UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-7931
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0701203
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
210 Baronne Street 70112
New Orleans, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 561-1371
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 last practicable date.
Class Outstanding as of August 11, 1994
Common Stock, $5.00 par value 26,162,932
<PAGE>
Part I
Item 1. Financial Statements.
The information called for by this item is included in First
Commerce Corporation's (FCC) 1994 Second Quarter Report to
Stockholders on pages 14 through 21 and is incorporated herein.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information called for by this item is included in FCC's
1994 Second Quarter report to Stockholders on pages 5 through 13 and
is incorporated herein.
Part II
Item 1. Legal Proceedings.
Legal proceedings involving FCC were previously reported in its
Annual Report on Form 10-K for the year ended December 31, 1993 and on
Form 10-Q for the quarter ended March 31, 1994. The Form 10-Q for the
quarter ended March 31, 1994 reported a judgement against a subsidiary
of Registrant for $681,000, plus interest. Both the plaintiff and the
subsidiary have since appealed to the Louisiana Court of Appeals.
Plaintiff seeks to hold the subsidiary responsible for a greater
amount of his damages up to $4.5 million plus interest. The
subsidiary has appealed on the basis that it is not responsible to the
plaintiff for any amount. In the opinion of management, after
consulting with counsel, the ultimate outcome of the litigation will
not result in a material adverse effect upon the Registrant.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of the stockholders of FCC (the "Meeting")
was held on April 18, 1994.
(b) and (c)
<TABLE>
<CAPTION>
SUBMISSION OF MATTERS FOR AGAINST* ABSTAIN BROKER
NONVOTE
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. DIRECTORS ELECTED
Ian Arnof 19,007,384 46,171 0 0
James J.Bailey III 18,944,044 109,511 0 0
John W. Barton 18,739,788 313,767 0 0
Sydney J. Besthoff III 18,986,067 67,488 0 0
Robert H. Bolton 18,985,736 67,819 0 0
Francis B. Davis 19,005,732 47,823 0 0
Laurance Eustis, Jr 19,003,578 49,977 0 0
William P. Fuller 18,990,553 63,002 0 0
Arthur Hollins III 19,007,268 46,287 0 0
F. Ben James, Jr. 19,008,054 45,501 0 0
Erik F. Johnsen 19,005,296 48,259 0 0
J. Merrick Jones, Jr. 19,008,054 45,501 0 0
Edwin Lupberger 19,004,158 49,397 0 0
Hermann Moyse, Jr. 18,987,325 66,230 0 0
O. Miles Pollard, Jr. 19,005,163 48,392 0 0
G. Frank Purvis, Jr. 19,003,809 49,746 0 0
Edward M. Simmons 19,008,054 45,501 0 0
H. Leighton Steward 18,696,003 357,552 0 0
Joseph B. Storey 18,987,144 66,411 0 0
Robert A. Weigle 19,007,804 45,751 0 0
- - --------------------------------------------------------------------------------
* With respect to Item I of the table, Directors Elected, these numbers
reflect the number of shares as to which authority to vote for the
particular director was withheld.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBMISSION OF MATTERS FOR AGAINST ABSTAIN BROKER
NONVOTE
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
II. Amendment and restatement of
FCC's 1992 Stock Incentive Plan
(the "Plan") 16,509,455 751,770 171,560 1,620,770
- - ---------------------------------------------------------------------------
III. Approval of the performance
goals applicable to awards of
restricted stock and
performance shares granted under
the Plan. 16,939,628 324,610 168,547 1,620,770
- - ---------------------------------------------------------------------------
IV. Approval of FCC's Chief
Executive Officer Sharemax Plan. 18,069,646 813,286 170,623 0
- - ---------------------------------------------------------------------------
</TABLE>
Item 5. Other Information.
FCC and Lakeside Bancshares, Inc. have signed a definitive
agreement to merge the two companies and their respective
subsidiaries, The First National Bank of Lake Charles and Lakeside
National Bank. Lakeside Bancshares, Inc. is headquartered in Lake
Charles, Louisiana and as of March 31, 1994, had assets of $190
million and deposits of $172 million.
FCC and First Bancshares, Inc. have signed a definitive
agreement to merge the two companies and their respective
subsidiaries, First National Bank of Commerce and First Bank. First
Bancshares, Inc. is headquartered in Slidell, Louisiana and as of
March 31, 1994, had assets of $247 million and deposits of $223
million.
FCC and City Bancorp, Inc. have signed a letter of intent to
merge the two companies and their respective subsidiaries, The First
National Bank of Lafayette and City Bank and Trust Company of New
Iberia. As of March 31, 1994, City Bancorp, Inc. had assets of $89
million and deposits of $73 million.
Each of these transactions are subject to regulatory and
shareholder approval, and certain other conditions. If all conditions
are met, it is expected that all three mergers would be effected in
the fourth quarter of 1994.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
4.1 - Indenture between FCC and Republic Bank Dallas, N.A.
(now NationsBank of Texas, N.A.), Trustee, including the
form of 12 3/4% Convertible Debenture due 2000, Series A
included as Exhibit 4.1 to FCC's Annual Report on Form
10-K for the year ended December 31, 1985 and
incorporated herein by reference.
4.2 - Indenture between FCC and Republic Bank Dallas, N.A.
(now NationsBank of Texas, N.A.), Trustee, including the
form of 12 3/4% Convertible Debenture due 2000, Series B
included as Exhibit 4.2 to FCC's Annual Report on Form
10-K for the year ended December 31, 1985 and
incorporated herein by reference.
11 - Computation of Earnings Per Share
13 - 1994 Second Quarter Report to Stockholders of First
Commerce Corporation
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Commerce Corporation
Date August 12, 1994 /s/Thomas L. Callicutt, Jr.
Thomas L. Callicutt, Jr.
Senior Vice President,
Controller and Principal
Accounting Officer
FIRST COMMERCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- -------------------------
1994 1993 1994 1993
(Restated)* (Restated)*
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary earnings per share
- - ----------------------------------
Weighted average number of common shares
outstanding 26,160,438 25,879,306 26,145,851 25,822,578
Shares from assumed exercise of options,
net of treasury stock method 168,193 245,460 169,598 259,775
Less shares held in treasury - - - -
-------------- ------------ ------------ ------------
26,328,631 26,124,766 26,315,449 26,082,353
============== ============ ============ ============
Net income (in thousands) $19,079 $25,388 $45,211 $48,515
Preferred dividend requirements 1,087 1,087 2,174 2,174
-------------- ------------ ------------ ------------
Income applicable to common shares $17,992 $24,301 $43,037 $46,341
============== ============ ============ ============
Per common share $ .68 $ .93 $1.63 $1.78
============== ============ ============ ============
Fully diluted earnings per share
- - ----------------------------------
Weighted average number of shares
outstanding, net of shares held in treasury 26,160,438 25,944,773 26,145,851 25,888,044
Shares from assumed exercise of options,
net of treasury stock method 172,408 250,996 181,951 268,903
Shares from assumed conversion of dilutive
convertible notes and debentures:
Preferred stock 2,793,284 2,794,065 2,793,672 2,794,106
Convertible debentures 3,133,709 3,151,041 3,141,208 3,152,703
-------------- ------------ ------------ ------------
32,259,839 32,140,875 32,262,682 32,103,756
============== ============ ============ ============
Income applicable to common shares $17,992 $24,301 $43,037 $46,341
Expenses that would not have been incurred
if assumed conversions occurred:
Preferred dividend requirements 1,087 1,087 2,174 2,174
Interest expense, net of tax 1,715 1,768 3,455 3,538
-------------- ------------ ------------ ------------
Income applicable to common shares plus
expenses that would not have been incurred
if assumed conversions occurred $20,794 $27,156 $48,666 $52,053
============== ============ ============ ============
Per common share $ .65 $ .84 $1.51 $1.62
============== ============ ============ ============
* 1993 data has been restated to reflect the effect of First Acadiana National Bancshares, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- - -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
Second Quarter June 30
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands except per common share data) 1994 1993 % Change 1994 1993 % Change
(Restated)***<F3> (Restated)***<F3>
- - -----------------------------------------------------------------------------------------------------------------------------------
INCOME DATA
Net income $ 19,079 $ 25,388 (25)% $ 45,211 $ 48,515 (7)%
Net interest income (FTE)*<F1> 63,349 64,391 (2)% 127,553 128,980 (1)%
- - -----------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Net income - primary $ .68 $ .93 (27)% $ 1.63 $ 1.78 (8)%
Net income - fully diluted .65 .84 (23)% 1.51 1.62 (7)%
Book value (end of period) 16.56 16.01 3 % 16.56 16.01 3 %
Tangible book value (end of period) 15.99 15.33 4 % 15.99 15.33 4 %
Cash dividends .25 .20 25 % .50 .40 25 %
- - -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Securities $ 3,017,831 $ 3,105,153 (3)% $ 3,151,608 $ 3,085,904 2 %
Loans and leases**<F2> 2,707,502 2,350,167 15 % 2,670,621 2,322,521 15 %
Earning assets 5,788,051 5,750,800 1 % 5,899,182 5,732,759 3 %
Total assets 6,320,118 6,269,647 1 % 6,463,157 6,250,125 3 %
Deposits 5,201,291 5,183,694 - % 5,238,291 5,197,948 1 %
Stockholders' equity 496,635 460,115 8 % 511,207 450,046 14 %
- - -----------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 1.21 % 1.62 % 1.41 % 1.57 %
Return on average total equity 15.41 % 22.13 % 17.83 % 21.74 %
Return on average common equity 15.35 % 24.36 % 18.73 % 23.96 %
Net interest margin 4.38 % 4.49 % 4.34 % 4.52 %
Efficiency ratio 65.15 % 59.73 % 63.40 % 59.33 %
Overhead ratio 2.20 % 1.92 % 2.08 % 1.95 %
Allowance for loan losses to loans and leases**<F2> 2.09 % 3.09 % 2.09 % 3.09 %
Equity ratio 7.80 % 7.37 % 7.80 % 7.37 %
Leverage ratio 8.31 % 7.31 % 8.31 % 7.31 %
- - -----------------------------------------------------------------------------------------------------------------------------------
<F1>* Based on a 34% tax rate for 1993, and a 35% tax rate for 1994.
