- --------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ---------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission file number 0-7931
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0701203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
210 Baronne Street 70112
New Orleans, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 561-1371
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of the last practicable
date.
Class Outstanding as of May 10, 1995
_____ ______________________________
Common Stock, $5.00 par value 28,935,853
<PAGE>
FIRST COMMERCE CORPORATION
INDEX
Part 1: Financial Information
Item 1. Financial Statements Page No.
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes
in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Report of Independent Public Accountants 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 16
Part II: Other Information 26
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(dollars in thousands) March 31 December 31
=======================================================================================
1995 1994 1994
(Restated) (Restated)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $343,176 $315,985 $408,343
Interest-bearing deposits in other banks 151 90,693 281
Securities
Held to maturity (market value $10,180,
$455,001 and $12,984, respectively) 10,179 456,363 12,973
Available for sale, at market 2,590,376 2,614,312 2,492,578
Trading account securities 13,613 466 8,970
Federal funds sold and securities purchased
unde resale agreements 2,825 115,330 66,230
Loans and leases, net of unearned income of
$9,674, $12,583 and $8,147, respectively 3,577,687 2,810,738 3,387,415
Allowance for loan losses (57,828) (66,085) (55,933)
- ---------------------------------------------------------------------------------------
Net loans and leases 3,519,859 2,744,653 3,331,482
=======================================================================================
Premises and equipment 129,264 113,303 123,159
Accrued interest receivable 62,730 55,367 62,442
Other real estate 2,762 7,027 5,913
Goodwill and other intangibles 21,064 15,494 15,118
Other assets 183,327 89,382 274,936
- ---------------------------------------------------------------------------------------
Total assets $6,879,326 $6,618,375 $6,802,425
=======================================================================================
LIABILITIES
Noninterest-bearing deposits $1,233,515 $1,334,878 $1,270,130
Interest-bearing deposits 4,434,589 4,185,859 4,406,240
- ---------------------------------------------------------------------------------------
Total deposits 5,668,104 5,520,737 5,676,370
=======================================================================================
Short-term borrowings 489,215 408,368 470,974
Accrued interest payable 29,196 19,650 22,907
Accounts payable and other accrued
liabilities 56,769 52,190 51,499
Long-term debt 88,665 89,682 88,956
- ---------------------------------------------------------------------------------------
Total liabilities 6,331,949 6,090,627 6,310,706
=======================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares
authorized Series 1992, 7.25%
cumulative convertible, $25 stated
value Issued--2,397,370, 2,399,170
and 2,398,170 shares, respectively 59,934 59,979 59,954
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--29,446,705, 28,849,573 and
28,898,051 shares, respectively 147,234 144,248 144,491
Capital surplus 140,262 128,546 128,811
Retained earnings 232,139 218,323 231,305
Treasury stock -- 516,100 common shares,
at cost (13,760) - -
Unearned restricted stock compensation (1,056) (1,191) (592)
Net unrealized (loss) on securities
available for sale (17,376) (22,157) (72,250)
- ---------------------------------------------------------------------------------------
Total stockholders' equity 547,377 527,748 491,719
=======================================================================================
Total liabilities and stockholders'
equity $6,879,326 $6,618,375 $6,802,425
=======================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Balance Sheets.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(dollars in thousands except per share data) March 31
======================================================================================
1995 1994
(Restated)
- --------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases $75,987 $59,771
Interest on tax-exempt securities 1,840 1,907
Interest and dividends on taxable securities 40,043 39,444
Interest on money market investments 884 822
- --------------------------------------------------------------------------------------
Total interest income 118,754 101,944
======================================================================================
INTEREST EXPENSE
Interest on deposits 39,717 27,887
Interest on short-term borrowings 6,052 4,841
Interest on long-term debt 2,739 2,836
- --------------------------------------------------------------------------------------
Total interest expense 48,508 35,564
======================================================================================
NET INTEREST INCOME 70,246 66,380
PROVISION FOR LOAN LOSSES 3,007 (3,757)
======================================================================================
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 67,239 70,137
======================================================================================
OTHER INCOME
Deposit fees and service charges 11,654 11,148
Credit card fee income 6,371 5,470
Trust fee income 3,751 3,483
Broker/dealer revenue 1,916 2,202
ATM fee income 1,786 1,021
Other operating revenue 4,048 4,873
Securities transactions (13,322) 1,122
- --------------------------------------------------------------------------------------
Total other income 16,204 29,319
======================================================================================
OPERATING EXPENSE
Salary expense 29,768 26,898
Employee benefits 6,565 5,778
- --------------------------------------------------------------------------------------
Total personnel expense 36,333 32,676
Net occupancy expense 4,389 4,217
Equipment expense 4,826 3,673
Professional fees 3,299 3,063
FDIC insurance expense 3,072 3,008
Other operating expense 15,749 12,275
- --------------------------------------------------------------------------------------
Total operating expense 67,668 58,912
======================================================================================
INCOME BEFORE INCOME TAX EXPENSE 15,775 40,544
INCOME TAX EXPENSE 5,142 13,116
======================================================================================
NET INCOME 10,633 27,428
PREFERRED DIVIDEND REQUIREMENTS 1,087 1,087
======================================================================================
INCOME APPLICABLE TO COMMON SHARES $9,546 $26,341
======================================================================================
EARNINGS PER COMMON SHARE
Primary $ .33 $ .91
Fully diluted $ .33 $ .83
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 29,103,906 29,007,657
Fully diluted 29,103,906 34,950,531
======================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net
Unrealized
Unearned (Loss) on
Preferred Restricted Securities
(dollars in thousands Stock Common Capital Retained Treasury Stock Available
except per share data) Series 1992 Stock Surplus Earnings Stock Compensation for Sale Total
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994
(Restated) $59,979 $143,839 $127,051 $198,515 $ - $ (817) $ - $528,567
Net income - - - 27,428 - - - 27,428
Cash dividends
Series 1992 preferred stock
($.45 per share) - - - (1,087) - - - (1,087)
Common stock ($.25 per share) - - - (6,533) - - - (6,533)
Common stock issuances to plans -
32,552 shares - 161 633 - - - - 794
Stock options exercised, net of
shares surrendered in payment
and tax benefit - 39,835 - 199 392 - - - - 591
Restricted stock activity - 49 470 - - (374) - 145
Change in net unrealized (loss)
on securities available for
sale - - - - - - (22,157) (22,157)
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1994
(Restated) $59,979 $144,248 $128,546 $218,323 $ - $ (1,191) $(22,157) $527,748
===============================================================================================================================
Balance at January 1, 1995
(Restated) $59,954 $144,491 $128,811 $231,305 $ - $ (592) $(72,250) $491,719
Net income - - - 10,633 - - - 10,633
Cash dividends
Series 1992 preferred stock
($.45 per share) - - - (1,087) - - - (1,087)
Common stock ($.30 per share) - - - (8,694) - - - (8,694)
Conversion of 800 shares of
preferred stock into 931
shares of common stock (20) 5 15 - - - - -
Common stock purchase under plan - - - (18) - - - (18)
Stock options exercised, net of
shares surrendered in payment
and tax benefit-10,948 shares - 55 83 - - - - 138
Restricted stock activity - 103 440 - - (464) - 79
Issuance and repurchase of
equal number of shares to
acquire City Bancorp, Inc.
