City National Bank, Whitehouse, Texas ("Target"), a
national banking association organized under the laws of the
United States of America having its principal office in
Whitehouse, Texas, with and into Tyler Bank and Trust, N.A.,
Tyler, Texas ("Subsidiary"), a national banking association
organized under the laws of the United States of America and
wholly-owned subsidiary of First Commercial Corporation
("Parent"), an Arkansas corporation, pursuant to a Plan and
Agreement of Merger among Parent, Subsidiary, and Target dated
as of May 6, 1996 (the "Merger Agreement").
In this regard, we have reviewed the Merger Agreement and
made such review of applicable federal income tax law as we
deemed necessary in connection with the opinions expressed
herein. We have undertaken no affirmative duty to investigate
or review any documents other than the Merger Agreement.
For purposes of this opinion, we have, with your
permission, knowledge and consent, made the following factual
assumptions, and this opinion is based upon the truth and
accuracy of such assumptions:
(a) Parent, Subsidiary and Target are, directly or
indirectly, engaged in the ownership and/or operation of banks
and financial institutions offering a broad range of bank and
bank-related services. Subsidiary is a wholly owned first
tier direct subsidiary of Parent. Parent is the sole
shareholder of Subsidiary and Parent will continue to be the
sole shareholder of Subsidiary at all times prior to the
merger.
<PAGE>
(b) Upon the effective date of the merger (i) except for
dissenters who will receive cash for their Target shares, the
shareholders of Target will receive the number of shares of
Parent voting common stock, $3.00 par value per share ("FCC
Stock") as calculated using the formula provided in the Merger
Agreement in exchange for each share of Target common stock
and (ii) each share of stock of Target will be canceled and
extinguished. In lieu of issuing fractional shares of FCC
Stock, Parent shall pay cash to the Target shareholders for
the value of such shares.
(c) Target presently has, and within the last five (5)
years has had, only one class of capital stock outstanding,
all of which is common stock having a par value of Five
Dollars ($5.00) per share. Target currently has authorized
187,500 shares of common stock, 172,500 of which are presently
issued and outstanding.
(d) Target will be merged with and into Subsidiary
pursuant to applicable provisions of the National Banking Act
and the separate existence of Target shall cease and
Subsidiary shall continue as the surviving corporation with
all the assets and liabilities of Target and Subsidiary
combined. Subsidiary will continue to carry on the historic
business previously conducted by Target, as well as the
business previously conducted by Subsidiary.
(e) The FCC Stock to be received by Target shareholders
in connection with the merger shall be voting common stock
with a par value of Three Dollars ($3.00) per share. It is
anticipated that approximately 174,492 shares of FCC Stock
will be issued to Target shareholders in connection with the
merger.
(f) The merger is being consummated for valid business
reasons germane to the business of the parties, separate and
apart from tax purposes.
(g) The fair market value of the FCC Stock to be
received by each Target shareholder will be approximately
equal to the fair market value of the Target common stock
surrendered in the exchange.
(h) There is no plan or intention by the shareholders of
Target to sell, exchange, or otherwise dispose of a number of
shares of FCC Stock received in the transaction that would
reduce the Target shareholders' ownership of FCC Stock to a
number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value of
all formerly outstanding stock of Target as of the same date.
For purposes of this assumption, shares of Target stock
exchanged for cash or other property, surrendered by
dissenters, or purchased in lieu of issuing fractional shares
of FCC Stock, will be treated as outstanding Target stock on
the date of the transaction. Moreover, shares of Target
common stock and shares of FCC Stock held by Target
shareholders and otherwise sold,
<PAGE>
redeemed, or disposed of prior or subsequent to the
transaction, will be considered for purposes of this
assumption.
(i) Subsidiary will acquire all or substantially all of
Target's assets and properties in connection with the merger.
In this regard, Subsidiary will acquire, in the merger, at
least ninety percent (90%) of the fair market value of
Target's net assets, and following the transaction Subsidiary
will hold such assets and at least seventy percent (70%) of
the fair market value of Target's gross assets, and at least
ninety percent (90%) of the fair market value of Subsidiary's
net assets, and at least seventy percent (70%) of the fair
market value of Subsidiary's gross assets held immediately
prior to the transaction. For purposes of this assumption,
amounts paid by Target, Subsidiary or Parent to dissenters and
shareholders who receive cash or other property, amounts used
by Target or Subsidiary to pay reorganization expenses, and
all redemptions and distributions (except for regular
dividends) made by Target or Subsidiary will be included as
assets of Target or Subsidiary, respectively, immediately
prior to the transaction. There have been no extraordinary
asset sales or dispositions by Target within the last year.