<F2>** Net of unearned income.
<F3>*** First Commerce Corporation's financial information for 1993 has been restated to
include First Acadiana National Bancshares, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (dollars in thousands except per share data)
1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
(Restated) (Restated) (Restated)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEET DATA
Total assets $ 6,320,118 $ 6,597,863 $ 6,487,017 $ 6,379,762 $ 6,269,647
Earning assets 5,788,051 6,011,953 5,946,367 5,855,578 5,750,800
Loans and leases*<F1> 2,707,502 2,633,335 2,552,923 2,437,291 2,350,167
Securities 3,017,831 3,287,273 3,221,279 3,053,247 3,105,153
Deposits 5,201,291 5,276,203 5,181,477 5,159,238 5,183,694
Long-term debt 89,349 89,694 94,354 95,453 95,519
Stockholders' equity 496,635 518,026 499,463 480,591 460,115
- - -------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Total interest income $ 96,708 $ 97,183 $ 97,608 $ 98,709 $ 97,956
Net interest income 61,990 62,746 61,882 62,102 62,934
Net interest income (FTE) 63,349 64,204 63,359 63,710 64,391
Provision for loan losses (4,832) (3,832) (600) (2,233) (2,259)
Other income (exclusive of securities transactions) 27,231 27,379 26,171 25,087 26,997
Securities transactions (6,683) 1,122 (926) 229 73
Operating expense 59,011 56,472 59,370 54,589 54,585
Net income 19,079 26,132 22,829 23,870 25,388
- - -------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 1.21 % 1.61 % 1.40 % 1.48 % 1.62 %
Return on average total equity 15.41 % 20.46 % 18.13 % 19.71 % 22.13 %
Return on average common equity 15.35 % 22.17 % 19.63 % 21.49 % 24.36 %
Net interest margin 4.38 % 4.30 % 4.24 % 4.33 % 4.49 %
Overhead ratio 2.20 % 1.96 % 2.22 % 2.00 % 1.92 %
Allowance for loan losses to loans and leases*<F1> 2.09 % 2.40 % 2.55 % 2.82 % 3.09 %
Nonperforming assets to loans and leases*<F1>
plus foreclosed assets .84 % .98 % 1.22 % 1.57 % 2.03 %
Allowance for loan losses to nonperforming loans 324.05 % 311.07 % 268.26 % 283.02 % 230.54 %
Equity ratio 7.80 % 7.96 % 7.65 % 7.30 % 7.37 %
Leverage ratio 8.31 % 7.81 % 7.63 % 7.50 % 7.31 %
- - -------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA
EARNINGS PER SHARE
Primary $ .68 $ .95 $ .83 $ .87 $ .93
Fully diluted $ .65 $ .86 $ .76 $ .80 $ .84
COMMON DIVIDENDS
Cash dividends $ .25 $ .25 $ .25 $ .20 $ .20
Dividend payout ratio 36.76 % 26.32 % 30.12 % 22.99 % 21.51 %
BOOK VALUES (end of period)
Book value $ 16.56 $ 17.14 $ 17.28 $ 16.66 $ 16.01
Tangible book value $ 15.99 $ 16.55 $ 16.66 $ 16.02 $ 15.33
COMMON STOCK DATA
High stock price $ 30.00 $ 28.50 $ 31.80 $ 31.80 $ 32.20
Low stock price $ 23.50 $ 24.00 $ 23.90 $ 28.40 $ 25.40
Closing stock price $ 28.25 $ 24.00 $ 25.13 $ 30.00 $ 29.60
Trading volume 7,274,300 12,340,097 8,516,265 2,935,716 4,424,135
Number of stockholders (end of period) 7,607 7,508 7,604 7,507 7,526
AVERAGE COMMON SHARES OUTSTANDING (in thousands)
Primary 26,329 26,302 26,191 26,171 26,125
Fully diluted 32,260 32,245 32,199 32,181 32,141
NUMBER OF EMPLOYEES (end of period) 3,545 3,460 3,400 3,343 3,309
- - -------------------------------------------------------------------------------------------------------------------------------
<F1> *Net of unearned income.
</TABLE>
<PAGE>
FINANCIAL REVIEW
SECOND QUARTER IN REVIEW
First Commerce Corporation's (FCOM) net income for the second
quarter of 1994 was $19.1 million. The most significant factor
affecting the second quarter's net income was a $4.3 million net
loss, after tax, on securities transactions resulting from a
repositioning of the Available for Sale securities portfolio. Net
income was $25.4 million in the second quarter of 1993 and $26.1
million in the first quarter of 1994.
Fully diluted earnings per common share were $.65 in the
second quarter, compared to $.84 in the second quarter of 1993 and
$.86 in the first quarter of 1994. Primary earnings per common
share were $.68 in the second quarter, compared to $.93 in 1993's
second quarter and $.95 in the first quarter. Return on average
assets was 1.21% in this quarter, and return on average total
equity was 15.41%.
FCOM repositioned a portion of its $2.9 billion securities
portfolio during the quarter in order to improve future net
interest income. FCOM sold $490 million in Treasury notes and
purchased the same amount of Treasury notes at a higher yield. The
quarter's $4.3 million after tax loss on securities transactions
will be recaptured through higher net interest income within 10
months. Securities transactions resulted in a $.13 negative impact
on fully diluted earnings per share this quarter.
Operating expense increased when compared to both prior
periods, primarily related to personnel expense and equipment
expense. New employees, added for the introduction of customer
teleservicing, and annual merit raises effective on March 1, caused
the increase in personnel expense. The branch automation project
caused equipment expense to increase as new equipment was placed in
service.
Improving loan quality and lower net charge-offs again
resulted in a negative provision. The provision for loan losses
was a negative $4.8 million, compared to a negative $2.3 million in
1993's second quarter and last quarter's negative $3.8 million.
FCOM's net interest margin increased 8 basis points from the
first quarter of 1994, to 4.38% in the second quarter. Net
interest income (FTE) was $63.3 million, $1.0 million less than
last year's second quarter and $855,000 lower than in the first
quarter. The decrease from the same period last year was primarily
due to a 14 basis point decline in the earning asset yield,
partially offset by a more favorable earning asset mix related to
rising loan demand. Compared to the first quarter, the decline in
the level of earning assets, mainly in the securities portfolio,
contributed to the decline in net interest income. The present
rising interest rate environment caused FCOM to decrease the level
of securities and relatively expensive short-term borrowings.
A more detailed review of FCOM's financial condition and
earnings for the second quarter follows. This review should be
read in conjunction with the consolidated financial statements of
First Commerce Corporation and Subsidiaries, which follows this
review and the Financial Review in the 1993 Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for the second quarter was $63.3
million, 2% lower than 1993's second quarter and 1% lower than in
the first quarter of 1994. For the first six months, net interest
income was $127.6 million, a 1% decrease from 1993's first six
months.
The $1.0 million decrease in net interest income from the
second quarter of 1993 to the current quarter was primarily due to
a decline in the earning asset yield of 14 basis points, while the
cost of funds fell only 3 basis points. A favorable volume
variance, caused by loan growth, was more than offset by a negative
rate variance, primarily due to lower yields on loans and
securities. Loans increased 15% over the second quarter of 1993,
and were 47% of earning assets, compared to 41% in the same period
of 1993. Increasing loan demand is a trend expected to continue
throughout 1994, and to contribute to a more favorable earning
asset mix. Although loan volume increased over 1993's second
quarter, new loans had lower yields than maturing and prepaying
loans, which contributed to the decline in the earning asset yield.
The securities yield also declined because new securities were
purchased at lower yields than maturing securities.
Net interest income decreased $855,000 this quarter when
compared to the first quarter. The decrease was primarily related
to the deleveraging of the balance sheet begun in late March, 1994.
Given the rising interest rate environment, FCOM reduced its
exposure to increases in short-term funding costs by reducing its
level of short-term borrowings and earning assets, primarily
securities. Short-term borrowings funded 8% of earning assets this
quarter, compared with 11% in the first quarter.