-516,100 shares - 2,580 10,913 - (13,760) - - (267)
Change in net unrealized (loss)
on securities available for
sale - - - - - - 54,874 54,874
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1995 $59,934 $147,234 $140,262 $232,139 ($13,760) $ (1,056) $(17,376) $547,377
===============================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
(dollars in thousands) March 31
========================================================================================
1995 1994
(Restated)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $10,633 $27,428
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 3,007 (3,757)
Depreciation and amortization 4,434 3,286
Amortization of intangibles 547 650
Deferred income tax expense 273 1,888
Net (gain) loss from securities transactions 13,322 (1,122)
Net (gain) on loan sales (18) (1,087)
(Increase) decrease in trading account securities (4,643) 16
Decrease in accrued interest receivable 24 1,139
Decrease in other assets 9,844 19,234
Increase in accrued interest payable 6,085 2,404
Increase (decrease) in accounts payable and other
accrued liabilities 6,616 (6,568)
Other, net 31 (256)
- ----------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 50,155 43,255
========================================================================================
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits
in other banks 130 (35,271)
Proceeds from sales and calls of securities held to
maturity 344 60
Proceeds from maturities of securities held to maturity 38,024 321,924
Purchases of securities held to maturity (16) -
Proceeds from sales and calls of securities available
for sale 519,394 449,188
Proceeds from maturities of securities available
for sale 35,611 102,587
Purchases of securities available for sale (541,046) (616,753)
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements 67,955 (84,730)
Proceeds from sales of loans 5,132 54,749
Net (increase) in loans (156,658) (30,365)
Purchase of City Bancorp, Inc., net of cash acquired (9,679) -
Purchases of premises and equipment (9,311) (7,819)
Proceeds from sales of foreclosed assets 5,040 2,678
Other, net (589) 100
- ----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (45,669) 156,348
========================================================================================
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (189,579) 30,890
Net increase (decrease) in time deposits 110,810 (35,403)
Net increase (decrease) in short-term borrowings 18,241 (270,445)
Payments on long-term debt (291) (1,473)
Proceeds from sales of common stock 110 1,150
Cash dividends (8,944) (7,284)
- ----------------------------------------------------------------------------------------
NET CASH (USED) BY FINANCING ACTIVITIES (69,653) (282,565)
========================================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (65,167) (82,962)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 408,343 398,947
========================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $343,176 $315,985
========================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTE 1
Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of First
Commerce Corporation (FCC) and all of its subsidiaries. All significant
intercompany accounts and transactions are eliminated.
The consolidated financial statements reflect all adjustments which are,
in the opinion of management, necessary for a fair presentation of the
consolidated financial condition, results of operations and cash flows for
the interim periods. Adjustments included herein are of a normal recurring
nature and include appropriate estimated provisions. The consolidated
financial statements for the interim periods have not been independently
audited. However, the interim consolidated financial statements have been
reviewed by FCC's independent public accountants in accordance with standards
for such reviews established by the American Institute of Certified Public
Accountants, and their review report is included herein.
Certain prior year amounts have been reclassified to conform with current
year financial statement presentation.
The Notes to Consolidated Financial Statements included herein should be
read in conjuction with the Notes to Consolidated Financial Statements
included in FCC's 1994 Annual Report to Stockholders.
Change in Accounting Principle - Loan Impairment
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
standards require the measurement of impairment on certain loans based on
the present value of expected future cash flows discounted at the loan's
effective interest rate or the fair value of the loan's collateral, if the
loan is collateral dependent. FCC adopted these statements effective
January 1, 1995, and adoption did not have a material impact on the
consolidated financial statements.
<PAGE>
NOTE 2
Acquisitions
On February 17, 1995, FCC completed its mergers with First Bancshares,
Inc. (First) and City Bancorp, Inc. (City). First, the parent company of
First Bank, Slidell, Louisiana, merged with FCC in exchange for 2,705,537
shares of FCC common stock. First Bank was merged with First National Bank
of Commerce (FNBC), a wholly owned subsidiary of FCC. The acquisition was
accounted for as a pooling-of-interests; accordingly, prior period financial
information has been restated to include this acquisition. On December 31,
1994, First had $244 million in assets. Selected separate and combined
financial information of FCC and First for the quarter ended March 31,
1994 are presented below (in thousands, except per share amounts).
FCC First Combined
- -------------------------------------------------------------------------
Three Months Ended March 31, 1994
Net interest income $62,746 $3,634 $66,380
Other income, excluding
securities transactions $27,379 $818 $28,197
Net income $26,132 $1,296 $27,428
Earnings per common share
Primary $ .95 $1.53 $ .91
Fully diluted $ .86 $1.53 $ .83
- -------------------------------------------------------------------------
On February 17, 1995, City, the parent company of City Bank & Trust Company
(City Bank), New Iberia, Louisiana, merged with FCC in exchange for 516,100
shares of FCC common stock. FCC repurchased an equal number of shares of its
common stock. City Bank was merged with The First National Bank of Lafayette,
a wholly owned subsidiary of FCC. The acquisition was accounted for as
a purchase. Related intangibles will be amortized over periods not to exceed
fifteen years. Proforma results of City have been excluded due to the
immaterial impact on FCC's consolidated results of operations.
FCC has mergers pending with Lakeside Bancshares, Inc. (Lakeside) in Lake
Charles, Louisiana and Peoples Bancshares, Inc. (Peoples) in Chalmette,
Louisiana. Both mergers are subject to regulatory approval and certain other
conditions. It is expected that both mergers will be completed in the third
quarter of 1995.
<PAGE>
NOTE 3
Securities Held to Maturity
An analysis of securities held to maturity follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
==================================================================================
March 31, 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Obligations of states
and political
subdivisions $ 126 $ 1 $ - $127
Other debt securities 500 - - 500
Equity securities 9,553 - - 9,553
- ----------------------------------------------------------------------------------
Total securities held
to maturity $10,179 $ 1 $ - $10,180
==================================================================================
March 31, 1994 (Restated)
- ----------------------------------------------------------------------------------
U.S. Treasury securities $437,575 $1,535 $ - $439,110
Obligations of U.S.
