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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1997
Commission file number 0-7931
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0701203
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 St. Charles Avenue, 29th Floor 70170
New Orleans, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 623-1371
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 April 30,1997
----- -------------------------------
Common Stock, $5.00 par value 38,987,773
FIRST COMMERCE CORPORATION
TABLE OF CONTENTS
Page No.
Part I: Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Report of Independent Public Accountants 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II: Other Information 23
FIRST COMMERCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) March 31 December 31
1997 1996
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ASSETS
Cash and due from banks $398,944 $440,347
Interest-bearing deposits in other banks 59 134
Securities available for sale,
at fair value 2,262,360 2,177,529
Trading account securities 34,445 13,122
Federal funds sold and securities
purchased under resale agreements 32,125 59,250
Loans, net of unearned income of
$1,731 and $2,589, respectively 6,215,904 6,217,483
Allowance for loan losses (81,690) (81,606)
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Net loans 6,134,214 6,135,877
===============================================================================
Premises and equipment 171,270 170,431
Accrued interest receivable 104,909 105,888
Other assets 112,832 87,532
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Total assets $9,251,158 $9,190,110
===============================================================================
LIABILITIES
Noninterest-bearing deposits $1,335,044 $1,436,038
Interest-bearing deposits 6,181,684 5,868,808
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Total deposits 7,516,728 7,304,846
===============================================================================
Short-term borrowings 392,330 944,823
Accrued interest payable 50,397 44,160
Accounts payable and
other accrued liabilities 230,912 91,883
Long-term debt 340,185 80,723
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Total liabilities 8,530,552 8,466,435
===============================================================================
STOCKHOLDERS' EQUITY
Preferred stock;
5,000,000 shares authorized, none issued 0 0
Common stock, $5 par value
Authorized -- 100,000,000 shares
Issued -- 39,030,321 and 39,402,926 shares,
respectively 195,152 197,015
Capital surplus 150,021 146,390
Retained earnings 375,969 373,521
Treasury stock -- 28,000 and 482,998
common shares, respectively, at cost (1,101) (13,150)
Unearned restricted stock compensation (5,974) (2,956)
Net unrealized gain on securities
available for sale 6,539 22,855
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Total stockholders' equity 720,606 723,675
===============================================================================
Total liabilities
and stockholders' equity $9,251,158 $9,190,110
===============================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Balance Sheets.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(dollars in thousands except per share data) March 31
===============================================================================
1997 1996
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INTEREST INCOME
Interest and fees on loans $135,466 $114,142
Interest and dividends on taxable securities 33,502 38,408
Interest on tax-exempt securities 1,510 1,601
Interest on money market investments 679 923
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Total interest income 171,157 155,074
===============================================================================
INTEREST EXPENSE
Interest on deposits 62,503 55,113
Interest on short-term borrowings 7,294 8,317
Interest on long-term debt 5,527 2,719
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Total interest expense 75,324 66,149
===============================================================================
NET INTEREST INCOME 95,833 88,925
PROVISION FOR LOAN LOSSES 13,225 3,825
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 82,608 85,100
===============================================================================
OTHER INCOME
Deposit fees and service charges 14,038 14,419
Credit card fee income 12,561 9,938
Trust fee income 5,421 4,578
Broker/dealer revenue 2,778 2,565
ATM fee income 2,603 2,391
Other operating revenue 6,144 6,909
Securities transactions 23 1,207
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Total other income 43,568 42,007
===============================================================================
OPERATING EXPENSE
Salary expense 39,135 36,017
Employee benefits 7,471 8,079
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Total personnel expense 46,606 44,096
Equipment expense 7,134 6,788
Net occupancy expense 5,141 5,623
Communications and delivery expense 5,044 4,970
Advertising expense 3,835 3,244
Professional fees 2,522 3,531
FDIC insurance expense 323 577
Other operating expense 12,237 10,957
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Total operating expense 82,842 79,786
===============================================================================
INCOME BEFORE INCOME TAX EXPENSE 43,334 47,321
INCOME TAX EXPENSE 14,314 15,788
===============================================================================
