<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------- --------
Commission File Number 0 - 9676
FIRST COMMERCIAL CORPORATION
(Exact name of registrant as specified in its charter)
ARKANSAS 71-0540166
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 WEST CAPITOL AVENUE, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501)371-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practical date.
Class Outstanding at March 31, 1997
--------------------------------------- -----------------------------
Common Stock, $3.00 par value per share 30,201,044
<PAGE>
TABLE OF CONTENTS
Item Page
---- ----
PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited)............................. 3
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 10
PART II - OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders.......... 20
6. Exhibits and Reports on Form 8-K............................. 20
Signatures............................................................. 21
2
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
--------------------
<TABLE>
<CAPTION>
FIRST COMMERCIAL CORPORATION Unaudited
CONSOLIDATED BALANCE SHEETS March 31, December 31,
(Dollars in thousands, except par value) -------------- --------------
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks................................................... $ 322,794 $ 338,022
Federal funds sold........................................................ 172,781 258,351
-------------- --------------
Total cash and cash equivalents.......................................... 495,575 596,373
Investment securities held-to-maturity, estimated market
value $000,000 ($342,065 in 1996)........................................ 327,448 342,131
Investment securities available-for-sale.................................. 1,056,901 1,033,278
Trading account securities................................................ 166 196
Loans and leases, net of unearned income.................................. 3,498,562 3,278,688
Allowance for possible loan and lease losses.............................. (59,532) (52,575)
-------------- --------------
Net loans and leases..................................................... 3,439,030 3,226,113
Bank premises and equipment, net.......................................... 107,229 104,500
Other real estate owned,
net of allowance for possible losses of $95 ($87 in 1996)................ 2,695 2,305
Other assets.............................................................. 228,670 225,887
-------------- --------------
Total assets........................................................... $ 5,657,714 $ 5,530,783
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing transaction accounts................................. $ 995,049 $ 951,390
Interest bearing transaction and savings accounts......................... 1,751,865 1,795,442
Certificates of deposit $100,000 and over................................. 569,851 546,853
Other time deposits....................................................... 1,585,440 1,521,456
-------------- --------------
Total deposits........................................................... 4,902,205 4,815,141
Short-term borrowings..................................................... 178,096 177,453
Other liabilities and deferred income taxes............................... 70,396 56,960
Long-term debt............................................................ 6,097 6,097
-------------- --------------
Total liabilities........................................................ 5,156,794 5,055,651
Stockholders' equity
Preferred stock, $1 par value, 400,000 shares authorized, none issued.... -- --
Common stock, $3 par value, 50,000,000 shares authorized,
30,201,044 and 28,810,368 shares issued, respectively................... 90,603 86,431
Capital surplus.......................................................... 234,078 233,957
Retained earnings........................................................ 179,836 153,603
Unrealized net gains (losses) on available-for-sale securities,
net of income tax....................................................... (3,597) 1,141
-------------- --------------
Total stockholders' equity.............................................. 500,920 475,132
-------------- --------------
Total liabilities and stockholders' equity............................. $ 5,657,714 $ 5,530,783
============== ==============
See accompanying notes.
</TABLE>
3
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<TABLE>
<CAPTION>
FIRST COMMERCIAL CORPORATION Unaudited
CONSOLIDATED INCOME STATEMENTS Three Months Ended
(Dollars in thousands, except per share data) March 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest income
Loans and leases, including fees.................................................. $ 76,977 $ 71,641
Short-term investments............................................................ 1,885 1,459
Investment securities-taxable..................................................... 18,514 17,126
-nontaxable.................................................. 2,419 2,031
Trading account securities........................................................ 12 (8)
---------- ----------
Total interest income........................................................... 99,807 92,249
Interest expense
Interest on deposits.............................................................. 39,074 37,353
Short-term borrowings............................................................. 2,145 2,468
Long-term debt.................................................................... 93 121
---------- ----------
Total interest expense.......................................................... 41,312 39,942
Net interest income.................................................................. 58,495 52,307
Provision for possible loan and lease losses......................................... 2,201 1,529
---------- ----------
Net int inc after prov for possible loan and lease losses....................... 56,294 50,778
Other income
Trust department income........................................................... 3,109 3,070
Mortgage servicing fee income..................................................... 9,271 10,998
Broker-dealer operations income................................................... 1,223 908
Service charges on deposit accounts............................................... 7,011 6,039
Other service charges and fees.................................................... 3,478 2,978
Investment securities gains (losses), net......................................... 12 66
Other real estate gains (losses), net............................................. (331) 12
Other............................................................................. 1,888 1,677
---------- ----------
Total other income.............................................................. 25,661 25,748
Other expenses
Salaries, wages and employee benefits............................................. 25,437 23,986
Net occupancy..................................................................... 3,324 2,990
Equipment......................................................................... 3,402 3,103
FDIC insurance.................................................................... (85) 307
Amortization of mortgage servicing rights......................................... 4,173 5,064
Other............................................................................. 16,322 16,380
---------- ----------
Total other expenses............................................................ 52,573 51,830
Income before income taxes........................................................... 29,382 24,696
Income tax provision................................................................. 10,424 8,664
---------- ----------
Net income...................................................................... $ 18,958 $ 16,032
========== ==========
Weighted average number of common shares outstanding
during the period................................................................... 30,179,808 28,970,557
Earnings per common share............................................................ $ 0.63 $ 0.55
See accompanying notes.
</TABLE>
4
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<TABLE>
<CAPTION>
FIRST COMMERCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
Unrealized
Preferred Common Retained Gains and Treasury
Stock Stock Surplus Earnings (Losses) Stock Total
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1996.............. $ -- $ 82,030 $ 195,019 $ 154,356 $ 854 $ -- $ 432,259
Change in unrealized gains (losses),
net of income taxes of $1,097........ (1,890) (1,890)
Net income............................ 16,032 16,032
Cash dividends - $.20 per common share (5,786) (5,786)
Stock options exercised............... 39 157 196
Acquisition of equity interest of
Security National Bank,
253,154 shares....................... 759 1,541 1,267 (12) 3,555
--------- --------- --------- --------- --------- --------- ---------
Balance - March 31, 1996............... $ -- $ 82,828 $ 196,717 $ 165,869 $ (1,048)$ -- $ 444,366
========= ========= ========= ========= ========= ========= =========
Balance - January 1, 1997.............. $ -- $ 86,431 $ 233,957 $ 153,603 $ 1,141 $ -- $ 475,132
Change in unrealized gains (losses),
net of income taxes of $2,681........ (4,953) (4,953)
Net income............................ 18,958 18,958
Cash dividends - $.24 per common share (7,249) (7,249)
Stock options exercised............... 85 111 196
Purchase of treasury stock,
87 shares............................ (2) (2)
Purchase of minority shares of
Springhill Bank & Trust Company,
328 shares........................... 1 10 2 13
Acquisition of equity interest of
W.B.T. Holding Company, Inc.,
1,361,952 shares..................... 4,086 14,524 215 18,825
--------- --------- --------- --------- --------- --------- ---------
Balance - March 31, 1997............... $ -- $ 90,603 $ 234,078 $ 179,836 $ (3,597)$ -- $ 500,920
========= ========= ========= ========= ========= ========= =========
See accompanying notes.
</TABLE>
5
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<TABLE>
<CAPTION>
FIRST COMMERCIAL CORPORATION Unaudited
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
(Dollars in thousands) March 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................................................... $ 18,958 $ 16,032
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation...................................................................... 2,806 2,641
Amortization...................................................................... 5,048 5,941
Provision for possible loan and lease losses...................................... 2,201 1,529
Gain on investment securities available-for-sale.................................. (12) (66)
Loss (gain) on sale of equipment.................................................. 4 (5)
Loss (gain) on sale of other real estate.......................................... 23 (267)
Write downs of other real estate.................................................. 12 17
Equity in undistributed earnings of unconsolidated subsidiary..................... (133) (351)
Decrease (increase) in trading securities......................................... 171 (164)
Net unrealized gain on trading securities......................................... - (2)
Decrease in mortgage loans held for resale........................................ 2,939 44,827
Increase in income taxes payable.................................................. 9,543 8,717
Increase in interest and other receivables........................................ (384) (947)
Decrease in interest payable...................................................... (1,032) (525)
Reduction in other assets......................................................... 1,171 -
Increase in accrued expenses...................................................... 1,859 2,105
Increase in prepaid expenses...................................................... (499) (2,579)
---------- ----------
Net cash provided by operating activities........................................ 42,675 76,903
INVESTING ACTIVITIES
Proceeds from sales of investment securities available-for-sale.................... - 15,016
Proceeds from maturing investment securities available-for-sale.................... 205,926 231,918
Proceeds from maturing investment securities held-to-maturity...................... 68,413 154,577
Purchases of investment securities available-for-sale.............................. (171,013) (257,924)
Purchases of investment securities held-to-maturity................................ (53,730) (180,987)
Purchase of institution, net of funds acquired..................................... 23,947 7,204
Net increase in loans and leases................................................... (44,447) (20,342)
Capital expenditures............................................................... (2,839) (1,996)
Proceeds from sale of bank premises and equipment.................................. 172 1,803
Additions to purchased mortgage servicing rights and other assets.................. - (1,060)
Proceeds from sales of other real estate........................................... 546 1,159
---------- ----------
Net cash provided by (used in) investing activities............................... 26,975 (50,632)
(Continued on next page)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FIRST COMMERCIAL CORPORATION Unaudited
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Three Months Ended
(Dollars in thousands) March 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
FINANCING ACTIVITIES
Net decrease in demand deposits, NOW accounts, and savings accounts................ (162,680) (163,965)
Net increase (decrease) in time deposits........................................... (356) 30,854
Net decrease in short-term borrowings.............................................. (357) (64,346)
Purchase of treasury stock......................................................... (2) -
Stock options exercised............................................................ 196 196
Cash dividends paid on common stock................................................ (7,249) (5,786)
---------- ----------
Net cash used in financing activities............................................. (170,448) (203,047)
Net decrease in cash and cash equivalents.......................................... (100,798) (176,776)
Cash and cash equivalents at the beginning of year................................. 596,373 540,298
---------- ----------
Cash and cash equivalents at end of period........................................ $ 495,575 $ 363,522
========== ==========
See accompanying notes.