agencies and
corporations 6,882 - (2,960) 3,922
Obligations of states
and political
subdivisions 2,041 63 - 2,104
Other debt securities 500 - - 500
Equity securities 9,365 - - 9,365
- ----------------------------------------------------------------------------------
Total securities held
to maturity $456,363 $1,598 ($2,960) $455,001
==================================================================================
</TABLE>
An analysis of the amortized cost and the fair values of securities held
to maturity by maturity periods follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
==================================================================================
March 31, 1995
==================================================================================
<S> <C> <C> <C> <C>
Within one year $ 35 $ - $ - $ 35
One to five years 591 1 - 592
Five to ten years - - - -
After ten years 9,553 - - 9,553
- ----------------------------------------------------------------------------------
Total securities held
to maturity $10,179 $ 1 $ - $10,180
==================================================================================
</TABLE>
<PAGE>
NOTE 4
Securities Available for Sale
An analysis of securities available for sale follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
===================================================================================
March 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $1,457,601 $2,715 $ (5,133) $1,455,183
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 930,103 1,948 (37,388) 894,663
Notes 119,451 2,501 - 121,952
Obligations of states
and political
subdivisions 96,780 9,853 (728) 105,905
Equity securities 13,172 - (499) 12,673
- -----------------------------------------------------------------------------------
Total securities
available for sale $2,617,107 $17,017 $ (43,748) $2,590,376
===================================================================================
March 31, 1994 (Restated)
- -----------------------------------------------------------------------------------
U.S. Treasury securites $1,106,467 $ 2,655 $ (16,591) $1,092,531
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 1,405,883 464 (31,476) 1,374,871
Notes 8,400 112 (11) 8,501
Obligations of states
and political
subdivisions 92,403 11,849 (287) 103,965
Other debt securities 5,390 42 - 5,432
Equity securities 29,859 - (847) 29,012
- -----------------------------------------------------------------------------------
Total securities
available for sale $2,648,402 $15,122 $ (49,212) $2,614,312
===================================================================================
</TABLE>
An analysis of the amortized cost and fair values of the securities
available for sale by maturity periods follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
===================================================================================
March 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within one year $ 183,559 $ 331 $ (983) $ 182,907
One to five years 1,404,913 5,438 (4,327) 1,406,024
Five to ten years 166,174 1,454 (5,931) 161,697
After ten years 862,461 9,794 (32,507) 839,748
- -----------------------------------------------------------------------------------
Total securities
available for sale $2,617,107 $17,017 $ (43,748) $2,590,376
===================================================================================
</TABLE>
<PAGE>
NOTE 5
Loans and Leases
The composition of loans and leases was as follows (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
===========================================================================
1995 1994 1994
(Restated) (Restated)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Loans to individuals -
Residential mortgages
First lien $604,766 $475,768 $560,990
Junior lien 79,809 84,093 88,340
Loans to individuals - other 951,280 729,980 902,716
Commercial, financial and
agricultural 750,081 508,977 716,193
Real estate 686,874 576,751 613,026
Credit card loans 412,710 358,695 426,224
Other loans 101,841 89,057 88,073
- ---------------------------------------------------------------------------
Total loans and leases 3,587,361 2,823,321 3,395,562
Unearned income (9,674) (12,583) (8,147)
- ---------------------------------------------------------------------------
Loans and leases, net
of unearned income $3,577,687 $2,810,738 $3,387,415
===========================================================================
</TABLE>
NOTE 6
Impaired Loans
A loan is considered to be impaired when, based on current information
and events, it is probable that FCC will be unable to collect all amounts
due according to the contractual terms of the loan agreement. As of March
31, 1995, impaired loans totaled $15,316,000, of which $535,000 required a
total impairment allowance of $116,000. During the first quarter of 1995,
impaired loans averaged $13,400,000.
FCC places loans and leases on nonaccrual status when, in the opinion of
managment, there is sufficient uncertainty as to timely collection of
interest or principal so as to preclude the recognition in reported earnings
of some or all of the contractual interest. When a loan is placed on
nonaccrual status, interest accrued but not collected is usually reversed
against interest income. Generally, any payments received on nonaccrual
loans are first applied to reduce outstanding principal amounts. Loans are
not reclassified as accruing until interest and principal payments are
brought current and future payments are reasonably assured. Loans that are
considered to be impaired also meet FCC's criteria for nonaccrual status, and
no interest income is accrued on impaired loans.
In accordance with the provisions of SFAS No. 114, consumer installment
loans, residential mortgages and credit card loans are not considered to be
impaired loans.
NOTE 7
Debt
Total cash payments for interest expense on long-term debt, short-term
borrowings and deposits were $42,219,000 and $33,147,000 for the three-month
periods ended March 31, 1995 and 1994, respectively.
<PAGE>
NOTE 8
Off-Balance Sheet Instruments
A summary of obligations under financial instruments which are not
reflected in the consolidated financial statements follows (in thousands):
<TABLE>
<CAPTION>
March 31
===========================================================================
1995 1994
(Restated)
- ---------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit for loans and
leases (excluding credit card plans) $1,042,210 $767,271
Commitments to extend credit for credit
card plans $1,481,695 $1,234,312
Commercial letters of credit $ 1,359 $ 2,242
Financial letters of credit $ 54,466 $ 44,016
Performance letters of credit $ 16,519 $ 18,144
Foreign exchange contracts
Commitments to purchase $ 418 $ 1,323
Commitments to sell $ - $ 1,386
When-issued securities
Commitments to purchase $ 2,120 $ 1,900
Commitments to sell $ 1,405 $ -
Interest rate contracts (a)
Swaps, including amortizing interest
rate swaps $ 360,000 $ 258,000
Caps $ 350,000 $ 5,000
Cap corridors $ 100,000 $ 550,000
===========================================================================
(a) Notional principal amounts.
</TABLE>
NOTE 9
Income Taxes
The components of income tax expense in the consolidated statements of
income were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31
===================================================================
1995 1994
(Restated)
- -------------------------------------------------------------------
<S> <C> <C>
Current $4,869 $11,228
Deferred 273 1,888
- -------------------------------------------------------------------
Total $5,142 $13,116
===================================================================
</TABLE>
Income tax expense related to state and foreign income taxes is included
above and was insignificant in both periods presented. Income tax expense
(benefit) related to securities transactions was $(4,663,000) and $393,000
for the three month periods ended March 31, 1995 and 1994, respectively.
<PAGE>
NOTE 9, continued
Income Taxes
Total income tax expense was different from the amount computed by
applying the statutory federal income tax rates to pretax income as follows
(in percentages):
<TABLE>
<CAPTION>
Three Months Ended March 31
==========================================================================
1995 1994
(Restated)
- --------------------------------------------------------------------------
<S> <C> <C>
Federal income tax expense 35.00% 35.00%
Increase (decrease) resulting from:
Benefits attributable to
tax-exempt interest (5.50) (2.17)
Nondeductible expenses 3.06 .45
Other items, net .04 (.93)
- --------------------------------------------------------------------------
Actual income tax expense 32.60% 32.35%
==========================================================================
</TABLE>
Current income taxes payable were $1.78 million and $9.37 million at
March 31, 1995 and 1994, respectively.
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. There were
net deferred tax assets of $25.56 million and $34.60 million on March 31,
1995 and 1994, respectively. The major temporary differences which created
deferred tax assets and liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
March 31
=============================================================================
1995 1994
(Restated)
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for loan losses $19,740 $ - $22,678 $ -
Unrealized loss on securities 9,503 - 11,933 -
Amortization of intangibles 2,929 - 3,599 -
Employee benefits 2,463 - 1,826 -
Interest on nonaccrual loans 1,169 - 2,624 -
Allowance for losses on
foreclosed assets 1,050 - 3,578 -
Accumulated depreciation - 4,711 - 4,412
Accrued liabilities - 4,261 - 3,945
Bond accretion - 3,120 - 4,039
Other 1,786 991 3,336 2,580
- -----------------------------------------------------------------------------
Total deferred taxes $38,640 $13,083 $49,574 $ 14,976
=============================================================================
</TABLE>
FCC's cash payments for federal income tax liabilities were $11.22 million
for the three months ended March 31, 1994. There were no cash payments for
federal income tax liabilities for the three months ended March 31, 1995.