In comparing the first and second quarters of 1994, the effect
of the lower earning assets level was partially offset by a 16
basis point increase in the earning asset yield. The securities
yield rose 22 basis points primarily due to FCOM's repositioning of
$490 million of Treasury notes during the quarter. The Treasury
notes sold had an average yield of 4.19%, and the Treasury notes
purchased had an average yield of 5.87%. The cost of interest-
bearing liabilities increased 15 basis points from the prior
quarter due to the higher interest rates and the repricing of time
deposits. The net interest margin increased 8 basis points from
the first quarter to 4.38%, while the net interest spread increased
1 basis point.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE)*<F1> AND INTEREST RATES
- - ------------------------------------------------------------------------------------------------------------------------------------
Second Quarter 1994 First Quarter 1994 Second Quarter 1993
(Restated)
- - ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
EARNING ASSETS
Loans and leases**<F2> $ 2,707,502 $ 57,605 8.53 % $2,633,335 $ 56,414 8.67 % $2,350,167 $53,107 9.06 %
Securities
Taxable 2,924,451 37,361 5.12 3,187,819 38,769 4.90 2,998,616 40,493 5.41
Tax-exempt 93,380 2,551 10.93 99,454 2,709 10.90 106,537 3,347 12.57
- - ------------------------------------------------------------------------------------------------------------------------------------
Total securities 3,017,831 39,912 5.30 3,287,273 41,478 5.08 3,105,153 43,840 5.66
- - ------------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in
Domestic banks 8,611 75 3.49 21,760 186 3.47 83,190 686 3.31
Foreign banks***<F3> 46,659 390 3.35 51,391 415 3.28 198,982 1,684 3.39
Federal funds sold and securities purchased
under resale agreements 5,984 65 4.36 16,445 125 3.29 11,747 78 2.66
Trading account securities 1,464 20 5.55 1,749 23 5.26 1,561 18 4.50
- - ------------------------------------------------------------------------------------------------------------------------------------
Total money market investments 62,718 550 3.52 91,345 749 3.36 295,480 2,466 3.35
- - ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 5,788,051 $ 98,067 6.79 % 6,011,953 $ 98,641 6.63 % 5,750,800 $99,413 6.93 %
- - ------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets **** <F4> 594,523 653,663 596,179
Allowance for loan losses (62,456) (67,753) (77,332)
- - ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 6,320,118 $6,597,863 $6,269,647
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 844,015 $ 2,951 1.40 % $ 900,853 $ 3,055 1.38 % $ 858,041 $ 2,814 1.32 %
Money market investment deposits 734,624 3,526 1.93 745,405 3,606 1.96 783,776 3,990 2.04
Savings and other consumer time deposits 2,035,207 17,506 3.45 2,035,100 16,921 3.37 2,088,015 18,954 3.64
Time deposits $100,000 and over 375,314 3,364 3.60 376,949 3,170 3.41 338,808 3,019 3.57
Foreign branch time deposits 5,527 49 3.56 5,718 39 2.77 11,220 72 2.57
- - ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 3,994,687 27,396 2.75 4,064,025 26,791 2.67 4,079,860 28,849 2.84
- - ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 465,089 4,554 3.93 650,212 4,838 3.02 466,487 3,248 2.79
Long-term debt 89,349 2,768 12.43 89,694 2,808 12.70 95,519 2,925 12.28
- - ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,549,125 $ 34,718 3.06 % 4,803,931 $ 34,437 2.91 % 4,641,866 $35,022 3.03 %
- - ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,206,604 1,212,178 1,103,834
Other liabilities 67,754 63,728 63,832
Stockholders' equity 496,635 518,026 460,115
- - ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities & stockholders' equity $ 6,320,118 $6,597,863 $6,269,647
====================================================================================================================================
Net interest income (FTE)*<F1> and margin $ 63,349 4.38 % $ 64,204 4.30 % $64,391 4.49 %
====================================================================================================================================
Net earning assets and spread $ 1,238,926 3.73 % $1,208,022 3.72 % $1,108,934 3.90 %
====================================================================================================================================
<F1>* Based on a 34% tax rate for periods ended prior to June 30, 1993 and
a 35% tax rate for periods ended after June 30, 1993.
<F2>** Net of unearned income, prior to deduction of allowance for loan losses and including nonaccrual loans.
<F3>*** Principally foreign branches of foreign and domestic banks; other foreign assets and revenues are insignificant
and have therefore not been separately disclosed in this schedule.
<F4>****All 1994 periods presented include mark-to-market adjustments on securities available for sale.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE)*<F1> AND INTEREST RATES
- - ------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 1994 June 30, 1993 (Restated)
- - ------------------------------------------------------------------------------------------------------------------------
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
EARNING ASSETS
Loans and leases**<F2> $ 2,670,621 $ 114,019 8.60 % $ 2,322,521 $ 105,749 9.17 %
Securities
Taxable 3,055,225 76,130 5.00 2,979,265 81,895 5.52
Tax-exempt 96,383 5,260 10.91 106,639 6,750 12.65
- - ------------------------------------------------------------------------------------------------------------------------
Total securities 3,151,608 81,390 5.18 3,085,904 88,645 5.77
- - ------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in
Domestic banks 15,149 261 3.47 92,503 1,539 3.36
Foreign banks***<F3> 49,012 805 3.31 214,842 3,745 3.52
Federal funds sold and securities purchased
under resale agreements 11,186 190 3.60 14,025 204 2.94
Trading account securities 1,606 43 5.39 2,964 89 6.04
- - ------------------------------------------------------------------------------------------------------------------------
Total money market investments 76,953 1,299 3.43 324,334 5,577 3.47
- - ------------------------------------------------------------------------------------------------------------------------
Total earning assets 5,899,182 $196,708 6.70 % 5,732,759 $199,971 7.02 %
- - ------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets **** <F4> 628,982 595,817
Allowance for loan losses (65,007) (78,451)
- - ------------------------------------------------------------------------------------------------------------------------
Total assets $ 6,463,157 $ 6,250,125
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 872,278 $ 6,006 1.39 % $ 864,758 $ 5,927 1.38 %
Money market investment deposits 739,985 7,132 1.94 788,831 8,114 2.07
Savings and other consumer time deposits 2,035,155 34,427 3.41 2,100,838 38,757 3.72
Time deposits $100,000 and over 376,126 6,534 3.50 342,271 6,124 3.61
Foreign branch time deposits 5,622 88 3.16 10,173 132 2.62
- - ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,029,166 54,187 2.71 4,106,871 59,054 2.90
- - ------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 557,159 9,392 3.40 444,211 6,083 2.76
Long-term debt 89,520 5,576 12.56 95,577 5,854 12.35
- - ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,675,845 $69,155 2.98 % 4,646,659 $70,991 3.08 %
- - ------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,209,125 1,091,077
Other liabilities 66,980 62,343
Stockholders' equity 511,207 450,046
- - ------------------------------------------------------------------------------------------------------------------------
Total liabilities & stockholders' equity $ 6,463,157 $ 6,250,125
========================================================================================================================
Net interest income (FTE)*<F1> and margin $127,553 4.34 % $128,980 4.52 %
========================================================================================================================
Net earning assets and spread $ 1,223,337 3.72 % $ 1,086,100 3.94 %
========================================================================================================================
<F1>* Based on a 34% tax rate for periods ended prior to June 30, 1993 and
a 35% tax rate for periods ended after June 30, 1993.
<F2>** Net of unearned income, prior to deduction of allowance for loan losses and including nonaccrual loans.
<F3>*** Principally foreign branches of foreign and domestic banks; other foreign assets and revenues are insignificant
and have therefore not been separately disclosed in this schedule.
<F4>****All 1994 periods presented include mark-to-market adjustments on securities available for sale.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE)*<F1>
- - --------------------------------------------------------------------------------------------------------------------------
Second Quarter 1994 Second Quarter 1994
Compared to First Quarter 1994 Compared to Second Quarter 1993
- - --------------------------------------------------------------------------------------------------------------------------
Total Due to Due to Total Due to Due to
Increase Change in Change in Increase Change in Change in
(in thousands) (Decrease) Volume Rate (Decrease) Volume Rate
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans and leases $ 1,191 $ 1,580 $ (389) $ 4,498 $ 7,734 $ (3,236)
Securities
Taxable (1,408) (3,303) 1,895 (3,132) (985) (2,147)
Tax-exempt (158) (166) 8 (796) (387) (409)
- - --------------------------------------------------------------------------------------------------------------------------
Total securities (1,566) (3,469) 1,903 (3,928) (1,372) (2,556)
- - --------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in
Domestic banks (111) (114) 3 (611) (648) 37
Foreign banks (25) (39) 14 (1,294) (1,273) (21)
Federal funds sold and securities purchased
under resale agreements (60) (100) 40 (13) (49) 36
Trading account securities (3) (4) 1 2 (1) 3
- - --------------------------------------------------------------------------------------------------------------------------
Total money market investments (199) (257) 58 (1,916) (1,971) 55
- - --------------------------------------------------------------------------------------------------------------------------
Total interest income $ (574) $ (2,146) $ 1,572 $ (1,346) $ 4,391 $ (5,737)
==========================================================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ (104) $ (197) $ 93 $ 137 $ (47) $ 184
Money market investment deposits (80) (52) (28) (464) (243) (221)
Savings and other consumer time deposits 585 1 584 (1,448) (471) (977)
Time deposits $100,000 and over 194 (14) 208 345 327 18
Foreign branch time deposits 10 (1) 11 (23) (44) 21
- - --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 605 (263) 868 (1,453) (478) (975)
- - --------------------------------------------------------------------------------------------------------------------------
Short-term borrowings (284) (1,584) 1,300 1,306 (10) 1,316
Long-term debt (40) (11) (29) (157) (191) 34
- - --------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 281 $ (1,858) $ 2,139 $ (304) $ (679) $ 375
- - --------------------------------------------------------------------------------------------------------------------------
Change in net interest income (FTE)*<F1> $ (855) $ (288) $ (567) $ (1,042) $ 5,070 $ (6,112)
==========================================================================================================================
<F1>* Based on a 34% tax rate for periods ended prior to June 30, 1993 and
a 35% tax rate for periods ended after June 30, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE)*<F1>
- - -----------------------------------------------------------------------------------
Six Months Ended June 30, 1994
Compared to Six Months Ended
June 30, 1993
- - -----------------------------------------------------------------------------------
Total Due to Due to
Increase Change in Change in
(in thousands) (Decrease) Volume Rate
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNING ASSETS
Loans and leases $ 8,270 $ 15,152 $ (6,882)
Securities
Taxable (5,765) 2,046 (7,811)
Tax-exempt (1,490) (612) (878)
- - -----------------------------------------------------------------------------------
Total securities (7,255) 1,434 (8,689)
- - -----------------------------------------------------------------------------------
Interest-bearing deposits in
Domestic banks (1,278) (1,331) 53
Foreign banks (2,940) (2,735) (205)
Federal funds sold and securities purchased
under resale agreements (14) (45) 31
Trading account securities (46) (37) (9)
- - -----------------------------------------------------------------------------------
Total money market investments (4,278) (4,148) (130)
- - -----------------------------------------------------------------------------------
Total interest income $ (3,263) $ 12,438 $(15,701)
===================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 79 $ 52 $ 27
Money market investment deposits (982) (487) (495)
Savings and other consumer time deposits (4,330) (1,184) (3,146)
Time deposits $100,000 and over 410 592 (182)
Foreign branch time deposits (44) (67) 23
- - -----------------------------------------------------------------------------------
Total interest-bearing deposits (4,867) (1,094) (3,773)
- - -----------------------------------------------------------------------------------
Short-term borrowings 3,309 1,734 1,575
Long-term debt (278) (376) 98
- - -----------------------------------------------------------------------------------
Total interest expense $ (1,836) $ 264 $ (2,100)
- - -----------------------------------------------------------------------------------
Change in net interest income (FTE)*<F1> $ (1,427) $ 12,174 $(13,601)
===================================================================================
<F1>* Based on a 34% tax rate for periods ended prior to June 30, 1993 and
a 35% tax rate for periods ended after June 30, 1993.