</TABLE>
7
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FIRST COMMERCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
1. There have been no significant changes in the accounting policies of the
Company since December 31, 1996, the date of the most recent annual report
to shareholders, nor have there occurred events, except as disclosed in
Notes 4, 5, 6 and 7, which have had a material impact on the disclosures
contained therein.
2. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position as of March 31, 1997, and the results of
operations and changes in cash flows for the three months then ended. Any
adjustments consist only of normal recurring accruals.
3. Cash payments for interest were approximately $42.3 million and $40.5
million for the first three months of 1997 and 1996, respectively. Cash
payments for income taxes during the first three months of 1997 and 1996
were $900 thousand.
4. Aearth Development, Inc. v. First Commercial Bank, N.A.
-------------------------------------------------------
First Commercial Bank, N.A., a wholly owned subsidiary of Registrant, is the
defendant in litigation initiated in 1989 seeking approximately $200 million
in compensatory damages plus punitive damages. Plaintiffs in the litigation
allege fraudulent conspiracy, fraudulent misrepresentation, tortious
interference with a business expectancy, breach of contract, willful breach
of fiduciary duty, interference with performance of contract, securities law
violations, conversion, prima facie tort and violations of the Federal
Racketeer Influenced and Corrupt Organizations Act as a basis for trebled
damages. In June of 1991, the matter was tried before a chancery judge in
Chancery Court in Pulaski County, Arkansas, and on June 5, 1992, the
complaint was dismissed and no damages were assessed against First
Commercial Bank, N.A. Plaintiffs appealed this decision to the Supreme
Court of Arkansas in July of 1992, alleging error for failure to try the
case before a jury in Circuit Court. On July 18, 1994, the Supreme Court of
Arkansas remanded the case to Circuit Court in Pulaski County, Arkansas, for
jury trial. A jury trial was held, which concluded March 13, 1996, with the
jury awarding plaintiffs a total of $12.5 million compensatory damages and
$10.0 million punitive damages. On April 30, 1996, the trial court approved
a $7.3 million set off to the March 13, 1996, $22.5 million jury verdict.
The set off pertained to monies owed by Aearth Development, Inc., and
related interests, to First Commercial Bank, N.A. On May 20, 1996, the
Court entered a judgment against First Commercial Bank, N.A., in the amount
of $15.2 million. Thereafter, on June 21, 1996, the Court granted a Motion
for Remittitur and reduced the punitive damages awarded in the judgment by
$7.0 million. Therefore, the final award was $8.2 million. On June 27,
1996, First Commercial Bank, N.A., filed a Notice of Appeal to the Supreme
Court of Arkansas. Management of the Company and First Commercial Bank,
N.A., intend to vigorously pursue the appeal. The ultimate legal and
financial liability of the Company in connection with this matter cannot be
estimated with certainty, but management, based on the advice of legal
counsel that the judgment entered on the verdict will be reversed and
dismissed in whole or in part or a new trial ordered in whole or in part,
8
<PAGE>
FIRST COMMERCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
believes that the impact of this matter will not have a materially adverse
effect on the Company's financial position. However, if any substantial
loss were to occur as a result of this litigation it could have a material
adverse impact upon results of operations in the fiscal quarter and/or year
in which it were to be incurred, but the Company cannot estimate the range
of any reasonably possible loss.
5. On February 13, 1997, the Company acquired all of the outstanding common
stock of W.B.T. Holding Company, Memphis, Tennessee, in exchange for
1,361,952 Company common shares. This transaction was accounted for as a
pooling-of-interests. The results of W.B.T. Holding Company are included in
the consolidated financial statements for 1997; however, prior period
financial data has not been restated due to immateriality. W.B.T. Holding
Company had approximately $267 million in assets, $181 million in loans, and
$236 million in deposits.
6. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Statement 128"), "Earnings Per
Share," which is required to be adopted on December 31, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new
requirements for calculating primary ("basic") earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of earnings per share for the Company for the first
quarter ended March 31, 1997, and March 31, 1996, would not have been
material
7. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 129 ("Statement 129"), "Disclosure of
Information about Capital Structure." Statement 129 consolidates existing
guidance in Accounting Principles Board (APB) Opinion No. 10, "Omnibus
Opinion 1966," APB Opinion No. 15, "Earnings Per Share," and Financial
Accounting Standards No. 47, "Disclosure of Long-Lived Obligations,"
relating to disclosure about a company's capital structure. Statement 129
is required to be adopted on December 31, 1997. The Company believes
Statement 129 will have no material impact on the Company's capital
structure disclosures.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
First Commercial Corporation ("Registrant" or the "Company") is a multi-
bank holding company headquartered in Little Rock, Arkansas. The Company
operates fifteen institutions in the state of Arkansas, seven institutions in
the state of Texas, one institution in the state of Tennessee, and one
institution in the state of Louisiana. In a joint venture with Arvest Bank
Group, Inc., of Bentonville, Arkansas, the Company owns 50% of two institutions
in Norman and Duncan, Oklahoma. The Company's consolidated assets at March 31,
1997, totaled approximately $5.7 billion.
On January 31, 1997, through a joint venture with Arvest Bank Group of
Bentonville, Arkansas, the Company purchased a 50% interest in Oklahoma
National Bank of Duncan, Oklahoma, which had assets of $60 million, loans of
$43 million, and deposits of $55 million. The transaction was accounted for as
a purchase.
On February 5, 1997, a definitive agreement was entered into whereby the
Company will acquire First Central Corporation and its wholly owned subsidiary,
First National Bank, Searcy, Arkansas, which has assets of $267 million, loans
of $141 million and deposits of $235 million. The Company will issue
approximately 1.65 million shares of its stock in exchange for all of the
outstanding shares of First Central Corporation common stock. The transaction
will be accounted for as a pooling-of-interests and is expected to close during
the second quarter of 1997.
On February 13, 1997, the Company acquired all of the outstanding common
stock of W.B.T. Holding Company, Memphis, Tennessee, in exchange for 1,361,952
Company common shares. This transaction was accounted for as a pooling-of-
interests. The results of W.B.T. Holding Company are included in the
consolidated financial statements for 1997; however, prior period financial
data has not been restated due to immateriality. W.B.T. Holding Company's
wholly-owned subsidiary, United American Bank, which was merged into an
existing affiliate of the Company, First Commercial Bank, N.A., Memphis,
Tennessee, had approximately $267 million in assets, $181 million in loans, and
$236 million in deposits.
On April 17, 1997, the Company acquired all of the outstanding common stock
of City National Bank, Whitehouse, Texas, in exchange for 145,478 Company
common shares. This transaction was accounted for as a pooling-of-interests.
The results of City National Bank will be included in the consolidated
financial statements for 1997; however, prior period financial data will not
been restated due to immateriality. City National Bank, which was merged into
an existing affiliate of the Company, Tyler Bank and Trust Company, Tyler,
Texas, had approximately $39 million in assets, $30 million in loans, and $37
million in deposits.
10
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Financial Review
- ----------------
The following financial review provides management's analysis of the
consolidated financial condition and results of operations of the Company. As
such, the presentation focuses on those factors that have had the most
significant impact on the Company's financial condition during the periods
discussed.
Consolidated Earnings Summary
Earnings of $0.63 per share in 1997's first quarter represented an increase
of 15% from $0.55 per share during the same period in 1996. Net income for the
three months ended March 31, 1997, was $19.0 million, up 18% from $16.0 million
in 1996. The increase in net income reflects strong growth in net interest
margin combined with tight controls over non-interest expense. A detailed
explanation of these increases is included in the Net Interest Income, Non-
Interest Income and Non-Interest Expense sections of the Financial Review.
When evaluating the earnings performance of a banking organization, two
profitability ratios are important standards of measurement: return on average
assets and return on average common stockholders' equity. Return on average
assets measures net income in relation to total average assets and portrays the
organization's ability to profitably employ its resources. Annualized returns
on average assets for the first three months of 1997 and 1996 were 1.37% and
1.24%, respectively.
The second profitability ratio, return on average common stockholders'
equity, indicates how effectively a company has been able to generate earnings
on the capital invested by its stockholders. In the first three months of
1997, the Company earned 15.37% on average common stockholders' equity compared
with 14.74% for the first three months of 1996. The improvement seen in the
return on average common stockholders' equity ratio is indicative of the
Company's successful deployment of its capital, combined with strong earnings
growth.
Net Interest Income
Net interest income, the greatest component of a bank's earnings, is the
difference between income generated by earning assets and the interest cost of
funding those assets. For the purpose of this analysis and discussion, net
interest income and net interest margin reflect income from tax-exempt loans
and tax-exempt investments on a fully tax-equivalent basis. This permits
comparability of income data through recognition of the tax savings realized on
tax-exempt earnings. On a tax-equivalent basis, net interest income was $59.6
million in the first three months of 1997 compared to $53.2 million in the
first three months of 1996. Net interest margin is the ratio of net interest
income to average earning assets. This ratio indicates the Company's ability
to manage its earning assets and to control the spread between yields earned on
assets and rates paid on liabilities. Fully tax-equivalent net interest margin
was 4.77% for the first three months of 1997, compared to 4.61% for the same
period in 1996. The increase in net interest income and net interest margin
resulted from stable returns on earning assets combined with a decrease in
liability costs.
