SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported): February 17, 1995
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
LOUISIANA 0-7931 72-0701203
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
210 BARONNE ST., NEW ORLEANS, LOUISIANA 70112
(Address of principal executive offices - Zip Code)
Registrant's telephone number, including area code: (504) 561-1371
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Consolidated Financial Statements of First Bancshares,
Inc. 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 Statements of Cash Flows for the year
ended December 31, 1994
Notes to Consolidated Financial Statements
(b) 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 Pro Forma Condensed Combined Financial
Statements
(c) Exhibits
2 Agreement and Plan of Merger dated May 27, 1994,
included as Exhibit 2 to First Commerce
Corporation's Registration Statement on Form S-4
(Registration Number 33-54865) and incorporated
herein by reference.
4.1 Indenture between First Commerce Corporation 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 First Commerce
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1985 and incorporated
herein by reference.
4.2 Indenture between First Commerce Corporation 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 First Commerce
Corporation's Annual Report on Form 10-K for the
year ended December 31, 1986 and incorporated
herein by reference.
23 Consent of Arthur Andersen LLP.
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND
FOR THE YEAR THEN ENDED
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of
Directors of First Bancshares, Inc.:
We have audited the accompanying consolidated balance sheet of
First Bancshares, Inc. (a Louisiana corporation) and subsidiary as
of December 31, 1994, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides 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 First
Bancshares, Inc. and subsidiary as of December 31, 1994, and the
results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
New Orleans, Louisiana,
March 17, 1995
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1994
ASSETS 1994
______ _____
CASH AND DUE FROM BANKS $11,308,487
FEDERAL FUNDS SOLD 28,030,000
INVESTMENT SECURITIES AVAILABLE FOR SALE, at fair value 35,224,312
value
INVESTMENT SECURITIES HELD TO MATURITY (fair value of
approximately $3,093,112) 3,083,733
LOANS 150,511,232
Less: Reserve for possible loan losses (2,277,487)
___________
Net loans 148,233,745
PREMISES AND EQUIPMENT, net 5,717,912
OTHER REAL ESTATE, net 1,688,516
ACCRUED INCOME RECEIVABLE 1,060,042
OTHER ASSETS 9,863,281
___________
Total assets $244,210,028
===========
LIABILITIES
___________
DEPOSITS:
Non-interest bearing $43,507,144
Interest bearing 174,931,829
___________
Total deposits 218,438,973
NOTE OPTION ACCOUNT 490,933
DIVIDENDS PAYABLE 811,209
ACCRUED TAXES, INTEREST AND EXPENSES 3,795,674
___________
Total liabilities 223,536,789
___________
SHAREHOLDERS' EQUITY
____________________
COMMON STOCK, $1 par value, 907,500 shares authorized,
847,658 shares issued and outstanding after
deduction of treasury stock 847,787
PAID-IN CAPITAL 3,823,218
RETAINED EARNINGS 16,494,776
INVESTMENT SECURITIES MARKET VALUATION, net of tax (489,551)
TREASURY STOCK, 129 shares at cost (2,991)
___________
Total shareholders' equity 20,673,239
___________
Total liabilities and shareholders' equity $244,210,028
===========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
1994
____
INTEREST INCOME:
Interest and fees on loans $15,358,109
Interest on securities-
U. S. Treasury securities 1,496,762
Mortgage-backed securities and collateral mortgage
obligatios 1,496,143
State and political obligations 109,109
Interest on deposits with banks 7,401
Interest on Federal funds sold and other investments 1,510,331
__________
Total interest income 19,977,855
__________
INTEREST EXPENSE:
Interest on deposits 4,741,781
Interest on parent company borrowings 27,732
Interest on short-term borrowings 14,508
__________
Total interest expense 4,784,021
__________
NET INTEREST INCOME 15,193,834
PROVISION FOR POSSIBLE LOAN LOSSES 125,000
__________
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN
LOSSES 15,068,834
__________
NON-INTEREST INCOME:
Service charges on deposits 2,033,309
Net securities gains 64,631
Net other real estate gains 223,063
Other income 228,743
__________
Total non-interest income 2,549,746
__________
NON-INTEREST EXPENSE:
Salaries and benefits 6,112,475
Occupancy 1,451,897
Net other real estate expense 209,240
Other operating expenses 4,580,861
__________
Total non-interest expense 12,354,473
__________
INCOME BEFORE INCOME TAXES 5,264,107
__________
PROVISION (CREDIT) FOR INCOME TAXES:
Current 2,353,198
Deferred (167,554)
__________
Total provision for income taxes 2,185,644
__________
NET INCOME $3,078,463
==========
EARNINGS PER SHARE: $ 3.63
==========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Investment
Common Stock Treasury Stock Securities
____________ ______________ Paid-In Retained Market
Shares Amount Shares Amount Capital Earnings Valuation
______ ______ ______ ______ _______ ________ __________
<S> <C>
BALANCE, December 31, 1993
(as restated) 847,787 $847,787 - $ - $3,823,218 $14,227,522 $ 683,781
Purchase of treasury stock - - (129) (2,991) - - -
Dividends ($0.957 per share) - - - - - (811,209) -
Net change in investment
securities market
valuation-net of tax - - - - - - (1,173,332)
Net income - 1994 - - - - - 3,078,463 -
_______ ________ ______ _______ __________ ___________ __________
BALANCE, December 31, 1994 847,787 $847,787 (129) $(2,991) $3,823,218 $16,494,776 $ (489,551)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994
_________
OPERATING ACTIVITIES:
<S> <C>
Net income $3,078,463
Adjustments to reconcile net income to net operating cash flows-
Provision for possible loan losses 125,000
Depreciation 778,392
Net accretion of security discount and premium (1,316)
Net other real estate gains (223,063)
Decrease in accrued income receivable 248,736
Increase in accrued taxes, interest and expenses 2,607,828
Net securities gains (64,631)
Net increase in other assets (409,158)
Deferred tax benefit (167,554)
__________
Net operating cash flows 5,972,697
__________
INVESTING ACTIVITIES:
Proceeds from debentures 1,000,000
Proceeds from sales of investment securities available for sale 1,485,763
Proceeds from sales of investment securities held to maturity 3,560,000
Proceeds from maturities of investment securities available for sale 20,715,782
Proceeds from maturities of investment securities held to maturity 1,315,390
Purchases of investment securities available for sale (20,108,657)
Net decrease in loan portfolio 9,480,372
Net increase in Federal funds sold (26,030,000)
Proceeds from sales of premises and equipment 309,286
Purchase of premises and equipment (126,735)
Proceeds from sales of other real estate 751,341
__________
Net investing cash flows (7,647,458)
__________
FINANCING ACTIVITIES:
Net decrease in interest-free, money market, savings and NOW deposits (8,841,392)
Net increase in certificates of deposit 11,889,027
Net decrease in note payable and other borrowings (1,460,197)
Purchase of treasury stock (2,991)
__________
Net financing cash flows 1,584,447
__________
DECREASE IN CASH AND DUE FROM BANKS (90,314)
__________
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 11,398,801
__________
CASH AND DUE FROM BANKS AT END OF YEAR $11,308,487
==========
CASH PAID FOR INTEREST $4,802,909
==========
CASH PAID FOR INCOME TAXES $2,635,000
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
__________________________________________
Basis of Presentation
_____________________
The accounting principles and reporting policies of First
Bancshares, Inc. (the Company) conform with generally accepted
accounting principles. The following is a description of the more
significant of these policies.