NET INCOME 29,020 31,533
PREFERRED DIVIDEND REQUIREMENTS 0 713
===============================================================================
INCOME APPLICABLE TO COMMON SHARES $29,020 $30,820
===============================================================================
EARNINGS PER COMMON SHARE
Primary $ 0.74 $ 0.79
Fully diluted $ 0.73 $ 0.75
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 39,268,817 38,898,536
Fully diluted 42,286,093 44,007,862
===============================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
(dollars in thousands) March 31
===============================================================================
1997 1996
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OPERATING ACTIVITIES
Net income $29,020 $31,533
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 13,225 3,825
Depreciation and amortization 5,991 6,031
Amortization of intangibles 585 729
Deferred income tax (benefit) (12) (538)
Net deferred loan (fees) (1,122) (1,935)
Net (gain) from securities transactions (23) (1,207)
Net (gain) on branch divestiture 0 (1,137)
(Increase) in trading account securities (21,323) (7,191)
Decrease in accrued interest receivable 979 11,360
(Increase) in other assets (16,536) (7,506)
Increase in accrued interest payable 6,237 2,648
Increase in accounts payable and
other accrued liabilities 2,197 15,202
Other, net 6,003 (6,583)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 25,221 45,231
===============================================================================
INVESTING ACTIVITIES
Net decrease in interest-bearing
deposits in other banks 75 443
Proceeds from maturities/calls of
securities available for sale 251,453 164,694
Purchases of securities available for sale (223,603) (781)
Net decrease in federal funds sold and
securities purchased under resale agreements 27,125 14,500
Net (increase) decrease in loans (19,278) 16,294
Divestiture of branch 0 (14,410)
Purchases of premises and equipment (7,156) (7,493)
Proceeds from sales of foreclosed assets 3,933 3,263
Other, net 9 1,745
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NET CASH PROVIDED BY INVESTING ACTIVITIES 32,558 178,255
===============================================================================
FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (143,704) (149,457)
Net increase in time deposits 355,586 99,947
Net (decrease) in short-term borrowings (552,493) (234,964)
Issuance of bank notes 258,664 0
Payments on long-term debt (6) (39)
Cash dividends (15,598) (14,297)
Proceeds from issuance of common
and treasury stock 577 123
Purchase of treasury stock (2,208) 0
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NET CASH (USED) BY FINANCING ACTIVITIES (99,182) (298,687)
===============================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (41,403) (75,201)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 440,347 497,268
===============================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $398,944 $422,067
===============================================================================
Cash paid during the period for:
Interest expense $69,087 $63,597
Income taxes $5,500 $5,100
===============================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accounting and reporting policies of First Commerce
Corporation and its subsidiaries (FCC) conform with generally
accepted accounting principles and with general practices
within the financial services industry. In preparing the
consolidated financial statements, FCC is required to make
estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
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 presented. 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.
The Notes to Consolidated Financial Statements included
herein should be read in conjunction with the Notes to
Consolidated Financial Statements included in FCC's 1996 Annual
Report to Shareholders.
NOTE 2 - LONG-TERM DEBT
In January 1997, FCC's subsidiary bank, First National
Bank of Commerce, established an ongoing bank note program to
diversify its access to external funding sources. During the
first quarter of 1997, $260 million par value of bank notes
were issued with an effective yield of 6.56% and an average
original maturity of three years.
NOTE 3 - STOCK-BASED INCENTIVE COMPENSATION PLANS
The following table summarizes the activity related to
stock options and stock appreciation rights (SARs) during the
first quarter of 1997:
==================================================================
Weighted Weighted
Number Average Average
of Exercise Number of Exercise
Options Price SARs Price
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Outstanding at
December 31,
1996 902,348 $25.97 1,085,862 $26.99
Granted 254,633 $40.13 - -
Exercised (42,401) $16.90 (63,171) $26.85
Canceled (6,255) $30.50 (9,712) $26.31
- -----------------------------------------------------------------
Outstanding at
March 31, 1997 1,108,325 $29.54 1,012,979 $27.01
=================================================================
Exercisable at
March 31, 1997 483,834 484,655
=================================================================
Stock options are granted at fair value at the date of grant.
No compensation expense has been recorded in connection with stock
options. Options have a four-year vesting schedule with 25% of the
options becoming exercisable each year. The options expire eight
years from the date of grant.