11
<PAGE>
Management of net interest income and net interest margin is actively
pursued through a continuing emphasis on pricing both loans and deposits with
focus on profitability, rather than a narrow emphasis on local market
conditions. Presented in the following table is an analysis of the components
of fully tax-equivalent net interest income for the three months ended March
31, 1997 and 1996.
<TABLE>
<CAPTION>
Analysis of Net Interest Income (FTE = Fully Tax-Equivalent)
For the Three Months
Ended March 31,
-----------------------
1997 1996
(Dollars in thousands) ---------- ----------
<S> <C> <C>
Interest income...................................................................... $ 99,807 $ 92,249
Fully tax-equivalent adjustment...................................................... 1,070 867
---------- ----------
Interest income - FTE................................................................ 100,877 93,116
Interest expense..................................................................... 41,312 39,942
---------- ----------
Net interest income - FTE $ 59,565 $ 53,174
========== ==========
Yield on earning assets - FTE........................................................ 8.08% 8.07%
Cost of interest bearing liabilities................................................. 4.08% 4.21%
Net interest spread - FTE............................................................ 4.00% 3.86%
Net interest margin - FTE............................................................ 4.77% 4.61%
</TABLE>
The following schedule details rate sensitive assets and liabilities at
March 31, 1997. The repricing schedule, as depicted, represents the first
opportunity to reprice earning assets or interest bearing liabilities. The
interest rate sensitivity data is based on repricing terms, rather than actual
contractual maturities.
12
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<TABLE>
<CAPTION>
Interest Rate Sensitivity Period
(Dollars in thousands) ----------------------------------------------------------------------------
0 - 30 31 - 90 91 - 180 181 - 365 1 to 5 Over 5
Days Days Days Days Years Years Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Short-term investments..........$ 172,781 $ -- $ -- $ -- $ -- $ -- $ 172,781
Trading account securities...... 166 -- -- -- -- -- 166
Taxable investment securities... 167,734 132,835 133,826 127,735 596,956 39,247 1,198,333
Tax-exempt investment securities 2,848 2,512 4,787 14,930 92,427 68,512 186,016
Loans and leases................ 859,321 267,388 330,364 522,373 1,186,838 332,278 3,498,562
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total earning assets............ 1,202,850 402,735 468,977 665,038 1,876,221 440,037 5,055,858
Interest bearing liabilities:
Savings and NOW accounts........ 1,044,221 -- -- -- -- -- 1,044,221
Money market accounts........... 707,644 -- -- -- -- -- 707,644
Other time deposits............. 294,638 415,473 522,189 523,937 379,911 19,143 2,155,291
Short-term borrowings........... 178,096 -- -- -- -- -- 178,096
Long-term debt.................. 1,071 -- -- 2 5,007 17 6,097
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total interest bearing
liabilities.................... 2,225,670 415,473 522,189 523,939 384,918 19,160 4,091,349
Interest rate
sensitivity gap................(1,022,820) (12,738) (53,212) 141,099 1,491,303 420,877
Cumulative interest rate
sensitivity gap................(1,022,820)(1,035,558)(1,088,770) (947,671) 543,632 964,509
Cumulative rate sensitive assets
to rate sensitive liabilities.. 54.0% 60.8% 65.6% 74.3% 113.3% 123.6%
Cumulative gap as a percentage
of earning assets.............. (20.2%) (20.5%) (21.5%) (18.7%) 10.8% 19.1%
</TABLE>
The Company is currently in a negative static gap situation. However,
management recognizes the limitations of a static gap analysis. While a
comparison of rate sensitive assets and rate sensitive liabilities (static gap
analysis) does provide a general indication of how net interest income will be
affected by changes in interest rates, an important limitation is that static
gap analysis considers only the dollar volume of assets and liabilities to be
repriced. Changes in net interest income are determined not only by the
volumes being repriced, but also by the rates at which the assets and
liabilities are repriced, and the relationship between the rates earned on
assets and rates paid on liabilities are not necessarily constant over time.
Therefore, management uses a beta adjusted gap along with a net interest
revenue simulation model to actively manage the gap position. Management
believes that the dynamic gap position is in a near balanced situation, so that
the impact of changes in the general level of interest rates on net interest
margin is likely to be minimal. Management will continue to closely monitor
all aspects of the Company's gap position to maximize profitability as interest
rates fluctuate.
13
<PAGE>
Non-Interest Income
In addition to net interest income increases, the Company has continued to
develop its sources of non-interest income. The primary sources of sustainable
non-interest income are trust services, service charges on deposit accounts,
broker-dealer operations, and other service charges and fees. For the first
three months of 1997 and 1996, non-interest income totaled $25.7 million.
During late 1995 and early 1996, the Company's mortgage subsidiary made several
large loan servicing rights acquisitions which brought the Company's total
servicing portfolio at March 31, 1996, to $8.0 billion. This compares to a
$7.1 billion total servicing portfolio at March 31, 1997. This was the reason
the Company experienced a decrease in fee income from mortgage servicing
activities. Excluding the other real estate and investment securities gains
and losses, the effect of lower fees from mortgage servicing activities, and
the 1997 first quarter acquisition of W.B.T. Holding Company, non-interest
income increased $1.7 million, which represented an increase from 1996's first
quarter of 11%. The primary contributor to this increase was an increase in
service charges and fee income due to an increase in the Company's deposit
base. The following table summarizes non-interest income for the three months
ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------------------
1997 1996 % Change
---------- ---------- -----------
<S> <C> <C> <C>
Trust department income................................................. $ 3,109 $ 3,070 1.27%
Mortgage servicing fee income........................................... 9,271 10,998 (15.70)
Broker-dealer operations income......................................... 1,223 908 34.69
Service charges on deposits............................................. 7,011 6,039 16.10
Other service charges and fees.......................................... 3,478 2,978 16.79
Investment securities gains (losses), net............................... 12 66 (81.82)
Other real estate gains (losses), net................................... (331) 12 (2858.83)
Other income............................................................ 1,888 1,677 12.58
---------- ----------
Total non-interest income............................................... $ 25,661 $ 25,748 (0.34)%
========== ==========
</TABLE>
Non-Interest Expense
Non-interest expenses consist of salaries and benefits, occupancy,
equipment and other expenses such as legal, postage, etc., necessary for the
operation of the Company. Management is committed to controlling the level of
non-interest expenses through improved efficiency and consolidation of certain
activities to achieve economies of scale. It is expected that these efforts
will further improve the Company's efficiency ratio during the remainder of
1997 and future years.
Non-interest expenses were $52.6 million for the first three months of 1997
compared to $51.8 million for the first three months of 1996. In the first
quarter of 1997, the Company recorded $1.1 million in non-recurring expenses
relating to operating losses, merger expenses and medical benefit expenses.
14
<PAGE>
In the first quarter of 1996, the Company recorded $1.8 million in non-
recurring expenses relating to legal matters. Excluding the effect of the non-
recurring expense items, the 1997 first quarter acquisition of W.B.T. Holding
Company, and the expenses associated with intangible amortization and FDIC
insurance, non-interest expense increased $1.3 million, which represented an
increase from 1996's first three months of 3%. The following table summarizes
non-interest expenses for the three months ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------------------
1997 1996 % Change
---------- ---------- -----------
<S> <C> <C> <C>
Salaries, wages and employee benefits................................... $ 25,437 $ 23,986 6.05%
Net occupancy........................................................... 3,324 2,990 11.17
Equipment............................................................... 3,402 3,103 9.64
FDIC Insurance.......................................................... (85) 307 (127.69)
Amortization of mortgage servicing rights............................... 4,173 5,064 (17.59)
Other expenses.......................................................... 16,322 16,380 (0.35)
---------- ----------
Total non-interest expenses............................................. $ 52,573 $ 51,830 1.43%
========== ==========
</TABLE>
An important tool in determining a bank's effectiveness in managing non-
interest expenses is the efficiency ratio, which is calculated by dividing non-
interest expense by the sum of net interest margin on a tax-equivalent basis
and non-interest income, excluding securities and other real estate gains and
losses. The Company's ratio decreased from 55.9% for the first three months of
1996 to 54.4% in the first three months of 1997. The Company, in calculating
its efficiency ratio has excluded the effect of the non-recurring expenses,
mentioned previously, as well as the amortization of intangible assets. The
decrease in the efficiency ratio shows the Company's commitment to controlling
non-interest expenses while increasing revenues. The 1996 efficiency ratio
reached the Company's long-term goal of 57%. Management has reviewed trends in
the financial services industry and set a new efficiency ratio goal of 54%.
Income Taxes
The effective income tax rate differs from the statutory rate primarily
because of tax-exempt income from loans, leases and municipal securities. The
effective tax rate was 35.5% for the first three months of 1997 and 35.1% for
the first three months of 1996.
Loan and Lease Portfolio
At March 31, 1997, the Company's loan and lease portfolio, net of unearned
income, totaled $3.5 billion, as compared to a $3.3 billion loan portfolio at
December 31, 1996. Excluding the Company's first quarter 1997 acquisition of
W.B.T. Holding Company, the Company's loan and lease portfolio experienced an
increase of $38.6 million, or 1%, during the first three months of 1997.