Consolidation
_____________
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, First Bank (the Bank).
Intercompany accounts and transactions are eliminated in
consolidation.
Investment Securities
_____________________
As of December 31, 1993, the Company adopted the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Under this standard, securities
classified as held to maturity are those debt securities in which
the Bank 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 Bank's asset and
liability management strategies, changes in the types of products
offered by the Bank, changes in its deposit structure, or potential
liquidity needs. The Bank has no trading securities, which 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.
Securities held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts, using the
interest method or the straight-line method, when it does not
differ materially from the interest method. Available for sale
securities are carried at fair value, with the difference between
amortized cost and fair value reflected in shareholders' equity,
net of tax, as an investment securities market valuation account.
Fair value for securities is determined from quoted prices or,
where no quoted market price exists, from quoted prices of similar
securities of comparable risk and maturity. Premiums and discounts
on mortgage-backed securities are amortized at a constant rate with
monthly adjustments for the amount of prepayments in relation to
the remaining balance. The lives used are adjusted periodically
due primarily to prepayment variations resulting from changes in
market interest rates.
During 1994, the Bank sold $10,143,000 of securities out of its
available for sale portfolio, resulting in gross realized losses
of $538,000 and gross realized gains of $35,000, and sold
$3,992,000 of securities out of its held to maturity portfolio,
resulting in gross realized losses of $432,000 and no realized
gains. In addition, the Company realized a gain of $1,000,000 on
the redemption of the First Continental Bancshares, Inc.
debentures, as discussed further in Note 3. The securities were
sold out of the held to maturity portfolio because the Federal
Financial Institutional Examination Council deemed them high risk
and recommended the sale. Of the total amount sold,
approximately $8,139,000 were not settled as of December 31,
1994. These securities are included in other assets in the
consolidated balance sheet.
Interest earned on investment securities is included in interest
income. The adjusted cost of the specific security sold is used
to compute the gain or loss on the sale of an investment
security. Such gains or losses are shown separately as a
component of non-interest income in the consolidated statement of
income.
Loans
_____
Loans are stated at the principal balance outstanding less unearned
discount on certain consumer loans. Interest on loans, other than
certain consumer loans, is recognized as income based on the
principal balance outstanding. Interest on certain consumer loans
is recognized as income over the term of the loan using the sum-of-
the-months' digits method, which does not differ materially from
the interest method. Accrual of interest on a loan is discontinued
when management believes that collection of interest is doubtful,
after considering economic and business conditions and collection
efforts, and reviewing the borrower's financial condition. Income
is recorded on a cash basis for nonaccrual loans.
Nonperforming Loans
___________________
Loans and leases past due 90 days or more are considered to be
performing loans and leases until placed on nonaccrual status.
Loans and leases are placed on nonaccrual status when, in the
opinion of management, 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 and
leases 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.
Reserve for Possible Loan Losses
________________________________
The provision for possible loan losses charged to operating expense
is determined by management based on a review of the past loan loss
experience and an evaluation of the quality of the current loan
portfolio. The reserve for possible loan losses is based on
estimates and ultimate losses may vary from current estimates.
These estimates are reviewed periodically and, as adjustments
become necessary, they are reported in earnings in the periods in
which they become known.
Premises and Equipment
______________________
Premises and equipment are stated at cost, net of accumulated
depreciation. Depreciation expense is computed primarily on a
straight-line basis over the estimated useful lives of the
depreciable assets. Maintenance and repairs are charged to
operating expense, and gains or losses on dispositions are
reflected currently in the consolidated statement of income.
Income Taxes
____________
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." In general, under this accounting
standard, deferred taxes are recognized based on temporary
differences between book and tax bases of assets and liabilities as
of the balance sheet date. The change in net deferred assets or
liabilities between periods is recognized as a deferred tax expense
or benefit in the consolidated statement of income. Income taxes
and the impact of adopting SFAS No. 109 are discussed in more
detail in Note 7.
Other Real Estate
_________________
The cost basis of foreclosed real estate and other assets is
established at the lower of the loan balance or fair value less
estimated costs to sell the asset at the time of foreclosure. Any
excess of the loan balance over the fair value less estimated costs
to sell at foreclosure is charged to the reserve for possible loan
losses. Subsequent declines in fair value of the assets below the
initial cost basis are provided for in the reserve for other real
estate losses in the period the decline is noted. These reserves
are periodically adjusted as fair values change; however, the net
carrying value of each asset never exceeds the cost basis.
