As filed with the Securities and Exchange Commission on August 4, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
First Commerce Corporation
(Exact name of registrant as specified in its charter)
Louisiana 6711 72-0701203
(State or other jursidication (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
210 Baronne Street
New Orleans, Louisiana 70112
(504) 561-1371
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Copy to: THOMAS L. CALLICUTT, Jr. Copy to:
ANTHONY J. CORRERO, III 925 Common St., 7th Floor PAUL M. HAYGOOD
Correro, Fishman New Orleans, Louisiana 70112 Stone, Pigman, Walther,
& Casteix, L.L.P. (504) 582-2913 Wittmann & Hutchinson, L.L.P.
201 St. Charles Avenue (Name, address, including 546 Carondelet Street
47th Floor zip code, and telephone New Orleans,Louisiana
New Orleans, Louisiana number, including area 70170-4700
70170-4700 code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon the date of the shareholders' meetings described in this
registration statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, please check the following box. _______
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
___________________________________________________________________________________________
Proposed Proposed
Maximum Maximum
Title of Each Number of Shares Offering Aggregate
Class of Securities to be Price Per Offering Amount of
to be Registered Registered<F1> Share<F2> Price<F2> Registration Fee<F2>
____________________________________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock
$5 par value . . . . . 1,009,705 $15.433 $15,583,183 $5,373.51
______________________________________________________________________________
<FN>
<F1> Based on the closing sales price of a share of Registrant's Common Stock on July
31, 1995. There is also registered hereby a currently indeterminate number of
additional shares that may be issued in the transaction described herein that may
result from application of the pricing formula described herein.
<F2> Calculated in accordance with Rule 457(f)(2), based on the aggregate book value as
of March 31, 1995 of the shares of common stock of the corporations to be acquired
as described in this registration statement.
</FN>
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
FIRST COMMERCE CORPORATION
CROSS REFERENCE SHEET
Item of Form S-4 Location in Prospectus
_________________ ______________________
A. Information About the Transaction of
1. Forepart of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Cover; Table of Contents
3. Risk Factors, Ratio of Earnings to Summary
Fixed Charges and Other Information
4. Terms of the Transaction Summary; The Plan; Certain
Federal Income Tax Consequences;
Comparative Rights of
Shareholders
5. Pro Form Financial Information Pro Forma Condensed Combined
Financial Statements (Unaudited)
6. Material Contracts with the Company The Plan - Background of and
Being Acquired Reasons for the Plan
7. Additional Information Required for *
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel *
9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
B. Information About the Registrant
10. Information with Respect to S-3 Information About FCC
Registrants
11. Incorporation of Certain Information Information About FCC
by Reference
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants *
Other than S-2 or S-3 Registrants
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 *
Companies
17. Information with Respect to Companies Information About the Company
Other than S-2 or S-3 Companies and the Bank
D. Voting and Management Information
18. Information if Proxies, Consents or
Authorizations are to be Solicited
(1) Date, Time and Plan Information Introductory Statement-General
(2) Revocability of Proxy Introductory Statement-
Solicitation, Voting and
Revocation of Proxies
(3) Dissenters' Rights of Appraisal Dissenters' Rights
(4) Persons Making the Solicitation Introductory Statement
-General
(5) Interests of Certain Persons in Summary; The Plan-Interests of
Matters to be Acted upon; Certain Persons; The Plan -
Voting Securities and Principal Employee Benefits; Information
Holders Thereof about the Company and the Bank
- Security Ownership of
Principal Shareholders and
Management
(6) Vote Required for Approval Introductory Statement -
Shares Entitled to Vote;
Quorum; Vote Required
(7) Directors and Executive Officers; Information About FCC
Executive Compensation; Certain
Relationships and Related
Transactions
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited
or in an Exchange Offer
_____________________________
* Not applicable or answer is in the negative.
<PAGE>
PEOPLES BANCSHARES, INC.
PEOPLES BANK & TRUST COMPANY OF ST. BERNARD
P. O. Box 1099
Chalmette, LA 70044-1099
, 1995
Dear Shareholder:
You are invited to attend joint special meetings of
shareholders of Peoples Bancshares, Inc. (the "Company") and
Peoples Bank & Trust Company of St. Bernard (the "Bank") to be
held on September ___, 1995 at 4:00 P.M., local time, at the
Company's main office, 1615 E. Judge Perez Drive, Chalmette,
Louisiana.
At the meeting you will be asked to approve an Amended and
Restated Agreement and Plan of Merger (the "Plan") pursuant to
which, among other things, the Company will merge into First
Commerce Corporation ("FCC"), the Bank will merge into First
National Bank of Commerce, a bank subsidiary of FCC ("FNBC"), and
each outstanding share of common stock of the Company and each
outstanding share of common stock of the Bank not owned by the
Company will be converted into shares of FCC common stock as more
fully described in the attached Proxy Statement and Prospectus.
You are urged carefully to read the Proxy Statement and
Prospectus in its entirety for a more complete description of the
terms of the Plan.
The Plan has been approved by the Boards of Directors of the
Company and the Bank. As a result of the proposed mergers, you,
as a new shareholder of FCC, will own stock that is publicly
traded on the NASDAQ National Market. Through FNBC, FCC will be
better able to offer a broad range of banking services in our
market area and to compete more effectively with other financial
institutions in the changing environment facing all financial
institutions. The Boards also have received the opinion of the
Company's and Bank's financial advisor, Chaffe & Associates,
Inc., to the effect that the consideration to be received in the
mergers by the Company's and the Bank's shareholders is fair to
such shareholders from a financial point of view.
At the meeting, the Company's shareholders also will be
asked to vote on an amendment to the Company's Articles of
Incorporation to repeal Article Seventeen in its entirety (the
"Amendment"). The purpose of the Amendment is to remove certain
provisions from the Company's Articles that, if read broadly,
might impede the effectiveness of the merger of the Company into
FCC.
The Boards of Directors recommend that you vote FOR the Plan
and, if you are a shareholder of the Company, FOR the Amendment,
and you are urged to execute the enclosed proxy and return it
promptly in the accompanying envelope.
Very truly yours,
________________________________________
President, Peoples Bancshares, Inc. and
Peoples Bank & Trust Company of St. Bernard
<PAGE>
PEOPLES BANCSHARES, INC.
P. O. Box 1099
Chalmette, LA 70044-1099
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Chalmette, Louisiana
, 1995
A special meeting of shareholders of Peoples Bancshares, Inc.
(the "Company") will be held on September ___, 1995 at 4:00 p.m.,
local time, at the Company's main office, 1615 E. Judge Perez
Drive, Chalmette, Louisiana, to vote upon the following matters:
1.A proposal to amend the Articles of Incorporation of the
Company to repeal Article 17 in its entirety.
2.A proposal to approve an Amended and Restated Agreement
and Plan of Merger (the "Plan") pursuant to which, among other
things: (a) Peoples Bank & Trust Company of St. Bernard, the
bank subsidiary of the Company, will merge into First National
Bank of Commerce, a wholly-owned bank subsidiary of First
Commerce Corporation ("FCC"), (b) the Company will merge into
FCC, and (c) each outstanding share of common stock of the
Company will be converted into a number of shares of FCC
common stock as determined in accordance with the terms of the
Plan.
3.Such other matters as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on
, 1995, are entitled to notice of and to vote at the meeting.
Dissenting shareholders who comply with the procedural
requirements of the Business Corporation Law of Louisiana will be
entitled to receive payment of the fair cash value of their
shares if the Plan is effected upon approval by less than eighty
percent of the total voting power of the Company.
Your vote is important regardless of the number of shares you
own. Whether or not you plan to attend the meeting, please mark,
date and sign the enclosed proxy and return it promptly in the
enclosed stamped envelope. Your proxy may be revoked by
appropriate notice to the Company's Secretary at any time prior
to the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
John F. Rowley, Secretary
<PAGE>
PEOPLES BANK & TRUST COMPANY OF ST. BERNARD
P. O. Box 1099
Chalmette, LA 70044-1099
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Chalmette, Louisiana
, 1995
A special meeting of shareholders of Peoples Bank & Trust
Company of St. Bernard (the "Bank") will be held on September
___, 1995 at 4:00 P.M., local time, at the Bank's main office,
1615 E. Judge Perez Drive, Chalmette, Louisiana, to vote upon the
following matters:
1. A proposal to approve an Amended and Restated
Agreement and Plan of Merger (the "Plan") pursuant to which,
among other things, the Bank will merge into First National
Bank of Commerce, a wholly-owned bank subsidiary of First
Commerce Corporation ("FCC") and each outstanding share of
common stock of the Bank not owned by Peoples Bancshares,
Inc. will be converted into a number of shares of FCC common
stock as determined in accordance with the terms of the
Plan.
2. Such other matters as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on
, 1995, are entitled to notice of and to vote at the meeting.
Dissenting shareholders who comply with the procedural
requirements of the Louisiana Banking Law will be entitled to
receive payment of the fair cash value of their shares if the
Plan is effected upon approval by less than eighty percent of the
total voting power of the Bank.
Whether or not you plan to attend the meeting, please mark,
date and sign the enclosed proxy and return it promptly in the
enclosed stamped envelope. Your proxy may be revoked by
appropriate notice to the Bank's Secretary at any time prior to
the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
John F. Rowley, Secretary
<PAGE>
FIRST COMMERCE CORPORATION
Common Stock, $5.00 par value
First Commerce Corporation ("FCC") has filed a Registration
Statement pursuant to the Securities Act of 1933 covering the
shares of common stock of FCC ("FCC Common Stock") which may be
issued in connection with a proposed merger of Peoples
Bancshares, Inc. (the "Company") into FCC and of Peoples Bank &
Trust Company of St. Bernard (the "Bank") into First National
Bank of Commerce, the actual number of shares to be determined
on the basis of the operation of the pricing formula described
herein. This document constitutes a Proxy Statement of the
Company and the Bank in connection with the transactions
described herein and a Prospectus of FCC with respect to the
shares of FCC Common Stock to be issued if the mergers are
consummated.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized to give any information or to
make any representations other than those contained in this
Proxy Statement and Prospectus, and, if given or made, such
information or representations must not be relied upon as
having been authorized by FCC, the Company or the Bank. This
Proxy Statement and Prospectus shall not constitute an offer by
FCC to sell or the solicitation of an offer by FCC to buy nor
shall there be any sale of the securities offered by this Proxy
Statement and Prospectus in any state in which, or to any
person to whom, it would be unlawful prior to registration or
qualification under the laws of such state for FCC to make such
an offer or solicitation. Neither the delivery of this Proxy
Statement and Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has
been no change in the affairs of FCC, the Company or the Bank
since the date hereof.
This Proxy Statement and Prospectus is dated ,
1995. This Proxy Statement and Prospectus was mailed to
shareholders of the Company and the Bank on approximately
____________________, 1995.
<PAGE>
AVAILABLE INFORMATION
FCC is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith is
required to file reports and other information with the
Securities and Exchange Commission (the "Commission"). Such
reports, together with proxy statements and other information
filed by FCC, can be inspected at, and copies thereof may be
obtained at prescribed rates from, the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and from the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
FCC has filed with the Commission a Registration Statement
on Form S-4 ("Registration Statement") under the Securities Act
of 1933 with respect to the common stock offered hereby. This
Proxy Statement and Prospectus does not contain all of the
information set forth in the Registration Statement or the
exhibits thereto. Statements contained herein as to the
contents of any documents are necessarily summaries of the
documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the
Commission. For further information with respect to FCC and
the transactions contemplated hereby, reference is made to the
Registration Statement, including the exhibits thereto.
As more fully set forth under "Information about FCC"
elsewhere herein, certain information with respect to FCC, as
well as a copy of the Agreement and Plan of Merger described
herein, has been incorporated by reference into this Proxy
Statement and Prospectus. FCC hereby undertakes to provide
without charge to each person to whom a copy of this Proxy
Statement and Prospectus has been delivered, upon the written
or oral request of such person, a copy of any or all of the
information or documents which have been incorporated by
reference herein, other than exhibits to such documents.
Requests for such copies should be directed to Mr. Thomas L.
Callicutt, Jr., Senior Vice President and Controller, First
Commerce Corporation, P. O. Box 60279, New Orleans, Louisiana
70160, or 925 Common Street, 7th Floor, New Orleans, Louisiana
70112, telephone (504) 582-2913. In order to ensure timely
delivery of the documents, any request should be made by
, 1995. [Five business days before the date of the meeting]
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY
INTRODUCTORY STATEMENT
General
Purpose of the Meeting
Shares Entitled to Vote; Quorum; Vote Required
Solicitation, Voting and Revocation of Proxies
AMENDMENT TO COMPANY'S ARTICLES OF INCORPORATION
General
Article 17 and Reasons for Repeal
Required Vote
THE PLAN
General
Background of and Reasons for the Plan
Opinion of Investment Banker.
Conversion of Common Stock
Effective Date
Exchange of Certificates
Conditions
Conduct of Business Prior to the Effective Date
Waiver, Amendment and Termination
Interests of Certain Persons
Insiders' Commitments
Employee Benefits
Expenses
Status Under Federal Securities Laws;
Certain Restrictions on Resales
Accounting Treatment
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
DISSENTERS' RIGHTS
INFORMATION ABOUT THE COMPANY AND THE BANK
Principal Business
Competitive Conditions
Properties
Employees
Market Prices and Dividends
Security Ownership of Principal
Shareholders and Management
COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INFORMATION ABOUT FCC
COMPARATIVE RIGHTS OF SHAREHOLDERS
General
Preferred Stock
Preemptive Rights
Special Meetings of Shareholders
Issuance or Sale of Common Stock
Shareholder Vote Requirements
Restrictions on Certain Stock Acquisitions
Assessment of Stock
Inspection Rights
Voluntary Dissolution
Anti-Takeover Provisions
LEGAL MATTERS
EXPERTS
OTHER MATTERS
PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
PEOPLES BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED
FINANCIAL STATEMENTS TABLE OF CONTENTS
PEOPLE'S BANK & TRUST COMPANY OF ST. BERNARD
CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS
Appendix - Fairness Opinion of Chaffe & Associates, Inc. .
<PAGE>
SUMMARY
The following summary is necessarily incomplete and is
qualified in its entirety by the more detailed information
appearing elsewhere herein, the appendix hereto and the
documents incorporated herein by reference. Shareholders are
urged to read carefully all such material.
The Companies
First Commerce Corporation, a Louisiana corporation ("FCC"),
is a multi-bank holding company with five wholly-owned bank
subsidiaries in New Orleans, Baton Rouge, Alexandria, Lake
Charles and Lafayette, Louisiana. FCC's principal executive
offices are at 210 Baronne Street, New Orleans, Louisiana
70112, and its telephone number is (504) 561-1371. See
"Information About FCC."
Peoples Bancshares, Inc., a Louisiana corporation (the
"Company"), is a one bank holding company that owns 96.3% of
the outstanding stock of Peoples Bank & Trust Company of St.
Bernard (the "Bank"). The Company's and Bank's principal
executive offices are at 1615 E. Judge Perez Drive, Chalmette,
Louisiana 70043-4582, telephone number (504) 279-5211. See
"Information about the Company and the Bank."
Unless the context otherwise requires, FCC and its
subsidiaries are referred to collectively herein as "FCC", and
FCC, the Company and the Bank are collectively referred to as
the "Companies."
The Special Meeting
Date; Voting. Special meetings of shareholders of the
Company and the Bank will be held on September ___, 1995 at the
time and place set forth in the accompanying notices of special
meeting of shareholders of the Company and of the Bank (each of
the special meetings is hereafter referred to as the
"Meeting"). Only record holders of the common stock of the
Company ("Company Common Stock") and the common stock of the
Bank ("Bank Common Stock") on ____________, 1995 are entitled
to notice of and to vote at the Meeting. On that date, there
were outstanding 23,408 shares of Company Common Stock and
25,000 shares of Bank Common Stock, each of which is entitled
to one vote on each matter properly to come before the Meeting.
See "Introductory Statement - General and - Shares Entitled to
Vote; Quorum; Vote Required."
Purpose. The purpose of the Meeting is to vote (i) in the
case of both the Company and Bank, upon a proposal to approve
an Amended and Restated Agreement and Plan of Merger (the
"Plan") pursuant to which, among other things, the Company will
merge into FCC (the "Merger"), the Bank will merge into First
National Bank of Commerce ("FNBC"), a wholly-owned subsidiary
of FCC (the "Bank Merger," and collectively with the Merger,
the "Mergers"), and shareholders of the Company and the Bank
will receive the consideration described below under
"Conversion of Common Stock" and (ii) in the case of the
Company only, upon a proposal to amend its Articles of
Incorporation. See "Introductory Statement - Purpose of the
Meeting."
Vote Required. The Plan must be approved by the affirmative
vote of the holders of at least 75% of the Company Common Stock
present in person or represented by proxy at the Meeting of the
Company and by holders of two-thirds of the outstanding Bank
Common Stock. The affirmative vote of holders of at least 75%
of the shares of Company Common Stock present at the Meeting is
required to approve the Amendment. Directors, executive
officers and certain principal shareholders of the Company
beneficially owning an aggregate of 13,069 shares, or 55.83%,
of the outstanding Company Common Stock have agreed, subject to
certain conditions, to vote in favor of the Plan and the
Amendment at the Company's Meeting. The Company, as the holder
of 96.3% of the outstanding stock of the Bank, has agreed,
subject to certain conditions, to vote in favor of the Plan at
the Bank's Meeting. Under Louisiana law, shareholders of FCC
are not required to approve the Plan. See "Introductory
Statement - Shares Entitled to Vote; Quorum; Vote Required."
Amendment to Company's Articles of Incorporation
At the meeting, the Company's shareholders will be asked to
vote on an amendment to the Company's Articles of Incorporation
to repeal Article Seventeen in its entirety (the "Amendment").
Under a broad reading of Article Seventeen, it might be
contended that its provisions are violated by the Merger.
Accordingly, the purpose of the Amendment is to repeal Article
Seventeen, which might impede the effectiveness of the Merger.
The Company's Board of Directors recommends that you vote FOR
approval of the Amendment. See "Amendment to Company's
Articles of Incorporation."
The Plan
Board Recommendation. The Boards of Directors of the
Company and the Bank approved the Plan after seeking and
reviewing proposals from a number of financial institutions.
The financial and other terms of the Plan were arrived at
through arm's length negotiations between representatives of
the Companies. The Boards believe that the Plan is in the best
interests of the Company, the Bank and their respective
shareholders and recommend that shareholders vote FOR approval
of the Plan.
See "The Plan - Background of and Reasons for the Plan and -
Interests of Certain Persons."
Opinion of Investment Banker. Chaffe & Associates, Inc.
("Chaffe"), an independent financial advisor to the Company and
the Bank, has issued an opinion dated July ___, 1995, to the
Boards of Directors of the Company and the Bank that: (i) the
"Aggregate Consideration" (defined in "Conversion of Common
Stock" below) is fair, from a financial point of view, to the
Company, the Bank and their respective shareholders; (ii) the
allocation of the Aggregate Consideration between shareholders
of the Company and the Bank is fair, from a financial point of
view, to the shareholders of each; and (iii) the allocation of
the "Enterprise Consideration" (meaning the Aggregate
Consideration plus the consideration being paid to purchase
certain real estate and related facilities as described under
"Interests of Certain Persons") among the shareholders of the
Company and the Bank, on the one hand, and the partnership that
owns such real estate and related facilities (the
"Partnership"), on the other hand, is fair to each of them.
The opinion referred to in clause (iii) was rendered by Chaffe
at the request of FCC and its independent accountants, and is
based upon, and assumes the correctness of, a real estate
appraisal made by a real estate firm unaffiliated with the
Company, the Bank, the Partnership or Chaffe.
On _______________, 1995, Chaffe reissued the foregoing
opinion with respect to the matters described in clauses (i)
and (ii) in the preceding paragraph. A copy of the reissued
opinion is attached and should be read in its entirety. The
original and reissued opinions are directed only to the
fairness of the consideration from a financial point of view
and do not constitute a recommendation to any shareholder on
how to vote at the Meeting.
See "The Plan - Opinion of Investment Banker."
Conversion of Common Stock. The Plan provides that,
assuming no fractional shares or perfected dissenters' rights,
shareholders of the Company and the Bank will receive a total
number of shares of common stock of FCC ("FCC Common Stock")
equal to $30.796 million less the Deductible Amount as defined
below (the "Aggregate Consideration") divided by the average of
the closing sales prices on the NASDAQ National Market of a
share of FCC Common Stock for the ten business days ending on
the last business day prior to the date the Plan becomes
effective ("Market Value"). The term "Deductible Amount" means
the excess over $200,000 of the Company's and Bank's aggregate
legal, accounting, investment banking, printing and mailing
fees and costs from January 1, 1994, through the date the Plan
becomes effective (the "Effective Date") related to the
prospective sale of the Company and the Bank, the process
leading to the execution of the Plan, and the negotiation,
implementation and consummation of the Plan ("Transaction
Costs"), other than (i) any such fees and costs that had been
accrued on or before December 31, 1994, and (ii) any such fees
and costs, up to but not exceeding $300,000, that are accrued
and paid at any time from January 1, 1995 through the date that
is 30 days prior to the date set for consummation of the Plan.
On the Effective Date, each outstanding share of Company
Common Stock will be converted into a number of shares of FCC
Common Stock equal to the quotient of (a) 96.33% of the
Aggregate Consideration divided by the Market Value, divided by
(b) the number of outstanding shares of Company Common Stock on
the Effective Date, currently 23,408 shares.
On the Effective Date, each outstanding share of Bank Common
Stock not owned by the Company will be converted into a number
of shares of FCC Common Stock equal to the quotient of (a)
3.67% of the Aggregate Consideration divided by the Market
Value, divided by (b) the number of outstanding shares of Bank
Common Stock on the Effective Date that are not owned by the
Company, currently 918 shares.
The following table provides examples of the number of
shares of FCC Common Stock into which each share of Company
Common Stock and Bank Common Stock would be converted on the
Effective Date, assuming that on such date the Market Value is
as specified below, the number of outstanding shares of Company
Common Stock and Bank Common Stock does not change from the
number on the date hereof, and there is no Deductible Amount.
As of the date hereof, it is expected that Transaction Costs
will not result in any Deductible Amount, but there can be no
assurance to this effect.
Assumed Market Number of FCC Numberof FCC
Value of Shares Per Shares Per
FCC Common Stock Company Share Bank Share
____________________ ___________________ ____________________
$24 52.805641 51.298711
26 48.743669 47.352656
28 45.261978 43.970324
30 42.244513 41.038969
32 39.604230 38.474033
34 37.274570 36.210855
On _____________, 1995, the actual closing sales price for a
share of FCC Common Stock was $________, and if such date had
been the Effective Date, the Market Value would have been
$________.
In lieu of issuing any fractional share of FCC Common Stock,
each shareholder of the Company or the Bank who would otherwise
be entitled thereto will receive a cash payment (without
interest) equal to such fractional share multiplied by the
Market Value.
See "The Plan - Conversion of Common Stock."
Exchange of Certificates. Upon consummation of the Plan, a
letter of transmittal, together with instructions for the
exchange of certificates of Company and Bank Common Stock for
FCC Common Stock certificates, will be mailed to each
shareholder of record of the Company and the Bank on the
Effective Date. Shareholders should not send in their stock
certificates until they have received the letter of
transmittal. Shareholders who cannot locate their certificates
should contact promptly Dorothy R. Roper, 1615 E. Judge Perez,
Chalmette, Louisiana 70043, telephone (504) 279-5211. See
"The Plan - Exchange of Certificates."
Conditions. In addition to approval by the Company's and
Bank's shareholders, consummation of the Plan is subject to a
number of conditions, including (i) required regulatory
approvals, (ii) assurances that the mergers may be accounted
for as poolings-of-interests, (iii) receipt of an opinion as to
the qualification of the mergers as tax-free reorganizations
under applicable law and (iv) consummation of the purchase by
FCC of certain real estate from a partnership controlled by
certain directors and officers of the Company and the Bank.
The Companies intend to consummate the Plan as soon as
practicable after all of the conditions have been met or
waived.
FCC has filed applications seeking the required regulatory
approvals and expects to receive them by September, 1995;
however, there can be no assurance that the approvals will be
obtained or that the other conditions to consummation of the
Plan will be satisfied.
See "The Plan - Conditions."
Waiver, Amendment and Termination. Each of the parties may
waive any of the conditions to its obligation to consummate the
Plan other than shareholder and regulatory approvals. The Plan
may also be amended at any time before or after shareholder
approval by mutual agreement, but no amendment made after such
shareholder approval may alter the amount or type of shares
into which Company or Bank Common Stock will be converted or
alter the Plan in a manner that would adversely affect any
shareholder of the Company or the Bank.
The Plan may be terminated before it is consummated (i) by
mutual consent, (ii) for certain breaches of representations,
warranties or covenants, (iii) if the conditions to a party's
obligation have not been met or waived, (iv) if by March 31,
1996, the Merger has not occurred, or (v) on the basis of
certain other grounds specified in the Plan. See "The Plan -
Waiver, Amendment and Termination."
Certain Federal Income Tax Consequences. Consummation of
the Plan is conditioned upon receipt of an opinion from Arthur
Andersen LLP to the effect that, among other things, each
Company and Bank shareholder who receives FCC Common Stock
pursuant to the Plan will not recognize gain or loss except
with respect to the receipt of cash (i) in lieu of fractional
shares of FCC Common Stock or (ii) pursuant to the exercise of
dissenters' rights. Because of the complexity of the tax laws,
each shareholder should consult his tax advisor concerning the
applicable federal, state and local income tax consequences of
the mergers. See "Certain Federal Income Tax Consequences."
Dissenters' Rights. Under certain conditions, and by
complying with the specific procedures required by statute and
described herein, shareholders of the Company will have the
right to dissent from the Plan, in which event, if the Plan is
consummated, they may be entitled to receive in cash the fair
value of their shares of Company Common Stock. Because the
Company will vote all of its shares of Bank Common Stock in
favor of the Plan, shareholders of the Bank will not have
dissenters' rights. See "Dissenters' Rights."
Insiders' Commitments. Each director and executive officer
of the Company and certain of its principal shareholders has
agreed, among other things, to vote as a shareholder in favor
of the Plan and against any other proposal relating to the sale
of the Bank or the Company, to release FCC and FNBC from any
indemnification obligations to indemnify him except as set
forth in the Plan, and that for two years after the Effective
Date he will not assume a significant proprietary or managerial
position with a financial institution that competes with the
business of the Bank as continued by FCC. The Company has also
agreed to vote its shares of Bank Common Stock in favor of the
Plan. See "The Plan - Insiders' Commitments."
Employee Benefits. FCC has agreed that after the Effective
Date, subject to certain limitations, it will provide employees
of the Company or the Bank who become employees of FCC the same
employee benefits as are provided by FCC to its employees, as
well as certain additional benefits. See "The Plan - Employee
Benefits."
Interests of Certain Persons.
Indemnification. FCC has agreed that after the Effective
Date it will indemnify each officer or director of the Company
or the Bank against certain liability and expenses related to
this Proxy Statement and Prospectus, and in an amount up to $5
million in the aggregate against certain liabilities and
expenses arising out of their service as directors or officers
of the Company or the Bank.
Real Estate Agreements. FCC has agreed to purchase from a
partnership controlled by certain directors and executive
officers of the Company and the Bank, certain real estate and
related facilities currently leased to the Bank (the "Real
Estate Agreements"). The purchase price under the Real Estate
Agreements is $2.504 million, effected by means of the
assumption by FCC of existing indebtedness of the partnership
in that amount guaranteed by the partners. The purchase price
is based upon the appraised value of the real estate and
related facilities. See "The Plan - Interests of Certain
Persons - Real Estate Agreements."
Life Insurance. FCC has agreed that each director of the
Bank who participates in the Bank's split dollar life insurance
program will be permitted to purchase from the Bank the policy
covering such director's life upon payment to the Bank of the
cash surrender value of the policy. As of May 24, 1995, the
cash surrender values of the policies ranged from approximately
$2,624 to $12,319. All directors, other than Nicholas P.
Trist, Jr., and Dorothy R. Roper, participate in this program.
Severance Pay. Nicholas P. Trist, Jr., and Ronald W.
Mistrot, who are directors and officers of the Company, are
eligible to receive severance pay under the Bank's Change of
Control Severance Plan (the "Severance Plan") if they suffer a
termination of employment within one year after the Effective
Date. Under the Severance Plan, if a loss of employment occurs
within one year after the consummation of the Mergers,
Mr. Trist would be entitled to receive severance pay equal to
approximately 15 months of his salary, or $170,000, and
Mr. Mistrot would be entitled to receive approximately 5 months
of his salary, or $31,250.
Employment and Severance Agreements. The Company and the
Bank intend to enter into an agreement with Dorothy R. Roper,
the Executive Vice-President and a director of the Company and
Bank (the "Employment Agreement"), under which she will be
employed by the Bank or its successor, FNBC, for a period of
six months following consummation of the Bank Merger and will
receive total salary of $55,000 for such six-month period. The
Company and the Bank also expect to enter into a Severance
Agreement under which, subject to certain conditions, after her
period of employment ends she will be paid as severance
$240,000 in installments over an 18-month period. Under the
Severance Agreement, Mrs. Roper will waive her right to receive
severance pay under the Severance Plan. FNBC has agreed to
honor the Severance Agreement following the effective date of
the Bank Merger.
Release of Personal Guarantees. At the time the Companies
entered into the Plan, the Company was indebted to a third
party lender under a promissory note dated September 30, 1994,
in the original principal amount of $497,549.77 (the "Company
Indebtedness"). All of the directors of the Company and Bank
personally guaranteed payment of the Company Indebtedness, and
it also was secured by a pledge of the Company's shares of Bank
Common Stock. FCC agreed that, if the Company did not pay the
Company Indebtedness before the Effective Date, FCC would pay
such indebtedness in order to effectuate a release of the Bank
Common Stock and other collateral securing such indebtedness,
including the directors' personal guaranties. On June 15,
1995, the Company established a line of credit at FNBC, which
was used in part to pay in full the Company Indebtedness in the
amount of $487,881.26. Accordingly, the personal guarantees of
the directors have been extinguished.
See "The Plan - Interests of Certain Persons."
Selected Financial Data of the Company
The following selected financial data of the Company with
respect to each of the fiscal years in the two-year period
ended December 31, 1994 has been derived from the financial
statements of the Company and should be read in conjunction
with the Company's financial statements included herein, the
notes thereto, and the Company Management's Discussion and
Analysis of Financial Condition and Operations contained
elsewhere herein.
(In Thousands Except Per Share Amounts)
Three Months Years Ended
Ended March 31, December 31,
_________________
1995 1994 1994 1993
________ _________ ________ ________
(Unaudited) (Unaudited)
Statements of Operations Data:
Interest Income $2,947 $2,885 $11,601 $12,525
Net Interest Income 1,899 1,957 7,976 8,706
Provision for Loan Losses _ 150 _ 300
Other Income 444 575 1,707 1,816
Operating Expenses 1,915 1,822 7,624 7,859
Net Income 274 374 1,385 1,467
Net Income Per Share:
Net Income Before Change
in Accounting Principle $12.29 $16.59 $61.52 $66.59
Change in Accounting Principle _ _ _ (1.53)
Minority Interest (0.60) (0.61) (2.34) (2.40)
_______ _________ ________ __________
Net Income $11.69 $15.98 $59.18 $62.66
Cash Dividends Per Share $10.00 $10.00 $15.00 $10.00
Statements of Condition Data:
Total Assets $175,146 175,154 $171,476 $175,790
Securities Available-for-Sale
and Investment Securities 88,507 89,434 86,921 79,862
Loans, Net of Unearned Income 55,146 58,173 58,141 61,685
Total Deposits 156,463 157,482 153,578 158,169
Total Stockholders' Equity 15,068 14,223 14,420 13,845
Selected Ratios:
Return on Average
Assets (Annualized) 0.63% 0.85% 0.81% 0.83%
Return on Average
Equity (Annualized) 7.27% 10.52% 9.25% 10.60%
Net Interest Margin 4.72% 4.89% 5.03% 5.41%
Allowance for Loan Losses
as a Percent of Loans, Net of
Unearned Income at Period-End 4.20% 4.13% 3.98% 3.50%
Average Equity to Average
Assets 8.60% 8.12% 8.71% 7.88%
Dividend Payout 85.54% 62.59% 25.35% 15.96%
Selected Financial Data of the Bank
The following selected financial data of the Bank with
respect to each of the fiscal years in the two-year period
ended December 31, 1994 has been derived from the financial
statements of the Bank and should be read in conjunction with
the Bank's financial statements included herein, the notes
thereto, and the Company Management's Discussion and Analysis
of Financial Condition and Operations contained elsewhere
herein.
(In Thousands Except Per Share Amounts)
Three Months Years Ended
Ended March 31, December 31,
___________________
1995 1994 1994 1993
_________ _________ _________ ________
(Unaudited)(Unaudited)
Statements of Operations Data:
Interest Income $2,947 $2,885 $11,601 $12,525
Net Interest Income 1,908 1,967 8,016 8,754
Provision for Loan Losses - 150 - 300
Other Income 445 576 1,709 1,816
Operating Expenses 1,819 1,834 7,587 7,900
Net Income 377 388 1,493 1,528
Net Income Per Share:
Net Income Before Change
in Accounting Principle $15.08 $15.50 $59.73 $62.56
Change in Accounting Principle - - - (1.45)
_________ __________ _________ _________
Net Income $15.08 $15.50 $59.73 $61.11
Cash Dividends Per Share $10.00 $10.00 $15.80 $16.40
Statements of Condition Data:
Total Assets $174,348 $174,358 $170,684 $174,994
Securities Available-for-Sale
and Investment Securities 88,507 89,434 86,043 79,862
Loans, Net of Unearned
Income 55,146 58,173 58,141 61,685
Total Deposits 156,576 157,635 153,733 158,324
Total Stockholders' Equity 15,243 14,390 15,111 14,003
Selected Ratios:
Return on Average
Assets (Annualized) 0.86% 0.89% 0.87% 0.87%
Return on Average
Equity (Annualized) 9.89% 10.79% 9.88% 10.91%
Net Interest Margin 4.74% 4.92% 5.06% 5.44%
Allowance for Loan Losses
as a Percent of Loans, Net of
Unearned Income at Period-End 4.20% 4.13% 3.98% 3.50%
Average Equity to Average Assets 8.74% 8.25% 8.85% 8.00%
Dividend Payout 66.31% 64.52% 26.45% 26.84%
Selected Financial Data of FCC
The following selected financial data of FCC with respect to
each of the fiscal years in the five-year period ended December
31, 1994 has been derived from the consolidated financial
statements of FCC and should be read in conjunction with the
information concerning FCC which has been incorporated by
reference in this Proxy Statement and Prospectus. Selected
financial data for the years 1992 through 1994 have been
restated to reflect the merger, effective February 17, 1995, of
First Bancshares, Inc. into FCC, which was accounted for as a
pooling-of-interests. Selected financial data for the years
1990 and 1991 would not be materially different if restated.
(In thousands of dollars, except per share data)
Years Ended December 31
____________________________________________________________
1994 1993 1992 1991 1990
______ _______ _______ _______ _______
(Restated) (Restated) (Restated)
Average Balance
Sheet Data:
Total assets $ 6,695,681 $ 6,568,960 $ 5,969,877 $ 4,671,478 $ 4,482,019
Earning assets 6,148,715 6,028,927 5,486,604 4,257,388 4,035,104
Loans and leases* 2,975,045 2,555,754 2,329,899 2,323,018 2,402,541
Securities 3,094,496 3,166,901 2,786,965 1,515,299 1,290,487
Deposits 5,438,314 5,391,832 5,164,378 3,931,612 3,552,578
Long-term debt 89,266 98,244 100,816 101,246 103,033
Stockholders' equity 521,668 486,256 366,786 235,385 239,011
Income Statement Data:
Total interest
income $ 427,790 $ 413,973 $ 419,196 $ 393,922 $ 408,996
Net interest income 271,268 265,620 249,165 191,862 168,021
Provision for loan
losses (11,443) (5,804) 22,720 43,734 47,425
Other income
(exclusive of
securities
transactions) 113,049 105,387 98,338 83,419 73,213
Operating expense 253,659 231,665 213,515 185,963 165,325
Net income 66,762 101,202 76,155 34,029 22,038
(In thousands of dollars, except per share data)
Years Ended December 31
____________________________________________________________
1994 1993 1992 1991 1990
______ _______ _______ _______ _______
(Restated) (Restated) (Restated)
Per Share Data:
Fully diluted earnings
per share $ 2.10 $ 3.11 $ 2.58 $ 1.56 $ .94
Primary earnings
per share 2.15 3.36 2.73 1.56 .94
Cash dividends 1.10 .85 .70 .64 .64
Book value (period-end) 14.95 16.31 13.59 11.38 10.45
High stock price 30.00 32.20 27.86 18.14 12.54
Low stock price 21.75 23.90 16.94 7.20 6.66
KEY RATIOS:
Net income as a percent
of average assets 1.00% 1.54% 1.28% .73% .49%
Net income as a percent
of average total
equity 12.80% 20.81% 20.76% 14.46% 9.22%
Net income as a percent
of average common
equity 14.46% 23.74% 24.53% 14.46% 9.11%
Net interest margin 4.50% 4.46% 4.63% 4.69% 4.37%
(In thousands of dollars, except per share data)
Years Ended December 31
____________________________________________________________
1994 1993 1992 1991 1990
______ _______ _______ _______ _______
(Restated) (Restated) (Restated)
Allowance for loan losses
to loans and leases* 1.65% 2.49% 3.37% 3.11% 2.44%
Leverage ratio 8.07% 7.61% 6.72% 4.87% 4.66%
Dividend payout ratio 51.16% 25.30% 25.64% 41.03% 68.09%
___________________________
*Net of unearned income.
Comparative Per Share Data (Unaudited)
Bank. The following table presents net income, cash dividend and book
value per common share information for FCC and the Bank on an historical,
unaudited pro forma combined and unaudited pro forma equivalent basis.
The unaudited pro forma combined information is based upon the historical
financial condition and results of operations of the companies and
adjustments directly attributable to the proposed Bank Mergers based on
estimates derived from information currently available. They do not
purport to be indicative of the results that would actually have been
obtained if the Bank Mergers had been consummated on the date or for the
periods indicated below, or the results that may be obtained in the future.
Historical
_____________________ Pro Forma Bank
FCC Bank Combined<F1><F2> Equivalent
_________ ___________ __________________ ______________
Primary earnings
per common
share <F3>:
Year ended:
December 31, 1994 $2.15 $59.73 $2.13 $ 86.27
December 31, 1993 3.36 62.56 3.30 133.65
December 31, 1992 2.73 52.36 2.67 108.14
Three months ended
March 31, 1995 $ .33 $15.08 $ .33 $ 13.37
Dividends declared per
common share <F4>:
Years ended:
December 31, 1994 $1.10 $15.80 $1.08 $ 44.55
December 31, 1993 .85 16.40 .83 34.43
December 31, 1992 .70 16.00 .69 28.35
Three months ended
March 31, 1995 $ .30 $10.00 .30 $12.15
Book value per
common share<F5>:
As of March 31, 1995 $16.87 $610.20 $16.81 $680.81
As of
December 31, 1995 $14.95 $579.96 $14.93 $604.67
_________________________
<F1> In accordance with generally accepted accounting principles,
FCC expects to account for the Bank Merger using the pooling-of-
interests method.
<F2> To calculate pro forma combined per share information, it has
been assumed that the number of outstanding shares of FCC common
stock includes shares to be issued by FCC upon consummation of
the Bank Merger. Under the terms of the Plan, the number of
shares of FCC common stock to be delivered will be determined by
reference to the average of the closing sales prices of a share
of FCC common stock for the 10 trading days ending on the last
trading day before the closing date of the Merger. For purposes
of this table, the assumed conversion rate is 40.50 (the Assumed
Conversion Rate) based on the average closing sales prices of a
share of stock for the 10 trading days ended July 27, 1995.
<F3> Pro forma primary earnings per common share was calculated by
dividing the combined net income, adjusted for preferred stock
dividends, of FCC and the Bank during the periods presented by
the weighted average outstanding shares of FCC common stock
during such periods, after adjustment for shares of FCC common
stock assumed to be issued in connection with the Bank Merger.
The Bank adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" in 1993 and reported the
cumulative effect of this accounting change in its 1993
consolidated statement of income. The effect of this change was
a $36,000 decrease in net income for the Bank. This amount is
not considered to be a component of ongoing results and
accordingly has not been included in the historical or pro forma
combined amounts presented. The Bank equivalent data presented
is the product of the pro forma combined per share information
multiplied by the Assumed Conversion Rate.
<F4> Pro forma dividends were calculated by multiplying FCC's and
the Bank's dividend rates by the applicable weighted average
outstanding shares of FCC's and the Bank's common stock. Pro
forma dividends per common share were then calculated by dividing
pro forma total dividends by the weighted average outstanding
shares of FCC common stock during such periods, after adjustment
for shares of FCC common stock assumed to be issued in connection
with the Bank Merger. The Bank equivalent data presented was
calculated by multiplying the historical per share FCC common
stock dividend by the Assumed Conversion Rate.
<F5> Pro forma combined book value per common share was calculated
by dividing the total of FCC's and Bank's common stockholders'
equity by the total shares of FCC common stock outstanding after
adjustment for unearned shares of FCC restricted and treasury
stock and for shares of FCC common stock assumed to be issued in
connection with the Bank Merger. The Bank equivalent data
presented is the product of the pro forma combined per share
information multiplied by the Assumed Conversion Rate.
Company. The following table presents certain net income, cash dividend
and book value per common share information for FCC and the Company on an
historical, unaudited pro forma combined and unaudited pro form equivalent
basis. The unaudited pro forma combined information is based upon the
historical financial condition and results of operations of the Companies
and adjustments directly attributable to the proposed Merger based on
estimates derived from information currently available. They do not purport
to be indicative of the results that would actually have been obtained if
the Merger had been in effect on the date or for the periods indicated
below, or the results that may be obtained in the future.
Historical
_____________________ Pro Forma Bank
FCC Bank Combined<F1><F2> Equivalent
_________ ___________ __________________ ______________
Primary earnings
per common
share <F3>:
Year ended:
December 31, 1994 $2.15 $59.18 $2.13 $ 88.80
December 31, 1993 3.36 64.21 3.30 137.58
December 31, 1992 2.73 53.07 2.67 111.31
Three months ended
March 31, 1995 $ .33 $11.69 $ .33 $ 13.76
Dividends declared per
common share <F4>:
Years ended:
December 31, 1994 $1.10 $15.80 $1.08 $ 45.86
December 31, 1993 .85 10.00 .83 35.44
December 31, 1992 .70 10.04 .68 29.18
Three months ended
March 31, 1995 $ .30 $10.00 .30 $12.51
Book value per
common share<F5>:
As of March 31, 1995 $16.87 $641.79 $16.82 $701.23
As of
December 31, 1995 $14.95 $614.23 $14.94 $622.85
_________________________
<F1> In accordance with generally accepted accounting principles,
FCC expects to account for the Bank Merger using the pooling-of-
interests method.
<F2> To calculate pro forma combined per share information, it has
been assumed that the number of outstanding shares of FCC common
stock includes shares to be issued by FCC upon consummation of
the Merger. Under the terms of the Plan, the number of shares of
FCC common stock to be delivered will be determined by reference
to the average of the closing sales prices of a share of FCC
common stock for the 10 trading days ending on the last trading
day before the closing date of the Merger. For purposes of this
table, the assumed conversion rate is 41.69 (the Assumed
Conversion Rate) based on the average closing sales prices of a
share of stock for the 10 trading days ended July 27, 1995.
<F3> Pro forma primary earnings per common share was calculated by
dividing the combined net income, adjusted for preferred stock
dividends, of FCC and the Company during the periods presented by
the weighted average outstanding shares of FCC common stock
during such periods, after adjustment for shares of FCC common
stock assumed to be issued in connection with the Merger. The
Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" in 1993 and reported the
cumulative effect of this accounting change in its 1993
consolidated statement of income. The effect of this change was
a $36,000 decrease in net income for the Company. This amount is
not considered to be a component of ongoing results and
accordingly has not been included in the historical or pro forma
combined amounts presented. The Company equivalent data
presented is the product of the pro forma combined per share
information multiplied by the Assumed Conversion Rate.
<F4> Pro forma dividends were calculated by multiplying FCC's and
the Company's dividend rates by the applicable weighted average
outstanding shares of FCC and the Company's common stock. Pro
forma dividends per common share were then calculated by dividing
pro forma total dividends by the weighted average outstanding
shares of FCC common stock during such periods, after adjustment
for shares of FCC common stock assumed to be issued in connection
with the Merger. The Company equivalent data presented was
calculated by multiplying the historical per share FCC common
stock dividend by the Assumed Conversion Rate.
<F5> Pro forma combined book value per common share was calculated
by dividing the total of FCC's and Company's common stockholders'
equity by the total shares of FCC common stock outstanding after
adjustment for unearned shares of FCC restricted stock, treasury
stock and for shares of FCC common stock assumed to be issued in
connection with the Merger. The Company equivalent data
presented is the product of the pro forma combined per share
information multiplied by the Assumed Conversation Rate.
In addition to the Plan, FCC has several other merger transactions pending.
There can be no assurance that any or all of these transactions will be
completed. Pro forma information giving effect to all of these
acquisitions is included beginning at page F-1 of this Proxy Statement and
Prospectus.
Market Prices
On May 1, 1995, the day before the public announcement that the Plan had
been entered into, the closing sales price for a share of FCC Common Stock,
as quoted on the NASDAQ National Market, was $27.75. On _________________,
1995, the closing per share sales price for a share of FCC Common Stock was
$______, and if such date had been the Effective Date the Market Value
would have been $__________. No assurance can be given as to the Market
Value
of FCC Common Stock on the Effective Date.
Neither Company nor Bank Common Stock is traded on any exchange, and
there is no established public trading market for the stock. There is,
however, very limited and sporadic trading of Company Common Stock in its
local area. Based on the limited information available to management, only
one sale was effected during the last two fiscal years involving one share
of Company Common Stock sold for a price of $500. There can be no
assurance that such trade was effected on an arms-length basis. The Bank
is not aware of any transaction in Bank Common Stock during the past two
years. See "Information About the Company and the Bank - Market Prices and
Dividends."
<PAGE>
INTRODUCTORY STATEMENT
General
This Proxy Statement and Prospectus is furnished to the
shareholders of Peoples Bancshares, Inc. (the "Company") and Peoples Bank &
Trust Company of St. Bernard (the "Bank") in connection with the
solicitation of proxies on behalf of their respective Boards of Directors
for use at special meetings of shareholders of the Company and the Bank
(each of such meetings being referred to hereafter as the "Meeting") to be
held on the date and at the time and place specified in the accompanying
notices of special meeting of shareholders, or any adjournments thereof.
The Company, the Bank and First Commerce Corporation (collectively,
the "Companies") have each supplied all information included herein with
respect to it and its consolidated subsidiaries. Unless the context
otherwise requires, First Commerce Corporation ("FCC") and its subsidiaries
are collectively referred to herein as "FCC."
Purpose of the Meeting
The purpose of the Meeting is to consider and vote upon (i) in the
case of the Company's shareholders only, a proposal to amend the Articles
of Incorporation of the Company; and (ii) in the case of both the Company's
and Bank's shareholders, a proposal to approve an Agreement and Plan of
Merger between FCC on the one hand, and the Company and the Bank on the
other hand (the "Plan"), pursuant to which, among other things, the Company
will merge into FCC (the "Merger"), the Bank will merge into First National
Bank of Commerce ("FNBC"), FCC's wholly-owned subsidiary (the "Bank
Merger") and each outstanding share of common stock of the Company
("Company Common Stock") and common stock of the Bank ("Bank Common Stock")
not owned by the Company will be converted into a number of shares of
common stock of FCC ("FCC Common Stock") as described under "The Plan -
Conversion of Common Stock."
Shares Entitled to Vote; Quorum; Vote Required
Only holders of record of Company Common Stock and Bank Common
Stock at the close of business on ____________, 1995 (the "Record Date")
are entitled to notice of and to vote at the Meeting. On that date, there
were 23,408 shares of Company Common Stock and 25,000 shares of Bank Common
Stock outstanding, each of which is entitled to one vote on each matter
properly brought before the Meeting. The presence at the Meeting, in
person or by proxy, of the holders of a majority of the outstanding shares
is necessary to constitute a quorum.
The Plan must be approved by the affirmative vote of the holders of
at least 75% of the outstanding Company Common Stock present at the
Company's Meeting and holders of two-thirds of the outstanding Bank Common
Stock. An abstention will have the effect of a vote against the Plan and
will cause a shareholder otherwise entitled to dissenters' rights to
forfeit any claim to such rights. Approval of the Amendment requires the
affirmative vote of at least 75% of the Company's voting power present at
the Meeting. An abstention will have the effect of a vote against the
Amendment. Directors, executive officers and certain principal
shareholders of the Company beneficially owning an aggregate of 13,069
shares, or approximately 55.83% of the outstanding Company Common Stock,
have agreed, subject to certain conditions, to vote in favor of the Plan
and the Amendment at the Company's Meeting. The Company, as the holder of
96.3% of the outstanding Bank Common Stock, has agreed, subject to approval
of the Plan by shareholders of the Company, to vote in favor of the Plan at
the Bank's Meeting.
Louisiana law does not require that shareholders of FCC approve the
Plan.
Solicitation, Voting and Revocation of Proxies
In addition to soliciting proxies by mail, directors, officers and
employees of the Company and the Bank, without receiving additional
compensation therefor, may solicit proxies by telephone and in person.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the
beneficial owners of shares of Company and Bank Common Stock, and the
Company will reimburse such parties for reasonable out-of-pocket expenses
incurred in connection therewith. The cost of soliciting proxies is being
paid by the Company.
The proxies that accompany this Proxy Statement and Prospectus
permit each holder of record of Company Common Stock and Bank Common Stock
on the Record Date to vote on all matters that properly come before the
Meeting. Where a shareholder specifies his choice on the proxy with respect
to the proposal to approve the Plan or the Amendment, the shares
represented by the proxy will be voted in accordance with such
specification. If no such specification is made, the shares will be voted
in favor of the Plan and the Amendment. If a shareholder does not sign and
return a proxy and specify on the proxy an instruction to vote against the
Plan, he will not be able to exercise dissenters' rights unless he attends
the Meeting in person and votes against the Plan and gives written notice
of his dissent from the Plan at or prior to the Meeting. See "Dissenters'
Rights." A proxy may be revoked by (i) giving written notice of revocation
at any time before its exercise to the Secretary of the Company or the
Bank, as the case may be, or (ii) executing and delivering to the Secretary
at any time before its exercise a later dated proxy.
AMENDMENT TO COMPANY'S ARTICLES OF INCORPORATION
General
At the Meeting, the Company's shareholders will be asked to approve
an amendment to the Company's Articles of Incorporation (the "Amendment")
to eliminate in its entirety Article Seventeen thereof ("Article 17").
Article 17 contains provisions described more fully below that, if read
broadly, might impede the effectiveness of the Merger. The Board of
Directors of the Company, therefore, has proposed that it be repealed
effective prior to the vote on the Plan. The Company's Board of Directors
unanimously recommends repeal of Article 17.
Article 17 and Reasons for Repeal
Article 17 provides that no person who owns of record or
beneficially 1/5 or more of the outstanding shares of the Company, nor any
other person who controls, is controlled by, or is under common control
with such person (each an "affiliate") may acquire record or beneficial
ownership of an additional 1/20 of the outstanding shares of the Company
during any 12-month period, unless the consideration per share paid or
given for such additional shares shall be equal to or greater than the
average consideration per share paid or given by such person or persons in
acquiring the shares theretofore owned by such person or persons (the
"Average Consideration"). The provisions of Article 17 do not apply to
certain acquisitions not relevant here. FCC does not own of record any
shares of Company Common Stock. However, all directors of the Company have
executed agreements (the "Insider Commitments") to vote the shares of
Company Common Stock over which they have voting control (except in a
fiduciary capacity) in favor of the Plan and have further agreed not to
vote their shares in favor of any other merger or similar transaction with
another party. Reading Article 17 broadly, it might be contended that, as
a result of the Insider Commitments, FCC should be deemed to be an
affiliate of the directors of the Company. The directors collectively own
more than 1/5 of the Company Common Stock. Although FCC and the directors
of the Company do not believe that FCC is an affiliate or has record or
beneficial ownership of any shares of stock over which the directors have
voting control as a result of the Insider Commitments, the Plan or
otherwise, under a broad reading of Article 17, it might be contended that
the acquisition of Company Common Stock by FCC in the Merger is subject to
Article 17.
As is described elsewhere in this Proxy Statement and Prospectus,
in connection with the Merger, FCC also is purchasing the Partnership
Properties (defined below under "Background and Reasons for the Plans")
from the Partnership. See "The Plan - Background of and Reasons for the
Plan and - Interests of Certain Persons - Real Estate Agreements." All of
the partners of the Partnership are shareholders of the Company. It might
be contended, again based on a broad reading of Article 17, that amounts
paid by FCC for the Partnership Properties should be included in
determining the Average Consideration paid by FCC for shares of Company
Common Stock in the Merger. In that event, the Merger could be deemed to
violate Article 17 because the consideration per share paid or given by FCC
for shares of Company Common Stock acquired in the Merger might not be
equal to or greater than the Average Consideration. However, the
consideration to be received by the Partnership is payable on account of
the sale to FCC of the Partnership Properties and is not being paid on
account of FCC's acquisition of any shares of Company Common Stock. One
purpose of repealing Article 17, therefore, is to remove the contention
that Article 17 may be violated by the Merger as a result of the
contemporaneous purchase by FCC of the Partnership Properties.
Three executive officers of the Company, who are also shareholders,
will be entitled to receive severance payments from FCC or FNBC under
certain circumstances following the Effective Date. See "The Plan -
Interests of Certain Persons - Severance Pay and - Employment and Severance
Agreement." It might be contended, again based on a broad reading of
Article 17, that amounts paid to these executive officers as severance
should be included in determining the Average Consideration paid by FCC for
shares of Company Common Stock in the Merger. Such a reading of Article 17
also could impede the effectiveness of the Merger. However, the severance
benefits payable to these officers, to the extent paid, will be paid by
reason of the loss of employment of the officers and in recognition of the
services performed by such officers for the Company and Bank. Accordingly,
a second purpose of the proposed Amendment is to eliminate the contention
that Article 17 may be violated by the Merger as a result of the severance
benefits that would be payable to certain officers by reason of a loss of
employment following the Merger.
In summary, the purpose of the Amendment is to eliminate Article 17
from the Company's Articles of Incorporation in order to negate the
possible contention that Article 17 is in any way violated by the Merger,
including by FCC's purchase of the Partnership Properties or by the
severance benefits payable to officers of the Company. The Company's Board
recommends adoption of the Amendment.
Required Vote
Under Article Nineteen of the Company's Articles of Incorporation,
approval of the Amendment requires the affirmative vote of at least 75% of
the Company's voting power present at the Meeting. Directors and executive
officers of the Company, who have indicated they will vote in favor of the
Plan and Amendment, own 55.83% of the outstanding shares.
<PAGE>
THE PLAN
General
The following brief description does not purport to be complete and
is qualified in its entirety by reference to the Plan, which is
incorporated by reference herein. See "Available Information."