(j) Prior to the transaction, Parent will be in control
of Subsidiary within the meaning of IRC Section 368(c) and own
all of the capital stock of Subsidiary, and Subsidiary will
have no options or other securities outstanding.
(k) Subsidiary has no plan or intention to issue
additional shares of its stock that would result in Parent
losing eighty percent (80%) control of Subsidiary within the
meaning of IRC Section 368(c).
(l) Parent has no plan or intention to reacquire any of
its stock issued in the transaction.
(m) Parent has no plan or intention to liquidate
Subsidiary; to merge Subsidiary with or into another
corporation; to sell or otherwise dispose of the stock of
Subsidiary except for transfers of stock to corporations
controlled by Parent; or to cause Subsidiary to sell or
otherwise dispose of any of its assets or of any of the assets
acquired from Target, except for dispositions made in the
ordinary course of business or transfers of assets to a
corporation controlled by Subsidiary.
(n) Following the transaction, Subsidiary will continue
its historic business or use a significant portion of its
historic business assets in a business and will continue the
historic business of Target or use a significant portion of
Target's historic assets in a business.
(o) Except for cash paid to dissenters, if any, and cash
paid in lieu of fractional shares, Target shareholders will
receive solely FCC Stock in exchange for their Target common
stock and will receive no other property or consideration as a
result of the merger.
<PAGE>
(p) Parent, Subsidiary, Target and the Target
shareholders will each pay their respective expenses, if any,
incurred in connection with the transaction.
(q) There is no intercorporate indebtedness existing
between Parent and Target or between Subsidiary and Target
that was issued, acquired, or will be settled at a discount.
(r) In the merger transaction, shares of Target stock
constituting at least eighty percent (80%) of the total
combined voting power of all classes of Target stock entitled
to vote and at least eighty percent (80%) of the total number
of shares of all other classes of Target stock will be
exchanged solely for FCC Stock. For purposes of this
assumption, shares of Target stock exchanged for cash or other
property originating with Parent will be treated as
outstanding Target stock on the date of the transaction.
(s) At the time of the transaction, Target will not have
outstanding any warrants, options, convertible securities, or
other type of right pursuant to which any person could
acquire, in the aggregate, more than ten percent (10%) of the
stock of Target.
(t) Parent does not own, nor has it owned during the
past five (5) years, any shares of stock of Target.
(u) No two parties to the transaction are investment
companies as defined in IRC Section 368(a)(2)(F)(iii) and (iv).
(v) On the date of the transaction, the fair market
value of the assets of Subsidiary and Target, respectively,
will exceed the sum of their liabilities, respectively, plus
the amount of liabilities, if any, to which their respective
assets are subject. Target is not thinly capitalized and has
the full financial wherewithal to satisfy all of its
outstanding indebtedness.
(w) Target is not under the jurisdiction of a court
pursuant to a case under Title XI of the United States code,
nor under a receivership, foreclosure, or other similar
proceeding in a federal or state court.
(x) No fractional share interests in FCC Stock will be
issued in connection with the transaction. The payment of
cash in lieu of the issuance of fractional shares is solely
for the purpose of avoiding the expense and inconvenience to
Parent in issuing fractional shares and does not represent
separately bargained for consideration.
(y) None of the compensation received by any
shareholder-employee of Target will be separate consideration
for, or allocable to, any shares of Target stock owned by such
shareholder-employee.
<PAGE>
(z) None of the shares of FCC Stock received by any
shareholder-employee owning Target common stock shares will be
separate consideration for, or allocable to, any employment
agreement, and the compensation paid to any shareholder-
employee will be for services actually rendered and will be
commensurate with the amounts paid to third parties bargaining
at arms-length for similar services.
(aa) No dividends have been or will be paid by Target
prior to the consummation of the transaction, other than
regular periodic dividends, consistent in amount and effect
with prior dividend distributions. Within the last year,
Target has not paid any extraordinary dividend or made any
other extraordinary distribution with respect to its stock.
(bb) The liabilities of Target assumed by Subsidiary and
the liabilities to which the transferred assets of Target are
subject were incurred by Target in the ordinary course of its
business.