<PAGE>
NOTE 10
Contingencies
FCC and its subsidiaries have been named as defendants in various legal
actions arising from normal business activities in which damages in various
amounts are claimed. The amount, if any, of ultimate liability with respect
to such matters cannot be determined. However, after consulting with legal
counsel, management believes any such liability will not have a material
effect on FCC's consolidated financial condition or results of operations.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
and Board of Directors of
First Commerce Corporation:
We have reviewed the accompanying consolidated balance
sheets of FIRST COMMERCE CORPORATION (a Louisiana corporation)
and subsidiaries as of March 31, 1995 and 1994, and the related
consolidated statements of income for the three-month periods
ended March 31, 1995 and 1994, and the consolidated statements of
changes in stockholders' equity and cash flows for the three-
month periods ended March 31, 1995 and 1994. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding
the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
First Commerce Corporation and subsidiaries as of December 31,
1994 and the related statements of income, changes in
stockholders' equity and cash flows for the year then ended (not
presented herein) and, in our report dated January 11, 1995, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1994
is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 12, 1995
<PAGE>
SELECTED FINANCIAL DATA (dollars in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994
==============================================================================================
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
(Restated) (Restated) (Restated) (Restated)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEET DATA
Total assets $6,722,307 $6,758,027 $6,616,987 $6,562,902 $6,838,438
Earning assets 6,165,016 6,252,583 6,096,066 6,012,760 6,233,181
Loans and leases 3,445,077 3,202,692 3,043,151 2,860,632 2,787,702
Securities 2,656,089 2,950,532 3,008,704 3,079,505 3,344,808
Deposits 5,609,016 5,439,220 5,402,500 5,422,006 5,493,851
Long-term debt 88,717 88,989 89,039 89,349 91,129
Stockholders' equity 522,006 506,455 517,783 516,655 538,075
- ----------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Total interest income $118,754 $115,948 $108,437 $101,467 $101,944
Net interest income 70,246 70,454 68,828 65,606 66,380
Net interest income (FTE) 71,620 71,866 70,275 66,978 67,851
Provision for loan losses 3,007 (354) (2,550) (4,782) (3,757)
Other income (exclusive of
securities transactions) 29,526 29,398 27,609 27,845 28,197
Securities transactions (13,322) (18,326) (19,576) (6,705) 1,122
Operating expense 67,668 70,883 62,505 61,359 58,912
Operating income 19,292 19,236 24,443 24,648 26,699
Net income 10,633 7,325 11,717 20,292 27,428
- ----------------------------------------------------------------------------------------------
KEY RATIOS
Operating return on average assets 1.16% 1.13% 1.50% 1.51% 1.58%
Operating return on average total
equity 14.99% 15.07% 19.23% 19.14% 20.12%
Operating return on average common
equity 15.98% 16.13% 20.80% 20.69% 21.73%
Net interest margin 4.68% 4.58% 4.59% 4.46% 4.39%
Efficiency ratio 66.90% 70.00% 63.86% 64.71% 61.34%
Overhead ratio 2.51% 2.63% 2.27% 2.24% 2.00%
Allowance for loan losses to
loans and leases 1.62% 1.65% 1.86% 2.06% 2.35%
Nonperforming assets to loans
and leases plus foreclosed assets .51% .58% .74% .88% 1.01%
Average loans to deposits ratio 61.42% 58.88% 56.33% 52.76% 50.74%
Equity ratio 7.96% 7.23% 7.69% 7.84% 7.97%
Leverage ratio 8.06% 8.07% 8.29% 8.33% 7.84%
- ----------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Net income-primary $ .33 $ .21 $ .37 $ .66 $ .91
Operating income-primary $ .63 $ .63 $ .80 $ .81 $ .88
Net income-fully diluted $ .33 $ .21 $ .37 $ .63 $ .83
Operating income-fully diluted $ .60 $ .60 $ .75 $ .75 $ .81
COMMON STOCK DIVIDENDS
Cash dividends $ .30 $ .30 $ .30 $ .25 $ .25
Dividend payout ratio 90.91% 142.86% 81.08% 37.88% 27.47%
BOOK VALUES (end of period)
Book value $16.87 $14.95 $15.81 $15.73 $16.24
Tangible book value $16.14 $14.43 $15.31 $15.22 $15.70
COMMON STOCK DATA
High stock price $27.25 $26.76 $28.75 $30.00 $28.50
Low stock price $22.00 $21.75 $25.75 $23.50 $24.00
Closing stock price $25.00 $22.00 $26.75 $28.25 $24.00
Trading volume 5,826,590 5,723,897 4,857,105 7,313,633 12,340,097
Number of stockholders
(end of period) 8,014 7,808 7,825 7,812 7,713
AVERAGE COMMON SHARES OUTSTANDING
(in thousands)
Primary 29,104 29,023 29,026 29,034 29,008
Fully diluted 29,104 29,023 29,026 34,965 34,951
NUMBER OF EMPLOYEES (end of period) 3,462 3,575 3,638 3,725 3,638
=============================================================================================
</TABLE>
<PAGE>
FIRST QUARTER IN REVIEW
First Commerce Corporation's (FCC's) net income for the first
quarter of 1995 was $10.6 million, compared to $7.3 million in the
fourth quarter of 1994 and $27.4 million in 1994's first quarter.
Losses on securities transactions were the most significant factor
impacting net income in both the first quarter of 1995 and 1994's
fourth quarter. During the first quarter of 1995, $528 million of
securities were sold at a net after tax loss of $8.7 million.
Securities transactions resulted in after tax losses of $11.9 million
in the fourth quarter and after tax gains of $.7 million in last year's
first quarter. Operating income, which excludes securities
transactions, was $19.3 million for the current quarter, $19.2 million
for the fourth quarter, and $26.7 million in last year's first quarter.
Fully diluted earnings per share were $.33 for the first quarter,
$.21 for the fourth quarter and $.83 in the first quarter of 1994.
Excluding the effect of securities transactions, fully diluted earnings
per share were $.60 in both the first quarter of 1995 and fourth
quarter of 1994, and $.81 in 1994's first quarter.
In addition to the losses on securities transactions, several
events impacted first quarter results. These included:
. an improved net interest margin due primarily to significant
loan growth and higher securities yields;
the return to a positive provision for loan losses;
. $1.1 million in severance expense related to delivery system
redesign and other strategic initiatives; and
. the completion of acquisitions in FCC's Lafayette and New
Orleans markets, with merger-related charges of $2.3
million.
On February 17, 1995, FCC completed its mergers with First
Bancshares, Inc. (First), the parent company of First Bank, Slidell,
Louisiana, and City Bancorp, Inc. (City), the parent company of City
Bank & Trust Company, New Iberia, Louisiana. The First merger was
accounted for as a pooling-of-interests; accordingly, prior period
financial information has been restated. The City merger was accounted
for as a purchase.
FCC has mergers pending with Lakeside Bancshares, Inc. in Lake
Charles, Louisiana and Peoples Bancshares, Inc. in Chalmette,
Louisiana. Both mergers are subject to regulatory approval and certain
other conditions and are expected to be completed in the third quarter
of 1995. These two mergers are expected to add approximately $300
million in assets when they are completed.
A more detailed review of FCC's financial condition and earnings
for the first quarter follows. This review should be read in
conjunction with the consolidated financial statements of First
Commerce Corporation and Subsidiaries, which follows and the Financial
Review in the 1994 Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for the first quarter was $71.6 million,
a decline of less than 1% from the fourth quarter but an increase of 6%
from the same quarter in 1994. The net interest margin was 4.68% for
the first quarter. This was an improvement of ten basis points over
the fourth quarter and was 29 basis points higher than 1994's first
quarter. The net interest spread of 3.85% also improved - three basis
points better than the fourth quarter and five basis points wider than
1994's first quarter.