Background of and Reasons for the Plan
During the first half of 1994, the Company received a preliminary
contact from a larger financial institution (the "First Interested Party")
inquiring whether the Company wished to enter into discussions concerning a
possible acquisition of the Company. No indication was given of the price
shareholders of the Company might receive in such a transaction and the
Company did not enter into discussions at that time. In September 1994,
the First Interested Party again informally expressed an interest in
entering into merger discussions. At a joint meeting of the Boards of the
Company and Bank held on October 11, 1994, the Boards considered this
expression of interest and determined to pursue discussions with the First
Interested Party and to retain a financial advisor to assist the Boards in
evaluating whether such a transaction would be in the best interest of
their shareholders. The Company and Bank then retained Chaffe to act as
their financial advisor. Chaffe was selected on the basis of its
experience and expertise in providing investment banking services to
financial institutions and its reputation in the banking and investment
communities. See "- Opinion of Investment Banker."
The First Interested Party was advised that the Bank leases from
Peoples Properties Limited Partnership (the "Partnership") three of the
Bank's branch locations (the "Partnership Properties"), and that the
Partnership desired to sell the Partnership Properties in connection with
any merger or similar transaction. The Partnership is a limited
partnership whose partners consist of all the current directors of the
Company and Bank, plus the spouses of two former directors who are
deceased. The Partnership's partners collectively have beneficial
ownership of approximately 63.14% of the outstanding shares of the
Company's Common Stock. The Partnership reached its decision to attempt to
sell the Partnership Properties at the same time that the Company and Bank
determined to enter into preliminary discussions. See "- Interests of
Certain Persons - Real Estate Agreements."
After discussions with the First Interested Party had begun, the
Company received an expression of interest from a second interested party,
FCC, regarding its acquiring the Company and Bank. At a joint meeting of
the Boards of the Company and Bank held on December 8, 1994, the Boards
determined, in light of this second expression of interest, that it would
be in the best interest of their shareholders to permit other financial
institutions (in addition to FCC and the First Interested Party) the
opportunity to indicate the level of interest such other institutions might
have in acquiring the Company before determining what actions to take with
respect to the indications of interest received from FCC and the First
Interested Party.
Chaffe discussed with six institutions whether they wished to
receive information concerning the Company and Bank for purposes of
submitting a non-binding, preliminary indication of interest in acquiring
the Company and Bank. In December 1994 and January 1995, Chaffe circulated
financial and other information to the five financial institutions
(including FCC and the First Interested Party) that expressed an interest
in receiving such information. Chaffe also advised those interested
institutions of the Partnership's willingness to sell the Partnership
Properties and furnished information provided by the Partnership relating
to those properties. In this regard, it was the belief of the Company,
Bank and Partnership that the interested financial institutions would want
to purchase the Partnership Properties in connection with any acquisition
of the Company and Bank. The Partnership contemplated that the Partnership
Properties would be sold to the acquiring financial institution at fair
value in accordance with an appraisal performed by an independent appraiser
satisfactory to the Partnership and the interested parties.
Four of the five institutions that received information from
Chaffe, including the First Interested Party and FCC, submitted
non-binding, preliminary indications of interest and were then permitted to
perform on-site due diligence at the Bank. These due diligence reviews
took place during January and February 1995. At the request of the Boards
of the Company and Bank, Chaffe invited each of these four interested
parties to submit a final proposal relating to a merger or similar
transaction with the Company and by February 27, 1995, two institutions,
FCC and a third interested party (the "Third Interested Party"), had
submitted proposals. Both proposals contemplated the acquisition of the
Partnership Properties. The First Interested Party declined to submit a
new proposal, but expressed a willingness to continue discussions on an
exclusive basis.
The Boards of the Company and Bank met at a joint meeting on
March 9, 1995, to consider the proposals of FCC and the Third Interested
Party. At the meeting, Chaffe provided a detailed analysis of each
proposal individually, in relation to the other proposal, in comparison to
remaining independent and in relation to other recent bank and bank holding
company merger transactions. Based on Chaffe's analyses and
recommendations and other considerations, the Boards of the Company and
Bank directed Chaffe and legal counsel for the Company and Bank to enter
into negotiations with FCC. During the negotiations, another financial
institution submitted an indication of interest and was permitted to
perform on-site due diligence at the Bank. Eventually, however, this
financial institution declined to make a formal offer, except at a value
less than that proposed by FCC.
While negotiations with FCC continued, the Third Interested Party
increased its offer. At a joint meeting of the Boards of the Company and
Bank held on April 6, 1995, the Boards considered this increased offer and
Chaffe presented an analysis of the increased offer and the Third
Interested Party in comparison to FCC and its proposal. Based on Chaffe's
recommendations and other considerations, the Boards instructed Chaffe to
ask FCC and the Third Interested Party whether they would improve their
proposals and to report to the Boards at a meeting scheduled for April 13,
1995. At that meeting, Chaffe made a presentation comparing the
transactions proposed by both FCC and the Third Interested Party. Chaffe
reported that FCC had increased its offer; that the value of the shares
being offered by FCC and the Third Interested Party were substantially the
same; but that the higher dividends paid by FCC in comparison to the Third
Interested Party made FCC's offer more favorable for the shareholders of
the Company and Bank. Chaffe also reviewed the structure of FCC's proposal,
which provided for a total Enterprise Consideration of $33.3 million for
the Company, the Bank and the Partnership Properties. FCC conditioned its
offer on its ability also to acquire the Partnership Properties. Of the
total Enterprise Consideration of $33.3 million, initially $30,622,000 (the
"Initial Aggregate Consideration") was allocated for the acquisition of the
Company and Bank and $2,678,000 was allocated for the purchase of the
Partnership Properties. This allocation of the total Enterprise
Consideration was based on an appraised value of the Partnership Properties
of $2,678,000. See "- Interests of Certain Persons - Real Estate
Agreements." The Initial Aggregate Consideration to be paid for the Bank
and Company consisting of shares of FCC Common Stock valued at $30,622,000
was allocated between, on the one hand, the shareholders of the Company
and, on the other hand, the shareholders of the Bank other than the
Company, based on the opinion of Chaffe, which made such allocation based
primarily on the relative number of shares of Bank Common Stock owned by
the Company and such other shareholders of the Bank, respectively.
Finally, at the meeting Chaffe issued its oral opinion subsequently
confirmed in writing (described more fully below) to the effect that (i)
the Initial Aggregate Consideration is fair to the shareholders of the
Company and Bank, from a financial point of view; (ii) the allocation of
the Initial Aggregate Consideration between the shareholders of the Company
and the shareholders of the Bank is fair to the shareholders of the Company
and Bank from a financial point of view; and (iii) the division of the
Enterprise Consideration of $33.3 million between, on the one hand, the
shareholders of the Company and Bank and, on the other hand, the
Partnership, is fair to the respective shareholders of the Company and
Bank, from a financial point of view. Based on the presentation and
recommendations of Chaffe and various other factors, the Boards of the
Company and Bank authorized entering into the Plan with FCC, and the Plan
was executed as of April 27, 1995.
Subsequently, the appraisal on which the allocation of the
Enterprise Consideration was based was modified and the amount to be paid
for the Partnership Properties reduced to $2,504,000. See "Interests of
Certain Persons - Real Estate Agreement." As a result of this reduction,
the Aggregate Consideration to be paid to the shareholders of the Company
and the Bank for the Company Common Stock and Bank Common Stock increased
to $30,796,000. On July 27, 1995, Chaffe updated and reissued its written
opinion to the effect that (i) the Aggregate Consideration is fair to the
shareholders of the Company and Bank from a financial point of view; (ii)
the allocation of the Aggregate Consideration between the shareholders of
the Company and the shareholders of the Bank is fair to the shareholders of
the Company and Bank from a financial point of view; and (iii) the division
of the Enterprise Consideration of $33.3 million between, on the one hand,
the shareholders of the Company and Bank and, on the other hand, the
Partnership is fair to the respective shareholders of the Company and Bank,
from a financial point of view. On July ____, 1995, the parties executed
an Amended and Restated Agreement and Plan of Merger reflecting this
increase in the Aggregate Consideration.
The Boards of Directors of the Company and the Bank believe that
approval of the Plan is in the best interests of the Company, the Bank and
their respective shareholders. Among the factors considered by the Boards
in recommending the Plan, in addition to the financial terms, was the
likelihood that the Bank would continue to face significant additional
competitive pressures in its market area from larger banking and other
financial institutions capable of offering a broad array of financial
services. Given the Bank's relatively small size and market position, the
Boards believe that this increasing competition could adversely impact the
performance of the Bank. Other factors considered by the Boards were the
liquidity that would be afforded to the Company's and Bank's shareholders
by the ownership of a publicly traded stock and a review of the business
and prospects of FCC.
The financial and other terms of the Plan were arrived at through
arm's length negotiations between representatives of the Companies.
Determination of the consideration to be received by the Company's and
Bank's shareholders in exchange for their stock was based upon various
factors considered by the Boards of Directors of the parties, including
primarily the comparative financial condition, historical results of
operations, current business and future prospects of the Companies, the
market price, dividends, and historical earnings per share of the common
stock of the Companies, and the desirability of combining the financial and
managerial resources of FCC and the Company to pursue available consumer
and commercial banking business in the market area served by the Bank.
The Boards of Directors of the Company and the Bank each
unanimously approved the Plan and recommends that its shareholders vote FOR
approval of the Plan. For information concerning the interest of certain
directors voting for the Plan, see "- Interests of Certain Persons."
Opinion of Investment Banker
General. Pursuant to an engagement letter dated as of July ____,
1995, the Company retained Chaffe & Associates, Inc. ("Chaffe") to provide
an opinion as to the fairness of the transactions contemplated by the Plan
("Proxy Statement Opinion"). Pursuant to this engagement letter and
earlier engagement letters dated as of November 22, 1994 and April 20,
1995, both as amended as of April 28, 1995, Chaffe at the request of the
Board of Directors of the Company acted as the Company's and Bank's
financial advisor in connection with the Plan, including providing certain
analyses of the financial terms of the Plan and providing opinions as to
fairness dated April 28, 1995 (the "April Opinion") and July 27, 1995 (the
"July Opinion"). Chaffe is a recognized investment banking firm and is
experienced in the securities industry, in investment analysis and
appraisal, and in related corporate finance and investment banking
activities, including mergers and acquisitions, corporate
recapitalizations, and valuations for estate, corporate and other purposes.
It is frequently retained to perform similar services for other banks and
bank holding companies. The Company selected Chaffe as its and the Bank's
financial advisor on the basis of Chaffe's experience and expertise in
transactions similar to the Mergers and Chaffe's reputation in the banking
and investment communities.
Scope of Engagement. In connection with Chaffe's engagement to act
as the Company's and the Bank's financial advisor with respect to the Plan,
the Company and the Bank instructed Chaffe to evaluate the fairness to the
Company and Bank shareholders, from a financial point of view, of the
Aggregate Consideration to be paid pursuant to the provisions of the Plan
for the shares of the Company Common Stock and Bank Common Stock in the
Mergers and of the allocation of the Aggregate Consideration between the
Company and the Bank, and to conduct such investigations as Chaffe deemed
appropriate for such purposes. The Company and the Bank did not place any
limitations on the scope or manner of Chaffe's investigation and review.
The consideration to be received by the Company's and the Bank's
shareholders in the Mergers was determined by the Company, the Bank and FCC
in their negotiations.
Chaffe delivered an oral opinion to the Company's Board and Bank's
Board on April 13, 1995, subsequently confirmed in writing in the April
Opinion, to the effect that, based upon and subject to the assumptions
made, the factors considered, the review undertaken and the limitations
stated in its opinions and such other matters as Chaffe considered
relevant, as of the date of such opinions, the Initial Aggregate
Consideration to be received in the Mergers by the Company's and Bank's
shareholders for their shares of the Company Common Stock and Bank Common
Stock, respectively, was fair to each, from a financial point of view, and
that the allocation of the Initial Aggregate Consideration between the
shareholders of the Company and the shareholders of Bank was fair to
shareholders of each of those financial institutions, from a financial
point of view. Chaffe supplemented its April Opinion with the July
Opinion, which concluded on the same basis that the Aggregate Consideration
to be received in the Mergers by the Company's and Bank's shareholders for
their shares of Company Common Stock and Bank Common Stock, respectively,
was fair to each, from a financial point of view, and that the allocation
of the Aggregate Consideration between the shareholders of the Company and
the shareholders of the Bank was fair to the shareholders of each
institution from a financial point of view. The Proxy Statement Opinion is
identical to the July Opinion other than for (i) references to Chaffe's
having considered materials bearing upon the financial and operating
condition of the Company, the Bank and FCC subsequent in time to those to
which reference is made in the July Opinion and (ii) the absence therefrom
of the opinion to the effect that the allocation of the Enterprise
Consideration among the shareholders of the Company and the Bank, on the
one hand, and the Partnership, on the other hand, is fair to each of them.
The full text of Chaffe's Proxy Statement Opinion is attached hereto as an
Appendix and is incorporated by reference. The description of the Proxy
Statement Opinion set forth herein is qualified in its entirety by
reference to the Appendix. The Company, and Bank, shareholders are urged
to read the Proxy Statement Opinion in its entirety for a description of
the procedures followed, assumptions made, matters considered and
limitations on the review undertaken, by Chaffe. Chaffe's opinion relates
only to the consideration to be received by the Company's and the Bank's
shareholders, from a financial point of view, and does not constitute a
recommendation to any Company or Bank shareholder as to how such
shareholder should vote at the Special Meeting.
Materials Reviewed. In connection with rendering its opinions,
Chaffe reviewed the materials indicated therein. FCC did not allow Chaffe
to review any information other than publicly-available information.
Chaffe also reviewed statistical and financial information derived from
various statistical services for Company, Bank, FCC and comparable
companies, as well as certain publicly available information and analyses
relating to them.
Analysis of Selected Financial Data. In preparation of both the
July Opinion and the Proxy Statement Opinion, Chaffe analyzed the
historical performance of the Company, the Bank and FCC, and considered the
current financial condition, operations and prospects for the Company, the
Bank and FCC. Chaffe reviewed certain historical market information for
Company Common Stock and Bank Common Stock, and noted that no independent
market exists for either shares. Chaffe analyzed information and data
provided by the management of the Company and the Bank and by management of
FCC concerning the loans, other real estate, securities portfolio, fixed
assets and operations of each respectively, although Chaffe did not perform
an independent review of the Company's, the Bank's or FCC's assets or
liabilities. Chaffe relied solely on the Company, the Bank and FCC for
information as to the adequacy of their respective loan loss allowances and
the values of other real estate owned. Chaffe relied solely on FCC for
information as to the value of its securities portfolio.
At July ___, 1995, Chaffe noted strengths of the Company, including
its consistent record of profitability, strong equity (with the ratio of
tangible equity to total assets as of March 31, 1995 of 8.26%), and low
non-performing assets (with the ratio of non-performing assets to total
assets as of March 31, 1995 of 0.75%). Chaffe also noted certain
weaknesses of the Company, including its low earnings level (with a return
on assets in 1994 of 0.80% and a return on equity in 1994 of 9.87%), high
overhead expense (with the ratio of non-interest expenses to average assets
of approximately 4.51% annualized for the first quarter of 1995), and low
and declining loan level (with the ratio of net loans to total assets of
30.32% as of March 31, 1995).
Also, Chaffe analyzed the historical performance of FCC and
considered the current financial condition, operations and prospects for
FCC. At July 27, 1995, Chaffe noted that, as of June 30, 1995, the
return on average assets, annualized for 1995, was 1.02%, and the return on
average equity, also annualized for 1995, was 12.67%. Excluding securities
transactions, net operating income on average assets annualized for 1995,
was 1.27%, and the return on average equity, also annualized for 1995, was
15.85%. FCC's ratio of tangible equity to total assets as of the end of
March 1995 was 8.21%, and the ratio of non-performing assets to total
assets as of the end of June 1995 was approximately .48%.
Analysis of Transaction. In connection with rendering its
opinions, and preparing its various written and oral presentations to the
Company's Board and the Bank's Board, Chaffe performed a variety of
financial analyses. Chaffe compared certain financial and stock market
data for peer groups of bank holding companies whose securities are
publicly traded; reviewed the financial terms of business combinations in
the commercial banking industry specifically and other industries
generally; considered a number of valuation methodologies, including among
others, those that incorporate book value, deposit base premiums and
capitalization of earnings; and performed such other studies and analyses
as Chaffe deemed appropriate for purposes of its opinions. Chaffe's
opinions were necessarily based upon market, economic and other conditions
as they existed on, and could be evaluated as of, the respective dates of
its opinions.
Chaffe noted that an essential element of the transaction, as
proposed by FCC, is the acquisition by FCC of 100% of the ownership in the
Company and the Bank, as well as ownership of the Partnership Properties
which the Partnership owns and leases to the Bank. Chaffe noted further
that the total consideration proposed by FCC for the acquisition of the
Company and Bank and the purchase of the Partnership Properties, is an
aggregate amount of $33,300,000 (the "Enterprise Consideration"). The
Partnership has agreed to sell the Partnership Properties to FCC at
a price of $2,504,000 (the "Appraised Value"), which
was based upon the Appraisal Documents. See "- Background of and Reasons
for the Plan and Interests of Certain Persons - Real Estate Agreements."
Chaffe noted that the payment of this consideration will be effected
through the assumption by FCC of $2,504,000 of the debt owed by the
Partnership to ArgentBank, under a note dated March 31, 1994 and related
documents. Further, it is Chaffe's understanding, relied upon in its
opinion, that the Partnership will, through the necessary payments, reduce
the principal balance of this indebtedness to $2,504,000 prior to the
consummation of the transactions contemplated herein.
In its review, Chaffe relied, without independent verification,
upon the accuracy and completeness of the historical financial information,
capital plans and other information reviewed by it for purposes of its
opinions. Chaffe expressed no opinion on the tax consequences of the
proposed transaction or the effect of any tax consequences on the value
received by the holders of Company Common Stock or Bank Common Stock.
The following is a summary of selected analyses performed by Chaffe
in connection with the opinions. The summary set forth below does not
purport to be a complete description of the analyses performed in this
regard, but does include all material analyses.
Analysis of Selected Merger Transactions. In connection with the
July Opinion, Chaffe performed an analysis of premiums paid for selected
banks with characteristics comparable to the Company and the Bank.
Comparable transactions were considered to be transactions in the United
States for the period July 26, 1994 through July 26, 1995, in which the
sellers had total assets of between $100 million and $300 million, a
tangible equity ratio between 6.5% and 11.0%, a return on average assets
between 0.5% and 1.25%, and non-performing assets less than 1.5% of total
assets. In addition, Chaffe performed an analysis of premiums paid for a
similar group of selected banks, limited in geographic area to sixteen
states in the southern United States. Finally, Chaffe performed an
analysis of premiums paid for substantially all Louisiana banks sold during
the period July 26, 1994 through July 26, 1995. With respect to each of
these groups of transactions and the proposed Mergers, Chaffe compared the
prices to be received by the peer groups as a multiple of its tangible
equity, its earnings per share for the four quarters prior to such a
transaction, its premium over tangible equity to core deposits, and its
total assets. The following table summarizes certain results of this
analysis:
U.S. Southern Louisiana
FCC/Company Peer Group Peer Group Peer Group
____________ ___________ ___________ ____________
Seller Total Assets ($000's)
- Mean $149,781 $158,805 $538,125
- Median $173,824 $123,925 $115,300 $109,991
Seller Tangible Equity 8.65% 8.31% 8.74% 8.45%
Seller Year-To-Date Return on
Average Assets 0.77% 1.07% 1.08% 1.29%
Seller Year-To-Date Return on
Average Equity 8.94% 12.16% 12.16% 16.00%
Seller Non-Performing
Assets/Assets 0.79% 0.26% 0.24% 0.73%
Price/Tangible Equity 2.05x 1.96x 1.97x 2.18x
Price/4-Quarter Earnings Per
Shares* 22.53x 16.40x 19.46x 13.22x
Price-Tangible Equity/
Core Deposits 10.68% 9.36% 12.19% 11.79%
Price/Assets 17.72% 16.30% 18.35% 18.59%
* The Company's earnings include minority earnings, adjusted by
non-recurring merger-related expenses.
In connection with the Proxy Statement Opinion, Chaffe performed an
additional analysis of premiums paid for selected banks with
characteristics comparable to the Company and the Bank. Each of the above
described peer groups was updated though August 2, 1995. With respect to
each of these groups of transactions and the proposed Mergers, Chaffe
compared the prices to be received by the peer groups in the same manner as
described above, and found results substantially similar to those shown
above.
Conclusions based on these analyses are not mathematical.
Accordingly, an analysis of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and
operating characteristics of the companies, as well as other factors that
affect the public trading value or the acquisition value of the companies
to which the Company and the Bank are being compared.
Discounted Cash Flow Analysis. Using discounted cash flow
analysis, Chaffe calculated the present value of the future stream of
after-tax cash flows that the Company could produce in the future. Chaffe
estimated the cash flow stream through year 2001 and a terminal value after
year 2001, based on information from management of the Company, and then
discounted them, using an estimated required rate of return for the Company
of 12.3%. Additional cash flow analyses were performed at the time of the
Proxy Statement Opinion, using a methodology and discount rate similar to
the previously described cash flow analysis, and found substantially
similar results to those previously found.
Analysis of Allocation of the Aggregate Consideration. Chaffe
examined the proposed allocation of the Aggregate Consideration between
shareholders of the Company and the Bank. Although the Company has certain
assets and liabilities beyond those of the Bank, Chaffe believes that there
is no material value or debt belonging to the Company that would alter the
split of the Aggregate Consideration. The allocation takes into account
the treasury stock held by the Company, and it is this factor which causes
the difference in the proposed exchange ratio for the Company Common Stock
and Bank Common Stock.
Certain Limitations. In arriving at its fairness opinions, Chaffe
considered the analyses outlined above. Chaffe did not rely on any single
analysis, but relied on a combination of factors derived from all of the
analytical procedures employed. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Chaffe believes that the summary set forth above and
Chaffe's analysis must be considered as a whole and that selecting portions
of its analyses, without considering all of its analyses, creates an
incomplete view of the process underlying Chaffe's opinions.
The analyses performed by Chaffe are not necessarily indicative of
actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. Additionally, analyses
relating to the value of businesses do not purport to be appraisals or
necessarily reflect the prices at which businesses actually may be sold.
The fact that any specific analysis has been referred to in the summary
above is not meant to indicate that such analysis was given greater weight
than any other analysis.
Compensation. Prior to its retention in November 1994 to act as
the Company's financial advisor, Chaffe had provided no services to the
Company. Neither Chaffe nor any of its officers or employees has any
interest in the Common Stocks of the Company, the Bank or FCC.
The Company has paid Chaffe approximately $213,338.95 in fees
plus out-of-pocket expenses for its services, including its services in
rendering the Proxy Statement Opinion. For any other services requested of
Chaffe by the Company, the Company has agreed to pay Chaffe on an hourly
basis. The fees received by Chaffe in connection with its services to the
Company were not dependent or contingent upon the occurrence or lack
thereof of any transaction.
The Company has agreed to indemnify and hold harmless Chaffe, its
subsidiaries and affiliates, and its officers, directors, shareholders,
employees, attorneys, agents and representatives, successors and assigns of
each of the foregoing parties from and against any and all damage, loss,
cost, expense, obligation, claim or liability, including attorney fees and
expenses, arising directly or indirectly, from, or in any way related to,
the opinions or any other services performed by Chaffe, provided that
Chaffe and its officers, directors, employees, attorneys, agents and
representatives have not been negligent or guilty of reckless or willful
misconduct in connection with the opinion, or such services.
Conversion of Common Stock
Shareholders of the Company and the Bank will receive an aggregate
number of shares of FCC Common Stock, assuming no fractional shares or
perfected dissenters' rights, equal to $30.796 million less the Deductible
Amount as defined below ("Aggregate Consideration"), divided by the average
of the closing sales prices of a share of FCC Common Stock on the NASDAQ
National Market for the ten business days ending on the day before the date
the Plan becomes effective ("Market Value"). The term "Deductible Amount"
means the excess over $200,000 of the Company's and Bank's aggregate legal,
accounting, investment banking, printing and mailing fees and costs from
January 1, 1994, through the date the Plan becomes effective ("Effective
Date") related to the prospective sale of the Company and the Bank, the
process leading to the execution of the Plan, and the negotiation,
implementation and consummation of the Plan ("Transaction Costs"), other
than (i) any such fees and costs that had been accrued on or before
December 31, 1994, and (ii) any such fees and costs, up to but not
exceeding $300,000, that are accrued and paid at any time from January 1,
1995 through the date that is 30 days prior to the date set for
consummation of the Plan.
Each share of Company Common Stock outstanding on the Effective
Date will be converted into a number of shares of FCC Common Stock equal to
the quotient of (a) 96.33% of the Aggregate Consideration divided by the
Market Value, divided by (b) the number of shares of Company Common Stock
outstanding on the Effective Date. Each share of Bank Common Stock
outstanding on the Effective Date will be converted into a number of shares
of FCC Common Stock equal to the quotient of (a) 3.67% of the Aggregate
Consideration divided by the Market Value, divided by (b) the number of
shares of Bank Common Stock outstanding on the Effective Date other than
shares owned by the Company.
The following table provides examples of the number of shares of
FCC Common Stock into which each share of Company and Bank Common Stock
would be converted on the Effective Date, assuming that on such date the
Market Value is as specified below, there is no change in the number of
outstanding shares of Company Common Stock or Bank Common Stock from the
number on the date hereof, and there is no Deductible Amount. As of the
date hereof, it is not expected that Transaction Costs will result in a
Deductible Amount but there can be no assurance to this effect.
Assumed Market Number of FCC Number of FCC
Value of Shares Per Shares Per
FCC Common Stock Company Share Bank Share
__________________ __________________ ______________
$24 52.805641 51.298711
26 48.743669 47.352656
28 45.261978 43.970324
30 42.244513 41.038969
32 39.604230 38.474033
34 37.274570 36.210855
On ____________, 1995, the actual closing sales price for a share of FCC
Common Stock was $________ and, if such date had been the Effective Date
the Market Value would have been $________.
Shareholders of the Company who perfect dissenters' rights will not
receive FCC Common Stock but instead will be entitled to receive the "fair
cash value" of their shares as determined under Section 131 of the
Louisiana Business Corporation Law (the "LBCL"). Shareholders of the Bank
will not have dissenters' rights. See "Dissenters' Rights."
In lieu of issuing any fractional share of FCC Common Stock, each
shareholder of the Company or Bank who would otherwise be entitled thereto
will receive a cash payment (without interest) equal to such fractional
share multiplied by the Market Value.
For information regarding restrictions on the transfer of FCC Common
Stock received pursuant to the Plan applicable to certain of the Company's
and Bank's shareholders, see "- Status under Federal Securities Laws;
Certain Restrictions on Resales."
Effective Date
A Certificate of Merger respecting the Merger will be filed for
recordation with the Secretary of State of Louisiana as soon as practicable
after shareholder and regulatory approval is obtained and all other
conditions to the consummation of the Plan have been satisfied or waived,
and the Merger will be effective at the date and time specified in a
certificate issued by the Secretary of State. It is intended that the Bank
Merger will be effective on the same day. The Companies are not able to
predict the effective date of the Mergers, and no assurance can be given
that the transactions contemplated by the Plan will be effected at any time
or at all. See "- Conditions."
Exchange of Certificates
On the Effective Date, each Company and each Bank shareholder will cease
to have any rights as a shareholder of the Company or the Bank and his sole
rights will pertain to the shares of FCC Common Stock into which his shares
of Company or Bank Common Stock have been converted pursuant to the Plan,
except for any such shareholder who exercises dissenters' rights and except
for the right to receive cash for any fractional shares. See "Dissenters'
Rights."
Upon consummation of the Plan, a letter of transmittal, together with
instructions for the exchange of certificates representing shares of
Company or Bank Common Stock for certificates representing shares of FCC
Common Stock will be mailed to each person who was a shareholder of record
of the Company or the Bank on the Effective Date. Shareholders are
requested not to send in their stock certificates until they have received
a letter of transmittal and further written instructions.
After the Effective Date and until surrendered, certificates
representing Company or Bank Common Stock will be deemed for all purposes,
other than the payment of dividends or other distributions, if any, in
respect of FCC Common Stock, to represent the number of whole shares of FCC
Common Stock into which such shares of Company or Bank Common Stock have
been converted. FCC, at its option, may decline to pay former shareholders
of the Company or the Bank who become holders of FCC Common Stock pursuant
to the Plan any dividends or other distributions that may have become
payable to holders of record of FCC Common Stock following the Effective
Date until they have surrendered their certificates for Company and Bank
Common Stock. Any dividends not paid after one year from the date of
payment will revert in ownership to FCC, and FCC will have no further
obligation to pay such dividends.
Company or Bank shareholders who cannot locate their certificates are
urged to contact promptly Dorothy R. Roper, 1615 Judge Perez, Chalmette,
Louisiana 70043-4582, telephone number (504) 279-5211. A new certificate
will be issued to replace a missing certificate only upon execution by the
shareholder of an affidavit certifying that his or her certificate cannot
be located and an agreement to indemnify the Company, FCC and certain other
persons against any claim that may be made against any of them by the
holder of the certificate alleged to have been missing. The Company or FCC
may also require the shareholder to post a bond in such sum as is
sufficient to support the shareholder's indemnity agreement.
Conditions
In addition to Company and Bank shareholder approval, consummation of
the Plan will require the approvals of the Federal Reserve Board and the
United States Comptroller of the Currency. FCC has filed applications
seeking the required approvals and expects to receive them by September,
1995; however, there can be no assurance that the approvals will be
obtained by that time or at all.
The obligations of the parties to consummate the transactions
contemplated by the Plan are also subject to a number of other conditions
set forth in the Plan, including, among others, (i) the receipt of an
opinion of Arthur Andersen LLP as to certain tax aspects of the Mergers,
(ii) the absence of a material adverse change in the financial condition,
results of operations, business or prospects of the other party, and (iii)
other conditions customary for transactions of this sort. The obligation
of FCC to consummate the transactions is also conditioned upon, among other
things, (i) assurance that FCC is permitted to account for the transactions
as poolings-of-interests and (ii) the consummation of the real estate
agreements referred to below under "Interests of Certain Persons."
The Companies intend to consummate the Plan as soon as practicable after
all of the conditions to the Plan have been met or waived; however, there
can be no assurance that the conditions will be satisfied.
Conduct of Business Prior to the Effective Date
The Company and the Bank have each agreed that prior to the Effective
Date it will conduct its business only in the ordinary course consistent
with past practices. In addition, without the prior written consent of the
chief executive officer of FCC or his duly authorized designee, and except
as otherwise provided in the Plan, the Company and the Bank have each
agreed that it will not, among other things, (a) declare or pay any
dividend other than as described below, (b) enter into or modify any
agreement pertaining to compensation arrangements with its present or
former directors, officers or employees or increase by more than 3% the
compensation of such persons whose annual compensation would, following
such increase, exceed $30,000; (c) engage in various banking or other
business activities except within certain limits specified in the Plan; or
(d) take certain actions related to any possible business combination
involving the Company or the Bank, other than as contemplated by the Plan.
The Plan permits the Company to pay a regular dividend payable in or
after June 1995 at the rate of $5.00 per share of Company Common Stock,
and, if the Effective Date is after December 31, 1995, a regular dividend
payable in January 1996 at the rate of $10.00 per share of Company Common
Stock. The Bank is also permitted to pay to its shareholders such
dividends as are necessary to provide the Company with the funds required
to pay (i) its operating and business expenses not materially exceeding
$25,000 per calendar year, (ii) expenses relating to the Plan, (iii) any
advancement of expenses or indemnification permitted by the Company's
Articles of Incorporation or Bylaws or the Bank's Bylaws, (iv) any
permitted dividend by the Company (plus dividends payable by the Bank to
other shareholders of the Bank on account of such dividends paid to the
Company), and (v) the Company's indebtedness to an unaffiliated bank in the
principal amount of approximately $498,000, plus interest.
The Company and the Bank have also agreed:
(a) Until the Plan terminates, neither the Company nor the Bank
will, without the prior consent of FCC's chief executive officer or his
designee, directly or indirectly, solicit, initiate or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any takeover
proposal (and in no event will any such information be supplied except
pursuant to a confidentiality agreement), and each of them will instruct
its officers, directors, agents and affiliates ("Representatives") not to
do any of the above, and will notify FCC immediately if any such inquiries
or proposals are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated with, it or
any of its Representatives; provided that this covenant shall not prohibit
any Company or Bank director from taking any action that in the written
opinion of counsel is required by law to discharge his or her fiduciary
duties to the Company or Bank and their respective shareholders.
(b) Neither the Company's nor the Bank's Board nor any committee
thereof shall (i) withdraw, modify, or propose to withdraw or modify, the
approval or recommendation to shareholders of the Plan, or (ii) approve,
recommend, or propose to recommend any takeover proposal with respect to
the Company or Bank, except in any such case such action as is required in
the written opinion of counsel to discharge fiduciary duties to the
Company's shareholders or Bank's shareholders, or (iii) modify, waive or
release any party from, or fail to enforce any provision of, any
confidentiality agreement between the Company or Bank and any prospective
acquiror.
Waiver, Amendment and Termination
The Plan provides that the parties may waive in writing any of the
conditions to their respective obligations to consummate the Plan other
than the receipt of necessary regulatory and shareholder approvals.
The Plan, including all related agreements, may be amended or modified
at any time, before or after its approval by the shareholders of the
Company or the Bank, by mutual agreement; provided that any amendment made
after shareholder approval may not alter the amount or type of shares into
which the Company's or Bank's Common Stock will be converted or alter any
term or condition of the Plan in a manner that would adversely affect any
shareholder of the Company or the Bank. Additionally, the Plan may be
amended at any time by the sole action of the chief executive officers of
the Companies to correct typographical errors or other misstatements which
are not material to the substance of the transactions contemplated by the
Plan.
The Plan may be terminated at any time prior to the Effective Date
by mutual consent or by either party (i) in the event of a material breach
by the other of them of any representation, warranty or covenant contained
in the Plan which cannot be cured by the earlier of 30 days after written
notice of such breach or March 31, 1996; or (ii) if by March 31, 1996 all
conditions to consummating the Mergers have not been met or waived, cannot
be met, or the Mergers have not occurred. The Plan may be terminated by
FCC if (i) shareholders of the Company entitled to dissenters rights would
have been entitled to receive as much as 9% of the total number of shares
of FCC Common Stock issuable pursuant to the Plan; (ii) the Board of
Directors of the Company or the Bank (A) withdraws, modifies or changes its
recommendation to its shareholders regarding the Plan or shall have
resolved to do any of the foregoing, (B) recommends to its shareholders (a)
any merger, consolidation, share exchange, business combination or other
similar transaction (other than transactions contemplated by the Plan), (b)
any sale, lease, transfer or other disposition of all or substantially all
of the assets of any member of the Company's consolidated group, or (c) any
acquisition, by any person or group, of beneficial ownership of a majority
or more of any class of Company capital stock, or (C) makes any
announcement of a proposal, plan or intention to do any of the foregoing or
agreement to engage in any of the foregoing; (iii) the Company's deposits,
stockholder's equity or earnings fall below certain levels; or (iv) any of
the real estate agreements referred to under "Interests of Certain Persons"
below shall have been terminated.
FCC may terminate the Plan if a material adverse change has
occurred since December 31, 1994, to the Closing Date, in the financial
condition, results of operations, business or prospects of the Company and
Bank taken as a whole. The Company and Bank will be entitled to terminate
the Agreement if there has occurred any material adverse change since
December 31, 1994, to the Closing Date in the financial condition, results
of operations, business or prospects of FCC. In determining whether there
has occurred with respect to FCC a material adverse change entitling the
Company and Bank to terminate the Plan, FCC's securities losses will be
ignored except to the extent they cause FCC to fail to meet regulatory
capital requirements applicable to it, or result from investment losses
which affect FCC's consolidated statement of income in off-balance-sheet
instruments of the nature commonly referred to as derivative products.
The Plan may also be terminated by either the Company or the Bank
if both (i) the quotient of the average closing sales prices of FCC Common
Stock on the NASDAQ National Market for the five trading days immediately
preceding the date set for consummation of the Plan ("Closing Date")
divided by the closing sales price of such stock on April 26, 1995, is less
than 0.75 and (ii) the quotient of the average closing value of the
Standard & Poor's Regional Bank Index for the five trading days preceding
the Closing Date divided by the value of the Standard & Poor's Regional
Bank Index for April 26, 1995 exceeds the quotient set forth above for FCC
Common Stock by more than .25. A decline in the price of FCC Common Stock
before the Closing Date will not be deemed to be a material adverse change
with respect to FCC unless the conditions described in both clauses (i) and
(ii) are met.
FCC also may terminate the Plan: (i) if the level of the daily
averages of certain of the Bank's deposits for the ten consecutive banking
days ending three banking days before the Closing Date have declined by
more than $17.5 million from the level thereof on December 31,
1994; (ii) if the level of the daily averages of certain of the Bank's
deposits for the period from December 31, 1994, through the date that is
three banking days before the Closing Date declines by more than $17.5
million; (iii) if the consolidated stockholders' equity of the Company,
without taking into account the unrealized losses, if any, in investment
securities held by the Bank, has decreased at the Closing Date by 10% or
more from the Company's consolidated stockholders' equity as of
December 31, 1994; or (iv) if either the net earnings of the Bank, without
taking into account unrealized securities losses, or its net earnings
before taxes, securities gains and losses, and provisions for loan and
lease losses and other real estate owned, from December 31, 1994, to the
Closing Date (in each case without taking into account expenses applicable
to the transactions contemplated by the Plan), are lower by 20% or more
than the amount of such earnings shown on the Bank's budget for the
comparable period of its fiscal year ending December 31, 1995. A change of
the nature described in clauses (i) through (iv) of this paragraph will not
constitute a material adverse change affecting the Company and Bank that
would entitle FCC to terminate the Plan unless such change equals or
exceeds the level that would permit FCC to terminate the Plan under clauses
(i) through (iv) above.
Interests of Certain Persons
Indemnification. FCC has agreed to indemnify the Company and the
Bank, and each of their respective directors, officers and controlling
persons against certain liabilities arising out of or based upon certain
alleged misstatements or omissions of material facts in this Proxy
Statement and Prospectus or the Registration Statement of which it is a
part. In addition, FCC has agreed that for a period of ten years following
the Effective Date, it will indemnify and advance expenses to each officer
or director of the Company or the Bank who has signed an Insider's
Commitment (an "Indemnified Person") to the same extent as he or she would
have been indemnified under the Articles of Incorporation or Bylaws of the
Company or the Bank, as appropriate. The aggregate amount of such
indemnification payments and advancement of expenses required to be made by
FCC is $5 million, and no Indemnified Person is entitled to indemnification
for any claim made prior to the Effective Date of which the Indemnified
Person, the Company or the Bank was aware but did not disclose to FCC.
Real Estate Agreements. The Bank leases from Peoples Properties
Limited Partnership (the "Partnership") three of the Bank's branch
locations (the "Partnership Properties"). The Partnership is a limited
partnership whose partners consist of all of the current directors of the
Company and Bank, plus the spouses of two former directors who are
deceased. The Partnership constructed and owns the three branch buildings
which it leases to the Bank and owns the land underlying two of them. The
land under the third is held by the Partnership under a long-term ground
lease. In connection with the Mergers, FCC has entered into an agreement
with the Partnership (the "Real Estate Agreement") to purchase from the
Partnership its interests in the three branch locations it leases to the
Bank. Under the Plan, FCC is not obligated to complete the Mergers unless
it is able to purchase the Partnership's interests in the Partnership
Properties.
The purchase price for the Partnership Properties is $2,504,000.
As of March 1, 1995, the Partnership Properties were subject to mortgages
securing an indebtedness of $2,905,558.22. The purchase price for the
Partnership Properties will be paid by FCC's assuming $2,504,000 of such
indebtedness. The balance of this indebtedness will be paid by the
Partnership on or before the Effective Date. The purchase price of
$2,504,000 was determined in accordance with an appraisal of the real
estate and related facilities performed by an independent appraiser. The
appraiser issued its appraisal dated January 31, 1995, valuing the
Partnership Properties in two separate ways. Under one method (the "Fee
Simple Approach"), the properties were valued without regard to the fact
that they are under lease to the Bank and without attributing any value to
those leases. Under the second method (the "Leased Fee Approach"), the
appraiser included in the valuation the value of the Partnership's leases
with the Bank (the "Partnership Leases"), and assumed the Partnership
Leases would remain in force at the rents then being paid, for a remaining
term of 10 years. The Fee Simple Approach resulted in an appraised value
of $1,808,000, while the Leased Fee Approach resulted in a valuation of
$4,790,000.
The Partnership was concerned that the Fee Simple Approach may have
valued the property too low because it failed to take into account the
existing Partnership Leases. At the same time, the Leased Fee Approach
appeared to over-value the Partnership Leases because it did not take into
account the Bank's option to buy the Partnership Properties effective
December 31, 1997. In a supplemental letter dated February 17, 1995, the
appraiser, in response to a request made on behalf of the Partnership,
calculated the leased fee advantage under the Partnership Leases, that is,
the amount by which the rent being paid under the Partnership Leases
exceeds the rent that could be obtained under current market conditions.
The appraiser noted his understanding that the Partnership Leases provide
for a buy-out option by the Bank effective March 31, 1997 (although in fact
under the Partnership Leases such buy-out option would not be effective
until December 31, 1997). The appraiser determined that the differential
between market net rent and contract net rent under the Partnership Leases
was $212,701.44 per annum or $17,725.10 per month. The appraiser concluded
that, based on an anticipated closing of the Mergers and related purchase
of the Partnership Properties on September 30, 1995, the remaining term
under the Partnership Leases would (assuming exercise of the buy-out
options on March 31, 1997) be eighteen months from the closing and the
present worth of the rent premium of $17,725.10 per month, when discounted
at a rate of 12% for eighteen months, was $291,000.
Representatives of the Partnership noted that, when valuing the
Partnership Leases in the first supplemental letter, the appraiser did not
take into account the rent escalation provisions in the leases, and
incorrectly assumed that the Bank had options to purchase the Partnership
Properties on March 31, 1997, when in fact such options were not
exercisable until December 31, 1997, the date on which the leases
terminate. In a second supplemental letter dated April 18, 1995, the
appraiser, in response to a request made on behalf of the Partnership,
performed a calculation determining the rent premium attributable to the
Partnership Leases based on the amount by which the rent the Partnership is
entitled to collect under the Partnership Leases exceeds the rent that
could be obtained under current market conditions. The Partnership Leases
all have terms commencing on December 30, 1985, and provide for a fixed
rental payable monthly, but subject to adjustment at the beginning of the
fourth, seventh and tenth lease years in proportion to changes in the
consumer price index. Although the Partnership Leases provide that the
rent shall increase in successive increments on January 1, 1989, January 1,
1992 and January 1, 1995, in proportion to increases in the consumer price
index, the Partnership has not enforced its right to require the Bank to
pay such increases.
The premium calculated under the appraiser's second supplemental
letter resulted, according to the appraiser, from the difference between
the actual annual contract rent that should be paid by the Bank, as per the
Partnership Leases and as determined by counsel for the Partnership, of
$640,178, and the estimated market rent as determined by the appraiser in
its report dated January 31, 1995. The net annual income from the
Partnership Leases under the market based estimate made by the appraiser,
was concluded to be $219,190.86, payable monthly at $18,265.90 per month.
The annual contract rent, adjusted for landlord's expense of 7%, was
determined to be $595,365.54, payable monthly at $49,613.79 per month. The
total monthly differential, according to the appraiser, is $31,347.89. The
rental premium under this analysis is considered in effect for 33 months
from April 1, 1995 through December 31, 1997. When discounted at 12% using
a monthly factor, the appraiser determined that the present worth of the
premium is $877,417.80, called $878,000. In a further letter also dated
April 18, 1995, the appraiser concluded that, when this premium is added to
the already estimated value of the fee simple interest of $1,808,000,
rounded down to $1,800,000, the total market value of the Partnership
Properties, with the Partnership Leases in place, would be $2,678,000.
Representatives of the Company and Bank subsequently raised a
question concerning an assumption made by the appraiser in the second
supplemental letter. The appraiser assumed that the rent escalation
provisions in the leases would entitle the Partnership to increase the rent
in proportion to changes occurring in the consumer price index since the
commencement of the leases on January 1, 1986. The leases, however, were
amended to reduce the rent effective as of January 1, 1990. As a result of
the amendments, the Partnership appeared to have waived its right to
require the increase in the rent based on changes in the consumer price
index which was to have occurred January 1, 1990. In a letter dated
July 20, 1995, the appraiser re-calculated the rent premium attributable to
the Partnership Leases, without allowing any increase in the rent based on
changes in the consumer price index before January 1, 1990. On this basis,
the appraiser determined that the present worth of the rent premium was
$704,000, which, when added to the estimated value of the fee simple
interest of $1,808,000, produced a total market value of the Partnership
Properties of $2,504,000. The purchase price for the Partnership
Properties was based on this aggregated determination of the total market
value of such properties.
The obligations of both FCC and the Partnership under the Real
Estate Agreement are subject to the Mergers taking effect, and upon the
effectiveness of the Mergers all conditions to the consummation of the Real
Estate Agreement will be deemed satisfied.
Life Insurance. The Bank pays the premiums on life insurance
policies for each of its directors, other than Mr. Trist and Mrs. Roper,
under a split dollar life insurance program. The death benefits payable
under the policies range from approximately $50,000 to $200,000. In
connection with the Mergers, each director will be permitted to purchase
from the Bank the policy covering such director's life upon payment to the
Bank of the cash surrender value of the policy. As of May 24, 1995, the
cash surrender values of the policies ranged from $2,624 to $12,319.
Severance Pay. On February 16, 1995, the Bank adopted a Change of
Control Severance Plan (the "Severance Plan") to provide severance pay to
employees of the Bank who might suffer a loss of employment as a result of
the Mergers. In general, the Severance Plan provides for severance pay to
be paid to eligible employees whose employment is terminated, other than
for cause (as defined in the Severance Plan), after the date of the Plan
and before the expiration of one year after the effective date of the
Mergers. Two directors who are officers and employees of the Company and
Bank, Mr. Trist and Mr. Mistrot, are eligible to receive severance pay
under the Plan. Following a termination of employment within one year
after the Effective Date of the Mergers, Mr. Trist would be entitled to
receive severance pay equal to approximately 15 months of his salary, or
$170,000, and Mr. Mistrot would be entitled to receive approximately 5
months of his salary, or $31,250. A third director who is an officer and
employee of the Bank, Mrs. Roper, has agreed to waive her rights under the
Severance Plan in connection with entering into the agreement described
below.
Employment and Severance Agreement. The Company and the Bank, with
FCC's consent, intend to enter into an agreement with Dorothy R. Roper, the
Executive Vice-President and a director of the Company and the Bank (the
"Employment Agreement"), under which she will be employed by the Bank or
its successor, FNBC, for a period of six months following consummation of
the Bank Merger. Under the Employment Agreement, Mrs. Roper will receive
total salary of $55,000 for such six-month period. Mrs. Roper also will
enter into a Severance Agreement with the Company and the Bank under which,
subject to certain conditions, after her period of employment ends she will
be paid as severance $240,000 in installments over an 18-month period by
reason of her termination of employment with the Company and the Bank as of
the Effective Date. Under the Severance Agreement, Mrs. Roper will waive
her right to receive severance pay under the Severance Plan. FNBC has
agreed to honor the Severance Agreement following the Effective Date.
Extinguishment of Personal Guarantees. At the time the Companies
entered into the Plan, the Company was indebted to a third party lender
under a promissory note dated September 30, 1994, in the original principal
amount of $497,549.77 (the "Company Indebtedness"). The Company
Indebtedness was incurred to finance the purchase of the Bank's branch in
Slidell, Louisiana, and was secured by, among other things, a pledge to the
third party lender of all of the Bank Common Stock owned by the Company.
All of the directors of the Company and the Bank personally guaranteed
payment of the Company Indebtedness. In the Plan, FCC agreed that, if the
Company did not pay the Company Indebtedness before the Effective Date, FCC
would pay such indebtedness in order to effectuate a release of the Bank
Common Stock and other collateral securing such indebtedness, including the
directors' personal guarantees. On June 15, 1995, the Company established
a line of credit at FNBC under which the Company is permitted to borrow up
to $850,000. The line of credit is unsecured, except for the Company's
agreement not to use its Bank Common Stock as security for any other
indebtedness. On June 15, 1995, the Company borrowed against this line of
credit, including the amount of $487,881 which was used to pay in full the
Company Indebtedness. Accordingly, the Bank Common Stock securing the
Company Indebtedness has been released, and the personal guarantees of the
directors have been extinguished.
Insiders' Commitments.
Each Company and Bank director and executive officer and certain of
the Company's principal shareholders have executed an individual agreement
pursuant to which he or she has agreed in his or her capacity as a
shareholder (i) to vote in favor of the Plan and against any other proposal
relating to the sale of the Company or the Bank; (ii) not to transfer any
of the shares of Company Common Stock over which he or she has dispositive
power, or grant any proxy thereto not approved by FCC, until the earlier of
the Effective Date or the date that the Plan has been terminated, except
for transfers by operation of law or transfers in connection with which the
transferee agrees to be bound by the agreement; (iii) not to deal in FCC
Common Stock or other securities of FCC in violation of the federal
securities laws or to affect the market price of FCC Common Stock until the
earlier of the Effective Date or the date the Plan has been terminated;
(iv) to release, as of the Effective Date, FCC and FNBC from any obligation
to indemnify such shareholder for acts taken as an officer, director or
employee of the Company or the Bank, except to the extent set forth in the
Plan; and (v) for a period of two years following the Effective Date not to
serve as a director, officer, employee or advisor of, or, except under
certain circumstances, have any investment in any financial institution
that competes with the business of the Bank as continued by FCC and FNBC in
the Bank's market area. The obligation of the directors and executive
officers under these individual agreements will terminate if the Plan or
the Real Estate Agreement terminates or if there is a material amendment to
the Plan.
Employee Benefits.
FCC has agreed that after the Effective Date it will provide to all
persons who were employees of the Company or the Bank immediately prior to
the Effective Date and who become employees of FCC or FNBC immediately
thereafter, the same employee benefits as are provided by FCC to its and
FNBC's employees. Full credit will be given for prior service by such
employees with the Company or the Bank for eligibility and vesting purposes
under all of FCC's benefit plans other than FCC's Retirement Plan, except
that if the Company's or Bank's 401(k) plan is terminated participation in
any 401(k) plan of FCC will not be permitted for one year after
termination. In addition, all benefits accrued through the Effective Date
under the Company's benefit plans disclosed to FCC at the time of execution
of the Plan will be paid by FCC to the extent such benefits are not
otherwise provided to such employees under the benefit plans of FCC, and
FNBC will honor, in accordance with their terms, all employment, severance,
consulting and other compensation contracts disclosed to FCC at the time of
execution of the Plan, as well as all disclosed provisions for vested
benefits or other vested amounts earned or accrued through the Effective
Date.
Expenses
The Plan provides that regardless of whether it is consummated,
expenses incurred in connection with the Plan will be borne by the party
incurring them.
Status Under Federal Securities Laws; Certain Restrictions on Resales
The shares of FCC Common Stock to be issued pursuant to the Plan
have been registered under the Securities Act of 1933 (the "Securities
Act"), thereby allowing such shares to be freely traded without restriction
by persons who will not be "affiliates" of FCC or who were not "affiliates"
of the Company or the Bank, as that term is defined in the Securities Act.
Directors and certain officers of the Company or the Bank may be
deemed to be "affiliates" within the meaning of the Securities Act. Such
persons will not be able to resell the FCC Common Stock received by them
unless it is registered for resale under the Securities Act or an exemption
from the registration requirements of the Securities Act is available. All
such persons should carefully consider the limitations imposed by Rules 144
and 145 under the Securities Act prior to effecting any resales of FCC
Common Stock. All such affiliates have entered into agreements not to sell
shares of FCC Common Stock received by them in violation of the Securities
Act.
In accordance with the requirements for using the pooling-of-
interests method of accounting, Company and Bank shareholders who are
deemed affiliates have agreed not to sell the shares of FCC Common Stock
received by them until financial results covering at least 30 days of post-
merger combined operations of FCC and the Company have been published by
FCC.
Accounting Treatment
It is a condition to FCC's obligation to consummate the Plan that
neither its accountants nor the Securities and Exchange Commission (the
"Commission") shall have taken the position that the Mergers may not be
accounted for as poolings-of-interests under applicable rules and policies.
Under the pooling-of-interests method of accounting, after certain
adjustments, the recorded assets and liabilities of the Companies will be
carried forward to FCC's consolidated financial statements at their
recorded amounts, the consolidated earnings of FCC will include earnings of
the Companies for the entire fiscal year in which the Plan is consummated
and the reported earnings of the Companies for prior periods will be
combined and restated as consolidated earnings of FCC. See "- Conditions"
and "- Status Under Federal Securities Laws; Certain Restrictions on
Resales."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences of the Mergers to holders of Company Common Stock and Bank
Common Stock. This discussion does not address all aspects of federal
income taxation that may be relevant to particular shareholders, and may
not be applicable to shareholders who are not citizens or residents of the
United States. The discussion also does not address the effect of any
applicable foreign, state or local tax laws or other tax laws, other than
the Federal income tax laws.
Consummation of the Plan is conditioned upon receipt by the
Companies of an opinion from Arthur Andersen LLP to the effect that (i)
each of the Mergers will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and (ii) the conversion in the
Mergers of Company Common Stock and Bank Common Stock into FCC Common Stock
will not give rise to recognition of gain or loss to the shareholders of
the Company or the Bank with respect to such conversion (except to the
extent of any cash received). In satisfaction of such condition Arthur
Andersen LLP will render the following opinion:
(a) The Merger qualifies as a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code (the "Code"); the Bank Merger
contemplated by the Plan qualifies as a reorganization under Section
368(a)(l)(A) and (a)(2)(D) of the Code; and the Company, the Bank, FCC and
FNBC each will be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) No material gain or loss will be recognized by the Company,
the Bank, FCC or FNBC as a result of the Mergers.
(c) No gain or loss will be recognized by a shareholder of the
Company or the Bank on the receipt solely of FCC Common Stock in exchange
for his shares of Company or Bank Common Stock.
(d) The basis of the shares of FCC Common Stock to be received by
the Company's or the Bank's shareholders pursuant to the Plan will, in each
instance, be the same as the basis of the shares of Company or Bank Common
Stock surrendered in exchange therefor, increased by any gain recognized on
the exchange.
(e) The holding period of the shares of FCC Common Stock to be
received by the Company's and the Bank's shareholders pursuant to the Plan
will, in each instance, include the holding period of the respective shares
of Company or Bank Common Stock exchanged therefor, provided that the
shares of Company or Bank Common Stock are held as capital assets on the
date of the consummation of the Plan.
(f) The payment of cash to the Company's and Bank's shareholders
in lieu of fractional share interests of FCC Common Stock will be treated
as if the fractional shares were distributed as part of the exchange and
then redeemed by FCC. These cash payments will be treated as having been
received as a distribution in redemption of that fractional share interest
subject to the conditions and limitations of Section 302 of the Code. If a
fractional share of FCC Common Stock would constitute a capital asset in
the hands of a redeeming shareholder, any resulting gain or loss will be
characterized as capital gain or loss in accordance with the provisions and
limitations of Subchapter P of Chapter 1 of the Code.