15
<PAGE>
The Company has continued its policy of conservative lending thereby
avoiding significant risk areas, such as out of territory lending and highly
leveraged transactions. This has been and will remain the philosophy of
Company management. In keeping with this philosophy, the Company has no
foreign loans, no loans outstanding to borrowers engaged in highly leveraged
transactions, and no concentrations of credit to borrowers in any one industry.
A concentration generally exists when more than 10% of total loans are
outstanding to borrowers in the same industry.
Provision and Allowance for Possible Loan and Lease Losses
The allowance for possible loan and lease losses is the amount deemed by
management to be adequate to provide for possible losses on loans and leases
that may become uncollectible. Reviews of general loss experience and the
performance of specific credits are conducted in determining reserve adequacy
and required provision expense. The allowance is adjusted by the provision for
possible loan and lease losses, increased by loan recoveries and decreased by
loan losses. As of March 31, 1997, the allowance for possible loan and lease
losses equaled $59.5 million or 1.70% of total loans and leases.
Comparatively, the allowance for possible for loan and lease losses amounted to
$52.6 million or 1.60% of total loans and leases at December 31, 1996. The
provision for possible loan and lease losses amounted to $2.2 million in the
first three months of 1997 as compared to $1.5 million in the first three
months of 1996.
A key indicator of the adequacy of the allowance for possible loan and
lease losses is the ratio of the allowance to non-performing loans. The
Company's ratio has been at or above 100% for the past seven years. At March
31, 1997, the Company's ratio was 177.05%. This means that for every dollar of
non-performing loans (impaired loans, other non-accrual loans, loans 90 days or
more past due, and renegotiated loans), $1.77 has been set aside in the
Company's reserves to cover possible losses. The ratio at December 31, 1996,
was 215.64%. Another reserve adequacy indicator is the ratio of allowance for
possible loan and lease losses and other real estate losses to non-performing
assets (defined as impaired loans, other non-accrual loans, renegotiated debt,
repossessed assets and other real estate owned). The ratio was 185.33% at
March 31, 1997, compared to 259.57% at December 31, 1996. Excluding the impact
of the W.B.T. Holding Company first quarter 1997 merger mentioned previously,
these ratios at March 31, 1997, would have been 201.62% and 213.58%,
respectively. Presented in the following table is a comparison of net loan and
lease losses sustained to average loans and leases, allowance for possible loan
and lease losses to total loans and leases, and non-performing loans to total
loans and leases.
16
<PAGE>
<TABLE>
<CAPTION>
Annualized Three Months
Ended March 31, For the Years Ended December 31,
----------------------- --------------------------------------------
1997 1996 1995 1994 1993 1992
----------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net loan and lease losses sustained
to average loans and leases 0.22% 0.20% 0.08% 0.04% 0.16% 0.52%
Allowance for possible loan and lease
losses to total loans and leases 1.70% 1.60% 1.60% 1.79% 2.19% 2.15%
Non-performing loans to total
loans and leases 0.96% 0.74% 0.54% 0.52% 0.72% 0.86%
</TABLE>
Although asset quality remained relatively stable during the periods
reflected in the preceding table, the principal area of risk for the Company
will continue to be in the real estate loan portion of the portfolio, and
accordingly, this area has the largest allocation of the reserve for loan and
lease losses. Management attempts to control the loan loss risks by
maintaining a diverse portfolio with no significant concentrations in any
industry or category of borrowers and through an aggressive real estate write
down policy. Also, the Company maintains a corporate "in-house-lending limit"
that represents only 27% of the Company's combined legal lending limit. Any
exception to this limit must be approved by a corporate credit group prior to
commitment or funding. The Company currently has only 33 loan relationships
with aggregate outstanding balances of $5 million or greater, which further
mitigates the loan loss risks.
Liquidity
Long-term liquidity is a function of a large core deposit base and a strong
capital position. Core deposits, which consist of total deposits less
certificates of deposit of $100,000 and over, represent the Company's largest
and most important funding source. The capital position of the Company is a
result of internal generation of capital and earnings retention. The Company
manages dividends to retain sufficient capital for long-term liquidity and
growth. Two key measures of the Company's long-term liquidity are the ratios
of loans and leases to total deposits and loans and leases to core deposits.
Lower ratios in these two measures correlate to higher liquidity. As can be
seen from the accompanying table, the Company's ratios have increased,
indicating lower liquidity. The Company's liquidity has decreased because the
funding of loans has outpaced the growth in the Company's core deposit base.
However, the Company's relatively sound deposit base, along with its low debt
level and common and preferred stock availability, provide several alternatives
for future financing and long-term liquidity needs.
17
<PAGE>
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Years Ended December 31,
-------------------- ------------------------------------
1997 1995 1994 1993
-------------------- ---------- ---------- ----------
<C> <C> <C> <C> <C>
Average loans and leases to average deposits....... 71.03% 70.38% 69.29% 61.76%
Average loans and leases to average core deposits.. 80.40% 79.08% 76.88% 67.83%
</TABLE>
Short-term liquidity is the ability of the Company to meet the borrowing
needs and deposit withdrawal requirements of its customers due to growth in the
customer base and, to a lesser extent, seasonal and cyclical customer demands.
Short-term liquidity needs can be met by short-term borrowings in state and
national money markets. Short-term borrowings include federal funds purchased,
securities sold under agreement to repurchase, treasury tax and loan accounts,
and other borrowings. Average short-term borrowings exceeded average short-
term investments by $33.0 million in the first three months of 1997. During
the fourth quarter of 1996 average short-term borrowings exceeded average
short-term investments by $4.6 million. The Company has continued to use
short-term borrowings to fund overall loan growth throughout the Company.
Future short-term liquidity needs for daily operations are not expected to vary
significantly and management believes that the Company's level of liquidity is
sufficient to meet current funding requirements.
Capitalization
The Company maintains its goal of providing a strong capital position while
earning an acceptable return for its shareholders. Management will use the
additional financial leverage provided by internal generation of capital and
recent acquisitions in pursuit of above average return opportunities. A
position of strength is important to the Company's customers, investors and
regulators.
At March 31, 1997, the Company's equity to asset ratio was 8.85% compared
to 8.59% at December 31, 1996. At March 31, 1997, the Company's leverage, tier
1 and total risk-based capital ratios substantially exceeded the required 3%,
4% and 8% levels established by the Board of Governors of the Federal Reserve
System, as can be seen from the accompanying table.
<TABLE>
<CAPTION>
Regulatory March 31, December 31, September 30, June 30, March 31,
Minimum 1997 1996 1996 1996 1996
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Leverage ratio.................. 3.00% 8.27% 8.07% 7.98% 7.86% 7.66%
Tier 1 risk-based capital ratio. 4.00% 12.44% 11.83% 11.48% 11.52% 11.34%
Total risk-based capital ratio.. 8.00% 13.23% 12.62% 12.28% 12.32% 12.15%
</TABLE>
18
<PAGE>
While management plans to maintain the Company's strong capital base, it
recognizes the need to effectively manage capital levels as they relate to
asset growth. In order to avoid declining return on equity ratios caused by a
more rapid rate of growth in capital than in assets, management will continue
to evaluate options to utilize excess capital thereby improving return on
equity.
The Company is not aware of any current recommendations by any regulatory
authorities which, if they were implemented, are reasonably likely to have a
material effect on the Company's liquidity, capital resources or operations.
Dividend Policy
The Company's long-term dividend policy has been to pay between 35% and 40%
of earnings in cash dividends to its stockholders while maintaining adequate
capital to support growth. In October 1996, the Company increased its dividend
rate for the tenth consecutive year, bringing the annual dividend rate to $.96
per share.
The dividend payout ratios for the past three years were 35.34% in 1996,
35.77% in 1995, and 33.97% in 1994. The Company's Board of Directors reviews
the cash dividend policy and payout levels annually in the fourth quarter.
19
<PAGE>
PART II. OTHER INFORMATION
On April 15, 1997, in the annual meeting of the Company's shareholders, the
shareholders elected six (6) directors. The individuals elected and the votes
received were as follows:
Nominee For Against
--------------------------- ------------- -------------
William H. Bowen 24,429,608 99,512
Peggy Clark 24,425,458 103,662
Robert G. Cress 24,425,571 103,549
Cecil W. Cupp, Jr. 24,416,543 112,577
Walter E. Hussman, Jr. 23,383,564 1,145,556
Sam C. Sowell 24,423,509 105,611
The shareholders also approved and ratified the adoption of the 1997
Incentive Stock Plan. 23,591,837 shares were voted in favor of the amendment,
370,549 shares were voted against the amendment, and 566,734 shares were not
voted.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10 1997 Incentive Stock Plan.
27 Financial Data Schedule.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the first
quarter of 1997.
20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST COMMERCIAL CORPORATION
/s/ J. Lynn Wright
By: -------------------------------
J. Lynn Wright
Chief Financial Officer
Date: May 13, 1997
21
<PAGE>
Index to Exhibits
Exhibit Number Exhibit
---------------- --------------------------------------------
10 1997 Incentive Stock Plan.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 10
FIRST COMMERCIAL CORPORATION
1997 INCENTIVE STOCK PLAN
Section 1. Purpose
First Commercial Corporation(hereinafter referred to as the "Company") hereby
establishes the 1997 Incentive Stock Plan (the "Plan") to promote the
interests of the Company and its shareholders through the (i) attraction and
retention of executive officers and other key employees essential to the
success of the Company; (ii) motivation of executive officers and other key
employees using performance-related incentives linked to longer range
performance goals and the interests of Company shareholders; and (iii)
enabling of such employees to share in the long term growth and success of
the Company. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options (intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended), Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units, Bonus Stock, and any other Stock Unit Awards or stock based forms of
awards as the Committee may determine under its sole and complete discretion
at the time of grant.