On April 21, 1997, FCC's shareholders approved the FCC 1997
Stock Option Plan (the "Option Plan"). Under the Option Plan, all
outstanding SARs are cancelled and are replaced with stock options
with equivalent terms. Compensation expense is increased or
decreased in connection with SARs based on the market value of FCC's
common stock on the date of the financial statements; therefore, this
expense is subject to the volatility of the stock market. Because
FCC has elected under SFAS No. 123 "Accounting for Stock-Based
Compensation" to continue to account for stock-based compensation
under APB Opinion No. 25 "Accounting for Stock Issued to Employees",
this exchange caps the total expense at the stock price on the
exchange date, eliminating this volatility. On April 25, 1997, each
SAR was exchanged for one newly-issued option to purchase one share
of FCC's common stock. FCC's closing stock price on April 25, 1997
was $39.625.
The following table summarizes the activity related to
restricted stock during the first quarter of 1997:
==================================
Number
of
Shares
----------------------------------
Outstanding at
December 31, 1996 140,673
Granted 97,947
Canceled (2,529)
----------------------------------
Outstanding at
March 31, 1997 236,091
===================================
Performance shares were granted in conjunction with the 1997
restricted stock grant, equal to 50% of restricted shares.
In the event of a change in control of FCC, all outstanding options become
exercisable immediately, and the restrictions on all shares of restricted stock
lapse immediately.
NOTE 4 - EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share"
which establishes standards for computing and presenting earnings per share
("eps"). Under SFAS No. 128, primary eps is replaced with basic eps.
Basic eps is computed by dividing income applicable to common shares by the
weighted average shares outstanding; no dilution for any potentially
convertible shares is included in the calculation. Fully diluted eps, now
called diluted eps, is still required; however, when applying the treasury
stock method, the average stock price is used rather than the greater of
the average or closing stock price for the period. Under SFAS No. 128,
basic eps was $.75 and $.80 for the first quarters of 1997 and 1996,
respectively. Diluted eps was $.73 for the first quarter of 1997 and $.75
for the first quarter of 1996. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997.
NOTE 5 - 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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
and Board of Directors of
First Commerce Corporation:
We have reviewed the accompanying consolidated balance
sheet of FIRST COMMERCE CORPORATION (a Louisiana corporation)
and subsidiaries as of March 31, 1997, and the related
consolidated statements of income and cash flows for the three-
month periods ended March 31, 1997 and 1996. 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,
1996 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 10,
1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set
forth in the accompanying consolidated condensed balance sheet
as of December 31, 1996 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 25, 1997
FIRST COMMERCE CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(dollars in thousands except per share data) 1997 1996
===============================================================================================================
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEET DATA
Total assets $9,082,650 $8,843,783 $8,526,062 $8,284,388 $8,442,698
Earning assets 8,400,237 8,188,195 7,857,391 7,576,406 7,699,873
Loans 6,206,007 5,982,771 5,612,251 5,277,895 5,170,534
Securities 2,137,468 2,157,419 2,201,775 2,197,283 2,457,394
Deposits 7,372,870 6,950,851 6,792,549 6,917,697 6,889,954
Long-term debt 257,275 82,460 85,912 85,980 87,028
Stockholders' equity 723,937 710,131 709,896 738,940 740,091
---------- ---------- ---------- ---------- ----------
INCOME STATEMENT DATA
Total interest income $ 171,157 $ 169,763 $ 162,338 $ 154,050 $ 155,074