</TABLE>
For the six months, net interest income was $127.6 million, a
$1.4 million decline from the comparable 1993 period. The effect
of lower yields on earning assets was partially offset by the 3%
growth of average earning assets. The net interest margin was
4.34% for the first six-month period in 1994, an 18 basis point
decrease from the same period in 1993. The yield on earning assets
was 32 basis points lower due to the impact of lower interest rates
on the repricing of loans and the reinvestment of securities. The
cost of interest-bearing liabilities declined 10 basis points, and
the cost of funds was 14 basis points lower than in 1993. Loans
were 15% higher in the 1994 period, and securities grew 2%. Money
market assets were 76% lower in the current six months, while
interest-free funds grew 13%.
Table 1 presents the average balance sheets, net interest
income (FTE) and interest rates for the second quarter of 1994 and
1993, the first quarter of 1994 and the first six months of 1994
and 1993. Table 2 analyzes the components of changes in net
interest income between these same periods.
Provision For Loan Losses
Loan quality improvements continued this quarter and led to
another negative provision for loan losses and a corresponding
reduction in the allowance for loan losses. Fewer watch list loans
and nonperforming assets and lower net charge-offs resulted in a
negative $4.8 million provision for loan losses in the current
quarter and a negative $8.7 million in the first six months of
1994. The provision for loan losses was a negative $2.3 million in
1993's second quarter, a negative $3.8 million in the first quarter
and a negative $1.7 million in the first six months of 1993.
<PAGE>
A continuation of negative provisions in future quarters
similar in size to the second quarter is unlikely since, among
other things, loan growth is expected to continue. However, if
loan quality improvements similar to the second quarter's continue,
the provision may be minimal or negative for the second half of
1994.
For a discussion of the allowance for loan losses, net charge-
offs and nonperforming assets, see the Credit Risk Management
section of this Financial Review.
Other Income
Other income, excluding securities transactions, was $27.2
million in the second quarter, a 1% increase over 1993's second
quarter. This improvement was due to increases in ATM fees from
the higher volume of transactions related to additional machines
($903,000), trust fees from additional accounts ($557,000) and
credit card income ($511,000). Partially offsetting these
increases were lower broker/dealer income ($691,000) and the
absence of unrealized gains on off-balance sheet interest rate
contracts ($914,000).
1994's first quarter included a one-time net gain of $1.1
million from the sale of approximately $55 million of 30-year, 1-4
family mortgage loans to FNMA. Excluding this gain, other income
was 4% higher than in the first quarter. Higher credit card income
and ATM fees were the primary causes of the increase. Lower
broker/dealer income primarily related to lower mutual funds sales
volumes partially offset this increase.
For the six-month period, other income, excluding securities
transactions, was $54.6 million, 6% higher than in 1993. In 1994,
there was a $1.1 million net gain on the sale of mortgage loans,
while in 1993 there was $914,000 unrealized gain on off-balance
sheet interest rate contracts. ATM fees increased $1.5 million
from the prior year due to new ATM usage charges, plus higher
volumes resulting from additional ATMs in service. Trust fee
income increased $1.2 million primarily from a higher volume of
employee benefit plans and bond trusteeships. Increases in credit
card income resulted from higher merchant volumes, plus higher late
charge fee income. Broker/dealer revenue declined $791,000 due to
lower annuity and mutual fund sales.
Securities transactions resulted in a $6.7 million loss in the
second quarter of 1994, compared to a $73,000 gain in 1993's second
quarter and a $1.1 million gain in the first quarter of 1994. For
the six-month period, securities transactions were a $5.6 million
loss and a $274,000 gain for 1994 and 1993, respectively.
Operating Expense
Operating expense was $59.0 million in the second quarter, an
8% increase over the same period of 1993 and 4% higher than in the
first quarter of this year. For the six-month period, operating
expense was $115.5 million, 8% higher than in the same period of
1993.
Compared to 1993's second quarter, operating expense increased
$4.4 million due to higher personnel expense ($2.7 million),
equipment expense ($757,000) and professional fees ($648,000),
partially offset by lower nonperforming asset expense ($599,000).
A 7% increase in the number of employees to improve service levels
and to staff future revenue-producing initiatives, as well as the
1994 merit increases for existing employees, caused the personnel
expense increase. Equipment expense increased due to the branch
automation project. An increase in professional fees was primarily
the result of FCOM's initiative to improve future profitability.
Further reductions in nonperforming assets caused the related
nonperforming assets expense to decline.
Operating expense in the second quarter increased $2.5 million
from the first quarter of this year due to merit raises effective
March 1, a 2% increase in the number of staff, higher equipment
expense ($463,000) and a $308,000 loss related to the termination
of several interest rate contracts. Higher volumes of loan
originations caused a decrease in other operating expense due to
the deferral of loan origination costs.
For the six-month period, operating expense was $8.4 million
higher, primarily due to additional employees, 1994 merit raises
for existing employees, higher equipment expense and professional
fees. These increases were partially offset by lower nonperforming
assets expense.
<PAGE>
FINANCIAL CONDITION ANALYSIS
Investments
FCOM repositioned $490 million of Treasury notes in its $2.9
billion securities portfolio during the quarter in order to improve
future net interest income. The investment portfolio transactions
increased the average yield on the $490 million by 168 basis points
and extended the average maturity on these securities by 1.33
years. The average maturity of the total securities portfolio was
lengthened approximately two months, to 3.1 years, as a result of
these transactions.
Although securities remained the largest component of earning
assets, they were 52% of earning assets in the second quarter,
compared to 55% in 1994's first quarter. Given the rising rate
environment, in late March, 1994, FCOM deleveraged the balance
sheet in order to reduce its exposure to increases in short-term
borrowings cost, resulting in the lower level of securities in the
second quarter.
Securities Available for Sale
Securities Available for Sale were $2.6 billion, stated at
fair value, as of both June 30, 1994 and March 31, 1994. At June
30, 1994, there was a net unrealized loss of $75.3 million,
including gross losses of $87.2 million and gross gains of $11.9
million. The net unrealized loss of $75.3 million reduced
stockholders' equity by $48.9 million after tax at the end of the
quarter. The unrealized loss resulted from increases in interest
rates beginning late in the first quarter, causing a decline in the
market values of these securities.
See Note 4 of Notes to Consolidated Financial Statements for
additional information regarding Securities Available for Sale.
Securities Held to Maturity
Securities Held to Maturity were $314.5 million at June 30,
1994, compared to $2.0 billion at June 30, 1993 and $446.7 million
at March 31, 1994. As of January 1, 1994, $757 million of
securities previously classified as Held to Maturity were
reclassified as Available for Sale, which resulted in the decrease
in this securities category when compared to last year. This
reclassification was the result of the implementation of Statement
of Financial Accounting Standards No. 115 (SFAS 115), "Accounting
for Certain Investments in Debt and Equity Securities". The
decline from March 31, 1994 was related to the reinvestment of
proceeds from maturities of securities in the Held to Maturity
category into the Available for Sale classification.
At June 30, 1994, there was a net unrealized gain of $413,000,
including gross gains of $479,000 and gross losses of $66,000, in
the Securities Held to Maturity portfolio. See Note 3 of Notes to
Consolidated Financial Statements for additional information
regarding the Held to Maturity portfolio.