Section 2. Definitions
Except as otherwise defined in the Plan, the following terms shall have the
meanings set forth below:
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
2.2 "Agreement" means a written agreement which sets forth the terms of
each Award and is signed by an authorized officer of the Company.
2.3 "Award" means individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares, Bonus Stock or other Stock Unit Awards.
2.4 "Award Date" or "Grant Date" means the date on which an Award is made
by the Committee under this Plan
2.5 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d 3 under the Exchange Act.
2.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.7 "Bonus Stock" means an Award granted pursuant to Section 10 of the Plan
expressed as a Share of Common Stock which may or may not be subject to
restrictions.
<PAGE>
2.8 "Cashless Exercise" means the exercise of an option by the Participant
through the use of a brokerage firm to make payment to the Company of
the exercise price either from the proceeds of a loan to the
Participant from the brokerage firm or from the proceeds of the sale of
Stock issued pursuant to the exercise of the option, and upon receipt
of such payment, the Company delivers the exercised shares to the
brokerage firm.
2.9 "Change in Control" shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been
satisfied:
(a) any person or persons (as defined in Section 3(a)(9) of the
Exchange Act, and shall also include any syndicate or group deemed
to be a "person" under Section 13(d)(3) of the Exchange Act)
acting together, excluding employee benefit plans of the Employer,
are or become the "beneficial owner" (as defined in Rules 13d 3
and 13d 5 under the Exchange Act or any successor provisions
thereto), directly or indirectly, of securities of the Company
representing twenty five percent (25%) or more of the combined
voting power of the Company's then outstanding securities; or
(b) the Company's shareholders approve (or, in the event no approval
of the Company's shareholders is required, the Company
consummates) a merger, consolidation, share exchange, division or
other reorganization or transaction of the Company (a "Fundamental
Transaction") with any other corporation, other than a Fundamental
Transaction which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty
percent (60%) of the combined voting power immediately after such
Fundamental Transaction of (i) the Company's outstanding
securities, (ii) the surviving entity's outstanding securities, or
(iii) in the case of a division, the outstanding securities of
each entity resulting from the division; or
(c) the shareholders of the Company approve a plan of complete
liquidation or winding up of the Company or an agreement for the
sale or disposition (in one transaction or a series of
transactions) of all or substantially all of the Company's assets;
or
(d) during any period of twenty four consecutive months, individuals
who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or
nomination for election by the Company's shareholders was approved
by a vote of at least two thirds (2/3) of the directors then still
in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the
Board.
2.10 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
<PAGE>
2.11 "Committee" means the Compensation Committee of the Board which will
administer the Plan pursuant to Section 3 herein.
2.12 "Common Stock" or "Stock" means the Common Stock of the Company, with a
par value of $3.00 per share, or such other security or right or
instrument into which such common stock may be changed or converted in
the future.
2.13 "Company" means First Commercial Corporation, including all Affiliates
and wholly owned Subsidiaries, or any successor thereto.
2.14 "Covered Participant" means a Participant who is a "covered employee"
as defined in Section 162(m)(3) of the Code, and the regulations
promulgated thereunder, or who the Committee believes will be such a
covered employee for a Performance Period, and who the Committee
believes will have remuneration in excess of $1,000,000 for the
Performance Period, as provided in Section 162(m) of the Code.
2.15 "Department" means the Human Resources Department of the Company.
2.16 "Designated Beneficiary" means the beneficiary designated by the
Participant, pursuant to procedures established by the Department, to
receive amounts due to the Participant in the event of the
Participant's death. If the Participant does not make an effective
designation, then the Designated Beneficiary will be deemed to be the
Participant's estate.
2.17 "Disability" means (i) the mental or physical disability, either
occupational or non-occupational in origin, of the Participant defined
as "Total Disability" in the Disability Plan of the Company currently
in effect and as amended from time to time, or (ii) a determination by
the Committee of "Total Disability," based on medical evidence that
precludes the Participant from engaging in any occupation or employment
for wage or profit for at least twelve months and appears to be
permanent.
2.18 "Divestiture" means the sale of, or closing by, the Company of the
business operations in which the Participant is employed, or the
elimination of the Participant's position at the Company's discretion.
2.19 "Early Retirement" means retirement of a Participant from employment
with the Company after age 55, but prior to age 65, as approved by the
Committee.
2.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.21 "Executive Officer" means any employee designated by the Company as an
officer or any employee covered by Rule 16b 3 of the Exchange Act.
2.22 "Fair Market Value" means, on any given date, the (i) average of the
closing bid and ask price as reported by the Nasdaq National Market on
that date or (ii) if the stock hereafter becomes listed on a stock
exchange, the closing price of Stock as reported on the exchange on
such day or, if no Shares were traded on the exchange on such day,
then on the next preceding day that Stock was traded on such exchange,
all as reported by such source as the Committee may select.
<PAGE>
2.23 "Full time Employee" means an employee designated by the Company's
Department as being a "permanent, full time employee" who is eligible
for all plans and programs of the Company set forth for such employees.
This designation excludes all part time, temporary, or contract
employees or consultants to the Company.
2.24 "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Section 6 herein, which is designated as an incentive
stock option and is intended to meet the requirements of Section 422A
of the Code.
2.25 "Key Employee" means an officer or other key employee of the Company or
its Subsidiaries, who, in the opinion of the Committee, can contribute
significantly to the growth and profitability of, or perform services
of major importance to, the Company and its Subsidiaries.
2.26 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Stock, granted under Article 6 herein, which is not intended to be an
Incentive Stock Option.
2.27 "Normal Retirement" means the retirement of any Participant at age 65
or at some earlier date if approved by the Committee.
2.28 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.29 "Other Stock Unit Award" means awards of Stock or other awards that are
valued in whole or in part by reference to, or are otherwise based on,
Shares or other securities of the Company.
2.30 "Participant" means a Key Employee who has been granted an Award under
the Plan.
2.31 "Performance Criteria" or "Performance Goals" or "Performance Measures"
mean the objectives for a Performance Period established by the
Committee based upon Stockholder Approved Standards, for the purpose of
determining when an Award subject to such objectives are earned.
2.32 "Performance Award" means a performance based Award, which may be in
the form of either Performance Shares or Performance Units.
2.33 "Performance Period" means the time period designated by the Committee
during which performance goals must be met.
2.34 "Performance Share" means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 9 herein, the value of
which is determined, in whole or in part, by the value of Company Stock
in a manner deemed appropriate by the Committee and described in the
Agreement.
2.35 "Performance Unit" means an Award, designated as a Performance Unit,
granted to a Participant pursuant to Section 9 herein, the value of
which is determined, in whole or in part, by the attainment of pre
established goals relating to Company financial or operating
performance as deemed appropriate by the Committee and described in the
Agreement.
<PAGE>
2.36 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is restricted, pursuant to Section 8 herein.
2.37 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d).
2.38 "Plan" means the First Commercial Corporation 1997 Incentive Stock Plan
as herein described and as hereafter from time to time amended.
2.39 "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Section 8 herein.
2.40 "Restricted Stock Unit" means a fixed or variable dollar denominated
right to acquire Stock, which may or may not be subject to
restrictions, contingently awarded under Section 8 of the Plan.
2.41 "Rule 16b 3" means Rule 16b-3 under Section 16(b) of the Exchange Act
as adopted in Exchange Act Release No. 34 37260 (May 31, 1996), or any
successor rule as amended from time to time.
2.42 "Section 162(m)" means Section 162(m) of the Code, or any successor
section under the Code, as amended from time to time and as interpreted
by final or proposed regulations promulgated thereunder from time to
time.
2.43 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as amended
from time to time.
2.44 "Stock" or "Shares" means the Common Stock of the Company.
2.45 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over the Exercise Price of a
related Option or the Fair Market Value of the Stock on the Date of
Grant of the Stock Appreciation Right.
2.46 "Stock Unit Award" means an award of Common Stock or units granted
under Section 11.
2.47 "Stockholder Approved Standard" means any pre established objective
performance goal qualifying under Section 162(m) and approved by the
shareholders of the Company in accordance with Section 162(m),
including (a) total stockholder return (Stock price appreciation plus
dividends), (b) net income, (c) earnings per share, (d) return on
sales, (e) return on equity, (f) return on assets, (g) increase in the
market price of Stock or other securities of the Company, (h) the
performance of the Company in any of the items mentioned in clause (a)
through (g) in comparison to the average performance of companies
combined into a Company constructed peer group established before the
beginning of the performance period.
2.43 "Subsidiary" means a corporation in which the Company owns, either
directly or through one or more of its Subsidiaries, at least 50% of
the total combined voting power of all classes of stock.
<PAGE>
Section 3. Administration
3.1 The Committee. The Plan shall be administered and interpreted by the
- -------------------
Committee which shall have full authority and all powers necessary or
desirable for such administration. The express grant in this Plan of any
specific power to the Committee shall not be construed as limiting any power
or authority of the Committee. In its sole and complete discretion the
Committee may adopt, alter, suspend and repeal any such administrative rules,
regulations, guidelines, and practices governing the operation of the Plan as
it shall from time to time deem advisable. In addition to any other powers
and, subject to the provisions of the Plan, the Committee shall have the
following specific powers: (i) to determine the terms and conditions upon
which the Awards may be made and exercised; (ii) to determine all terms and
provisions of each Agreement, which need not be identical for types of awards
nor for the same type of award to different participants; (iii) to construe
and interpret the Agreements and the Plan; (iv) to establish, amend, or waive
rules or regulations for the Plan's administration; (v) to accelerate the
exercisability of any Award, the length of a Performance Period or the
termination of any Period of Restriction; and (vi) to make all other
determinations and take all other actions necessary or advisable for the
administration of the Plan. The Committee may take action by a meeting in
person, by unanimous written consent, or by meeting with the assistance of
communications equipment which allows all Committee members participating in
the meeting to communicate in either oral or written form. The Committee may
seek the assistance or advice of any persons it deems necessary to the proper
administration of the Plan.