Expenses associated with owning and operating other real estate and
gains and losses on disposition of such assets are recorded in
earnings in the period incurred.
New Financial Accounting Standards
__________________________________
In November, 1992, the FASB issued Statement No. 112, "Employers'
Accounting for Postemployment Benefits," which was effective for
the Company for the year ended December 31, 1994. This statement
had no material impact on the Company.
In May, 1993, the FASB issued Statement No. 114, "Accounting by
Creditors for Impairment of a Loan," as amended by Statement No.
118, which requires that impaired loans that are within the scope
of this statement be measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate or at the loan's market price or the fair value of
the collateral if the loan is collateral dependent. Adoption of
the new standard is required for fiscal years beginning after
December 15, 1994. The effect, if any, the new standards may
have on the Bank's financial position and results of operations
is not expected to be significant.
2. MERGER:
______
On May 27, 1994, the Company and First Commerce Corporation (FCC)
entered into an Agreement and Plan of Merger (the "Agreement")
pursuant to which the Company would merge with and into FCC and
each outstanding share of the Company's Common Stock would be
converted into shares of FCC Common Stock. On February 17, 1995,
the merger was consummated, which resulted in the issuance of
2,705,537 shares of FCC Common Stock in exchange for all
outstanding shares of the Company's Common Stock (a final
exchange ratio of 3.19 to 1). As of December 31, 1994, the
Company accrued approximately $1.1 million of fees and expenses
associated with the merger. This amount is included in other
operating expenses in the consolidated statement of income.
3. INVESTMENT SECURITIES:
_____________________
The amortized cost and estimated fair values of investments in
securities are as follows:
<TABLE>
<CAPTION>
AGGREGATE BOOK AND ESTIMATED FAIR VALUES
________________________________________
December 31, 1994
___________________________________________________________________________
Fair Value/
Unrealized Unrealized Estimated Book
Held to Maturity Book Value Gains Losses Fair Value Difference
________________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
U. S. government direct
agency obligations $1,502,517 $ - $(827) $1,501,690 $(827)
State and political
obligations 1,581,216 10,206 - 1,591,422 10,206
__________ ___________ _______ __________ _______
Total $3,083,733 $ 10,206 $(827) $3,093,112 $9,379
========== =========== ======= ========== =======
</TABLE>
<TABLE>
<CAPTION>
Fair Value/
Unrealized Unrealized Estimated Book
Available for Sale Book Value Gains Losses Fair Value Difference
__________________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
U. S. Treasury $18,159,147 $ - $(424,924) $17,734,223 $(424,924)
U. S. government direct
agency obligations 4,770,846 - (533) 4,770,313 (533)
U. S government
agencies:
Mortgage-backed
securites 7,981,318 - (143,156) 7,838,162 (143,156)
Collateral mortgage
obligations 3,966,293 - (173,679) 3,792,614 (173,679)
Other investments 1,089,000 - - 1,089,000 -
__________ ___________ _______ __________ _______
Total $35,966,604 $ - $(742,292) $35,224,312 $(742,292)
========== =========== ======= ========== =======
</TABLE>
The amortized cost and estimated fair value of debt securities at
December 31, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED COST AND ESTIMATED FAIR VALUE BY MATURITY
___________________________________________________
Estimated
Held to Maturity Book Value Fair Value Difference
________________ __________ __________ _________
<S> <C> <C> <C>
Due in one year or less $ 455,000 $ 455,584 $ 584
Due after one year through
five years 2,126,371 2,132,218 5,847
Due after five years through 502,362 505,310 2,948
_________ _________ ______
Total $3,083,733 $3,093,112 $ 9,379
========= ========= ======
</TABLE>
<TABLE>
<CAPTION>
Estimated
Available for Sale Book Value Fair Value Difference
__________________ _________ __________ __________
<S> <C> <C> <C>
Due in one year or less $9,987,314 $9,890,700 $(96,614)
Due after one year through
five years 12,942,679 12,613,836 (328,843)
__________ __________ _______
22,929,993 22,504,536 (425,457)
Equity securities 1,089,000 1,089,000 -
Mortgage-backed securities 11,947,611 11,630,776 (316,835)
__________ __________ _______
Total $35,966,604 $35,224,312 $(742,292)
========== ========== ========
</TABLE>
The Bank's mortgage-backed securities consist of ownership
interests in pools of residential mortgages guaranteed by a U.S.
government agency with contract maturities ranging from
approximately 1 to 36 years; however, the underlying mortgages are
subject to significant prepayments, primarily when contractual
interest rates exceed the current market rate on similar mortgages.
Based on current prepayment assumptions, the estimated average
remaining life of these securities was approximately 5.65 years at
December 31, 1994.
Investment securities with book values of $7,613,000 at
December 31, 1994 were pledged as security for public deposits and
other liabilities as required by law.
At December 31, 1994, the company owned $1,089,000 in stock at book
and fair value in the Federal Home Loan Bank of Dallas. This stock
is included in the Company's available for sale portfolio.
The Bank held a $1,000,000 investment in debentures of an
affiliated bank representing 12% mandatory convertible
subordinated debentures of First Continental Bancshares, Inc.
(FCB). The debentures were issued in 1986 and were to mature in
1996 with principal payment to be made with 78 shares of FCB
common stock per thousand in debenture face value. During 1988
and 1989, a reserve equal to the cost of these debentures was
recorded. During 1994, FCB and Hibernia Corporation (Hibernia)
merged. Under the terms of the agreement, Hibernia redeemed all
of the outstanding principal and accrued interest related to
FCB's outstanding debentures. The debenture agreement required a
redemption price of 105% if redeemed during the twelve-month
period ending November 15, 1994. Therefore, the Bank received
$1,000,000 of principal and accrued interest of $745,000 on
August 1, 1994 and a premium of approximately $50,000. As
discussed above, the Bank had assigned no value to the FCB
debentures and related accrued interest in the accompanying
financial statements; therefore, the Bank recognized income upon
collection of the principal, accrued interest and related
premium. The accrued interest and premium are included in
interest on other investments. The collection of principal is
included in net securities gains.