(cc) No stock of Subsidiary will be issued in the
proposed merger.
(dd) We have assumed that the factual representations in
the Merger Agreement are true and correct and that the Merger
Agreement constitutes the entire agreement of the parties with
respect to this transaction, and that there are no oral or
written representations, agreements or understandings which
modify, amend or vary any of the terms thereof.
(ee) We have assumed the genuineness and accuracy of the
Merger Agreement, and that such agreement is legal, valid,
binding and enforceable against the respective parties thereto
under applicable law.
(ff) We have assumed the legal capacity of all natural
persons and the genuineness of all signatures on all original
documents, the conformity of the original documents to all
copies submitted to us, and the due execution and delivery of
all documents where due execution and delivery are
prerequisites to effectiveness thereof.
Based on the foregoing factual assumptions and subject to
the comments and qualifications expressed herein, we are of
the opinion that:
1. The proposed merger will constitute a reorganization
within the meaning of IRC Section 368(a)(1)(A). The reorganization
will not be disqualified by reason of the fact that voting
common stock of Parent is used in connection with the merger.
IRC Section 368(a)(2)(D).
<PAGE>
2. Parent, Subsidiary and Target will each be "a party
to the reorganization" within the meaning of IRC Section 368(b).
3. No gain or loss will be recognized by Target on the
transfer of its assets to Subsidiary in exchange for FCC Stock
and the assumption by Subsidiary of the liabilities, if any,
of Target. IRC Section 357(a) and 361(a).
4. No gain or loss will be recognized by Subsidiary
upon the receipt of the assets of Target in exchange for FCC
Stock. IRC Section 1032(a).
5. No gain or loss will be recognized by Parent on the
receipt of any Target common stock solely in exchange for FCC
Stock. IRC Section 354(a)(1).
6. The basis of the assets of Target acquired by
Subsidiary will, in each instance, be the same in the hands of
Subsidiary as the basis of such assets in the hands of Target
immediately prior to the exchange. IRC Section 362(b).
7. The holding period of the assets of Target in the
hands of Subsidiary will, in each instance, include the period
for which such assets were held by Target. IRC Section 1223(2).
8. No gain or loss will be recognized by the
shareholders of Target upon the exchange of Target stock
solely for FCC Stock. IRC Section 354(a)(1).
9. The basis of the FCC Stock received by the
shareholders of Target will be the same as the basis of the
Target stock surrendered in exchange therefor. IRC Section
358(a)(1).
10. The holding period of the FCC Stock received by the
Target shareholders will include the period during which the
Target stock surrendered in the exchange therefor was held,
provided the stock of Target is a capital asset in the hands
of the shareholders of Target on the date of the exchange.
IRC Section 1223(1).
11. Where a shareholder of Target dissents to the
proposed transaction and receives solely cash in exchange for
its stock or receives cash in lieu of the issuance of
fractional shares, such cash shall be treated as having been
received by the shareholder as a distribution in redemption of
such shareholder's stock subject to the provisions and
limitations of IRC Section 302. Rev. Rul. 74-502, 1974-2 C.B. 116.
<PAGE>
The opinions expressed herein are subject to the following
qualifications:
(i) The opinions expressed above regarding tax-free
reorganization treatment of the merger assume that the Target
shareholders have and will continue following the merger to
maintain a "continuity of interest" in the business of Target,
directly through the ownership of Target common stock prior to
the merger, and indirectly through the ownership of FCC Stock
following the merger. For this purpose, a "continuity of
interest" shall mean ownership of stock having a value, as of
the date of the transaction, of fifty percent (50%) or more of
the value of all outstanding stock of Target on such date.
(ii) This opinion is rendered as of the date hereof and
is based upon the current version of the Internal Revenue
Code, and the regulations promulgated thereunder, current
rulings of the Internal Revenue Service and applicable case
law, and, accordingly, is subject to any changes in such law,
regulations, rulings or judicial decisions occurring after the
date of this opinion.
(iii) This opinion is based upon factual assumptions
described herein without any independent investigation or
verification on our part. Accordingly, we shall have no
liability in rendering this opinion to the extent it is
adversely affected by reason of any such factual assumptions
being false or incorrect.
(iv) This opinion is limited to the matters expressly
addressed herein, and no opinion may be implied or inferred
beyond the express language of the opinion stated herein.
(v) The opinions herein represent our reasoned judgment
as to certain matters of law, based upon the assumptions
contained herein, and should not be construed or considered as
a guarantee.