Loans
Loans and leases, net of unearned income, were $2.8 billion as
of June 30, 1994, a 17% increase from one year ago and 6% higher
than March 31. Average loans were 15% higher in the second quarter
than in 1993's second quarter and were up 3% from the first quarter
of 1994. The strong loan growth trend is expected to continue
throughout 1994. Commercial and consumer loan demand is expected
to continue as economic activity grows in FCOM's markets.
Average loans were higher in the second quarter than in the
same period in 1993 with increases in most categories of loans.
The largest increases were primarily in residential mortgage and
automobile loans. Increased loan demand for both categories was
primarily the result of consumers' anticipation of higher interest
rates given the current interest rate environment.
The strongest loan growth was in automobile and other consumer
loans from the first quarter to the second quarter. The increase
in automobile loans was due to increased loan demand related to
lower interest rates offered in promotional campaigns during the
second quarter of 1994 and seasonal close-outs by dealers of 1994
models. The increase in loans to individuals for education
purposes was seasonal. Average commercial loans were 2% higher
than in the first quarter. Commercial loan growth came from all
industry categories.
Money Market Investments
As of June 30, 1994, money market investments were $60.9
million. Average money market investments were $62.7 million in
the second quarter of 1994, $295.5 million in the second quarter of
1993 and $91.3 million last quarter. Money market investments
continued to decline as liquidity needs were served with Securities
Available for Sale, which provide a higher return until funds are
needed. The decline was also related to FCOM's efforts to
deleverage the balance sheet.
Deposits
Average deposits for the second quarter were $5.2 billion, of
which 93% were core deposits and 7% were time deposits $100,000 and
over. The volume and mix did not significantly change during the
quarter compared to the second quarter of 1993 or to the first
quarter of 1994.
<PAGE>
<TABLE>
<CAPTION>
TABLE 3: ANALYSIS OF DERIVATIVE PRODUCT INTEREST INCOME (EXPENSE)
- - ------------------------------------------------------------------------------------
Option Interest Amortizing
Six months ended June 30, 1994 Based Rate Interest/
(in thousands) Instruments Swaps Callable Swaps Total
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income (expense) accrued $ 310 $ (115) $ 896 $ 1,091
Premium amortization (278) - - (278)
- - ------------------------------------------------------------------------------------
Interest income (expense) $ 32 $ (115) $ 896 $ 813
- - ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TABLE 4. CHANGES IN DERIVATIVE PRODUCTS (NOTIONAL AMOUNTS)
- - -----------------------------------------------------------------------------------------
Option Interest Amortizing
Based Rate Interest/
(in thousands) Instruments Swaps Callable Swaps Total
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $ 755,000 $ 13,000 $ 250,000 $ 1,018,000
Maturities (200,000) (5,000) - (205,000)
Sales (455,000) (8,000) - (463,000)
- - -----------------------------------------------------------------------------------------
Balance, June 30, 1994 $ 100,000 $ - $ 250,000 $ 350,000
- - -----------------------------------------------------------------------------------------
</TABLE>
Short-Term Borrowings
During the second quarter, short-term borrowings averaged
$465.1 million, compared to $466.5 million in the second quarter of
1993 and $650.2 million in the first quarter of 1994. As a percent
of average interest-bearing liabilities, short-term borrowings were
10% in both the second quarter of 1994 and 1993 and 14% in the
first quarter of 1994. The deleveraging of the balance sheet in
late March reduced the level of average short-term borrowings by
28% from the first to the second quarter of 1994. As of June 30,
1994, short-term borrowings were $437.1 million. By decreasing
FCOM's usage of relatively expensive short-term borrowings, the
cost of funds should be less variable within the current rising
interest rate environment.
Off-Balance Sheet Instruments
Derivative products are used only to reduce overall interest
rate risk. All of these interest rate contracts hedge specific
assets and liabilities and qualify for deferral accounting. Net
interest income from interest rate contracts was $125,000 this
quarter, compared to $688,000 in the first quarter and $556,000 in
the second quarter of 1993. Table 3 summarizes the impact of
FCOM's derivative products on net interest income for the first six
months of 1994, while Table 4 summarizes the changes in FCOM's
derivative products by type during 1994. The decline in net
interest income related to interest rate contracts was due to the
termination of several interest rate contracts in the second
quarter. These contracts were originally purchased to hedge
certain assets and liabilities in a declining interest rate
environment. Given the current rising interest rate environment,
these contracts were no longer performing as intended, and were
terminated.
See Note 8 of Notes to Consolidated Financial Statements for
additional information regarding off-balance sheet instruments.
Credit Risk Management
Nonperforming Assets
Nonperforming assets declined $2.4 million, or 9%, during the
second quarter. Nonperforming assets were $23.7 million at June
30, 1994, compared to $49.2 million at June 30, 1993 and $26.0
million at March 31. As a percent of loans and foreclosed assets,
nonperforming assets were .84% at quarter-end, 2.03% at June 30,
1993 and .98% at March 31, 1994.
Positive trends in nonperforming assets in 1993 continued
throughout the first six months of 1994, as shown in Table 5.
Table 6 presents the detail of the changes in nonperforming assets
during 1994. The largest decrease in nonperforming assets during
the quarter was primarily due to full repayment of nonaccrual
commercial and commercial mortgage loans. At the end of 1994's
second quarter, 68% of nonperforming loans were contractually
current or no more than 30 days past due, compared to 77% last
quarter. During the quarter, FCOM recovered $886,000 of interest
on nonaccrual loans, which was recorded as interest income.
Loans and leases past due 90 days or more and not on
nonaccrual status were $12.5 million at June 30, 1994, a $2.4
million decrease from the prior quarter. Watch list loans and
foreclosed assets declined 13% during the second quarter to $133.5
million as of June 30, 1994.
Allowance for Loan Losses
The allowance for loan losses was $58.8 million as of June 30,
1994, a $15.7 million decline since June 30, 1993 and a $5.1
million decrease from the first quarter. In comparison to both
last year's second quarter and the first quarter of this year, the
negative provision for loan losses was reflected in the decrease in
the allowance. As a percent of loans and leases, the allowance was
2.09% at the end of this quarter, compared to 3.09% at June 30,
1993 and 2.40% at March 31, 1994. Management believes that the
allowance is adequate to cover possible losses in the loan
portfolio.
<PAGE>
<TABLE>
<CAPTION>
TABLE 5. NONPERFORMING ASSETS
- - --------------------------------------------------------------------------------------------------------------------------
June 30 December 31
1994 1993 1993
(dollars in thousands) (Restated)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 4,358 $ 7,010 $ 4,998
Loans to individuals-other 907 1,229 866
Commercial, financial and agricultural 1,591 6,831 3,761
Real estate-commercial mortgages 11,099 16,902 15,613
Real estate-other 164 315 223
Other 13 - -
- - --------------------------------------------------------------------------------------------------------------------------
18,132 32,287 25,461
- - --------------------------------------------------------------------------------------------------------------------------
Foreclosed assets
Other real estate 10,020 24,618 12,667
Other foreclosed assets 123 100 96
Allowance for losses on foreclosed assets (4,598) (7,843) (5,515)
- - --------------------------------------------------------------------------------------------------------------------------
5,545 16,875 7,248
- - --------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 23,677 $ 49,162 $ 32,709
- - --------------------------------------------------------------------------------------------------------------------------
Loans past due 90 days or more and not on nonaccrual status $ 12,546 $ 14,124 $ 12,523
- - --------------------------------------------------------------------------------------------------------------------------
End of period ratios
Nonperforming assets as a percent of loans and leases*<F1> plus foreclosed assets .84 % 2.03 % 1.22 %
Allowance for loan losses as a percent of nonperforming loans 324.05 % 230.54 % 268.26 %
Loans and leases past due 90 days or more and not on nonaccrual status
as a percent of loans and leases *<F1> .45 % .59 % .47 %
- - --------------------------------------------------------------------------------------------------------------------------
<F1>*Net of unearned income.
</TABLE>
<TABLE>
<CAPTION>
TABLE 6: CHANGES IN NONPERFORMING ASSETS
- - ---------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands) June 30, 1994 June 30, 1994
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 26,042 $ 32,709
Additions 2,787 5,111
Payments and sales (4,545) (12,514)
Writedowns, charge-offs and foreclosed
assets provisions (334) (249)
Loans returned to accrual status (273) (1,380)
- - ---------------------------------------------------------------------------------
Net change (2,365) (9,032)
- - ---------------------------------------------------------------------------------
Balance at end of period $ 23,677 $ 23,677
- - ---------------------------------------------------------------------------------
</TABLE>
The decline in net charge-offs from the first quarter of 1994
primarily reflected lower gross charge-offs on credit card loans
and higher recoveries on other real estate loans. Net charge-offs
on credit card loans remain stable at around 2% of average credit
card loans. Table 7 presents the activity for the second quarter
and the first six months of 1994 and 1993.
As discussed in the Nonperforming Assets section above,
favorable loan quality trends have continued into 1994 and resulted
in a negative provision for loan losses in 1994's second quarter
and first six-month period.