4. LOANS:
_____
The composition of the loan portfolio is as follows:
December 31,
1994
____________
COMMERCIAL AND INDUSTRIAL
LOANS, other than real estate $ 8,033,000
REAL ESTATE LOANS-
Residential properties 51,523,000
Commercial properties 50,950,000
CONSUMER LOANS 43,095,000
___________
153,601,000
LESS: Unearned discount (3,090,000)
___________
$150,511,000
===========
The Bank grants commercial, real estate and consumer loans to
customers located primarily in St. Tammany Parish and the
surrounding area. The Bank evaluates the credit risk of each
customer on an individual basis and, where deemed appropriate,
collateral is obtained. Collateral varies by individual loan
customer but may include accounts receivable, inventory, real
estate, equipment, deposits, personal and government guarantees,
and general security agreements. Access to collateral is dependent
upon the type of collateral obtained. On an on-going basis, the
Bank monitors its collateral and the collateral value related to
the loan balance outstanding.
5. RESERVE FOR POSSIBLE LOAN LOSSES
AND OTHER REAL ESTATE LOSSES:
____________________________
The provision for possible loan losses charged to expense is
determined in accordance with the policy described in Note 1.
Transactions in the reserve for possible loan losses during 1994
were as follows:
1994
_________
Balance, beginning of year $2,157,000
Provision for possible loan losses 125,000
Losses charged to the reserve (277,000)
Recoveries of loans previously
charged-off 272,000
_________
Balance, end of year $2,277,000
=========
Transactions in the reserve for other real estate losses during
1994 were as follows:
1994
_________
Balance, beginning of year $ 403,000
Write-downs charged to the reserve (152,000)
_________
Balance, end of year $ 251,000
=========
Nonperforming assets include loans on nonaccrual status and real
estate acquired through foreclosure. Loans past due 90 days or
more are considered to be performing assets until placed on
nonaccrual status. Nonperforming assets included in the
accompanying consolidated balance sheet are as follows:
December 31,
1994
___________
Nonperforming assets:
Nonaccrual loans $ 145,000
Other real estate, net 1,689,000
__________
Total nonperforming assets $1,834,000
==========
Loans past due 90 days or more
and not on nonaccrual status $ 6,000
==========
No income was recognized on nonaccrual loans in 1994. If the
accrual of interest on these loans had not been suspended, their
recorded income would have totaled approximately $56,000.
In the opinion of management, progress has been made in its credit
risk management process and only normal risk and loss potential
remains in the loan portfolio. Consequently, the Company does not
anticipate significant increases in the level of nonperforming
assets in the foreseeable future. The current level of
nonperforming assets is not anticipated to have a significant,
adverse effect on the results of operations of the Company.
6. PREMISES AND EQUIPMENT:
______________________
Premises and equipment, stated at cost less accumulated
depreciation, consist of the following:
Estimated December 31,
Useful Life 1994
___________ ____________
Land - $2,552,463
Buildings and leasehold improvements 5-40 years 5,600,240
Furniture, fixtures and equipment 3-10 years 5,589,434
__________
13,742,137
Less- accumulated depreciation (8,024,225)
__________
$5,717,912
==========
Depreciation included in occupancy expense totaled $778,000 in 1994.
7. FEDERAL INCOME TAXES:
____________________
Net deferred tax assets, which are included in other assets in the
consolidated balance sheets, were approximately $656,000 as of
December 31, 1994. The components of deferred taxes as of
December 31, 1994 were as follows:
December 31,
1994
____________
Deferred tax assets:
Reserve for possible loan losses $247,000
Other real estate 215,000
Net unrealized loss on securities
available for sale 252,000
Accrued compensation 235,000
Other 6,000
________
Subtotal 955,000
Deferred tax liability:
Premises and equipment (299,000)
________
Net deferred tax asset $656,000
========
In accordance with the provisions of SFAS No. 115 (Note 1), the
benefit related to the net unrealized loss on securities available
for sale is not included in deferred tax provision in the
consolidated statement of income; instead, it is included in the
investment securities market valuation account in the consolidated
balance sheet.
Under SFAS No. 109, a valuation allowance must be established
against deferred tax assets if, based on all available evidence, it
is more likely than not that some or all of the assets will not be
realized. Based on income taxes paid during the available
carryback period, management believes that a valuation allowance is
not required as of December 31, 1994.
The effective tax rate is less than the statutory Federal income
tax rate for the year ended December 31, 1994 because of the
following:
1994
____
Statutory tax rate 34.0%
Tax exempt income (1.4)
Non-deductible expenses 9.1
Other (0.2)
____
Effective tax rate 41.5%
====
The Company adopted SFAS No. 109 "Accounting for Income Taxes"
effective January 1, 1993. The cumulative effect of adoption of
the accounting principle was recorded as $677,000. During 1994, it
was determined that the temporary differences recorded associated
with premises and equipment were misstated. As a result, the
cumulative effect has been restated to be $40,000, resulting in a
reduction to retained earnings as of December 31, 1993 of $632,000.
8. SHAREHOLDERS' EQUITY:
____________________
Earnings per share are calculated based upon 847,666 weighted
average shares outstanding in 1994.
During 1994, the Company purchased 129 shares of outstanding
common stock for $23.19 per share. The total cost of this
purchase is reflected as treasury stock in the consolidated
balance sheet.