3.2 Selection of Participants. The Committee shall have sole and complete
- -------------------------------
discretion in determining those Key Employees who shall participate in the
Plan. The Committee may request recommendations for individual awards from
the Chief Executive Officer of the Company and may delegate to the Chief
Executive Officer of the Company the authority to make Awards to Participants
who are not Executive Officers of the Company, subject to a fixed maximum
Award amount for such a group and a maximum Award amount for any one
Participant, as determined by the Committee. Awards made to the Executive
Officers shall be determined by the Committee.
3.3 Committee Decisions. All determinations and decisions made by the
- -------------------------
Committee pursuant to the provisions of the Plan shall be final, conclusive,
and binding upon all persons, including the Company, its stockholders,
employees, Participants, and Designated Beneficiaries, except when the terms
of any sale or award of shares of Stock or any grant of rights or Options
under the Plan are required by law or by the Articles of Incorporation or
Bylaws of the Company to be approved by the Company's Board of Directors or
shareholders prior to any such sale, award or grant.
3.4 Rule 16b 3 Requirements. Notwithstanding any other provision of the
- -----------------------------
Plan, the Committee may impose such conditions on any Award, and the Board
may amend the Plan in any such respects, as may be required to satisfy the
requirements of Rule 16b 3 under the Exchange Act, as amended (or any
successor or similar rule), or Section 162(m) of the Internal Revenue Code.
<PAGE>
3.5 Indemnification of Committee. In addition to such other rights of
- ----------------------------------
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses incurred from their administration of the Plan. Such
reasonable expenses include, but are not limited to, attorneys' fees,
actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Award granted or
made hereunder, and against all amounts reasonably paid by them in settlement
thereof or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, if such members acted in good faith and in a manner which
they believed to be in, and not opposed to, the best interests of the Company
and its Subsidiaries.
Section 4. Eligibility
The Committee in its sole and complete discretion shall determine the Key
Employees, including officers, who shall be eligible for participation under
the Plan, subject to the following limitations: (i) no non Employee director
of the Company shall be eligible to participate under the Plan; (ii) no
member of the Committee shall be eligible to participate under the Plan;
(iii) no person owning, directly or indirectly, more than 5% of the total
combined voting power of all classes of stock of the Company shall be
eligible to participate under the Plan; and (iv) only Full time Employees
shall be eligible to participate under the Plan.
Section 5. Shares Subject to the Plan
5.1 Number of Shares. Subject to adjustment as provided in Section 5.4
- ----------------------
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed One Million Two Hundred Thousand
(1,200,000) Shares of Stock, which may be in any combination of Options;
Restricted Stock, Restricted Stock Units, Performance Shares, Bonus Shares,
or any other right or option. No Participant may receive an Award which
would cause such Participant to be issued more than 25% of the total number
of Shares issued over the life of the Plan. Shares of Stock may be available
from the authorized, but unissued Shares of Stock or treasury Shares. Except
as provided in Sections 5.2 and 5.3 herein, the issuance of Shares in
connection with the exercise of, or as other payment for, Awards under the
Plan shall reduce the number of Shares available for future Awards under the
Plan.
5.2 Lapsed Awards of Forfeited Shares. In the event that (i) any Option or
- ---------------------------------------
other Award granted under the Plan terminates, expires, or lapses for any
reason other than exercise of the Award, or (ii) if Shares issued pursuant to
the Awards are canceled or forfeited for any reason, such Shares subject to
such Award shall thereafter be again available for grant of an Award under
the Plan.
<PAGE>
5.3 Delivery of Shares as Payment. In the event a Participant pays for any
- -----------------------------------
Option or other Award granted under the Plan through the delivery of
previously acquired shares of Stock, the number of shares of Stock available
for Awards under the Plan shall be increased by the number of shares
surrendered by the Participant, subject to Rule 16b 3 under the Exchange Act
as interpreted by the Securities and Exchange Commission or its staff.
5.4 Capital Adjustments. The number and class of Shares subject to each
- -------------------------
outstanding Award, the Option Price and the aggregate number, type and class
of Shares for which Awards thereafter may be made shall be subject to
adjustment, if any, as the Committee deems appropriate, based on the
occurrence of a number of specified and non specified events. Such specified
events are discussed herein this Section 5.4, but such discussion is not
intended to provide an exhaustive list of such events which may necessitate
such adjustments.
(a) If the outstanding shares of the Company are increased, decreased
or exchanged through merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split or
other distribution in respect to such Shares, for a different number or
type of Shares, or if additional Shares or new or different Shares are
distributed with respect to such Share, an appropriate and
proportionate adjustment shall be made in: (i) the maximum number of
shares of Stock available for the Plan as provided in Section 5.1
herein, (ii) the type of shares or other securities available for the
Plan, (iii) the number of shares of Stock subject to any then
outstanding Awards under the Plan, and (iv) the price (including
Exercise Price) for each share of Stock (or other kind of shares or
securities) subject to then outstanding awards, but without change in
the aggregate purchase price as to which such Options remain
exercisable or Restricted Stock releasable.
(b) In the event other events not specified above in this Section 5.4, such
as any extraordinary cash dividend, split up, spin off, combination,
exchange of shares, warrants or rights offering to purchase Common
Stock, or other similar corporate event, affect the Common Stock such
that an adjustment is necessary to maintain the benefits or potential
benefits intended to be provided under this Plan, then the Committee in
its discretion may make adjustments to any or all of (i) the number and
type of shares which thereafter may be optioned and sold or awarded or
made subject to Stock Appreciation Rights under the Plan, (ii) the
grant, exercise or conversion price of any Award made under the Plan
thereafter, and (iii) the number and price (including Exercise Price)
of each share of Stock (or other kind of shares or securities) subject
to then outstanding awards, but without change in the aggregate
purchase price as to which such Options remain exercisable or
Restricted Stock releasable.
<PAGE>
(c) Any adjustment made by the Committee pursuant to the provisions of this
Section 5.4, subject to approval by the Board of Directors, shall be
final, binding and conclusive. A notice of such adjustment, including
identification of the event causing such an adjustment, the calculation
method of such adjustment, and the change in price and the number of
shares of Stock, or securities, cash or property purchasable subject to
each Award shall be sent to each Participant. No fractional interests
shall be issued under the Plan based on such adjustments.
Section 6. Stock Options
6.1 Grant of Stock Options. Subject to the terms and provisions of the
- ----------------------------
Plan and applicable law, the Committee, at any time and from time to time,
may grant Options to Key Employees as it shall determine. The Committee
shall have sole and complete discretion in determining the type of Option
granted, the Option Price (as hereinafter defined), the duration of the
Option, the number of Shares to which an Option pertains, any conditions
imposed upon the exercisability of the Options, the conditions under which
the Option may be terminated and any such other provisions as may be
warranted to comply with the law or rules of any securities trading system or
stock exchange. Each Option grant shall have such specified terms and
conditions detailed in an Award Agreement. The Agreement shall specify
whether the Option is intended to be an Incentive Stock Option within the
meaning of Section 422A of the Code, or a Nonqualified Stock Option not
intended to be within the provisions of Section 422A of the Code.
Notwithstanding the foregoing and any other provision in this Plan or an
Agreement to the contrary, in the event of a Change in Control, all
outstanding Options granted pursuant to this Plan which have not previously
terminated, expired, lapsed or forfeited shall become immediately vested and,
if they are not yet exercisable pursuant to the terms of the Agreement, shall
become immediately exercisable.
6.2 Option Price. The exercise price per share of Stock covered by an
- ------------------
Option ("Option Price") shall be determined at the time of grant by the
Committee, subject to the limitation that the Option Price shall not be less
than 100% of Fair Market Value of the Stock on the Grant Date.
6.3 Exercisability. Options granted under the Plan shall be exercisable at
- --------------------
such times and be subject to such restrictions and conditions as the
Committee shall determine, which will be specified in the Award Agreement and
need not be the same for each Participant. However, no Option granted under
the Plan may be exercisable until the expiration of at least six months after
the Grant Date (except that such limitations shall not apply in the case of
death or disability of the Participant, or a Change in Control of the
Company), nor after the expiration of ten years from the Grant Date.
<PAGE>
6.4 Method of Exercise. Options shall be exercised by the delivery of a
- ------------------------
written notice from the Participant to the Company in the form prescribed by
the Committee setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares. The
Option price shall be payable to the Company in full in cash, or its
equivalent, or by delivery of Shares of Stock (not subject to any security
interest or pledge) valued at Fair Market Value at the time of exercise or by
a combination of the foregoing. In addition, at the request of the
Participant, and subject to applicable laws and regulations, the Company may
(but shall not be required to) cooperate in a "Cashless Exercise" of the
Option. As soon as practicable, after receipt of written notice and payment,
the Company shall deliver to the Participant, stock certificates in an
appropriate amount based upon the number of Shares with respect to which the
option is exercised, issued in the Participant's name.