Capital and Dividends
Stockholders' equity was $492.6 million at June 30, 1994, a
$14.9 million decline from March 31, 1994. With the implementation
of SFAS 115 on January 1, 1994, securities classified as Available
for Sale were marked to market. This adjustment is reflected in
the equity section, net of the tax effect. The effect on equity
was an $48.9 million unrealized loss at June 30, 1994 and an $22.2
million unrealized loss at March 31, 1994.
The regulatory leverage ratio and risk-based capital ratios do
not include the effect of the accounting required by SFAS 115.
Return on equity and the equity ratio were affected by the SFAS 115
adjustment. Return on total equity was increased 41 basis points
for the six-month period and the equity ratio was 71 basis points
lower at quarter-end, as a result of the SFAS 115 adjustment.
As of June 30, 1994, the equity ratio was 7.80% of assets, and
the regulatory leverage ratio was 8.31%, compared to an equity
ratio of 7.96% and a leverage ratio of 7.81% at March 31, 1994.
Table 8 presents FCOM's risk-based and capital ratios as of June
30, 1994 and 1993 and December 31, 1993. All risk-based and
capital ratios remain well above regulatory minimums.
The Parent Company's sources of funds to pay dividends are its
net working capital and the dividends it receives from the Banks.
At June 30, 1994, the Parent Company had net working capital of
$54.9 million. The Parent Company could receive dividends, without
prior regulatory approval, of $180.3 million from the Banks, plus
an amount equal to the Banks' adjusted net profits for the
remainder of the year.
<PAGE>
<TABLE>
<CAPTION>
TABLE 7. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
- - ----------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- - ----------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
(dollars in thousands) (Restated) (Restated)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 63,844 $ 78,539 $ 68,302 $ 79,919
Provision for loan losses (4,832) (2,259) (8,664) (1,671)
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 7 163 85 379
Loans to individuals-other 553 465 1,074 1,055
Commercial, financial and agricultural 154 464 335 1,530
Real estate-commercial mortgages 9 261 62 334
Real estate-other - - - 28
Credit card loans 2,241 2,466 4,744 5,106
- - ----------------------------------------------------------------------------------------------------------------------
Total charge-offs 2,964 3,819 6,300 8,432
- - ----------------------------------------------------------------------------------------------------------------------
Recoveries on loans and leases previously charged to the allowance
Loans to individuals-residential mortgages 217 300 709 530
Loans to individuals-other 414 369 783 782
Commercial, financial and agricultural 967 648 1,997 1,533
Real estate-commercial mortgages 99 99 332 385
Real estate-other 355 38 372 52
Credit card loans 655 506 1,217 997
Other - 15 7 341
- - ----------------------------------------------------------------------------------------------------------------------
Total recoveries 2,707 1,975 5,417 4,620
- - ----------------------------------------------------------------------------------------------------------------------
Net charge-offs 257 1,844 883 3,812
- - ----------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 58,755 $ 74,436 $ 58,755 $ 74,436
======================================================================================================================
Gross charge-offs as a percent of average loans and leases*<F1> .44 % .65 % .47% .73%
Recoveries as a percent of gross charge-offs 91.33 % 51.72 % 85.98% 54.79%
Net charge-offs as a percent of average loans and leases*<F1> .04 % .31 % .07% .33%
Allowance for loan losses as a percent of loans and leases*<F1>
at end of period 2.09 % 3.09 % 2.09% 3.09%
- - ----------------------------------------------------------------------------------------------------------------------
<F1>*Net of unearned income.
</TABLE>
<TABLE>
<CAPTION>
TABLE 8. RISK-BASED CAPITAL AND CAPITAL RATIOS
- - ---------------------------------------------------------------------------------------
June 30 December 31
1994 1993 1993
(dollars in thousands) (Restated)
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital $ 526,613 $ 457,214 $ 493,529
Tier 2 capital 122,306 124,879 121,921
- - ---------------------------------------------------------------------------------------
Total capital $ 648,919 $ 582,093 $ 615,450
- - ---------------------------------------------------------------------------------------
Risk-weighted assets $ 3,041,700 $ 2,765,952 $ 3,005,545
- - ---------------------------------------------------------------------------------------
Ratios at end of period
Tier 1 capital 17.04 % 16.53 % 16.42 %
Total capital 21.00 % 21.04 % 20.48 %
Equity ratio 7.80 % 7.37 % 7.65 %
Tangible equity ratio 7.58 % 7.12 % 7.43 %
Leverage ratio 8.31 % 7.31 % 7.63 %
- - ---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (dollars in thousands)
June 30 December 31
- - ----------------------------------------------------------------------------------------------------------------------
1994 1993 1993
(Restated)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 330,723 $ 274,966 $ 387,548
Interest-bearing deposits in other banks 36,134 373,719 55,422
Securities
Held to maturity (market value $314,925, $1,991,204
and $1,547,086, respectively) 314,512 1,960,074 1,523,638
Available for sale, at market 2,574,140 - -
Held for sale, at lower of aggregate amortized cost or market - 1,229,366 1,779,927
Trading account securities 526 618 482
Federal funds sold and securities purchased under resale agreements 24,225 9,500 28,600
Loans and leases, net of unearned income of $7,163, $15,562
and $11,822, respectively) 2,813,840 2,410,499 2,674,697
Allowance for loan losses (58,755) (74,436) (68,302)
- - ----------------------------------------------------------------------------------------------------------------------
Net loans and leases 2,755,085 2,336,063 2,606,395
- - ----------------------------------------------------------------------------------------------------------------------
Premises and equipment 110,157 98,097 102,230
Accrued interest receivable 56,332 57,927 55,197
Other real estate 5,447 16,801 7,177
Goodwill and other intangibles 14,899 17,450 16,143
Other assets 93,992 64,602 97,526
- - ----------------------------------------------------------------------------------------------------------------------
Total assets $ 6,316,172 $ 6,439,183 $ 6,660,285
======================================================================================================================
LIABILITIES
Domestic deposits
Noninterest-bearing deposits $ 1,208,690 $ 1,091,005 $ 1,196,259
Interest-bearing deposits 4,020,829 4,095,551 4,107,813
Foreign branch interest-bearing deposits 6,403 8,126 5,787
- - ----------------------------------------------------------------------------------------------------------------------
Total deposits 5,235,922 5,194,682 5,309,859
- - ----------------------------------------------------------------------------------------------------------------------
Short-term borrowings 437,050 555,196 678,316
Accrued interest payable 17,721 15,601 16,844
Accounts payable and other accrued liabilities 43,839 103,536 55,890
Long-term debt 89,056 95,504 89,704
- - ----------------------------------------------------------------------------------------------------------------------
Total liabilities 5,823,588 5,964,519 6,150,613
- - ----------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible, $25 stated value
Issued--2,398,170, 2,399,170 and 2,399,170 shares, respectively 59,954 59,979 59,979
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--26,162,127, 21,024,171 and 26,062,067 shares, respectively 130,811 105,123 130,311
Capital surplus 137,559 134,456 135,911
Retained earnings 214,230 176,809 184,288
Unearned restricted stock compensation (1,042) (1,703) (817)
Net unrealized (loss) on securities available for sale (48,928) - -
- - ----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 492,584 474,664 509,672
- - ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 6,316,172 $ 6,439,183 $ 6,660,285
======================================================================================================================
<F1>The accompanying Notes to Consolidated Financial Statements are an integral part of these
Consolidated Balance Sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands except share amounts)
Three Months Ended Six Months Ended
June 30 June 30
- - --------------------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
(Restated) (Restated)
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $ 57,086 $ 52,594 $ 112,976 $ 104,750
Interest on tax-exempt securities 1,785 2,405 3,668 4,825
Interest and dividends on other taxable securities 37,288 40,492 75,952 81,872
Interest on money market investments 549 2,465 1,295 5,570
- - --------------------------------------------------------------------------------------------------------------------------------
Total interest income 96,708 97,956 193,891 197,017
- - --------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 27,396 28,849 54,187 59,054
Interest on short-term borrowings 4,554 3,248 9,392 6,083
Interest on long-term debt 2,768 2,925 5,576 5,854
- - --------------------------------------------------------------------------------------------------------------------------------
Total interest expense 34,718 35,022 69,155 70,991
- - --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 61,990 62,934 124,736 126,026
PROVISION FOR LOAN LOSSES (4,832) (2,259) (8,664) (1,671)
- - --------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 66,822 65,193 133,400 127,697
- - --------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME
Deposit fees and service charges 10,796 10,943 21,438 21,450
Credit card fee income 6,195 5,684 11,654 10,682
Trust fee income 3,548 2,991 7,031 5,788
Broker/dealer revenue 1,675 2,366 3,877 4,668
Other operating revenue 5,017 5,013 10,610 8,998
Securities transactions (6,683) 73 (5,561) 274
- - --------------------------------------------------------------------------------------------------------------------------------
Total other income 20,548 27,070 49,049 51,860
- - --------------------------------------------------------------------------------------------------------------------------------
87,370 92,263 182,449 179,557
OPERATING EXPENSE
Salary expense 26,290 23,887 52,170 46,570
Employee benefits 5,724 5,476 11,290 11,305
- - --------------------------------------------------------------------------------------------------------------------------------
Total personnel expense 32,014 29,363 63,460 57,875
Net occupancy expense 4,211 3,919 8,276 7,647
Equipment expense 3,926 3,169 7,389 6,097
FDIC insurance expense 2,890 2,961 5,780 5,922
Other operating expense 15,970 15,173 30,578 29,580
- - --------------------------------------------------------------------------------------------------------------------------------
Total operating expense 59,011 54,585 115,483 107,121
- - --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 28,359 37,678 66,966 72,436
INCOME TAX EXPENSE 9,280 12,290 21,755 23,921
- - --------------------------------------------------------------------------------------------------------------------------------
NET INCOME 19,079 25,388 45,211 48,515
PREFERRED DIVIDEND REQUIREMENTS 1,087 1,087 2,174 2,174
- - --------------------------------------------------------------------------------------------------------------------------------