In connection with the merger discussed in Note 2, the Company
and FCC agreed that the Company would pay a dividend to its
shareholders because the merger was not consummated prior to the
payment of a dividend by FCC to its shareholders for the quarter
ending December 31, 1994. The board declared an equivalent
dividend on December 31, 1994, which consisted of a cash dividend
of $.45 per share ($381,446), which was paid in January, 1995 and
a contingent dividend to be determined based upon the final
exchange ratio. The contingent dividend of $.507 per share, or
$429,763, was accrued as of December 31, 1994 and paid on
February 17, 1995 and has been included in dividends payable as
of December 31, 1994. This dividend was determined by
multiplying the final exchange ratio by the amount of the FCC
dividend paid in the fourth quarter of 1994, less the $.45
dividend previously paid by the Company.
9. RELATED PARTY TRANSACTIONS:
__________________________
In the ordinary course of business, the Bank makes loans to its
directors, executive officers and principal shareholders. These
loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons. Loans made to
directors, executive officers and principal shareholders, including
their family members and companies in which they have a significant
ownership interest, are summarized as follows:
Balance, December 31, 1993 $2,501,000
Additions 369,000
Repayments (1,023,000)
__________
Balance, December 31, 1994 $1,847,000
==========
10. REGULATORY MATTERS:
__________________
The Bank is required to maintain non-interest bearing balances with
correspondent banks to fulfill its regulatory reserve requirements.
The average reserve requirement was approximately $1,938,000 in
1994.
11. COMMITMENTS AND CONTINGENCIES:
_____________________________
The Company is involved in various litigation which is routine to
the nature of its business. Management believes that resolution of
these matters will not result in any material adverse effect on the
financial statements.
The Company is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include
standby letters of credit and commitments to extend credit. Those
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the
balance sheet.
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the
counterparty. The extent of collateral varies for each commitment
but may include accounts receivable, inventory, property, plant and
equipment, and income-producing commercial properties.
Standby letters of credit are commitments issued by the Company to
guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing,
and similar transactions. Most guarantees expire in 1995. The
credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to
customers. The Company holds collateral supporting those
commitments for which collateral is deemed necessary. Mortgage
loans sold with recourse are pre-sold mortgage loans (FHA and VA
type loans) that the Company sells to various lenders. The Company
does not retain any servicing rights and interest rate risk is
minimal as rates are locked in at closing. The loans are sold with
a 90-day recourse period.
Financial instruments whose contract amounts represent credit risk
as of December 31, 1994 are as follows:
1994
____
Commitments to extend credit $16,562,000
Standby letters of credit 1,457,000
Mortgage loans sold with recourse 848,000
The Bank does not maintain insurance coverage protection for losses
resulting from actions of their directors or officers. The Bank
has agreed to indemnify its officers and directors for personal
losses from litigation while serving as officers and directors.
12. EMPLOYEE BENEFIT PLANS:
______________________
In December 1990, the FASB issued SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The
Statement, which is effective for fiscal years beginning after
December 15, 1994, requires the accrual of the expected costs of
postretirement benefits during the years that an eligible employee
renders service to the employer. The Company has not adopted the
new standard as of December 31, 1994. As of December 31, 1994, the
accumulated postretirement benefit obligation (APBO) related to
these benefits was estimated to be approximately $350,000. The
Company has the option, upon adopting SFAS No. 106, of recognizing
the APBO immediately or over a 20 year period. Subsequent to
adoption, the Company does not expect the annual expense related to
these benefits to materially differ from that recognized prior to
adoption.
Effective January 1, 1988, the Company adopted a defined
contribution savings plan for its employees. Under the terms of
the plan, the Company shall make a matching contribution of no less
than 40% of the first 3% of the employee's compensation
contributed. For 1994, the Company matched 40% of the first 4% of
employee contributions representing contributions of $37,000. In
addition, the employer may make a discretionary contribution as
authorized by the Board of Directors. No discretionary
contribution was made in 1994.
The Chief Executive Officer has an employment agreement which
provides for a payment of three years' salary upon change of
control of the Company. In addition, retention agreements were
adopted in 1994 to encourage certain other officers of the Bank
to continue their employment with the Bank in the context of
ongoing merger discussions between the Company and certain non-
affiliated financial institutions. The retention agreements were
executed primarily to maintain stability within the organization
and reduce the risk of loss of key members of management before
consummation of any potential merger or acquisition of the
Company. The retention agreements provide that if the Officers
remain with the Bank through the consummation of a merger, and
certain other conditions are satisfied, they would receive
additional compensation. The Company accrued $1,393,000 as of
December 31, 1994 associated with the employment and retention
agreements. This amount is included in salaries and benefits in
the December 31, 1994 consolidated statement of income.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
___________________________________
Fair values of financial instruments are based on quoted market
prices when available. If quoted market prices are not available,
fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected
by assumptions used, including the discount rate and estimates of
future cash flows. The derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, could not be realized in immediate settlement of the
instrument. Further, the disclosures do not include estimated fair
value for the core deposit intangible, which is not a financial
instrument, but represents significant value to the Company.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company. The carrying amount
of cash and short-term investments, demand, money market and
savings deposits and short-term borrowing approximates the
estimated fair value of these financial instruments. The estimated
fair value of securities is based on quoted market prices, dealer
quotes and prices obtained from independent pricing services. The
estimated fair value of loans, time deposits and long-term debt is
estimated based on present values using applicable risk-adjusted
spreads to the U. S. Treasury bond yield curve to approximate entry-
value interest rates applicable to each category of these financial
instruments.
Entry-value interest rates were not adjusted for changes in credit
of performing commercial loans for which there are no known credit
concerns. Management believes that the risk factor embedded in the
entry-value interest rates results in a fair valuation of these
loans on an entry-value basis.
Variances between the carrying amount and the estimated fair value
of loans reflect both interest rate risk and credit risk. The fair
value estimates presented are based on information available to
management as of December 31, 1994. The carrying amount and
estimated fair value of off-balance sheet financial instruments is
immaterial.