Table 1 presents average balance sheets, net interest income (FTE)
and interest rates for the first quarters of 1995 and 1994 and the
fourth quarter of 1994. Table 2 analyzes the components of changes in
net interest income between these same periods.
<PAGE>
<TABLE>
<CAPTION>
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) (a) AND INTEREST RATES
================================================================================================================================
First Quarter 1995 First Quarter 1994 Fourth Quarter 1994
(Restated) (Restated)
- --------------------------------------------------------------------------------------------------------------------------------
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
EARNING ASSETS
Loans and leases $3,445,077 $76,554 8.99% 2,787,702 60,295 8.75% 3,202,692 $70,764 8.78%
Securities
Taxable 2,558,139 40,070 6.31 3,243,572 39,549 4.91 2,851,697 42,545 5.94
Tax-exempt 97,950 2,621 10.71 101,236 2,746 10.85 98,835 2,634 10.66
- --------------------------------------------------------------------------------------------------------------------------------
Total securities 2,656,089 42,691 6.47 3,344,808 42,295 5.09 2,950,532 45,179 6.10
- --------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits in banks 258 3 3.47 73,521 608 3.35 4,400 65 5.86
Federal funds sold and securities
purchased under resale agreement 53,434 769 5.84 25,401 194 3.23 89,604 1,250 5.51
Trading account securities 10,158 111 4.45 1,749 23 5.26 5,355 102 7.57
- --------------------------------------------------------------------------------------------------------------------------------
Total money market investments 63,850 883 5.61 100,671 825 3.36 99,359 1,417 5.64
- --------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,165,016 $120,128 7.88% 6,233,181 $103,415 6.70% 6,252,583 $117,360 7.47%
- --------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets (b) 614,420 675,204 562,501
Allowance for loan losses (57,129) (69,947) (57,057)
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $6,722,307 $6,838,438 $6,758,027
================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $940,037 $4,630 2.00% $ 947,831 $ 3,269 1.40% $854,989 $3,516 1.63%
Money market investment deposits 648,339 3,364 2.11 787,346 3,797 1.96 709,853 3,587 2.01
Savings and other consumer time 2,219,708 24,321 4.44 2,109,438 17,519 3.37 2,176,897 22,191 4.04
Time deposits $100,000 and over 566,048 7,402 5.31 392,887 3,302 3.41 462,116 5,310 4.56
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,374,132 39,717 3.68 4,237,502 27,887 2.67 4,203,855 34,604 3.27
- --------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 421,863 6,052 5.82 650,622 4,841 3.02 655,696 8,086 4.90
Long-term debt 88,717 2,739 12.53 91,129 2,836 12.62 88,989 2,804 12.50
- --------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,884,712 $48,508 4.03% 4,979,253 2.90% 4,948,540 $45,494 3.65%
- --------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,234,884 1,256,349 1,235,365
Other liabilities 80,705 64,761 67,667
Stockholders' equity 522,006 538,075 506,455
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders'equity $6,722,307 $6,838,438 $6,758,027
================================================================================================================================
Net interest income (FTE) and
margin $71,620 4.68% $ 67,851 4.39% $71,866 4.58%
================================================================================================================================
Net earning assets and spread $1,280,304 3.85% $1,253,928 3.80% $1,304,043 3.82%
================================================================================================================================
Cost of funds 3.19% 2.31% 2.89%
================================================================================================================================
(a) Based on a 35% tax rate.
(b) Includes mark-to-market adjustment on securities available for sale.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) (a)
==========================================================================================================
First Quarter 1995 First Quarter 1995
Compared to First Quarter 1994 Compared to Fourth Quarter 1994
- ----------------------------------------------------------------------------------------------------------
Total Due to Due to Total Due to Due to
Increase Change in Change in Increase Change in Change in
(in thousands) (Decrease) Volume Rate (Decrease) Volume Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans and leases $16,259 $14,567 $ 1,692 $5,790 $5,384 $ 406
Securities
Taxable 521 (9,371) 9,892 (2,475) (4,527) 2,052
Tax-exempt (125) (88) (37) (13) (24) 11
- ----------------------------------------------------------------------------------------------------------
Total securities 396 (9,459) 9,855 (2,488) (4,551) 2,063
- ----------------------------------------------------------------------------------------------------------
Interest-bearing deposits in
banks (605) (446) (159) (62) (32) (30)
Federal funds sold and securities
purchased under resale
agreements 575 319 256 (481) (519) 38
Trading account securities 88 93 (5) 9 65 (56)
- ----------------------------------------------------------------------------------------------------------
Total money market
investments 58 (34) 92 (534) (486) (48)
- ----------------------------------------------------------------------------------------------------------
Total interest income $16,713 $ 5,074 $11,639 $2,768 $ 347 $2,421
==========================================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 1,361 $ (27) $ 1,388 $1,114 $ 373 $ 741
Money market investment
deposits (433) (706) 273 (223) (317) 94
Savings and other consumer
time deposits 6,802 957 5,845 2,130 443 1,687
Time deposits $100,000 and
over 4,100 1,813 2,287 2,092 1,296 796
- ----------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits 11,830 2,037 9,793 5,113 1,795 3,318
- ----------------------------------------------------------------------------------------------------------
Short-term borrowings 1,211 (2,136) 3,347 (2,034) (3,207) 1,173
Long-term debt (97) (75) (22) (65) (9) (56)
- ----------------------------------------------------------------------------------------------------------
Total interest expense $12,944 $ (174) $13,118 $3,014 $(1,421) $4,435
- ----------------------------------------------------------------------------------------------------------
Change in net interest
income (FTE) $3,769 $5,248 $(1,479) $ (246) $1,768 $(2,014)
==========================================================================================================
(a) Based on a 35% tax rate.
</TABLE>
The slight decrease in net interest income from the fourth quarter
was attributable to three principal factors: higher interest-bearing
liability costs, a 1% lower level of earning assets and fewer days.
The cost of funds was 3.19% for the first quarter, 30 basis points
higher than the fourth quarter. This increase primarily reflected the
repricing of deposits at higher rates combined with a 92 basis point
increase in the rate on short-term borrowings. The lower level of
earning assets reflected a reduction in short-term borrowings,
lessening reliance upon this relatively high cost funding source.
Loan growth and the higher-yielding securities portfolio offset
increased interest-bearing liability costs and caused the improvement
in the net interest margin and spread as compared to the prior quarter.
Average loans grew 8% in 1995's first quarter from the fourth quarter
of 1994. Loans were 56% of average earning assets in the current
quarter, compared to 51% last quarter. The yield on the securities
portfolio increased for the fourth consecutive quarter. For the first
quarter of 1995, the yield on the securities portfolio was 6.47%, a 37
basis point increase from the fourth quarter.
<PAGE>
When compared to the first quarter of 1994, improvements in net
interest income and the net interest margin and spread reflected 24%
average loan growth and the higher-yielding securities portfolio.
Loans increased to 56% of average earning assets in the current
quarter, compared to 45% in the same period of last year. The yield on
the securities portfolio was 138 basis points higher than in the first
quarter of 1994. These positive factors were partially offset by an 88
basis point increase in the cost of funds.
Provision For Loan Losses
The provision for loan losses was a positive $3.0 million in the
first quarter. In 1994, there were negative provisions of $.4 million
in the fourth quarter and $3.8 million in the first quarter. The
return to a positive provision was the result of continued strong loan
growth; FCC's asset quality measures remain strong. The provision is
expected to remain positive for the remainder of 1995, mainly because
loan growth is expected to continue.