INCOME APPLICABLE TO COMMON SHARES $ 17,992 $ 24,301 $ 43,037 $ 46,341
================================================================================================================================
EARNINGS PER SHARE
Primary $ .68 $ .93 $ 1.63 $ 1.78
Fully diluted $ .65 $ .84 $ 1.51 $ 1.62
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary 26,328,631 26,124,766 26,315,449 26,082,353
Fully diluted 32,259,839 32,140,875 32,262,682 32,103,756
- - --------------------------------------------------------------------------------------------------------------------------------
<F1>The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (dollars in thousands except per share data)
- - ------------------------------------------------------------------------------------------------------------------------------------
Net
Unrealized
Unearned (Loss)
Preferred Restricted on Securities
Stock Common Capital Retained Stock Available
Series 1992 Stock Surplus Earnings Compensation for Sale Total
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 (Restated) $59,991 $103,882 $129,758 $140,315 $ (606) $ - $433,340
Net income - - - 48,515 - - 48,515
Cash dividends:
Series 1992 preferred stock ($.91 per share) - - - (2,174) - - (2,174)
Common stock ($.40 per share) - - - (9,847) - - (9,847)
Conversion of 470 shares of preferred stock
into 437 shares of common stock (12) 2 10 - - - -
Common stock issuances:
FANB Convertible Debt-65,877 shares - 329 301 - - - 630
Tax-Deferred Savings Plan - 52,151 shares - 261 1,596 - - - 1,857
Dividend and Interest Reinvestment and
Stock Purchase Plan - 25,494 shares - 127 720 - - - 847
Stock options exercised, net of shares surrendered
in payment and tax benefit - 66,291 shares - 331 452 - - - 783
Restricted stock issued - 38,255 shares - 191 1,157 - (1,348) - -
Amortization of unearned restricted stock compensation - - - - 713 - 713
Change in estimated restricted stock value - - 462 - (462) - -
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1993 (Restated) $59,979 $105,123 $134,456 $176,809 $ (1,703) $ - $474,664
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1994 $59,979 $130,311 $135,911 $184,288 $ (817) $ - $509,672
Net income - - - 45,211 - - 45,211
Cash dividends:
Series 1992 preferred stock ($.91 per share) - - - (2,174) - - (2,174)
Common stock ($.50 per share) - - - (13,077) - - (13,077)
Conversion of 1,000 shares of preferred stock
into 1,164 shares of common stock (25) 6 19 - - - -
Common stock issuances:
Tax-Deferred Savings Plan - 12,152 shares - 59 249 - - - 308
Dividend and Interest Reinvestment and
Stock Purchase Plan - 20,400 shares - 102 383 (18) - - 467
Stock options exercised, net of shares surrendered
in payment and tax benefit - 56,762 shares - 284 526 - - - 810
Restricted stock issued - 9,792 shares - 49 222 - (271) - -
Amortization of unearned restricted stock compensation - - - - 295 - 295
Change in estimated restricted stock value - - 249 - (249) - -
Net unrealized (loss) on securities available for sale - - - - - (48,928) (48,928)
- - ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 $59,954 $130,811 $137,559 $214,230 $ (1,042) $(48,928) $492,584
- - ------------------------------------------------------------------------------------------------------------------------------------
<F1>The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
- - ------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30
- - ------------------------------------------------------------------------------------------------------------------------
1994 1993
(Restated)
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 45,211 $ 48,515
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses (8,664) (1,671)
Depreciation and amortization 6,464 5,364
Amortization of intangibles 1,244 1,452
Deferred income taxes 3,352 1,947
(Gains) losses on securities transactions 5,561 (274)
(Gains) on loan sales (1,087) -
(Increase) decrease in trading account securities (44) 1,758
(Increase) in accrued interest receivable (1,135) (991)
(Increase) decrease in other assets 26,532 (202)
Increase (decrease) in accrued interest payable 877 (1,520)
Increase (decrease) in accounts payable and other accrued liabilities (12,036) 7,788
Other, net 550 1,274
- - ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 66,825 63,440
- - ------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in other banks 19,288 9,955
Proceeds from sales and calls of securities held to maturity and held for sale 65 89,912
Proceeds from maturities of securities held to maturity and held for sale 453,942 420,754
Purchases of securities held to maturity and held for sale (6) (581,848)
Proceeds from sales and calls of securities available for sale 936,971 -
Proceeds from maturities of securities available for sale 151,012 -
Purchase of securities available for sale (1,208,712) -
Net decrease in federal funds sold and securities purchased
under resale agreements 4,375 14,114
Net (increase) in loans (139,980) (83,589)
Purchases of premises and equipment (14,831) (7,512)
Proceeds from sales of foreclosed assets 3,333 4,849
Other, net 424 24
- - ------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES 205,881 (133,341)
- - ------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (59,748) 5,580
Net (decrease) in domestic and foreign time deposits (14,189) (87,810)
Net increase (decrease) in short-term borrowings (241,266) 72,478
Payments on long-term debt (648) (170)
Proceeds from sales of common stock 1,227 2,618
Cash dividends (14,907) (12,006)
- - ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (329,531) (19,310)
- - ------------------------------------------------------------------------------------------------------------------------
(DECREASE) IN CASH AND CASH EQUIVALENTS (56,825) (89,211)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 387,548 364,177
- - ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 330,723 $ 274,966
- - ------------------------------------------------------------------------------------------------------------------------
<F1>The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
</TABLE>
<PAGE>
NOTE 1
Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of First Commerce
Corporation (FCC) and all of its subsidiaries. All significant intercompany
accounts and transactions are eliminated.
The consolidated financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of the
consolidated financial condition, results of operations and cash flows for
the interim periods. Adjustments included herein are of a normal recurring
nature and include appropriate estimated provisions. The financial statements
for the interim periods have not been independently audited. However, the
interim consolidated financial statements have been reviewed by FCC's
independent public accountants in accordance with standards for such reviews
established by the American Institute of Certified Public Accountants, and
their review report is included herein.
Certain prior year amounts have been reclassified to conform with current
year financial statement presentation.
The Notes to Consolidated Financial Statements included herein should be
read in conjunction with the Notes to Consolidated Financial Statements
included in FCC's 1993 Annual Report to Stockholders.
NOTE 2
ACQUISITIONS
Effective January 1, 1994, First Acadiana National Bancshares, Inc. (FANB),
the parent company of First Acadiana National Bank, was acquired by FCC for
1,290,145 shares of common stock. First Acadiana National Bank was merged
with The First National Bank of Lafayette, a wholly owned subsidiary of FCC.
The acquisition was accounted for as a pooling-of-interests.
All 1993 financial information reported reflects the pooling-of-interests with
FANB. Financial information prior to 1993 was not restated, since the effect
would be immaterial.
NOTE 3
Securities Held to Maturity
An analysis of securities held to maturity follows (in thousands):
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
- - ---------------------------------------------------------------------------------------------
June 30, 1994
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. treasury and agency securities $ 305,484 $ 477 $ (66) $ 305,895
Equity securities 8,313 - - 8,313
Other debt securities 715 2 - 717
- - ---------------------------------------------------------------------------------------------
Total securities held
to maturity $ 314,512 $ 479 $ (66) $ 314,925
- - ---------------------------------------------------------------------------------------------
June 30, 1993 (Restated)
- - ---------------------------------------------------------------------------------------------
U.S treasury securities $ 1,142,975 $ 13,701 $ - $ 1,156,676
Obligations of U.S.
agencies and
corporations 711,573 7,719 (2,037) 717,255
Obligations of states and
political subdivisions 77,142 12,242 (37) 89,347
Other bonds, notes,
debentures and stock 28,384 54 (512) 27,926
- - ---------------------------------------------------------------------------------------------
Total securities held
to maturity $ 1,960,074 $ 33,716 $(2,586) $ 1,991,204
- - ---------------------------------------------------------------------------------------------
</TABLE>
During the current quarter, proceeds from the call of securities held to
maturity were $5,000, resulting in gross realized gains of $500.
<PAGE>
An analysis of the amortized cost and fair values of the securities held to
maturity by contractual maturity periods follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
- - ---------------------------------------------------------------------------------------------
June 30, 1994
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within one year $305,534 $ 478 $ (64) $305,948
One to five years 165 1 (2) 164
Five to ten years 500 - - 500
After ten years 8,313 - - 8,313
- - ---------------------------------------------------------------------------------------------
Total securities held
to maturity $ 314,512 $ 479 $ (66) $ 314,925
- - ---------------------------------------------------------------------------------------------
</TABLE>
NOTE 4
Securities Available for Sale
An analysis of securities available for sale follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
- - -------------------------------------------------------------------------------------------------------
June 30, 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. treasury and agency securities $ 1,145,905 $ 1,719 $ (24,257) $ 1,123,367
Mortgage-backed securities 1,373,918 86 (60,970) 1,313,034
Obligations of states and
political subdivisions 95,899 10,101 (769) 105,231
Equity securities 33,690 - (1,182) 32,508
- - -------------------------------------------------------------------------------------------------------
Total securities
available for sale $ 2,649,412 $ 11,906 $ (87,178) $ 2,574,140
- - -------------------------------------------------------------------------------------------------------
</TABLE>
During the current quarter, proceeds from the sales and calls of securities
available for sale were $487,783,000, resulting in gross realized gains of
$13,000 and gross realized losses of $6,702,000. The net unrealized loss on
available for sale securities, net of the tax effect, included as a separate
component of equity was $48,928,000 at June 30, 1994. The fair value of
securities available for sale is the market value. The fair value was
determined from quoted prices or quoted prices of similar securities of
comparable risk and maturity where no quoted market price exists.