(vi) Finally, this opinion is provided solely for the
benefit of Parent, Subsidiary, Target, and the shareholders of
Target and may not be relied upon by any other person or
entity, quoted in whole or part, filed with any governmental
agency, or otherwise referred to or utilized for any other
purpose, without our prior written consent. We consent to the
use and filing of this opinion as an exhibit to First
Commercial Corporation's Registration Statement on Form S-4,
as it may be amended, filed with the Securities and Exchange
Commission in connection with the transaction to be
consummated pursuant to the terms of the Merger Agreement, and
consent to such references to our firm as are made therein.
Very truly yours,
FRIDAY, ELDREDGE & CLARK
FEC/JWS/lg
<PAGE>
FRIDAY, ELDREDGE & CLARK
2000 First Commercial Building
400 West Capitol Avenue
Little Rock, Arkansas 72201-3493
September 19, 1996
Barnett Grace, Chairman of the Board
First Commercial Corporation
400 West Capitol Avenue
Little Rock, Arkansas 72201
------------------------------------
Robert McKnight, Chairman of the Board
Security National Bank
3000 University Drive
P.O. Box 632018
Nacogdoches, Texas 75963-2018
Re: Merger of Security National Bank, Nacogdoches, Texas,
with and into Stone Fort National Bank, Nacogdoches,
Texas, a subsidiary of First Commercial Corporation
Gentlemen:
You have asked for our opinion regarding certain federal
income tax consequences in connection with the proposed merger
of Security National Bank, Nacogdoches, Texas ("Target"), a
national banking association organized under the laws of the
United States of America having its principal office in
Nacogdoches, Texas, with and into Stone Fort National Bank,
Nacogdoches, Texas ("Subsidiary"), a national banking
association organized under the laws of the United States of
America and wholly-owned subsidiary of First Commercial
Corporation ("Parent"), an Arkansas corporation, pursuant to a
Plan and Agreement of Merger among Parent, Subsidiary, and
Target dated as of June, 28, 1996 (the "Merger Agreement").
In this regard, we have reviewed the Merger Agreement and
made such review of applicable federal income tax law as we
deemed necessary in connection with the opinions expressed
herein. We have undertaken no affirmative duty to investigate
or review any documents other than the Merger Agreement.
For purposes of this opinion, we have, with your
permission, knowledge and consent, made the following factual
assumptions, and this opinion is based upon the truth and
accuracy of such assumptions:
(a) Parent, Subsidiary and Target are, directly or
indirectly, engaged in the ownership and/or operation of banks
and financial institutions offering a broad range of bank and
bank-related services. Subsidiary is a wholly owned first
tier direct subsidiary of Parent. Parent is the sole
shareholder of
<PAGE>
Subsidiary and Parent will continue to be the sole shareholder
of Subsidiary at all times prior to the merger.
(b) Upon the effective date of the merger (i) except for
dissenters who will receive cash for their Target shares, the
shareholders of Target will receive, in connection with the
merger, the number of shares of Parent voting common stock,
$3.00 par value per share ("FCC Stock") as calculated using
the formula provided in the Merger Agreement in exchange for
each share of Target common stock and (ii) each share of stock
of Target will be canceled and extinguished. In lieu of
issuing fractional shares of FCC Stock, Parent shall pay cash
to the Target shareholders for the value of such shares.
(c) Target presently has, and within the last five (5)
years has had, only one class of capital stock outstanding,
all of which is common stock having a par value of Five
Dollars ($5.00) per share. Target currently has authorized
250,000 shares of common stock, 230,000 shares of which are
presently issued and outstanding.
(d) Target will be merged with and into Subsidiary
pursuant to applicable provisions of the National Banking Act
and the separate existence of Target shall cease and
Subsidiary shall continue as the surviving corporation with
all the assets and liabilities of Target and Subsidiary
combined. Subsidiary will continue to carry on the historic
business previously conducted by Target, as well as the
business previously conducted by Subsidiary.
(e) The FCC Stock to be received by Target shareholders
in connection with the merger shall be voting common stock
with a par value of Three Dollars ($3.00) per share. It is
anticipated that approximately 241,171 shares of FCC Stock
will be issued to Target shareholders in connection with the
merger.
(f) The merger is being consummated for valid business
reasons germane to the business of the parties, separate and
apart from tax purposes.