Net interest income 95,833 96,232 93,617 90,968 88,925
Net interest income (FTE) 97,592 97,776 95,051 92,289 90,384
Provision for loan losses 13,225 14,168 12,525 7,465 3,825
Other income (exclusive of securities transactions) 43,545 45,498 43,578 42,501 40,800
Securities transactions 23 407 (1,370) (84) 1,207
Operating expense 82,842 85,304 83,614 78,144 79,786
Net income 29,020 28,707 26,531 31,667 31,533
---------- ---------- ---------- ---------- ----------
KEY RATIOS
Return on average assets 1.30% 1.29% 1.24% 1.54% 1.50%
Return on average total equity 16.26% 16.08% 14.87% 17.24% 17.14%
Return on average common equity 16.26% 16.81% 15.31% 17.79% 17.82%
Net interest margin 4.70% 4.76% 4.82% 4.89% 4.71%
Efficiency ratio 58.70% 59.54% 60.31% 57.97% 60.82%
Overhead ratio 1.90% 1.93% 2.03% 1.89% 2.04%
Average loans to average deposits 84.17% 86.07% 82.62% 76.30% 75.04%
Allowance for loan losses to loans 1.31% 1.31% 1.36% 1.39% 1.46%
Nonperforming assets to loans plus foreclosed assets 0.59% 0.51% 0.57% 0.61% 1.09%
Allowance for loan losses to nonperforming loans 255.47% 299.42% 279.00% 265.98% 150.38%
Equity ratio 7.79% 7.87% 8.03% 8.80% 8.94%
Leverage ratio 7.70% 7.76% 7.90% 8.65% 8.33%
---------- ---------- ---------- ---------- ----------
SELECTED PER SHARE DATA
Earnings Per Common Share
Primary $ 0.74 $ 0.76 $ 0.68 $ 0.79 $ 0.79
Fully diluted $ 0.73 $ 0.72 $ 0.66 $ 0.76 $ 0.75
Common Dividends
Cash dividends $ 0.40 $ 0.40 $ 0.35 $ 0.35 $ 0.35
Dividend payout ratio 54.05% 52.63% 51.47% 44.30% 44.30%
Book Value (end of period)
Book value $ 18.58 $ 18.66 $ 17.96 $ 18.11 $ 18.02
Tangible book value $ 18.13 $ 18.20 $ 17.46 $ 17.61 $ 17.51
Common Stock Data
High stock price $ 46.38 $ 39.88 $ 36.63 $ 36.00 $ 34.25
Low stock price $ 38.25 $ 34.88 $ 33.25 $ 32.25 $ 30.25
Closing stock price $ 40.50 $ 38.88 $ 34.88 $ 35.38 $ 33.00
Trading volume (in thousands) 8,049 7,095 9,118 5,498 5,051
Number of stockholders (end of period) 9,223 9,319 9,267 9,257 9,286
Average Shares Outstanding (in thousands)
Primary 39,269 37,771 38,074 39,114 38,899
Fully diluted 42,286 42,256 42,895 43,972 44,008
NUMBER OF EMPLOYEES (end of period) 4,058 4,036 3,997 4,053 4,080
</TABLE>
FIRST QUARTER IN REVIEW
First Commerce Corporation's (FCC's) net income for the
first quarter of 1997 was $29.0 million, compared to $31.5
million in last year's first quarter. Fully diluted earnings
per share were $.73 this quarter, compared to $.75 for 1996's
first quarter. Return on average equity was 16.26%, and return
on average assets was 1.30% for the first quarter of 1997. The
key points for the first quarter's results included:
Net interest income (FTE) was up 8% from the first quarter
of 1996, mainly on the strength of loan growth.
The provision for loan losses was $13.2 million in the first
quarter, compared to $3.8 million in last year's first
quarter. The provision increase was primarily related to
rising credit card losses.
Other income, excluding securities transactions and a
nonrecurring gain in 1996's first quarter, was 10% higher
than the first quarter of 1996.
Operating expense was 3.8% higher than in last year's first
quarter. The efficiency ratio was 58.7% for the current
quarter.
A more detailed review of FCC's financial condition and
earnings for the first quarter of 1997 follows. This review
should be read in conjunction with the consolidated financial
statements of First Commerce Corporation and Subsidiaries
included in this report, and the Financial Review in the 1996
Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for the first quarter of 1997
was $97.6 million, 8% higher than last year's first quarter.
The rise in net interest income primarily reflected average
loan growth. Average loans rose 20%, while average earning
assets grew 9%, resulting in a more favorable mix of earning
assets. As a percent of earning assets, average loans
increased to 74% in the current quarter, compared to 67% in the
first quarter of 1996. Loan growth was funded by a reduction
in securities, plus increased levels of deposits and long-term
debt. Growth in deposits and debt was primarily due to the
issuance of retail brokered CDs and bank notes.