For discussion of the allowance for loan losses, net charge-offs
and nonperforming assets, see the Credit Risk Management section of
this Financial Review.
Other Income
Other income, excluding securities transactions, was $29.5 million
for the first quarter, compared to $29.4 million and $28.2 million in
the fourth and first quarters of 1994, respectively.
The less than 1% increase from the fourth quarter was due to
higher trust ($394,000) and ATM ($359,000) fees, partially offset by a
seasonal decline in credit card fees ($572,000). Trust fees increased
12%, primarily from a higher volume of bond trusteeships and employee
benefit plans. The 25% rise in ATM fees mainly reflected higher
volumes associated with the addition of ATMs during the quarter.
Higher credit card ($901,000), ATM ($765,000), deposit ($506,000)
and trust ($268,000) fees caused the 5% rise from the first quarter of
1994. These increases were primarily the result of a continuing
increase in business volumes. A $1.1 million gain on the sale of
mortgage loans included in 1994's first quarter and a $286,000 decrease
in broker/dealer income partially offset these increases.
Securities transactions resulted in pretax net losses of $13.3
million in the first quarter of 1995. For the fourth and first
quarters of 1994, securities transactions resulted in pretax net losses
of $18.3 million and pretax net gains of $1.1 million, respectively.
Operating Expense
Operating expense was $67.7 million for the first quarter of 1995
and included $2.3 million of merger-related charges and $1.1 million in
severance expense. In 1994's fourth quarter, operating expense was
$70.9 million and included $2.7 million of merger-related charges and
$2.3 million in severance expense. Operating expense was $58.9 million
in last year's first quarter. The severance expense recognized in both
the current and fourth quarters was related to delivery system redesign
and other strategic initiatives.
Excluding severance and merger-related charges, operating expense
decreased 2% from the fourth quarter. This decline was primarily due
to lower professional fees ($920,000) and nonperforming assets expense
($940,000). Lower professional fees were mainly due to expenses
included in 1994's fourth quarter associated with FCC's ongoing
strategic initiatives. Nonperforming assets expense reflected lower
provisions for losses on foreclosed properties combined with gains on
sales of foreclosed properties.
Compared to the first quarter of 1994, the $8.8 million increase
in operating expense was mainly due to the current quarter's severance
expense and merger-related charges. Additional increases from 1994's
first quarter resulted from annual raises for employees, depreciation
of branch automation equipment and higher advertising costs.
<PAGE>
FINANCIAL CONDITION ANALYSIS
Securities
The securities portfolio totaled $2.6 billion at March 31, 1995,
compared to $2.5 billion at December 31, 1994 and $3.1 billion at March
31, 1994. Average securities were $2.7 billion for the first quarter
of 1995, $3.0 billion last quarter and $3.3 billion in 1994's first
quarter. The lower level of average securities was related to
significant loan growth and the reduction of short-term borrowings.
Securities were 43% of average earning assets in the first quarter of
1995, compared to 47% in the fourth quarter and 54% in last year's
first quarter.
During the first quarter of 1995, FCC continued its strategy of
improving the earnings stream on its portfolio, rather than holding
securities to maturity and maintaining an earnings stream significantly
below the current market yield. $528 million of securities were sold
at a pretax loss of $13.3 million during the first quarter. At the end
of 1995's first quarter, the securities portfolio yield was 6.70%,
compared to 6.26% at the end of 1994 and 5.05% at March 31, 1994.
Notes 3 and 4 contain additional information on securities held to
maturity and available for sale.
Securities Available for Sale
As of March 31, 1995, securities available for sale were $2.6
billion, compared to $2.5 billion at year-end 1994 and $2.6 billion at
March 31, 1994. As of March 31, 1995, 99.6% of FCC's securities
portfolio was classified as available for sale, compared to 99.5% and
85.1% at December 31, 1994 and March 31, 1994, respectively.
The net unrealized loss, net of tax, reflected as a reduction of
stockholders' equity was $17.4 million at March 31, 1995, including
gross unrealized losses of $43.7 million and gross unrealized gains of
$17.0 million. The net unrealized loss, net of tax, was $72.3 million
at year-end 1994 and $22.2 million at March 31, 1994. The significant
reduction in the unrealized loss from December 31, 1994 primarily
reflected improving bond prices during 1995's first quarter. The
unrealized loss resulted almost wholly from interest rate fluctuations
and does not represent a permanent impairment of value.
Securities Held to Maturity
Securities held to maturity were $10.2 million at March 31, 1995,
compared to $13.0 million at December 31, 1994 and $456.4 million a
year ago. The decline from March 31, 1994 reflects maturities of
securities in the held to maturity category.
Money Market Investments
As of March 31, 1995, money market investments were $16.6 million
and averaged $63.9 million for the quarter. Average money market
investments were $99.4 million last quarter and $100.7 million in the
first quarter of 1994. The decrease in money market investments was
the result of significant loan growth and the reduction in short-term
borrowings.
<PAGE>
Loans
Loans and leases, net of unearned income, were $3.6 billion as of
March 31, 1995, a 6% increase from December 31, 1994 and 27% higher
than a year ago. Average loans rose 8% from the fourth quarter and
were up 24% from last year's first quarter.
Loan growth was across all sectors of the portfolio. From the
fourth quarter to 1995's first quarter, the most significant increases
were in commercial real estate loans and loans to individuals,
primarily automobile loans. Compared to the first quarter of 1994, the
strongest loan growth was in commercial loans and loans to individuals,
primarily automobile loans. Commercial loan growth came from virtually
all industry categories. Strong loan growth is a trend that is
expected to continue throughout 1995.
Deposits
As of March 31, 1995, deposits were $5.7 billion. Average
deposits for the first quarter were $5.6 billion, 3% over 1994's fourth
quarter and 2% above the first quarter of 1994. The most significant
growth from both prior periods was in time deposits of $100,000 and
over. This growth was mainly due to a rise in public funds deposits
reflecting FCC's reentry into that market. Core deposits were 90% of
average deposits for the current quarter, compared to 92% in the fourth
quarter and 93% in last year's first quarter.
Short-Term Borrowings
Short-term borrowings were $489.2 million at March 31, 1995.
During the first quarter, short-term borrowings averaged $421.9
million, a 36% reduction from the prior quarter and down 35% from last
year's first quarter. As a percent of average interest-bearing
liabilities, short-term borrowings were 9% in the first quarter,
compared to 13% for both the first and fourth quarters of 1994. The
proceeds from a portion of FCC's securities sales in both the current
and prior quarter were used to reduce the level of short-term
borrowings, lessening the reliance upon this relatively high cost
funding source.
Off-Balance Sheet Instruments
FCC uses off-balance sheet instruments to manage various risks and
generate fee income. FCC does not use off-balance sheet instruments
for speculative purposes. Note 8 provides additional information for
off-balance sheet instruments.
The total notional amount of FCC's interest rate contracts was
$810 million as of March 31, 1995, unchanged from year-end 1994. The
estimated fair value of FCC's interest rate contracts at March 31, 1995
was a loss of $9.5 million, compared to a loss of $13.0 million at year-
end 1994. The change reflected declining interest rates. Interest
rate contracts increased FCC's interest expense $994,000 in the first
quarter of 1995. This expense was related to amortizing interest rate
swaps, combined with the amortization of the premium paid for interest
rate caps. The amortizing interest rate swaps were purchased to hedge
the cost of certificates of deposit when interest rates were declining,
converting deposits which were fixed rate into floating rate. As rates
began to rise in 1994, these swaps began to increase FCC's deposit
costs. Interest rate caps were purchased during the fourth quarter of
1994 to limit future increases in the cost of short-term borrowings,
which is an offsetting factor to the impact on interest expense from
these swaps.