An analysis of the amortized cost and fair values of the securities available
for sale by contractual maturity periods follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
- - -------------------------------------------------------------------------------------------------------
June 30, 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within one year $ 84,521 $ 403 $ (613) $ 84,311
One to five years 1,094,925 2,122 (24,287) 1,072,760
Five to ten years 296,377 933 (13,947) 283,363
After ten years 1,173,589 8,448 (48,331) 1,133,706
- - -------------------------------------------------------------------------------------------------------
Total securities
available for sale $ 2,649,412 $ 11,906 $ (87,178) $ 2,574,140
- - -------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5
Loans and Leases
The composition of loans and leases was as follows (in thousands):
<TABLE>
<CAPTION>
June 30 December 31
=====================================================================
1994 1993 1993
(Restated)
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
Domestic
Loans to individuals -
Residential mortgages
First lien $ 471,104 $ 330,056 $ 448,054
Junior lien 68,181 65,655 73,308
Loans to individuals - other 795,768 595,087 663,364
Commercial, financial
and agricultural 498,994 476,961 482,677
Real estate 532,333 492,441 521,283
Credit card loans 371,281 363,291 383,932
Other loans 81,171 96,403 106,465
- - ---------------------------------------------------------------------
Total domestic loans
and leases 2,818,832 2,419,894 2,679,083
International
In domestic offices 2,171 6,167 7,436
- - ---------------------------------------------------------------------
Total loans and leases 2,821,003 2,426,061 2,686,519
Unearned income (7,163) (15,562) (11,822)
- - ---------------------------------------------------------------------
Loans and leases, net
of unearned income $ 2,813,840 $ 2,410,499 $ 2,674,697
=====================================================================
</TABLE>
<PAGE>
NOTE 6
Allowance for Loan Losses
A summary analysis of the transactions in the allowance for loan
losses follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
June 30
=============================================================================
1994 1993
(Restated)
- - -----------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 63,844 $ 78,539
Provision for loan losses (4,832) (2,259)
Loans and leases charged to the allowance (2,964) (3,819)
Recoveries on loans and leases previously
charged to the allowance 2,707 1,975
- - -----------------------------------------------------------------------------
Net charge-offs (257) (1,844)
- - -----------------------------------------------------------------------------
Balance at end of period $ 58,755 $ 74,436
- - -----------------------------------------------------------------------------
Net charge-offs as a percent of
average loans and leases*<F1> .04 % .31 %
Allowance for loan losses as a percent of
loans and leases*<F1> at end of period 2.09 % 3.09 %
=============================================================================
<F1>*Net of unearned income.
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30
=============================================================================
1994 1993
- - -----------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 68,302 $ 79,919
Provision for loan losses (8,664) (1,671)
Loans and leases charged to the allowance (6,300) (8,432)
Recoveries on loans and leases previously
charged to the allowance 5,417 4,620
- - -----------------------------------------------------------------------------
Net charge-offs (883) (3,812)
- - -----------------------------------------------------------------------------
Balance at end of period $ 58,755 $ 74,436
- - -----------------------------------------------------------------------------
Net annualized charge-offs as a percent of
average loans and leases**<F1> .07 % .33 %
Allowance for loan losses as a percent of
loans and leases*<F1> at end of period 2.09 % 3.09 %
=============================================================================
<F1>**Net of unearned income.
</TABLE>
NOTE 7
Debt
Total cash payments for interest expense on deposits, short-term
borrowings and long-term debt were $68,278,000 and $71,602,000
for the six-month periods ended June 30, 1994 and 1993, respectively.
NOTE 8
Off-Balance Sheet Instruments
A summary of obligations under financial instruments which are not
reflected in the Consolidated Balance Sheets follows (in thousands):
<TABLE>
<CAPTION>
June 30
=======================================================================
1994 1993
(Restated)
- - -----------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit for loans and
leases (excluding credit card plans) $ 785,570 $ 501,071
Commitments to extend credit for credit
card plans $1,283,121 $ 980,942
Commercial letters of credit $ 5,045 $ 9,712
Financial letters of credit $ 48,960 $ 43,050
Performance letters of credit $ 19,147 $ 9,746
Foreign exchange contracts
Commitments to purchase $ 1,217 $ 974
Commitments to sell $ 1,350 $ 8,732
When-issued securities
Commitments to purchase $ 1,750 $ 880
Commitments to sell $ 880 $ 555
Interest rate contracts*<F1>
Cap corridors $ 100,000 $ 350,000
Caps $ - $ 10,000
Floors $ - $ 200,000
Swaps, including amortizing interest
rate swaps $ 250,000 $ 213,000
- - -----------------------------------------------------------------------
<F1>*Notional principal amounts.
</TABLE>
NOTE 9
Contingencies
FCC and its subsidiaries have been named as defendents in various legal
actions arising from normal business activities in which damages in various
amounts are claimed. The amounts, if any, of ultimate liability with respect to
such matters cannot be determined. However, after consulting with legal
counsel, management believes any such liability will not have a material effect
on FCC's consolidated financial condition or results of operations.
<PAGE>
NOTE 10
Income Taxes
Deferred income taxes reflect the tax effects of temporary differences the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. There was a net deferred tax
asset of $47.22 million and $13.68 million on June 30, 1994 and 1993,
respectively. The major temporary differences which created deferred tax
assets and liabilities as of June 30, 1994 and 1993 are as follows (in
thousands):
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
June 30, 1994 June 30, 1993
(Restated)
- - ---------------------------------------------------------------------------------------------------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unrealized loss on securities $ 26,346 $ - $ - $ -
Allowance for loan losses 20,700 - 24,074 -
Alowance for losses on foreclosed assets 3,249 - 4,408 -
Amortization of intangibles 3,203 - - -
Nonaccrual loan interest 2,819 - 3,607 -
Employee benefits 1,921 - 1,532 -
Bond accretion - 4,110 - 3,642
Accrued liabilities - 3,947 - 12,144
Accumulated depreciation - 3,868 - 4,082
Other 3,738 2,830 2,865 2,940
- - ---------------------------------------------------------------------------------------------------------------------
Total deferred taxes $ 61,976 $ 14,755 $ 36,486 $ 22,808
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Current income taxes payable were $1.63 million and $4.52 million on
June 30, 1994 and 1993, respectively.
The components of income tax expense under the liability method in the
consolidated statements of income for the three and six-month periods ended
June 30 were as follows (in thousands):
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- - ------------------------------------------------------------------------------------------------
1994 1993 1994 1993
(Restated) (Restated)
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current $ 7,816 $ 10,576 $ 18,403 $ 21,974
Deferred 1,464 1,714 3,352 1,947
- - ------------------------------------------------------------------------------------------------
Total $ 9,280 $ 12,290 $ 21,755 $ 23,921
- - ------------------------------------------------------------------------------------------------
</TABLE>
Income tax expense related to securities transactions and state and foreign
income taxes are included above and were insignificant in all periods presented.
The statutory federal income tax rate was increased to 35% from 34% on
August 10, 1993. This increase was made retroactive to January 1, 1993.
The additional income tax expense resulting from this rate was not recorded
until the quarter ended September 30, 1993. Total income tax expense for the
three and six-months ended June 30, 1994 and 1993 was different from the
amount computed by applying the statutory federal income tax rates to pretax
income as follows (in percentages):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
- - --------------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
(Restated) (Restated)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal income tax expense 35.00 % 34.00 % 35.00 % 34.00 %
Increase (decrease) resulting from:
Benefits attributable to tax-exempt interest (2.95) (2.56) (2.56) (2.68)
Effect of adopting SFAS 109 - - - .82
Nondeductible expenses .83 .46 .63 .44
Other items, net (.16) .72 (.58) .44
- - --------------------------------------------------------------------------------------------------------------------
Actual income tax expense 32.72 % 32.62 % 32.49 % 33.02 %
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
FCC's cash payments for federal income tax liabilities were $26.23 million
and $17.72 million for the six months ended June 30, 1994 and 1993,
respectively.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
and Board of Directors of
First Commerce Corporation:
We have reviewed the accompanying consolidated balance sheets of FIRST
COMMERCE CORPORATION (a Louisiana corporation) and subsidiaries as of June 30,
1994 and 1993, and the related consolidated statements of income for the
three-month and six-month periods ended June 30, 1994 and 1993, and the
consolidated statements of changes in stockholders' equity and cash flows for
the six-month periods ended June 30, 1994 and 1993. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the consolidated financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Commerce Corporation and
subsidiaries as of December 31, 1993 and the related statements of income,
changes in stockholders' equity and cash flows for the year then ended (not
presented herein) and, in our report dated January 12, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1993 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
New Orleans, Louisiana
July 13, 1994