The net interest margin was 4.70% this quarter, compared
to 4.71% in 1996's first quarter. The earning asset yield rose
16 basis points, due to the shift in the mix to a higher
proportion of loans. This improvement was offset by a 14 basis
point increase in the cost of interest-bearing liabilities,
plus a reduction in the interest-free funding ratio. The rise
in the cost of interest-bearing liabilities reflected rates
paid on FCC's increased level of longer-term funding sources.
Interest-free funds were 18% of average earning assets in the
current quarter, compared to 19% in 1996's first quarter.
Table 1 presents average balance sheets, net interest
income (FTE) and interest rates for the first quarters of 1997
and 1996. Table 2 analyzes the components of changes in net
interest income between these periods.
Provision For Loan Losses
The provision for loan losses was $13.2 million in the
first quarter of 1997, compared to $3.8 million in 1996's first
quarter. The increase in the provision was principally related
to higher net charge-offs of credit card loans and loans to
individuals.
For a discussion of the allowance for loan losses, net
charge-offs and nonperforming assets, see the Credit Risk
Management section of this Financial Review.
Other Income
Other income, excluding securities transactions, was $43.5
million in the first quarter, compared to $40.8 million in the
same quarter of 1996. In 1996's first quarter, other income
included a $1.1 million gain from the divestiture of a branch.
Excluding securities transactions and the gain from
divestiture, other income rose 10% over the first quarter of
1996. Virtually all categories increased, with the most
significant growth in credit card and trust fee income. Credit
card fee income rose $2.6 million, or 26%, reflecting increases
in sales volumes and late charge fee income. Higher late
charge fee income was driven by both volume and pricing
increases. Trust fee income was $843,000, or 18%, higher than
in 1996's first quarter, due to new trust business.
Securities transactions resulted in pretax net gains of
$23,000 and $1.2 million in the first quarters of 1997 and
1996, respectively.
Operating Expense
Operating expense was $82.8 million in 1997's first
quarter, compared to $79.8 million in the first quarter of
1996. The 3.8% increase in operating expense was mainly due to
higher personnel costs. Personnel expense rose $2.5 million,
or 6%, reflecting expense for incentive pay tied to stock
performance, plus annual merit raises. Higher bank stock taxes
(Louisiana does not assess income tax on commercial banks;
rather, banks pay property tax based on the value of their
capital stock) and advertising expenses also contributed to the
rise in operating expense. Lower professional fees, due to
declines in consulting and legal expenses, partially offset the
increase.
The efficiency ratio was 58.7% for the first quarter of
1997, compared to 61.4% in 1996's first quarter, excluding the
gain on divestiture.
FINANCIAL CONDITION ANALYSIS
Loans
Loans were $6.2 billion at March 31, 1997, 22% higher than
one year ago and unchanged from year-end 1996. Average loans
for the first quarter of 1997 were $6.2 billion, 20% higher
than last year's same period. The average loan growth from
1996's first quarter was across-the-board, with significant
increases in credit card, consumer and commercial real estate
loans.
Securities
At March 31, 1997, securities were $2.3 billion, compared
to $2.2 billion at December 31, 1996. For both periods, all
securities were classified as available for sale. Unrealized
gains, net of tax, increased stockholders' equity $7 million at
March 31, 1997, compared to $23 million at year-end 1996. The
fluctuation in market values was mainly driven by changes in
market interest rates.
Average securities for the current quarter were $2.1
billion, 13% lower than last year's first quarter. The
majority of the proceeds from securities maturing during 1996
funded loan growth. It is likely that the proceeds from
securities maturities or sales will be reinvested in other
securities during 1997.
Money Market Investments
Money market investments were $67 million at March 31,
1997. Average money market investments for the first quarter
of 1997 were $57 million, compared to $72 million for the first
quarter of 1996. As a percent of average earning assets, money
market investments were 1% for both periods.
Deposits
At March 31, 1997, deposits were $7.5 billion, compared to
$7.3 billion at December 31, 1996. Average deposits for the
current quarter were $7.4 billion, 7% over 1996's first
quarter. Deposit growth was primarily related to FCC's retail
brokered CD program and public funds deposits. FCC's retail
brokered CD program was established in the fourth quarter of
1996. CDs issued under this program are included in time
deposits of $100,000 and over and averaged $229 million for the
first quarter of 1997.