(g) A Company shareholder who perfects his statutory right to
dissent and who receives solely cash in exchange for his Company Common
Stock will be treated as having received such cash payment as a
distribution in redemption of his shares of Company Common Stock, subject
to the provisions and limitations of Section 302 of the Code. After such
distribution, if the former Company shareholder does not actually or
constructively own any Company Common Stock, the redemption will constitute
a complete termination of interest and be treated as a distribution in full
payment in exchange for the Company Common Stock redeemed.
The opinion of Arthur Andersen LLP is not binding on the Internal
Revenue Service, which could take positions contrary to the conclusions in
such opinion. It is based on applicable federal law and judicial and
administrative interpretations as of the date of such opinion, any of which
may change prior to the Effective Date.
As a result of the complexity of the tax laws, and because the tax
consequences to any particular shareholder may be affected by matters not
discussed herein, it is recommended that each shareholder of Company and
the Bank consult his personal tax advisor concerning the applicable
federal, state and local income tax consequences of the Plan.
DISSENTERS' RIGHTS
Because the Company will vote all of its shares of the Bank in
favor of the Plan, shareholders of the Bank will not have dissenters
rights. Unless the Plan is approved by the holders of at least 80% of the
total voting power of the Company, Section 131 of the LBCL allows a share-
holder of the Company who objects to the Plan and who complies with the
provisions of that section to dissent from the Plan and to have paid to him
in cash the fair cash value of his shares of Company Common Stock as of the
day before the Meeting, as determined by agreement between the shareholder
and FCC or by the Civil District Court for the Parish of Orleans if the
shareholder and FCC are unable to agree upon the fair cash value.
To exercise the right of dissent, a shareholder must (i) file with
the Company a written objection to the Plan prior to or at the Meeting and
(ii) also vote his shares (in person or by proxy) against the Plan at the
Meeting. Neither a vote against the Plan nor a specification in a proxy to
vote against the Plan will in and of itself constitute the necessary
written objection to the Plan. Moreover, by voting in favor of, or
abstaining from voting on, the Plan, or by returning the enclosed proxy
without instructing the proxy holders to vote against the Plan, a
shareholder waives his rights under Section 131. The right to dissent may
be exercised only by the record owners of the shares and not by persons who
hold shares only beneficially. Beneficial owners who wish to dissent
should have the record ownership of the shares transferred to their names
or instruct the record owner to follow the Section 131 procedure on their
behalf.
If the Plan is approved by less than 80% of the total number of
shares of Company Common Stock outstanding, then promptly after the Effec-
tive Date written notice of the consummation of the Plan will be given by
FCC by registered mail to each former shareholder of the Company who filed
a written objection to the Plan and voted against it, at such shareholder's
last address on the Company's records. Within 20 days after the mailing of
such notice, the shareholder must file with FCC a written demand for
payment for his shares at their fair cash value as of the day before the
Meeting and must state the amount demanded and a post office address to
which FCC may reply. He must also deposit the certificates formerly
representing his shares of Company Common Stock in escrow with a bank or
trust company located in Orleans Parish, Louisiana. The certificates must
be duly endorsed and transferred to FCC upon the sole condition that they
be delivered to FCC upon payment of the value of the shares in accordance
with Section 131. With the above-mentioned demand, the shareholder must
also deliver to FCC the written acknowledgment of such bank or trust
company that it holds the certificates, duly endorsed as described above.
Unless the shareholder objects to and votes against the Plan,
demands payment, endorses and deposits his certificates and delivers the
required acknowledgment in accordance with the procedures and within the
time periods set forth above, the shareholder will conclusively be presumed
to have acquiesced to the Plan and will forfeit any right to seek payment
pursuant to Section 131.
If FCC does not agree to the amount demanded by the shareholder, or
does not agree that payment is due, it will, within 20 days after receipt
of such demand and acknowledgment, notify the shareholder in writing at the
designated post office address, of either (i) the value it will agree to
pay or (ii) its belief that no payment is due. If the shareholder does not
agree to accept the offered amount, or disagrees with FCC's assertion that
no payment is due, he must, within 60 days after receipt of such notice,
file suit against FCC in the Civil District Court for the Parish of Orleans
for a judicial determination of the fair cash value of the shares. Any
shareholder entitled to file such suit may, within such 60-day period but
not thereafter, intervene as a plaintiff in any suit filed against FCC by
another former shareholder of the Company for a judicial determination of
the fair cash value of such other shareholder's shares. If a shareholder
fails to bring or to intervene in such a suit within the applicable 60-day
period, he will be deemed to have consented to accept FCC's statement that
no payment is due or, if FCC does not contend that no payment is due, to
accept the amount specified by FCC in its notice of disagreement.
If upon the filing of any such suit or intervention FCC deposits
with the court the amount, if any, which it specified in its notice of
disagreement, and if in that notice FCC offered to pay such amount to the
shareholder on demand, then the costs (not including legal fees) of the
suit or intervention will be taxed against the shareholder if the amount
finally awarded to him, exclusive of interest and costs, is equal to or
less than the amount so deposited; otherwise, the costs (not including
legal fees) will be taxed against FCC.
Upon filing a demand for the value of his shares, a shareholder
ceases to have any rights of a shareholder except the rights provided by
Section 131. The shareholder's demand may be withdrawn voluntarily at any
time before FCC gives its notice of disagreement, but thereafter only with
the written consent of FCC. If his demand is properly withdrawn, or if the
shareholder otherwise loses his dissenters' rights, he will be restored to
his rights as a shareholder as of the time of filing of his demand for fair
cash value.
Prior to the Effective Date, dissenting shareholders should send
any communications regarding their rights to Nicholas P. Trist, P. O. Box
1099, Chalmette, Louisiana 70044-1099. Thereafter, dissenting shareholders
should send any such communications to Thomas L. Callicutt, Jr., Senior
Vice President and Controller, First Commerce Corporation, 925 Common
Street, New Orleans, Louisiana 70112. All such communications should be
signed by or on behalf of the dissenting shareholder in the form in which
his shares are registered on the books of the Company. FCC has the right
to terminate the Plan if the number of shares of Company Common Stock as to
which the holders thereof have perfected dissenters' rights would, had they
been converted pursuant to the Plan, constitute as much as 9% of the total
number of shares of FCC Common Stock issuable pursuant to the Plan. See
"The Plan - Waiver, Amendment and Termination."
INFORMATION ABOUT THE COMPANY AND THE BANK
Principal Business
The Company is a business corporation organized under the laws of
Louisiana and a registered bank holding company under the Federal Bank
Holding Company Act of 1956. Its principal business is the ownership of
its stock of the Bank. The Bank is a commercial bank offering consumer and
commercial banking services in St. Bernard, Orleans and St. Tammany
Parishes in Louisiana. As of March 31, 1995, the Company and Bank had
total consolidated assets of approximately $174 million, total deposits of
approximately $156 million, total net loans of approximately $52.4 million
and shareholders' equity of approximately $15.3 million. The Company's
executive offices are located at 1615 East Judge Perez Drive, Chalmette,
Louisiana 70043.
Competitive Conditions
Intense competition for loans and deposits comes from other
commercial banks and savings and loan institutions in the Bank's market
areas. The Bank also competes with credit unions, small loan companies,
insurance companies, mortgage companies, finance companies, brokerage
houses and other financial institutions, some of which are not subject to
the same degree of regulation and restrictions as the Bank and many of
which have financial resources far greater than the Bank.
Properties
The Bank has eight full-service banking offices located in
St. Bernard, Orleans and St. Tammany Parishes, Louisiana. The popular
names and addresses of these banking offices are as follows:
1. Main Office 2. Village Square Branch
1615 East Judge Perez Drive 9109 West Judge Perez Drive
Chalmette, Louisiana 70043 Chalmette, Louisiana 70043
3. St. Bernard Highway Branch 4. East Judge Perez Branch
Madison Ave. at St. Bernard Hwy. 1801 East Judge Perez
Chalmette, Louisiana 70043 Chalmette, Louisiana 70043
5. New Orleans East Branch 6. Poydras Branch
5550 Crowder Boulevard Farmsite Road at St. Bernard Hwy.
New Orleans, Louisiana 70128 Poydras, Louisiana 70085
7. Arabi Branch 8. Slidell Branch
6624 St. Claude Avenue 220 Gause Boulevard
Arabi, Louisiana 70032 Slidell, Louisiana 70458
The Bank owns the land and buildings of its Main Office and New Orleans
East Branch. The land and building at the Slidell Branch are owned by the
Company and leased to the Bank. The Poydras and St. Bernard Highway
Branches are leased from third parties. The Village Square, Arabi and East
Judge Perez Drive Branches are leased to the Bank by the Partnership. See
"The Plan - Interests of Certain Persons - Real Estate Agreements."
Employees
The Company and the Bank have, in the aggregate, approximately 130
full-time equivalent employees.
Market Prices and Dividends
Market Prices. Neither Company nor Bank Common Stock is traded on
any exchange or in any other established public trading market. There is,
however, very limited and sporadic trading of Company Common Stock in its
local area. Management has trading information available to it with
respect to only one trade that was effected during the last two years. That
trade occurred on August 24, 1994, and involved a sale of one share of
Company Common Stock for a price of $500. Management is unable to assure
that such trade was effected on an arm's-length basis. There have been no
trades of Bank Common Stock in the past two years.
At the Record Date there were ____ shareholders of record of the
Company and ___ shareholders of record of the Bank.
Cash Dividends. The Company paid dividends of $10.00, $15.00 and
$15.00 per share in 1993, 1994 and 1995, respectively. The Bank paid
dividends of $16.40, $15.80 and $15.80 per share in 1993, 1994 and 1995,
respectively. See "The Plan - Conduct of Business Prior to the Effective
Date" for a description of provisions of the Plan concerning the payment of
dividends by the Company or the Bank prior to the Effective Date.
Substantially all of the funds used by the Company to pay dividends
to its shareholders are derived from dividends paid to it by the Bank,
which are subject to certain legal restrictions. With respect to the Bank,
prior regulatory approval is required if the total of all dividends
declared and paid in any calendar year will exceed the sum of its net
profits of that year combined with the retained net profits of the
immediately preceding year. Regulatory authorities also have the power to
restrict the Bank's dividend payments if such payments are deemed an unsafe
or unsound banking practice or if the authority deems the Bank's capital
inadequate.
Security Ownership of Principal Shareholders and Management
Principal Shareholders. The following table reflects as of the
Record Date the only persons or entities known to the Company to own
beneficially or of record more than five percent of the outstanding shares
of Company Common Stock. No person other than the Company owns more than
five percent of the outstanding shares of Bank Common Stock.
Name and Address of Number of Percent
Beneficial Owner Shares of Class
____________________ ___________ ____________
Richard J. Brennan 2,099 8.97%
1530 Third Street
New Orleans, Louisiana 70130
Colomb Family Trust 2,060<F1> 8.80%
45 East Carmack Circle
Chalmette, Louisiana 70043
Ronald W. Mistrot 1,444 6.17%
617 Rowley Boulevard
Arabi, Louisiana 70032
Cheryl R. Pierce 2,764 11.81%
1527 Hoaaina
Honolulu, Hawaii
Nicholas P. Trist, Jr. 3,307<F2> 14.13%
201 Bellaire Drive
New Orleans, Louisiana 70124
________________________
<F1> Includes 1,572 shares held by C. Earl Colomb as Trustee for the
Colomb Family Trust, 188 shares held by Mary W. Colomb as Trustee
for the Colomb Family Trust, and 300 shares held by Chalmette
Vista, Inc., a corporation of which C. Earl Colomb is president and
principal owner.
<F2> Includes 494 shares held by the Inez Lauga Trist Trust, of which
Mr. Trist is co-trustee and shares voting and investment power.
Management. The following table sets forth the number of shares
and the percentage of outstanding Company and Bank Common Stock
beneficially owned by each director of the Company and the Bank, the Chief
Executive Officer of the Company and the Bank and all directors and
executive officers of the Company and the Bank as a group as of the Record
Date. Unless otherwise indicated, beneficial ownership consists of sole
voting and investment power.
<TABLE>
<CAPTION>
Company Common Stock Bank Common Stock
____________________ _________________
Beneficial Owner No. of Shares Percent of Class No. of Shares Percent of Class
_________________ ______________ ________________ _____________ ________________
<S> <C> <C> <C> <C>
Richard J. Brennan 2,099 8.97% 1 *
William J. Connick 800 3.42%
F. Ralph Dauterive 950 4.06%
Ronald W. Mistrot 1,444 6.17%
Samuel B. Nunez, Jr. 345 1.47%
Alvin Pailet 800 3.42%
Cheryl R. Pierce 2,764 11.81%
Dorothy R. Roper 142 * 71 *
John F. Rowley 418 1.79% 1 *
Nicholas P. Trist, Jr. 3,307<F1> 14.13% 1 *
All Directors and
Executive Officers
as a Group 13,069 55.83% 74 <F2>
* Less than 1%
_______________________
<FN>
<F1> Includes 494 shares held by the Inez Lauga Trist Trust, of which
Mr. Trist is co-trustee and shares voting and investment power.
<F2> The Company owns 96.3% of the Bank's outstanding stock and,
therefore, directors and executive officers of the Company,
individually and as a group, have indirect beneficial ownership of
that 96.3% ownership interest in the Bank and, acting as the Board
of Directors of the Company, have voting control of such shares.
If the Company's ownership of Bank Common Stock is excluded, the
directors and officers of the Company and Bank collectively own
less than 1% of the Bank's outstanding shares.
</FN>
______________________
<PAGE>
COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE TWO YEARS ENDED DECEMBER 31, 1994 AND 1993
The following discussion provides certain information concerning
the financial condition and results of operations of Peoples Bancshares,
Inc. and Subsidiary for the two years ended December 31, 1994 and 1993.
The financial position and results of operations of Peoples Bancshares,
Inc. were due primarily to its banking subsidiary, Peoples Bank and Trust
Company of St. Bernard. (For purposes of this discussion, Peoples
Bancshares, Inc. and Peoples Bank and Trust Company of St. Bernard are
collectively referred to as Bancshares or the Company.) Management's
discussion should be read in conjunction with the financial statements and
accompanying notes presented elsewhere in this Proxy Statement and
Prospectus.
Overview
The Company reported consolidated net income for 1994 of $1,385,364
compared to $1,466,672 for 1993. Return on average assets was .81% and
return on average equity was 9.25% for 1994, compared to .83% and 10.60%,
respectively, for 1993. The decline in earnings for the year ended
December 31, 1994 was principally attributable to a reduction in net
interest income. Continued improvement in loan quality and a low level of
net chargeoffs resulted in zero provision for loan losses in 1994.
Increases in other service charges and fees and decreases in other
operating expenses, along with the zero provision for loan losses, offset
the majority of the decrease in net interest income in 1994.
Average assets in 1994 decreased by $3,755,000, or 2.13%, from 1993
due to a continued decline in interest bearing NOW and money market
deposits and other time deposits, which reduced the resources available to
the Company. Funds provided by reductions in the level of Federal Funds
Sold were used to purchase investment securities.
The net interest margin, the percentage of net interest income to
average earning assets, decreased slightly in 1994, from 5.41% to 5.03%,
primarily due to decreased yields on investment securities and loans. The
favorable net interest margin of 5.03% in 1994 reflects the continued low
interest rates paid on deposits and the wider spread between rates on
deposits and yields on investments and loans. Average earning assets
comprised 92.20% and 91.60% of total average assets in 1994 and 1993,
respectively.
Results of Operations
Net Interest Income. Net interest income for 1994 was $7,976,000,
compared to $8,706,000 for 1993. The decrease of $730,000 was caused
primarily by declines in interest rates earned on investment securities and
loans and a decline in the volume of loans and was offset partially by the
increase in the volume of investment securities. The shrinkage of interest
bearing deposits contributed to the lower cost of funds in 1994.
Investment securities continued to be the largest component of
earning assets. Average investment securities for 1994 were $86,921,000, or
54.80% of average earning assets. Average loans totaled $58,141,000 and
comprised 36.67% of average earning assets. The remaining earning asset of
Bancshares was its position in Federal Funds Sold. The net yield on
investment securities declined .84% , from 6.31% to 5.47%, from 1993 to
1994. The net yield on loans declined .49%, from 11.43% to 10.94%, during
that same time. The net yield on total earning assets declined .47%, from
7.78% to 7.31%, from 1993 to 1994, and was offset by a .01% decrease in the
rate paid on interest bearing liabilities, for a decrease in the net
interest spread of .46%.
Table 1 presents the average balance sheets, net interest income
and net yield for each category of assets for 1994 and 1993. Table 2
provides the components of changes in net interest income in the format of
a rate/volume analysis.
Interest Rate Sensitivity. The interest rate sensitivity gap is
the difference between the amount of interest bearing assets and interest
bearing liabilities maturing in any given time frame. A primary objective
of asset/liability management is to maximize net interest margin while not
subjecting Bancshares to a significant interest rate risk in periods of
rising or falling interest rates. At December 31, 1994 Bancshares one year
repricing gap, defined as repricing assets minus repricing liabilities, as
a percentage of total assets, was a negative 21.66%, i.e. more of
Bancshares' liabilities than assets reprice within a one year time frame.
A negative gap implies that earnings would increase in a falling interest
rate environment. However, the degree of interest rate sensitivity is not
equal for all types of assets and liabilities. The Company's experience
has indicated that the repricing of interest-bearing demand, savings and
money market accounts does not move with the same magnitude as general
market rates. Additionally, these deposit categories, along with non-
interest demand, have historically been stable sources of funds for the
Company, which indicates a much longer implicit maturity than their
contractual availability. Therefore, it is unlikely that an increase in
market rates would result in an immediate repricing of all assets and
liabilities simultaneously, thereby reducing the negative impact on net
interest income of an increase in rates.
Provision for Loan Losses. The provision for loan losses charged
to operating expense is the result of a continuing review and assessment of
the loan portfolio, taking into consideration the history of chargeoffs in
the loan portfolio by category, the current economic condition in the
lending area, the payment history, ability to repay and strength of
collateral of specific borrowers, and other relevant factors. There was no
provision for loan losses in 1994. Improving economic conditions, which
have led to lower nonperforming loans, have resulted in no provision for
loan losses being necessary, in the judgment of management, to maintain an
adequate level of reserves for potential losses on loans. Recoveries
exceeded chargeoffs by $149,000 and $358,000 in 1994 and 1993,
respectively.
Non-Interest Income. Non-interest income in 1994 totaled
$1,707,000 compared to $1,816,000 in 1993. The decrease was caused mostly
by decreases in service charges, NSF charges, and net gains on the sales of
securities, offset by increases in rental income and check printing
commissions.
Non-Interest Expense. In 1994, non-interest expenses decreased by
$234,940, or 2.99%, from 1993 levels. Amortization of the intangibles
associated with acquisitions accounted for a $200,000 decrease, along with
a $167,000 decrease in loss on sale of assets. These declines were offset
by increases in salaries and benefits, legal fees and write-downs of other
real estate.
Income Taxes. The effective tax rate for 1994 was 30.05%, compared
to 34.02% in 1993. The 1994 effective rate was lower because of larger tax
exempt income than in 1993, and less non-deductible amortization of
acquisition premiums in 1994 than in 1993.
Analysis of Financial Condition
Investment Securities. In 1994 average investment securities
increased from $79,862,000 to $86,921,000, or $7,059,000, from 1993. The
investment securities portfolio is used as a source of liquidity and a
means of managing interest rates and interest rate sensitivity. In
addition, the portfolio serves as a source of collateral on certain
deposits. Table 4 sets forth the composition of the Company's investment
portfolio at the end of each period presented.
On January 1, 1994, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
Under this standard, securities are classified into one of three
classifications: held to maturity, available for sale, or trading. Held
to maturity securities are those debt securities which the Company has the
positive intent and ability to hold to maturity. These criteria are not
considered satisfied when a security would be available to be sold in
response to significant interest rate changes which were not anticipated in
the Company's asset and liability management strategies, changes in the
types of products offered by the Company, changes in its deposit structure,
or potential liquidity needs. Trading securities are defined as securities
bought and held principally for the purpose of selling them in the near
term. Securities not meeting the criteria for classification as held to
maturity or trading are classified as securities available for sale. The
available for sale securities are recorded at market value with the net
unrealized gain or loss reflected in shareholders' equity, net of the
related tax effect.
As of December 31, 1994, the Company's held to maturity securities
had a net unrealized loss of $426,004 with gross gains of $26,890 and gross
losses of $452,894. As of that same date, the Company's available for sale
securities portfolio had a net unrealized loss of $1,758,422, comprised of
$1,929,382 in unrealized losses and $170,960 in unrealized gains. Gross
realized gains of $276,229 and gross realized losses of $251,803 were
realized on available for sale investment securities during 1994. Gross
realized gains of $82,473 and gross realized losses of $3,466 were realized
in 1993 on the sale of investment securities. At December 31, 1994 the
Company held no securities classified as trading.
Investment Securities Maturity Distribution. The amortized cost
and estimated market value of securities at December 31, 1994, by
contractual maturity, are shown at Table 5. Expected maturities will
differ from contractual maturities because the issuers may have the right
to prepay obligations with or without penalties.
Loans. Loans outstanding at December 31, 1994 totaled $56,407,000.
Average loans in 1994 were $58,141,000, a decrease of $3,544,000 from the
average for 1993. Table 6 shows the amounts of loans outstanding according
to the type of loan for each of the periods indicated.
Real estate loans comprise 63.22% and 66.86% and consumer loans
19.22% and 18.22% of the loan portfolio at December 31, 1994 and 1993,
respectively.
At December 31, 1994, fixed rate loans totaled $27,803,000 and
variable rate loans totaled $30,435,000. At December 31, 1993, fixed rate
loans totaled $37,632,000 and variable rate loans totaled $24,274,000.
Nonperforming Assets. Nonaccrual loans and foreclosed assets are
included in nonperforming assets. Nonperforming assets decreased $411,000
during 1994 to $1,300,000 at December 31, 1994. The decrease is
attributable to a decrease in nonaccrual loans of $656,000, offset by an
increase in other real estate of $245,000.
Nonaccrual loans are loans on which the accrual of interest income
has been discontinued and previously accrued interest has been reversed
because the borrower's financial condition has deteriorated to the extent
that the collection of principal and interest is doubtful. Until the loan
is returned to performing status, generally as the result of the full
payment of all past due principal and interest, interest income is recorded
on the cash basis. Interest income that would have been recognized on
nonaccrual loans had those loans been on accrual status at contractual
terms throughout 1994 was approximately $2,988. Interest income recognized
on nonaccrual loans for 1994 was $82,053.
Table 7 summarizes nonperforming assets and includes several ratios
that measure the level of nonperforming assets.
Management is not aware of any loans classified for regulatory
purposes and excluded from Table 7 which: (1) represent or result from
trends or uncertainties that will materially impact future operating
results, liquidity, or capital resources, or (2) represent material credits
about which management is aware of any information which causes doubts as
to the ability of such borrowers to comply with the loan repayment terms.
Summary of Loan Loss Experience. Table 8 summarizes the loan loss
experience for each of the periods indicated. Management believes that the
allowance for loan losses at December 31, 1994 was adequate to absorb the
known and inherent risks in the loan portfolio at that time. However, no
assurance can be given that future changes in economic conditions that
might adversely affect the Company's principal market area, borrowers or
collateral values, and other circumstances will not result in increased
losses in the Company's loan portfolio in the future.
Deposits. Total deposits at December 31, 1994 were $151,847,000, a
decrease of $3,460,000 from the December 31, 1993 total of $155,307,000.
Average deposits in 1994 decreased $4,591,000 from 1993. Average NOW and
money market deposits decreased $3,285,000 and average time deposits
decreased $1,987,000, and were partially offset by increases in non-
interest bearing demand deposits.
Time deposits of $100,000 or more were $7,614,000 and $5,011,000 at
December 31, 1994 and 1993, which comprises 5.01% and 3.23% of total
deposits, respectively.
Deposit Average Balances and Rates. Table 9 indicates the average
daily amount of deposits and rates paid on such deposits for the periods
indicated.
Liquidity. Liquidity involves Bancshares' ability to raise funds
to support asset growth or to reduce assets, meet deposit withdrawals and
other borrowing needs, maintain reserve requirements and otherwise operate
the company on an ongoing basis.
As shown in the accompanying 1994 statement of cash flows, cash and
cash equivalents decreased by $13,246,000 from December 31, 1993 to 1994.
Cash and cash equivalents were generated primarily from the sale and
maturities of investments, and were offset and exceeded by the purchases of
investments.
Capital Resources. Bancshares maintains adequate capital for
regulatory purposes and has sufficient capital to absorb the risks inherent
in the business. Risk-based capital requirements have been established
that weight different assets according to the level of risk associated with
those types of assets. Table 10 summarizes Bancshares' capital levels for
December 31, 1994 and 1993.
TABLE 1
SUMMARY AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES
(dollars in thousands)
</TABLE>
<TABLE>
<CAPTION>
1994 1993
____________________________ ___________________________
Interest and Average Yield/Rates Interest Average Interest Average
Average Income/ Yield Average Income/ Yield
Balance Expense Rate Balance Expense Rate
_________ _________ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning Assets:
U.S. Treasury Securities $46,761 $2,579 5.52% $40,851 $2,273 5.56%
Government Agencies 18,033 1,071 5.94% 19,994 1,717 8.59%
State and Political Subdivisions<F1> 5,080 238 4.69% 3,332 169 5.07%
Other Securities 17,047 867 5.09% 15,685 884 5.64%
__________ _________ ________
Total Investment Securities<F3> 86,921 4,755 5.47% 79,862 5,043 6.31%
Federal Funds Sold 13,550 483 3.56% 19,475 431 2.21%
Loans (Net)<F2> 58,141 6,363 10.94% 61,685 7,051 11.43%
__________ _________ _________
Total Earning Assets 158,612 11,601 7.31% 161,022 12,525 7.78%
Non-Earning Assets:
Allowance for Possible Loan Losses (2,168) (1,765)
Cash and Due from Banks 6,614 6,538
Premises and Equipment 4,171 4,381
Other Real Estate Owned 813 1,468
Other Assets 3,434 4,147
__________ _________
Total Average Assets $171,476 $175,790
========== =========
<FN>
<F1> Determined utilizing tax free rate of instruments.
<F2> Interest income includes loan fees of $791,000 and $892,000 for the years ended December 31, 1994
and 1993. Loans are presented net of unearned discount. Nonaccrual loans are included in average
balances and income on such loans is recognized on a cash basis.
<F3> Amounts computed based on historical cost without giving effect to the market valuation for
securities classified as available for sale.
</FN>
</TABLE>
<PAGE>
TABLE 1 (CONT.)
SUMMARY AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
___________________________ ___________________________
Interest and Average Yield/Rates Interest Average Interest Average
Average Income/ Yield Average Income/ Yield
Balance Expense Rate Balance Expense Rate
________________________________________________________
LIABILITIES AND
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Interest Bearing Liabilities:
Now and Money Market Deposits $39,125 $922 2.36% $42,410 $1,006 2.37%
Savings Deposits 39,185 983 2.51% 39,963 1,079 2.70%
Certificates of Deposit $100,000 or 6,508 158 2.43% 5,318 129 2.43%
Other Time Deposits 38,866 1,516 3.90% 42,043 1,552 3.69%
Notes Payable and Subordinated
Debentures 506 46 9.09% 604 53 8.77%
Total Interest Bearing Liabilitie 124,190 3,625 2.92% 130,338 3,819 2.93%
__________________ ___________________
Non-Interest Bearing Deposits 29,894 28,435
Other Liabilities 2,439 2,659
Minority Interest in Subsidiary 533 514
__________ ___________
Total Liabilities 157,056 161,945
Shareholders' Equity 14,420 13,845
__________ _________
Total Liabilities and
Shareholders' Equity $171,476 $175,790
========== =========
Net Interest Income and Margin $7,976 5.03% $8,706 5.41%
================ =================
Net Earning Assets and Spread $34,422 4.39% $30,684 4.85%
========== ====== ======= ======
</TABLE>
<PAGE>
TABLE 2
INTEREST RATE/VOLUME ANALYSIS
(dollars in thousands)
<TABLE>
<CAPTION>
1994/1993 1993/1992
________________________________________________________
Change Attributable Total Change Attributable Total
to Increase to Increase
___________________ ___________________
Rate Volume (Decrease) Rate Volume (Decrease)
_________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Investment Securities ($603) $315 ($288) ($837) $343 ($494)
Federal Funds Sold 122 (70) 52 72 70 142
Loans (301) (387) (688) (430) (1,326) (1,756)
_________________________________________________________
Total Interest Income (782) (142) (924) (1,195) (913) (2,108)
INTEREST BEARING LIABILITIES:
NOW, Money Market and
Savings Deposits (72) (108) (180) (681) 102 (579)
Certificates of Deposit $100,000 or 0 29 29 (64) 5 (59)
Other Time Deposits 89 (125) (36) (427) (289) (716)
Notes Payable 1 (8) (7) (9) (15) (24)
_________________________________________________________
Total Interest Expense 18 (212) (194) (1,181) (197) (1,378)
CHANGE IN NET INTEREST INCOME ($800) $70 ($730) ($14) ($716) ($730)
=========================================================
The changes in interest due to both volume and rate have been allocated proportionately between rate and
volume. Interest income includes loan fees of $791,000 and $892,000 for the years ended December 31,
1994 and 1993. Nonaccrual loans are included in average balances and income on such loans is recognized
on a cash basis.
</TABLE>
TABLE 3
INTEREST RATE SENSITIVITY AT DECEMBER 31, 1994
(dollars in thousands)
<TABLE>
<CAPTION>
Non-
0-3 4-6 7-12 After Interest
Months Months Months One Year Bearing TOTAL
_____________________________________________________
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans $18,566 $8,931 $17,237 $11,673 $0 $56,407
Less: Allowance for Loan Losses 0 0 0 0 (2,243) (2,243)
Investments 3,680 7,292 12,220 69,700 0 92,892
Federal Funds Sold 6,500 0 0 0 0 6,500
Other Non-Interest Bearing Assets 0 0 0 0 16,190 16,190
______________________________________________________
Total Assets $28,746 $16,223 $29,457 $81,373 $13,947 $169,746
======================================================
SOURCES OF FUNDS:
Now and Money Market Deposits $36,903 $0 $0 $0 $0 $36,903
Savings Deposits 37,836 0 0 0 0 37,836
Certificates of Deposit
$100,000 or More 5,465 716 761 672 0 7,614
Other Time Deposits 13,904 9,108 6,431 9,024 0 38,467
Notes Payable 17 17 34 420 0 488
Non-Interest Bearing Deposits 0 0 0 0 31,028 31,028
Other Liabilities 0 0 0 0 2,500 2,500
Minority Interest in Subsidiary 0 0 0 0 532 532
Shareholders' Equity 0 0 0 0 14,378 14,378
______________________________________________________
Total Sources of Funds $94,125 $9,841 $7,226 $10,116 $48,438 $169,746
======================================================
Rate Sensitivity Gap ($65,379) $6,382 $22,231 $71,257 ($34,491)
Cumulative Rate Sensitivity Gap (65,379) (58,997) (36,766) 34,491 0
Cumulative Rate Sensitivity Gap as
a Percentage of Total Assets (38.52%) (34.76%) (21.66%) 20.32%
</TABLE>
<PAGE>
TABLE 4
INVESTMENT SECURITIES
(in thousands)
Available Held to Maturity
for Sale
1994 1994 1993
___________ ____________________
U.S. Treasury $49,029 - $43,278
Government Agencies 20,456 - 15,037
State and Political Subdivisions - 5,568 4,592
Other Securities 1,877 15,963 16,285
___________ ___________________
Total $71,362 $21,531 $79,192
=========== ===================
Securities Whose Book Value was Greater Than 10% of Equity
(Other than Securities of the U.S. Government and
Related Agencies) as of December 31, 1994
Carrying Market
Amount Value
__________ _________
General Electric Capital Corp. $1,515 $1,504
Sears Credit Card Tr1991B CLA 2,105 2,022
Chemical Bank Grtr Tr 1989B BOATS 366 367
RTC 1992-3 CLASS A2 FLT 1,310 1,322
__________ __________
$5,296 $5,215
========== ==========
Note: The last two issues were less than 10% of equity on December 31, 1994;
However, their original face was more.
<PAGE>
TABLE 5
Investment Securities- Maturities and Yields
(dollars in thousands)
One Year One to Five to Over Ten
Available for Sale: or Less Five Years Ten Years Years Total
_________________________________________________
U.S. Treasury:
Amount $8,876 $40,153 $ - $ - $49,029
Weighted Average Yield 5.34% 5.45% 0.00% 0.00%
Government Agencies:
Amount $5,952 $13,374 $ - $1,130 $20,456
Weighted Average Yield 5.00% 5.36% 0.00% 9.10%
Other Securities:
Amount $ - $ 151 $154 $1,322 $1,627
Weighted Average Yield 0.00% 6.38% 9.41% 5.69%
Equity Securities $ - $ - $ - $ - $250
_________________________________________________
Total Available for Sale $14,828 $53,678 $154 $2,452 $71,362
=================================================
Held to Maturity:
State and Political Subdivisions:
Amount $1,104 $4,022 $442 $ - $5,568
Weighted Average Yield<F1> 4.46% 4.32% 5.32% 0.00%
Other Securities:
Amount $7,011 $8,952 $ - $ - $15,963
Weighted Average Yield 4.59% 6.04% 0.00% 0.00%
_________________________________________________
Total Held to Maturity $8,115 $12,974 $442 $ - $21,531
=================================================
Total Investment Securities $92,893
=======
<F1> The yield on tax-exempt securities is not on a tax equivalent basis for
this schedule.
<PAGE>
TABLE 6
LOAN PORTFOLIO
(dollars in thousands)
December 31,
_________________________________________
1994 1993
_____________________ __________________
Amount Percent Amount Percent
Real Estate - Residential $18,572 32.92% $22,043 36.82%
Real Estate - Commercial 16,733 29.66% 17,293 28.88%
Construction 356 0.63% 694 1.16%
Commercial - Non-Real Estate 6,696 11.87% 6,713 11.21%
Student Loans 3,391 6.01% 3,114 5.20%
Consumer Loans 10,840 19.22% 10,912 18.22%
Other 1,650 2.93% 1,136 1.90%
__________ __________ _________ ________
Total Loans 58,238 103.25% 61,905 103.39%
Unearned Income (1,831) (3.25%) (2,030) (3.39%)
__________ __________ _________ ________
Total Loans (Net) $56,407 100.00% $59,875 100.00%
========== ========== ========= ========
Variable Fixed
Rate Rate Total
__________ __________ _________
As of December 31, 1994, Loans
Maturing Within:
Three Months or Less $12,035 $6,531 $18,566
Three Months to One Year 16,912 11,087 27,999
One Year to Five Years 1,488 8,986 10,474
After Five Years 0 1,199 1,199
__________ ___________ _________
$30,435 $27,803 $58,238
========== =========== =========
<PAGE>
TABLE 7
NON-PERFORMING ASSETS
(dollars in thousands)
December 31,
__________________
1994 1993
_____ _____
Non-Accrual Loans $365 $1,021
Real Estate Acquired Through
Foreclosure 935 690
________ ________
Total Non-Performing Assets $1,300 $1,711
======== ========
Accruing Loans Past Due Ninety
Days or More $186 $810
======== ========
Non-Accrual Loans as a Percent
of Total Loans 0.65% 1.71%
Non-Performing Assets as a Percent of
Total Loans and Real Estate and Other
Property Acquired by Foreclosure 2.27% 2.83%
Allowance for Loan Losses as a Percen
of Non-Accruing Loans 614.52% 205.09%
Allowance for Loan Losses as a Percent
of Non-Performing Assets 172.54% 122.38%
<PAGE>
TABLE 8
SUMMARY OF LOAN LOSS EXPERIENCE
(dollars in thousands)
December 31,
__________________
1994 1993
_______ _______
Balance at Beginning of Year $2,094 $1,436
Provision Charged to Expense 0 300
Charge-Offs:
Real Estate 18 220
Consumer 220 351
Commercial and All Other 0 2
________ _______
Total Charge-Offs 238 573
________ _______
Recoveries:
Real Estate 118 566
Consumer 231 189
Commercial and All Other 38 176
________ _______
Total Recoveries 387 931
________ _______
Net Loan Charge-Offs (Recoveries) (149) (358)
________ ________
Balance at End of Year $2,243 $2,094
======== =========
Net Loan (Recoveries) as a Percent
of Average Loans (0.26%) (0.58%)
(Recoveries) as a Percent of Charge-O (162.61%) (162.48%)
Allowance for Possible Loan Losses as
a Percent of Year-End Loans 3.98% 3.50%
<PAGE>
TABLE 9
DEPOSIT AVERAGE BALANCES AND RATES
(dollars in thousands)
December 31,
_______________________________________
1994 1993
____________________ _________________
Amount Rate Amount Rate
____________________ _________________
Non-Interest Bearing Demand Deposits $29,894 0.00% $28,435 0.00%
Now and Money Market Deposits 39,125 2.36% 42,410 2.37%
Savings Deposits 39,185 2.51% 39,963 2.70%
Other Consumer Time Deposits 38,866 3.90% 42,043 3.69%
___________________ ___________________
Total Core Deposits 147,070 2.33% 152,851 2.38%
Time Deposits of $100,000 and Over 6,508 2.43% 5,318 2.43%
___________________ ___________________
Total Average Deposits $153,578 2.33% $158,169 2.38%
==================== ===================
Remaining Maturity of Time Deposits of $100,000 and Over
1994 1993
_________________
Three Months or Less $3,666 $1,785
Over Three Through Six Months 1,549 2,280
Over Six Through Twelve Months 885 1,003
Over One Year Through Five Years 408 250
Over Five Years 0 0
__________________
Total $6,508 $5,318
==================
<PAGE>
TABLE 10
(dollars in thousands)
December 31,
_____________________
1994 1993
__________ ___________
CAPITAL
Tier I $13,663 $13,728
Tier II 981 1,064
_________ ___________
Total Capital $14,644 $14,792
========= ===========
Risk Weighted Assets $75,926 $82,785
========= ===========
RATIOS:
Tier I Capital to Risk Weighted Ass 18.00% 16.58%
Tier II Capital to Risk Weighted As 1.29% 1.29%
Total Capital to Risk Weighted Asse 19.29% 17.87%
Leverage Ratio 8.45% 7.66%
Dividend Payout Ratio 25.35% 15.96%
Return on Average Assets 0.81% 0.83%
Return on Average Equity 9.25% 10.60%
Average Equity to Average Assets 8.71% 7.88%
COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
The following discussion provides certain information concerning
the financial condition and results of operations of Peoples Bancshares,
Inc. and Subsidiary for the three months ended March 31, 1995 and 1994.
The financial position and results of operations of Peoples Bancshares,
Inc. were due primarily to its banking subsidiary, Peoples Bank and Trust
Company of St. Bernard. (For purposes of this discussion, Peoples
Bancshares, Inc. and Peoples Bank and Trust Company of St. Bernard are
collectively referred to as Bancshares or the Company.) Management's
discussion should be read in conjunction with the financial statements and
accompanying selected information presented elsewhere in this Proxy
Statement and Prospectus.
Overview
Net income for the first three months of 1995 was $274,000 compared
to $374,000 for the same period in 1994. The decrease of $100,000 was
caused by a decrease in the net interest margin of $58,000, an increase in
other operating expenses of $107,000, offset by a decrease in the provision
for loan losses of $150,000.
Average assets for the first three months of 1995 were
$175,146,000, a decrease of $8,000 over the same period in 1994. Increases
occurred in federal funds sold, offset by decreases in loans and
investments.
Results of Operations
Net Interest Income. Net interest income for the first three
months of 1995 was $1,899,000, compared to $1,957,000 for 1994. The
$58,000 decrease is attributable to declines in both the interest rates and
the volume of loans, which decrease was largely offset by the increase in
rates of return on investment securities. Increased rates on interest
bearing deposits contributed to the higher cost of funds in the three
month period ended March 31, 1995.
Interest Rate Sensitivity. The interest rate sensitivity gap is
the difference between the amount of interest bearing liabilities and the
amount of interest bearing assets maturing in any given time frame. These
differences provide a relative indication of the extent to which future
interest rate changes will affect net interest income. Bancshares
continues to operate at a negative gap, meaning that more liabilities
reprice in a short time frame than do assets. At March 31, 1995 the one
year repricing gap was a negative 5.92%.
Provision for Loan Losses. The provision for loan losses is the
periodic charge to earnings for potential losses in the loan portfolio.
The provision is based on a continuing review and assessment of the loan
portfolio, taking into consideration the history of the portfolio, the
current economy, the health of specific industries and the condition of
individual borrowers. There was no provision recorded for the period ended
March 31, 1995 compared to $150,000 for the same period in 1994.
Bancshares maintains an allowance for loan losses which it believes
is adequate to absorb reasonably foreseeable losses in the loan portfolio.
The allowance for loan losses was $2,298,000 at March 31, 1995 and
$2,295,000 at March 31, 1994. Net recoveries exceeded chargeoffs by
$54,837 and $51,476 during the periods ended March 31, 1995 and 1994,
respectively, and caused an increase in the allowance. The balance at March
31, 1995 was 4.20% of outstanding loans and at March 31, 1994 was 4.13% of
outstanding loans.
Non-Interest Income. Non-interest income for the first three
months of 1995 was $444,000, which was a $131,000 decrease from the
$575,000 recorded for the first three months of 1994. The decrease was
attributed to the decrease in gains on the sale of securities owned by
Bancshares as compared to the same period in 1994.
Non-Interest Expense. Non-interest expense for the first three
months of 1995 increased by $93,000 or 5.13% over the same period of 1994.
This increase was due to legal and professional fees related to the
proposed sale and merger of the Company.
Income Tax Expense. Income tax expense continues to be accrued at
the statutory rate of 34%. Deferred taxes are recognized for timing
differences between book and tax income.
Analysis of Financial Condition
Investment Securities. At March 31, 1995 investment securities
totaled $89,163,000, a decrease of $3,729,000 from the total at December
31, 1994. Held to maturity securities had a net unrealized loss of
$206,354 with gross gains of $38,342 and gross losses of $244,696 and
available for sale securities had net unrealized losses of $805,111,
comprised of gross gains of $104,888 and gross losses of $909,991 at March
31, 1995.
Loans. Total loans outstanding at March 31, 1995 were $54,706,000,
a decrease of $1,700,000 since December 31, 1994. The sale of $1,400,000
of student loans along with a decline in commercial lending caused this
decrease. Real estate loans continue to be the largest component of the
loan portfolio, comprising 64.68% at March 31, 1995.
Nonperforming Assets. Nonaccrual loans and foreclosed assets are
included in nonperforming assets. Nonperforming assets at March 31, 1995
totaled $1,325,000 and included $354,000 in nonaccrual loans and $971,000
in other real estate.
Management is not aware of any loans classified for regulatory
purposes and excluded from the above table which: (1) represent or result
from trends or uncertainties that will materially impact future operating
results, liquidity, or capital resources, or (2) represent material credits
about which management is aware of any information which causes doubts as
to the ability of such borrowers to comply with the loan repayment terms.
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114 (SFAS No. 114),
"Accounting by Creditors for Impairment of a Loan." In October 1994, FASB
issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures," which amends SFAS No. 114. These
statements establish standards, including the use of discounted cash flow
techniques, for measuring the impairment of a loan when it is probable that
the contractual terms will not be met. Bancshares adopted these statements
effective January 1, 1995, and adoption did not have a material impact on
financial position and results of operations.
Deposits. Total deposits at March 31, 1995 were $155,931,000, an
increase of $4,084,000 from the December 31, 1994 total of $151,847,000. A
decline in savings deposits contributed to the increases that occurred in
all other deposit categories.
Liquidity. Liquidity involves Bancshares' ability to raise funds
to support asset growth or to reduce assets, meet deposit withdrawals and
other borrowing needs, maintain reserve requirements and otherwise operate
the company on an ongoing basis. As shown in the accompanying statement of
cash flows for the period ended March 31, 1995, Bancshares' cash and cash
equivalents totaled $24,285,000, an increase of $10,745,000 from December
31, 1994. Cash and cash equivalents were generated primarily from
increases in deposits and maturities of investment securities.
Capital Resources. Bancshares maintains adequate capital for
regulatory purposes and has sufficient capital to absorb the risks inherent
in the business. At March 31, 1995 Bancshares had a Tier I capital to risk
weighted asset ratio of 19.68% and a leverage ratio of 8.57%.
INFORMATION ABOUT FCC
The following documents, or the indicated portions thereof, have
been filed by FCC with the Commission and are incorporated by reference
into this Proxy Statement and Prospectus: FCC's Annual Report on Form 10-K
for the year ended December 31, 1994; FCC's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995; FCC's Form 8-K dated March 3, 1995,
as amended by FCC's Form 8-K/A, dated March 31, 1995; FCC's Form 8-K filed
May 8, 1995; and the description of FCC Common Stock set forth in FCC's
Applications for Registration on Form 8-A filed with the Commission on
November 9, 1972 and December 22, 1976, as amended by a report on Form 8
filed with the Commission on June 19, 1989 and by a report on Form 8-A/A
filed with the Commission on August 12, 1993.
In addition, all other documents that will be filed by FCC with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") between the date of this Proxy
Statement and Prospectus and the date of the Meeting are incorporated
herein by reference from the date of filing. See "Available Information"
for information with respect to securing copies of documents incorporated
by reference in this Proxy Statement and Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded to
the extent that a statement contained herein or in any other document
subsequently filed and incorporated or deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement and Prospectus.
COMPARATIVE RIGHTS OF SHAREHOLDERS
General
If the Plan is consummated, all shareholders of the Company and the
Bank, other than those exercising dissenters' rights, will become
shareholders of FCC, and their rights will be governed by and be subject to
the Articles of Incorporation ("Articles") and Bylaws of FCC rather than
the Articles and Bylaws of the Company or the Bank. The following is a
brief summary of certain of the principal differences between the rights of
shareholders of FCC and the Company not described elsewhere herein.
Preferred Stock
The Board of Directors of FCC is authorized, without action of its
shareholders, to issue FCC preferred stock (the "Preferred Stock") from
time to time and to establish the designations, preferences and relative,
optional or other special rights and qualifications, limitations and
restrictions thereof, as well as to establish and fix variations in the
relative rights as between holders of any one or more series of such
Preferred Stock. The authority of the Board of Directors includes but is
not limited to the determination or fixing of the following with respect to
each series of Preferred Stock which may be issued: (a) the designation
of such series; (b) the number of shares initially constituting such
series; (c) the dividend rate and conditions and the dividend preferences,
if any, in respect of the FCC Common Stock and among the series of
Preferred Stock; (d) whether, and upon what terms, the Preferred Stock
would be convertible into or exchangeable for shares of any other class or
other series of the same class; (e) whether, and to what extent, holders
of one or more shares of a series of Preferred Stock will have voting
rights; and (f) the restrictions, if any, that are to apply on the issue
or reissue of any additional Preferred Stock.
Shares of Preferred Stock that are authorized would be available
for issuance in connection with the acquisition of other businesses,
infusion of capital, or for other lawful corporate purposes, at the
discretion of the Board of Directors. The Board of Directors could issue
Preferred Stock to a person or persons who would support management in
connection with a proxy contest to replace an incumbent director or in
opposition to an unsolicited tender offer. As a result, such proposals or
tender offers could be defeated even though favored by the holders of a
majority of the FCC Common Stock. As of the Record Date, FCC had
approximately 2,397,370 shares of Preferred Stock outstanding.
Neither the Company's nor the Bank's Articles authorize the
issuance of preferred stock.
Preemptive Rights
FCC's Articles do not grant holders of common stock preemptive
rights. Such rights enable holders of a corporation's stock to subscribe
for their proportionate share of new shares being issued by the corporation
for cash. The Company's Articles provide for preemptive rights to
subscribe to unissued shares of Company Common Stock or certain options or
warrants to purchase unissued shares.
Special Meetings of Shareholders
FCC's Articles provide that a special meeting of shareholders may
be called by the holders of a majority of the total voting power of FCC.
Under provisions of the Louisiana Business Corporation Law ("LBCL")
applicable to the Company, shareholders holding an aggregate of 20% of the
voting power may call such a meeting. The Bylaws of the Company provide
that a special meeting may be called by the holders of 10% of all shares
entitled to vote at such meeting. The Bank's Bylaws provide that a special
meeting may be called by the holders of not less than 25% of the voting
power of the Bank.
Issuance or Sale of Common Stock
Under the Articles of FCC and applicable provisions of the LBCL,
FCC's Board of Directors without shareholder approval may authorize the
issuance or sale of FCC Common Stock, and grant options, warrants or other
rights to acquire FCC Common Stock, up to the full number of shares
authorized by FCC's Articles. The Articles of the Company, on the other
hand, require shareholder approval of the issuance of Company Common Stock,
or certain rights to acquire Company Common Stock, if the number of shares
proposed to be issued or covered by such rights in any twelve-month period
would exceed 20% of the then outstanding shares of Company Common Stock.
Shareholder Vote Requirements
Under the Articles of FCC and applicable provisions of the LBCL,
the affirmative vote of holders of two-thirds of the voting power of FCC
present at a meeting of shareholders is necessary whenever FCC shareholder
approval is required for an amendment to FCC's Articles or a merger,
consolidation, share exchange, sale of assets or dissolution. The
Company's Articles generally require approval of holders of 75% of the
voting power present for similar actions. In addition, the Company's
Articles require shareholder approval by the same percentage of the voting
power present for certain actions that FCC's shareholders would not be
required to approve under FCC's Articles: (a) certain issuances of Company
Common Stock, as described under "Issuance or Sale of Common Stock," above,
(b) agreements pursuant to which at least 40% of the shares of Company
Common Stock are to be acquired from the holders thereof, and (c) the sale
of 40% or more of the Company's assets. The Bank's Articles generally
require shareholder approval by a vote of two-thirds (2/3) of the amount of
the capital stock when present or represented and voting at a general
meeting of the shareholders in order to make certain changes affecting the
Bank's capital stock, to amend the Bank's Articles, or to dissolve the
Bank. The Louisiana Commissioner of Financial Institutions must approve
any amendment of the Bank's Articles.
Restrictions on Certain Stock Acquisitions
Other than certain restrictions of Louisiana and federal law
applicable to both FCC and the Company, there are no restrictions on the
number of shares of FCC Common Stock or Preferred Stock that may be
acquired by any person. Article Seventeen of the Company's Articles
prohibits certain persons owning 20% or more of the Company's Common Stock
from acquiring an additional 5% or more of the Company's Common Stock in
any twelve-month period, other than by will or intestate succession, unless
the consideration paid is equal to or greater than the average
consideration paid for all other shares owned by such person and his or its
affiliates. The Company has proposed the repeal of Article Seventeen in
its entirety at the Meeting. See "Amendment to Company's Articles of
Incorporation."
Assessment of Stock
Neither the stock of FCC nor of the Company may be assessed.
However, pursuant to La. R.S. 6:262, upon a determination by the Louisiana
Commissioner of Financial Institutions that the capital stock of the Bank
is impaired, and upon the subsequent authorization of a majority vote of
the Bank's Board of Directors, the Board may levy a special assessment
against every shareholder of record for the amount required to remedy the
impairment. In general, if the shareholder does not pay the special
assessment within thirty days notice after the assessment is sent, the
Board may declare that shareholder's shares to be in default and may
proceed to sell the shares.
Inspection Rights
Under the LBCL, applicable to FCC and the Company, upon five days'
written notice, any shareholder, except a business competitor, who has
possessed at least 5% of the outstanding shares for a minimum of six months
has the right to examine in person or by representative the books and
records of the corporation for any proper purpose. Two or more
shareholders may aggregate their stock holdings to reach the requisite 5%.
Business competitors, however, must have possessed at least 25% of the
outstanding shares for a minimum of six months to obtain such inspection
rights.
Under La. R.S. 6:279 applicable to the Bank, any shareholder,
except a business competitor, who has possessed at least 2% of the
outstanding shares for a minimum of six months has the right to examine in
person or by representative the books showing the amount of common stock
subscribed, the names and residences of owners of stock, the amount of
stock owned by each of them, the amount of said stock paid and by whom, the
last transfer of such stock with the date of transfer, the names and
residences of the Bank's officers, the records of the proceedings of the
shareholders, directors, and committees of the board, and the Bank's
Articles and Bylaws. Any shareholder, except a business competitor, who
has possessed at least 25% of the outstanding shares for a minimum of six
months has the right to examine in person or by representative the books
and records of the Bank, except files and records relating to credit
information, loan transactions, and deposit accounts of individual
customers of the Bank. Two or more shareholders may aggregate their stock
holdings to reach the requisite 2% or 25% thresholds. Business
competitors, however, must have possessed at least 40% of the outstanding
shares for a minimum of six months to exercise such inspection rights.
Voluntary Dissolution
The FCC Articles provide that the affirmative vote of the holders
of two-thirds of the voting power present or represented by proxy at a
meeting of shareholders is required to approve a voluntary dissolution of
FCC. The Company's Articles state that a voluntary proceeding for
dissolution of the Company can be commenced only upon authorization by the
holders of 75% of the voting power present or represented at a meeting of
shareholders. Under La. R.S. 6:371 applicable to the Bank, a voluntary
proceeding for dissolution of the Bank must be approved by the vote of at
least two-thirds of the total voting power of the Bank.
Anti-Takeover Provisions
Sections 12:132-134 of the LBCL (the "Fair Price Law") place
restrictions on certain "business combinations" which include generally
mergers, consolidations, share exchanges, sales and leases of assets,
issuances of securities and similar transactions, if made by certain
Louisiana corporations (including both FCC and the Company) with an
"interested shareholder." An interested shareholder generally includes any
person who is the beneficial owner of 10% or more of the voting power of
the then outstanding voting stock. The Fair Price Law generally does not
apply if the shareholders receive in the business combination consideration
for their shares determined under a set of complex provisions, the effect
of which can be to discourage certain acquisitions of stock of a
corporation that is subject to the Fair Price Law. A corporation is
entitled under certain circumstances to elect not to be subject to the Fair
Price Law respecting business combinations. If such election is not made,
and if the Fair Price Law otherwise applies, a business combination with an
interested shareholder generally is prohibited unless the business
combination is recommended by the Board of Directors and approved by the
affirmative vote of at least each of the following: (i) 80% of the votes
entitled to be cast by outstanding shares of voting stock voting together
as a single voting group, and (ii) two-thirds of the votes entitled to be
cast by holders of voting stock, other than voting stock held by the
interested shareholder who is a party to the business combination, voting
together as a single voting group. By resolution of its Board, the Company
has elected not to have the Fair Price Law apply to the Merger. The Fair
Price Law does not apply to the Bank and its shareholders.
Under Sections 12:135 through 140.2 of the LBCL (the "Control
Shares Law"), a person who acquires shares in certain Louisiana
corporations (including FCC and the Company) and, as a result, increases
such person's voting power in the corporation to within any of three ranges
of voting power, acquires the voting rights with respect to such shares
only to the extent granted by a majority of the pre-existing, disinterested
shareholders of the corporation. The three applicable ranges of voting
power are: (i) more than one-fifth, but less than one-third;
(ii) one-third or more, but less than a majority of all voting power; and
(iii) a majority or more of all voting power. Certain acquisitions of
shares are exempted from the provisions of the Control Shares Law,
including acquisitions pursuant to a merger, consolidation, or share
exchange agreement to which the issuing corporation is a party. Since
FCC's acquisition of Company Common Stock is to be made pursuant to a
merger agreement and FCC and the Company are parties thereto, the Control
Shares Law does not apply to the Merger. The Control Shares Law does not
apply to the Bank and acquisitions of its shares.