<PAGE>
<TABLE>
<CAPTION>
TABLE 3. ANALYSIS OF DERIVATIVE PRODUCT INTEREST INCOME (EXPENSE)
===========================================================================================
Option Interest Amortizing
Three months ended March 31, 1995 Based Rate Interest Rate/
(in thousands) Instruments Swaps Callable Swaps Total
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income (expense) $ 296 $ (19) $(1,019) $ (742)
Premium amortization (252) - - (252)
- -------------------------------------------------------------------------------------------
Interest income (expense) $ 44 $ (19) $(1,019) $ (994)
===========================================================================================
</TABLE>
Capital and Dividends
As of March 31, 1995, stockholders' equity was 7.96% of total
assets, compared to 7.23% at December 31, 1994. The
unrealized loss on securities available for sale, net of tax,
reflected as a reduction of stockholders' equity was $17.4
million at March 31, 1995, compared to $72.3 million at year-end
1994.
Regulatory ratios, including leverage, tier 1 and total
capital, are calculated excluding the effect of the unrealized
loss on securities available for sale (SFAS 115 adjustment).
The regulatory leverage ratio was 8.06% as of March 31, 1995,
and 8.07% at year-end 1994. Table 4 presents FCC's risk-based
and other capital ratios as of March 31, 1995 and 1994 and
December 31, 1994. All ratios remain well above regulatory
minimums. Under present regulations, all five of FCC's banks
are classified as "well-capitalized."
The Parent Company's sources of funds to pay cash dividends on
its common and preferred stock are its net working capital and
the dividends it receives from the banks. At March 31, 1995,
the Parent Company had $90.9 million of net working capital.
Additionally, the Parent Company could receive dividends from
the banks without prior regulatory approval of $63.9 million,
plus an amount equal to the bank's adjusted net profits for
the remainder of the year.
During the first quarter, FCC issued shares of its common
stock in conjunction with the acquisitions of First (2.7
million shares) and City (516,100 shares). FCC repurchased
shares of its common stock equal to those issued in the City
acquisition.
<TABLE>
<CAPTION>
TABLE 4. RISK-BASED CAPITAL AND CAPITAL RATIOS
================================================================================
March 31 December 31
1995 1994 1994
(dollars in thousands) (Restated) (Restated)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital $543,689 $534,411 $548,851
Tier 2 capital 132,040 122,692 129,970
- --------------------------------------------------------------------------------
Total capital $675,729 $657,103 $678,821
================================================================================
Risk-weighted assets $3,906,504 $3,070,576 $3,717,600
================================================================================
Ratios at end of period
Tier 1 capital 13.92% 17.40% 14.76%
Total capital 17.30% 21.40% 18.26%
Equity ratio 7.96% 7.97% 7.23%
Tangible equity ratio 7.67% 7.76% 7.02%
Leverage ratio 8.06% 7.84% 8.07%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Credit Risk Management
Nonperforming Assets
Nonperforming assets continued to improve by decreasing to
$18.2 million at March 31, 1995, compared to $19.5 million at
December 31, 1994 and $28.4 million at March 31, 1994. As a
percent of loans and foreclosed assets, nonperforming assets
were .51% at quarter-end, .58% at the end of the prior quarter
and 1.01% at March 31, 1994.
67% of nonperforming loans were contractually current or no
more than 30 days past due at the end of 1995's first quarter,
compared to 62% at December 31, 1994. Loans and leases past
due 90 days or more and not on nonaccrual status were $16.1
million at March 31, 1995, a $5.8 million increase from the
prior quarter. This rise was related to government-guaranteed
student loans. Watch list loans and foreclosed assets were
$119.3 million at March 31, 1995, compared to $107.5 million
at December 31, 1994. The increase related to the
acquisitions of First and City, combined with the impact of
continued loan growth.
<TABLE>
<CAPTION>
TABLE 5. NONPERFORMING ASSETS
===========================================================================================
March 31 December 31
1995 1994 1994
(dollars in thousands) (Restated) (Restated)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans by type
Loans to individuals-residential mortgages $5,031 $4,368 $4,207
Loans to individuals-other 257 977 622
Commercial, financial and agricultural 1,489 2,329 910
Real estate-commercial mortgages 8,115 13,372 7,578
Real estate-other 424 176 227
- -------------------------------------------------------------------------------------------
15,316 21,222 13,544
- -------------------------------------------------------------------------------------------
Foreclosed assets
Other real estate 4,632 11,968 9,786
Other foreclosed assets 206 143 91
Allowance for losses on foreclosed assets (1,905) (4,966) (3,898)
- -------------------------------------------------------------------------------------------
2,933 7,145 5,979
- -------------------------------------------------------------------------------------------
Total nonperforming assets $18,249 $28,367 $19,523
===========================================================================================
Loans past due 90 days or more and not on
nonaccrual status $16,145 $14,929 $10,310
===========================================================================================
End of period ratios
Nonperforming assets as a percent of loans
and leases plus foreclosed assets .51% .10% .58%
Allowance for loan losses as a percent of
nonperforming loans 377.57% 311.40% 412.97%
Loans and leases past due 90 days or more
and not on nonaccrual status as a percent
of loans and leases .45% .53% .30%
===========================================================================================
</TABLE>
<PAGE>
Allowance for Loan Losses
The allowance for loan losses was $57.8 million as of March 31,
1995, a $1.9 million increase since year-end 1994. This
increase reflects the current quarter's positive provision for
loan losses. As a percent of loans and leases, the allowance
was 1.62% at the end of this quarter, compared to 1.65% at
December 31, 1994 and 2.35% at March 31, 1994. Management
believes that the allowance is adequate to cover possible
losses in the loan portfolio.
Net charge-offs as a percent of average loans were .26% during
the current quarter, compared to .24% last quarter and .09% in
the first quarter of 1994. The increase in net charge-offs
from the first quarter of 1994 was primarily caused by a lower
level of net recoveries on commercial loans, combined with an
increase in net charge-offs on loans to individuals. Net
charge-offs on credit card loans remained stable at around 2%
of average credit card loans. Table 6 presents the activity
for the first quarters of 1995 and 1994.
<TABLE>
<CAPTION>
TABLE 6. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
=======================================================================================
Three Months Ended
March 31
- ---------------------------------------------------------------------------------------
1995 1994
(dollars in thousands) (Restated)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period $55,933 $70,459
Purchased allowance 1,142 -
Provision charged to expense 3,007 (3,757)
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 49 78
Loans to individuals-other 987 546
Commercial, financial and agricultural 421 276
Real estate-commercial mortgages 17 53
Credit card loans 2,837 2,503
- ---------------------------------------------------------------------------------------
Total charge-offs 4,311 3,456
- ---------------------------------------------------------------------------------------
Recoveries on loans and leases previously charged
to the allowance
Loans to individuals-residential mortgages 221 494
Loans to individuals-other 450 424
Commercial, financial and agricultural 578 1,032
Real estate-commercial mortgages 140 300
Real estate-other 27 20
Credit card loans 631 562
Other 10 7
- ---------------------------------------------------------------------------------------
Total recoveries 2,057 2,839
- ---------------------------------------------------------------------------------------
Net charge-offs 2,254 617
- ---------------------------------------------------------------------------------------
Balance at end of period $57,828 $66,085
=======================================================================================
Gross charge-offs as a percent of average loans
and leases .50% .50%
Recoveries as a percent of gross charge-offs 47.72% 82.15%
Net charge-offs as a percent of average loans
and leases .26% .09%
Allowance for loan losses as a percent of loans
and leases at end of period 1.62% 2.35%
=======================================================================================
</TABLE>
<PAGE>
Part II: Other Information
Item 1. Legal Proceedings.