Short-Term Borrowings
Short-term borrowings were $392 million as of March 31,
1997, a 58% decline from year-end 1996. Average short-term
borrowings for the current quarter were $579 million, compared
to $959 million for the fourth quarter of 1996 and $603 million
for 1996's first quarter. Issuance of longer term retail
brokered CDs and bank notes allowed short-term borrowings to
decline during the first quarter.
Long-Term Debt
At March 31, 1997, long-term debt was $340 million,
compared to $81 million at December 31, 1996. In January 1997,
First National Bank of Commerce, FCC's largest bank,
established an ongoing bank note program to diversify its
access to external funding sources. The increase in long-term
debt from year-end 1996 reflects the issuance of $260 million
of bank notes under this program. The bank notes issued have
an average maturity of three years.
Interest Rate Contracts
The total notional amount of FCC's interest rate contracts
at March 31, 1997 was $766 million, compared to $630 million at
December 31, 1996. Table 3 summarizes FCC's interest rate
contracts at March 31, 1997.
During the first quarter of 1997, FCC entered into
interest rate swaps with a total notional amount of $136
million. As shown in Table 3, these interest rate swaps
convert a portion of retail brokered CDs and long-term bank
notes from fixed to floating rate. These swaps have an average
maturity of three years.
Interest rate contracts increased net interest income
$126,000 for the current quarter. At March 31, 1997, the
estimated fair value of FCC's interest rate contracts was a
loss of $862,000.
Liquidity
In order to enhance liquidity, FCC has begun to diversify
its access to external funding sources. Retail brokered CD and
bank note programs were established in the fourth quarter of
1996 and the first quarter of 1997, respectively. In addition,
FCC is considering establishing a credit card securitization
program during 1997.
Capital and Dividends
Stockholders' equity was 7.79% of total assets at March
31, 1997, compared to 7.87% at December 31, 1996. Table 5
presents FCC's risk-based and other capital ratios as of March
31, 1997 and year-end 1996. All ratios remain well above
regulatory minimums. Under present regulations, all six of
FCC's banks are classified as "well-capitalized."
At the end of the first quarter, the Parent Company had
$53 million of net working capital. Additionally, the Parent
Company could receive dividends from the Banks without prior
regulatory approval of $62 million, plus an amount equal to the
Banks' adjusted net profits for the remainder of the year.
Credit Risk Management
Nonperforming Assets
Nonperforming assets were $36 million at March 31, 1997,
compared to $32 million at December 31, 1996. The increase was
mainly due to several commercial loans placed on nonaccrual
status. Nonperforming assets were .59% of loans at quarter-end,
compared to .51% at December 31, 1996 .63% of nonperforming
loans were contractually current or no more than 30 days past
due at the end of the first quarter, compared to 42% at
December 31, 1996.
Accruing loans past due 90 days or more were $30 million,
or .49% of loans, at March 31, 1997, compared to $29 million,
or .47% of loans, at the end of 1996. Watch list loans and
foreclosed assets were $153 million at quarter-end, compared to
$157 million at December 31, 1996.
Table 6 presents information on nonperforming assets,
detailed by type, as of March 31, 1997 and December 31, 1996.
Allowance for Loan Losses
The allowance for loan losses was $82 million, or 1.31% of
loans, at March 31, 1997, unchanged from year-end 1996. The
allowance for loan losses was 255% of nonperforming loans at
the end of 1997's first quarter, compared to 299% at December
31, 1996. Management believes that the allowance is adequate
to cover losses inherent in the loan portfolio.
First quarter net charge-offs were $13 million, or .85% of
loans. Net charge-offs were $12 million in the fourth quarter
and $5 million in 1996's first quarter. Increased credit card
net charge-offs caused the rise from the prior quarter, while
higher net charge-offs of credit card loans and loans to
individuals caused the increase from last year's first quarter.
Credit card net charge-offs rose to 4.40% in the first quarter
from 3.85% in the fourth quarter and 2.68% in 1996's first
quarter. The rise in credit card charge-offs reflected the
national trend, also experienced at FCC, of rising credit card
loan losses. Dependent primarily upon economic conditions,
national and regional trends and changes in the level and mix
of the loan portfolio, FCC's net charge-offs may continue to
grow in future periods; this growth could result in a rising
provision for loan losses.