LEGAL MATTERS
Correro, Fishman & Casteix, L.L.P., has rendered its opinion that
the shares of FCC Common Stock to be issued in connection with the Plan
have been duly authorized and, if and when issued pursuant to the terms of
the Plan, will be validly issued, fully paid and non-assessable.
EXPERTS
The audited consolidated financial statements of the Company and
its subsidiary as of and for each of the years in the three-year period
ended December 31, 1994 have been audited by LaPorte, Sehrt, Romig & Hand,
independent public accountants, as indicated in their report with respect
thereto, and have been included herein in reliance upon the authority of
such firm as experts in accounting and auditing.
The audited consolidated financial statements of FCC and its
subsidiaries incorporated by reference in this Proxy Statement and
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and have
been so incorporated by reference in reliance upon the authority of such
firm as experts in accounting and auditing. With respect to the unaudited
consolidated interim financial information of FCC and its subsidiaries
incorporated by reference herein from FCC's quarterly report on Form 10-Q,
Arthur Andersen LLP has applied limited procedures in accordance with
professional standards for a review of that information. However, their
separate report thereon states that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on that information should be restricted
in light of the limited nature of the review procedures applied. In
addition, Arthur Andersen LLP is not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of
the registration statement prepared or certified by them within the meaning
of Sections 7 and 11 of the Securities Act.
OTHER MATTERS
At the time of the preparation of this Proxy Statement and
Prospectus, the Company and the Bank had not been informed of any matters
to be presented for action at the Meeting other than the consideration of
the Plan, and, in the case of the Company, the Amendment. If any other
matters come before the Meeting or any adjournment thereof, the persons
named in the enclosed proxy will vote on such matters according to their
best judgment.
Shareholders are urged to sign the enclosed proxy, which is
solicited on behalf of the Boards of Directors of the Company and the Bank,
and return it at once in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
___________________________________________
Secretary, Peoples Bancshares, Inc. and
Peoples Bank & Trust Company of St. Bernard
Chalmette, Louisiana
____________, 1995
<PAGE>
FIRST COMMERCE CORPORATION
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
In addition to the proposed merger with Peoples Bancshares, Inc.
(Peoples), First Commerce Corporation (FCC) has a merger
pending with Central Corporation (Central). Additionally, FCC's
merger with Lakeside Bancshares, Inc. (Lakeside) was completed
on August 3, 1995. The unaudited pro forma condensed combined
balance sheet as of March 31, 1995 and the unaudited pro forma
condensed combined statements of income for the three months ended
March 31, 1995 and for the years ended December 31, 1994, 1993 and
1992 appearing on the following pages give effect to the proposed
mergers of Peoples and Central and the recently completed merger
of Lakeside (collectively the "Mergers") into FCC. A brief
description of each of the mergers follows.
FCC and Peoples have signed a definitive agreement to merge the
two companies. Peoples' majority owned subsidiary, Peoples Bank
and Trust Company of St. Bernard (Peoples Bank), will be merged
with FCC's wholly owned subsidiary, First National Bank of
Commerce. Shareholders of Peoples and the minority shareholders
of Peoples Bank will receive shares of FCC common stock with a
value of approximately $30.8 million. The exact number of shares
will be determined at the time the mergers are effected. Also,
under the terms of the Merger Agreement with Peoples, upon the
closing of the merger, certain properties which are leased by
Peoples from Peoples Properties Limited Partnership (Partnership)
will be purchased by FCC for a price of $2,504,000. The payment
of this consideration will be effected through the assumption by
FCC of the debt owed on these properties with an outstanding
principal balance of $2,504,000.
FCC and Central, the parent company of Central Bank, Monroe,
Louisiana, have signed a definitive agreement to merge Central
into FCC. Under the terms of the agreement, Central Bank will
retain separate bank status and will become a wholly owned
subsidiary of FCC. Shareholders of Central will receive 1.67
shares, subject to reduction in certain limited circumstances not
expected to occur, of FCC common stock for each share of Central
common stock outstanding. The exact number of shares will be
determined at the time the merger is effected but in no event
will exceed 6,792,453 shares.
FCC and Lakeside and their respective subsidiaries, The First
National Bank of Lake Charles (FNBLC) and Lakeside National Bank
of Lake Charles (LNB) completed their merger on August 3, 1995.
Shareholders of Lakeside received approximately 984,220 shares of
FCC common stock with a value of approximately $30 million. The
Lakeside merger has been accounted for as a pooling-of-interests.
The proposed mergers are expected to be accounted for as
poolings-of-interests. The pro forma financial statements have
been prepared to reflect the consummation of all of the proposed
mergers. No assurance can be given, however, that any or all of
the mergers will be consummated, and consummation of one or more
of the proposed mergers is not a condition to the consummation of
any other proposed merger.
On February 17, 1995, FCC completed mergers with First
Bancshares, Inc. (First) and City Bancorp, Inc. (City). The
First merger was accounted for as a pooling-of-interests;
accordingly, FCC's financial statements have been restated. The
City merger was accounted for using the purchase method of
accounting. FCC's results of operations include nonrecurring
costs associated with these mergers of approximately $1.5 million
after taxes for the three months ended March 31, 1995, and $2
million after taxes for the year ended December 31, 1994.
No provision has been made for nonrecurring charges or credits
directly related to the Mergers in the pro forma
financial statements. Such charges are estimated to be $6 to $11
million after taxes. The unaudited pro forma condensed combined
balance sheet includes adjustments directly attributable to the
Mergers based on estimates derived from information
currently available.
The pro forma financial statements do not purport to be
indicative of the financial position or results of operations
that would actually have been obtained if the Mergers
had been in effect at such dates or for such periods, or of the
results that may be obtained in the future.
<PAGE>
FIRST COMMERCE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
March 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Historical
---------------------------------------------
Peoples
Minority Lakeside Pro Pro
Partner- Divestiture Forma Forma
FCC Central Lakeside Peoples ship Intere <F1> Adjustment<F2>Combined
--------- -------- --------- -------- -------- ------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from
banks $343,176 $38,408 $12,562 $7,285 $- $- ($6,904) $- $394,527
Interest-bearing
deposits in
other banks 151 137 8,990 - - - - - 9,278
Securities held to
maturity 10,179 84,751 39,564 20,953 - - - - 155,447
Securities available
for sale 2,590,376 35,742 9,010 68,210 - - - - 2,703,338
Trading account
securities 13,613 - - - - - - - 13,613
Federal funds sold
and securities
purchased under
resale agreements 2,825 56,035 2,123 17,000 - - - - 77,983
Loans and leases,
net of unearned
income 3,577,687 594,709 92,913 54,706 - - (25,534) - 4,294,481
Allowance for
loan losses (57,828) (9,929) (3,028) (2,298) - - - - (73,083)
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Net loans and
leases 3,519,859 584,780 89,885 52,408 - - (25,534) - 4,221,398
Premises and
equipment 129,264 19,199 8,013 3,767 2,504 - (701) - 162,046
Goodwill and other
intangible assets 21,064 826 - 397 - - - - 22,287
Other assets 248,819 14,174 1,756 4,951 - 560 (105) (560)<F4> 269,595
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Total assets $6,879,326 $834,052 $171,903 $174,971 $2,504 $560 ($33,244) ($560) $8,029,512
========== ======== ======== ======== ====== ===== ======== ======== ==========
LIABILITIES
Noninterest-
bearing deposits $1,233,515 $114,959 $44,795 $33,093 $- $- ($11,067) $- $1,415,295
Interest-bearing
deposits 4,434,589 629,035 108,484 122,838 - - (25,735) - 5,269,211
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Total deposits 5,668,104 743,994 153,279 155,931 - - (36,802) - 6,684,506
Short-term borrowings 489,215 8,179 - - - - - - 497,394
Minority Interest - - - 560 - - - (560)<F4> -
Other liabilities 85,965 9,096 1,084 2,978 2,504 - 1,218 - 102,845
Long-term debt 88,665 - - 479 - - - - 89,144
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Total
liabilities 6,331,949 761,269 154,363 159,948 2,504 - (35,584) (560) 7,373,889
---------- -------- -------- -------- ------ ----- -------- -------- ----------
STOCKHOLDERS' EQUITY
Preferred stock 59,934 - - - - - - - 59,934
Common stock 147,234 4,067 1,250 602 - - - 38,024 <F3> 191,177
Capital surplus 140,262 15,904 2,500 3,026 - - - (38,290)<F3> 123,402
Retained earnings 232,139 52,975 13,882 12,173 - 560 2,340 - 314,069
Unearned restricted
stock compensation (1,056) - - - - - - - (1,056)
Treasury stock (13,760) - - (266) - - - 266 <FN3> (13,760)
Unrealized gain(loss)
on securities
available for sale (17,376) (163) (92) (512) - - - - (18,143)
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Total
stockholders'
equity 547,377 72,783 17,540 15,023 - 560 2,340 - 655,623
---------- -------- -------- -------- ------ ----- -------- -------- ----------
Total
liabilities
& stockholders'
equity $6,879,326 $834,052 $171,903 $174,971 $2,504 $560 ($33,244) ($560) $8,029,512
========== ======== ======== ======== ====== ===== ======== ======== ==========
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended March 31, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Central Lakeside Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $118,754 $16,295 $2,990 $2,947 $- $- $140,986
Interest expense 48,508 6,551 692 1,048 - - 56,799
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income 70,246 9,744 2,298 1,899 - - 84,187
Provision for loan losses 3,007 230 (75) - - - 3,162
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 67,239 9,514 2,373 1,899 - - 81,025
Other income 16,204 4,201 743 444 - - 21,592
Operating expense 67,668 9,000 2,130 1,916 - - 80,714
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense 15,775 4,715 986 428 - - 21,903
Income tax expense 5,142 1,752 352 140 - - 7,386
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income before minority
interest 10,633 2,963 634 288 - - 14,517
Earnings of minority interest - - - (14) 14 - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income 10,633 2,963 634 274 14 - 14,517
Preferred dividend requirements 1,087 - - - - - 1,087
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common
shares $9,546 $2,963 $634 $274 $14 $- $13,430
============ ============ ============ ============ ============ ============ ============
Earnings per share <F5>
Primary $0.33 $0.73 $1.27 $11.69 $15.08 $0.35
Fully diluted $0.33 $0.73 $1.27 $11.69 $15.08 $0.35
Weighted average shares outstanding <F5>
Primary 29,103,906 4,061,731 500,000 23,408 37,892,593
Fully diluted 29,103,906 4,061,731 500,000 23,408 37,892,593
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Central Lakeside Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $427,790 $56,314 $11,533 $11,601 $- $- $507,238
Interest expense 156,522 21,084 2,724 3,625 - - 183,955
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income 271,268 35,230 8,809 7,976 - - 323,283
Provision for loan losses (11,443) 1,025 - - - - (10,418)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 282,711 34,205 8,809 7,976 - - 333,701
Other income 69,564 16,132 3,238 1,707 - - 90,641
Operating expense 253,659 34,531 9,710 7,624 - - 305,524
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense 98,616 15,806 2,337 2,059 - - 118,818
Income tax expense 31,854 5,279 775 619 - - 38,527
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income before minority
interest 66,762 10,527 1,562 1,440 - - 80,291
Earnings of minority interest - - - (55) 55 - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income 66,762 10,527 1,562 1,385 55 - 80,291
Preferred dividend requirements 4,347 - - - - - 4,347
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common
shares $62,415 $10,527 $1,562 $1,385 $55 $- $75,944
============ ============ ============ ============ ============ ============ ============
Earnings per share <F5>
Primary $2.15 $2.59 $3.12 $59.18 $59.73 $2.01
Fully diluted $2.10 $2.59 $3.12 $59.18 $59.73 $1.98
Weighted average shares outstanding <F5>
Primary 29,022,779 4,066,731 500,000 23,408 37,811,466
Fully diluted 31,817,158 4,066,731 500,000 23,408 40,605,845
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1993
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Central Lakeside Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $413,973 $52,889 $11,999 $12,525 $- $- $491,386
Interest expense 148,353 20,084 3,207 3,819 - - 175,463
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income 265,620 32,805 8,792 8,706 - - 315,923
Provision for loan losses (5,804) 3,080 - 300 - - (2,424)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 271,424 29,725 8,792 8,406 - - 318,347
Other income 104,964 15,898 3,256 1,816 - - 125,934
Operating expense 231,665 32,404 9,764 7,859 - - 281,692
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense 144,723 13,219 2,284 2,363 - - 162,589
Income tax expense 43,521 4,194 822 804 - - 49,341
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income before minority
interest 101,202 9,025 1,462 1,559 - - 113,248
Earnings of minority interest - - - (56) 56 - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income <F6> 101,202 9,025 1,462 1,503 56 - 113,248
Preferred dividend requirements 4,348 - - - - - 4,348
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common
shares $96,854 $9,025 $1,462 $1,503 $56 $- $108,900
============ ============ ============ ============ ============ ============ ============
Earnings per share <F5>
Primary $3.36 $2.22 $2.92 $64.21 $62.56 $2.89
Fully diluted $3.11 $2.22 $2.92 $64.21 $62.56 $2.76
Weighted average shares outstanding <F5>
Primary 28,837,748 4,066,731 500,000 23,408 37,626,435
Fully diluted 34,830,540 4,066,731 500,000 23,408 43,619,227
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1992
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Central Lakeside Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $419,196 $56,309 $13,593 $14,633 $- $- $503,731
Interest expense 170,031 25,979 4,798 5,197 - - 206,005
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income 249,165 30,330 8,795 9,436 - - 297,726
Provision for loan losses 22,720 4,185 675 1,506 - - 29,086
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 226,445 26,145 8,120 7,930 - - 268,640
Other income 98,682 14,498 4,167 1,882 - - 119,229
Operating expense 213,515 30,270 10,383 7,862 - - 262,030
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense
and minority interest 111,612 10,373 1,904 1,950 - - 125,839
Income tax expense 34,539 3,321 689 660 - - 39,209
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income before minority
interest 77,073 7,052 1,215 1,290 - - 86,630
Earnings of minority interest (918) - - (48) 48 - (918)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income 76,155 7,052 1,215 1,242 48 - 85,712
Preferred dividend requirements 4,076 - - - - - 4,076
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common
shares $72,079 $7,052 $1,215 $1,242 $48 $- $81,636
============ ============ ============ ============ ============ ============ ============
Earnings per share <F5>
Primary $2.73 $1.73 $2.43 $53.07 $52.36 $2.32
Fully diluted $2.58 $1.73 $2.43 $53.07 $52.36 $2.26
Weighted average shares outstanding <F5>
Primary 26,434,077 4,066,731 500,000 23,408 35,222,764
Fully diluted 32,273,902 4,066,731 500,000 23,408 41,062,589
(See accompanying notes)
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (Unaudited)
<F1> In order to eliminate any concern about the competitive impact of the
merger with Lakeside, FCC and Lakeside committed to the
divestiture of two branches of LNB as required by regulators. The
sale of the two branches included loans, deposits, premises and
equipment, and cash related to the branches. The amounts shown
represent the estimated book values of the assets and liabilities
sold as a result of these divestitures, for a premium of $3.6
million before taxes. The pro forma condensed combined income
statements do not reflect any adjustments for the divestiture. Any
such adjustments are estimated to be immaterial to the pro forma
combined results of operations.
<F2> To calculate pro forma information, it has been assumed that the
number of outstanding shares of FCC common stock includes shares
issued or to be issued upon consumation of the mergers. In
connection with the proposed mergers, FCC will issue shares of
its common stock to the shareholders of Peoples, Central and to
the minority shareholders of Peoples Bank. The total number of
shares issued in the transaction with Lakeside was approximately
984,220.
Under the terms of the proposed merger with Peoples, the number of
shares of FCC common stock to be delivered will be determined by
reference to the average of the closing sales prices of a share of FCC
common stock for the 10 trading days ending on the last trading day
before the closing date for the merger. For purposes of these pro
formas, the conversion rate has been assumed to be 41.69 for each
share of Peoples common stock and 40.50 for each share of Peoples Bank
common stock owned by the minority interest, based on the average
closing sales prices of a share of FCC common stock for the 10 trading
days ending July 27, 1995, of $30.40.
Under the terms of the proposed merger with Central, the number of
shares of FCC common stock to be issued will be 1.67 times the number
of Central common shares outstanding at the date of the merger, not to
exceed 6,792,453 shares. These pro formas assume the issuance of
6,791,441 shares of FCC common stock based on the number of shares of
Central common stock outstanding as of March 31, 1995.
<F3> Calculation of Pro Forma Capital. As required by generally accepted
accounting principles under the pooling-of-interests method of
accounting, FCC's common stock account has been decreased by the
balance in common stock for Central, Lakeside and Peoples and
increased by the par value of the FCC common stock issued or assumed
to be issued under the mergers. An analysis of these adjustments
follows (in thousands):
<TABLE>
<CAPTION>
Stockholders' Equity
-------------------------------------------------------------
Loss On
Securities Total
Common Capital Retained Treasury Available Stockholders'
Stock Surplus Earnings Stock For Sale Equity
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peoples (A) $ 5,065 $ (1,703) $ - $ - $ - $ 3,362
(602) (3,026) - 266 - (3,362)
Lakeside (B) 4,921 (1,171) - - - 3,750
(1,250) (2,500) - - - (3,750)
Central (C) 33,957 (13,986) - - - 19,971
(4,067) (15,904) - - - (19,971)
--------------------------------------------------------------
$38,024 $(38,290) $ - $ 266 $ - $ -
==============================================================
</TABLE>
(A) Issuance of 1,031,026 shares of FCC common stock for 24,082 shares of
Peoples common stock (less 674 shares of treasury stock retired) and
for the minority interest in Peoples Bank in a transaction accounted
for as a pooling-of-interests. FCC's common stock account has been
decreased by the balance in Peoples common stock account ($602,000)
and increased by the par value of the FCC common stock issued
($5,065,000).
(B) Issuance of 984,220 shares of FCC common stock for 500,000 shares
of Lakeside common stock in a transaction accounted for as a pooling-
of-interests. FCC's common stock account has been decreased by the
balance in Lakeside's common stock account ($1,250,000) and increased
by the par value of the FCC common stock issued ($4,921,000).
(C) Issuance of 6,791,441 shares of FCC common stock for 4,066,731 shares
of Central common stock in a transaction accounted for as a pooling-
of-interests. FCC's common stock account has been decreased by the
balance in Central's common stock account ($4,067,000) and increased
by the par value of the FCC common stock issued ($33,957,000).
<F4> Reflects the elimination of the Peoples Bank minority interest upon
the consummation of the mergers.
<F5> Pro forma earnings per share have been computed on the pro forma
combined weighted average shares outstanding. Pro forma combined
weighted average shares outstanding include weighted average
outstanding shares of FCC common stock, after adjustment for shares
of FCC common stock issued or assumed to be issued in connection with
the mergers. Income for primary earnings per share is adjusted
for preferred stock dividends. Income for fully diluted earnings per
share is adjusted for interest related to convertible debentures, net
of the related income tax effect, and preferred stock dividends. For
the first quarter of 1995, convertible items were antidilutive;
therefore, the primary and fully diluted earnings per share
computations are the same.
<F6> Lakeside and Peoples adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" in 1993 and reported
the cumulative effect of this change in their respective 1993
consolidated statements of income. The effect of this change was a
$131,000 decrease in net income for Lakeside and a $36,000 decrease
in net income for Peoples. These amounts are not considered to be
components of ongoing results and, accordingly, have not been
included in the historical or combined pro forma amounts presented.
<F7> The effect of the transaction with Partnership is estimated to be
immateral to the pro forma combined results of operations.
<PAGE>
FIRST COMMERCE CORPORATION
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
(Peoles Bancshares, Inc. Transaction Only)
The unaudited pro forma condensed combined balance sheet as of
March 31, 1995 and the unaudited pro forma condensed combined
statements of income for the three months ended March 31, 1995
and for the years ended December 31, 1994, 1993 and 1992
appearing on the following pages give effect to the proposed
merger of Peoples Bancshares, Inc. (Peoples) into First Commerce
Corporation (FCC) using the pooling-of-interests method of
accounting. A brief description of the merger follows.
FCC and Peoples have signed a definitive agreement to merge the
two companies. Peoples' majority owned subsidiary, Peoples Bank
and Trust Company of St. Bernard (Peoples Bank), will be merged
with FCC's wholly owned subsidiary, First National Bank of
Commerce. Shareholders of Peoples and the minority shareholders
of Peoples Bank will receive shares of FCC common stock with a
value of approximately $30.8 million. The exact number of shares
will be determined at the time the mergers are effected. Also
under the terms of the Merger Agreement with Peoples, upon the
closing of the merger, certain properties which are leased by
Peoples from Peoples Properties Limited Partnership (Partnership)
will be purchased by FCC for a price of $2,504,000. The payment
of this consideration will be effected through the assumption by
FCC of the debt owed on these properties with an outstanding
balance of $2,504,000.
On February 17, 1995, FCC completed mergers with First Bancshares,
Inc. (First) and City Bancorp, Inc. (City). The First merger was
accounted for as a pooling-of-interests; accordingly, FCC's
financial statements have been restated. The City merger was
accounted for using the purchse method of accounting. FCC's
results of operations include nonrecurring costs associated with
these mergers of approximately $1.5 million after taxes for the
three months ended March 31, 1995 and $2 million after taxes for
the year ended December 31, 1994.
No provision has been made for nonrecurring charges or credits
directly related to the proposed merger in the pro forma
financial statements. Such charges are estimated to be $4 to $5
million after taxes. The unaudited pro forma condensed combined
balance sheet includes adjustments directly attributable to the
Mergers based on estimates derived from information currently
available.
The pro forma financial statements do not purport to be
indicative of the financial position or results of operations
that would actually have been obtained if the merger had been
in effect at such dates or for such periods, or of the results
that may be obtained in the future.
FIRST COMMERCE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
March 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Historical
---------------------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Peoples Partnership Interest Adjustments<F1> Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $343,176 $7,285 $- $- $- $350,461
Interest-bearing deposits in
other banks 151 - - - - 151
Securities held to maturity 10,179 20,953 - - - 31,132
Securities available for sale 2,590,376 68,210 - - - 2,658,586
Trading account securities 13,613 - - - - 13,613
Federal funds sold and securities - -
purchased under resale agreements 2,825 17,000 - - - 19,825
Loans and leases, net of unearned
income 3,577,687 54,706 - - - 3,632,393
Allowance for loan losses (57,828) (2,298) - - - (60,126)
------------ ------------ ------------ ------------ ------------ ------------
Net loans and leases 3,519,859 52,408 - - - 3,572,267
Premises and equipment 129,264 3,767 2,504 - - 135,535
Goodwill and other intangible assets 21,064 397 - - - 21,461
Other assets 248,819 4,951 - 560 (560)<F3> 253,770
------------ ------------ ------------ ------------ ------------ ------------
Total assets $6,879,326 $174,971 $2,504 $560 ($560) $7,056,801
============ ============ ============ ============ ============ ============
LIABILITIES
Noninterest-bearing deposits 1,233,515 33,093 - - - 1,266,608
Interest-bearing deposits 4,434,589 122,838 - - - 4,557,427
------------ ------------ ------------ ------------ ------------ ------------
Total deposits 5,668,104 155,931 - - - 5,824,035
Short-term borrowings 489,215 - - - - 489,215
Minority Interest - 560 - (560)<F3> -
Other liabilities 85,965 2,978 2,504 - - 91,447
Long-term debt 88,665 479 - - - 89,144
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities 6,331,949 159,948 2,504 - (560) 6,493,841
------------ ------------ ------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock 59,934 - - - - 59,934
Common stock 147,234 602 - - 4,463<F2> 152,299
Capital surplus 140,262 3,026 - - (4,729)<F2> 138,559
Retained earnings 232,139 12,173 - 560 - 244,872
Unearned restricted stock
compensation (1,056) - - - - (1,056)
Treasury stock (13,760) (266) - - 266<F2> (13,760)
Unrealized gain(loss) on securities
available for sale (17,376) (512) - - - (17,888)
------------ ------------ ------------ ------------ ------------ ------------
Total stockholders' equity 547,377 15,023 - 560 - 562,960
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity $6,879,326 $174,971 $2,504 $560 ($560) $7,056,801
============ ============ ============ ============ ============ ============
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended March 31, 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
--------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest income $118,754 $2,947 $- $121,701
Interest expense 48,508 1,048 - 49,556
------------ ------------ ------------ ------------ ------------
Net interest income 70,246 1,899 - 72,145
Provision for loan losses 3,007 - - 3,007
------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 67,239 1,899 - 69,138
Other income 16,204 444 - 16,648
Operating expense 67,668 1,916 - 69,584
------------ ------------ ------------ ------------ ------------
Income before income tax expense 15,775 428 - 16,202
Income tax expense 5,142 140 - 5,282
------------ ------------ ------------ ------------ ------------
Net income before minority interest 10,633 288 - - 10,920
Earnings of minority interest - (14) 14 - -
------------ ------------ ------------ ------------ ------------
Net income 10,633 274 14 - 10,920
Preferred dividend requirements 1,087 - - - 1,087
------------ ------------ ------------ ------------ ------------
Income applicable to common shares $9,546 $274 $14 $- $9,833
============ ============ ============ ============ ============
Earnings per share <F4>
Primary $0.33 $11.69 $15.08 $0.33
Fully diluted $0.33 $11.69 $15.08 $0.33
Weighted average shares outstanding <F4>
Primary 29,103,906 23,408 30,116,932
Fully diluted 29,103,906 23,408 30,116,932
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
--------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest income $427,790 $11,601 $- $- $439,391
Interest expense 156,522 3,625 - - 160,147
____________ ____________ ____________ ____________ ___________
Net interest income 271,268 7,976 - - 279,244
Provision for loan losses (11,443) - - - (11,443)
------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 282,711 7,976 - - 290,687
Other income 69,564 1,707 - - 71,271
Operating expense 253,659 7,624 - - 261,283
------------ ------------ ------------ ------------ ------------
Income before income tax expense 98,616 2,059 - - 100,675
Income tax expense 31,854 619 - - 32,473
------------ ------------ ------------ ------------ ------------
Net income before minority interest 66,762 1,440 - - 68,202
Earnings of minority interest - (55) 55 - -
------------ ------------ ------------ ------------ ------------
Net income 66,762 1,385 55 - 68,202
Preferred dividend requirements 4,347 - - - 4,347
------------ ------------ ------------ ------------ ------------
Income applicable to common shares $62,415 $1,385 $55 $- $63,855
============ ============ ============ ============ ============
Earnings per share <F4>
Primary $2.15 $59.18 $59.73 $2.13
Fully diluted $2.10 $59.18 $59.73 $2.08
Weighted average shares outstanding <F4>
Primary 29,022,779 23,408 30,035,805
Fully diluted 31,817,158 23,408 32,830,184
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1993
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
--------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest income $413,973 $12,525 $- $- $426,498
Interest expense 148,353 3,819 - - 152,172
------------ ------------ ------------ ------------ ------------
Net interest income 265,620 8,706 - - 274,326
Provision for loan losses (5,804) 300 - - (5,504)
------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 271,424 8,406 - - 279,830
Other income 104,964 1,816 - - 106,780
Operating expense 231,665 7,859 - - 239,524
------------ ------------ ------------ ------------ ------------
Income before income tax expense 144,723 2,363 - - 147,086
Income tax expense 43,521 804 - - 44,325
------------ ------------ ------------ ------------ ------------
Net income before minority interest 101,202 1,559 - - 102,761
Earnings of minority interest - (56) 56 - -
------------ ------------ ------------ ------------ ------------
Net income <F5> 101,202 1,503 56 - 102,761
Preferred dividend requirements 4,348 - - - 4,348
------------ ------------ ------------ ------------ ------------
Income applicable to common shares $96,854 $1,503 $56 $- $98,413
============ ============ ============ ============ ============
Earnings per share <F4>
Primary $3.36 $64.21 $62.56 $3.30
Fully diluted $3.11 $64.21 $62.56 $3.06
Weighted average shares outstanding <F4>
Primary 28,837,748 23,408 29,850,774
Fully diluted 34,830,540 23,408 35,843,566
(See accompanying notes)
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
Year Ended December 31, 1992
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical
--------------------------------------
Peoples Pro Pro
Minority Forma Forma
FCC Peoples Interest Adjustments Combined
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest income $419,196 $14,633 $- $- $433,829
Interest expense 170,031 5,197 - - 175,228
------------ ------------ ------------ ------------ ------------
Net interest income 249,165 9,436 - - 258,601
Provision for loan losses 22,720 1,506 - - 24,226
------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 226,445 7,930 - - 234,375
Other income 98,682 1,882 - - 100,564
Operating expense 213,515 7,862 - - 221,377
------------ ------------ ------------ ------------ ------------
Income before income tax expense
and minority interest 111,612 1,950 - - 113,562
Income tax expense 34,539 660 - - 35,199
------------ ------------ ------------ ------------ ------------
Net income before minority interest 77,073 1,290 - - 78,363
Earnings of minority interest (918) (48) 48 - (918)
------------ ------------ ------------ ------------ ------------
Net income 76,155 1,242 48 - 77,445
Preferred dividend requirements 4,076 - - - 4,076
------------ ------------ ------------ ------------ ------------
Income applicable to common shares $72,079 $1,242 $48 $- $73,369
============ ============ ============ ============ ============
Earnings per share <F4>
Primary $2.73 $53.07 $52.36 $2.67
Fully diluted $2.58 $53.07 $52.36 $2.54
Weighted average shares outstanding <F4>
Primary 26,434,077 23,408 27,447,103
Fully diluted 32,273,902 23,408 33,286,928
(See accompanying notes)
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
(1) To calculate pro forma information, it has been assumed that the
number of outstanding shares of FCC common stock includes shares
assumed to be issued upon consummation of the merger. In connection
with the proposed merger, FCC will issue shares of its common stock
to the shareholders of Peoples and to the minority shareholders of
Peoples Bank.Under the terms of the proposed merger with Peoples,
the number of shares of FCC common stock to be delivered will be
determined by reference to the average of the closing sales prices
of a share of FCC common stock for the 10 trading days ending on the
last trading day before the closing date for the merger. For
purposes of these pro formas, the conversion rate has been assumed
to be 41.69 for each share of Peoples common stock and 40.50 for each
share of Peoples Bank common stock owned by the minority interest,
based on the average closing sales prices of a share of FCC common
stock for the 10 trading days ending July 27, 1995, of $30.40.
(2) Calculation of Pro Forma Capital. As required by generally accepted
accounting principles under the pooling-of-interests method of
accounting, FCC's common stock account has been decreased by the
balance in common stock for Peoples and increased by the par value
of the FCC common stock issed or assumed to be issued under the
merger. An analysis of these adjustments follows (in thousands):
<TABLE>
<CAPTION>
Stockholders' Equity
------------------------------------------------------------------------
Loss On
Securities Total
Common Capital Retained Treasury Available Stockholders'
Stock Surplus Earnings Stock For Sale Equity
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Peoples (A) $ 5,065 $ (1,703) $ - $ - $ - $ 3,362
(602) (3,026) - 266 - (3,362)
------------------------------------------------------------------------
$ 4,463 $ (4,729) $ - $ 266 $ - $ -
========================================================================
</TABLE>
(A) Issuance of 1,013,026 shares of FCC common stock for 24,082 shares
of Peoples common stock (less 674 shares of treasury stock retired)
and for the minority interest in Peoples Bank in a transaction
accounted for as a pooling-of-interests. FCC's common stock account
has been decreased by the balance in Peoples common stock account
($602,000) and increased by the par value of the FCC common stock
issued ($5,065,000).
(3) Reflects the elimination of the Peoples Bank minority interest upon
the consummation of the merger.
(4) Pro forma earnings per share have been computed on the pro forma
combined weighted average shares outstanding. Pro forma combined
weighted average shares outstanding include weighted average
outstanding shares of FCC common stock, after adjustment for shares
of FCC common stock assumed to be issued in connection with the
proposed merger. Income for primary earnings per share is adjusted
for preferred stock dividends. Income for fully diluted earnings per
share is adjusted for interest related to convertible debentures, net
of the related income tax effect, and preferred stock dividends. For
the first quarter of 1995, convertible items were antidilutive;
therefore, the primary and fully diluted earnings per share
computations are the same.
(5) Peoples adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Tax" in 1993 and reported the cumulative effect
of this change in their 1993 consolidated statement of income. The
effect of this change was a $36,000 decrease in net income for
Peoples. This amount is not considered to be a component of ongoing
results and, accordingly, has not been included in the historical or
combined pro forma amounts presented.
(6) The effect of the transaction with Partnership is estimated to be
immaterial to the pro forma combined results of operations.
<PAGE>
C O N T E N T S
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
Financial Statements For The Three-Month Periods Ended
March 31, 1995 and 1994 (Unaudited):
Balance Sheets
Statements of Income
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Selected Information
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
Financial Statements For The Three-Month Periods Ended
March 31, 1995 and 1994 (Unaudited):
Balance Sheets
Statements of Income
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Selected Information
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
March 31,
_________________________
1995 1994
____________ ____________
Cash and Due from Banks $7,285,177 $7,156,843
Federal Funds Sold 17,000,000 17,650,000
Investment Securities Held-to-Maturity
Market Value of $20,746,534
and $19,398,183, Respectively) 20,952,888 19,407,220
Investment Securities Available-for-Sale 68,210,116 68,443,157
Loans - Net of Unearned Discount 54,706,177 55,585,022
Less: Allowance for Loan Losses (2,298,006) (2,294,990)
____________ ____________
Net Loans 52,408,171 53,290,032
____________ ____________
Premises and Equipment, Net 3,767,351 4,426,007
Other Real Estate Owned 970,946 691,917
Accrued Interest Receivable 1,719,970 1,540,753
Customers' Acceptance Liability 458,600 548,200
Excess Cost Over Fair Value of Assets
Acquired 397,278 445,611
Other Assets 1,800,810 1,720,269
____________ ____________
$174,971,307 $175,320,009
____________ ____________
See accompanying selected information
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
___________________________
1995 1994
_____________ _____________
LIABILITIES
Deposits
Non-Interest Bearing Demand $33,092,952 $29,519,035
NOW and Insured Money Market Accounts 38,069,749 41,601,960
Savings 36,517,731 40,387,275
Time 48,251,027 45,486,257
_____________ _____________
Total Deposits 155,931,459 156,994,527
Acceptances Outstanding 458,600 548,200
Accrued Interest Payable 458,451 401,103
Notes Payable 478,791 515,510
Other Liabilities 2,060,628 1,681,500
_____________ _____________
159,387,929 160,140,840
Minority Interest in Subsidiary 559,928 540,932
_____________ _____________
Total Liabilities 159,947,857 160,681,772
_____________ _____________
STOCKHOLDERS' EQUITY
Common Stock - $25 Par Value, 125,000
Shares Authorized, 24,082 Shares Issued
and Outstanding in 1995 and 1994 602,050 602,050
Additional Paid-In Capital 3,025,918 3,025,918
Undivided Profits 12,173,559 11,239,560
Unrealized Loss on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes (511,861) 36,925
_____________ _____________
Total 15,289,666 14,904,453
Less: Treasury Stock at Cost - 674 Shares in
1995 and 1994 (266,216) (266,216)
_____________ _____________
Total Stockholders' Equity 15,023,450 14,638,237
_____________ _____________
$174,971,307 $175,320,009
_____________ _____________
See accompanying selected information
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For The
Three-Month Periods Ended
March 31,
___________ _____________
1995 1994
____________ ___________
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $1,567,209 $1,673,593
U.S. Treasury Securities 671,866 588,117
Interest on U.S. Agency and Corporation Securities 271,838 221,089
Obligations of State and Political Subdivisions 57,987 50,988
Other Investment Income 245,561 197,648
Interest on Federal Funds Sold 132,647 153,082
____________ ___________
Total Interest Income 2,947,108 2,884,517
____________ ___________
INTEREST EXPENSE
Interest on Deposits 1,037,331 916,169
Interest on Notes Payable 10,836 11,635
____________ ___________
Total Interest Expense 1,048,167 927,804
____________ ___________
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSS 1,898,941 1,956,713
PROVISION FOR LOAN LOSSES 0 150,000
____________ ___________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,898,941 1,806,713
____________ ___________
OTHER INCOME
Service Charges on Deposit Accounts 321,671 305,318
Other Service Charges and Fees 86,718 92,770
Other Operating Income 36,072 34,217
Securities Gains (Losses) 0.00 143,045
____________ ___________
Total Other Income 444,461 575,350
____________ ___________
OTHER EXPENSE
Salaries and Employee Benefits 954,741 964,251
Occupancy Expense 468,710 473,051
Other Operating Expense 491,896 384,559
____________ ___________
Total Other Expenses 1,915,347 1,821,861
____________ ___________
INCOME BEFORE INCOME TAXES 428,055 560,202
PROVISION FOR INCOME TAXES 140,464 171,976
____________ ___________
INCOME BEFORE MINORITY INTEREST
IN CONSOLIDATED SUBSIDIARY 287,591 388,226
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY (13,845) (14,235)
____________ ___________
NET INCOME $273,746 $373,991
____________ ___________
EARNINGS PER SHARE $11.69 $15.98
____________ ___________
</TABLE>
See accompanying selected information.
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
For The Three-Month Periods Ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Investment
Additional Securities
Common Paid-In Undivided Available Treasury
Stock Capital Profits For Sale Stock Total
___________ ___________ ____________ ______________ ___________ ____________
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994 $602,050 $3,025,918 $11,099,649 $- ($266,216) $14,461,401
Net Income through March 31, 1994 - - 373,991 - - 373,991
Cash Dividends Paid
($10.00 Per Share) - - (234,080) - - (234,080)
Unrealized Gain on Securities
Available-for-Sale, Net of
Applicable Deferred Income Taxes - - - 36,925 - 36,925
___________ ___________ ____________ ______________ ___________ ____________
Balance - March 31, 1994 $602,050 $3,025,918 $11,239,560 $36,925 ($266,216) $14,638,237
=========== =========== ============ =============== =========== ============
Balance - January 1, 1995 $602,050 $3,025,918 $12,133,893 ($1,117,943) ($266,216) $14,377,702
Net Income through March 31, 1995 - - 273,746 - - 273,746
Cash Dividends Paid
($10.00 Per Share) - - (234,080) - - (234,080)
Unrealized Loss on Securities
Available-for-Sale, Net of
Applicable Deferred Income Taxe - - - 606,082 - 606,082
___________ ___________ ____________ ______________ ___________ ____________
Balance - March 31, 1995 $602,050 $3,025,918 $12,173,559 ($511,861) ($266,216) $15,023,450
=========== =========== ============= ============== =========== ============
</TABLE>
See accompanying selected information
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
For The
Three-Month Periods Ended
March 31,
_____________________________
1995 1994
_______________ _____________
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $273,746 $373,991
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Deferred Income Taxes (285,729) (59,574)
Provision for Loan Losses 150,000
Other Real Estate Owned Adjustments to Fair Market Value (72,800) 0.00
Depreciation and Amortization 99,299 100,058
Amortization of Excess Cost on Assets Acquired 12,083 12,083
Amortization of Premium Investment Securities - Held-to-Maturity 81,493 99,937
Amortization of Premium Investment Securities - Available-for-Sale 57,663 68,713
Accretion of Discount on Investment Securities - Held-to-Maturity (3,388) 0.00
Accretion of Discount on Investment Securities - Available-for-Sale (15,688) (10,862)
Increase in Minority Interest 27,800 6,487
Amount Realized on Sale of Security (Gain) Loss - (143,045)
(Increase) Decrease in Interest Receivable 100,658 (22,741)
(Increase) Decrease in Other Assets (142,134) 126,320
Increase in Interest Payable 74,956 17,300
Increase in Other Liabilities 399,164 160,608
(Decrease) in Unearned Discount (18,788) (60,390)
_______________ _____________
Net Cash Provided by Operating Activities 588,335 818,885
_______________ _____________
INVESTING ACTIVITIES
Proceeds from Sale of Investment Securities - Available-for-Sale - 25,199,141
Purchases of Investment Securities - Held-to-Maturity (207,058) (5,298,873)
Purchases of Investment Securities - Available-for-Sale - (35,978,016)
Proceeds from Maturities of Investment Securities - Available-for-Sale 4,000,000 3,000,000
Proceeds from Maturities of Investment Securities - Held-to-Maturity 680,000 4,280,000
Principal Payments on Mortgage-Backed Securities 63,835 144,384
Principal Payments on Corporate Bonds 25,490 38,353
Net Decrease in Loans 1,773,990 4,401,998
Purchases of Bank Premises and Equipment (20,970) (28,855)
(Increase) Decrease in Other Real Estate Owned - (1,500)
_______________ _____________
Net Cash Provided by (Used in) Investing Activities 6,315,287 (4,243,368)
_______________ _____________
FINANCING ACTIVITIES
Net Increase in Non-Interest Bearing Deposits 2,065,171 759,693
Net Increase in NOW and Insured Money Market Accounts 1,167,115 254,751
Net (Decrease) in Savings (1,317,821) (146,812)
Net Increase in Time Deposits 2,170,130 819,872
Repayment of Notes Payable (9,605) (8,805)
Payments of Dividends (234,080) (234,080)
Net Cash Provided by Financing Activities 3,840,910 1,444,619
_______________ _____________
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,744,532 (1,979,864)
_______________ _____________
CASH AND CASH EQUIVALENTS - JANUARY 1 13,540,645 26,786,707
CASH AND CASH EQUIVALENTS - MARCH 31 $24,285,177 $24,806,843
============== ==============
</TABLE>
SUPPLEMENTAL DISCLOSURES:
Interest Paid: The Company paid $974,658 and $911,575 during the three-month
periods ended March 31, 1995 and 1994 respectively, in interest on deposits
and other borrowings.
Total decrease in unrealized loss on securities available-for-sale, net of
applicable deferred income taxes, during 1995 was $606,082.
See accompanying selected information.
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Substantially all disclosures required by Generally Accepted
Accounting Principles are not included.
NOTE A
UNAUDITED STATEMENTS
The accompanying unaudited, consolidated financial
statements have been prepared by Peoples Bancshares, Inc. &
Subsidiary in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures
are adequate to make the information presented not misleading.
In the opinion of management, the accompanying financial
statements contain all adjustments necessary for a fair
statement of the result of the interim periods presented, and
all adjustments are of a normal, recurring nature.
NOTE B
INVESTMENT SECURITIES
The carrying value and approximate market value of
investment securities are summarizedas follows:
Securities Held-to-Maturity consisted of the following at
March 31, 1995
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
____________ ___________ __________ ____________
State and Political
Subdivisions $ 5,076,496 $31,474 $ 41,288 $5,066,682
Corporate Notes 15,876,392 6,868 203,408 15,679,852
____________ ___________ __________ ____________
$ 20,952,888 $38,342 $244,696 $20,746,534
Securities Available-for-Sale consisted of the following at
March 31, 1995
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
____________ _____________ ___________ ____________
U. S. Treasury
Securities $ 49,198,735 $70,116 $576,976 $48,691,875
Government Agencies 18,029,790 - 333,015 17,696,775
Equity Securities 250,000 250,000
Collateralized Mortgage
Obligations 1,536,702 34,764 - 1,571,466
____________ ___________ ____________ ____________
$ 69,015,227 $104,880 $909,991 $68,210,116
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
SELECTED INFORMATION
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity consisted of the following at
March 31, 1994
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
____________ ___________ __________ ____________
State and Political
Subdivisions $ 4,860,976 $57,644 $ 29,731 $4,888,889
Corporate Notes 14,546,244 35,743 72,693 14,509,294
____________ ___________ __________ ____________
$ 19,407,220 $93,387 $102,424 $19,398,183
============ =========== ========== ============
Securities Available-for-Sale consisted of the following at
March 31, 1994
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
____________ _____________ ___________ ____________
U. S. Treasury
Securities $ 48,166,699 $296,566 $371,034 $48,092,231
Government Agencies 18,017,224 81,694 33,511 18,065,407
Equity Securities 250,000 - - 250,000
Collateralized Mortgage
Obligations 1,949,672 85,847 - 2,035,519
____________ _____________ ___________ ____________
$ 68,383,595 $464,107 $404,545 $68,443,157
============ ============= =========== ============
The Maturities of Investment Securities at March 31, 1995
are as follows:
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
_____________ _______________ _____________ ______________
U. S. Treasury Securities:
One Year and Under $- $- $24,016,703 $ 23,768,125
Two to Five Years - - 25,182,032 24,923,750
_____________ _______________ _____________ ______________
$- $- $49,198,735 $ 48,691,875
============= =============== ============= ==============
Government Agencies:
One Year and Under $- $- $6,000,000 $ 5,949,375
Two to Five Years - - 12,029,790 11,747,400
_____________ _______________ ______________ _____________
$- $- $18,029,790 $ 17,696,775
============= =============== ============== =============
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
SELECTED INFORMATION
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
_____________ _______________ _____________ ______________
State and Political
Subdivisions:
One Year and Under $772,281 $770,584 $ - $ -
Two to Five Years 4,204,215 4,184,026 - -
Six to Ten Years 100,000 112,072 - -
_____________ _______________ _____________ ______________
$5,076,496 $5,066,682 $ - $ -
============= =============== ============= ==============
Collateralized Mortgage
Obligations:
One Year and Under $ - $ - $ - $ -
Two to Five Years - - 133,581 134,162
Six to Ten Years - - 132,797 148,104
After Ten Years - - 1,270,324 1,289,200
_____________ _______________ _____________ ______________
$ - $ - $1,536,702 $1,571,466
============= =============== ============= ==============
Corporate Notes:
One Year and Under $8,980,162 $8,914,449 $ - $ -
Two to Five Years 6,896,230 6,765,403 - -
_____________ _______________ _____________ ______________
$15,876,392 $15,679,852 $ - $ -
============= =============== ============= ==============
Investment securities available-for-sale with an adjusted
cost of $15,983,000 at March 31, 1995, were pledged to secure
public deposits.
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
SELECTED INFORMATION
NOTE C
LOANS
Major classifications of loans are summarized as follows:
March 31,
_________________________
1995 1994
____________ _____________
Real Estate - Residential $18,817,436 $20,305,982
Real Estate - Commercial 16,566,472 16,483,708
Commercial - Non-Real Estate 6,563,684 6,093,528
Student Loans 2,289,705 3,103,714
Installment 10,415,923 10,608,462
Other 1,865,327 959,473
_____________ _____________
56,518,547 57,554,867
Unearned Discount (1,812,371) (1,969,845)
_____________ _____________
54,706,177 55,585,022
Allowance for Loan Losses (2,298,005) (2,294,990)
_____________ _____________
$52,408,171 $53,290,032
============= =============
NOTE D
PREMISES AND EQUIPMENT
Major classifications of fixed assets are summarized as
follows:
March 31,
____________________________
1995 1994
_____________ ______________
Bank Building and Improvements $ 2,859,549 $ 2,839,877
Furniture and Equipment 3,293,969 3,182,904
Leasehold Improvements 329,931 319,814
Land 1,064,494 1,476,844
_____________ _____________
7,547,943 7,819,439
Less: Accumulated Depreciation
and Amortization (3,780,592) (3,393,432)
_____________ _____________
$ 3,767,351 $ 4,426,007
============= =============
NOTE E
DEPOSITS
Major classifications of deposits are as follows:
March 31,
________________________
1995 1994
___________ ____________
Non-Interest Bearing Demand $33,092,952 $29,519,035
NOW and Insured Money
Market Accounts 38,069,749 41,601,960
Savings Accounts 36,517,731 40,387,275
Certificates of Deposit
Greater than $100,000 7,465,911 5,925,128
Other Certificates of Deposit 40,785,116 39,561,129
_____________ _____________
$155,931,459 $156,994,527
============== =============
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
BALANCE SHEETS - UNAUDITED
ASSETS
March 31,
__________________________
1995 1994
____________ ___________
Cash and Due from Banks $7,285,177 $7,156,843
Federal Funds Sold 17,000,000 17,650,000
Investment Securities Held-to-Maturity
(Market Value of $20,746,534
and $19,398,183, Respectively) 20,952,888 19,407,220
Investment Securities Available-for-Sale 68,210,116 68,443,157
Loans - Net of Unearned Discount 54,706,177 55,585,022
Less: Allowance for Loan Losses (2,298,006) (2,294,990)
_____________ _____________
Net Loans 52,408,171 53,290,032
_____________ _____________
Premises and Equipment, Net 3,404,624 3,644,057
Other Real Estate Owned 603,346 691,917
Accrued Interest Receivable 1,719,970 1,540,753
Customers' Acceptance Liability 458,600 548,200
Excess Cost Over Fair Value of Assets
Acquired 397,278 445,611
Other Assets 1,737,369 1,698,941
_____________ ____________
$174,177,539 $174,516,731
============= ============
See accompanying selected information
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
BALANCE SHEETS - UNAUDITED
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
___________________________
1995 1994
LIABILITIES _____________ _____________
Deposits
Non-Interest Bearing Demand $33,093,142 $29,519,079
NOW and Insured Money Market Accounts 38,073,386 41,673,384
Savings 36,517,731 40,387,275
Time 48,318,020 45,570,398
_____________ _____________
Total Deposits 156,002,279 157,150,136
Acceptances Outstanding 458,600 548,200
Accrued Interest Payable 458,451 401,103
Other Liabilities 2,002,723 1,679,165
_____________ _____________
Total Liabilities 158,922,053 159,778,604
_____________ _____________
STOCKHOLDERS' EQUITY
Common Stock - $25 Par Value, 92,500
Shares Authorized, 25,000 Shares Issued
and Outstanding in 1995 and 1994 625,000 625,000
Additional Paid-In Capital 4,000,000 4,000,000
Undivided Profits 11,161,859 10,074,795
Unrealized Loss on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes (531,373) 38,332
_____________ _____________
Total Stockholders' Equity 15,255,486 14,738,127
_____________ _____________
$174,177,539 $174,516,731
============= =============
See accompanying selected information
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
STATEMENTS OF INCOME - UNAUDITED
For The Three-Month Periods Ended
March 31,
_________________________
1995 1994
____________ ____________
INTEREST INCOME
Interest and Fees on Loans $1,567,209 $1,673,593
U.S. Treasury Securities 671,866 588,117
Interest on U.S. Agency and Corporation Securit 271,838 221,089
Obligations of State and Political Subdivisions 57,987 50,988
Other Investment Income 245,561 197,648
Interest on Federal Funds Sold 132,647 153,082
___________ ____________
2,947,108 2,884,517
INTEREST EXPENSE
Interest on Deposits 1,038,778 917,240
___________ ____________
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,908,330 1,967,277
PROVISION FOR LOAN LOSSES - 150,000
____________ ___________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,908,330 1,817,277
_____________ ___________
OTHER INCOME
Service Charges on Deposit Accounts 321,671 305,318
Other Service Charges and Fees 86,718 92,770
Other Operating Income 36,572 34,717
Securities Gains (Losses) 0.00 143,045
_____________ ___________
Total Other Income 444,961 575,850
_____________ ____________
OTHER EXPENSE
Salaries and Employee Benefits 954,741 964,251
Occupancy Expense 480,492 484,833
Other Operating Expense 383,555 384,474
_____________ ____________
Total Other Expenses 1,818,788 1,833,557
_____________ ____________
INCOME BEFORE INCOME TAXES 534,503 559,569
PROVISION FOR INCOME TAXES 157,463 171,958
_____________ ____________
NET INCOME $377,040 $387,611
============= ============
EARNINGS PER SHARE $15.08 $15.50
============= ============
See accompanying selected information.
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
For The Three-Month Periods Ended March 31, 1995 and March 31, 1994
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Investment
Additional Securities
Common Paid-In Undivided Available-
Stock Capital Profits For- Sale Total
____________ ___________ _____________ _____________ _____________
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1994 $625,000 $4,000,000 $9,937,184 $- $14,562,184
Net Income through March 31, 1994 - - 387,611 - 387,611
Cash Dividends Paid ($10.00 Per Share) - - (250,000) - (250,000)
Unrealized Gain on Securities
Available-For-Sale, Net of
Applicable Deferred Income
Taxes - - - 38,332 38,332
__________ ____________ ______________ ____________ ____________
Balance - March 31, 1994 $625,000 $4,000,000 $10,074,795 $38,332 $14,738,127
__________ ____________ ______________ ____________ ____________
Balance - January 1, 1995 $625,000 $4,000,000 $11,034,819 $- $15,659,819
Net Income through March 31, 1995 - - 377,040 - 377,040
Cash Dividends Paid ($10.00 Per Share) - - (250,000) - (250,000)
Unrealized Loss on Securities
Available-For-Sale, Net of
Applicable Deferred Income
Taxes - - - (531,373) (531,373)
__________ ____________ ______________ ____________ ____________
Balance - March 31, 1995 $625,000 $4,000,000 $11,161,859 ($531,373) $15,255,486
__________ ____________ ______________ ____________ ____________
</TABLE>
<TABLE>
<CAPTION>
For The Three-Month Periods Ended
March 31,
__________________________________
1995 1994
________________ ________________
<S>
OPERATING ACTIVITIES <C> <C>
Net Income $377,040 $387,611
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Deferred Income Taxes (285,729) (59,574)
Provision for Loan Losses - 150,000
Other Real Estate Owned Adjustments to Fair Market Value (36,400) -
Depreciation and Amortization 97,580 98,340
Amortization of Excess Cost on Assets Acquired 12,083 12,083
Amortization of Premium Investment Securities - Held-to-Maturity 81,493 99,937
Amortization of Premium Investment Securities - Available-for-Sale 57,663 68,713
Accretion of Discount on Investment Securities - Held-to-Maturity (3,388) -
Accretion of Discount on Investment Securities - Available-for-Sale (15,688) (10,862)
Amount Realized on Sale of Security (Gain) Loss 0.00 (143,045)
(Increase) Decrease in Interest Receivable 100,658 (22,741)
(Increase) Decrease in Other Assets (140,657) 130,649
Increase in Interest Payable 74,956 17,300
Increase in Other Liabilities 379,377 158,273
(Decrease) in Unearned Discount (18,788) (60,390)
_____________ ______________
Net Cash Provided by Operating Activities 680,200 826,294
_____________ ______________
INVESTING ACTIVITIES
Proceeds from Sale of Investment Securities - Available-for-Sale - 25,199,141
Purchases of Investment Securities - Held-to-Maturity (207,058) (5,298,873)
Purchases of Investment Securities - Available-for-Sale - (35,978,016)
Proceeds from Maturities of Investment Securities - Available-for-Sale 4,000,000 3,000,000
Proceeds from Maturities of Investment Securities - Held-to-Maturity 680,000 4,280,000
Principal Payments on Mortgage-Backed Securities 63,835 144,384
Principal Payments on Corporate Bonds 25,490 38,353
Net Decrease in Loans 1,773,990 4,401,998
Purchases of Bank Premises and Equipment (20,970) (28,855)
(Increase) in Other Real Estate Owned - (1,500)
_____________ ______________
Net Cash Provided by (Used in) Investing Activities 6,315,287 (4,243,368)
_____________ ______________
FINANCING ACTIVITIES
Net Increase in Non-Interest Bearing Deposits 2,065,234 759,589
Net Increase in NOW and Insured Money Market Accounts 1,101,393 253,921
Net (Decrease) in Savings (1,317,821) (146,812)
Net Increase in Time Deposits 2,150,239 820,512
Payments of Dividends (250,000) (250,000)
Net Cash Provided by Financing Activities 3,749,045 1,437,210
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,744,532 (1,979,864)
CASH AND CASH EQUIVALENTS - JANUARY 1 13,540,645 26,786,707
CASH AND CASH EQUIVALENTS - MARCH 31 $24,285,177 $24,806,843
_____________ ______________
</TABLE>
SUPPLEMENTAL DISCLOSURES:
Interest Paid: The Bank paid $963,822 and $899,940 during the three-month
periods ended March 31, 1995 and 1994, respectively, in interest on deposits
and other borrowings.