December 31, 1994
________________________
Estimated
Carrying Fair
Amount Value
___________ ___________
ASSETS:
Cash and short-term investments $39,338,487 $39,338,487
Securities 38,308,045 38,317,424
Commercial loans 86,967,356 84,865,753
Installment loans 61,266,389 58,951,839
LIABILITIES:
Demand deposits 43,507,144 43,507,144
Savings deposits 102,774,895 102,774,895
Time deposits 72,156,934 71,102,093
14. PARENT COMPANY ONLY FINANCIAL DATA:
__________________________________
The condensed balance sheet of First Bancshares, Inc. (parent
company only) as of December 31, 1994, and the statement of income
for the year then ended follow:
BALANCE SHEET
_____________
ASSETS
______
INVESTMENT IN FIRST BANK $21,395,943
CASH 1,280,433
OTHER ASSETS 77,104
___________
Total assets $22,753,480
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
____________________________________
DIVIDEND PAYABLE $811,209
ACCRUED TAXES, INTEREST AND EXPENSES 1,269,032
___________
Total liabilities 2,080,241
___________
SHAREHOLDERS' EQUITY 20,673,239
___________
Total liabilities and shareholders' equity $22,753,480
===========
STATEMENT OF INCOME
___________________
REVENUES:
Dividends received from First Bank $2,500,000
Undistributed earnings of First Bank 1,960,868
Interest income 5,587
___________
Total revenues 4,466,455
___________
EXPENSES:
Interest expense 27,732
Other expenses, net 1,409,512
___________
Total expenses 1,437,244
___________
INCOME BEFORE INCOME TAXES 3,029,211
CREDIT FOR INCOME TAXES 49,252
___________
NET INCOME $3,078,463
===========
<PAGE>
FIRST COMMERCE CORPORATION
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
In addition to the merger with First Bancshares, Inc., First Commerce
Corporation recently completed a merger with City Bancorp, Inc. and has a
merger pending with Lakeside Bancshares, Inc., which are described below.
The unaudited pro forma condensed combined balance sheet as of December
31, 1994 and the unaudited pro forma condensed combined statements of
income for the years ended December 31, 1994, 1993 and 1992 appearing on
the following pages give effect to the mergers of First Bancshares, Inc.,
City Bancorp, Inc. and Lakeside Bancshares, Inc. into First Commerce
Corporation ("FCC"). A brief description of each of the mergers follows.
On February 17, 1995, First Bancshares, Inc. (First), the parent
company of First Bank, Slidell, Louisiana, merged into FCC in exchange
for 2,705,537 shares of FCC common stock. First Bank was merged into
First National Bank of Commerce (FNBC), a wholly owned subsidiary of FCC.
On February 17, 1995, City Bancorp, Inc. (City), the parent company of
City Bank and Trust Company, New Iberia, Louisiana, merged into FCC in
exchange for 516,100 shares of FCC common stock. City Bank was merged
into The First National Bank of Lafayette, a wholly owned subsidiary of
FCC. FCC has repurchased the shares of common stock equal to the number
of shares issued for the City acquisition.
FCC and Lakeside Bancshares, Inc. (Lakeside) have signed a definitive
agreement to merge the two companies and their respective subsidiaries,
The First National Bank of Lake Charles (FNBLC) and Lakeside National Bank
of Lake Charles (LNB). Shareholders of Lakeside will receive shares of
FCC Common Stock with a value of approximately $30 million. The number of
shares will be determined at the time the mergers are effected.
The First merger was accounted for using the pooling-of-interests
method of accounting. The City merger was accounted for using the
purchase method of accounting, and the Lakeside merger is expected to be
accounted for as a pooling-of-interests. The following pro forma
financial statements have been prepared to reflect the consummation of all
of the described mergers.
No provision has been made for nonrecurring charges or credits
directly related to the mergers. Such charges are estimated to be $2.5
million, after taxes. Certain direct costs of the mergers which have been
incurred and included in the pro forma financial statements are
approximately $2 million, after taxes. The unaudited pro forma condensed
combined balance sheet includes adjustments directly attributable to the
proposed mergers based on estimates derived from information currently
available.