Table 7 presents the activity in the allowance for loan
losses for the first quarters of 1997 and 1996, and for the
fourth quarter of 1996.
<TABLE>
<CAPTION>
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) (a) AND INTEREST RATES
============================================================================================================================
First Quarter 1997 First Quarter 1996
- ----------------------------------------------------------------------------------------------------------------------------
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
---------- -------- ----- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
EARNING ASSETS
Loans (b) $6,206,007 $136,552 8.91% $5,170,534 $114,890 8.93%
Securities
Taxable 2,053,070 33,554 6.60 2,367,189 38,463 6.52
Tax-exempt 84,398 2,128 10.08 90,205 2,255 10.00
---------- -------- ----- ---------- -------- -----
Total securities 2,137,468 35,682 6.74 2,457,394 40,718 6.65
---------- -------- ----- ---------- -------- -----
Money market investments 56,762 682 4.87 71,945 925 5.17
---------- -------- ----- ---------- -------- -----
Total earning assets 8,400,237 $172,916 8.33% 7,699,873 $156,533 8.17%
---------- -------- ----- ---------- -------- -----
NONEARNING ASSETS
Other assets (c) 765,290 818,757
Allowance for loan losses (82,877) (75,932)
---------- -------- ----- ---------- -------- -----
Total assets $9,082,650 $8,442,698
---------- -------- ----- ---------- -------- -----
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $1,271,108 $ 7,427 2.37% $1,135,291 $ 5,719 2.03%
Money market investment deposits 883,044 6,840 3.14 806,229 5,911 2.95
Savings and other consumer time deposits 2,748,014 32,486 4.79 2,803,393 33,153 4.76
Time deposits $100,000 and over 1,157,736 15,750 5.52 767,508 10,330 5.41
---------- -------- ----- ---------- -------- -----
Total interest-bearing deposits 6,059,902 62,503 4.18 5,512,421 55,113 4.02
---------- -------- ----- ---------- -------- -----
Short-term borrowings 578,574 7,294 5.11 603,438 8,317 5.54
Long-term debt 257,275 5,527 8.59 87,028 2,719 12.57
---------- -------- ----- ---------- -------- -----
Total interest-bearing liabilities 6,895,751 $ 75,324 4.43% 6,202,887 $ 66,149 4.29%
---------- -------- ----- ---------- -------- -----
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,312,968 1,377,533
Other liabilities 149,994 122,187
Stockholders' equity 723,937 740,091
---------- -------- ----- ---------- -------- -----
Total liabilities and stockholders' equity $9,082,650 $8,442,698
---------- -------- ----- ---------- -------- -----
Net interest income (FTE) and margin $97,592 4.70% $90,384 4.71%
---------- -------- ----- ---------- -------- -----
Net earning assets and interest spread $1,504,486 3.90% $1,496,986 3.88%
---------- -------- ----- ---------- -------- -----
Cost of funds 3.63% 3.45%
---------- -------- ----- ---------- -------- -----
</TABLE>
(a) Fully taxable equivalent based on a 35% tax rate.
(b) Net of unearned income, prior to deduction of allowance for loan losses
and including nonaccrual loans.
(c) Includes mark-to-market adjustment on securities available for sale.
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) (a)
First Quarter 1997
Compared to First Quarter 1996
- -------------------------------------------------------------------------------
Total Due to Due to
Increase Change in Change in
(in thousands) (Decrease) Volume(b) Rate(b)
- -------------------------------------------------------------------------------
INTEREST INCOME (FTE)
Loans $21,662 $23,852 ($2,190)
Securities
Taxable (4,909) (5,104) 195
Tax-exempt (127) (146) 19
- -------------------------------------------------------------------------------
Total securities (5,036) (5,250) 214
- -------------------------------------------------------------------------------
Money market investments (243) (212) (31)
- -------------------------------------------------------------------------------
Total interest income (FTE) $16,383 $18,390 ($2,007)
===============================================================================
INTEREST EXPENSE
Interest-bearing deposits
NOW account deposits $1,708 $ 731 $ 977
Money market investment deposits 929 583 346
Savings and other consumer time deposits (667) (655) (12)
Time deposits $100,000 and over 5,420 5,308 112
- -------------------------------------------------------------------------------
Total interest-bearing deposits 7,390 5,967 1,423
- -------------------------------------------------------------------------------
Short-term borrowings (1,023) (333) (690)
Long-term debt 2,808 3,886 (1,078)
- -------------------------------------------------------------------------------
Total interest expense $9,175 $ 9,520 ($345)
- -------------------------------------------------------------------------------
Change in net interest income (FTE) $7,208 $ 8,870 ($1,662)
===============================================================================
(a) Fully taxable equivalent based on a 35% tax rate.