(g) The fair market value of the FCC Stock to be
received by each Target shareholder will be approximately
equal to the fair market value of the Target common stock
surrendered in the exchange.
(h) There is no plan or intention by the shareholders of
Target to sell, exchange, or otherwise dispose of a number of
shares of FCC Stock received in the transaction that would
reduce the Target shareholders' ownership of FCC Stock to a
number of shares having a value, as of the date of the
transaction, of less than fifty percent (50%) of the value of
all formerly outstanding stock of Target as of the same date.
For purposes of this assumption, shares of Target stock
exchanged for cash or other property, surrendered by
dissenters,
<PAGE>
or purchased in lieu of issuing fractional shares of FCC
Stock, will be treated as outstanding Target stock on the date
of the transaction. Moreover, shares of Target common stock
and shares of FCC Stock held by Target shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent
to the transaction, will be considered for purposes of this
assumption.
(i) Subsidiary will acquire all or substantially all of
Target's assets and properties in connection with the merger.
In this regard, Subsidiary will acquire, in the merger, at
least ninety percent (90%) of the fair market value of
Target's net assets, and following the transaction Subsidiary
will hold such assets and at least seventy percent (70%) of
the fair market value of Target's gross assets, and at least
ninety percent (90%) of the fair market value of Subsidiary's
net assets, and at least seventy percent (70%) of the fair
market value of Subsidiary's gross assets held immediately
prior to the transaction. For purposes of this assumption,
amounts paid by Target, Subsidiary or Parent to dissenters and
shareholders who receive cash or other property, amounts used
by Target or Subsidiary to pay reorganization expenses, and
all redemptions and distributions (except for regular
dividends) made by Target or Subsidiary will be included as
assets of Target or Subsidiary, respectively, immediately
prior to the transaction. There have been no extraordinary
asset sales or dispositions by Target within the last year.
(j) Prior to the transaction, Parent will be in control
of Subsidiary within the meaning of IRC Section 368(c) and own all of
the capital stock of Subsidiary, and Subsidiary will have no
options or other securities outstanding.
(k) Subsidiary has no plan or intention to issue
additional shares of its stock that would result in Parent
losing eighty percent (80%) control of Subsidiary within the
meaning of IRC Section 368(c).
(l) Parent has no plan or intention to reacquire any of
its stock issued in the transaction.
(m) Parent has no plan or intention to liquidate
Subsidiary; to merge Subsidiary with or into another
corporation; to sell or otherwise dispose of the stock of
Subsidiary except for transfers of stock to corporations
controlled by Parent; or to cause Subsidiary to sell or
otherwise dispose of any of its assets or of any of the assets
acquired from Target, except for dispositions made in the
ordinary course of business or transfers of assets to a
corporation controlled by Subsidiary.
(n) Following the transaction, Subsidiary will continue
its historic business or use a significant portion of its
historic business assets in a business and will continue the
historic business of Target or use a significant portion of
<PAGE>
Target's historic assets in a business.
(o) Except for cash paid to dissenters, if any, and cash
paid in lieu of fractional shares, Target shareholders will
receive solely FCC Stock in exchange for their Target common
stock and will receive no other property or consideration as a
result of the merger.
(p) Parent, Subsidiary, Target and the Target
shareholders will each pay their respective expenses, if any,
incurred in connection with the transaction.
(q) There is no intercorporate indebtedness existing
between Parent and Target or between Subsidiary and Target
that was issued, acquired, or will be settled at a discount.
(r) In the merger transaction, shares of Target stock
constituting at least eighty percent (80%) of the total
combined voting power of all classes of Target stock entitled
to vote and at least eighty percent (80%) of the total number
of shares of all other classes of Target stock will be
exchanged solely for FCC Stock. For purposes of this
assumption, shares of Target stock exchanged for cash or other
property originating with Parent will be treated as
outstanding Target stock on the date of the transaction.
(s) At the time of the transaction, Target will not have
outstanding any warrants, options, convertible securities, or
other type of right pursuant to which any person could
acquire, in the aggregate, more than ten percent (10%) of the
stock of Target.
(t) Parent does not own, nor has it owned during the
past five (5) years, any shares of stock of Target.
(u) No two parties to the transaction are investment
companies as defined in IRC Section 368(a)(2)(F)(iii) and (iv).