Legal proceedings involving FCC were
previously reported in its Annual Report on Form 10-
K for the year ended December 31, 1994. There have
been no material developments since that filing.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
4.1 - Indenture between FCC and Republic Bank Dallas,
N.A. (now NationsBank of Texas, N.A.),
Trustee, including the form of 12 3/4%
Convertible Debenture due 2000, Series A
included as Exhibit 4.1 to FCC's Annual Report
on Form 10-K for the year ended December 31,
1985 and incorporated herein by reference.
4.2 - Indenture between FCC and Republic Bank Dallas,
N.A. (now NationsBank of Texas, N.A.),
Trustee, including the form of 12 3/4%
Convertible Debenture due 2000, Series B
included as Exhibit 4.2 to FCC's Annual Report
on Form 10-K for the year ended December 31,
1985 and incorporated herein by reference.
11 - Computation of Earnings Per Share
27 - Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K dated March 3, 1995,
was filed by the registrant reporting Item
2, Acquisition of Assets. The report
contained information regarding the
consummation of FCC's acquisition of First
Bancshares, Inc.
<PAGE>
Item 6, continued
A report on Form 8-K/A filed on April 3, 1995
amended the Form 8-K filed on March 3, 1995.
The report contained the following:
(1) Consolidated Financial Statements of First
Bancshares, and subsidiary:
Report of Independent Public Accountant
Consolidated Balance Sheet as of December
31, 1994
Consolidated Statement of Income for the
year ended December 31, 1994
Consolidated Statement of Shareholders'
Equity for the year ended December 31, 1994
Consolidated Statement of Cash Flows for
the year ended December 31, 1994
Notes to Consolidated Financial Statements
(2) First Commerce Corporation Pro Forma
Condensed Combined Financial
Statements (Unaudited)
Pro Forma Condensed Combined Balance
Sheet as of December 31, 1994
Pro Forma Condensed Combined Statement of
Income for the year ended December 31, 1994
Pro Forma Condensed Combined Statement of
Income for the year ended December 31, 1993
Pro Forma Condensed Combined Statement of
Income for the year ended December 31, 1992
Notes to the Pro Forma Condensed Combined
Financial Statements
A report on Form 8-K dated May 8, 1995, was
filed by the registrant reporting Item 5,
Other Events. This report included
supplemental consolidated financial
statements of FCC and Subsidiaries which had
been restated to reflect the pooling-of-
interests with First Bancshares, Inc. as
follows:
Report of Independent Public Accountant
Supplemental Consolidated Balance Sheets
as of December 31, 1994 and 1993
Supplemental Consolidated Statements of
Income for the years ended December 31,
1994, 1993 and 1992.
Supplemental Consolidated Statements of
Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992
<PAGE>
Item 6, continued
Supplemental Consolidated Statements of
Cash Flows for the years ended December
31, 1994, 1993, and 1992
Notes to the Supplemental Consolidated
Financial Statements
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
First Commerce Corporation
(Registrant)
Date: May 15, 1995 /s/ Thomas L. Callicutt, Jr.
Thomas L. Callicutt, Jr.
Senior Vice President, Controller and
Principal Accounting Officer
<PAGE>
EXHIBIT 11
FIRST COMMERCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31
_______________________
1995 1994
(Restated)*
__________ __________
<S> <C> <C>
Primary earnings per share
__________________________
Weighted average number of common shares
outstanding 28,969,862 28,836,638
Shares from assumed exercise of options,
net of treasury stock method 134,044 171,019
Less shares held in treasury - -
__________ __________
29,103,906 29,007,657
========== ==========
Net income (in thousands) 10,633 27,428
Preferred dividend requirements 1,087 1,087
__________ __________
Income applicable to common shares 9,546 26,341
========== ==========
Per common share $.33 $.91
Fully diluted earnings per share **
___________________________________
Weighted average number of shares
outstanding, net of shares held in treasury 28,969,862 28,836,638
Shares from assumed exercise of options,
net of treasury stock method 134,044 171,038
Shares from assumed conversion of dilutive
convertible notes and debentures:
Preferred stock - 2,794,064
Convertible debentures - 3,148,791
__________ __________
29,103,906 34,950,531
========== ==========
Income applicable to common shares 9,546 26,341
Expenses that would not have been incurred
if assumed conversions occurred:
Preferred dividend requirements - 1,087
Interest expense, net of tax - 1,740
__________ __________
Income applicable to common shares plus
expenses that would not have been incurred
if assumed conversions occurred 9,546 29,168
========== ==========
Per common share $.33 $.83
* 1994 data has been restated to reflect the effect of First Bancshares, Inc.
**For the first quarter of 1995, convertible items were antidilutive;
therefore, the primary and fully diluted EPS computations are the same.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANICAL
STATEMENTS FOR THE PERIOD ENDING MARCH 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<EXCHANGE-RATE> 1 1
<CASH> 343,176 315,985
<INT-BEARING-DEPOSITS> 151 90,693
<FED-FUNDS-SOLD> 2,825 115,330
<TRADING-ASSETS> 13,613 466
<INVESTMENTS-HELD-FOR-SALE> 2,590,376 2,614,312
<INVESTMENTS-CARRYING> 10,179 456,363
<INVESTMENTS-MARKET> 10,180 455,001
<LOANS> 3,577,687 2,810,738
<ALLOWANCE> (57,828) (66,085)
<TOTAL-ASSETS> 6,879,326 6,618,375
<DEPOSITS> 5,668,104 5,520,737
<SHORT-TERM> 489,215 408,368
<LIABILITIES-OTHER> 85,965 71,840
<LONG-TERM> 88,665 89,682
<COMMON> 147,234 144,248
0 0
59,934 59,979
<OTHER-SE> 340,209 323,521
<TOTAL-LIABILITIES-AND-EQUITY> 6,879,326 6,618,375
<INTEREST-LOAN> 75,987 59,771
<INTEREST-INVEST> 41,883 41,351
<INTEREST-OTHER> 884 822
<INTEREST-TOTAL> 118,754 101,944
<INTEREST-DEPOSIT> 39,717 27,887
<INTEREST-EXPENSE> 48,508 35,564
<INTEREST-INCOME-NET> 70,246 66,380
<LOAN-LOSSES> 3,007 (3,757)
<SECURITIES-GAINS> (13,322) 1,122
<EXPENSE-OTHER> 67,668 58,912
<INCOME-PRETAX> 15,775 40,544
<INCOME-PRE-EXTRAORDINARY> 15,775 40,544
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,546 26,341
<EPS-PRIMARY> .33 .91
<EPS-DILUTED> .33 .83
<YIELD-ACTUAL> 0 0
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 0 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