Total decrease in unrealized loss on securities available-for-sale, net of
applicable deferred income taxes, during 1995 was $629,185.
<PAGE>
Substantially all disclosures required by Generally Accepted
Accounting Principles are not included.
NOTE A
UNAUDITED STATEMENTS
The accompanying unaudited, financial statements have been
prepared by PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD in
accordance with generally accepted accounting principles, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements have been condensed or omitted
pursuant to such rules and regulations, although management
believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, the
accompanying financial statements contain all adjustments
necessary for a fair statement of the result of the interim
periods presented, and all adjustments are of a normal, recurring
nature.
NOTE B
INVESTMENT SECURITIES
The carrying value and approximate market value of investment
securities are summarized as follows:
Securities Held-to-Maturity consisted of the following at
March 31, 1995
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
_____________ ____________ ___________ ___________
State and Political
Subdivisions $ 5,076,496 $ 31,474 $ 41,288 $ 5,066,682
Corporate Notes 15,876,392 6,868 203,408 15,679,852
_____________ ____________ ___________ ___________
$ 20,952,888 $ 38,342 $ 244,696 $ 20,746,534
============= ============ =========== ===========
Securities Available-for-Sale consisted of the following at March 31, 1995
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
______________ _____________ ____________ ____________
U. S. Treasury
Securities $ 49,198,735 $ 70,116 $ 576,976 $ 48,691,875
Government Agencies 18,029,790 - 333,015 17,696,775
Equity Securities 250,000 - - 250,000
Collateralized Mortgage
Obligations 1,536,702 34,764 - 1,571,466
______________ _____________ _____________ ___________
$ 69,015,227 $104,880 $ 909,991 $ 68,210,116
============== ============= ============= ===========
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
SELECTED INFORMATION
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity consisted of the following at March 31, 1994
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
____________ ____________ ____________ ____________
State and Political
Subdivisions $ 4,860,976 $ 57,644 $ 29,731 $ 4,888,889
Corporate Notes 14,546,244 35,743 72,693 14,509,294
____________ ____________ ____________ ____________
$ 19,407,220 $ 93,387 $ 102,424 $19,398,183
============= ============ ============ ============
Securities Available-for-Sale consisted of the following at March 31, 1994
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
____________ ____________ _____________ ___________
U. S. Treasury
Securities $48,166,699 $296,566 $ 371,034 $48,092,231
Government Agencies 18,017,224 81,694 33,511 18,065,407
Equity Securities 250,000 - - 250,000
Collateralized Mortgage
Obligations 1,949,672 85,847 - 2,035,519
____________ _____________ ____________ ____________
$68,383,595 $464,107 $ 404,545 $68,443,157
============ ============= ============ ============
The Maturities of Investment Securities at March 31, 1995 are as follows:
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
___________ ______________ ______________ _________________
U.S. Treasury
Securities:
One Year and Under $ - $ - $ 24,016,703 $ 23,768,125
Two to Five Years - - 25,182,032 24,923,750
____________ ______________ ______________ _________________
$ - $ - $ 49,198,735 $ 48,691,875
============ ============== ============== =================
Government Agencies:
One Year and Under $ - $ - $ 6,000,000 $ 5,949,375
Two to Five Years - - 12,029,790 11,747,400
____________ ______________ ______________ _________________
$ - $ - $ 18,029,790 $ 17,696,775
============ ============== ============== =================
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
SELECTED INFORMATION
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
___________ ______________ ______________ ________________
State and Political
Subdivisions:
One Year and
Under $ 772,281 $ 770,584 $ - $ -
Two to Five
Years 4,204,215 4,184,026 - -
Six to Ten
Years 100,000 112,072 - -
_____________ ______________ _______________ _______________
$5,076,496 $ 5,066,682 $ - $ -
============= ============== =============== ===============
Collateralized Mortgage Obligations:
One Year and
Under $ - $ - $ - $ -
Two to Five
Years - - 133,581 134,162
Six to Ten
Years - - 132,797 148,104
After Ten Years - - 1,270,324 1,289,200
_____________ _______________ _______________ ______________
$ - $ - $1,536,702 $1,571,466
============= =============== =============== ==============
Corporate Notes:
One Year and
Under $ 8,980,162 $ 8,914,449 $ - $ -
Two to Five
Years 6,896,230 6,765,403 - -
______________ _______________ _______________ _____________
$15,876,392 $15,679,852 $ - $ -
============== =============== =============== =============
Investment securities available-for-sale with an adjusted cost of
$15,983,000 at March 31, 1995, were pledged to secure public deposits.
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
SELECTED INFORMATION
NOTE C
LOANS
Major classifications of loans are summarized as follows:
March 31,
_________________________
1995 1994
_____________ ____________
Real Estate - Residential $18,817,436 $20,305,982
Real Estate - Commercial 16,566,472 16,483,708
Commercial - Non-Real Estate 6,563,684 6,093,528
Student Loans 2,289,705 3,103,714
Installment 10,415,923 10,608,462
Other 1,865,327 959,473
______________ _____________
56,518,547 57,554,867
Unearned Discount (1,812,371) (1,969,845)
______________ _____________
54,706,177 55,585,022
Allowance for Loan Losses (2,298,005) (2,294,990)
______________ _____________
$52,408,171 $53,290,032
============== =============
NOTE D
PREMISES AND EQUIPMENT
Major classifications of fixed assets are summarized as follows:
March 31,
_____________________________
1995 1994
_______________ ______________
Bank Building and Improvements $2,653,383 $2,633,711
Furniture and Equipment 3,293,969 3,182,904
Leasehold Improvements 329,931 319,814
Land 877,294 877,294
_______________ ______________
7,154,577 7,013,723
Less: Accumulated Depreciation
and Amortization (3,749,953) (3,369,666)
_______________ _______________
$3,404,624 $3,644,057
=============== ===============
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
SELECTED INFORMATION
NOTE E
DEPOSITS
Major classifications of deposits are as follows:
March 31,
_________________________
1995 1994
_____________ _____________
Non-Interest Bearing Demand $33,093,142 $29,519,079
NOW and Insured Money Market Accounts 38,073,386 41,673,384
Savings Accounts 36,517,731 40,387,275
Certificates of Deposit Greater than
$100,000 7,465,911 5,925,128
Other Certificates of Deposit 40,852,109 39,645,270
______________ _____________
$156,002,279 $157,150,136
============= =============
<PAGE>
PEOPLES BANCSHARES, INC.
AND SUBSIDIARY
December 31, 1994
Audits of Financial Statements
December 31, 1994
and
December 31, 1993
<PAGE>
C O N T E N T S
Independent Auditor's Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5 - 6
Notes to Consolidated Financial Statements 7 - 27
<PAGE>
To the Officers and Board of Directors
Peoples Bancshares, Inc. and Subsidiary
Independent Auditor's Report
_____________________________
We have audited the consolidated balance sheets of PEOPLES BANCSHARES,
INC. AND SUBSIDIARY as of December 31, 1994 and December 31, 1993, and the
related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December
31, 1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsiblity is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We belive that our audits
provide a reasonable basis for our opinion
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of PEOPLES BANCSHARES, INC AND SUBSIDIARY as of December 31, 1994 and
December 31, 1993, and the results of its operations and its cash
flows for the three years then ended in conformity with generally
accepted accounting principles.
As discussed in Note B to the financial statements, the Bank changed
its method of accounting for securities as required under Statement of
Financial Accounting Standards (FAS) 115 in 1994.
As explained in Note Q to the financial statements, on April 27, 1995,
Peoples Bancshares, Inc.'s stockholders entered into an agreement and
plan of merger with another company.
A Professional Accounting Corporation
March 13, 1995 except for Note Q
for which the date is April 27, 1995
<PAGE>PEOPLES BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
__________________________
1994 1993
_____________ ____________
Cash and Due from Banks $7,040,645 $6,186,707
Federal Funds Sold 6,500,000 20,600,000
Investment Securities Held-to-Maturity (Market Value
of $21,104,505 and $80,710,438,
Respectively) 21,530,509 79,192,029
Investment Securities Available-for-Sale 71,361,531 -
Loans - Net of Unearned Discount 56,406,542 59,875,174
Less: Allowance for Loan Losses (2,243,169) (2,093,534)
______________ ___________
Net Loans 54,163,373 57,781,640
______________ ___________
Premises and Equipment, Net 3,845,679 4,497,210
Other Real Estate Owned 934,546 690,417
Accrued Interest Receivable 1,820,628 1,518,012
Customers' Acceptance Liability 456,100 473,200
Excess Cost Over Fair Value of Assets
Acquired 409,361 457,695
Other Assets 1,683,777 1,808,169
_____________ ____________
$169,746,149 $173,205,079
The accompanying notes are an integral part of these financial statements.
<PAGE>
PEOPLES BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
_________________________
1994 1993
____________ ____________
LIABILITIES
Deposits
Non-Interest Bearing Demand $31,027,781 $28,759,342
NOW and Insured Money Market Accounts 36,902,634 41,347,209
Savings 37,835,552 40,534,087
Time 46,080,897 44,666,385
_____________ ___________
Total Deposits 151,846,864 155,307,023
Acceptances Outstanding 456,100 473,200
Accrued Interest Payable 383,495 383,803
Notes Payable 488,396 524,315
Other Liabilities 1,661,464 1,520,892
_____________ ____________
154,836,319 158,209,233
Minority Interest in Subsidiary 532,128 534,445
_____________ ____________
Total Liabilities 155,368,447 158,743,678
_____________ ____________
STOCKHOLDERS' EQUITY
Common Stock - $25 Par Value, 125,000
Shares Authorized, 24,082 Shares Issued
and Outstanding in 1994 and 1993 602,050 602,050
Additional Paid-In Capital 3,025,918 3,025,918
Undivided Profits 12,133,893 11,099,649
Unrealized Loss on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes (1,117,943) -
_____________ ___________
Total 14,643,918 14,727,617
Less: Treasury Stock at Cost - 674 Shares in
1994 and 1993 (266,216) (266,216)
_____________ ___________
Total Stockholders' Equity 14,377,702 14,461,401
____________ ____________
$169,746,149 $173,205,079
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
PEOPLES BANCSHARES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For The Years Ended
________________________________
December 31,
1994 1993 1992
___________ __________ __________
INTEREST INCOME
Interest and Fees on Loans $6,363,366 $7,050,555 $8,806,529
U.S. Treasury Securities 2,578,706 2,273,001 2,381,250
Interest on U.S. Agency and
Corporation Securities 1,071,101 1,716,591 1,904,910
Obligations of State and
Political Subdivisions 238,045 169,443 295,899
Other Investment Income 866,726 884,008 955,455
Interest on Federal Funds Sold 483,330 431,369 289,285
___________ ___________ ___________
11,601,274 12,524,967 14,633,328
INTEREST EXPENSE
Interest on Deposits 3,579,583 3,766,047 5,120,067
Interest on Notes Payable 45,844 49,162 60,413
Interest on Debentures - 4,091 16,711
____________ ___________ __________
Total Interest Expense 3,625,427 3,819,300 5,197,191
____________ ___________ __________
NET INTEREST INCOME BEFORE PROVISIONS
FOR LOAN LOSSES 7,975,847 8,705,667 9,436,137
PROVISION FOR LOAN LOSSES - 300,000 1,506,000
____________ ___________ __________
NET INTEREST INCOME 7,975,847 8,405,667 7,930,137
____________ ___________ __________
OTHER INCOME
Service Charges on Deposit Accounts 1,232,006 1,364,213 1,391,167
Other Service Charges and Fees 325,590 213,301 314,229
Other Operating Income 125,348 159,733 162,955
Securities Gains (Losses) 24,425 79,007 13,996
____________ ___________ __________
Total Other Income 1,707,369 1,816,254 1,882,347
____________ ___________ __________
OTHER EXPENSE
Salaries and Employee Benefits 3,753,043 3,707,974 3,546,412
Occupancy Expense 1,981,203 1,979,478 1,935,603
Other Operating Expense 1,890,034 2,171,768 2,379,779
____________ ___________ __________
Total Other Expenses 7,624,280 7,859,220 7,861,794
____________ ___________ __________
INCOME BEFORE INCOME TAXES
AND CHANGES IN ACCOUNTING
PRINCIPLE AND MINORITY INTEREST
IN CONSOLIDATED SUBSIDIARY 2,058,936 2,362,701 1,950,690
PROVISION FOR INCOME TAXES 618,770 803,885 660,302
____________ ___________ __________
INCOME BEFORE CHANGES IN
ACCOUNTING PRINCIPLE AND MINORITY
INTEREST IN CONSOLIDATED SUBSIDIARY 1,440,166 1,558,816 1,290,388
Change in Accounting Principle -
Adoption of FAS 109 - 36,040 -
____________ ___________ __________
INCOME BEFORE MINORITY INTEREST
IN CONSOLIDATED SUBSIDIARY 1,440,166 1,522,776 1,290,388
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 54,802 56,104 48,080
____________ ___________ __________
NET INCOME $1,385,364 $1,466,672 $1,242,308
============ =========== ==========
EARNINGS PER SHARE $59.18 $62.66 $53.07
============ =========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Excess Unrealized
Cost Over Loss on
Market Investment
Additional Value - Securities
Common Paid-In Undivided Equity Available- Treasury
Stock Capital Profits Securities For-Sale Stock Total
__________ ___________ ____________ ____________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1991 $602,050 $3,025,918 $8,859,729 ($127,210) $ - ($230,216)
Net Income - - 1,242,308 - - - 1,242,308
Cash Dividends Paid
($10.04 Per Share) - - (234,980) - - - (234,980)
Reverse Securities Loss
Allocation - - - 127,210 - - 127,210
Purchase of Treasury Stock - - - - (36,000) (36,000)
__________ ___________ ____________ ____________ ___________ ___________ ____________
Balance - December 31, 1992 602,050 3,025,918 9,867,057 - - (266,216) 13,228,809
Net Income - - 1,466,672 - - - 1,466,672
Cash Dividends Paid
($10.00 Per Share) - - (234,080) - - - (234,080)
__________ ___________ ____________ ____________ ___________ ___________ ____________
Balance - December 31, 1993 602,050 3,025,918 11,099,649 - - (266,216) 14,461,401
Net Income - - 1,385,364 - - - 1,385,364
Cash Dividends Paid
($15.00 Per Share) - - (351,120) - - - (351,120)
Unrealized Loss on Securities
Available-for-Sale, Net of
Applicable Deferred Income
Taxes - - - - (1,117,943) - (1,117,943)
__________ ___________ ____________ ____________ ___________ ___________ ____________
Balance - December 31, 1994 $602,050 $3,025,918 - ($266,216)
========== =========== ============ ============ =========== =========== ============
</TABLE>
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Years Ended
December 31,
_________________________________________
1994 1993 1992
_____________ _____________ _____________
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $1,385,364 $1,466,672 $1,242,308
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Deferred Income Taxes 538,605 (5,345) (52,739)
Provision for Loan Losses - 300,000 1,506,000
Other Real Estate Owned Adjustments to
Fair Market Value 80,720 211,497 124,023
Depreciation and Amortization 401,137 384,869 358,812
Amortization of Excess Cost on Assets Acquired 48,333 248,333 398,333
Amortization of Premium Investment
Securities - Held-to-Maturity 378,594 706,091 622,990
Amortization of Premium Investment
Securities - Available-for-Sale 300,810 - -
Accretion of Discount on Investment
Securities - Held-to-Maturity (8,093) (23,380) (23,331)
Accretion of Discount on Investment
Securities - Available-for-Sale (54,438) - -
(Gain) Loss on Sale of Other Real Estate 7,500 74,525 86,728
Amount Realized on Sale of Security (Gain) Loss (24,425) (79,007) (13,996)
(Increase) Decrease in Interest Receivable (302,616) 144,039 461,563
(Increase) Decrease in Other Assets 226,268 (694,846) 268
Increase (Decrease) in Interest Payable (308) (78,468) (301,661)
Increase (Decrease) in Other Liabilities 140,569 (395,876) 185,666
Increase (Decrease) in Minority Interest (2,317) 41,045 30,936
Increase (Decrease) in Unearned Discount (199,076) (502,293) (978,451)
_____________ _____________ _____________
Net Cash Provided by Operating Activities 2,916,627 1,797,856 3,647,449
_____________ _____________ _____________
INVESTING ACTIVITIES
Proceeds from Sale of Investment
Securities - Held-to-Maturity - 36,408,327 28,921,452
Proceeds from Sale of Investment
Securities - Available-for-Sale 36,055,781 - -
Purchases of Investment
Securities - Held-to-Maturity (13,458,411) (35,672,427) (35,200,986)
Purchases of Investment
Securities - Available-for-Sale (62,224,846) - -
Proceeds from Maturities of Investment
Securities - Available-for-Sale 13,000,000 - -
Proceeds from Maturities of Investment
Securities - Held-to-Maturity 9,932,358 - -
Principal Payments on Mortgage-Backed Securities 490,647 - -
Principal Payments on Corporate Bonds 153,589 - -
Net (Increase) Decrease in Loans 3,817,347 4,498,760 16,108,132
Purchases of Bank Premises and Equipment (161,956) (628,448) (130,795)
Proceeds from Sale of Bank Premises and Equipment - 10,228 251,083
(Increase) Decrease in Other Real Estate Owned - (249,687) (2,018,663)
Covered Transactions on Other Real Estate Paid - 26,900 -
Proceeds from Sale of Other Real Estate 80,000 1,470,053 584,400
_____________ _____________ _____________
Net Cash Provided by (Used in)
Investing Activities (12,315,491) 5,863,706 8,514,623
_____________ _____________ _____________
FINANCING ACTIVITIES
Purchase of Treasury Stock - - (36,000)
Net Increase (Decrease) in Non-Interest
Bearing Deposits 2,268,439 649,357 5,688,825
Net Increase (Decrease) in NOW and
Insured Money Market (4,444,575) (2,125,753) (825,348)
Net Increase (Decrease) in Savings (2,698,535) 1,321,905 9,141,070
Net Increase (Decrease) in Time Deposits 1,414,512 (5,566,813) (9,843,032)
Repayment of Notes Payable (35,919) (32,602) (19,359)
Repayment of Subordinated Debentures - (125,506) (125,505)
Payments of Dividends (351,120) (234,080) (234,980)
_____________ _____________ _____________
Net Cash Provided by (Used in)
Financing Activities (3,847,198) (6,113,492) 3,745,671
_____________ _____________ _____________
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,246,062) 1,548,070 15,907,743
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 26,786,707 25,238,637 9,330,894
_____________ _____________ _____________
CASH AND CASH EQUIVALENTS - END OF YEAR $13,540,645 $26,786,707 $25,238,637
</TABLE>
<PAGE>
PEOPLES BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURES:
Interest Paid: The Company paid $3,584,371, $4,058,581 and $5,304,478, in
1994, 1993 and 1992, respectively, in interest on dep borrowings.
Income Taxes Paid: The Company paid $125,000, $1,761,125, $280,000 of income
taxes during 1994, 1993 and 1992, respectively.
Total increase in unrealized loss on securities available-for-sale, net of
applicable deferred income taxes, during 1994 was $1,
<PAGE>
NOTE A
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts
of PEOPLES BANCSHARES, INC. AND SUBSIDIARY and its majority
owned subsidiary, Peoples Bank and Trust Company of St.
Bernard. In consolidation, all significant intercompany
accounts, balances and transactions have been eliminated.
INVESTMENT SECURITIES
Securities of State and Political subdivisions and
corporate bonds that management has the ability and intent
to hold to maturity are classified as held-to-maturity and
carried at cost, adjusted for amortization of premium and
accretion of discounts using methods approximating the interest
method. Treasury securities, agencies, equity securities and
collateral mortgage obligations are classified as available-for-
sale and are carried at fair value. Realized gains and losses
on securities are included in net income. Unrealized gains and
losses on securities available-for-sale are recognized as
direct increases or decreases in stockholders' equity, net of
the related tax effect. Cost of securities sold is recognized
using the specific identification method.
INTEREST INCOME
Interest income on loans is primarily accrued using the
interest method on the amount of principal outstanding.
Interest income on a portion of installment consumer loans is
based upon the sum-of-the-months digits method, which does not
differ materially from results obtained using the interest
method.
Fee income, in the form of commitment fees, or origination
fees is recognized at the time the loans are made. The amount
of income, net of expenses, derived from these sources is
immaterial.
NONPERFORMING ASSETS
Nonperforming assets include nonaccrual loans and other
real estate acquired through foreclosure. Nonaccrual loans are
loans on which the accrual of interest income has been
discontinued. The accrual of income on commercial and real
estate loans is generally discontinued when the loan becomes 90
days past due as to principal or interest. At that time,
interest accruals are discontinued and all previous accruals
are reversed against interest income. Generally, a loan is
returned to performing status as a result of full payment of
all past due principal and interest. In the interim, interest
income is recognized as received when collection of principal
is no longer doubtful.
At the time, the loan is foreclosed, the collateral is
transferred to Other Real Estate at the lesser of the loan
balance or fair value. Gains or losses from sales related to
these properties are included in Other Operating Expenses.
<PAGE>
NOTE A
SIGNIFICANT ACCOUNTING POLICIES (Continued)
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a
provision for loan losses charged to expense. The allowance
represents an amount which, in management's judgment, will be
adequate to absorb possible losses on existing loans that may
become uncollectible. Management's judgment in determining the
adequacy of the allowance is based on such factors as changes
in the nature and volume of the loan portfolio, current
economic factors that may affect the borrowers' ability to pay,
overall portfolio quality and review of specific problem loans.
BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Bank premises, equipment and leasehold improvements are
stated at cost less accumulated depreciation and amortization.
Depreciation on bank premises and equipment is computed
principally on the straight-line method over the estimated
lives of the assets. Leasehold improvements are amortized
principally on the straight-line method over the useful lives
of the improvements.
EXCESS COST OVER FAIR VALUE OF ASSETS ACQUIRED
In connection with certain acquisitions, the excess of
costs of the assets acquired, under the purchase method, over
the fair value of the tangible net assets acquired is being
amortized over 15 years using the straight-line method.
INCOME TAXES
PEOPLES BANCSHARES, INC. AND SUBSIDIARY file a consolid
ated Federal income tax return. The subsidiary bank records
income tax expense by applying the statutory tax rate to their
income as adjusted for tax-exempt interest and other timing
differences and remits the portion of Federal income taxes
currently due to the parent Company.
Income taxes are provided for the tax effects of trans
actions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to
differences between the basis of loans, bank premises and
equipment, deferred gain on sale of bank premises, deferred
compensation payable, the values of available for sale
securities and the self insurance plan for financial and income
tax reporting. The deferred taxes represent the future tax
return consequences of those differences which will either be
taxable or deductible when the assets and liabilities are
recovered or settled.
STATEMENTS OF CASH FLOWS
For purposes of statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents.
EARNINGS PER SHARE
Earnings per share were calculated by dividing net income
by the average number of shares outstanding which was 23,408 in
1994, 1993 and 1992.
<PAGE>
NOTE A
SIGNIFICANT ACCOUNTING POLICIES (Continued)
COMPARATIVE DATA
Certain amounts in the 1993 disclosures have been
reclassified to provide comparability with the 1994
presentation.
NOTE B
INVESTMENT SECURITIES
Carrying amounts and approximate market values of
investment securities are summarized as follows:
Securities Held-to-Maturity consisted of the following at
December 31, 1994:
Carrying Unrealized Unrealized Approximate
Amount Gains Losses Market Value
_____________ ______________ ____________ _______________
State and Political
Subdivisions $5,568,004 $25,430 $135,604 $5,457,830
Corporate Notes 15,962,505 1,460 317,290 15,646,675
_____________ ______________ ____________ _______________
$21,530,509 $26,890 $452,894 $21,104,505
============= ============== ============ ===============
Securities Available-for-Sale consisted of the following
at December 31, 1994:
Amortized Unrealized Unrealized Approximate
Cost Gains Losses Market Value
_____________ ______________ ____________ _______________
U.S. Treasury
Securities $50,244,414 $6,956 $1,222,308 $49,029,062
Government Agencies 21,028,851 134,161 707,074 20,455,938
Equity Securities 250,000 - - 250,000
Collateralized Mortgage
Obligations 1,596,688 29,843 - 1,626,531
_____________ ______________ ____________ _______________
$73,119,953 $170,960 $1,929,382 $71,361,531
============= ============== ============ ===============
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity consisted of the following at
December 31, 1993:
Carrying Unrealized Unrealized Approximate
Amount Gains Losses Market Value
_____________ ______________ ____________ _______________
U.S. Treasury
Securities $43,278,333 $852,561 $15,269 $44,115,625
Government Agencies 15,036,838 434,222 3,790 15,467,270
State and Political
Subdivisions 4,591,788 74,441 15,162 4,651,067
Equity Securities 250,000 - - 250,000
Other Securities 16,035,070 200,434 9,028 16,226,476
_____________ ______________ ____________ _______________
$79,192,029 $ 1,561,658 $43,249 $80,710,438
============= ============== ============ ===============
The Maturities of Investment Securities at December 31, 1994 are as follows:
Securities Held-to-Maturity Securities Available-for-Sale
___________________________ _____________________________
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
____________ ______________ _____________ _______________
U.S. Treasury
Securities:
One Year and Under $ - $ - $ 9,016,078 $ 8,875,625
Two to Five Years - - 41,228,336 40,153,437
____________ ______________ _____________ _______________
$ - $ - $50,244,414 $ 49,029,062
============ ============== ============= ===============
Government Agencies:
One Year and Under $ - $ - $ 5,999,486 $ 5,951,875
Two to Five Years - - 14,033,526 13,374,063
Six to Ten Years - - - -
Over Ten Years - - 995,839 1,130,000
____________ ______________ _____________ _______________
$ - $ - $21,028,851 $ 20,455,938
============ ============== ============= ===============
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity Securities Available-for-Sale
___________________________ _____________________________
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
____________ ______________ _____________ _______________
State and Political
Subdivisions:
One Year
and Under $ 1,103,611 $1,100,221 $ - $ -
Two to
Five Years 4,022,501 3,928,314 - -
Six to
Ten Years 441,892 429,295 - -
After
Ten Years - - - -
____________ ______________ _____________ _______________
$5,568,004 $5,457,830 $ - $ -
============ ============== ============= ===============
Collateralized Mortgage
Obligations:
One Year and Under $ - $ - $ - $ -
Two to Five Years - - 150,513 150,635
Six to Ten Years - - 136,655 154,170
After Ten Years - - 1,309,520 1,321,726
____________ ______________ _____________ _______________
$ - $ - $1,596,688 $ 1,626,531
============ ============== ============= ===============
Corporate Notes:
One Year
and Under $ 7,011,120 $6,909,231 $ - $ -
Two to
Five Years 8,951,385 8,737,444 - -
Six to Ten Years - - - -
After Ten Years - - - -
____________ ______________ _____________ _______________
$15,962,505 $15,646,675 $ - $ -
============ ============== ============= ===============
Investment securities held-to-maturity with an adjusted
cost of $14,091,000 at December 31, 1993, were pledged to
secure public deposits.
Investment securities available-for-sale with an adjusted
cost of $14,629,375 at December 31, 1994, were pledged to
secure public deposits.
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
Included in the average maturity of Collateral Mortgage
Obligations are certain mortgage backed securities having
contractual remaining maturities ranging from 1 month to 25
years. Based on prepayment assumptions, the estimated average
remaining lives of these securities range from 2 years to 5
years.
Gross realized gains on sales of securities held-to
maturity were:
1994 1993 1992
____________ ___________ ___________
Government Agencies $- $43,149 $12,050
State and Political Subdivisions - 29,054 (8,054)
Equity Securities - - -
Other Securities - 6,804 10,000
____________ ___________ ___________
$- $79,007 $13,996
============ =========== ===========
Gross realized gains on sales of securities available-for-
sale were:
1994 1993 1992
____________ ___________ ___________
U.S. Treasury Securities $ 3,019 $- $-
Government Agencies 21,406 - -
State and Political Subdivisions - - -
Equity Securities - - -
Other Securities - - -
____________ ___________ ___________
$24,425 $- $-
============ =========== ===========
As of January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115 on "Accounting for
Certain Investment Securities". This statement requires
investment securities to be classified into one of the
following categories: held-to-maturity, available-for-sale or
trading. Investment securities classified as held-to-maturity
are measured at amortized cost while investment securities
classified as available-for-sale or trading are measured at
fair value, with unrealized gains or losses recorded in the
"Equity" section for available-for-sale securities and in the
income statement for trading securities. The effect of this
change in accounting principle is reflected in the "Equity"
section of the Statement of Changes in Stockholders' Equity as
an unrealized loss on investment securities available-for-sale
of $1,117,943 net of deferred taxes of $575,921.
A specific reserve allocation was recorded against income
for two preferred stocks held in Investment Securities prior to
1992. Both preferred stocks were sold prior to the reversal of
the $132,500 specific reserve allocation included in
stockholders equity during the year ended December 31, 1992.
<PAGE>
NOTE C
LOANS
Major classifications of loans are summarized as follows:
For The Years Ended
December 31,
________________________
1994 1993
___________ ____________
Real Estate - Residential $18,571,673 $22,042,771
Real Estate - Commercial 17,089,078 17,987,194
Commercial - Non-Real Estate 6,695,896 6,713,025
Student Loans 3,391,123 3,114,060
Installment 10,839,905 10,912,226
Other 1,650,026 1,136,132
____________ ____________
58,237,701 61,905,408
Less: Unearned Discount (1,831,159) (2,030,234)
_____________ ____________
56,406,542 59,875,174
Less: Allowance for
Loan Losses (2,243,169) (2,093,534)
______________ ___________
$54,163,373 $57,781,640
============== ===========
At December 31, 1994, $365,072 of loans were in the nonaccrual
status and $2,988 of interest was foregone in the year then
ended. At December 31, 1993, $1,021,086 of loans were in the
nonaccrual status and $85,774 of interest was foregone in the
year then ended. The net effect of the reversal of previously
accrued interest was to reduce interest income by $2,585,
$64,949 and $67,904, in 1994, 1993 and 1992, respectively.
An approximate schedule of loan maturities or repricing
opportunities and interest rates is as follows:
Variable Fixed
Maturities Rate Rate Total
________________ _____________ _____________ ______________
Three Months or Less $12,035,296 $ 6,530,991 $ 18,566,287
Three Months - One Year 16,911,442 11,087,177 27,998,619
One Year - Five Years 1,488,163 8,985,629 10,473,792
Over Five Years - 1,199,003 1,199,003
_____________ ____________ ______________
$30,434,901 $ 27,802,800 $ 58,237,701
============= ============ ==============
<PAGE>
NOTE D
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for loan losses were as
follows:
For The Years Ended
December 31,
_________________________________
1994 1993 1992
___________ ___________ ___________
Balance at January 1 $2,093,534 $1,436,356 $1,288,900
Provision Charged to
Operations - 300,000 1,506,000
Loans Charged Off (237,869) (572,993) (1,925,428)
Recoveries 387,504 930,171 566,884
___________ ___________ ___________
Balance at December 31 $2,243,169 $2,093,534 $1,436,356
=========== =========== ===========
The Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," which
is effective January 1, 1995. This statement establishes
standards, including the use of discounted cash flow
techniques, for measuring the impairment of a loan when it is
probable that the contractual terms will not be met. The
effect of adopting this new standard will not have a material
impact on the Company's financial position or results of
operation.
NOTE E
BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Major classifications of fixed assets are summarized as
follows:
December 31,
___________________________
1994 1993
______________ ____________
Bank Building and Improvements $ 2,894,407 $ 2,849,444
Furniture, Fixtures and Equipment 3,291,508 3,172,614
Leasehold Improvements 289,781 291,682
Land 1,064,494 1,476,844
______________ ____________
7,540,190 7,790,584
Less: Accumulated Depreciation
and Amortization (3,694,511) (3,293,374)
______________ ____________
$ 3,845,679 $ 4,497,210
============== ============
Depreciation and amortization expense totaled $401,137,
$384,869 and $358,516 for the years ended December 31, 1994,
1993 and 1992, respectively.
<PAGE>
NOTE F
OTHER REAL ESTATE
Other Real Estate includes a variety of property acquired
through foreclosure. These properties are recorded at the
lower of the loan balance or fair value, less estimated
disposal cost. The appraisals of such properties are addressed
annually, and all properties are adjusted to the lower of the
current carrying value or appraisal value. Other Real Estate
also includes a piece of property which was previously
purchased to build a branch but is now being held as an
investment at the bank holding company level. Additionally the
Company has set up a reserve for anticipated carrying and
disposal cost of these properties.
Changes in the reserve were as follows:
For The Years Ended
December 31,
___________________________________
1994 1993 1992
____________ __________ ___________
Balance at January 1 $50,000 $ - $ -
Provision Charged to
Operations 17,400 50,000 -
Charge Offs - - -
Recoveries - - -
____________ ___________ __________
Balance at December 31 $67,400 $50,000 $ -
============ =========== ==========
The sale of certain pieces of these properties resulted in
losses of ($7,500), ($74,525) and ($86,787), in 1994, 1993 and
1992, respectively. These amounts have been included in other
operating income (expenses) for the respective periods.
NOTE G
ACQUISITIONS
Under a Purchase and Assumption Agreement (the Agreement)
dated May 24, 1989, between Peoples Bank and Trust Company of
St. Bernard and the Federal Deposit Insurance Corporation
(FDIC) as receiver of First Eastern Bank and Trust Company, New
Orleans, Louisiana, Peoples Bank and Trust Company purchased
certain assets and assumed the deposit liabilities of First
Eastern.
The negative bid of ($640,500) received was allocated to
the following assets: ($250,000) as a discount on loans
purchased, ($475,500) as an adjustment of Bank Premises to
their fair market value and a premium of $85,000 on the
deposits assumed. The $85,000 premium is included in Excess
Cost Over Fair Value of Assets Acquired along with amounts from
prior acquisitions and is being amortized by annual charges to
earnings over a period of 15 years.
<PAGE>
NOTE G
ACQUISITIONS
Under a Deposit Transfer and Asset Purchase Agreement
(Agreement II) dated October 12, 1990, between Citizens Bank
and Trust Company, Covington, Louisiana and Peoples Bank and
Trust Company of St. Bernard, Peoples Bank and Trust Company
agreed to assume all deposit liabilities of Citizens Bank's
Slidell branch and purchase certain assets of that branch.
Subject to Agreement II, Peoples had the opportunity to
purchase any loans at par from the Slidell branch within 120
days of the date of the agreement. Additionally, Peoples'
parent company, Peoples Bancshares, Inc., acquired the branch
location of the Citizens' Slidell branch and subsequently
entered into a lease with Peoples Bank for the facility. Under
Agreement II, Peoples paid a premium of $80,000 for the deposit
base which is included in Excess Cost Over Fair Value of Assets
Acquired along with amounts from prior years and is being
amortized by annual charges to earnings over a period of 15
years.
Under a Purchase and Assumption Agreement (the Agreement
III) dated December 3, 1987, between Peoples Bank and Trust
Company of St. Bernard and the FDIC as receiver of the State
Bank of Commerce, Slidell, Louisiana, Peoples purchased certain
assets and assumed the deposit liabilities of State Bank of
Commerce. In consideration of such assumption, Peoples
acquired certain assets of State Bank and assistance from FDIC
with an aggregate fair value equal to the total amount of
liabilities assumed less $1,310,000. Peoples is amortizing
such excess by annual charges to earnings over a period of 15
years. A comparison of the deposit base purchased to the
deposit base at December 31, 1992 reflected a decline in the
deposit base estimated to be retained after the acquisition.
Therefore, an additional charge to earnings of $180,000 and
$300,000 was made during the years ended December 31, 1993 and
1992, respectively. The balance is being amortized over the
remaining fifteen year period.
Accumulated amortization amounted to $1,065,639 and
$1,017,305 at December 31, 1994 and 1993, respectively. The
total amount of amortization was $48,334, $248,333, and
$398,333 for 1994, 1993 and 1992, (from the above acquisitions)
and has been included in Other Operating Expenses.
NOTE H
NOTES PAYABLE
Notes payable consist of the following:
December 31,
_____________________
1994 1993
__________ __________
9% two year note, due in quarterly
installments of $20,441 and one balloon
payment on September 30, 1996. $488,396 $524,315
========== ==========
The above notes are secured by a pledge of securities of a
minimum of 80% of the outstanding shares of the Capital Stock
of Peoples Bank and Trust Company of St. Bernard.
<PAGE>
NOTE H
NOTES PAYABLE (Continued)
Interest expense on these notes for the years ended
December 31, 1994, 1993 and 1992 totaled $45,844, $49,162 and
$60,413, respectively.
The aggregate amount of maturities for these notes is as
follows:
1995 $ 67,871
1996 420,525
____________
$ 488,396
============
NOTE I
INCOME TAXES
During 1993, the Company adopted FAS Statement 109. The
Bank elected not to retroactively adopt the pronouncement and,
therefore, has accounted for the adoption as a change in
accounting principle and reported the results of such change as
of January 1, 1993.
Under the new rules, the Company recognized a deferred tax
asset based on temporary differences between book and tax
purposes.
The effective tax rates differ from the statutory rates
principally because of tax exempt revenues. A reconciliation
of these rates is shown below:
Years Ended December 31,
_____________________________________________________
1994 1993 1992
__________________ __________________ _________________
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
__________ ________ ________ ________ ________ ________
Federal Income Tax at
Statutory Rate $ 700,039 34.00% $803,318 34.00% $639,804 34.00%
Increases (Decreases)
Resulting From:
Tax Exempt Income (114,867) (5.58) (76,069) (3.22) (136,425) (6.90)
Disallowed Interest
Expense 9,892 .48 6,436 .27 7,470 .38
Amortization
Acquisition Premium 16,433 .80 84,433 3.57 135,433 6.87
Miscellaneous Items 7,273 .35 (14,233) (.60) 14,020 .71
__________ ________ _________ ______ _________ ________
Total $ 618,770 30.05% $803,885 34.02% $660,302 35.06%
========== ======== ========= ====== ========= ========
<PAGE>
NOTE I
INCOME TAXES (Continued)
There were net deferred tax assets of $766,891 and
$707,633 as of December 31, 1994 and 1993, respectively. The
major temporary differences which created deferred tax assets
and liabilities are as follows:
1994 1993
___________ ___________
Unrealized loss on securities
(FASB 115 Adjustment) $ 597,863 $ -
Unrealized loss on securities
(Section 475 Adjustment) (413,220) -
Deferred compensation 337,541 257,363
Allowance for loan losses 280,554 217,524
Accumulated depreciation (138,321) (46,975)
Other Real Estate 80,989 77,064
Deferred Income 77,276 103,035
Other 29,419 99,622
____________ ___________
852,101 707,633
Valuation Allowance (85,210) -
____________ ___________
$ 766,891 $707,633
============ ===========
These amounts are included in Other Assets on the Balance Sheet.
The income tax provision is composed of current and deferred
portions as follows:
December 31,
____________________________________
Deferred
Liability Method Method
____________________ _______________
1994 1993 1992
_________ __________ _______________
Current $80,165 $809,231 $713,042
Deferred 453,395 (5,346) (52,740)
Change in Valuation Allowance 85,210 - -
___________ ___________ _______________
$618,770 $803,885 $660,302
=========== =========== ===============
<PAGE>
NOTE J
LEASES
The following is a schedule by years of future minimum
rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess of
one year at December 31, 1994:
December 31,
_________________
1995 $ 499,851
1996 480,234
1997 446,400
______________
Total Minimum Payments Required $1,426,485
Rent expense totaled $510,209, $509,349 and $508,571 for
1994, 1993 and 1992, respectively.
The Bank is the lessor of office space under operating
leases expiring in various years through 1999.
Minimum future rentals to be received on non-cancelable
leases as of December 31, 1994 for each of the next 5 years and
in the aggregate are:
December 31,
___________________
1995 $ 106,673
1996 97,036
1997 92,735
1998 86,325
1999 74,125
____________
$ 456,894
============
NOTE K
EMPLOYEE BENEFITS
As of October 30, 1984, the Bank merged its target-benefit
pension plan with its profit sharing plan to form a new profit
sharing plan. The result of this merger was to combine the
benefits accrued into one plan, with no detrimental effect on
either the Bank or its employees. Employer contributions to
the plan are determined annually. The amounts of profit
sharing expense for 1994, 1993 and 1992 totaled $125,000,
$100,000 and $100,000, respectively, which are included
in salaries and employee benefits on the statements of income.
The plan covers all employees of the Bank who have
approximately six months of service (1,000 hours) and are age
twenty and one-half or older.
<PAGE>
NOTE L
RELATED PARTIES
Certain executive officers and directors have loans,
deposits and other transactions with the Bank. Such
transactions are on substantially the same terms as those
prevailing at the time for comparable transactions of others.
An analysis of loans to directors, officers and principal
holders of equity securities, is as follows:
December 31,
____________________________
1994 1993
_____________ ______________
Balance - January 1 $1,077,935 $ 1,471,787
New Loans Made and Renewals 458,697 579,894
Repayments and Maturities (511,029) (973,746)
_____________ ______________
$1,025,603 $ 1,077,935
============= ==============
On December 30, 1985, the Bank sold its buildings and land
to a partnership whose partners are the major stockholders of
the Bank's holding company. The sales price was $3,500,000,
the appraised value of the property. The terms consisted of an
installment sale with a down payment of $260,000, and a balance
of $3,240,000 to be paid. The balance of $3,240,000 was
repaid in January of 1987. At the time of the sale, the Bank
entered into operating leases with the partnership for the
property sold for a period of twelve years beginning December
30, 1985 and ending December 31, 1997. The leases require
minimum annual lease payments of $446,400. In accordance with
Generally Accepted Accounting Principles, the gain from the
sale/lease back is to be amortized over the life of the lease.
In 1994, 1993 and 1992, $75,761 of the gain was recognized in
each year. Deferred income of $227,283 and $303,044 for 1994
and 1993 have been included in other liabilities.
On October 13, 1990, the Bank entered into a lease
agreement with its parent, Peoples Bancshares, Inc. for its
branch facility located in Slidell, Louisiana. Under terms of
the agreement, the lease is for a 10 year period at a monthly
rent of $4,500 with adjustment clauses based upon changes in
the Consumer Price Index at the beginning of the 2nd, 4th, 6th,
8th and 10th years. The total rent under this agreement for
1994, 1993 and 1992 totaled $54,000 per year.
NOTE M
DEFERRED COMPENSATION AGREEMENTS
The Bank is a party to deferred compensation agreements
with several officers of the Bank. The amount of compensation
accumulated will be distributed to those officers at the time
they reach retirement age in time frames ranging from lump sum
distribution to 15 years. The amounts charged to operations
were $49,975, $47,512 and $57,346 from 1994, 1993 and 1992,
respectively. The total deferred compensation liability payable
equaled $992,769 and $927,112 for 1994 and 1993, respectively,
and was included in other liabilities. The liability includes
a prior period adjustment of $462,673 due to the underfunding
of the plan. These plans do not qualify under the Internal
Revenue Code, and accordingly, tax deductions are allowable
only when benefits are paid.
NOTE N
COMMITMENTS AND CONTINGENCIES
The Bank's financial statements do not reflect various
commitments and contingent liabilities that arise in the normal
course of business and the involved elements of credit risk,
interest rate risk and liquidity risk. These commitments and
contingent liabilities are commitments to extend credit,
commercial letters of credit and contingent liabilities of
secondary mortgage loans sold with recourse over a 90 day
period of time.
A summary of the Bank's commitments and contingent
liabilities at December 31, 1994 is as follows:
Amount
_______________
Secondary Mortgage Loans Sold With Recourse $1,553,650
Credit Card Arrangements 1,124,776
Commercial Lines of Credit 1,984,963
Commitments to Extend Credit 2,742,850
________________
$7,406,239
================
Commitments to extend credit, credit card arrangements,
commercial letters of credit and secondary mortgage loans sold
with recourse all include exposure to some credit loss in the
event of nonperformance of the customer. The Bank's credit
policies and procedures for credit commitments and financial
guarantees are the same as those for extension of credit that
are recorded on the statement of condition. Because these
instruments have fixed maturity dates and because many of them
expire without being drawn upon, they do not generally present
any significant liquidity risk to the Bank.
The Bank is a party to various legal proceedings arising
in the ordinary course of business. In the opinion of
management and the Bank's outside legal counsel, the ultimate
resolution of these proceedings will not have a material
adverse affect on the Bank's financial condition or results of
operations.
<PAGE>
NOTE O
DEPOSITS
Major classifications of deposits are as follows:
December 31,
____________________________________
1994 1993
___________________ ________________
Non-Interest Bearing Demand $31,027,781 $28,759,342
NOW and Insured Money
Market Accounts 36,902,634 41,347,209
Savings Accounts 37,835,552 40,534,087
Certificates of Deposit
Greater than $100,000 7,613,910 5,011,206
Other Certificates of Deposit 38,466,987 39,655,179
___________________ ________________
$151,846,864 $155,307,023
=================== ================
An approximate schedule of maturities for fixed rate
Certificates of Deposits $100,000 and over are as follows as of
December 31, 1994:
Three Months or Less $5,464,819
Over Three Months through Twelve Months 1,477,423
Over One Year through Five Years 671,668
Over Five Years -
____________
$7,613,910
NOTE P
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INVESTMENTS
The following methods and assumptions were used to
estimate the fair value of each class of financial instruments
for which it is practicable to estimate the value:
CASH AND SHORT-TERM INVESTMENTS
For cash, the carrying amount approximates fair
value. For short-term investments, fair values are
calculated based upon general investment market interest
rates for similar maturity investments.
INVESTMENT SECURITIES
For securities and marketable equity securities held
for investment purposes, fair values are based on quoted
market prices.
LOAN RECEIVABLES
For certain homogeneous categories of loans such as
residential mortgages, credit card receivables and other
consumer loans, fair value is estimated using the current
U.S. treasury interest rate curve, a factor for cost of
processing and a factor for historical credit risk to
determine the discount rate.
<PAGE>
NOTE P
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INVESTMENTS
(Continued)
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits
and certain money market deposits are calculated based
upon general investment market interest rates for similar
maturity investments. The fair value of fixed maturity
certificates of deposit is estimated using the U.S.
treasury interest rate curve currently offered for
deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the
fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements
and the present creditworthiness of the counterparties.
The estimated fair values of the Bank's financial
instruments are as follows:
December 31, 1994 December 31, 1993
_________________________ __________________________
Carrying Fair Carrying Fair
Amount Value Amount Value
_____________ ____________ ____________ ____________
Financial Assets:
Cash and Short-Term
Investment $13,541,000 $13,540,000 $26,786,707 $26,784,080
Investment
Securities 92,892,000 92,466,000 79,192,029 80,710,438
Loans 56,407,000 55,262,000 59,875,174 60,456,592
Less: Allowance for
Loan Losses (2,243,000) (2,243,000) (2,093,534) (2,093,534)
____________ ____________ _____________ ____________
$160,597,000 $159,025,000 $163,760,376 $165,857,576
============ ============ ============= ============
Financial Liabilities:
Deposits $151,847,000 $149,702,000 $155,307,023 $154,246,171
============ ============ ============ ============
Unrecognized Financial Instruments:
Commitments to Extend
Credit $2,742,850 $ 2,742,850 $3,834,000 $ 3,834,000
Secondary Mortgage
Loans with 90-Day
Recourse 1,553,650 1,553,650 4,321,350 4,321,350
Commercial Lines
of Credit 1,984,963 1,984,963 1,299,930 1,299,930
Credit Card
Arrangements 1,124,776 1,124,776 1,214,038 1,214,038
_____________ ____________ _____________ ____________
$7,406,239 $7,406,239 $10,669,318 $10,669,318
============= ============ ============= ============
<PAGE>
NOTE Q
SUBSEQUENT EVENTS
Effective April 27, 1995, Peoples Bancshares, Inc. entered
into an agreement and plan of merger with First Commerce
Corporation. The consideration for the acquisition of the
Company and its subsidiary will consist of $30,796,000 of
common stock of First Commerce Corporation with a market value
based on the average trading prices over the ten business days
prior to the date the Plan becomes effective.
As of December 31, 1994, Peoples Bank and Trust Company
of St. Bernard was in negotiations to sell $1,400,000 of
Student Loans to the Student Loan Marketing Association. As of
the date of this Independent Auditor's Report, the sale has not
been completed.
As of December 31, 1994, Peoples Bancshares was engaged in
negotiations to sell a piece of land which was previously held
to build a branch location for $385,000 which will result in no
gain when consummated. As of the date of this Independent
Auditor's Report, the sale of this property is still pending.
NOTE R
PARENT COMPANY ONLY FINANCIAL INFORMATION
PEOPLES BANCSHARES, INC.
BALANCE SHEETS
ASSETS
December 31,
______________________________
1994 1993
______________ ______________
CURRENT
Cash $156,370 $155,903
______________ ______________
Total 156,370 155,903
OTHER
Investment in Bank 13,967,134 14,027,137
Other Assets 694,816 282,377
Land and Buildings 364,446 783,668
______________ ______________
Total 15,026,396 15,093,182
______________ ______________
$15,182,766 $15,249,085
============== ==============
<PAGE>
NOTE R
PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)
PEOPLES BANCSHARES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
____________________________
1994 1993
______________ ______________
CURRENT
Current Maturities of Long-Term Debt $67,871 $524,315
Due to Subsidiary 280,865 263,369
Accounts Payable 35,803 -
______________ ______________
Total 384,539 787,684
______________ ______________
LONG-TERM
Notes Payable 420,525 -
______________ ______________
Total 420,525 -
______________ ______________
Total Liabilities 805,064 787,684
______________ ______________
STOCKHOLDERS' EQUITY
Common Stock - Par Value $25, 125,000
Shares Authorized, 24,082 Shares
Issued in 1994 and 1993, of which 674
were held as Treasury Stock
in 1994 and 1993 602,050 602,050
Additional Paid-In Capital 3,025,918 3,025,918
Retained Earnings 12,133,893 11,099,649
Unrealized Loss on Securities
Available-for-Sale Net of Applicable
Deferred Income Taxes (1,117,943) -
______________ ______________
Total 14,643,918 14,727,617
Less: Treasury Stock at Cost; 674 Shares (266,216) (266,216)
______________ ______________
Total Stockholders' Equity 14,377,702 14,461,401
______________ ______________
$15,182,766 $15,249,085
============== ==============
<PAGE>
NOTE R
PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)
PEOPLES BANCSHARES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For The Years Ended
December 31,
___________________________________
1994 1993 1992
___________ __________ ____________
REVENUE
Dividends from Subsidiary $380,496 $394,945 $385,312
Interest 5,213 4,590 7,532
Rent 54,000 54,000 54,000
___________ __________ ____________
439,709 453,535 446,844
___________ __________ ____________
EXPENSES
Interest 45,844 53,253 77,124
Other 93,772 13,052 12,766
___________ __________ ____________
139,616 66,305 89,890
___________ __________ ____________
INCOME BEFORE INCOME TAXES
AND EQUITY IN UNDISTRIBUTED 300,093 387,230 356,954
EARNINGS OF SUBSIDIARY
INCOME TAX BENEFIT 27,340 2,623 9,642
___________ __________ ____________
327,433 389,853 366,596
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 1,057,931 1,076,819 875,712
___________ __________ ____________
NET INCOME 1,385,364 1,466,672 1,242,308
RETAINED EARNINGS - BEGINNING OF
YEAR 11,099,649 9,867,057 8,859,729
LESS DIVIDENDS DECLARED (351,120) (234,080) (234,980)
___________ __________ ___________
RETAINED EARNINGS - END OF YEAR $12,133,893 $11,099,649 $9,867,057
============ ========== ===========
<PAGE>
NOTE R
PARENT COMPANY ONLY FINANCIAL INFORMATION (Continued)
PEOPLES BANCSHARES, INC.
STATEMENTS OF CASH FLOWS
For The Years Ended
December 31,
__________________________________
1994 1993 1992
___________ ___________ __________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,385,364 $1,466,572 $1,242,308
Depreciation 6,872 6,872 6,872
Equity in Earnings of Subsidiary (1,438,435) (1,471,767) (1,427,727)
Other Real Estate Owned Adjustment
to Fair Market Value 44,744 - -
Net (Increase) Decrease in Other Assets (44,839) (282,371) 51,175
Net Increase (Decrease) in Other
Liabilities 35,800 (428,310) 311,300
____________ ___________ __________
Net Cash Provided by (Used in) Operating
Activities (10,494) (708,904) 183,928
____________ ___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Premises and Land - - -
Purchase of Investment Securities - - -
Dividends from Subsidiary 380,504 394,945 385,312
Maturities of Investment Securities - - 100,000
____________ ___________ __________
Net Cash Provided by
Investing Activities 380,504 394,945 485,312
____________ ___________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Treasury Stock - - (36,000)
Repayment of Long-Term Debt (35,919) (32,608) (19,359)
Repayment of Subordinated Debentures - (125,506) (125,505)
Advance to (Payment from) Subsidiary 17,496 705,883 (203,038)
Dividends Paid (351,120) (234,080) (234,980)
____________ ___________ __________
Net Cash Used in Financing Activities (369,543) 313,689 (618,882)
____________ ___________ __________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 467 (270) 50,358
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 155,903 156,173 105,815
____________ ___________ __________
CASH AND CASH EQUIVALENTS - END OF YEAR $156,370 $155,903 $156,173
============ =========== ==========
SUPPLEMENTAL INFORMATION:
Transfer from Premises and
Land to Other Real Estate $412,350
PEOPLES BANK AND TRUST
COMPANY OF ST. BERNARD
December 31, 1994
Audits of Financial Statements
December 31, 1994
and
December 31, 1993
<PAGE>
C O N T E N T S
Independent Auditor's Report 1
Balance Sheets 2
Statements of Income 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5 - 6
Notes to Financial Statements 7 - 25
<PAGE>
Officers and Board of Directors
Peoples Bank and Trust Company of St. Bernard
Independent Auditor's Report
____________________________
We have audited the balance sheets of PEOPLES BANK AND TRUST COMPANY OF
ST. BERNARD as of December 31, 1994 and December 31, 1993 and the related
statements of income, changes in stockholders' equity and csh flows for each
of the three years in the period ended December 31, 1994. These financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts anddisclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PEOPLES BANK AND TRUST
COMPANY OF ST. BERNARD as of December 31, 1994 and December 31, 1993, and
the result of its operations and its cash flows for the three years then
ended, in conformity with generally accepted accounting principles.
As discussed in Note B to the financial statements, the Bank changed its
method of accounting for securities as required under Statement of Financial
Accounting Standards (FAS) 115 in 1994.
As explained in Note Q to the financial statements, on April 27, 1995,
Peoples Bank and Trust Company of St. Bernard's stockholders entered into
an agreement and plan of merger with another company.