(v) On the date of the transaction, the fair market
value of the assets of Subsidiary and Target, respectively,
will exceed the sum of their liabilities, respectively, plus
the amount of liabilities, if any, to which their respective
assets are subject. Target is not thinly capitalized and has
the full financial wherewithal to satisfy all of its
outstanding indebtedness.
(w) Target is not under the jurisdiction of a court
pursuant to a case under Title XI of the United States code,
nor under a receivership, foreclosure, or other similar
proceeding in a federal or state court.
<PAGE>
(x) No fractional share interests in FCC Stock will be
issued in connection with the transaction. The payment of
cash in lieu of the issuance of fractional shares is solely
for the purpose of avoiding the expense and inconvenience to
Parent in issuing fractional shares and does not represent
separately bargained for consideration.
(y) None of the compensation received by any
shareholder-employee of Target will be separate consideration
for, or allocable to, any shares of Target stock owned by such
shareholder-employee.
(z) None of the shares of FCC Stock received by any
shareholder-employee owning Target common stock shares will be
separate consideration for, or allocable to, any employment
agreement, and the compensation paid to any shareholder-
employee will be for services actually rendered and will be
commensurate with the amounts paid to third parties bargaining
at arms-length for similar services.
(aa) No dividends have been or will be paid by Target
prior to the consummation of the transaction, other than
regular periodic dividends, consistent in amount and effect
with prior dividend distributions. Within the last year,
Target has not paid any extraordinary dividend or made any
other extraordinary distribution with respect to its stock.
(bb) The liabilities of Target assumed by Subsidiary and
the liabilities to which the transferred assets of Target are
subject were incurred by Target in the ordinary course of its
business.
(cc) No stock of Subsidiary will be issued in the
proposed merger.
(dd) We have assumed that the factual representations in
the Merger Agreement are true and correct and that the Merger
Agreement constitutes the entire agreement of the parties with
respect to this transaction, and that there are no oral or
written representations, agreements or understandings which
modify, amend or vary any of the terms thereof.
(ee) We have assumed the genuineness and accuracy of the
Merger Agreement, and that such agreement is legal, valid,
binding and enforceable against the respective parties thereto
under applicable law.
(ff) We have assumed the legal capacity of all natural
persons and the genuineness of all signatures on all original
documents, the conformity of the original documents to all
copies submitted to us, and the due execution and delivery of
all documents where due execution and delivery are
prerequisites to effectiveness thereof.
Based on the foregoing factual assumptions and subject to
the comments and qualifications expressed herein, we are of
the opinion that:
<PAGE>
1. The proposed merger will constitute a reorganization
within the meaning of IRC Section 368(a)(1)(A). The reorganization
will not be disqualified by reason of the fact that voting
common stock of Parent is used in connection with the merger.
IRC Section 368(a)(2)(D).
2. Parent, Subsidiary and Target will each be "a party
to the reorganization" within the meaning of IRC Section 368(b).
3. No gain or loss will be recognized by Target on the
transfer of its assets to Subsidiary in exchange for FCC Stock
and the assumption by Subsidiary of the liabilities, if any,
of Target. IRC Section 357(a) and 361(a).
4. No gain or loss will be recognized by Subsidiary
upon the receipt of the assets of Target in exchange for FCC
Stock. IRC Section 1032(a).
5. No gain or loss will be recognized by Parent on the
receipt of any Target common stock solely in exchange for FCC
Stock. IRC Section 354(a)(1).
6. The basis of the assets of Target acquired by
Subsidiary will, in each instance, be the same in the hands of
Subsidiary as the basis of such assets in the hands of Target
immediately prior to the exchange. IRC Section 362(b).
7. The holding period of the assets of Target in the
hands of Subsidiary will, in each instance, include the period
for which such assets were held by Target. IRC Section 1223(2).
8. No gain or loss will be recognized by the
shareholders of Target upon the exchange of Target stock
solely for FCC Stock. IRC Section 354(a)(1).
9. The basis of the FCC Stock received by the
shareholders of Target will be the same as the basis of the
Target stock surrendered in exchange therefor. IRC
Section 358(a)(1).
10. The holding period of the FCC Stock received by the
Target shareholders will include the period during which the
Target stock surrendered in the exchange therefor was held,
provided the stock of Target is a capital asset in the hands
of the shareholders of Target on the date of the exchange.
IRC Section 1223(1).