Section 7. Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
- ----------------------------------------
provisions of the Plan and applicable law, the Committee, at any time and
from time to time, may grant freestanding Stock Appreciation Rights, Stock
Appreciation Rights in tandem with an Option, or Stock Appreciation Rights in
addition to an Option. Stock Appreciation Rights granted in tandem with an
Option or in addition to an Option may be granted at the time of the Option
or at a later time. No Stock Appreciation Rights granted under the Plan may
be exercisable until the expiration of at least six months after the Grant
Date (except that such limitations shall not apply in the case of death or
disability of the Participant, or a change in control of the Company), nor
after the expiration of ten years from the Grant Date.
7.2 Price. The exercise price of each Stock Appreciation Right shall be
- ----------
determined at the time of grant by the Committee, subject to the limitation
that the grant price shall not be less than 100% of Fair Market Value of the
Stock on the Grant Date.
7.3 Exercise. The Participant is entitled to receive an amount equal to
- --------------
the excess of the Fair Market Value of a Share over the grant price thereof
on the date of exercise of the Stock Appreciation Right.
7.4 Payment. Payment upon exercise of the Stock Appreciation Right shall
- -------------
be made in the form of cash, cash installments, Shares of Common Stock, or a
combination thereof, as determined in the sole and complete discretion of the
Committee. However, if any payment in the form of Shares results in a
fractional share, such payment for the fractional share shall be made in
cash.
<PAGE>
Section 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
- -------------------------------
Plan and applicable law, the Committee, at any time and from time to time,
may grant shares of Restricted Stock and Restricted Stock Units under the
Plan to such Participants, and in such amounts and for such duration and/or
consideration as it shall determine. Participants receiving Restricted Stock
and Restricted Stock Unit Awards are not required to pay the Company thereof
(except for applicable tax withholding) other than the rendering of services
and/or until other considerations are satisfied as determined by the
Committee at its sole discretion.
8.2 Restricted Stock Agreement. Each Restricted Stock and Restricted Stock
- --------------------------------
Unit grant shall be evidenced by an Agreement that shall specify the Period
of Restriction; the conditions which must be satisfied prior to removal of
the restriction; the number of Shares of Restricted Stock granted; and such
other provisions as the Committee shall determine. The Committee may
specify, but is not limited to, the following types of restrictions in the
Award Agreement: (i) restrictions on acceleration or achievement of terms or
vesting based on any business or financial goals of the Company, including,
but not limited to, absolute or relative increases in total shareholder
return, revenues, sales, net income, or net worth of the Company, any of its
Subsidiaries, divisions or other areas of the Company; and (ii) any other
further restrictions that may be advisable under the law, including
requirements set forth by the Securities Act, any securities trading system
or stock exchange upon which such Shares under the Plan are listed.
8.3 Nontransferability. Except as provided in this Section 8, the Shares
- ------------------------
of Restricted Stock or Restricted Stock Units granted under the Plan may not
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the termination of the applicable Period of Restriction or
upon earlier satisfaction of other conditions as specified by the Committee
in its sole discretion and set forth in the Agreement.
8.4 Removal of Restrictions. Except as otherwise noted in this Section 8,
- -----------------------------
Restricted Stock and Restricted Stock Units covered by each Award made under
the Plan shall be provided and become freely transferable by the Participant
after the last day of the Period of Restriction and/or upon the satisfaction
of other conditions as determined by the Committee. Except as specifically
provided in this Section 8, the Committee shall have no authority to reduce
or remove the restrictions or to reduce or remove the Period of Restriction
without the express consent of the stockholders of the Company. Any shares
of Restricted Stock or Restricted Stock Units issued pursuant to this Section
8, shall provide that the minimum Period of Restrictions shall be three (3)
years, which Period of Restriction would permit the removal of restrictions
on no more than one third (1/3) of the shares of Restricted Stock or
Restricted Stock Units at the end of the first year following the Grant Date,
and the removal of the restrictions on an additional one third (1/3) of the
shares at the end of each subsequent year. In no event shall any
restrictions be removed from shares of Restricted Stock or Restricted Stock
Units during the first year following the Grant Date. If the grant of
Restricted Stock or Restricted Stock Units is performance based, the total
Restricted Period for any or all shares or units of Restricted Stock and
Restricted Stock Units so granted shall be no less than one (1) year.
<PAGE>
8.5 Voting Rights. During the Period of Restriction, Participants in whose
- -------------------
name Restricted Stock is granted under the Plan may exercise full voting
rights with respect to those shares.
8.6 Dividends and Other Distributions. During the Period of Restriction,
- ---------------------------------------
Participants in whose name Restricted Stock is granted under the Plan shall
be entitled to receive all dividends and other distributions paid with
respect to those Shares. If any such dividends or distributions are paid in
Shares, the Shares shall be subject to the same restrictions on
transferability as the Restricted Stock with respect to which they were
distributed.
Section 9. Performance Based Awards
9.1 Grant of Performance Awards. Subject to the terms and provisions of
- ---------------------------------
the Plan and applicable law, the Committee at any time and from time to time
may issue Performance Awards in the form of either Performance Units or
Performance Shares to Participants subject to the Performance Goals and
Performance Period as it shall determine. The Committee shall have complete
discretion in determining the number and value of Performance Units or
Performance Shares granted to each Participant. Participants receiving
Performance Awards are not required to pay the Company thereof (except for
applicable tax withholding) other than the rendering of services.
9.2 Value of Performance Awards. The Committee shall determine the number
- ---------------------------------
and value of Performance Units or Performance Shares granted to each
Participant as a Performance Award. The Committee shall set performance
goals in its discretion for each Participant who is granted a Performance
Award. The extent to which such performance goals are met will determine the
value of the Performance Unit or Performance Share to the Participant. Such
Performance Goals may be particular to a Participant, may relate to the
performance of the Subsidiary which employs him or her, may be based on the
division which employees him or her, may be based on the performance of the
Company generally, or a combination of the foregoing. The Performance Goals
may be based on achievement of balance sheet or income statement objectives,
or any other objectives established by the Committee. The Performance Goals
may be absolute in their terms or measured against or in relationship to
other companies comparably, similarly or otherwise situated. The terms and
conditions of each Performance Award will be set forth in an Agreement.
9.3 Settlement of Performance Awards. After a Performance Period has
- --------------------------------------
ended, the holder of a Performance Unit or Performance Share shall be
entitled to receive the value thereof based on the degree to which the
Performance Goals established by the Committee and set forth in the Agreement
have been satisfied.
9.4 Form of Payment. Payment of the amount to which a Participant shall be
- ---------------------
entitled upon the settlement of a Performance Award shall be made in cash,
stock, or a combination thereof as determined by the Committee. Payment may
be made in a lump sum or installments as prescribed by the Committee.
<PAGE>
Section 10. Bonus Stock
Subject to the terms and provisions of the Plan and applicable law, the
Committee, at any time and from time to time, may award shares of Bonus Stock
to participants under the Plan without cash consideration. The Committee
shall determine and indicate in the related Award Agreement whether such
shares of Bonus Stock awarded under the Plan shall be unencumbered of any
restrictions (other than those advisable to comply with law) or shall be
subject to restrictions and limitations similar to those referred to in
Section 9. In the event the Committee assigns any restrictions on the shares
of Bonus Stock awarded under the Plan, then such shares shall be subject to
at least the following restrictions:
(a) No shares of Bonus Stock may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated if such shares are
subject to restrictions which have not lapsed or have not been vested.
(b) If any condition of vesting of the shares of Bonus Stock are not
met, all such shares subject to such vesting shall be delivered to the
Company (in a manner determined by the Committee) within 60 days of the
failure to meet such conditions without any payment from the Company.
Section 11. Other Stock Unit Awards
11.1 Grant of Other Stock Unit Awards. Subject to the terms and provisions
- ---------------------------------------
of the Plan and applicable law, the Committee, at any time and from time to
time, may issue to Participants, either alone or in addition to other Awards
made under the Plan, Stock Unit Awards which may be in the form of Stock or
other securities. The value of each such Award shall be based, in whole or
in part, on the value of the underlying Stock or other securities. The
Committee, in its sole and complete discretion, may determine that an Award,
either in the form of a Stock Unit Award under this Section 11 or as an Award
granted pursuant to Sections 6 through 10, may provide to the Participant (i)
dividends or dividend equivalents (payable on a current or deferred basis)
and (ii) cash payments in lieu of or in addition to an Award. Subject to the
provisions of the Plan, the Committee in its sole and complete discretion,
shall determine the terms, restrictions, conditions, vesting requirements,
and payment rules (all of which are sometimes hereinafter collectively
referred to as "rules") of the Award. The Award Agreement shall specify the
rules of each Award as determined by the Committee. However, each Stock Unit
Award need not be subject to identical rules.
11.2 Rules. The Committee, in its sole and complete discretion, may grant
- ------------
a Stock Unit Award subject to the following rules:
(a) Stock or other securities issued pursuant to Stock Unit Awards may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated by a Participant until the expiration of at least six
months from the Award Date, except that such limitation shall not apply
in the case of death or disability of the Participant. To the extent
Stock Unit Awards are deemed to be derivative securities within the
meaning of Rule 16b 3 under the Exchange Act, a Participant's rights
with respect to such Awards shall not vest or be exercisable until the
expiration of at least six months from the Award Date.
<PAGE>
(b) Stock Unit Awards may require the payment of cash consideration by
the Participant in receipt of the Award or provide that the Award, and
any Common Stock or other securities issued in conjunction with the
Award be delivered without the payment of cash consideration.