A Professional Accounting Corporation
March 13, 1995 except for Note Q
for which the date is April 27, 1995
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
BALANCE SHEETS
ASSETS
December 31,
_________________________
1994 1993
____________ ___________
Cash and Due from Banks $7,040,645 $6,186,707
Federal Funds Sold 6,500,000 20,600,000
Investment Securities Held-to-Maturity
(Market Value of $21,104,505 and
$80,710,438, Respectively) 21,530,509 79,192,029
Investment Securities Available-for-Sale 71,361,531 -
Loans - Net of Unearned Discount 56,406,542 59,875,174
Less: Allowance for Loan Losses (2,243,169) (2,093,534)
_____________ _____________
Net Loans 54,163,373 57,781,640
_____________ _____________
Premises and Equipment, Net 3,481,233 3,713,542
Other Real Estate Owned 566,946 690,417
Accrued Interest Receivable 1,820,628 1,518,012
Customers' Acceptance Liability 456,100 473,200
Excess Cost Over Fair Value of Assets
Acquired 409,361 457,695
Other Assets 1,635,110 1,789,161
_____________ _____________
$168,965,436 $172,402,403
============== =============
The accompanying notes are an intregal part of these financial statements.
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
_____________________________
1994 1993
LIABILITIES _____________ ______________
Deposits
Non-Interest Bearing Demand $31,027,908 $28,759,490
NOW and Insured Money Market Accounts 36,971,993 41,419,463
Savings 37,835,552 40,534,087
Time 46,167,781 44,749,886
_____________ _____________
Total Deposits 152,003,234 155,462,926
Acceptances Outstanding 456,100 473,200
Accrued Interest Payable 383,495 383,803
Other Liabilities 1,623,346 1,520,892
_____________ _____________
Total Liabilities 154,466,175 157,840,821
_____________ _____________
STOCKHOLDERS' EQUITY
Common Stock - $25 Par Value, 92,500
Shares Authorized, 25,000 Shares Issued
and Outstanding in 1994 and 1993 625,000 625,000
Surplus 4,000,000 4,000,000
Undivided Profits 11,034,819 9,936,582
Unrealized Loss on Securities Available-for-Sale,
Net of Applicable Deferred Income Taxes (1,160,558) -
_____________ _____________
Total Stockholders' Equity 14,499,261 14,561,582
_____________ _____________
$168,965,436 $172,402,403
============= =============
The accompanying notes are an integral part of these financial statements
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
STATEMENTS OF INCOME
For The Years Ended
December 31,
_______________________________________
1994 1993 1992
INTEREST INCOME
Interest and Fees on Loans $6,363,366 $7,050,555 $8,806,529
U.S. Treasury Securities 2,578,706 2,273,001 2,379,997
Interest on U.S. Agency and
Corporation Securities 1,071,101 1,716,591 1,904,910
Obligations of State and
Political Subdivisions 238,045 169,443 295,899
Other Investment Income 866,726 884,008 955,455
Interest on Federal Funds Sold 483,330 431,369 289,285
_____________ ____________ ___________
11,601,274 12,524,967 14,632,075
INTEREST EXPENSE
Interest on Deposits 3,584,796 3,770,637 5,126,346
_____________ ____________ ___________
NET INTEREST INCOME 8,016,478 8,754,330 9,505,729
PROVISION FOR LOAN LOSSES - 300,000 1,506,000
_____________ ____________ ___________
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 8,016,478 8,454,330 7,999,729
_____________ ____________ ___________
OTHER INCOME
Service Charges on Deposit Accounts 1,232,006 1,364,213 1,391,167
Other Service Charges and Fees 325,590 213,301 314,229
Other Operating Income 127,348 159,733 164,955
Securities Gains (Losses) 24,425 79,007 13,996
_____________ ____________ ___________
1,709,369 1,816,254 1,884,347
_____________ ____________ ___________
OTHER EXPENSE
Salaries and Employee Benefits 3,753,043 3,707,974 3,546,412
Occupancy Expense 2,026,846 2,025,097 1,981,199
Other Operating Expense 1,806,612 2,167,097 2,377,417
_____________ ____________ ___________
Total Other Expenses 7,586,501 7,900,168 7,905,028
_____________ ____________ ___________
INCOME BEFORE INCOME TAXES AND
CHANGES IN ACCOUNTING PRINCIPLE 2,139,346 2,370,416 1,979,048
PROVISION FOR INCOME TAXES 646,109 806,508 669,944
_____________ ____________ ___________
INCOME BEFORE CHANGES IN
ACCOUNTING PRINCIPLE 1,493,237 1,563,908 1,309,104
Change in Accounting Principle -
Adoption of FAS 109 - 36,040 -
_____________ ____________ ___________
NET INCOME $ 1,493,237 $ 1,527,868 $1,309,104
============= ============ ===========
EARNINGS PER SHARE $ 59.73 $ 61.11 $ 52.36
============= ============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PEOLES BANK AND TRUST COMPANY OF ST. BERNARD
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Years ended
December 31, 1994, December 31, 1993 and December 31, 1992
<TABLE>
<CAPTION>
Excess Unrealized
Cost Over Loss on
Market Investment
Additional Value Securities
Common Paid-In Undivided - Equity Available
Stock Capital Profits Securities For Sale Total
___________ ___________ ____________ ____________ ___________ ____________
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1991 $625,000 $4,000,000 $7,909,610 ($132,500) $- $12,402,110
Net Income - - 1,309,104 - - 1,309,104
Cash Dividends Paid ($16.00 Per share) - - (400,000) - - (400,000)
Reverse Securities Loss - -
Allocation - - - 132,500 - 132,500
___________ ___________ ____________ ____________ ___________ ____________
Balance - December 31, 1992 625,000 4,000,000 8,818,714 - - 13,443,714
Net Income - - 1,527,868 - - 1,527,868
Cash Dividends Paid ($16.40 Per - - (410,000) - - (410,000)
___________ ___________ ____________ ____________ ___________ ____________
Balance - December 31, 1993 $625,000 $4,000,000 $9,936,582 $- $- 13,443,714
Net Income - - 1,493,237 - - 1,493,237
Cash Dividends Paid ($15.80 Per Share) - - (395,000) - - (395,000)
Unrealized Loss on Securities
Available-for-Sale, Net of
Applicable Deferred Income
Taxes - - - - (1,160,558) (1,160,558)
___________ ___________ ____________ ____________ ___________ ____________
Balance - December 31, 1994 $625,000 $4,000,000 $11,034,819 $- $(1,160,558) $14,499,261
=========== =========== ============ ============ ============ ============
</TABLE>
<PAGE>
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Years Ended
December 31,
_______________________________________
1994 1993 1992
_____________ ____________ ____________
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $1,493,237 $1,527,868 $1,309,104
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Deferred Income Taxes 538,605 (5,345) (52,739)
Provision for Loan Losses - 300,000 1,506,000
Other Real Estate Owned Adjustments to Fair
Market Value 35,970 211,497 124,023
Depreciation and Amortization 394,265 377,997 351,644
Amortization of Excess Cost on Assets Acquired 48,333 248,333 398,333
Amortization of Premium Investment Securities -
Held to Maturity 378,594 706,091 622,990
Amortization of Premium Investment Securities -
Available for Sale 300,810 - -
Accretion of Discount on Investment Securities -
Held to Maturity (8,093) (23,380) (23,331)
Accretion of Discount on Investment Securities -
Available for Sale (54,438) - -
(Gain) Loss on Sale of Other Real Estate 7,500 74,525 86,728
Amount Realized on Sale of Security (Gain) Loss (24,425) (79,007) (13,996)
(Increase) Decrease in Interest Receivable (302,616) 144,039 458,640
(Increase) Decrease in Other Assets 213,309 (402,090) (6,592)
Increase (Decrease) in Interest Payable (308) (76,285) (299,547)
Increase (Decrease) in Other Liabilities 102,454 (414,448) 202,055
Increase (Decrease) in Unearned Discount (199,076) (502,293) (978,451)
_____________ ____________ ____________
Net Cash Provided by Operating Activities 2,924,121 2,087,502 3,684,861
_____________ ____________ ____________
INVESTING ACTIVITIES
Proceeds from Sale of Investment
Securities - Held-to-Maturity - 36,408,327 28,817,836
Proceeds from Sale of Investment
Securities - Available-for Sale 36,055,781 - -
Purchases of Investment Securities -
Held-to-Maturity (13,458,411) (35,672,427) (35,200,986)
Purchases of Investment Securities -
Available-for-Sale (62,224,846) - -
Proceeds from Maturities of Investment
Securities - Available-for-sale 13,000,000 - -
Proceeds from Maturities of Investment
Securities - Held-to-maturity 9,932,358 - -
Principal Payments on Mortgage-Backed Securities 490,647 - -
Principal Payments on Corporate Bonds 153,589 - -
Net (Increase) Decrease in Loans 3,817,347 4,498,760 16,108,132
Purchases of Bank Premises and Equipment (161,956) (628,448) (130,795)
Proceeds from Sale of Bank Premises and Equipment - 10,228 251,083
(Increase) Decrease in Other Real Estate Owned - (249,687) (2,018,663)
Covered Transactions on Other Real Estate Paid - 26,900 -
Proceeds from Sale of Other Real Estate 80,000 1,198,489 584,400
_____________ ____________ ____________
Net Cash Provided by (Used in)
Investing Activities (12,315,491) 5,592,142 8,411,007
_____________ ____________ ____________
FINANCING ACTIVITIES
Net Increase (Decrease) in Non-Interest
Bearing Deposits 2,268,418 644,413 5,700,793
Net Increase (Decrease) in NOW and
Insured Money Market (4,447,470) (2,123,561) (789,792)
Net Increase (Decrease) in Savings (2,698,535) 1,321,905 9,141,070
Net Increase (Decrease) in Time Deposits 1,417,895 (5,564,331) (9,840,197)
Payments of Dividends (395,000) (410,000) (400,000)
_____________ ____________ ____________
Net Cash Provided by (Used In)
Financing Activities (3,854,692) (6,131,574) 3,811,874
_____________ ____________ ____________
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,246,062) 1,548,070 15,907,742
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 26,786,707 25,238,637 9,330,895
_____________ ____________ ____________
CASH AND CASH EQUIVALENTS - END OF YEAR $13,540,645 $26,786,707 $25,238,637
============= ============ ============
The accompanying notes are an integral part of these financial statements.
SUPPLEMENTAL DISCLOSURES:
Interest Paid: The Bank paid $3,584,371, $4,058,581 and $5,304,478, in 1994,
1993 and 1992, respectively, in interest on deposits and other borrowings.
Income Taxes Paid: The Bank paid $125,000, $1,761,125, $280,000 of income
taxes during 1994, 1993 and 1992, respectively.
Total increase in unrealized loss on securities available-for-sale, net of
applicable deferred income taxes, during 1994 was $1,160,558.
<PAGE>
NOTE A
SIGNIFICANT ACCOUNTING POLICIES
MAJORITY OWNERSHIP
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD is
majority owned by Peoples Bancshares, Inc., an authorized
bank holding company.
INVESTMENT SECURITIES
Securities of State and Political subdivisions and
corporate bonds that management has the ability and intent
to hold-to-maturity are classified as held-to-maturity and
carried at cost, adjusted for amortization of premium and
accretion of discounts using methods approximating the
interest method. Treasury securities, agencies, equity
securities and collateral mortgage obligations are
classified as available-for-sale and are carried at fair
value. Realized gains and losses on securities are
included in net income. Unrealized gains and losses on
securities available-for-sale are recognized as direct
increases or decreases in stockholders' equity, net of the
related tax effect. Cost of securities sold is recognized
using the specific identification method.
INTEREST INCOME
Interest income on loans is primarily accrued using
the interest method on the amount of principal outstanding.
Interest income on a portion of installment consumer loans
is based upon the sum-of-the months digits method, which
does not differ materially from results obtained using the
interest method.
Fee income, in the form of commitment fees or
origination fees is recognized at the time the loans are
made. The amount of income, net of expenses, derived from
these sources is immaterial.
NONPERFORMING ASSETS
Nonperforming assets include nonaccrual loans and
other real estate acquired through foreclosure. Nonaccrual
loans are loans on which the accrual of interest income has
been discontinued. The accrual of income on commercial and
real estate loans is generally discontinued when the loan
becomes 90 days past due as to principal or interest. At
that time, interest accruals are discontinued and all
previous accruals are reversed against interest income.
Generally, a loan is returned to performing status as a
result of full payment of all past due principal and
interest. Interest income is recognized as received when
collection of principal is no longer doubtful.
At the time the loan is foreclosed, the collateral
is transferred to Other Real Estate at the lesser of the
loan balance or fair value. Gains or losses from sales
related to these properties are included in Other Operating
Expenses.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a
provision for loan losses charged to expense. The
allowance represents an amount which, in management's
judgment, will be adequate to absorb possible losses on
existing loans that may become uncollectible.
<PAGE>
NOTE A
SIGNIFICANT ACCOUNTING POLICIES (Continued)
ALLOWANCE FOR LOAN LOSSES (Continued)
Management's judgment in determining the adequacy of
the allowance is based on such factors as changes in the
nature and volume of the loan portfolio, current economic
factors that may affect the borrowers' ability to pay,
overall portfolio quality and review of specific problem
loans.
BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Bank premises, equipment and leasehold improvements
are stated at cost less accumulated depreciation and
amortization. Depreciation on bank premises and equipment
is computed principally on the straight-line method over
the estimated lives of the assets. Leasehold improvements
are amortized principally on the straight-line method over
the useful lives of the improvements.
EXCESS COST OVER FAIR VALUE OF ASSETS ACQUIRED
In connection with certain acquisitions, the excess of
costs of the assets acquired, under the purchase method
over the fair value of the tangible net assets acquired, is
being amortized over 15 years using the straight-line
method.
INCOME TAXES
PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD files a
consolidated tax return with its majority stockholder. In
accordance with their tax sharing agreement, the Bank
records as expense an amount obtained by applying the
statutory tax rate to their income as adjusted for tax-
exempt interest and other timing differences, and remits
the portion of expense currently due to the parent company.
Income taxes are provided for the tax effects of trans
actions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily
to differences between the basis of loans, bank premises
and equipment, deferred gain on sale of bank premises,
deferred compensation payable, the values of available-for-
sale securities and the self insurance plan for financial
and income tax reporting. The deferred taxes represent
the future tax return consequences of those differences,
which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
EARNINGS PER SHARE
Earnings per share were calculated by dividing net
income by the average number of shares outstanding.
COMPARATIVE DATA
Certain amounts in the 1993 disclosures have been
reclassified to provide comparability with the 1994 presentation.
<PAGE>
NOTE B
INVESTMENT SECURITIES
Carrying amounts and approximate market values of
investment securities are summarized as follows:
Securities Held-to-Maturity consisted of the following
at December 31, 1994
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
______________ ____________ ___________ __________
State and Political
Subdivisions $ 5,568,004 $25,430 $135,604 $5,457,830
Corporate Notes 15,962,505 1,460 317,290 15,646,675
_____________ ____________ ___________ __________
$21,530,509 $26,890 $452,894 $21,104,505
============= ============ =========== ===========
Securities Available-for-Sale consisted of the following at December 31, 1994
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
____________ ____________ ____________ ____________
U. S. Treasury
Securities $50,244,414 $ 6,956 $1,222,308 $49,029,062
Government Agencies 21,028,851 134,161 707,074 20,455,938
Equity Securities 250,000 250,000
Collateralized
Mortgage
Obligations 1,596,688 29,843 - 1,626,531
_____________ ____________ ____________ ____________
$73,119,953 $170,960 $1,929,382 $71,361,531
============= ============ ============ ============
Securities Held-to-Maturity consisted of the following at December 31, 1993
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
_____________ _____________ ____________ ___________
U. S. Treasury
Securities $43,278,333 $852,561 $15,269 $44,115,625
Government Agencies 15,036,838 434,222 3,790 15,467,270
State and Political
Subdivisions 4,591,788 74,441 15,162 4,651,067
Equity Securities 250,000 - - 250,000
Other Securities 16,035,070 200,434 9,028 16,226,476
_____________ _____________ ____________ ___________
$79,192,029 $1,561,658 $43,249 $80,710,438
============= ============= ============ ===========
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
The Maturities of Investment Securities at December 31, 1994 are as follows:
</TABLE>
<TABLE>
<CAPTION>
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
____________ ________________ ______________ ______________
<S> <C> <C> <C> <C>
U. S. Treasury Securities:
One Year and Under $ - $ - $ 9,016,078 $ 8,875,625
Two to Five Years - - 41,228,336 40,153,437
____________ _______________ ________________ ______________
$ - $ - $50,244,414 $49,029,062
============ =============== ================= =============
Government Agencies:
One Year and Under $ - $ - $ 5,999,486 $ 5,951,875
Two to Five Years - - 14,033,526 13,374,063
Six to Ten Years - - - -
Over Ten Years - - 995,839 1,130,000
_____________ _______________ _________________ _____________
$ - $ - $21,028,851 $20,455,938
============= =============== ================= =============
State and Political
Subdivisions:
One Year and Under $1,103,611 $1,100,221 $ - $ -
Two to Five Years 4,022,501 3,928,314 - -
Six to Ten Years 441,892 429,295 - -
After Ten Years - - - -
______________ _______________ _________________ _____________
$5,568,004 $5,457,830 $ - $ -
============== =============== ================= =============
Collateralized Mortgage
Obligations:
One Year and Under $ - $ - $ - $ -
Two to Five Years - - 150,513 150,635
Six to Ten Years - - 136,655 154,170
After Ten Years - - 1,309,520 1,321,726
______________ ______________ _________________ _____________
$ - $ - $1,596,688 $1,626,531
============== ============== ================= =============
</TABLE>
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
Securities Held-to-Maturity Securities Available-for-Sale
Carrying Approximate Amortized Approximate
Amount Market Value Cost Market Value
______________ _______________ _______________ ______________
Corporate Notes:
One Year and Under $7,011,120 $6,909,231 $ - $ -
Two to Five Years 8,951,385 8,737,444 - -
Six to Ten Years - - - -
After Ten Years - - - -
_____________ ______________ ______________ _____________
$15,962,505 $15,646,675 $ - $ -
============= ============== ============== =============
Investment securities held-to-maturity with an adjusted cost of $14,091,000
at December 31, 1993, were pledged to secure public deposits.
Investment securities available-for-sale with an adjusted cost of $14,629,375
at December 31, 1994, were pledged to secure public deposits.
Included in the average maturity of Collateral Mortgage Obligations are
certain mortgage-backed securities having contractual remaining maturities
ranging from 1 month to 25 years. Based on prepayment assumptions, the
estimated average remaining lives of these securities range from 2 years to
5 years.
Gross realized gains on sales of securities held-to maturity were:
1994 1993 1992
___________ ___________ ____________
Government Agencies $ - $43,149 $12,050
State and Political
Subdivisions - 29,054 (8,054)
Equity Securities - - -
Other Securities - 6,804 10,000
___________ ___________ ____________
$ - $79,007 $13,996
=========== =========== =============
<PAGE>
NOTE B
INVESTMENT SECURITIES (Continued)
Gross realized gains on sales of securities available-for-sale were:
1994 1993 1992
_________ _________ ___________
U.S. Treasury Securities $ 3,019 $ - $ -
Government Agencies 21,406 - -
State and Political
Subdivisions - - -
Equity Securities - - -
Other Securities - - -
__________ _________ ___________
$24,425 $ - $ -
========== ========= ===========
As of January 1, 1994, the Bank adopted Statement of
Financial Accounting Standards No. 115, on "Accounting for
Certain Investment Securities". This statement requires
investment securities to be classified into one of the
following categories: held-to-maturity, available-for-sale,
or trading. Investment securities classified as held-to-
maturity are measured at amortized cost while investment
securities classified as available-for-sale or trading are
measured at fair value, with unrealized gains or losses
recorded in the "Equity" section for available-for-sale
securities and in the income statement for trading
securities. The effect of this change in accounting
principle is reflected in the "Equity" section of the
Statement of Changes in Stockholders' Equity as an
unrealized loss on investment securities available-for-sale
of $1,160,558 net of deferred taxes of $597,863.
A specific reserve allocation was recorded against
income for two preferred stocks held in Investment
Securities prior to 1992. Both preferred stocks were sold
prior to the reversal of the $132,500 specific reserve
allocation included in stockholders equity during the year
ended December 31, 1992.
<PAGE>
NOTE C
LOANS
Major classifications of loans are summarized as follows:
For The Years Ended
December 31,
_______________________
1994 1993
__________ __________
Real Estate - Residential $18,571,673 $22,042,771
Real Estate - Commercial 17,089,078 17,987,194
Commercial - Non-Real Estate 6,695,896 6,713,025
Student Loans 3,391,123 3,114,060
Installment 10,839,905 10,912,226
Other 1,650,026 1,136,132
__________ __________
58,237,701 61,905,408
Less: Unearned Discount (1,831,159) (2,030,234)
__________ __________
56,406,542 59,875,174
Less: Allowance for
Loan Losses (2,243,169) (2,093,534)
__________ __________
Balance at December 31 $54,163,373 $57,781,640
========== ==========
At December 31, 1994, $365,072 of loans were in the
nonaccrual status and $40,119 of interest was foregone in
the year then ended. At December 31, 1993, $1,021,086 of
loans were in the nonaccrual status and $85,774 of interest
was foregone in the year then ended. The net effect of the
reversal of previously accrued interest was to reduce
interest income by $2,585, $64,949 and $67,904 in 1994,
1993 and 1992, respectively.
An approximate schedule of loan maturities or
repricing opportunities is as follows:
Variable Fixed
Maturities Rate Rate Total
_________________ __________ __________ __________
Three Months or Less $12,035,296 $6,530,991 $18,566,287
Three Months - One Year 16,911,442 11,087,177 27,998,619
One Year - Five Years 1,488,163 8,985,629 10,473,792
Over Five Years - 1,199,003 1,199,003
__________ __________ __________
$30,434,901 $27,802,800 $58,237,701
========== ========== ==========
<PAGE>
NOTE D
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
For The Years Ended
December 31,
__________________________________
1994 1993 1992
_________ _________ _________
Balance at January 1 $2,093,534 $1,436,356 $1,288,900
Provision Charged to
Operations - 300,000 1,506,000
Loans Charged Off (237,869) (572,993) (1,925,428)
Recoveries 387,504 930,171 566,884
_________ _________ _________
Balance at December 31 $2,243,169 $2,093,534 $1,436,356
========= ========= =========
The Financial Accounting Standards Board issued SFAS
No. 114, "Accounting by Creditors for Impairment of a
Loan," which is effective January 1, 1995. This statement
establishes standards, including the use of discounted cash
flow techniques, for measuring the impairment of a loan
when it is probable that the contractual terms will not be
met. The effect of adopting this new standard will not
have a material impact on the Company's financial position
or results of operation.
NOTE E
BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Major classifications of fixed assets are summarized
as follows:
December 31,
1994 1993
Bank Building and Improvements $2,652,511 $2,618,975
Furniture and Equipment 3,291,508 3,172,614
Leasehold Improvements 325,511 315,985
Land 877,294 877,294
_________ _________
7,146,824 6,984,868
Less: Accumulated Depreciation
and Amortization (3,665,591) (3,271,326)
_________ _________
$3,481,233 $3,713,542
========= =========
Depreciation and amortization expense totaled $394,265,
$377,997 and $351,644 for the years ended December 31, 1994,
1993 and 1992, respectively.
<PAGE>
NOTE F
OTHER REAL ESTATE
Other real estate includes a variety of property
acquired through foreclosure. These properties are recorded
at the lower of the loan balance or fair value, less
estimated disposal cost. The appraisals of such properties
are addressed annually, and all properties are adjusted to
the lower of the current carrying value or appraisal value.
Additionally, the Bank has set up a reserve for anticipated
carrying and disposal cost of these properties.
Changes in the reserve were as follows:
For The Years Ended
December 31,
_______________________________
1994 1993 1992
_______ _______ _______
Balance at January 1 $50,000 $- $-
Provision Charged to
Operations - 50,000 -
Loans Charged Off - - -
Recoveries - - -
_______ _______ _______
Balance at December 31 $50,000 $50,000 $-
======= ======= =======
The sale of certain pieces of these properties resulted
in gains (losses) of ($7,500), ($74,525) and ($86,787) in
1994, 1993 and 1992, respectively. These amounts have been
included in other operating income (expenses) for the
respective periods.
NOTE G
ACQUISITIONS
Under a Purchase and Assumption Agreement (the
Agreement) dated May 24, 1989, between PEOPLES BANK AND
TRUST COMPANY OF ST. BERNARD and the Federal Deposit
Insurance Corporation (FDIC) as receiver of First Eastern
Bank and Trust Company, New Orleans, Louisiana, Peoples
purchased certain assets and assumed the deposit liabilities
of First Eastern.
The negative bid of ($640,500) received was allocated
to the following assets, ($250,000) as a discount on loans
purchased, ($475,500) as an adjustment of Bank Premises to
their Fair Market Value and a premium of $85,000 on the
deposits assumed. The $85,000 premium is included in
Excess Cost Over Fair Value of Assets Acquired along with
amounts from prior acquisitions and is being amortized by
annual charges to earnings over a period of 15 years.
<PAGE>
NOTE G
ACQUISITIONS (Continued)
Under a Deposit Transfer and Asset Purchase Agreement
(Agreement II) dated October 12, 1990, between Citizens
Bank and Trust Company, Covington, Louisiana and PEOPLES
BANK AND TRUST COMPANY OF ST. BERNARD, Peoples agreed to
assume all deposit liabilities of Citizens Bank's Slidell
branch and purchase certain assets of that branch. Subject
to Agreement II, Peoples had the opportunity to purchase
any loans at par from the Slidell branch within 120 days of
the date of the agreement. Additionally, Peoples' parent
company, Peoples Bancshares, Inc., acquired the branch
location of the Citizens' Slidell branch and subsequently
entered into a lease with Peoples Bank for the facility.
Under the agreement, Peoples paid a premium of $80,000 for
the deposit base which is included in Excess Cost Over Fair
Value of Assets Acquired along with amounts from prior
years and is being amortized by annual charges to earnings
over a period of 15 years.
Under a Purchase and Assumption Agreement (Agreement
III) dated December 3, 1987, between PEOPLES BANK AND TRUST
COMPANY OF ST. BERNARD and the FDIC as receiver of the
State Bank of Commerce, Slidell, Louisiana, Peoples
purchased certain assets and assumed the deposits
liabilities of State Bank of Commerce. In consideration of
such assumption, Peoples acquired certain assets of State
Bank and assistance from FDIC with an aggregate fair value
equal to the total amount of liabilities assumed less
$1,310,000. Peoples is amortizing such excess by annual
charges to earnings over a period of 15 years. A
comparison of the deposit base purchased to the deposit
base at December 31, 1992 reflected a decline in the
deposit base estimated to be retained after the
acquisition. Therefore, an additional charge to earnings
of $180,000 and $300,000 was made during the years ended
December 31, 1993 and 1992, respectively. The balance is
being amortized over the remaining fifteen year period.
Accumulated amortization amounted to $1,065,639 and
$1,017,305 at December 31, 1994 and 1993, respectively.
The total amount of amortization was $48,334, $248,333 and
$398,333 for 1994, 1993, 1992 (from the above acquisitions)
and has been included in other operating expenses.
NOTE H
INCOME TAXES
During 1993, the Bank adopted FAS Statement 109. The
Bank elected not to retroactively adopt the pronouncement
and, therefore, has accounted for the adoption as a change
in accounting principle and reported the results of such
change as of January 1, 1993.
Under the new rules, the Bank recognized a deferred
tax asset based on temporary differences between book and
tax purposes.
<PAGE>
NOTE H
INCOME TAXES (Continued)
The effective tax rates differ from the statutory
rates principally because of tax exempt revenues. A
reconciliation of these rates is shown below:
<TABLE>
<CAPTION>
Years Ended December 31,
___________________________________________________________
1994 1993 1992
__________________ _________________ _________________
% of % of % of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
________ ______ ________ ______ ________ ______
<S> <C> <C> <C> <C> <C> <C>
Federal Income
Tax at Statutory Rate $727,378 34.00% $805,941 34.00% $649,446 34.00%
Increases (Decreases)
Resulting From:
Tax Exempt Income (114,867) (5.37) (76,069) (3.21) (136,425) (6.80)
Disallowed Interest
Expense 9,892 .46 6,436 .27 7,470 .37
Amortization Acqui-
sition Premium 16,433 .77 84,433 3.56 135,434 6.78
Miscellaneous Items 7,273 .34 (14,233) (.60) 14,019 .70
________ ______ ________ ______ ________ ______
Total $646,109 30.20% $806,508 34.02% $669,944 35.05%
======== ====== ======== ====== ======== ======
</TABLE>
The income tax provision is composed of current and deferred portions
as follows:
December 31,
________________________________________
Deferred
Liability Method Method
______________________ _______________
1994 1993 1992
________ ________ ________
Current $107,504 $811,853 $722,683
Deferred 453,395 (5,345) (52,739)
Change in Valuation Allowance 85,210 - -
________ ________ ________
$646,109 $806,508 $669,944
======== ======== ========
<PAGE>
NOTE H
INCOME TAXES (Continued)
There were net deferred tax assets as of $766,891 and
$707,633 as of December 31, 1994 and 1993, respectively.
The major temporary differences which created deferred tax
assets and liabilities are as follows:
1994 1993
_______ _______
Unrealized loss on securities
(FASB 115 Adjustment) $597,863 $ -
Unrealized loss on securities
(Section 475 Adjustment) (413,220) -
Deferred compensation 337,541 257,363
Allowance for loan losses 280,554 217,524
Accumulated depreciation (138,321) (46,975)
Other Real Estate 80,989 77,064
Deferred Income 77,276 103,035
Other 29,419 99,622
_______ _______
852,101 707,633
Valuation Allowance (85,210) -
_______ _______
$766,891 $707,633
======= =======
These amounts are included in Other Assets on the
Balance Sheet.
NOTE I
LEASES
The following is a schedule by years of future minimum
rental payments required under operating leases that have
initial or remaining non-cancelable lease terms in excess
of one year at December 31, 1994:
Year Ending
December 31,
___________
1995 $553,851
1996 534,234
1997 500,400
1998 54,000
1999 54,000
After 1999 42,450
_________
Total Minimum Payments Required $1,738,935
=========
Rent expense totaled $564,209, $563,349 and $562,571
for 1994, 1993 and 1992, respectively.
<PAGE>
NOTE I
LEASES (Continued)
The Bank is the lessor of office space under operating
leases expiring in various years through 1999.
Minimum future rentals to be received on non-
cancelable leases as of December 31, 1994 for each of the
next 5 years and in the aggregate are:
December 31,
____________
1995 $106,673
1996 97,036
1997 92,735
1998 86,325
1999 74,125
_______
$456,894
=======
NOTE J
EMPLOYEE BENEFITS
As of October 30, 1984, the Bank merged its target-
benefit pension plan with its profit sharing plan to form a
new profit sharing plan. The result of this merger was to
combine the benefits accrued into one plan, with no
detrimental effect on either the Bank or its employees.
Employer contributions to the plan are determined annually.
The amounts of profit sharing expense were $125,000,
$100,000 and $100,000 for 1994, 1993 and 1992,
respectively, and is included in salaries and employee
benefits on the statements of income. The plan covers all
employees of the Bank who have six months of service
(1,000) hours and are age twenty and one-half or older.
NOTE K
RELATED PARTIES
Certain executive officers and directors have loans,
deposits, and other transactions with the Bank. Such
transactions are on substantially the same terms as those
prevailing at the time for comparable transactions with
others. An analysis of loans to directors, officers and
principal holders of equity securities, is as follows:
December 31,
_____________________
1994 1993
_________ _________
Balance - January 1 $1,077,935 $1,471,787
New Loans Made and Renewals 458,697 579,894
Repayments and Maturities (511,029) (973,746)
_________ _________
$1,025,603 $1,077,935
========= =========
<PAGE>
NOTE K
RELATED PARTIES (Continued)
On December 30, 1985, the Bank sold its buildings and
land to a partnership whose partners are the major
stockholders of the Bank's holding company. The sales
price was $3,500,000, the appraised value of the property.
The terms consisted of an installment sale with a down
payment of $260,000 and a balance of $3,240,000 to be paid.
The balance of $3,240,000 was repaid in January of 1987.
At the time of the sale, the Bank entered into operating
leases with the partnership for the property sold for a
period of twelve years beginning December 30, 1985 and
ending December 31, 1997. The leases require minimum
annual lease payments of $446,400. In accordance with
Generally Accepted Accounting Principles the gain from the
sale/lease back is to be amortized over the life of the
lease. In 1994, 1993 and 1992, $75,761 of the gain was
recognized in each year. Deferred income of $227,283 and
$303,044 for 1994 and 1993 have been included in other
liabilities.
On October 13, 1990, the Bank entered into a lease
agreement with its parent, Peoples Bancshares, Inc., for
its branch facility located in Slidell, Louisiana. Under
terms of the agreement the lease is for a ten year period
at a monthly rent of $4,500 with adjustment clauses based
upon changes in the Consumer Price Index at the beginning
of the 2nd, 4th, 6th, 8th and 10th years. The total rent
under this agreement for 1994, 1993 and 1992 totaled
$54,000 per year.
NOTE L
DEFERRED COMPENSATION AGREEMENTS
The Bank is a party to deferred compensation
agreements with several officers of the Bank. The amount of
compensation accumulated will be distributed to those
officers at the time they reach retirement age in time
frames ranging from lump sum distribution to 15 years. The
amounts charged to operations were $49,975, $47,512 and
$57,346 from 1994, 1993 and 1992, respectively. The total
deferred compensation liability payable equaled $992,769
and $927,112 for 1994 and 1993, respectively, and was
included in other liabilities. These plans do not qualify
under the Internal Revenue Code, and accordingly, tax deduc
tions are allowable only when benefits are paid.
<PAGE>
NOTE M
COMMITMENTS AND CONTINGENCIES
The Bank's financial statements do not reflect various
commitments and contingent liabilities that arise in the
normal course of business and the involved elements of
credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to
extend credit, commercial letters of credit and contingent
liabilities of secondary mortgage loans sold with recourse
over a 90-day period of time. A summary of the Bank's
commitments and contingent liabilities at December 31, 1994
is as follows:
Amount
_________
Secondary Mortgage Loans Sold With Recourse $1,553,650
Credit Card Arrangements 1,124,776
Commercial Lines of Credit 1,984,963
Commitments to Extend Credit 2,742,850
_________
$7,406,239
=========
Commitments to extend credit, credit card
arrangements, commercial letters of credit and secondary
mortgage loans sold with recourse all include exposure to
some credit loss in the event of nonperformance of the
customer. The Bank's credit policies and procedures for
credit commitments and financial guarantees are the same as
those for extension of credit that are recorded on the
statement of condition. Because these instruments have
fixed maturity dates and because many of them expire
without being drawn upon, they do not generally present any
significant liquidity risk to the Bank.
The Bank is a party to various legal proceedings
arising in the ordinary course of business. In the opinion
of management and the Bank's outside legal counsel, the
ultimate resolution of these proceedings will not have a
material adverse affect on the Bank's financial condition
or results of operations.
<PAGE>
NOTE N
DEPOSITS
Major classifications of deposits are as follows:
December 31,
___________________________
1994 1993
___________ _____________
Non-Interest Bearing Demand $31,027,908 $28,759,490
NOW and Insured Money Market
Accounts 36,971,993 41,419,463
Savings Accounts 37,835,552 40,534,087
Certificates of Deposit
Greater than $100,000 7,613,910 5,400,683
Other Certificates of Deposit 38,553,871 39,349,203
__________ __________
$152,003,234 $155,462,926
=========== ===========
An approximate schedule of maturities for fixed rate
Certificates of Deposits $100,000 and over are as follows
as of December 31, 1994:
Three Months or Less $5,464,819
Over Three Months through Twelve Months 1,477,423
Over One Year through Five Years 671,668
Over Five Years -
_________
$7,613,910
=========
NOTE O
CONCENTRATIONS OF CREDIT
All of the Bank's loans, commitments, and commercial
and standby letters of credit have been granted to
customers in the Bank's market area. All such customers
are depositors of the Bank. Investments in state and
municipal securities also involve governmental entities
within the Bank's market area. The concentrations of
credit by type of loan are set forth in Note C. The
distribution of commitments to extend credit approximates
the distributions of loans outstanding. Commercial and
standby letters of credit were granted primarily to
commercial borrowers. The majority of the Bank's customers
are located in Southeastern Louisiana.
<PAGE>
NOTE P
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INVESTMENTS
The following methods and assumptions were used to
estimate the fair value of each class of financial
instruments for which it is practicable to estimate the
value:
CASH AND SHORT-TERM INVESTMENTS
For cash, the carrying amount approximates fair value.
For short-term investments, fair values are calculated
based upon general investment market interest rates
for similar maturity investments.
INVESTMENT SECURITIES
For securities and marketable equity securities held-
for-investment purposes, fair value are based on
quoted market prices.
LOAN RECEIVABLES
For certain homogeneous categories of loans, such as
residential mortgages, credit card receivables and
other consumer loans, fair value is estimated using
the current U.S. treasury interest rate curve, a
factor for cost of processing and a factor for
historical credit risk to determine the discount rate.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings deposits
and certain money market deposits are calculated based
upon general investment market interest rates for
similar maturity investments. The fair value of fixed
maturity certificates of deposit is estimated using
the U.S. treasury interest rate curve currently
offered for deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT
The fair value of commitments is estimated using the
fees currently charged to enter into similar
agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the
counterparties.
<PAGE>
NOTE P
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INVESTMENTS (Continued)
COMMITMENTS TO EXTEND CREDIT (Continued)
The estimated fair values of the Bank's financial instruments
are as follows:
December 31, 1994 December 31, 1993
____________________________ _______________________
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash and Short-Term
Investment $13,541,000 $13,540,000 $26,786,707 $26,784,080
Investment Securities 92,892,000 92,466,000 79,192,029 80,710,438
Loans 56,407,000 55,262,000 59,875,174 60,456,592
Less: Allowance for
Loan Losses (2,243,000) (2,243,000) (2,093,534) (2,093,534)
___________ ___________ __________ ___________
$160,597,000 $159,025,000 $163,760,376 $165,857,576
============ =========== =========== ===========
Financial Liabilities:
Deposits $152,003,000 $148,858,000 $155,462,926 $154,342,074
=========== =========== =========== ===========
Unrecognized Financial Instruments:
Commitments to Extend
Credit $2,742,850 $2,742,850 $3,834,000 $3,834,000
Secondary Mortgage Loans
with 90 day Recourse 1,553,650 1,553,650 4,321,350 4,321,350
Commercial Lines
of Credit 1,984,963 1,984,963 1,299,930 1,299,930
Credit Card
Arrangements 1,124,776 1,124,776 1,214,038 1,214,038
_________ _________ __________ __________
$7,406,239 $7,406,239 $10,669,318 $10,669,318
========= ========= ========== ==========
<PAGE>
NOTE Q
SUBSEQUENT EVENTS
Effective April 27, 1995, Peoples Bancshares, Inc.
entered into an agreement and plan of merger with First
Commerce Corporation. The consideration for the
acquisition of the Company and its subsidiary will consist
of $30,622,000 of common stock of First Commerce
Corporation, with a market value based on the average
trading prices over the ten business days prior to the date
the Plan becomes effective.
As of December 31, 1994, Peoples Bank and Trust Co.
was in negotiations to sell $1,400,000 of Student Loans to
the Student Loan Marketing Association. As of the date of
this Independent Auditor's Report, the sale has not been
completed.
<PAGE>
Appendix
PROXY FAIRNESS OPINION
DRAFT - SUBJECT TO REVISION
, 1995
The Board of Directors
Peoples Bancshares, Inc.
P. O. Box 1099
Chalmette, LA 70044-1099
The Board of Directors
Peoples Bank & Trust Company of St. Bernard
P. O. Box 1099
Chalmette, LA 70044-1099
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to Peoples Bancshares, Inc. ("Company"),
Peoples Bank & Trust Company of St. Bernard ("Bank") and their
respective shareholders of (a) the Aggregate Consideration, as
defined below, to be received by the shareholders of Company and
Bank pursuant to the Plan, as defined below and (b) the
allocation of the Aggregate Consideration between shareholders of
Company and Bank.
The terms of the transaction contemplated are set forth in an
Amended and Restated Agreement and Plan of Merger dated July
27, 1995, and a related Agreement of Merger of Bank into First
National Bank of Commerce (collectively, the "Plan"); and provide
that Company will merge into First Commerce Corporation ("FCC")
(the " Merger"), and Bank will merge into First National Bank of
Commerce, FCC's wholly-owned subsidiary, (the "Bank Merger").
Under the terms of the Plan, on the date the Merger becomes
effective (the "Effective Date"), the shareholders of Company
will become shareholders of FCC, as follows:
Each issued and outstanding share of the common stock, $25.00 par
value per share, of Company ("Company Common Stock"), except for
the shares as to which dissenters' rights of appraisal have been
perfected and not withdrawn or forfeited in accordance with
applicable law, shall be converted into a number of shares of the
common stock, $5.00 par value per share, of FCC ("FCC Common
Stock") equal to the quotient of (i) 96.33% of the quotient of
(the Aggregate Consideration divided by the Market Value, as
defined below, of a share of FCC Common Stock) divided by (ii)
the number of shares of Company Common Stock outstanding on the
Effective Date. The term, "Aggregate Consideration", is defined
in the Plan as $30,796,000 less the Deductible Amount. The
term, "Deductible Amount", is defined in the Plan as the excess
over $200,000 of Company's and Bank's aggregate legal,
accounting, investment banking, printing and mailing fees and
costs from January 1, 1994, through the Effective Date related
to the prospective sale of Company and Bank, the process leading
to the execution of the Plan, and the negotiation, implementation
and consummation of the Plan, other than (1) any such fees and
costs that had been accrued on or before December 31, 1994, and
(2) any such fees and costs, up to but not exceeding $300,000,
that are accrued and paid at any time from January 1, 1995
through the date that is 30 days prior to the date set for
consummation of the Plan. The term, "Market Value", is defined
in the Plan as the average of the closing sales prices of a share
of FCC Common Stock reported on the NASDAQ National Market for
the ten business days ending on the last
business day prior to the Effective Date.
The Boards of Directors , 1995
Peoples Bancshares, Inc. Page 2
Peoples Bank and Trust Company of St. Bernard
Under the terms of the Plan, on the Effective Date, the
shareholders of Bank will become shareholders of FCC, as follows:
Each issued and outstanding share of the common stock, $25.00 par
value per share, of Bank ("Bank Common Stock"), except for the
shares as to which dissenters' rights of appraisal have been
perfected and not withdrawn or forfeited in accordance with
applicable law and shares owned by the Company, shall be
converted into a number of shares of FCC Common Stock equal to
the quotient of (i) 3.67% of the quotient of (the Aggregate
Consideration, divided by the Market Value, of a share of FCC
Common Stock) divided by (ii) the number of shares of Bank Common
Stock outstanding that are not owned by the Company.
Under the terms of the Plan, in lieu of the issuance of any
fractional share of FCC Common Stock to which a Company or a Bank
shareholder would otherwise be entitled:
Each such Company or Bank shareholder shall be entitled to
receive a cash payment equal to such fractional share multiplied
by the Market Value.
Chaffe & Associates, Inc. ("Chaffe"), through its experience in
the securities industry, investment analysis and appraisal, and
in related corporate finance and investment banking activities,
including mergers and acquisitions, corporate recapitalization,
and valuations for estate, corporate and other purposes, states
that it is competent to provide opinions as to the fairness of
the consideration, and the allocation of the consideration,
contemplated herein. Neither Chaffe nor any of its officers or
employees has an interest in the common stocks of Company, Bank
or FCC, nor an interest in Peoples Properties Limited Partnership
(the "Partnership"). During the past year in addition to those
opinions, Chaffe has provided financial advisory services to
Company and Bank, including assistance in negotiating the
proposed transaction ("Advisory Services") and provision of
earlier fairness opinions on the proposed transaction (the
"April Opinion" and the "July Opinion"). The fee received for
the preparation and delivery of this opinion is not, and fees
received for Advisory Services the April Opinion and the July
Opinion were not, dependent or contingent upon any transaction.
In connection with this opinion, we have reviewed materials
bearing upon the transaction contemplated in the Plan and upon
the financial and operating condition of Company and the Bank,
including, among other information: a) the Plan; b) the Offer
and Agreement to Sell and to Purchase Real Property, signed by
the Partnership on April 1, 1995 and accepted by FCC on April 26,
1995, between FCC and Partnership, as amended by the First
Amendment to the Offer and Agreement to Sell and Purchase Real
Property, signed by Partnership on July 26, 1995, and to be
accepted by FCC; c) the Appraisal of the Market Value of 9109
West Judge Perez Drive, 1801 East Judge Perez Drive and 6624 St.
Claude Avenue, St. Bernard Parish, Louisiana for Mr. Nicholas P.
Trist, President and Chairman of the Board of the Bank, by
Patrick J. Egan, CRE, Robert W. Merrick Appraisal Division of
Latter & Blum, Inc./Realtors, dated January 31, 1995; and
Supplemental Letters by Mr. Egan, dated April 18, 1995 and July
20, 1995, addressed to Mr. Henry F. O'Connor, Jr., attorney for
the Partnership (collectively, the "Appraisal Documents"); d)
Company's audited financial statements, with examination and
opinion by LaPorte, Sehrt, Romig & Hand, Certified Public
Accountants ("LaPorte, Sehrt"), for the years 1989 through 1994;
e) Company's Federal Reserve Forms FR Y-6 dated December 31,
1992, 1993 and 1994; Forms FR Y-9C for each quarter ended March
31, 1994 through June 30, 1995; and Forms FR Y-9LP for each
quarter ended March 31, 1994 through June 30, 1995; f)
Company's Income Tax Return for the years 1992 through 1994,
prepared by LaPorte, Sehrt; g) Company's Uniform Holding
Company Performance Reports dated December 31, 1993, December
31, 1994 and March 31, 1995; h) Bank's audited financial
statements for the years 1988 through 1994, with examination and
opinion by LaPorte, Sehrt; i) Bank's CALL Reports for each
quarter ended June 30, 1993 through June 30, 1995; j) Bank's
Uniform Bank Performance Reports dated December 31, 1993, The
Boards of Directors
Peoples Bancshares, Inc. , 1995
Peoples Bank and Trust Company of St. Bernard Page 3
December 31, 1994 and March 31, 1995; k) Bank's Statement of
Budgeted Earnings & Expenses for 1995; l) Articles of
Incorporation and By-Laws of both Company and Bank; and m)
various Company and Bank reports, unaudited financial statements,
information, documents and regulatory correspondence and other
related documents.
In addition, we have reviewed materials bearing upon the
financial and operating condition of FCC, including: a) FCC's
audited financial statements for the years 1988 through 1994; b)
FCC's Proxy Statements for Annual Shareholders Meetings held in
1990 through 1995; c) FCC's Annual Reports on Form 10-K for the
years 1989 through 1994, and quarterly reports on Form 10-Q for
the quarters ended March 31, June 30 and September 30, 1993,
March 31, June 30 and September 30, 1994 and March 31, 1995; d)
FCC's Registration Statements on Form S-4 dated August 8, 1994,
and September 9, 1993; Form S-4 dated August 5, 1994, and post-
effective Amendment No. 1 dated April 27, 1995, and Form S-4
dated September 30, 1994 and Amendment No. 1 thereto dated
October 31, 1994; e) FCC's Forms 8-A dated August 12, 1993 and
December 22, 1994; f) FCC's Form 8-K dated February 17, 1995,
May 5, 1995 and May 15, 1995, and Form 8-K/A dated February 17,
1995; g) Schedules 13G dated April 8, 1994, February 10, 1994,
and February 15, 1995, ; h) FCC's quarterly consolidated
financial statement for June 30, 1995 Financial Information; i)
the draft Form S-4 relating to this transaction, as of July 27,
1995; and j) various FCC information and correspondence. We
note that Management of FCC has not allowed us to review any
information other than publicly-available information. We have
also reviewed statistical and financial information derived from
various statistical services for Company, Bank, FCC, and
comparable companies, as well as certain publicly-available
information and analyses relating to them.
We have reviewed certain historical market information for the
Company and Bank Common Stocks, and note that no independent
market exists for the shares of either. We note that, at
present, Company has authorized 125,000 shares of Common Stock,
of which 24,082 shares are issued, 23,408 shares are outstanding
and 674 shares are held in its treasury. We note that, at
present, Bank has authorized 92,500 shares of Common Stock, of
which 25,000 shares are issued and outstanding, and no shares are
held in its treasury. Company is the owner of 96.33% of
outstanding Bank Common Stock. In addition, we have reviewed
certain historical market information for FCC Common Stock. We
note that at June 30, 1995, FCC had authorized 100 million shares
of FCC common stock, of which at such date 29,468,248 shares
were issued, 28,974,823 shares were outstanding, and 493,425
shares were held as treasury stock. In addition, FCC had
authorized 5,000,000 shares of preferred stock, no par value, of
which 2,397,370 shares were issued and outstanding, and no shares
were held in its treasury.
We have analyzed the historical performances of Company, Bank
and FCC and have considered the current financial conditions,
operations and prospects for each company. We have held
discussions with
the Management of Company, Bank and FCC about these matters. We
analyzed information provided
by the Management of Company, Bank and FCC concerning their
loans, other real estate owned, securities portfolio, fixed
assets and operations, although we did not perform an
independent review of Company's, Bank's or FCC's assets or
liabilities. We have relied solely on Company, Bank and FCC for
information as to the adequacy of their respective loan loss
allowances and values of other real estate owned. We have relied
solely on FCC for information as to the value of its securities
portfolio.
Also, we compared certain financial and stock market data for
peer groups of bank Company companies whose securities are
publicly traded; reviewed the financial terms of business
combinations in the commercial banking industry specifically and
other industries generally; considered a number of valuation
methodologies, including among others, those that incorporate
book value, deposit base premium and capitalization of earnings;
and performed such other studies and analyses as we deemed
appropriate to
this opinion. This opinion is necessarily based upon market,
economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
The Boards of Directors , 1995
Peoples Bancshares, Inc. Page 4
Peoples Bank and Trust Company of St. Bernard
We note that in order for the proposed transaction to close,
Company and Bank must meet certain operating constraints, as more
fully described in the Plan. Further, we have relied on the
statement of the Management of Company, and Bank that Company
and Bank are in compliance with the operating constraints as of
the date of this letter and that Company and Bank expect to be
able to meet these operating constraints through the Closing
Date.
We note that an essential element of the transaction, as proposed
by FCC, is the acquisition by FCC of 100% of the ownership in
Company and Bank, as well as ownership of three banking
facilities (the "Properties"). Partnership is composed of all
members of the Board of Directors of Company and the widows of
two deceased Directors, all of whom own or control, in the
aggregate 63.14% of the stock of the Company. The total
consideration proposed by FCC for the acquisition of Company and
Bank and the purchase of the Properties, as described above, is
an aggregate amount of $33,300,000 (the "Enterprise
Consideration"). Partnership has agreed to sell the Properties
to FCC at a price of $2,504,000 (the "Appraised Value"), which
was determined solely by the Appraisal Documents. We note that
both Partnership and FCC have represented to Chaffe that the
choice of Latter & Blum, Inc. as the appraiser is acceptable to
them. The payment of this consideration will be effected through
the assumption by FCC of $2,504,000 of the debt owed by the
Partnership to ArgentBank, under a note dated March 31, 1994 and
related documents. Further, it is our understanding, relied upon
in this opinion, that the Partnership will, through the necessary
payments, reduce the principal balance of this indebtedness to
$2,504,000 prior to the consummation of the transactions
contemplated herein.
In our review, we have relied, without independent verification,
upon the accuracy and completeness of the historical and
projected financial information and all other information
reviewed by us for purposes of the opinions, including without
limitation, the Appraisal Documents. We note that the closing of
the mergers contemplated by the Plan is conditioned on receipt
of an opinion from FCC's independent public accountants, Arthur
Andersen LLP, that, inter alia, the mergers will constitute a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. We express no opinion on the tax
consequences of the proposed transaction or the effect of any tax
consequences on the value received by the holders of Company
Common Stock or Bank Common Stock.
Based upon and subject to the foregoing and based upon such other
matters as we considered relevant, it is our opinion that the
proposed Aggregate Consideration is fair, from a financial point
of view, to Company, Bank , and their respective shareholders;
and that the allocation of the Aggregate Consideration between
the shareholders of Company and the shareholders of Bank is
fair to the shareholders of each of those financial institutions,
from a financial point of view.
Very truly yours,
CHAFFE & ASSOCIATES, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 83 of the Louisiana Business Corporation Law
("LBCL") permits a corporation to indemnify its directors and
officers against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any action, suit or proceeding
to which he is or was a party or is threatened to be made a party
(including any action by or in the right of the corporation) if
such action arises out of the fact that he is or was a director,
officer, employee or agent of the corporation and he acted in
good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The indemnification
provisions of Section 83 are not exclusive, but no corporation
may indemnify any person for willful or intentional misconduct.
A corporation has the power to obtain and maintain insurance, or
to create a form of self-insurance on behalf of any person who is
or was acting for the corporation, regardless of whether the
corporation has the legal authority to indemnify the insured
person against such liability.
Section 11 of FCC's by-laws (the "Indemnification By-Law")
provides for mandatory indemnification for current and former
directors and officers to the full extent permitted by Louisiana
law. As permitted by FCC's Articles of Incorporation, FCC has
entered into contracts with its directors providing for
indemnification to the fullest extent permitted by law
("Indemnification Contracts"). The rights of the directors under
the Indemnification Contracts substantially mirror those granted
under the Indemnification By-law.
FCC maintains an insurance policy covering the liability of
its directors and officers for actions taken in their official
capacities.
The Indemnification Contracts provide that, to the extent
insurance is reasonably available, FCC will maintain comparable
insurance coverage for each contracting party as long as he or
she serves as an officer or director and thereafter for so long
as he or she is subject to possible personal liability for
actions taken in such capacities. The Indemnification Contracts
also provide that if FCC does not maintain comparable insurance,
it will hold harmless and indemnify a contracting party to the
full extent of the coverage that would otherwise have been
provided for his benefit.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
The following Exhibits are filed as part of this
Registration Statement:
Exhibit No. Description
2 Amended and Restated Agreement and Plan of Merger.
4.1 Indenture between Registrant and Republic Bank Dallas, N.A.
(now Nations Bank, Texas, N.A.), Trustee, including the form of
12-3/4% Convertible Debenture due 2000, Series A, included as
Exhibit 4.1 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1985 and incorporated herein by
reference.
4.2 Indenture between Registrant and Republic Bank Dallas, N.A.
(now Nations Bank, Texas, N.A.), Trustee, including the form of
12-3/4% Convertible Debenture due 2000, Series B, included as
Exhibit 4.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1985 and incorporated herein by
reference.
5 Opinion of Correro, Fishman & Casteix, L.L.P.
8 Form of opinion of Arthur Andersen LLP as to certain tax matters.
15 Letter of Arthur Andersen LLP regarding unaudited interim
financial information.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Laporte, Sehrt, Romig & Hand.
23.3 Consent of Chaffe and Associates, Inc.
23.4 Consent of Correro, Fishman & Casteix, L.L.P., included in Exhibit 5.
24 Powers of Attorney of directors and certain officers of
Registrant contained on page S-1 of the Registration Statement.
99 Forms of Proxy of Peoples Bancshares, Inc. and Peoples Bank &
Trust Company of St. Bernard.