11. Where a shareholder of Target dissents to the
proposed transaction and receives solely cash in exchange for
its stock or receives cash in lieu of the issuance of
fractional shares, such cash shall be treated as having been
received by the shareholder as a distribution in redemption of
such shareholder's stock subject to the provisions and
limitations of IRC Section 302. Rev. Rul. 74-502, 1974-2 C.B. 116.
<PAGE>
The opinions expressed herein are subject to the following
qualifications:
(i) The opinions expressed above regarding tax-free
reorganization treatment of the merger assume that the Target
shareholders have and will continue following the merger to
maintain a "continuity of interest" in the business of Target,
directly through the ownership of Target common stock prior to
the merger, and indirectly through the ownership of FCC Stock
following the merger. For this purpose, a "continuity of
interest" shall mean ownership of stock having a value, as of
the date of the transaction, of fifty percent (50%) or more of
the value of all outstanding stock of Target on such date.
(ii) This opinion is rendered as of the date hereof and
is based upon the current version of the Internal Revenue
Code, and the regulations promulgated thereunder, current
rulings of the Internal Revenue Service and applicable case
law, and, accordingly, is subject to any changes in such law,
regulations, rulings or judicial decisions occurring after the
date of this opinion.
(iii) This opinion is based upon factual assumptions
described herein without any independent investigation or
verification on our part. Accordingly, we shall have no
liability in rendering this opinion to the extent it is
adversely affected by reason of any such factual assumptions
being false or incorrect.
(iv) This opinion is limited to the matters expressly
addressed herein, and no opinion may be implied or inferred
beyond the express language of the opinion stated herein.
(v) The opinions herein represent our reasoned judgment
as to certain matters of law, based upon the assumptions
contained herein, and should not be construed or considered as
a guarantee.
(vi) Finally, this opinion is provided solely for the
benefit of Parent, Subsidiary, Target, and the shareholders of
Target and may not be relied upon by any other person or
entity, quoted in whole or part, filed with any governmental
agency, or otherwise referred to or utilized for any other
purpose, without our prior written consent. We consent to the
use and filing of this opinion as an exhibit to First
Commercial Corporation's Registration Statement on Form S-4,
as it may be amended, filed with the Securities and Exchange
Commission in connection with the transaction to be
consummated pursuant to the terms of the Merger Agreement, and
consent to such references to our firm as are made therein.
Very truly yours,
FRIDAY, ELDREDGE & CLARK
FEC/JWS/lg
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement Form S-4 and related
Prospectus of First Commercial Corporation for the
registration of 415,663 shares of its common stock and to the
incorporation by reference therein of our report dated January
30, 1996, with respect to the consolidated financial
statements of First Commercial Corporation included in its
Annual Report (Form 10-K) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Little Rock, Arkansas
September 18, 1996
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
First Commercial Corporation:
We consent to the incorporation by reference in the
Registration Statement on Form S-4 of First Commercial
Corporation of our report dated January 28, 1994, relating to
the consolidated statements of income, stockholders' equity
and cash flows of State First Financial Corporation and
subsidiaries for the year ended December 31, 1993 which report
appears as Exhibit 99(a) in the December 31, 1995 Annual
Report on Form 10-K of First Commercial Corporation.
We also consent to the reference to our firm under the heading
"Experts" in the Joint Proxy Statement/Prospectus.
KPMG Peat Marwick LLP
Little Rock, Arkansas
September 18, 1996
EXHIBIT 23.4
KEN ROGERS & ASSOCIATES, LTD.
CERTIFIED PUBLIC ACCOUNTANTS
A LIMITED LIABILITY COMPANY
1329 N. University Drive, Nacogdoches, Texas 75961
409-564-8186
Ken Rogers, CPA (Retired)
Gary Johnson, CPA
Michael Halls, CPA
Terre McLemore, CPA
Kenneth Rodrigues, CPA
INDEPENDENT AUDITORS' CONSENT
THE BOARD OF DIRECTORS
SECURITY NATIONAL BANK
We consent to the inclusion and incorporation by reference
herein of our following reports: (1) our Compiled Financial
Statements dated August 13, 1996, relating to the Statements
of Condition of Security National Bank as of June 30, 1996 and
1995, and the related Statements of Income, Changes in
Stockholders' Equity, and Cash Flows for the six (6) months
then ended; (2) our reports dated January 26, 1996, relating
to the Statements of Condition of Security National Bank as of
December 31, 1995 and 1994, and the related Statements of
Income, Stockholders' Equity, and Cash Flows for each of the
years then ended; (3) our reports dated January 13, 1995,
relating to the Balance Sheets of Security National Bank as of
December 31, 1994 and 1993, and the related Statements of
Income, Stockholders' Equity, and Cash Flows for each of the
years then ended; (4) our reports dated February 1, 1994,
relating to the Balance Sheets of Security National Bank as of
December 31, 1993 and 1992, and the related Statements of
Income, Stockholders' Equity, and Cash Flows for each of the
years then ended, which reports are included herein. We also
consent to the reference to our firm under the heading
"Experts" in the Prospectus.