(c) The Committee, in its sole and complete discretion, may establish
certain performance criteria that may relate in whole or in part to
receipt of the Stock Unit Awards.
(d) Stock Unit Awards may be subject to a deferred payment schedule
and/or vesting over a specified employment period.
(e) The Committee, in its sole and complete discretion, as a result of
certain circumstances, may waive or otherwise remove, in whole or in
part, any restriction or condition imposed on a Stock Unit Award at the
time of grant.
Section 12. Special Provisions Applicable to Covered Participants
Awards subject to performance criteria paid to Covered Participants under
this plan shall be governed by the conditions of this Section 12 in addition
to the requirements of Sections 8, 9, 10 and 11 above. Should conditions set
forth under this Section 12 conflict with the requirements of Sections 8, 9,
10 and 11, the conditions of this Section 12 shall prevail.
(a) All Performance Measures for a relevant Performance Period shall be
established by the Committee in writing based upon one or more of the
Stockholder Approved Standards prior to the beginning of the Performance
Period, or by such other later date for the Performance Period as may be
permitted under Section 162(m) of the Code.
(b) The Performance Measures shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an
Award is permissible.
(c) The Award and payment of any Award under this Plan to a Covered
Participant with respect to a relevant Performance Period shall be
contingent upon the attainment of the Performance Measures that are
applicable to such Covered Participant. The Committee shall certify in
writing prior to payment any such Award that such applicable Performance
Measure relating to the Award are satisfied. Approved minutes of the
Committee may be used for this purpose.
(d) All Awards to Covered Participants under this Plan shall be further
subject to such other conditions, restrictions, and requirements as the
Committee may determine to be necessary to carry out the purpose of this
Section 12.
Section 13. General Provisions
13.1 Plan Term. The Plan was adopted on February 18, 1997 by the Board.
- ----------------
Subject to shareholder approval, the Plan shall be effective on February 18,
1997; however, no Stock, rights or Options may be sold, awarded or granted
under the Plan until the Company is in receipt of a Registration Statement
under the Securities Act covering the shares of Stock to be issued under the
Plan. Any Stock, rights, or Options granted under this Plan shall be granted
subject to stockholder approval of the Plan.
<PAGE>
The Plan terminates February 17, 2007; however, all Awards made prior to, and
outstanding on such date, shall remain valid in accordance with their terms
and conditions.
13.2 Withholding. The Company shall have the right to deduct or withhold,
- ------------------
or require a Participant to remit to the Company, any taxes required by law
to be withheld from Awards made under this Plan. In the event an Award is
paid in the form of Common Stock, the Committee may require the Participant
to remit to the Company the amount of any taxes required to be withheld from
such payment in Common Stock, or, in lieu thereof, the Company may withhold
(or the Participant may be provided the opportunity to elect to tender) the
number of shares of Common Stock equal in Fair Market Value to the amount
required to be withheld.
13.3 Awards. Each Award granted under the Plan shall be evidenced in a
- -------------
corresponding Award Agreement provided in writing to the Participant, which
shall specify the terms, conditions and any rules applicable to the Award,
including but not limited to the effect of a Change in Control, or death,
Disability, Divestiture, Early Retirement, Normal Retirement or other
termination of employment of the Participant on the Award.
13.4 Nontransferability. No Award granted under the Plan may be sold,
- -------------------------
transferred, pledged, assigned, or otherwise alienated or hypothecated,
except by will or the laws of descent and distribution. Further, no lien,
obligation, or liability of the Participant may be assigned to any right or
interest of any Participant in an Award under this Plan.
13.5 Exercisability of Awards. All rights with respect to Awards granted
- -------------------------------
to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
13.6 No Right to Employment. No granting of an Award shall be construed as
- -----------------------------
a right to employment with the Company.
13.7 Rights as Shareholder. Subject to the Award provisions, no
- ----------------------------
Participant or Designated Beneficiary shall be deemed a shareholder of the
Company nor have any rights as such with respect to any shares of Common
Stock to be provided under the Plan until he or she has become the holder of
such shares. Notwithstanding the aforementioned, with respect to stock
granted under a Restricted Stock Agreement under this Plan, the Participant
or Designated Beneficiary of such Award shall be deemed the owner of such
shares provided herein and in the related Agreement of any Restricted Stock
Award, Restricted Stock Unit Award, Bonus Stock Award or Option Stock Award.
As such, unless contrary to the provisions herein or in any such related
Award Agreement, such stockholder shall be entitled to full voting, dividend
and distribution rights as provided any other Company stockholder for as long
as the Participant remains the owner of such stock.
<PAGE>
13.8 Amendment of Plan. The Committee or Board of Directors may amend,
- ------------------------
suspend, or terminate the Plan or any portion thereof at any time, provided
such amendment is made with shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for
these purposes any approval requirement which is a requirement for exemptive
relief under Section 16(b) of the Exchange Act or which is a requirement for
the performance-based compensation exception under Section 162(m) of the
Code. The Committee in its discretion may amend the Plan so as to conform
with local rules and regulations subject to any provisions to the contrary
specified herein.
13.9 Amendment of Award. In its sole and complete discretion, the
- -------------------------
Committee may at any time amend any Award for the following reasons: (i)
additions and/or changes to the Code, any federal or state securities law, or
other law or regulations applicable to the Award, are made prior to the Date
of Grant, and such additions and/or changes have some effect on the Award; or
(ii) any other event not described in clause (i) occurs and the Participant
gives his or her consent to such amendment.
13.10 Exemption from Computation of Compensation for Other Purposes. By
- ---------------------------------------------------------------------
acceptance of an applicable Award under this Plan, subject to the conditions
of such Award, each Participant shall be considered in agreement that all
shares of Stock sold or awarded and all Options granted under this Plan shall
be considered special incentive compensation and will be exempt from
inclusion as "wages" or "salary" in pension, retirement, life insurance, and
other employee benefits arrangements of the Company, except as determined
otherwise by the Company. In addition, each Designated Beneficiary of a
deceased Participant shall be in agreement that all such Awards or grants
will be exempt from inclusion in "wages" or "salary" for purposes of
calculating benefits of any life insurance coverage sponsored by the Company.
13.11 Legend. In its sole and complete discretion, the Committee may elect
- --------------
to legend certificates representing shares of Stock sold or awarded under the
Plan, to make appropriate references to the restrictions imposed on such
shares.
13.12 Certain Participants. All Award Agreements for Participants subject
- ----------------------------
to Section 16(b) of the Exchange Act shall be deemed to include any such
additional terms, conditions, limitations and provisions as Rule 16b 3
requires, unless the Committee in its discretion determines that any such
Award should not be governed by Rule 16b 3. All performance-based Awards
shall be deemed to include any such additional terms, conditions, limitations
and provisions as are necessary to comply with the performance-based
compensation exemption of Section 162(m) of the Code, unless the Committee in
its discretion determines that any such Award to an Executive Officer is not
intended to qualify for the exemption for performance-based compensation
under Section 162(m).
<PAGE>
13.13 Restriction on Awards. In the event a Participant has received a
- -----------------------------
hardship distribution from a Company plan which is qualified under Section
401 (a) of the Code with a Section 401(k) cash or deferred arrangement that
permits hardship withdrawals, then, as proscribed under the Code or by the
Internal Revenue Services' interpretation of the Code, such Participant must
cease all elective and employee contributions under the Plan for twelve
months following the hardship distribution.
13.14 Change in Control. In the event of a Change in Control, the Committee
- ------------------------
may, in its sole and complete discretion, accelerate the payment or vesting
of any Award and release any restrictions on any Awards.
13.15 Construction of the Plan. The Plan, and its rules, rights,
- --------------------------------
agreements and regulations, shall be governed, construed, interpreted and
administered solely in accordance with the laws of the state of Arkansas. If
the event any provision of the Plan shall be held invalid, illegal or
unenforceable, in whole or in part, for any reason, such determination shall
not affect the validity, legality or enforceability of any remaining
provision, portion of provision or Plan overall, which shall remain in full
force and effect as if the Plan had been absent the invalid, illegal or
unenforceable provision or portion thereof.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PAGE>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 322,794
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 172,781
<TRADING-ASSETS> 166
<INVESTMENTS-HELD-FOR-SALE> 1,056,901
<INVESTMENTS-CARRYING> 327,448
<INVESTMENTS-MARKET> 325,676
<LOANS> 3,498,562
<ALLOWANCE> 59,532
<TOTAL-ASSETS> 5,657,714
<DEPOSITS> 4,902,205
<SHORT-TERM> 178,096
<LIABILITIES-OTHER> 70,396
<LONG-TERM> 6,097
0
0
<COMMON> 90,603
<OTHER-SE> 410,317
<TOTAL-LIABILITIES-AND-EQUITY> 5,657,714
<INTEREST-LOAN> 76,977
<INTEREST-INVEST> 22,830
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 99,807
<INTEREST-DEPOSIT> 39,074
<INTEREST-EXPENSE> 41,312
<INTEREST-INCOME-NET> 58,495
<LOAN-LOSSES> 2,201
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 52,573
<INCOME-PRETAX> 29,382
<INCOME-PRE-EXTRAORDINARY> 29,382
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,958
<EPS-PRIMARY> .63
<EPS-DILUTED> .62
<YIELD-ACTUAL> 4.77
<LOANS-NON> 25,329
<LOANS-PAST> 6,023
<LOANS-TROUBLED> 2,272
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 52,575
<CHARGE-OFFS> 2,923
<RECOVERIES> 1,081
<ALLOWANCE-CLOSE> 59,532
<ALLOWANCE-DOMESTIC> 43,161
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16,371
</TABLE>