(b) Financial Statement Schedules
None
Item 22. Undertakings
The undersigned Registrant hereby undertakes as follows:
(1) To respond to requests for information that is
incorporated by reference into the Prospectus pursuant to Items
4, 10(b), 11 or 13 of Form S-4 within one business day of receipt
of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of
responding to the request.
(2) To supply by means of a post-effective amendment
all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
(3) That, for the purpose of determining any liability
under the Securities Act of 1933 each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement related to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(4) That prior to any public reoffering of the
securities registered hereunder through use of a prospectus which
is a part of this Registration Statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the Registrant undertakes that such reoffering prospectus
will contain the information called for by the applicable
registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for
by the other Items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to
paragraph (4) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act
of 1933 and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the provisions described in response to Item 20 of this
Registration Statement, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of New Orleans, State of Louisiana on the
3th day of August, 1995.
FIRST COMMERCE CORPORATION
By: /s/ Thomas L. Callicutt, Jr.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each
person whose signature appears below hereby constitutes and
appoints Thomas C. Jaeger and Thomas L. Callicutt, Jr., or either
of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or
all amendments to such Registration Statement, including post-
effective therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing
requisite and necessary to be done as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or agent, or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Signature Title Date
/s/ Ian Arnof President and Chief April 17, 1995
________________________ Executive Officer and Director
Ian Arnof
/s/ Hermann Moyse, Jr. Chairman of the Board April 17, 1995
________________________
Hermann Moyse, Jr.
/s/ Thomas L. Callicutt, Jr. Senior Vice President April 17, 1995
_____________________________ and Controller (Principal
Thomas L. Callicutt, Jr. Accounting Officer)
/s/ Thomas C. Jaeger Chief Financial Officer April 17, 1995
_____________________________
Thomas C. Jaeger
/s/ James J. Bailey III Director April 17, 1995
_____________________________
James J. Bailey III
/s/ John W. Barton Director April 17, 1995
_____________________________
John W. Barton
/s/ Sydney J. Bestoff III Director April 17, 1995
_____________________________
Sydney J. Bestoff III
/s/ Robert H. Bolton Director April 17, 1995
______________________________
Robert H. Bolton
/s/ Frances B. Davis Director April 17, 1995
______________________________
Frances B. Davis
/s/ Laurance Eustis, Jr. Director April 17, 1995
______________________________
Laurance Eustis, Jr.
/s/ William P. Fuller Director April 17, 1995
______________________________
William P. Fuller
/s/ Arthur Hollins III Director April 17, 1995
______________________________
Arthur Hollins III
/s/ F. Ben James, Jr. Director April 17, 1995
______________________________
F. Ben James, Jr.
/s/ Erik F. Johnsen Director April 17, 1995
______________________________
Erik F. Johnsen
/s/ Joseph Merrick Jones, Jr. Director April 17, 1995
______________________________
Joseph Merrick Jones, Jr.
Director , 1995
______________________________
Edwin Lupberger
/s/ O. Miles Pollard, Jr. Director April 17, 1995
______________________________
O. Miles Pollard, Jr.
/s/ G. Frank Purvis, Jr. Director April 17, 1995
______________________________
G. Frank Purvis, Jr.
/s/ Edward M. Simmons Director April 17, 1995
______________________________
Edward M. Simmons
Director , 1995
_______________________________
H. Leighton Steward
/s/ Joseph B. Storey Director April 17, 1995
_______________________________
Joseph B. Storey
/s/ Robert A. Weigle Director April 17, 1995
_______________________________
Robert A. Weigle
EXHIBIT INDEX
Exhibits
2 Amended and Restated Agreement and Plan of
Merger.
4.1 Indenture between Registrant and Republic
Bank Dallas, N.A. (now Nations Bank, Texas,
N.A.), Trustee, including the form of 12-
3/4% Convertible Debenture due 2000, Series
A, included as Exhibit 4.1 to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1985 and incorporated
herein by reference.
4.2 Indenture between Registrant and Republic
Bank Dallas, N.A. (now Nations Bank, Texas,
N.A.), Trustee, including the form of 12-
3/4% Convertible Debenture due 2000, Series
B, included as Exhibit 4.2 to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1985 and incorporated
herein by reference.
5 Opinion of Correro, Fishman & Casteix,
L.L.P.
8 Form of opinion of Arthur Andersen LLP as to
certain tax matters.
15 Letter of Arthur Andersen LLP regarding
unaudited interim financial information
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Laporte, Sehrt, Romig & Hand
23.3 Consent of Chaffe and Associates, Inc.
23.4 Consent of Correro, Fishman & Casteix,
L.L.P., included in Exhibit 5
24 Powers of Attorney of directors and certain
officers of Registrant contained on page S-1
of the Registration Statement.
99 Forms of Proxy of Peoples Bancshares, Inc.
and Peoples Bank & Trust Company of St.
Bernard.
Exhibit 2
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
("Agreement") is made as of April 27, 1995, between First
Commerce Corporation ("FCC"), on the one hand; and Peoples
Bancshares, Inc. ("Holding") and Peoples Bank & Trust Company of
St. Bernard ("Bank"), on the other hand.
ARTICLE 1: Mergers and Closing
0.1 Holding Company Merger. Subject to the conditions in
Article 5, at the Effective Time, as defined below, Holding will
merge into FCC (the "Holding Company Merger").
0.1 The Closing. The "Closing" of the transactions
contemplated hereby will occur in FCC's offices, 210 Baronne
Street, New Orleans, Louisiana, at 10:00 a.m., local time, on a
date (the "Closing Date") mutually agreeable or that is specified
by any party to the others upon ten days' notice after the
conditions in sections 5.1(a) and (b) are satisfied. If all
conditions in Article 5 are satisfied or waived, at the Closing
the proper persons will complete the Merger Certificate in the
form of Exhibit A, and the parties will take such actions as are
required to effect the Holding Company Merger and the Bank Merger
(defined below).
0.1 Effective Date and Time. The Merger Certificate will
be filed with and recorded by the Louisiana Secretary of State
immediately after (or concurrently with) the Closing, and the
Holding Company Merger will be effective on the date (the
"Effective Date") and time (the "Effective Time") specified
therein.
1.4 Bank Merger. Bank, which is Holding's majority-owned
subsidiary, and First National Bank of Commerce ("Acquiring
Bank"), FCC's wholly-owned subsidiary, have executed the Bank
Merger Agreement in the form of Exhibit B, pursuant to which Bank
will merge into Acquiring Bank (the "Bank Merger") on the
Effective Date immediately subsequent to the Holding Company
Merger. (The Holding Company Merger and the Bank Merger are
herein collectively called the "Mergers".)
ARTICLE 1: Conversion of Stock of Holding
0.1 Conversion. (a) Except for shares as to which
dissenters' rights have been perfected and not withdrawn or
otherwise forfeited under Section 131 of the Business Corporation
Law of Louisiana ("BCL") ("Holding Dissenter's Shares"), at the
Effective Time each outstanding share of common stock, par value
$25.00 per share, of Holding ("Holding Stock") will be converted
into a number of shares of common stock, par value $5.00 per
share, of FCC ("FCC Stock") equal to the quotient of (i) 96.33%
of the quotient of (A) the "Aggregate Consideration", defined
below, divided by (B) the average of the closing sales prices (as
adjusted in accordance with Section 2.1(e)) of a share of FCC
Stock on the NASDAQ Stock Market for the ten business days ended
on the last business day before the Effective Date ("Market
Value"); divided by (ii) the number of shares of Holding Stock
outstanding on the Effective Date.
(b) Except for shares as to which dissenters' rights have
been perfected and not withdrawn or otherwise forfeited under
Section 376 of the Louisiana Banking Law (which shares,
collectively with the Holding Dissenter's Shares, are called
"Dissenter's Shares"), at the effective time of the Bank Merger
each outstanding share of common stock, par value $25.00 per
share, of Bank ("Bank Stock") will be converted into a number of
shares of FCC Stock equal to the quotient of (i) 3.67% of the
quotient of (A) the Aggregate Consideration divided by (B) the
Market Value; divided by (ii) the number of shares of Bank Stock
outstanding on the effective date of the Bank Merger.
(c) The term "Aggregate Consideration" as used above means
$30,796,000, minus the "Deductible Amount", which term means the
excess over $200,000 of Holding's and Bank's aggregate legal,
accounting, investment banking, printing and mailing fees and
costs from January 1, 1994, through the Effective Time related to
the prospective sale of Holding and/or Bank, the process leading
to the execution of this Agreement, and the negotiation,
implementation and consummation of this Agreement, other than
(i) any such fees and costs that had been accrued on or before
December 31, 1994, and (ii) any such fees and costs, up to but
not exceeding $300,000, that are accrued and paid at any time
from January 1, 1995 through the date that is 30 days prior to
the Closing Date.
(d) For purposes of Sections 2.1(a) and 2.1(b), shares of
Holding Stock that are held by Holding or Bank (other than shares
held by Bank in a fiduciary capacity other than for Holding), and
shares of Bank Stock that are held by Holding or Bank (other than
shares held by Bank in a fiduciary capacity other than for
Holding), shall not be considered to be outstanding and shall be
cancelled (and not converted) by virtue of the Mergers.
(e) In the event FCC changes the number of shares of FCC
Stock issued and outstanding as a result of any stock split,
stock dividend or other similar change in FCC's capitalization,
or if a distribution of securities is made in respect of the FCC
Stock as a result of any dividend (other than regular quarterly
cash dividends), spinoff or other reorganization in which FCC
Stock is not changed into or exchanged for a different kind of
securities, and in any such case the record date is before the
Effective Time and the ex-dividend or ex-distribution date is
subsequent to, or during, the period during which Market Value is
determined such that such event is not reflected in any one or
more of the closing sales prices used to determine Market Value,
the appropriate adjustment shall be made in such closing sales
price or prices so as to reflect such change. If FCC Stock is
changed into or exchanged for a different kind of securities and
the record date is before the Effective Time, the number and kind
of securities issuable to the holders of Holding Stock and Bank
Stock in the Mergers, and the cash payable in lieu of fractional
shares, shall be adjusted appropriately.
0.1 Fractional Shares. In lieu of issuing any fractional
share of FCC Stock each holder of Holding Stock or Bank Stock who
would otherwise be entitled thereto, after aggregating into whole
shares all fractional shares of FCC Stock to which such holder is
entitled by virtue of the Mergers, upon surrender of the
certificate(s) which represented Holding Stock ("Holding
Certificate") and/or Bank Stock ("Bank Certificate"), will
receive cash equal to such fractional share multiplied by the
Market Value.
0.1 Exchange of Certificates. After the Effective Time,
each holder of Holding Stock or Bank Stock (other than
Dissenter's Shares), upon surrender of his Holding or Bank
Certificate to FCC together with a completed letter of
transmittal in the form furnished by FCC, will be entitled to
receive the shares of FCC Stock into which his shares have been
converted and cash in lieu of any fractional share as provided in
sections 2.1 and 2.2, less any applicable tax withholding. Until
then, each Holding or Bank Certificate will represent the number
of whole shares of FCC Stock into which the shares of Holding or
Bank Stock represented thereby were converted, except that FCC
may refuse to pay any dividend or other distribution payable to
holders of unsurrendered Holding or Bank Certificates until
surrender or if such dividend or distribution has reverted in
full ownership to FCC under its Articles of Incorporation.
Whether or not a Certificate is surrendered, after the Effective
Time it will not represent any interest in any person other than
FCC.
ARTICLE 1: Representations and Warranties
0.1 Mutual Representations and Warranties. FCC represents
and warrants to Holding and Bank, and, with the exceptions set
forth in the corresponding subsection of the Exceptions Schedule
that Holding has delivered to FCC, Holding (in whose
representations and warranties Bank joins to the extent
applicable to Bank) represents and warrants to FCC, as follows:
(a) Organization; Qualification. It is a corporation duly
organized and validly existing under Louisiana law, and its
subsidiary bank party to the Bank Merger Agreement ("Bank Party")
is a national bank duly organized and validly existing under the
laws of the United States, in the case of Acquiring Bank, or is a
state bank duly organized and validly existing under the
Louisiana Banking Law, in the case of Bank. Each of it and its
Bank Party has all requisite corporate power and authority to own
and lease its and such Bank Party's property and to carry on its
and such Bank Party's business as currently being conducted and
is qualified and in good standing wherever the failure to so
qualify would have a material adverse effect on the financial
condition, results of operations, business or prospects of it and
its subsidiaries, taken as a whole ("Material Adverse Effect").
(b) Corporate Authorization; No Conflicts. Subject to any
required approval of this Agreement by its shareholders and, in
the case of Bank, the shareholders of Bank, all corporate acts
required of it and its Bank Party for the due and valid
authorization, execution, delivery and performance of this
Agreement and consummation of the Mergers have been validly
taken. Subject to required shareholder and regulatory approvals,
this Agreement is its and, in the case of Bank, Bank's binding
obligation, enforceable in accordance with its terms, except to
the extent limited by bankruptcy and other similar laws and court
decisions affecting the enforcement of creditors' rights
generally and by general equitable principles. With respect to
each of it and its Bank Party, neither the execution, delivery or
performance of this Agreement nor the consummation of the Mergers
will (i) violate, conflict with, or breach any provisions of,
(ii) constitute, with or without notice or lapse of time or both,
a default under, (iii) result in the termination of or accelerate
the performance required by, or (iv) result in the creation of
any encumbrance upon any of its or such Bank Party's material
assets under, its or such Bank Party's articles of incorporation,
by-laws or any material instrument to or by which it or such Bank
Party or any of its or such Bank Party's assets is bound; or
violate any order, writ, injunction, decree, statute, rule or
regulation of any governmental body ("Law").
(c) Brokers' or Finders' Fees. No person is entitled to
any commission, broker's, finder's or financial advisory fee from
it or its Bank Party in connection with the Mergers, except for
the fees of Chaffe & Associates, Inc., the financial advisor
retained by Holding pursuant to a written agreement that has been
delivered to FCC.
(d) Community Reinvestment Act; Fair Lending. Its Bank
Party has complied in all material respects with the Community
Reinvestment Act ("CRA") and the rules and regulations
thereunder, has a CRA rating of not less than "satisfactory", and
has received no material criticism from regulators with respect
to discriminatory lending practices.
(e) Accuracy of Statements. The statements made or to be
made by it or its Bank Party herein and in any document or
information furnished or to be furnished by it or its Bank Party
pursuant hereto, including without limitation in (or incorporated
by reference into) the Registration Statement described in
section 4.14, do not contain, as of the date hereof, and will not
contain as of the effective date of the Registration Statement
and the Closing Date, when taken together as of each such date
with all of the documents and information furnished by such date,
an untrue statement of a material fact or an omission to state a
material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading.
0.1 Additional Representations and Warranties by Holding.
Holding (in whose warranties Bank joins to the extent applicable
to Bank) represents and warrants to FCC that except as set forth
in the corresponding subsection of the Exceptions Schedule that
it has delivered to FCC:
(a) Capital Stock; Other Interests. Its authorized capital
stock consists of 125,000 shares of Holding Stock, of which
23,408 shares are outstanding and 674 are held in its treasury.
Bank's authorized capital stock consists of 92,500 shares of Bank
Stock, of which 25,000 shares are outstanding (including 24,082
shares owned beneficially and of record by Holding). All
outstanding shares of its and Bank's capital stock have been duly
authorized and are validly issued, fully paid and (except as
provided in La. R.S. 6:262) non-assessable, and all of Bank's
shares which are owned by it are so owned free and clear of any
encumbrances other than those referred to in Section 4.18. There
are no stock options or other rights (including conversion
rights) outstanding to acquire, or any obligation to issue, sell
or deliver any of such rights or any shares of, Holding's or
Bank's capital stock. Neither it nor Bank has any equity or
voting interest exceeding 1% in any entity except for its
interest in Bank.
(b) Financial Statements and Reports. It has delivered to
FCC (i) its consolidated balance sheets as of December 31, 1994
and 1993, and the related consolidated statements of income,
shareholders' equity and changes in financial position
("Operating Statements") for the respective years then ended, the
related notes thereto, and the report of its independent public
accountants with respect thereto (collectively, the "Financial
Statements"), (ii) its annual report to the Federal Reserve Board
("FRB") for the year ended December 31, 1994, all call reports
made by it or Bank to any regulatory agency since, and to the
extent permitted by law all examination reports with respect to
it or Bank made by any regulatory authority since, December 31,
1992, and (iii) reports or proxy statements sent by it or Bank to
shareholders in 1994 and thereafter. The Financial Statements
have been and the financial statements delivered pursuant to
section 4.8(b) will be prepared in conformity with generally
accepted accounting principles ("GAAP") applied consistently with
prior periods, and present and will present fairly, in conformity
with GAAP, Holding's consolidated results of operations for the
respective periods covered thereby, and its consolidated
financial condition as of the respective dates thereof, except,
in the case of any such interim financial statements, for normal
recurring accruals and the absence of footnotes. All reports
have been or will be filed on the appropriate form and prepared
in accordance with the requirements of the regulating agency.
Neither it nor Bank has, nor are any of their assets subject to,
any material liability or obligation of any kind, whether
absolute, accrued, contingent, known, unknown, matured or
unmatured, that is not reflected and adequately reserved against
in the latest balance sheet forming part of the Financial
Statements (the "Latest Balance Sheet") except (i) obligations
under contracts and commitments whose existence does not violate
any representation or warranty of Bank or Holding herein,
(ii) obligations not required under GAAP to be reflected on the
Latest Balance Sheet, and (iii) obligations that have arisen
since the date of the Latest Balance Sheet ("Latest Balance Sheet
date") in the ordinary course of business consistent with past
practices. Neither Holding nor bank has any material loss
contingency (which term is used as defined in Statement of
Financial Accounting Standards No. 5, "Accounting for
Contingencies") except as described in the Latest Balance Sheet
or the Exceptions Schedule.
(c) Loan and Investment Portfolios. All loans, discounts
and financing leases in which Holding or Bank is lessor
(collectively, "Credits") reflected on the Latest Balance Sheet
(i) have been made for adequate consideration in the ordinary
course of business, (ii) are evidenced by instruments that are
true and genuine and (iii) if secured, have been secured by valid
perfected security interests. Accurate lists of all such Credits
and of the investment portfolios of Holding and Bank as of the
Latest Balance Sheet date have been made available to FCC.
(d) Loss Reserves. The allowances for losses on Credits
and other real estate and foreclosed assets owned reflected on
the Latest Balance Sheet are adequate in accordance with
regulatory guidelines and GAAP in all material respects, and
there are no circumstances likely to require in accordance with
such guidelines or GAAP a future material increase in any
provisions for such losses or a material decrease in such
allowances. Such allowances after the Latest Balance Sheet date
will be adequate in accordance with such guidelines and GAAP in
all material respects.
(e) Absence of Certain Changes or Events. Since the Latest
Balance Sheet date, there has been no circumstance, either
individually or in the aggregate, that has had, or can reasonably
be anticipated to have, a Material Adverse Effect on Holding and
Bank, taken as a whole, excluding changes in banking laws or
regulations that affect banking institutions generally. Neither
Holding nor Bank has, since the Latest Balance Sheet date, nor
will have, from the date hereof through the Closing Date without
the prior consent of FCC's chief executive officer or his
designee (not to be unreasonably withheld) or as otherwise
expressly permitted by this Agreement:
(i) except in the ordinary course of business, (A)
borrowed or loaned any money or pledged any of its credit, (B)
mortgaged or otherwise subjected any asset to any encumbrance or
liability other than those of the type referred to in
Sections 3.2(g)(i)(B) and (C), (C) transferred any of its assets
in excess of $25,000 in the aggregate, or (D) incurred any
material liability or obligation of any kind whatsoever, whether
accrued, contingent, known, unknown, matured or unmatured, other
than expenses incurred in connection with this transaction;
(ii)experienced any material change in asset
concentrations as to customers or industries or in the nature and
source of its liabilities or in the mix of interest-bearing and
non-interest bearing deposits other than seasonal changes not
materially inconsistent with events of prior periods;
(iii)had knowledge or reason to believe that any
material labor unrest exists among, or that any person has
attempted to organize, any of its employees;
(iv)failed to operate its business in the ordinary
course consistent with past practices, to preserve its business
organization substantially intact or to preserve the goodwill of
its customers and others with whom it has material business
relations;
(v) incurred or suffered any material loss not
adequately reserved against on the Latest Balance Sheet or waived
any material right;
(vi)cancelled any material debt owed to it or any of
its material claims, or paid any of its material noncurrent
obligations or liabilities;
(vii)made any capital expenditure in excess of $25,000;
(viii)paid or agreed to pay any money to any of its
present or former directors, officers or employees except under
agreements that are terminable at will by it without any penalty
or other payment by it, and then only as is consistent with its
past practices; or increased by more than 3% the compensation
(including salaries, fees, bonuses, profit sharing, incentive,
pension, retirement or other similar payments) of any such person
whose annual salary would, following such increase, exceed
$30,000;
(ix)changed any accounting practice used in preparing
the Financial Statements or any financial statements to be
delivered under section 4.8(b);
(x) acquired or obligated itself to acquire any shares
of Holding Stock or Bank Stock or any interest therein other than
shares held by Bank in a fiduciary capacity for beneficial owners
other than Holding;
(xi)made any Credit which has not been (A) made for
adequate consideration in the ordinary course of business, (B)
evidenced by instruments that are true and genuine and (C) fully
reserved against in an amount sufficient to provide for all net
charge-offs reasonably anticipated in the ordinary course; or
(xii)entered into any commitment to do any of the
foregoing.
(f) Taxes. Holding and Bank have each timely filed all
required tax returns, tax information returns and reports, paid
all taxes, interest payments and penalties that were due, made
(and will make) adequate provision for payment of all taxes
accruable for all periods ending on or before the Closing Date,
and are not delinquent in the payment of any tax or governmental
charge of any nature. The consolidated federal income tax
returns of Holding and Bank have been audited or closed through
December 31, 1992. No audit, examination or investigation is
currently being conducted or threatened, and no material unpaid
tax deficiencies or additional liabilities have been proposed, by
any taxing authority; and no agreements for extension of time for
the assessment of any tax have been made by or on behalf of
Holding or Bank. Holding and Bank have withheld from their
respective employees (and timely paid to the appropriate taxing
authority) correct amounts for all periods in compliance with all
tax withholding laws.
(g) Assets. (i) Except with respect to assets disposed of
for adequate consideration in the ordinary course after the
Latest Balance Sheet date, and except as reflected on the Latest
Balance Sheet, each of Holding and Bank has good and merchantable
title to all assets reflected on the Latest Balance Sheet, free
of all restrictions and encumbrances except for (A) encumbrances
that secure debt properly reflected on the Latest Balance Sheet;
(B) liens for taxes accrued but not yet payable; (C) liens
arising as a matter of law in the ordinary course with respect to
obligations incurred after the Latest Balance Sheet date that are
not delinquent or are being contested in good faith; (D) such
imperfections of title and encumbrances as do not materially
detract from the value or materially interfere with the present
use or potential sale of any such assets; and (E) capital leases
and leases, if any, to third parties for fair and adequate
consideration. Each of Holding and Bank owns, or has valid
leasehold interests in, all material assets used in its business.
(ii)Except for financing leases in which Holding or
Bank is lessor, (A) each lease of any real property or any
material personal property to which Holding or Bank is a party is
valid and in full force and effect in accordance with its terms;
(B) all rents and other amounts that have become due thereunder
have been paid; (C) there exists no default, or event which with
the giving of notice, the lapse of time or both would become a
default, thereunder; and (D) the Mergers will not constitute a
default or a cause for termination or modification of any such
lease.
(iii)Neither Holding nor Bank has any obligation to
sell or otherwise dispose of any substantial part of its assets
or to sell or dispose of any of its material assets except in the
ordinary course consistent with past practices.
(h) Legal Proceedings and Compliance with Laws. (i) There
are no material claims, actions, suits, proceedings, arbitrations
or investigations ("Actions") pending or, to the knowledge of
Holding or Bank, threatened, nor does Holding or Bank have
knowledge of a basis for any material Action, in any court or
before any governmental body or arbitration panel or otherwise,
against either of them.
(ii)Each of Holding and Bank has complied with and is
not in default in any material respect under, and has not been
charged or threatened with or come under investigation concerning
any material violation of, any Law.
(iii)There are no material uncured violations, or
violations with respect to which material refunds or restitution
may be required, cited in any report to Holding or Bank as a
result of examination by any regulatory authority, nor is Holding
or Bank subject to any written agreement, memorandum or order
with or by any regulatory authority. Bank has delivered to FCC
a copy of Bank's Home Mortgage Disclosure Act register for 1994,
as amended, and such register complies in all material respects
with applicable requirements.
(i) Benefit Plans. (i) The Exceptions Schedule lists all
(A) pension, retirement, profit sharing, deferred compensation,
stock option, stock ownership, severance pay, vacation, bonus,
and incentive plans or arrangements, (B) medical, vision, dental
or other health plans or arrangements, (C) life, health or
disability plans or arrangements, (D) written employment
contracts or arrangements, and any oral employment contract or
arrangement that is not terminable at will by Holding or Bank, as
the case may be, without any payment or other penalty except any
severance benefit described in Exhibit 4.16 and (E) material
fringe benefits or perquisites, provided by Holding or Bank to
any present or past employee, director or the spouse or
beneficiaries thereof (collectively, "Benefits"). True and
complete copies of all Benefit documents and written agreements,
together with copies of any tax determination letters, trust
agreements, summary plan descriptions, insurance contracts,
investment management agreements and the three most recent annual
reports on form series 5500 with respect to any plan or
arrangement have been made available to FCC.
(ii) Except for the plans identified as such on the
Exceptions Schedule (the "Plans"), neither Holding nor Bank has
at any time sponsored, maintained or contributed to any employee
benefit plan that is subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), in which any employee of it is or
was, during the 24 months preceding the date of this Agreement, a
participant, or is entitled to any unpaid benefit. All
contributions required by Holding or Bank have been made, all
insurance premiums required have been paid and each Plan has been
maintained and administered in all material respects in
compliance with its terms and all applicable laws. No
transaction has occurred that could result in the imposition of a
tax or penalty under Section 4975 of the Internal Revenue Code
(the "Code") or ERISA Section 502(i); there is no matter relating
to any such Plan pending or threatened, nor, to the knowledge of
Holding or Bank, are there any circumstances that could lead to
(other than routine filings such as qualification determination
filings) proceedings before, or administrative actions by, any
governmental agency; there are no Actions pending or, to the
knowledge of Holding or Bank, threatened (including, without
limitation, breach of fiduciary duty actions, but excluding
routine uncontested claims for benefits) against any such Plan or
its assets. Holding and Bank have complied in all material
respects with the reporting and disclosure requirements of ERISA
and the Code. No Plan is a multi-employer plan within the
meaning of ERISA Section 3(37). A favorable determination letter
has been issued by the Internal Revenue Service ("IRS") with
respect to each Plan intended to be qualified under Code Section
401(a), the IRS has taken no action to revoke any such letter and
nothing has occurred which would cause the loss of such
qualification. Neither Holding nor Bank has sponsored,
maintained or made contributions to any arrangement subject to
ERISA Title IV or to Code Section 412 or providing for post-
retirement medical benefits.
(iii)All group health plans of Holding and Bank to
which Code Section 4980B(f) or ERISA Section 601 applies are in
full compliance with the continuation coverage requirements of
Code Section 4980B(f) and ERISA Section 601, and any prior
violations of such Sections have been cured.
(iv)Except as expressly provided in section 4.13 or
4.16 the Merger will not (A) result in the imposition of any
obligation or liability on Holding, Bank, FCC or Acquiring Bank
to provide Benefits or make any payment to any current or former
employee of Holding or Bank or (B) result in a prohibited
transaction as such term is used in Code Section 4975 or ERISA
Section 406.
(j) Insurance. Each of Holding and Bank maintains in
force insurance policies and bonds in such amounts and against
such liabilities and hazards as are considered adequate by them.
Neither Holding nor Bank is now liable, nor will either become
liable, for any material retroactive premium increase. All
policies are in full force and effect, and neither Holding nor
Bank has received any notice of a material premium increase or
cancellation with respect to any of its insurance policies or
bonds. Within the last three years, neither Holding nor Bank has
been refused any insurance sought or has reason to believe that
its existing insurance coverage cannot be renewed upon terms as
favorable as those presently in effect, other than changes in
coverage or rates resulting from general market or other
conditions of general applicability unrelated to any adverse
claims experience of or other factors peculiar to Holding or
Bank.
(k) Commitments. (i) Neither Holding nor Bank is a party
to any agreement, contract or commitment (each a "Commitment") of
the following nature: (A) collective bargaining Commitment; (B)
Commitment with any employee not terminable at will without
penalty by the employer; (C) obligation of guaranty or
indemnification except, if entered into in the ordinary course
with respect to customers, letters of credit, guaranties of
endorsements and guaranties of signatures; (D) Commitment which
will or may reasonably be expected to have a Material Adverse
Effect on Holding and Bank; or (E) Commitment limiting its
freedom to engage in any line of business or to compete with any
person.
(ii)The subsection of the Exceptions Schedule
corresponding to this subsection lists each material Commitment
(except usual and customary instruments entered into in the
ordinary course with respect to loans, lines of credit, letters
of credit, depositor agreements, certificates of deposit and
similar banking activities) to which Holding or Bank is a party
or which affects it. Neither Holding nor Bank has in any
material respect breached, nor is there any pending or threatened
claim that it has breached, any of the terms of any of its
Commitments.
(l) Authorizations. Each of Holding and Bank has all
licenses, franchises, permits and other authorizations
("Authorizations") necessary for the continued conduct of its
business without interference or interruption. The deposits of
Bank are insured by the FDIC to the extent provided by law, and
there are no pending or threatened proceedings to revoke or
modify that insurance or for relief under 12 U.S.C. 1818.
(m) Corporate Documents. It has delivered to FCC copies of
its and Bank's articles of incorporation and by-laws. All of the
foregoing and all of the corporate minutes and stock transfer
records of Holding and Bank are current, complete and correct in
all material respects.
(n) Certain Transactions. No past or present director,
executive officer or five percent shareholder of Holding or Bank
has, since January 1, 1992, engaged in any transaction or series
of transactions which, if Holding or Bank had been subject to
Section 14(a) of the Securities Exchange Act of 1934 (the "34
Act") at all times since that date, would be required to be
disclosed pursuant to Item 404 of Regulation S-K of the
Securities and Exchange Commission ("SEC"). As used in this
Agreement, a person is a "five percent shareholder" of Holding or
Bank if such person will receive an aggregate of as much as 5% of
the shares of FCC Stock issuable pursuant to the Mergers.
(o) Environmental Matters.
(i) Each of Holding and Bank has obtained all material
required Authorizations under any applicable Environmental Law
Requirement (as hereinafter defined) in connection with the
operation of its businesses and ownership of its properties
(collectively, the "Subject Properties"), including without
limitation properties acquired by foreclosure or in settlement of
loans; and is in compliance in all material respects with all
terms of such Authorizations and with all applicable
Environmental Law Requirements. There are no past or present
circumstances related in any manner to Holding or Bank or to the
Subject Properties that did or would, in any material respect,
violate or prevent compliance with any Environmental Law
Requirement, or give rise to any Environmental Liability, as
hereinafter defined. There is no Action pending or threatened by
any person against Holding or Bank, or any prior owner of any of
the Subject Properties and relating to the Subject Properties,
relating in any way to any Environmental Law Requirement or
seeking to impose any Environmental Liability. Neither Holding
nor Bank is subject to any material Environmental Liability not
adequately reserved against on the Latest Balance Sheet.
(ii)"Environmental Law Requirement" means all
applicable statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises, and similar items, of all governmental
agencies, departments, commissions, boards, bureaus, or
instrumentalities of the United States, states and political
subdivisions thereof, and all applicable judicial,
administrative, and regulatory decrees, judgments and orders, in
each case relating to the protection of human health or the
environment.
(iii)"Environmental Liability" means any liability or
obligation (of any kind whatsoever, whether absolute or
contingent, accrued or unaccrued, known or unknown) arising under
any Environmental Law Requirement or under any other theory of
law or equity (including without limitation any liability for
personal injury, property damage or remediation) that results
from, or is based upon or related to, the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or
threatened release into the environment, of any hazardous
materials, pollutant, contaminant, chemical, or industrial, toxic
or hazardous substance or waste.
(p) Exhibit 3.2(p) lists, as of the date of this Agreement,
the directors, executive officers and five percent shareholders
of Holding and Bank. Except as noted thereon, each of such
persons has executed an Affiliate Agreement and an Insider's
Commitment in the forms of Exhibits C and D respectively, and
such instruments have been delivered to FCC.
0.1 Additional Representations and Warranties by FCC. FCC
represents and warrants to Holding that:
(a) Capital Stock; Legality of Stock. (i) All of its
outstanding shares of capital stock have been duly authorized and
are validly issued, fully paid and non-assessable, and (ii) all
shares of FCC Stock to be issued pursuant to the Mergers have
been duly authorized and, when so issued, will be validly issued,
fully paid and non-assessable, and will be at the time of their
delivery free and clear of all liens, charges, security
interests, mortgages, pledges or other encumbrances and any
preemptive or similar rights, except in each case those that are
attributable to Holding or Bank or any holder of Holding Stock or
Bank Stock or any other recipient of the FCC Stock designated by
such a holder. The total number of shares of FCC Stock
outstanding as shown in the later of its most recent Form 10-K or
Form 10-Q was correct as of the date thereof.
(b) Reports. It has delivered to Holding true and complete
copies of (i) its three most recent annual reports to the SEC on
Form 10-K; (ii) its most recent Proxy Statement; (iii) any annual
or quarterly reports sent to its shareholders since the date of
its most recent Form 10-K; and (iv) any other report made by it
to the SEC under Section 13 of the 34 Act since the date of its
most recent Form 10-K.
(c) Financial Statements. The consolidated balance sheets
and related consolidated statements of income, shareholders'
equity and changes in financial position, including the related
notes thereto, appearing in its most recent Form 10-K and the
latest Form 10-Q filed subsequent to such Form 10-K, if any, have
been prepared in conformity with GAAP applied consistently with
prior periods (except as noted therein) and present and will
present fairly, in conformity with GAAP, its consolidated results
of operations for the respective periods covered thereby, and its
consolidated financial condition as of the respective dates
thereof except, in the case of any such financial statements
appearing in a Form 10-Q, for normal recurring accruals and the
absence of footnotes.
(d) Articles; By-Laws. FCC has delivered to Holding and
Bank true and correct copies of the articles and by-laws of FCC
and Acquiring Bank as the same exist on the date of this
Agreement.
(e) Absence of Certain Changes or Events. Since
December 31, 1994, there has been no circumstance, either
individually or in the aggregate, that has had or can reasonably
be anticipated to have, a Material Adverse Effect on FCC and its
subsidiaries, taken as a whole.
(f) Ownership of Subsidiary Banks. FCC owns directly or
indirectly all of the outstanding shares of capital stock of
Acquiring Bank and each of FCC's other banking subsidiaries named
in its Form 10-K for the year ended December 31, 1994, other than
any such subsidiary which may hereafter be merged into or
consolidated with any other such subsidiary.
ARTICLE 4: Covenants
Each party covenants and agrees with the other as follows:
4.1 Cooperation and Best Efforts. It will cooperate with
the other and use its best efforts to satisfy all requirements of
law for, and all conditions herein to, the consummation of the
Mergers, and to effect the Mergers at the earliest practicable
date.
4.2 Registration and Proxy Statement. Each party will
cooperate in preparing the Registration Statement defined in
section 4.14 and a proxy statement of Holding (the "Proxy
Statement"), which complies with the Securities Act of 1933 (the
"33 Act"), for the purpose of submitting this Agreement to
Holding's and Bank's shareholders for approval. Each party will
as promptly as practicable after the date hereof furnish all such
information relating to it and its subsidiaries as the other
party may reasonably request for inclusion in the Proxy Statement
and the Registration Statement.
4.3 Press Releases. It will cooperate with the other in
the preparation of any press releases relating to this Agreement.
Without the prior consent of FCC's chief executive officer or his
designee (not to be unreasonably withheld), neither Holding nor
Bank will issue any press release or other written statement for
general circulation relating to the Mergers or this Agreement,
except as may otherwise be required by law.
4.4 401(k) Plan. Holding will amend its 401(k) plan to
provide that all participants who are employed by it or Bank on
the date hereof will be fully vested in their accounts as of the
Effective Date. FCC will take all reasonable actions necessary
after the Effective Date to maintain the qualification and tax-
exempt status of the 401(k) plan and to meet all other
requirements of law and the provisions of such plan until it is
either terminated or combined with FCC's plans.
4.5 Investigations. Each of Holding and Bank will provide
FCC and its representatives full access during all reasonable
times to its premises, properties, books and records, and furnish
them with such information respecting its business as FCC may
from time to time reasonably request. If this Agreement is
terminated for any reason, FCC will return all non-public
materials obtained pursuant hereto, and, for two years following
any termination for whatever the reason, will keep such
information confidential, except as may be required by law, and
not use it in connection with its business, in each case unless
such information has become publicly available through no fault
of FCC and in each case except as may be necessary to pursue or
defend judicially it rights under this Agreement. During the 30
days preceding the mailing of the Proxy Statement, and the
30 days preceding the Closing Date, FCC will provide Holding and
its representatives with such information concerning, and access
to, FCC as any of them may reasonably request for the purpose of
making an appropriate due diligence investigation or up-date
thereof with respect to FCC.
4.6 Preservation of Business. Each of Holding and Bank
will use its best efforts to preserve the possession and control
of all of its assets (other than those consumed or disposed of
for value in the ordinary course or except as otherwise expressly
permitted under this Agreement), and the goodwill of customers
and others having business relations with it, and will do nothing
knowingly to impair its ability to keep and preserve its business
as it exists on the date hereof.
4.7 Conduct of Business. Except as otherwise contemplated
by this Agreement or as expressly provided in the Exceptions
Schedule, each of Holding and Bank will conduct its business only
in the ordinary course consistent with past practices. In
addition, except as otherwise provided herein, neither Holding
nor Bank will do, whether or not in the ordinary course, without
the prior consent of FCC's chief executive officer or his
designee (not to be unreasonably withheld), any of the following:
(a) cause or permit a breach of any of its covenants or
cause or permit any representation or warranty of it to become
untrue in any material respect, as if each such representation
and warranty were continuously made from the date hereof;
(b) declare, pay or make any dividend or distribution on,
or reclassify or acquire, or issue or sell any additional shares
of or any securities or obligations convertible into or
exchangeable for, its capital stock, or make any other payment to
any holder of Holding Stock or Bank Stock in such holder's
capacity as such, other than (i) the regular dividend of Holding
payable in or after June 1995 at the rate of $5.00 per share of
Holding Stock (and, if the Closing Date is after December 31,
1995, the regular dividend of Holding payable in January 1996 at
the rate of $10.00 per share of Holding Stock), (ii) such
dividends by Bank as are necessary to provide Holding with the
funds required to pay (A) Holding's operating and business
expenses not materially exceeding the amounts set forth in the
Exceptions Schedule, (B) expenses relating to this transaction,
(C) any advancement of expenses or indemnification permitted by
Holding's Articles or Bylaws or Bank's bylaws, and (D) any
permitted dividend by Holding (plus dividends payable by Bank to
other shareholders of Bank on account of such dividends paid to
Holding); and (iii) the dividend referred to in Section 4.18;
(c) amend its Articles or by-laws or adopt or amend any
resolution (other than any resolutions necessary to implement any
indemnification permitted by Holding's Articles or Bylaws or
Bank's bylaws) or agreement concerning indemnification of its
directors or officers, except with respect to any required
renewal of the current policy of directors' and officers'
liability insurance maintained by Holding and Bank or the
purchase of a comparable (in cost and coverage) policy as a
replacement therefor, or fail to maintain its books and records
in the usual manner on a basis consistent with that heretofore
employed;
(d) place or suffer to exist on any of its assets or
properties any mortgage, pledge, lien, charge or other
encumbrance, except those of the character described in section
3.2(g)(i)(B) or (C), or cancel any material indebtedness to it or
any material claims which it may have had, or waive any right of
substantial value or, except as provided in Section 4.18,
discharge or satisfy any material noncurrent liability;
(e) enter into any new line of business, or merge or
consolidate with another entity, or sell or otherwise dispose of
a substantial part of its assets, or sell any of its assets other
than sales (i) of United States Treasury securities having a
maturity of less than three years in an aggregate amount not
exceeding $5 million from the date of this Agreement through the
Closing Date, (ii) in the ordinary course of business of other
investment securities having not more than $100,000 in market
value, (iii) of Credits for not less than book value, or (iv) of
any asset held as other real estate or other foreclosed assets
for an amount not less than its book value at the Latest Balance
Sheet date if such asset had a book value at the Latest Balance
Sheet date over $40,000;
(f) violate in any material respect any Law;
(g) fail to pay, or to make adequate provision for the
payment of, all taxes, interest payments and penalties due and
payable (and/or accruable for all periods or portions of periods
up to the Effective Date) to any taxing authority, except those
being contested in good faith by appropriate proceedings and for
which sufficient reserves have been established;
(h) acquire investment securities having an aggregate
market value greater than $100,000, except for any acquisition of
United States Treasury securities having a maturity of less than
three years in an aggregate amount not exceeding $5 million from
the date of this Agreement through the Closing Date; or that are
less than investment grade;
(i) charge off (except as may otherwise be required by law
or by regulatory authorities or by GAAP consistently applied or
in conformity with Bank's policy relating to charge offs provided
in Bank's loan policy, a copy of which has been delivered to FCC)
any of its Credits, or make or enter into any commitments to make
any Credits which (i) vary materially from its written loan
policies, copies of which have been made available to FCC, or
(ii) exceed $250,000, provided that Bank may extend or renew for
up to 12 months such Credits exceeding $250,000 in connection
with the renewal, workout or renegotiation of Credits currently
in its portfolio;
(j) issue or deliver any Holding or Bank Certificate to
replace any certificate claimed to be lost, destroyed or stolen
without requiring a bond from a solvent insurance company in
favor of FCC and its transfer agent against any loss resulting
from the issuance or delivery of such replacement certificate,
unless under FCC policy a bond would not be required to replace
any certificate for FCC Stock under similar circumstances;
(k) make any negative loan loss provision unless required
by any regulatory authority or GAAP consistently applied; or
(l) commit to do any of the foregoing.
4.8 Additional Information. Holding and Bank will provide
FCC (a) with prompt notice of any circumstance that has had or is
reasonably likely to have a Material Adverse Effect on Holding
and Bank, (b) as soon as available, true, correct and complete
copies of any financial statements and other documents of the
type referred to in section 3.2(b) becoming available, and (c)
promptly upon its dissemination, any report, release or other
information sent to its shareholders. FCC will provide Holding
and Bank, as soon as available, true, correct and complete copies
of any reports of the type referred to in section 3.3(b).
4.9 Shareholder Approval. Holding will submit this
Agreement to its shareholders for approval in accordance with the
BCL at a meeting duly called and convened for that purpose as
soon as practicable. Bank will submit the Bank Merger Agreement
to Bank's shareholders for approval in accordance with the
Louisiana Banking Law at a meeting duly called and convened for
that purpose as soon as practicable. As such meeting, Holding
will, if the shareholders of Holding shall have so approved this
Agreement, vote all shares of Bank Stock held by it "for"
approval of the Bank Merger. The foregoing meetings will, if
practicable, be held on the same date but, in any event, the Bank
meeting will not be convened until the Holding meeting has been
finally adjourned.
4.10 Restricted Stock. Each of Holding and Bank will use
its best efforts to obtain by the Closing Date, from each
director, executive officer and five percent shareholder who
becomes such after the date hereof and will receive FCC Stock, an
Affiliate Agreement in the form of Exhibit C.
4.11 Prohibited Negotiations. (a) Until this Agreement
terminates, neither Holding nor Bank will, without the prior
consent of FCC's chief executive officer or his designee,
directly or indirectly, solicit, initiate or encourage inquiries
or proposals with respect to, furnish any information relating
to, or participate in any negotiations or discussions concerning,
any transaction of the type described in section
6.1(e) (ii) ("takeover proposal") (and in no event will any such
information be supplied except pursuant to a confidentiality
agreement), and each of them will instruct its officers,
directors, agents and affiliates ("Representatives") not to do
any of the above, and will notify FCC immediately if any such
inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are
sought to be initiated with, it or any of its Representatives;
provided that this covenant shall not prohibit any Holding or
Bank director from taking any action that in the written opinion
of counsel identified in Section 5.2(b) is required by law to
discharge his or her fiduciary duties to Holding or Bank and
their respective shareholders.
(b) Neither Holding's nor Bank's Board nor any committee
thereof shall (i) withdraw, modify, or propose to withdraw or
modify, the approval or recommendation to shareholders of this
Agreement, or (ii) approve, recommend, or propose to recommend
any takeover proposal with respect to Holding or Bank, except in
any such case such action as is required in the written opinion
of counsel identified in Section 5.2(b) to discharge fiduciary
duties to Holding's shareholders or Bank's shareholders, or (iii)
modify, waive or release any party from, or fail to enforce any
provision of, any confidentiality agreement between Holding or
Bank and any prospective acquiror.
4.12 Operating Functions. (a) Each of Holding and Bank will
cooperate with FCC in connection with planning for the efficient
and orderly combination of the parties and the operation of
Acquiring Bank after the Bank Merger, and in the consolidation of
appropriate operating functions with Acquiring Bank to be
effective on the Effective Date, provided that this covenant
shall not require any action that, in the opinion of Holding's or
Bank's Board, would adversely affect its operations if the
Mergers were not consummated.
(b) Within 60 days prior to the anticipated Closing Date,
FCC may with the consent of the chief executive officer of Bank
(not to be unreasonably withheld) contact customers of Bank in
connection with the anticipated consolidation of operating
functions and provide such notices as shall in FCC's reasonable
judgment be necessary or desirable so that such functions may be
fully consolidated on the Effective Date.
(c) Each of Holding and Bank will cooperate with FCC with
respect to, and allow FCC to participate in connection with, any
unresolved compliance issues of Holding or Bank raised by any
regulator or found by FCC to exist.
4.13 Benefits to Holding's and Bank's Employees. After the
Effective Time, FCC will provide to persons who were employees of
Holding or Bank immediately before the Effective Date and who
become employees of FCC or Acquiring Bank immediately thereafter,
the same employee benefits as it provides to its and Acquiring
Bank's employees. Full credit will be given for prior service
with Holding or Bank for eligibility and vesting purposes under
all of FCC's benefit plans other than its retirement plan, except
that if Holding's or Bank's 401(k) plan is terminated,
participation in any 401(k) plan of FCC will not be permitted for
one year after termination. All benefits accrued through the
Effective Date under Benefits of Holding or Bank will be paid by
FCC, to the extent they are not otherwise provided to such
employees through FCC's benefit plans. Except as provided in
section 4.16, FCC will not be obligated to continue any Benefit
maintained by Holding or Bank.
4.14 Regulatory Filings. FCC will (a) prepare and file, as
promptly as practicable, all regulatory filings required to be
made with respect to the Mergers, (b) prepare and file, as
promptly as practicable, a registration statement (the
"Registration Statement") under and complying with applicable
requirements of the 33 Act (which will include the Proxy
Statement), for the purpose, among other things, of registering
the FCC Stock to be issued pursuant hereto, and (c) use its best
efforts to cause the Registration Statement to become effective
as soon as practicable, to qualify such FCC Stock under the
securities laws of such jurisdictions as may be required and to
keep the Registration Statement and such qualifications current
and in effect for so long as is necessary to effect the Mergers.
4.15 Indemnification (a) FCC will indemnify and hold
harmless Holding and Bank, and each of their respective directors
and officers, and each controlling person of Holding or Bank
within the meaning of the 33 Act, against any claims, suits,
proceedings, investigations or other actions, and any related
losses, damages, costs, expenses, liabilities or judgments,
whether joint, several or solidary (collectively, "Liabilities"),
insofar as they arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact made in
the Registration Statement or the Proxy Statement, or an omission
or alleged omission therefrom of a material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, and
will reimburse each such person promptly as incurred for legal
and other expenses reasonably incurred in connection with
investigating or defending any such Liabilities; provided, that
FCC will not be liable to the extent that any such Liability
arises out of or is based upon any such untrue statement or
omission or alleged untrue statement or omission made in reliance
on and in conformity with information furnished to FCC by Holding
or Bank or, with respect to any indemnified person, by that
person.
(b) In addition to the foregoing, for a period of ten years
after the Effective Time, FCC will indemnify and hold harmless,
and advance related legal and other expenses reasonably incurred
by, those directors and officers of Holding and Bank who have
executed an Insider's Commitment against all Liabilities arising
by reason of the fact that he or she is or was a director or
officer of Holding or Bank at any time prior to or at the
Effective Time, to the full extent indemnification is permitted
by Holding's Articles and Bylaws as in effect on the date hereof,
including any provisions relating to advances of legal and other
expenses (subject to any required undertaking), except that FCC's
obligation under this subsection 4.15(b) shall not exceed, in the
aggregate, $5 million (less any indemnification paid or awarded
by Holding or Bank subsequent to the date of this Agreement), and
no indemnification under this subsection 4.15(b) will be given in
respect of any Liability against an indemnified person (i) if he
or she knew of its existence prior to the date hereof and it was
not disclosed on the Exceptions Schedule, (ii) if he or she
becomes aware of its existence after the date hereof but before
the Effective Time and fails to inform FCC thereof prior to the
Effective Time, (iii) if a court of competent jurisdiction shall
finally determine that indemnification of such indemnified person
as contemplated hereby is prohibited, or (iv) unless he or she is
found to have acted with respect thereto in good faith and in a
manner he or she reasonably believed to be in, or not opposed to,
the best interests of Holding or Bank, as the case may be, and,
with respect to any criminal action or proceeding, is found to
have had no reasonable cause to believe his or her conduct was
unlawful (the standard of conduct described in clause (iv) and
any additional standard required by Holding's Articles or By-Laws
is herein called the "Applicable Standard").
(c) Any indemnified person wishing to claim indemnification
under section 4.15, upon learning of any claim, shall notify FCC
thereof as promptly as is practicable, but the failure so to
notify FCC shall not relieve FCC from any obligation it has under
this Section 4.15 except to the extent it is actually prejudiced
by such failure. FCC shall have the right to assume the defense
thereof and shall not be liable for any expenses subsequently
incurred by such indemnified person in connection with the
defense thereof, except that if FCC does not assume or continue
to pursue such defense, or counsel for the indemnified person
advises in writing that there are material substantive issues
that raise conflicts of interest between FCC and the indemnified
person, then the indemnified person may retain counsel
satisfactory to him (and reasonably satisfactory to FCC), and FCC
shall (subject in the case of indemnification pursuant to
Section 4.15(b) to the limitations therein) pay all reasonable
fees and expenses of such counsel promptly as incurred, provided
that (i) FCC shall not be obligated to pay for more than one
counsel for all indemnified persons in any jurisdiction except as
may be required due to conflicts of interest, (ii) the
indemnified persons will cooperate (to the extent reasonably
appropriate under the circumstances) in the defense of any such
claim, and (iii) FCC shall not be liable for any settlement
effected without its prior written consent. FCC shall effect no
settlement that would obligate any indemnified person to pay any
amount unless such person has consented thereto in writing.
(d) The determination whether the Applicable Standard has
been met shall be made as follows: If FCC, on the one hand, and
the indemnified parties, on the other hand, can agree upon an
independent counsel to make such determination, then the
determination shall be made by such counsel and shall be final
and binding. Absent such an agreement, each of FCC and the
indemnified parties shall appoint an independent counsel and the
two counsel so appointed shall appoint a third, who shall then
function as if such third counsel had been appointed in
accordance with the preceding sentence. The cost of all such
counsel shall be paid by FCC, but one half of the amount thereof
shall reduce the indemnification limit that is provided by
Section 4.15(b).
(e) The rights granted indemnified persons hereby are
contractual rights inuring to the benefit of each indemnified
person and his or her heirs and representatives, and shall
survive the Closing, the Mergers, and any merger, consolidation
or other reorganization of FCC.
4.16 Certain Contracts. FCC shall cause the Acquiring Bank
to honor, in accordance with their terms, all employment,
severance, consulting, and other compensation contracts and plans
listed in Exhibit 4.16 between Holding or Bank and any current or
former director, officer or employee thereof, and all provisions
for vested benefits or other vested amounts earned or accrued
through the Effective Time under the Plans that are identified on
the Exceptions Schedule.
4.17 Issuance of FCC Stock. FCC shall, prior to the
Closing, take such action as is required to permit the issuance
of the FCC Stock issuable to the shareholders of Holding and Bank
pursuant to the Mergers, and to permit such stock to be approved
for listing and quotation on the NASDAQ Stock Market.
4.18 Holding Indebtedness. Holding is indebted to First
National Bankers' Bank ("FNBB") under the Business Loan Agreement
dated September 30, 1994, by Holding as borrower, and FNBB as
lender, relating to a loan in the original principal amount of
$497,549.77, and under the related promissory note dated
September 30, 1994, in that original principal amount, made by
Holding payable to the order of FNBB (the "Holding
Indebtedness"). The Holding Indebtedness is secured by (among
other things) the pledge by Holding to FNBB of 23,896 shares of
Bank Stock under the Commercial Pledge Agreement dated
September 30, 1994, between Holding and FNBB, and by security
instruments affecting certain other property of Holding. Certain
directors and shareholders of Holding have personally guarantied
the Holding Indebtedness. Notwithstanding any provision of this
Agreement to the contrary, Holding may pay the Holding
Indebtedness at any time prior to or at the Closing, and Bank may
pay a dividend or otherwise distribute to Holding a sum
sufficient for it to pay the Holding Indebtedness. If the
Holding Indebtedness is not paid prior to or at the Closing by
Holding, at the Closing FCC shall pay in full the Holding
Indebtedness and use its reasonable best efforts to effectuate a
release of the Bank Stock and other collateral (including
personal guaranties) securing the Holding Indebtedness.
ARTICLE 5: Conditions of Closing
5.1 Conditions of All Parties. The parties' obligations to
effect the Mergers are subject to the following conditions:
(a) Approvals. (i) Holding's and Bank's shareholders shall
have duly approved this Agreement and (ii) all statutory
requirements for the Mergers shall have been fulfilled, including
the passage of any waiting period, and all appropriate
governmental authorizations required for the Mergers shall have
been received without imposing any conditions: (A) compliance
with which FCC determines in good faith would materially
adversely affect the economic or business benefits to it of the
Mergers, or (B) which are required to be complied with prior to
the Closing Date and compliance with which Holding or Bank
determines in good faith would materially adversely affect either
of them should the Mergers not occur (conditions described in
clause (A) are with respect to FCC, and conditions described in
clause (B) are with respect to Holding and Bank, "Unacceptable
Conditions").
(b) Effective Registration Statement. The Registration
Statement shall have become effective prior to mailing the Proxy
Statement, no stop order suspending its effectiveness shall have
been issued, and no proceedings for that purpose shall have been
instituted and not withdrawn or, to either party's knowledge,
contemplated by the SEC.