The proforma 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)
December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Historical
-------------------------------------------------- Pro Pro
City Lakeside Forma Forma
FCC Lakeside First (Unaudited) Divestiture<FN1> Adjustments<FN2> Combined
----------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 397,376 $ 16,348 $ 11,165 $ 4,673 $ (6,904) $ (13,759)<FN3> $ 408,899
Interest-bearing deposits
in other banks 138 4,846 143 99 - - 5,226
Securities held to maturity 8,800 39,644 3,084 9,031 - - 60,559
Securities available for sale 2,458,443 8,856 35,224 16,885 - - 2,519,408
Trading account securities 8,970 - - - - - 8,970
Federal funds sold and
securities purchased under
resale agreements 38,200 9,120 28,030 2,250 - - 77,600
Loans and leases, net of
unearned income 3,236,653 91,616 150,511 44,033 (25,534) - 3,497,279
Allowance for loan losses (53,656) (3,038) (2,277) (581) - - (59,552)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net loans and leases 3,182,997 88,578 148,234 43,452 (25,534) 3,437,727
Premises and equipment 117,441 8,205 5,718 1,828 (701) - 132,491
Goodwill and other intangible
assets 15,118 - - - - 6,047 <FN4> 21,165
Other assets 331,207 1,497 12,612 837 (105) - 346,048
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets $6,558,690 $ 177,094 $ 244,210 $ 79,055 $ (33,244) $ (7,712) $7,018,093
=========== =========== =========== =========== =========== =========== ===========
LIABILITIES
Noninterest-bearing
deposits $1,226,752 $ 46,494 $ 43,507 $ 16,056 $ (11,067) $ - $1,321,742
Interest-bearing deposits 4,231,318 113,185 174,932 50,562 (25,735) - 4,544,262
Total deposits 5,458,070 159,679 218,439 66,618 (36,802) 5,866,004
Short-term borrowings 470,483 20 491 4,036 - - 475,030
Other liabilities 70,135 593 4,607 689 1,218 - 77,242
Long-term debt 88,956 - - - - - 88,956
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total liabilities 6,087,644 160,292 223,537 71,343 (35,584) 6,507,232
----------- ----------- ----------- ----------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock 59,954 - - - - - 59,954
Common stock 130,963 1,250 848 500 - 16,636<FN5> 150,197
Capital surplus 137,671 2,500 3,823 2,504 - (19,643)<FN5> 126,855
Retained earnings 214,808 13,248 16,495 5,230 2,340 (5,230)<FN5> 246,891
Unearned restricted stock
compensation (592) - - - - - (592)
Treasury stock - - (3) - - 3<FN5> -
Unrealized gain(loss) on
securities available for
sale (71,758) (196) (490) (522) - 522<FN5> (72,444)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Total stockholders'
equity 471,046 16,802 20,673 7,712 2,340 (7,712) 510,861
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
stockholders'
equity $6,558,690 $ 177,094 $ 244,210 $ 79,055 $ (33,244) $ (7,712) $7,018,093
=========== =========== =========== =========== =========== =========== ===========
(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
------------------------------------------------------ Pro Pro
City Forma Forma
FCC Lakeside First (Unaudited) Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 408,004 $ 11,533 $ 19,978 $ 5,899 $ $ 445,414
Interest expense 151,743 2,724 4,784 1,931 - 161,182
------------ ------------ ------------ ------------ ------------ ------------
Net interest income 256,261 8,809 15,194 3,968 - 284,232
Provision for loan losses (11,568) - 125 175 - (11,268)
------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 267,829 8,809 15,069 3,793 - 295,500
Other income 66,885 3,238 2,549 823 - 73,495
Operating expense 241,362 9,710 12,354 3,300 403<FN6> 267,129
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income tax expe 93,352 2,337 5,264 1,316 (403) 101,866
Income tax expense 29,668 775 2,186 458 - 33,087
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) 63,684 1,562 3,078 858 (403) 68,779
Preferred dividend requirements 4,347 - - - - 4,347
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) applicable to common
shares $ 59,337 $ 1,562 $ 3,078 $ 858 $ (403) $ 64,432
============ ============ ============ ============ ============ ============
Earnings per share<FN7>
Primary $ 2.25 $ 3.12 $ 3.63 $ 8.58 $ 2.14
Fully diluted $ 2.19 $ 3.12 $ 3.63 $ 8.58 $ 2.09
Weighted average shares outstanding<FN7>
Primary 26,317,242 500,000 847,658 100,000 30,163,897
Fully diluted 29,111,621 500,000 847,658 100,000 32,958,276
(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
------------------------------------------------------ Pro Pro
City Forma Forma
FCC Lakeside First (Unaudited) Adjustments Combined
------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 393,334 $ 11,999 $ 20,640 $ 6,033 $ - $ 432,006
Interest expense 143,324 3,207 5,030 1,788 - 153,349
------------ ------------ ------------ ------------ ------------ ------------
Net interest income 250,010 8,792 15,610 4,245 - 278,657
Provision for loan losses (4,504) - (1,300) 205 - (5,599)
------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 254,514 8,792 16,910 4,040 - 284,256
Other income 102,421 3,256 2,544 807 - 109,028
Operating expense 221,080 9,764 10,586 3,224 403<FN6> 245,057
------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense 135,855 2,284 8,868 1,623 (403) 148,227
Income tax expense 40,641 822 2,919 552 - 44,934
------------ ------------ ------------ ------------ ------------ ------------
Net income<FN8> 95,214 1,462 5,949 1,071 (403) 103,293
Preferred dividend requirements 4,348 - - - - 4,348
------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common shares $ 90,866 $ 1,462 $ 5,949 $ 1,071 $ (403) $ 98,945
============ ============ ============ ============ ============ ============
Earnings per share<FN7>
Primary $ 3.48 $ 2.92 $ 7.02 $ 10.71 $ 3.30
Fully diluted $ 3.18 $ 2.92 $ 7.02 $ 10.71 $ 3.07
Weighted average shares outstanding<FN7>
Primary 26,132,211 500,000 847,787 100,000 29,978,866
Fully diluted 32,125,003 500,000 847,787 100,000 35,971,658
(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
------------------------------------------------------ Pro Pro
City Forma Forma
FCC Lakeside First (Unaudited) Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 398,701 $ 13,593 $ 20,495 $ 6,086 $ - $ 438,875
Interest expense 163,348 4,798 6,682 2,073 - 176,901
------------ ------------ ------------ ------------ ------------ ------------
Net interest income 235,353 8,795 13,813 4,013 - 261,974
Provision for loan losses 22,040 675 680 236 - 23,631
------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 213,313 8,120 13,133 3,777 - 238,343
Other income 96,627 4,167 2,106 728 - 103,628
Operating expense 203,781 10,383 9,785 3,113 403<FN6> 227,465
------------ ------------ ------------ ------------ ------------ ------------
Income before income tax expense and
minority interest 106,159 1,904 5,454 1,392 (403) 114,506
Income tax expense 32,766 689 1,774 226 - - 35,455
------------ ------------ ------------ ------------ ------------ ------------
Income before minority interest 73,393 1,215 3,680 1,166 (403) 79,051
Earnings of minority interest 918 - - - - 918
------------ ------------ ------------ ------------ ------------ ------------
Net income 72,475 1,215 3,680 1,166 (403) 78,133
Preferred dividend requirements 4,076 - - - - 4,076
------------ ------------ ------------ ------------ ------------ ------------
Income applicable to common shares $ 68,399 $ 1,215 $ 3,680 $ 1,166 $ (403) $ 74,057
============ ============ ============ ============ ============ ============
Earnings per share<FN7>
Primary $ 2.88 $ 2.43 $ 4.34 $ 11.66 $ 2.69
Fully diluted $ 2.70 $ 2.43 $ 4.34 $ 11.66 $ 2.56
Weighted average shares outstanding<FN7>
Primary 23,728,540 500,000 847,787 100,000 27,575,195
Fully diluted 29,568,365 500,000 847,787 100,000 33,415,020
(See accompanying notes)
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (Unaudited)
<FN1> In order to eliminate any concern about the competitive impact of
the proposed merger, FCC and Lakeside have committed to the
divestiture of two branches of LNB. The sale of the two branches
will include loans, deposits, premises and equipment, and cash
related to the branches. The amounts shown represent the estimated
book values of the assets and liabilities to be sold as result of
these divestitures, with a resulting net gain of $3.6 million
before taxes.