KEN ROGERS & ASSOCIATES, LTD.
Nacogdoches, Texas
September 18, 1996
<PAGE> EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Barnett Grace and Edwin P. Henry, and
each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-4 of
First Commercial Corporation (the "Company") pertaining to the
registration of up to 415,663 shares of the Company's Common
Stock, $3.00 par value per share, to be offered as described
in the Registration Statement and to sign any and all
amendments (including post-effective amendments) to the
Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto
such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
Date: September 18, 1996
/s/ Barnett Grace /s/ John W. Allison
Barnett Grace John W. Allison
Director Director
/s/ Truman Arnold /s/ William H. Bowen
Truman Arnold William H. Bowen
Director Director
/s/ Robert G. Cress
Peggy Clark Robert G. Cress
Director Director
/s/ Frank D. Hickingbotham
Cecil W. Cupp, Jr. Frank D. Hickingbotham
Director Director
/s/ Walter E. Hussman, Jr. /s/ Frederick E. Joyce, M.D.
Walter E. Hussman, Jr. Frederick E. Joyce, M.D.
Director Director
/s/ Jack G. Justus /s/ William M. Lemley
Jack G. Justus William M. Lemley
Director Director
/s/ Michael W. Murphy /s/ Sam C. Sowell
Michael W. Murphy Sam C. Sowell
Director Director
/s/ Paul D. Tilley
Paul D. Tilley
Director
EXHIBIT 99
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
City National Bank
1125 Highway 110 North
Whitehouse, Texas 75791
Telephone No. (903) 839-6000
PROXY
The undersigned hereby constitutes and appoints ---------
and --------------, or either of them, proxies for the
undersigned, with power of substitution, to represent the
undersigned and to vote all of the shares of Common Stock of
City National Bank (the "Company) which the undersigned is
entitled to vote at the special meeting of shareholders of the
Company to be held on ----------, 1996, and at any and all
adjournments thereof.
1. Proposal to approve the Plan and Agreement of Merger
among First Commercial Corporation, Tyler Bank and Trust,
N.A., Tyler, Texas and City National Bank, Whitehouse,
Texas dated May 9, 1996.
----- FOR ----- AGAINST ------ ABSTAIN
2. In their discretion to transact such other business as
may properly come before the meeting and all adjournments
thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC
DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
SET FORTH HEREIN.
------------------------- --------------------------------
Signature NAME: PLEASE PRINT
------------------------- --------------------------------
Signature (if held jointly) NAME (if joint tenant):
PLEASE PRINT
Date: -----------------
Please sign exactly as name appears on the certificates
representing shares to be voted by this proxy. When signing
as executor, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Security National Bank
3000 University Drive
Nacogdoches, Texas 75963-2018
Telephone No. (409) 560-2265
PROXY
The undersigned hereby constitutes and appoints ---------
and --------------, or either of them, proxies for the
undersigned, with power of substitution, to represent the
undersigned and to vote all of the shares of Common Stock of
Security National Bank (the "Company) which the undersigned is
entitled to vote at the special meeting of shareholders of the
Company to be held on ----------, 1996, and at any and all
adjournments thereof.
1. Proposal to approve the Plan and Agreement of Merger
among First Commercial Corporation, Stone Fort National
Bank, Nacogdoches, Texas and Security National Bank,
Nacogdoches, Texas dated June 28, 1996.
----- FOR ----- AGAINST ------ ABSTAIN
2. In their discretion to transact such other business as
may properly come before the meeting and all adjournments
thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC
DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
SET FORTH HEREIN.
------------------------- --------------------------------
Signature NAME: PLEASE PRINT
------------------------- --------------------------------
Signature (if held jointly) NAME (if joint tenant):
PLEASE PRINT
Date: -----------------
Please sign exactly as name appears on the certificates
representing shares to be voted by this proxy. When signing
as executor, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership,
please sign in partnership name by authorized persons.