(c) No Restraining Action. No proceeding shall have been
threatened or instituted before a court or other governmental
body to restrain or prohibit either of the Mergers or to obtain
damages or other relief in connection with the execution of this
Agreement or either of the Mergers; and no governmental body
shall have given notice to any party that either of the Mergers
would violate any law or that it intends to begin proceedings to
restrain consummation of either of them; provided that no
proceeding or threatened proceeding shall be a condition under
this Section: (i) unless the board of directors of at least one
of FCC, Holding or Bank shall have determined in good faith that
the proceeding or threatened proceeding makes consummation of the
Mergers unwise, (ii) if the proceeding has been concluded by a
final, unappealable judgment which would not (A) result in
material damages to any party to this Agreement or Acquiring
Bank, (B) restrain, prohibit or declare unlawful the consummation
of the Mergers, or (C) impose Unacceptable Conditions with
respect to the party asserting such condition, or (iii) if it is
a proceeding asserting the rights of a dissenting shareholder to
dissent.
(d) Tax Opinion. The parties shall have received the
opinion of Arthur Andersen LLP, in form and substance reasonably
satisfactory to them and their respective counsel, to the effect
that (i) the Mergers will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and
(ii) the conversion in the Mergers of Holding Stock and Bank
Stock for FCC Stock will not give rise to gain or loss to the
shareholders of Holding and Bank with respect to such exchange
(except to the extent of any cash received).
(e) Representations, Warranties and Covenants. Each of the
other party's representations and warranties shall have been
accurate in all material respects on the date hereof, shall have
remained accurate in all material respects from and after such
date and shall be accurate in all material respects on the
Closing Date, with the same effect as though made at such date,
except to the extent of changes permitted by the terms hereof,
and the other party shall have performed all obligations required
to be performed by it at or prior to the Closing. In addition,
each party shall have delivered to the other a certificate dated
as of the Closing Date and signed by its chief executive and
chief financial officers that, except as specified therein, they
do not know, and have no reasonable grounds to know, of any
inaccuracy or failure of any representation, warranty or covenant
made by it herein. As used in this section and elsewhere in this
Agreement, each of Holding and Bank is an "other party" with
respect to FCC, and FCC is the "other party" with respect to
Holding and Bank.
(f) NASDAQ. All necessary action shall have been taken to
permit the listing and quotation of the FCC Stock to be issued in
connection with the Mergers on the NASDAQ Stock Market.
(g) Bank Merger. All conditions shall have been met so as
to enable the Bank Merger to become effective on the Effective
Date immediately after the Holding Company Merger.
5.2 Additional Conditions of FCC. FCC's obligation to
effect the Mergers is also subject to the following additional
conditions:
(a) No Material Adverse Change. There shall not have
occurred any material adverse change since the date of the Latest
Balance Sheet to the Closing Date in the financial condition,
results of operations, business or prospects of Holding and Bank
taken as a whole.
(b) Opinion of Counsel. FCC shall have received from
Stone, Pigman, Walther, Wittmann & Hutchinson, L.L.P. (or
successor counsel reasonably acceptable to FCC), counsel for
Holding and Bank, an opinion, dated the Closing Date, to the
effect set forth in Exhibit E.
(c) Pooling. Neither FCC's independent public accountants
nor the SEC shall have taken the position that the Mergers do not
qualify for pooling-of-interests accounting treatment under GAAP.
(d) Schedule of Expenses. Each of Holding and Bank shall
have provided FCC with a schedule setting forth in reasonable
detail all of its expenses paid, billed to it or to be billed to
it, that are included in the Deductible Amount, or a statement
that such expenses will not exceed the dollar amount contained in
the definition of "Deductible Amount" in Section 2.1(c).
(e) Accountant's Letters. FCC shall have received
"comfort" letters from Holding's independent public accountants
dated, respectively, within three days prior to the mailing of
the Proxy Statement and the Closing Date, in form and substance
as are usual and customary for comfort letters in transactions of
this type.
(f) Affiliate Agreements; Insider's Commitments. The
Affiliate Agreements and the Insider's Commitments that have been
delivered pursuant to section 3.2(p) or 4.10 shall be in full
force and effect.
(g) Real Estate Transfers. The closing under the Offer and
Agreement To Sell and To Purchase that is annexed hereto as
Exhibit F, as amended by the First Amendment to Agreement To Sell
and To Purchase that is annexed hereto as Exhibit F-1 (as so
amended, the "Real Estate Agreement"), shall have occurred, or
shall occur simultaneously with the closing under this Agreement.
(h) Chaffe Opinion. FCC shall have received a copy of the
opinion of Chaffe & Associates, Inc. ("Chaffe"), financial
advisor to Bank and Holding, to the effect set forth in
Section 5.3(a)(ii); and Chaffe shall not have withdrawn or
qualified the opinion it delivered to Bank and Holding on or
prior to the date of this Agreement, which opinion pertains to
the overall fairness of the transactions contemplated by this
Agreement and the Real Estate Agreement, a copy of which opinion
has been delivered to FCC.
5.3 Additional Conditions of Holding and Bank. Holding's
and Bank's obligations to effect the Mergers are also subject to
the following additional conditions:
(a) Opinion of Counsel; Fairness Opinion. Holding and Bank
shall have received an opinion from (i) Correro, Fishman &
Casteix, L.L.P., counsel for FCC, dated the Closing Date, to the
effect set forth in Exhibit G, and (ii) Chaffe & Associates,
Inc., dated within five days prior to the mailing of the Proxy
Statement, that the Aggregate Consideration is fair to the
shareholders of Holding and Bank from a financial point of view
and the allocation of the Aggregate Consideration between the
shareholders of Holding and the shareholders of Bank is fair from
a financial point of view.
(b) No Material Adverse Change. There shall not have
occurred any material adverse change since December 31, 1994, to
the Closing Date, in the financial condition, results of
operations, business or prospects of FCC.
5.4 Waiver of Conditions. Any condition to a party's
obligations hereunder may be waived by it, other than those in
sections 5.1(a) and (b).
5.5 Material Adverse Effect and Change. No event of the
nature described in Section 6.1(f) or Section 6.1(h) shall be
deemed, in and of itself (or in combination with other such
events described in those Sections) to constitute (a) a material
adverse change with respect to the party that is the subject of
such event, or (b) a circumstance that has had a Material Adverse
Effect on such party, unless the level of change that would
permit the other party to terminate this Agreement under
Section 6.1(f) or 6.1(h) has been equalled or exceeded. In
addition, in determining whether there has occurred with respect
to FCC a material adverse change or whether any circumstance has
had a Material Adverse Effect with respect to FCC, securities
losses shall be ignored except to the extent that such losses
(i) cause FCC to fail to meet regulatory capital requirements
applicable to it, or (ii) result from investment losses, which
affect FCC's consolidated statement of income, in off-balance-
sheet instruments of the nature commonly referred to as
derivative products.
ARTICLE 6: Termination
6.1 Termination. This Agreement may be terminated at any
time before the Effective Time:
(a) Mutual Consent. By the mutual consent of the parties.
(b) Material Breach. By FCC on the one hand, or Holding
and Bank on the other hand, in the event of a material breach by
the other party (as defined in Section 5.1(e)) of any
representation, warranty or covenant herein, which in either case
cannot be cured by the earlier of (i) 30 days after notice of
such breach to the breaching party, or (ii) the date set forth in
subparagraph (c)(i) below.
(c) Abandonment. By any party if (i) all conditions to
Closing in Article 5 have not been met or waived by March 31,
1996, or (ii) any such condition cannot be met by such date and
has not been waived by the party in whose favor it runs or
(iii) the Holding Company Merger has not occurred by such date.
(d) Dissenting Shareholders. By FCC if the Dissenter's
Shares would be entitled to receive, were they converted pursuant
to the Mergers, as much as 9% of the total number of shares of
FCC Stock issuable pursuant to the Mergers.
(e) Holding Recommendation. By FCC if Holding's or Bank's
Board shall or shall have resolved to (i) withdraw, modify or
change its recommendation to its shareholders of this Agreement
or either of the Mergers, (ii) recommend to Holding's or Bank's
shareholders (A) any merger, consolidation, share exchange, or
other similar transaction (other than the Mergers), (B) any sale,
lease, or other disposition of all or substantially all of
Holding's or Bank's assets, or (C) any acquisition, by any person
or group, of the beneficial ownership of a majority or more of
any class of Holding's or Bank's capital stock; or (iii) announce
a proposal, plan or intention to do any of the foregoing or
agreement to engage in any of the foregoing.
(f) Occurrence of Certain Events. By FCC if:
(i) the level of "Short-Term Qualified Core Deposits"
(defined in section 7.11) has at the Closing Date (or any date
that is specified as the Closing Date by any party in accordance
with section 1.2) declined by more than $17.5 million from the
level thereof at the Latest Balance Sheet date; or the level of
"Long-Term Qualified Core Deposits" (defined in section 7.11) has
at the Closing Date (or any date that is specified as the Closing
Date by any party in accordance with section 1.2) declined by
more than $17.5 million from the level thereof at the Latest
Balance Sheet date;
(ii)the consolidated stockholder's equity of Holding,
without taking into account the unrealized losses, if any, in
investment securities held by Bank ("Unrealized Securities
Losses"), has decreased at the Closing Date (or any date that is
specified as the Closing Date by any party in accordance with
section 1.2) by 10% or more from its consolidated stockholder's
equity on the Latest Balance Sheet date;
(iii)either of the net earnings of Bank, without taking
into account Unrealized Securities Losses, or its net earnings
before taxes, securities gains and losses and provisions for loan
and lease losses and other real estate owned, from the Latest
Balance Sheet date to the Closing Date (or any date that is
specified as the Closing Date by any party in accordance with
Section 1.2), in each case without taking into account expenses
applicable to the transactions contemplated by this Agreement,
are lower by 20% or more than the amount of such earnings shown
on Bank's budget for the comparable period of its fiscal year
ending December 31, 1995 (which has been delivered to FCC);
(iv)the Real Estate Agreement shall have been
terminated; or
(v) Holding's or Bank's Board of Directors adopts any
resolution implementing any indemnification permitted by
Holding's Articles or Bylaws or Bank's bylaws or otherwise, or
there is otherwise implemented any such indemnification, in
either event without the prior written consent of the chief
executive officer of FCC or his designee.
(g) Approvals. (i) By any party if this Agreement is
disapproved by the shareholders of Holding or Bank, or (ii) by
any party if any agency whose approval is required for the
Holding Company Merger or the Bank Merger denies in any final
action any application for such approval or imposes as a
condition to its approval Unacceptable Conditions with respect to
the party asserting such termination.
(h) FCC Stock Price. By Holding or Bank if both (A) the
quotient of the average closing sales prices of FCC Common Stock
on the NASDAQ Stock Market for the five trading days immediately
preceding the Closing Date divided by the closing sales price of
such stock on the date immediately preceding the date of this
Agreement, is less than 0.75 and (B) the quotient of the average
closing value of the Standard & Poor's Regional Bank Index for
the five trading days preceding the Closing Date divided by the
value of the Standard & Poor's Regional Bank Index for the day
immediately preceding the date of this Agreement exceeds the
quotient set forth above for FCC Common Stock by more than 0.25.
In connection with the foregoing, appropriate adjustment shall be
made in the prices of FCC Common Stock so as to reflect any event
of the type described in Section 2.1(e) occurring at any time, to
the extent such event would cause such prices not to be
comparable with each other.
6.2 Effect of Termination; Survival. Upon its termination
pursuant to this Article 6, this Agreement shall be void and of
no effect, and there shall be no liability by reason of this
Agreement, or its termination, on the part of any party hereto or
its Bank Party or their respective directors, officers,
employees, agents or shareholders except, in the case of any
termination other than a termination pursuant to Section 6.1(a),
6.1(f), 6.1(g)(ii) or 6.1(h) or, if FCC had at the time of
termination no right to terminate under 6.1(b) or (e), 6.1(g)(i),
for any liability of a party hereto arising out of a knowing
breach of any material representation, material warranty or
covenant herein prior to the termination date, and except for any
liability of a party for any violation at any time of any
covenant that survives pursuant to the following sentence. The
following provisions shall survive any termination of this
Agreement: the penultimate sentence of section 4.5; subsections
4.15(a), (c), (d) and (e), and section 6.2; and Article 7.
ARTICLE 7: Miscellaneous
7.1 Notices. Any notice, communication, waiver or consent
("Notice") required or permitted to be given in connection
herewith must be in writing and may be given to the person to be
notified by (i) depositing it in the U. S. mail, postage prepaid
and registered or certified with return receipt requested, (ii)
delivering it to such person, or (iii) sending it by a national
commercial courier service for same- or next-day delivery,
provided such delivery is confirmed in writing by the courier.
Notice is effective, if by mail, 48 hours after deposit, and if
in person or by commercial courier, upon delivery. A party
delivering Notice shall try to obtain a receipt. For purposes of
Notice, the addresses of the parties shall, until changed by
Notice, be as follows:
If to FCC: With a copy to:
First Commerce Corporation Correro, Fishman & Casteix,
210 Baronne Street L.L.P.
New Orleans, LA 70112 201 St. Charles Avenue, 47th
Floor
Attention: Ian Arnof New Orleans, LA 70170-4700
Attention: Louis Y. Fishman
If to Holding or Bank: With a copy to:
Peoples Bancshares, Inc. Stone, Pigman, Walther,
P. O. Box 1099 Wittmann & Hutchinson, L.L.P.
Chalmette, LA 70044-1099 546 Carondelet Street
New Orleans, LA 70130-3588
Attention: Nicholas P.
Trist, Jr. Attention: Paul M. Haygood
7.2 Waiver. Failure by a party to enforce any right
hereunder is not a waiver of such right unless it is an express
written waiver executed by its chief executive officer or a
person designated in writing by its chief executive officer.
Waiver of any one right is not a waiver of any other right or of
any continuation of the violation waived.
7.3 Expenses. Regardless whether the Mergers are
consummated, all expenses incurred in connection herewith will be
borne by the party incurring them.
7.4 Headings. The headings herein are included solely for
reference and shall not be considered in the interpretation or
construction of this Agreement.
7.5 Exhibits and Schedules. The exhibits and schedules
hereto are incorporated herein by this reference and expressly
made a part hereof.
7.6 Integrated Agreement. This Agreement, the exhibits and
schedules hereto and all other papers delivered in accordance
herewith constitute the entire agreement of the parties with
respect to the subject matter hereof, all prior agreements being
superseded hereby.
7.7 Choice of Law. This Agreement's validity and
construction and the determination of the rights and duties of
the parties shall be governed by the laws of the United States
and those of Louisiana applicable to contracts made and to be
performed wholly within such State.
7.8 Parties in Interest. This Agreement shall bind and
inure to the benefit of the parties and their respective
successors and assigns, except that Holding may not transfer or
assign it without FCC's prior consent, including any transfer or
assignment by operation of law. Nothing herein shall be
construed to give anyone other than the parties any rights,
except that (a) following the Effective Time the representation
and warranty of FCC in clause (ii) of the first sentence of
Section 3.3 shall survive and inure to the benefit of the holders
of Holding Stock and Bank Stock before the Effective Time,
(b) following the Effective Time, the agreements of FCC in
Article 2 shall survive and inure to the benefit of FCC and the
holders of Holding Stock at the Effective Time and the holders of
Bank Stock at the effective time of the Bank Merger,
(c) following the Effective Time, the agreements of FCC in
Section 4.15 shall survive and inure to the benefit of the
indemnified persons referred to in Section 4.15 and FCC, and
(d) if this Agreement is terminated under Article 6, the
agreements of FCC in Section 4.15(a), (c) and (e) shall survive
and inure to the benefit of the indemnified persons referred to
in Section 4.15(a) and FCC.
7.9 Amendment. At any time before or after its approval by
Holding's and Bank's shareholders, this Agreement or any exhibit
or schedule may be amended or restated by (i) the parties, by
mutual agreement approved by their Boards, or (ii) by the
parties' chief executive officers or their designees to correct
typographical errors or to change erroneous references or cross
references or in any other manner not material to the substance
of the Mergers.
7.10 Counterparts. This Agreement may be executed in one or
more counterparts, which taken together shall constitute one and
the same instrument.
7.11 Certain Definitions. As used in this Agreement:
(a) "Core Deposits" are the "IPC deposits" (as such term is used
in connection with the preparation of call reports) of Bank, but
excluding all time deposits of $100,000 or more; (b) "Qualified
Core Deposits" are Core Deposits other than those (i) by or under
the control of any Insider (as such term is defined in
Regulation O of the FRB) of Holding or Bank, (ii) taken or
renewed after the Latest Balance Sheet date at rates more than
(A) with respect to Core Deposits held under Bank's "Peoples Safe
Savers 91 Day C.D. Statement Account", the simple average of the
91 day treasury bill discount rates ("T-Bill Rate") from the
twelve weekly 91 day treasury bill auctions preceding the date of
the deposit, (B) with respect to Core Deposits held under Bank's
"IRA 18 Month Floating Rate C.D.", the simple average T-Bill Rate
from the weekly 91 day treasury bill auctions during the month
preceding the date of the deposit, and (C) with respect to all
other Core Deposits, 70 basis points higher than the greater of
(X) the average rates being offered at the time for comparable
deposits in the Parish of domicile of Bank by other banking
institutions having full service offices in that Parish
(determined for any calendar week by reference to the most recent
survey of such rates prepared by Teri Russell and distributed to
subscribers to such survey not later than Wednesday of the
preceding calendar week or, if Teri Russell ceases to prepare and
distribute such survey, then by reference to a comparable survey
mutually agreeable to the parties), or (Y) the rates being
offered at the time for comparable deposits in such Parish by
Acquiring Bank, or (iii) that are seasonal deposits; (c) "Short-
Term Core Deposits" and "Short-Term Qualified Deposits" are daily
average Core Deposits and Qualified Core Deposits, respectively,
for the ten consecutive banking days ending three banking days
prior to the date of determination; and (d) "Long-Term Qualified
Core Deposits" are daily average Qualified Core Deposits for the
period from the Latest Balance Sheet date through the date that
is three banking days prior to the date of determination.
7.12 Nonsurvival of Representations. The representations
and warranties of the parties herein (and in any related
document, including without limitation any certificate delivered
in connection with this Agreement) shall expire with, and be
terminated and extinguished by, the effectiveness of the Merger
and shall not survive such effectiveness, except that FCC shall
continue to warrant and represent that the FCC Stock issued
pursuant to the Mergers is validly issued, fully paid and
nonassessable; provided, however, that no representation or
warranty given by Holding or Bank shall be deemed to be
terminated or extinguished so as to deprive FCC or Acquiring Bank
or their respective directors and officers, and no representation
or warranty given by FCC shall be deemed to be terminated or
extinguished so as to deprive Holding or Bank or their respective
directors and officers, of any defense in law or equity that they
otherwise would have to any claim against them by any person,
including, without limitation, any shareholder or former
shareholder of Holding or Bank. The survival of representations
and warranties pursuant to this section shall be solely for the
purpose of affording defenses as described herein and shall not
create, and shall not be construed to create, a cause or right of
action or other right (whether direct, indirect or third-party)
in any person.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date on the first page hereof.
FIRST COMMERCE CORPORATION PEOPLES BANCSHARES, INC.
By:______________________________ By:_______________________________
Ian Arnof Nicholas P. Trist, Jr.
President President
PEOPLES BANK & TRUST COMPANY
OF ST. BERNARD
By:_______________________________
Nicholas P. Trist, Jr.
President
Exhibit 5
[CORRERO, FISHMAN & CASTEIX, L.L.P. LETTERHEAD]
August 3, 1995
First Commerce Corporation
210 Baronne Street
New Orleans, LA 70112
Gentlemen:
We have acted as counsel for First Commerce Corporation, a
Louisiana corporation (the "Company"), in connection with the
Company's Registration Statement on Form S-4 (the "Registration
Statement") covering up to 1,009,705 shares of common stock (the
"Common Stock") of the Company (the "Shares") which the Company
proposes to issue to shareholders of Peoples Bancshares, Inc. and
Peoples Bank & Trust Company of St. Bernard in accordance with
the Agreement and Plan of Merger (the "Plan") described in the
Registration Statement.
For the purposes of the opinions expressed below, we have
examined the Registration Statement, the Plan, the Articles of
Incorporation, as amended, and By-laws, as amended, of the
Company, resolutions adopted by the Board of Directors and
Executive Committee of the Company and such other documents and
sources of law as we considered necessary to render the opinions
hereinafter expressed.
On the basis of the foregoing, we are of the opinion that
the proposed issuance of the Shares has been duly authorized by
all necessary corporate action, and such Shares, if and when
issued in accordance with the terms of the Plan, will be validly
issued, fully paid and non-assessable.
We hereby consent (i) to be named in the Registration
Statement under the heading "Legal Matters" as counsel for the
Company and (ii) to the filing of this opinion as an Exhibit to
the Registration Statement. In so doing we do not admit that we
are "experts" within the meaning of the Securities Act of 1933.
Yours sincerely,
/s/ Anthony J. Correro, III
Anthony J. Correro, III
Exhibit 8
__________, 1995
BY HANDDRAFT
Mr. Leon K. Poche, Jr.
First Commerce Corporation
210 Baronne Street
New Orleans, Louisiana 70112
Mr. Nicholas P. Trist, Jr.
Peoples Bancshares, Inc.
P. O. Box 1099
Chalmette, Louisiana 70044-1099
Dear Messrs. Poche and Trist:
This opinion is being furnished to you in connection with the
proposed acquisition of Peoples Bancshares, Inc. ("Holding") and
its wholly owned banking subsidiary, Peoples Bank & Trust Company
of St. Bernard ("Bank"), by First Commerce Corporation ("FCC"),
which is expected to be completed on __________, 1995 ("the
Effective Date"). You have requested our opinion concerning the
following:
Whether the merger of Holding into FCC will qualify as a
reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended ("the Code").
That the exchange of Holding common stock to the extent
exchanged for FCC common stock will not give rise to gain or loss
for federal income tax purposes to the holders of Holding common
stock with respect to such exchange.
Whether the merger of Bank into First National Bank of Commerce
("Acquiring Bank"), a wholly-owned banking subsidiary of FCC,
will qualify as a reorganization under Section 368(a)(1)(A) of
the Code.
That the exchange of Bank common stock to the extent exchanged
for FCC common stock will not give rise to gain or loss for
federal income tax purposes to the holders of Bank common stock
with respect to such exchange.
You have asked for our opinion on the federal income tax
consequences to FCC, Holding, Bank, Acquiring Bank and the
stockholders of Holding and Bank. We have not considered any
nonincome tax, state, local or foreign income tax consequences,
and, therefore, do not express any opinion regarding the
treatment that would be given the merger by the applicable
authorities on any nonincome tax or any state, local or foreign
tax issues. We also express no opinion on nontax issues, such as
corporate law or securities law matters, including, but not
limited to, all securities law disclosure requirements.
In rendering our opinion, we have relied upon the accuracy and
completeness of the facts and information as contained in the
Agreement and Plan of Merger dated __________, 1995 ("the
Agreement"), including all exhibits attached thereto, and the
representations included below. To the extent there are any
changes to the Agreement or representations, our opinion may be
affected accordingly.
The discussion and conclusions set forth below are based upon
the Code, the Treasury Regulations, and existing administrative
and judicial interpretations thereof as of the Effective Date,
all of which are subject to change. All section references are
to the Internal Revenue Code of 1986, as amended, unless
otherwise stated. If there is a change in the Code, the Treasury
Regulations or public rulings thereunder, the current Internal
Revenue Service rulings or releases, or in the prevailing
judicial interpretation of the foregoing, the opinion expressed
herein would necessarily have to be re-evaluated in light of any
such changes. We have no responsibility to update this opinion
for events, transactions, changes in the above-listed law and
authority or circumstances occurring after the Effective Date.
This opinion is solely for the benefit of Holding, Bank, and FCC
and is not intended to be relied upon by anyone other than
Holding, Bank, and FCC. Although you do hereby have our express
consent to inform Acquiring Bank, and Holding and Bank common
stockholders of our opinion by including copies of this letter as
an exhibit to the Agreement and as an exhibit in the Registration
Statement on Form S-4 for the proposed transactions, we assume no
responsibility for tax consequences to them. Instead, each of
these parties must consult and rely upon the advice of his/her
counsel, accountant or other advisor. Except to the extent
expressly permitted hereby, and without the prior written consent
of this firm, this letter may not be quoted in whole or in part
or otherwise referred to in any documents or delivered to any
other person or entity.
Proposed Transactions
Our understanding of the proposed transactions, as described in
the Agreement, is as follows:
A.Holding will be merged with and into FCC ("Holding Company
Merger") on the Effective Date under the Articles of
Incorporation of FCC, pursuant to Louisiana Business Corporation
Law.
B.On the Effective Date and pursuant to the Holding Company
Merger, the common stockholders of Holding will receive shares of
FCC common stock proportionate in value, based on the terms
contained in Article 2 Section 1(a) of the Agreement. The number
of shares of FCC common stock to be received by the common
stockholders of Holding will represent an ownership interest in
FCC common stock of less than 50% of the total outstanding stock
of FCC. In lieu of issuing fractional shares of FCC common stock
as a result of the merger, common stockholders of Holding will be
entitled to receive a cash payment equal to such fractional share
multiplied by the designated value of a share of FCC common
stock.
C.Bank will be merged with and into Acquiring Bank ("Bank
Merger") on the Effective Date immediately subsequent to the
Holding Company Merger, pursuant to Federal law (12 U.S.C.
Section 215a).
D.On the Effective Date and pursuant to the Bank Merger, the
common stockholders of Bank other than Holding ("Bank Minority
Shareholders") will receive shares of FCC common stock
proportionate in value, based on the terms contained in Article 2
Section 1(b) of the Agreement. In lieu of issuing fractional
shares of FCC common stock as a result of the Bank Merger, Bank
Minority Shareholders will be entitled to receive a cash payment
equal to such fractional share multiplied by the designated value
of a share of FCC common stock.
Unless stockholders of Holding common stock holding at least
eighty (80) percent of the voting rights of Holding approve the
plan of reorganization, objecting stockholders of Holding may
dissent from the Holding Company Merger, and instead receive cash
in exchange for their shares of Holding common stock, based on
the fair market value of such stock determined under Section 131
of the Louisiana Business Corporation Law (La. R.S. Section
12:131).
Additional Representations
In addition to the representations included in the Agreement,
the following representations have been made to us by
representatives of FCC and Holding regarding the Holding Company
Merger:
a)FCC, Holding and the stockholders of Holding will pay their
respective expenses, if any, incurred in connection with the
successful consummation of the transaction.
b)There is no intercorporate indebtedness existing between
Holding and FCC, that was issued, acquired, or will be settled at
a discount.
c)The fair market value of the assets of Holding transferred to
FCC will equal or exceed the sum of the liabilities assumed by
FCC plus the amount of liabilities, if any, to which the
transferred assets are subject.
d)None of the compensation received by any stockholder-employees
of Holding will be separate consideration for, or allocable to,
any of their shares of Holding common stock; none of the shares
of FCC common stock received by any stockholder-employees will be
separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any stockholder-employees
will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services.
e)Holding will be merged with and into FCC under the Articles of
Incorporation of FCC, pursuant to Louisiana Business Corporation
Law.
f)The Holding common stockholders will have unrestricted rights
of ownership of FCC common stock received in the transaction, and
their ability to retain the FCC common stock received in the
transaction will not be limited in any way.
g)The ratio for the exchange of shares of Holding common stock
for FCC common stock in the transaction was negotiated through
arm's length bargaining. Accordingly, the fair market value of
the FCC common stock to be received by Holding common
stockholders in the transaction will be approximately equal to
the fair market value of the Holding common stock surrendered by
such stockholders in exchange therefor.
The following representations have been made to us by
representatives of FCC regarding the Holding Company Merger:
a)FCC has no plan or intention to re-acquire any of its stock
issued in the transaction.
b)FCC has no plan or intention to sell or otherwise dispose of
any of the assets of Holding acquired in the transactions, except
for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the Code and
except for Bank common stock to be canceled in the Bank Merger.
c)Following the transactions, FCC will continue the historic
businesses of Holding or use a significant portion of these
historic business assets in the operation of a trade or business.
d)The payment of cash in lieu of fractional shares of FCC common
stock is solely for the purpose of avoiding the expense and
inconvenience to FCC of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Holding
stockholders instead of issuing fractional shares of FCC common
stock will not exceed (1) one percent of the total consideration
that will be issued in the transaction to the Holding
stockholders in exchange for their shares of Holding common
stock. The fractional share interests of each Holding
stockholder will be aggregated, and no Holding stockholder will
receive cash for such fractional share interests in an amount
equal to or greater than the value of one full share of FCC
common stock.
e)The assumption by FCC of the liabilities of Holding pursuant to
the transactions is for bona fide business purposes and the
principal purpose of such assumption is not the avoidance of
federal income tax on the transfer of assets of Holding pursuant
to the transactions.
f)FCC is not an investment company as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
g)The proposed transaction is being undertaken for reasons
germane to the continuance of the business of FCC.
The following representations have been made to us by
representatives of Holding regarding the Holding Company Merger:
a)There is no plan or intention by the Holding common
stockholders who own one percent or more of the stock, and to the
best of the knowledge of the management of Holding, there is no
plan or intention on the part of the remaining common
stockholders to sell, exchange, or otherwise dispose of a number
of shares of FCC common stock received in the transaction that
would reduce the stockholders' ownership of FCC common stock to a
number of shares having a value, as of the Effective Date, of
less than (50) fifty percent of the value of all the formerly
outstanding common stock of Holding as of the same date. For
purposes of this representation, shares of Holding common stock
exchanged for cash in lieu of fractional shares of FCC stock
will be treated as outstanding Holding common stock on the
Effective Date. Moreover, shares of Holding common stock and
shares of FCC common stock held by Holding stockholders and
otherwise sold, redeemed, or disposed of prior to the transaction
in contemplation thereof, or subsequent to the transaction, will
be considered in making this representation.
b)The liabilities of Holding assumed by FCC, and the liabilities
to which the transferred assets of Holding are subject were
incurred by Holding in the ordinary course of business.
c)Holding is not an investment company as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
d)The proposed transaction is being undertaken for reasons
germane to the continuance of the business of Holding.
In addition to the representations included in the Agreement,
the following representations have been made to us by
representatives of FCC, Acquiring Bank, Holding, and Bank
regarding the Bank Merger:
a)FCC, Acquiring Bank, Bank, Holding, and Bank Minority
Shareholders will pay their respective expenses, if any, incurred
in connection with the successful consummation of the
transaction.
b)There is no intercorporate indebtedness existing between FCC
and Bank or between Acquiring Bank and Bank that was issued,
acquired, or will be settled at a discount.
c)The fair market value of the assets of Bank transferred to
Acquiring Bank will equal or exceed the sum of the liabilities
assumed by Acquiring Bank plus the amount of liabilities, if any,
to which the transferred assets are subject.
d)None of the compensation received by any stockholder-employees
of Bank will be separate consideration for, or allocable to, any
of their shares of Bank common stock; none of the shares of FCC
common stock received by any stockholder-employees will be
separate consideration for, or allocable to, any employment
agreement; and the compensation paid to any stockholder-employees
will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services.
e)Bank will be merged with and into Acquiring Bank pursuant to
Federal law (12 U.S.C. Section 215a).
f)Bank Minority Shareholders will have unrestricted rights of
ownership of FCC common stock received in the transaction, and
their ability to retain the FCC common stock received in the
transaction will not be limited in any way.
g)The ratio for the exchange of shares of Bank common stock for
FCC common stock in the transaction was negotiated through arm's
length bargaining. Accordingly, the fair market value of the FCC
common stock to be received by Bank Minority Shareholders in the
transaction will be approximately equal to the fair market value
of the Bank common stock surrendered by such stockholders in
exchange therefor.
h)Acquiring Bank will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the
fair market value of the gross assets held by Bank immediately
prior to the transaction. For purposes of this representation,
amounts paid by Bank to dissenters, amounts used by Bank to pay
its reorganization expenses, amounts paid by Bank to Bank
Minority Shareholders who received cash or other property, and
all redemptions and distributions (except for regular, normal
dividends) made by Bank immediately preceding the transfer will
be included as assets of Bank immediately prior to the
transaction.
The following representations have been made to us by
representatives of FCC and Acquiring Bank regarding the Bank
Merger:
a)FCC has no plan or intention to re-acquire any of its stock
issued in the transaction.
b)FCC has no plan or intention to cause Acquiring Bank to sell or
otherwise dispose of any of the assets of Bank acquired in the
transactions, except for dispositions made in the ordinary course
of business or transfers described in Section 368(a)(2)(C) of the
Code.
c)Following the transactions, Acquiring will continue the
historic businesses of Bank or use a significant portion of these
historic business assets in the operation of a trade or business.
d)The payment of cash in lieu of fractional shares of FCC common
stock is solely for the purpose of avoiding the expense and
inconvenience to FCC of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Bank
Minority Shareholders instead of issuing fractional shares of FCC
common stock will not exceed (1) one percent of the total
consideration that will be issued in the transaction to the Bank
Minority Shareholders in exchange for their shares of Bank common
stock. The fractional share interests of each Bank Minority
Shareholder will be aggregated, and no Bank Minority Shareholder
will receive cash for such fractional share interests in an
amount equal to or greater than the value of one full share of
FCC common stock.
e)The assumption by Acquiring Bank of the liabilities of Bank
pursuant to the transactions is for bona fide business purposes
and the principal purpose of such assumption is not the avoidance
of federal income tax on the transfer of assets of Bank pursuant
to the transactions.
f)FCC and Acquiring Bank are not investment companies as defined
in Sections 368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
g)The proposed transaction is being undertaken for reasons
germane to the continuance of the business of FCC and Acquiring
Bank.
h)Prior to the transaction, FCC will be in control of Acquiring
Bank within the meaning of Section 368(c) of the Code.
i)Following the transaction, Acquiring Bank has no plan or
intention to issue additional shares of its stock that would
result in FCC losing control of Acquiring Bank within the meaning
of Section 368(c).
k)No stock of Acquiring Bank will be issued in the transaction.
The following representations have been made to us by
representatives of Bank regarding the Bank Merger:
a)The liabilities of Bank assumed by Acquiring Bank, and the
liabilities to which the transferred assets of Bank are subject
were incurred by Bank in the ordinary course of business.
b)Bank is not an investment company as defined in Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
c)The proposed transaction is being undertaken for reasons
germane to the continuance of the business of Bank.
Analysis of Applicable Federal Tax Provisions
Section 354(a)(1) addresses the effects of corporate
reorganizations on shareholders, providing in general that no
gain or loss shall be recognized if stock or securities in a
corporation a party to a reorganization are, in pursuance of the
plan of reorganization, exchanged solely for stock or securities
in such corporation or in another corporation, a party to the
reorganization.
For purposes of Code Section 354, the terms "reorganization" and
"party to a reorganization" mean only a reorganization or a party
to a reorganization as defined in Sections 368(a) and 368(b).
Section 368(a)(1)(A) states that the term reorganization includes
a statutory merger or consolidation. Reg. Section 1.368-2(b)(1)
states that in order for a transaction to qualify as a
reorganization under Section 368(a)(1)(A), the transaction must
be a merger or consolidation effected pursuant to the corporation
laws of the United States or State or Territory or the District
of Columbia. Under Section 368(b), the term party to a
reorganization includes both corporations in the case of a
reorganization resulting from the acquisition by one corporation
of stock or properties of another.
Section 368(a)(2)(D) provides that the acquisition by one
corporation in exchange for stock of a corporation which is in
control of the acquiring corporation, of substantially all of the
properties of another corporation shall not disqualify a
transaction under Section 368(a) if no stock of the acquiring
corporation is used in the transaction and such transaction would
have qualified under Section 368(a)(1)(A) had the merger been
into the controlling corporation.
The regulations under Section 368 require as a part of a
reorganization a continuity of the business enterprise under the
modified corporate form, a bona fide business purpose for the
reorganization, and a continuity of interest therein on the part
of those persons who, directly or indirectly, were owners of the
enterprise prior to the reorganization. Reg. Section 1.368-
1(d)(2) states that the continuity of business enterprise
requirement is met if the acquiring corporation either continues
the acquired corporation's historic business or uses a
significant portion of the acquired corporation's business assets
in the operation of a trade or business. Based on the
representations set forth above, the continuity of business
enterprise requirement is met with respect to the assets and
business operations of Holding and Bank.
Reg. Section 1.368-2(g) indicates that in addition to coming
within the scope of the specific language of Sec. 368(a), a
reorganization must also be "undertaken for reasons germane to
the
continuance of the business of a corporation a party to the
reorganization." If the transaction or series of transactions
has no business or corporate purpose, then the plan is not a
reorganization pursuant to Section 368(a). [Reg. Section 1.368-
1(c).] Based on the representations set forth above, the
transactions meet the business purpose requirement.
The continuity of interest requirement does not require that all
shareholders of the acquired corporation have a proprietary
interest in the surviving corporation after the acquisition; it
is not even necessary for a substantial percentage of such
shareholders to have such an interest. Rather, the IRS announced
in Rev. Proc. 77-37 that it would rule that the continuity of
interest requirement is met so long as one or more of the
acquired corporation's shareholders retain a sufficient
proprietary interest in the continuing corporation. The IRS
indicated in Rev. Proc. 77-37 that a sufficient proprietary
interest is an interest with a value that is at least 50% of the
total equity value of the acquired corporation.
In addition to meeting the continuity of interest requirement
immediately after the reorganization, the former shareholders of
the acquired corporation must retain their interest in the
acquiring corporation for some time after the reorganization.
The courts have ruled that the tax-free nature of the
reorganization may be retroactively invalidated if the continuity
of interest is not maintained either because, at the time of the
reorganization, the shareholders intended to dispose of the
proprietary interest soon after the reorganization (Christian
Est. v. Comr., T.C. Memo 1989-413) or because a shareholder
disposes of stock immediately following the reorganization in
accordance with a pre-existing commitment to sell (American Wire
Fabrics Corp. v. Comr., 16 TC 607). The courts have generally
looked to the intent of the shareholders at the time of the
reorganization to dispose of their interests in determining
whether the continuity of interest requirement is subsequently
violated.
The Internal Revenue Service has ruled that the continuity of
interest requirement was met in situations similar to the
proposed transactions (PLR 8839036, PLR 8903054, PLR 9319017 and
PLR 9325026). It should be noted, however, that a private letter
ruling (PLR) is directed only to the taxpayer who requested it.
Section 6110(j)(3) provides that it may not be used or cited as
precedent. On the other hand, a PLR does represent an indication
of how the IRS may view the tax consequences of a taxpayer with
similar facts and circumstances. In these rulings, a corporation
and its wholly-owned subsidiary were simultaneously merged into
the acquiring parent and its wholly-owned subsidiary,
respectively, as part of the same overall transaction.
Based on the above representations made by representatives of
Holding and Bank, the continuity of interest requirement is met
with respect to the transaction.
Section 356(a)(1) provides that if Section 354 would apply to an
exchange but for the fact that the property received in the
exchange consists not only of property permitted to be received
under Section 354 without the recognition of gain but also of
other property or money then the gain, if any, to the recipient
shall be recognized but not in excess of the sum of money and the
fair market value of the property received.
Section 356(c) states that no loss from the exchange may be
recognized by the shareholder.
In other official pronouncements, the Internal Revenue Service
has treated the distribution of cash distributed as part of a
reorganization and in a transaction subject to Section 356
considerations by applying the redemption principles under
Section 302. Section 302 provides, in part, that a redemption
will be treated as a distribution in part or full payment in
exchange for stock if it can meet the tests of that section.
In Rev. Rul. 66-365, the IRS announced that in a transaction
qualifying as a reorganization under Section 368(a)(1)(A) of the
Code where a cash payment is made by the acquiring corporation in
lieu of fractional shares and is not separately bargained for,
such cash payment will be treated under Section 302 of the Code
as in redemption of fractional share interests. Therefore, each
shareholder's redemption will be treated as a distribution in
full payment in exchange for his or her fractional share interest
under Section 302(a) of the Code and accorded capital gain or
loss treatment provided the redemption is not essentially
equivalent to a dividend and that the fractional shares redeemed
constitute a capital asset in the hands of the holder as
discussed below. In Rev. Proc. 77-41, the IRS stated that "a
ruling will usually be issued under Section 302(a) of the Code
that cash to be distributed to shareholders in lieu of fractional
share interests arising in corporate reorganizations...will be
treated as having been received in part or in full payment in
exchange for the stock redeemed if the cash distribution is
undertaken solely for the purpose of saving the corporation the
expense and inconvenience of issuing and transferring fractional
shares, and is not separately bargained-for consideration."
Under Section 302, where there is a complete redemption of all
of a shareholder's stock in a corporation (after consideration of
the constructive ownership rules of Section 302(c)), the
redemption payment is treated as made entirely in exchange for
the shareholder's stock in the corporation (Section 302(b)(3)).
Under Section 358(a)(1), in the case of an exchange to which
Section 354 or Section 356 applies, the basis of property which
is permitted to be received under such section without the
recognition of gain or loss shall be the same as that of the
property exchanged, decreased by the amount of any money received
by the recipient and the amount of loss recognized by the
recipient as a result of the exchange and increased by the amount
which was treated as a dividend and the amount of other gain
recognized by the recipient as a result of the transaction.
It should be noted that where cash is received in lieu of
fractional shares, the substance of the transaction is that of a
hypothetical receipt of the fractional shares and then a
redemption of such shares. Therefore, the basis that is to be
allocated to the stock of the acquiring corporation received must
be allocated to the shares retained and the fractional shares
hypothetically received. The gain or loss attributable to the
receipt of cash in lieu of fractional shares is measured by
comparing the cash received with the basis allocated to the
fractional shares that are hypothetically received, and such gain
or loss is recognized as discussed earlier pursuant to Rev. Rul.
66-365.
Code Section 361(a) states that, as a general rule, no gain or
loss is to be recognized by a corporation if such corporation is
a party to a reorganization and exchanges property, in pursuance
of the plan of reorganization, solely for stock or securities in
another corporation a party to the reorganization.
Section 361(b) states that if Section 361(a) would apply to an
exchange but for the fact that the property received in exchange
consists not only of stock or securities afforded nonrecognition
treatment under Section 361(a), but also of other property or
money, then provided the corporation receiving such other
property or money distributes it in pursuance to the plan of
reorganization, no gain to the corporation shall be recognized
from the exchange. Section 361(a) states that as a general rule
no gain or loss shall be recognized to a corporation a party to a
reorganization on the distribution to its shareholders of any
stock in another corporation which is a party to the
reorganization if such stock was received by the distributing
corporation in the exchange.
Section 1032(a) states that no gain or loss shall be recognized
to a corporation on the receipt of money or other property in
exchange for such corporation's stock, including treasury stock.
Code Section 362(b) states that the basis of property received
by the acquiring corporation in a reorganization is the same as
it would be in the hands of the transferor of the assets,
increased by any gain recognized by the transferor. The
transferor for purposes of the preceding sentence in the instant
case is Holding.
Section 1221 defines a capital asset as property held by the
taxpayer which is not inventory or other property held by the
taxpayer primarily for sale to customers in the ordinary course
of a trade or business, property used in the taxpayer's trade or
business subject to the allowance for depreciation under Section
167, a copyright, literary, musical or artistic composition, a
letter or memorandum, or similar property created by the personal
efforts of the taxpayer, accounts or notes receivable acquired in
the ordinary course of a trade or business for services rendered
or from the sale of inventory or other property held by the
taxpayer primarily for sale to customers in the ordinary course
of business, or a publication of the United States Government
which is received from the United States Government or any agency
thereof other than by purchase at the price at which it is
offered for sale to the public.
Section 1223(1) states that in determining the period for which
a taxpayer has held property received in an exchange, there shall
be included the period for which he or she held the property
exchanged if the property has, for the purpose of determining
gain or loss from a sale or exchange, the same basis as the
property exchanged and the property exchanged was a capital asset
as defined in Section 1221 as of the date of the exchange.
Section 1223(2) states that for determining the period for which
the taxpayer has held property however acquired there shall be
included the period for which such property was held by another
person if the property has the same basis in whole or in part in
his hands as it would have had in the hands of such other person.
Subchapter P of Chapter 1 of the Code provides limitations on
the recognition of capital gains and losses including, but not
limited to, the allowance of capital losses to the extent of
capital gains with respect to corporate taxpayers and the
allowance of up to $3,000 of net capital losses with respect to
taxpayers other than corporate taxpayers.
Opinion
Based upon all of the foregoing, including representations of
the management of FCC and the management and Board of Directors
of Holding, it is our opinion with respect to the Holding Company
Merger that:
a)The merger of Holding with and into FCC, as described above,
will constitute a reorganization under Section 368 of the Code
(Section 368(a)(1)(A)).
b)Holding and FCC will each be "a party to a reorganization"
(Section 368(b)).
c)No gain or loss will be recognized by the common stockholders
of Holding provided they only receive FCC common stock in
exchange for surrendered Holding common stock pursuant to the
plan of reorganization (Section 354(a)(1)).
d)The tax basis of the FCC common stock received by Holding
common stockholders will be the same as the basis of the Holding
common stock surrendered in exchange therefor, decreased by the
amount of basis allocated to the fractional shares that are
hypothetically received by the stockholder and redeemed for cash,
and increased by any gain recognized on the exchange (not
including any gain recognized for the receipt of cash in lieu of
fractional shares) (Section 358(a)(1)).
e)The holding period of the FCC common stock received by the
Holding common stockholders will include the period during which
the Holding common stock surrendered in exchange therefor was
held, provided that the Holding common stock is held as a capital
asset in the hands of the Holding stockholders on the Effective
Date (Section 1223(1)).
f)The payment of cash in lieu of fractional share interests of
FCC common stock will be treated as if each fractional share was
distributed as part of the exchange and then redeemed by FCC.
Pursuant to Section 302(a) of the Code, these cash payments will
be treated as having been received as distributions in full
payment in exchange for the FCC common stock. Any gain or loss
recognized upon such exchange (as determined under Section 1001
and subject to the limitations of Section 267) will be capital
gain or loss provided the fractional share would constitute a
capital asset in the hands of the exchanging stockholder (Rev.
Rul. 66-365 and Rev. Proc. 77-41).
g)Each shareholder of Holding who elects to dissent from the
merger transaction involving Holding and FCC under the provisions
of Section 131 of the Business Corporation Law of Louisiana, and
receives cash in exchange for his shares of Holding common stock,
will be treated as receiving such payment in complete redemption
of his shares of Holding, provided such shareholder does not
actually or constructively own any Holding common stock after the
exchange under the provisions and limitations of Section 302.
h)No gain or loss will be recognized by Holding on the transfer
of all of its assets to FCC solely in exchange for FCC common
stock and cash in lieu of fractional shares which is subsequently
distributed to Holding common stockholders pursuant to the plan
of reorganization (Section 361).
i)No gain or loss will be recognized by FCC on the receipt by FCC
of substantially all of the assets of Holding in exchange for FCC
stock (Section 1032(a)).
j)The tax basis of Holding's assets in the hands of FCC will be
the same as the basis of those assets in the hands of Holding
immediately prior to the merger (Section 362(b)). The tax basis
of Holding's assets in the hands of FCC will not be increased by
any cash paid to dissenters or cash paid in lieu of fractional
shares.
k)The holding period of the assets of Holding in the hands of FCC
will include the period during which such assets were held by
Holding (Section 1223(2)).
Based upon all of the foregoing, including representations of
the management of FCC and Acquiring Bank and the management and
Board of Directors of Holding and Bank, it is our opinion with
respect to the Bank Merger that:
a)The acquisition by Acquiring Bank of substantially all of the
assets of Bank solely in exchange for FCC common stock and the
assumption by Acquiring Bank of the liabilities of Bank will
qualify as a reorganization under the provisions of Section
368(a)(1)(A) and 368(a)(2)(D). For purposes of this opinion,
"substantially all" means at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair
market value of the gross assets of Bank held immediately prior
to the proposed transaction.
b)FCC, Acquiring Bank, and Bank will each be a "party to a
reorganization" (Section 368 (b)).
c)No gain or loss will be recognized by FCC or Acquiring Bank on
the merger of Bank into Acquiring Bank (Section 354(a)(1)).
d)No gain or loss will be recognized by Bank on the transfer of
all of its assets to Acquiring Bank pursuant to the plan of
reorganization (Section 361).
e)The tax basis of Bank's assets in the hands of Acquiring Bank
will be the same as the basis of those assets in the hands of
Bank immediately prior to the transaction (Section 362(b)). The
tax basis of Bank's assets in the hands of Acquiring Bank will
not be increased by any cash paid to dissenters or cash paid in
lieu of fractional shares.
f)The holding period of the assets of Bank in the hands of
Acquiring Bank will include the period during which such assets
were held by Bank (Section 1223(2)).
g)No gain or loss will be recognized by Bank Minority
Shareholders provided they only receive FCC common stock in
exchange for Bank common stock. (Section 354(a)(1)).
h)The tax basis of the FCC common stock received by Bank Minority
Shareholders will be the same as the basis of the Bank common
stock surrendered in exchange therefor, decreased by the amount
of basis allocated to the fractional shares that are
hypothetically received by the stockholder and redeemed for cash,
and increased by any gain recognized on the exchange (not
including any gain recognized for the receipt of cash in lieu of
fractional shares) (Section 358(a)(1)).
i)The holding period of the FCC common stock received by Bank
Minority Shareholders will include the period during which the
Bank common stock surrendered in exchange therefor was held,
provided that the Bank common stock is held as a capital asset in
the hands of the Bank Minority Shareholders on the Effective Date
(Section 1223(1)).
j)The payment of cash in lieu of fractional share interests of
FCC common stock will be treated as if each fractional share was
distributed as part of the exchange and then redeemed by FCC.
Pursuant to Section 302(a) of the Code, these cash payments will
be treated as having been received as distributions in full
payment in exchange for the FCC common stock. Any gain or loss
recognized upon such exchange (as determined under Section 1001
and subject to the limitations of Section 267) will be capital
gain or loss provided the fractional share would constitute a
capital asset in the hands of the exchanging stockholder (Rev.
Rul. 66-365 and Rev. Proc. 77-41).
We express no opinion on the impact, if any, on any other
sections of the Code, including but not limited to Section 382,
other than that as stated immediately above, and neither this
opinion nor any prior statements are intended to imply or to be
an opinion on any other matters.
In analyzing the authorities relevant to the potential tax
issues outlined in the opinions we have applied the standards of
"substantial authority" and "more likely than not proper," as
used in Section 6662 under current law. Based upon our analysis,
we have concluded that there is substantial authority for the
indicated tax treatment of the transaction, and we also believe
the indicated tax treatment of the transaction is more likely
than not proper.
The opinions expressed herein are based solely upon our
interpretation of the Code and income tax regulations as further
interpreted by court decisions, rulings, and procedures issued by
the Internal Revenue Service, as of the effective date of this
letter. Our opinions may be subject to change in the event of
changes in any of the foregoing authorities, some of which could
be retroactive. The opinions expressed herein are not binding on
the Internal Revenue Service, and there can be no assurance that
the Internal Revenue Service will not take a position contrary to
any of the opinions expressed herein, or if the Internal Revenue
Service took such a position, whether it would be sustained by
the courts. Further, Acquiring Bank, and Holding and Bank common
stockholders, are urged to discuss the consequences of the
proposed transactions with their own tax advisors.
Very truly yours,
ARTHUR ANDERSEN LLP
By
Charles A. Giraud III
Exhibit 15
August 4, 1995
First Commerce Corporation:
We are aware that First Commerce Corporation has incorporated by
reference in its Registration Statement its Form 10-Q for the
quarter ended March 31, 1995, which includes our report dated
April 13, 1995, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the
Securities Act of 1993, those reports are not considered a part
of the registration statement prepared or certified by our firm
or reports prepared or certified by our firm within the meaning
of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
our reports (and to all references to our Firm) included in or
made a part of this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
August 4, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report on the financial
statements of PEOPLES BANCSHARES, INC. dated March 13, 1995
except for note Q for which the date is April 27, 1995 in
the Prospectus for First Commerce Corporation constituting
part of this Registration Statement on Form S-4. We also
consent to the reference to us under the heading "Experts"
in the Prospectus contained therein.
LaPorte, Sehrt, Romig & Hand
A Professional Accounting Corporation
Metairie, Louisiana
August 4, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report on the financial
statements of PEOPLES BANK AND TRUST COMPANY OF ST. BERNARD
dated March 13, 1995 except for note Q for which the date is
April 27, 1995 in the Prospectus for First Commerce
Corporation constituting part of this Registration Statement
on Form S-4. We also consent to the reference to us under
the heading "Experts" in the Prospectus contained therein.
LaPorte, Sehrt, Romig & Hand
A Professional Accounting Corporation
Metairie, Louisiana
August 4, 1995
Exhibit 23.3
Consent of Chaffe & Associates
We hereby consent to the reference to our Firm under the captioned
"THE PLAN- Opinion of Investment Banker," and to the inclusion of
the draft opinion of our Firm in First Commerce Corporation's
Statement on Form S-4.
Yours sincerely,
/s/ Chaffe & Assocates, Inc.
August 4, 1995
Exhibit 99
PROXY
PEOPLES BANK & TRUST COMPANY OF ST. BERNARD
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Nicholas P.
Trist, Jr., Richard J. Brennan and John F. Rowley, or any of
them, the proxies of the undersigned, with full power of
substitution, to represent the undersigned and to vote all of the
shares of common stock of Peoples Bank & Trust Company of St.
Bernard (the "Bank") that the undersigned is entitled to vote at
the special meeting of the shareholders of the Bank to be held on
September ___, 1995 and at any and all adjournments thereof.
1.A proposal to approve an Amended and Restated Agreement and
Plan of Merger (the "Plan") pursuant to which, among other
things, the Bank will merge into First National Bank of Commerce
and, on the effective date of the merger, each outstanding share
of common stock of the Bank other than shares owned by Peoples
Bancshares, Inc. will be converted into a number of shares of
common stock of First Commerce Corporation as determined in
accordance with the terms of the Plan.
FOR ____ AGAINST ____ ABSTAIN ____
2.In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC DIRECTIONS
ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL SET FORTH
HEREIN.
Please sign exactly as name appears on the certificate or
certificates representing shares to be voted by this proxy. When
signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized persons. If a partnership, please sign in partnership
name by authorized persons.
Dated: ________________, 1995
Signature of Shareholder
Signature (if jointly owned)
Insert Mailing Label
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
TO THE BANK PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
PROXY
PEOPLES BANCSHARES, INC.
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Nicholas P.
Trist, Jr., Richard J. Brennan and John F. Rowley, or any of
them, the proxies of the undersigned, with full power of
substitution, to represent the undersigned and to vote all of the
shares of common stock of Peoples Bancshares, Inc. (the
"Company") that the undersigned is entitled to vote at the
special meeting of the shareholders of the Company to be held on
September ___, 1995 and at any and all adjournments thereof.
1.A proposal to approve an Amendment to the Articles of
Incorporation of the Company repealing Article 17 in its
entirety.
FOR______ AGAINST____ ABSTAIN______
2.A proposal to approve an Amended and Restated Agreement and
Plan of Merger (the "Plan") pursuant to which, among other
things, the Company will merge into First Commerce Corporation
("FCC") and, on the effective date of the merger, each
outstanding share of common stock of the Company will be
converted into a number of shares of FCC common stock as
determined in accordance with the terms of the Plan.
FOR ____ AGAINST ____ ABSTAIN ____
3.In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC DIRECTIONS
ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL SET FORTH
HEREIN.
Please sign exactly as name appears on the certificate or
certificates representing shares to be voted by this proxy. When
signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized persons. If a partnership, please sign in partnership
name by authorized persons.
Dated: ________________, 1995
Signature of Shareholder
Signature (if jointly owned)
Insert Mailing Label
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
TO THE COMPANY PROMPTLY USING THE ENCLOSED ENVELOPE.