<FN2> To calculate pro forma information, it has been assumed that the
number of outstanding shares of FCC Common Stock includes shares
to be issued upon consummation of the mergers. In connection
with the Lakeside merger, FCC will issue shares of its common
stock to the shareholders of Lakeside. Under the terms of the
proposed merger with Lakeside, 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 20 trading days ending on the fifth trading day
trading day before the closing date for the merger. For purposes
of these pro formas , the conversion rate has been assumed to be
2.28 based on the average closing sales prices of a share of
FCC common stock for the 20 trading days ending March 8, 1995 of
$26.29. The total number of shares issued in the transaction
with First was 2,705,537. The total number of shares issued in
the transaction with City was 516,100. FCC has repurchased
shares equal to the number issued in the City transaction at a
weighted average price of $26.66.
<FN3> Reflects the cost to repurchase the shares issued in conjunction
with the City merger.
<FN4> To record the estimated excess cost over fair value of City's net
assets of $6.0 million as required by generally accepted
accounting principles. For purposes of these pro formas, it has
been assumed that the adjustment from book values to fair values
for City would not be material; therefore these adjustments are
not reflected.
<FN5> 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 Lakeside and First
and increased by the par value of the FCC common stock issued and
assumed to be issued under the mergers. As required by generally
accepted accounting principles under the purchase method of
accounting, FCC's stockholders' equity has been decreased by the
balance in City's stockholders' equity accounts. An analysis of
these adjustments follows (in thousands):
<TABLE>
<CAPTION>
Stockholders' Equity
-------------------------------------------------------------------------
Loss On
Securities Total
Common Capital Retained Treasury Available Stockholders'
December 31, 1994 Stock Surplus Earnings Stock For Sale Equity
- ----------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lakeside (A) $ 5,706 $ (1,956) $ - $ - $ - $ 3,750
(1,250) (2,500) - - - (3,750)
First (B) 13,528 (8,860) - - - 4,668
(848) (3,823) - 3 - (4,668)
City (C) - - - - - -
(500) (2,504) (5,230) - 522 (7,712)
----------------------------------------------------------------------
Total $ 16,636 $ (19,643) $ (5,230) $ 3 $ 522 $ (7,712)
======================================================================
</TABLE>
(A) Issuance of 1,141,118 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 ($5,706,000).
(B) Issuance of 2,705,537 shares of FCC common stock for
848,658 shares of First common stock in a transaction
accounted for as a pooling-of-interests. FCC's common stock
account has been decreased by the balance in First's common
stock account ($848,000) and increased by the par value of
the FCC common stock issued ($13,528,000).
(C) Issuance of 516,100 shares of FCC common stock for 100,000
shares of City common stock in a transaction accounted for
as a purchase. FCC's common stock account has been
decreased by the balance in City's common stock account
($500,000). Excess cost over fair value of approximately
$6 million will be recorded as a result of this
transaction.
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED (continued)
FINANCIAL STATEMENTS (Unaudited)
<FN6> To record the excess cost over fair value for the City merger of
$6,047,000. The excess cost is being amortized over 15 years on
a straight-line basis.
<FN7> 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 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.
<FN8> First and Lakeside adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" in 1993 and
reported the cumulative effect of this change in their resepctive
1993 consolidated statements of income. The effect of this change
was a $131,000 decrease in net income for Lakeside and a $40,000
increase in net income for First. 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.
<PAGE>
SIGNATURE
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 hereunto duly
authorized.
FIRST COMMERCE CORPORATION
By: /s/ Thomas L. callicutt, Jr.
Thomas L. Callicutt, Jr.
Senior Vice President,
Controller and
Principal Accounting Officer
Dated: March 31, 1995
<PAGE>
EXHIBIT INDEX
Page
Exhibits Number
2 Agreement and Plan of Merger dated May 27,
1994, included as Exhibit 2 to First
Commerce Corporation's Registration
Statement on Form S-4 (Registration Number
33-54865) and incorporated herein by
reference.
4.1 Indenture between First Commerce
Corporation 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 First Commerce
Corporation's Annual Report on Form 10-K
for the year ended December 31, 1985 and
incorporated herein by reference.
4.2 Indenture between First Commerce
Corporation 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 First Commerce
Corporation's Annual Report on Form 10-K
for the year ended December 31, 1986 and
incorporated herein by reference.
23 Consent of Arthur Andersen LLP.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated March 17,
1995 covering the audited financial statements of First
Bancshares, Inc. included in First Commerce Corporation's
Form 8-K/A dated March 31, 1995 into First Commerce
Corporation's previously filed Registration Statement File
No. 2-97152 on Form S-8, Registration Statement File No. 33-
925 on Form S-8, Registration Statement File No. 33-28002 on
Form S-8, Registration Statement File No. 50150 on Form S-8,
Registration Statement File No. 33-57035 on Form S-8, and
Registration Statement File No. 33-54939 on Form S-4.
New Orleans, Louisiana
March 31, 1995