(b) Changes not solely due to either volume or rate are allocated on a
proportional basis.
TABLE 3. INTEREST RATE CONTRACTS
<TABLE>
<CAPTION>
Weighted Average Rate
-----------------------------------
Pay
Receive Floating
Notional Maturity Fixed Rate Strike Underlying
(dollars in thousands) Amount Date Rate (LIBOR) Rate Asset/Liability
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Floors $500,000 December 1998 0% 0% 4.65% Transaction deposits
Swaps 10,000 February 1998 - February 2000 6.19 5.63 0 Long-term bank notes
Swaps 156,000 January 1999 - February 2002 6.42 5.56 0 Retail brokered CDs
Swap 100,000 March 2002 7.18 5.60 0 Loans
Total at March 31, 1997 $766,000 6.70% 5.58% 4.65%
</TABLE>
TABLE 4. NET INTEREST INCOME (EXPENSE) FROM INTEREST
RATE CONTRACTS
(in thousands) Floors Swaps Total
- -----------------------------------------------------------------
Three months ended March 31, 1997
Interest income $ 0 $ 268 $ 268
Amortization (142) 0 (142)
- -----------------------------------------------------------------
Net interest income (expense) $ (142) $ 268 $ 126
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
March 31 December 31
(dollars in thousands) 1997 1996
- --------------------------------------------------------------------
Tier 1 capital $ 697,005 $ 683,190
Tier 2 capital 126,944 126,993
- --------------------------------------------------------------------
Total capital $ 823,949 $ 810,183
====================================================================
Risk-weighted assets $6,289,889 $6,294,032
====================================================================
Ratios
Leverage ratio 7.70% 7.76%
Tier 1 capital 11.08% 10.85%
Total capital 13.10% 12.87%
Equity ratio 7.79% 7.87%
Tangible equity ratio 7.62% 7.69%
====================================================================
TABLE 6. NONPERFORMING ASSETS
March 31 December 31
(dollars in thousands) 1997 1996
- -------------------------------------------------------------------------------
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 7,816 $ 7,908
Loans to individuals-other 2,068 1,007
Commercial, financial and other 9,330 11,037
Real estate-commercial mortgages 12,138 6,687
Real estate-construction and other 624 616
- -------------------------------------------------------------------------------
Total nonaccrual loans 31,976 27,255
- -------------------------------------------------------------------------------
Foreclosed assets 4,427 4,600
- -------------------------------------------------------------------------------
Total nonperforming assets $36,403 $31,855
===============================================================================
Loans past due 90 days or more and
not on nonaccrual status $30,465 $29,451
===============================================================================
Ratios
Nonperforming assets as a percent of loans
plus foreclosed assets 0.59% 0.51%
Allowance for loan losses as a percent of
nonperforming loans 255.47% 299.42%
Loans past due 90 days or more and
not on nonaccrual status as a percent of loans 0.49% 0.47%
===============================================================================
TABLE 7. SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
Three Months Ended
March 31 December 31 March 31
(dollars in thousands) 1997 1996 1996
------- ------- --------
<S> <C> <C> <C>
Balance at beginning of period $81,606 $79,310 $75,845
Provision charged to expense 13,225 14,168 3,825
Loans charged to the allowance
Loans to individuals-residential mortgages 7 51 6
Loans to individuals-other 5,643 6,810 3,278
Commercial, financial and other 1,106 436 77
Real estate-commercial mortgages 20 168 1
Real estate-construction and other 2 0 0
Credit card loans 9,988 8,261 4,951
------- ------- -------
Total charge-offs 16,766 15,726 8,313
------- ------- -------
Recoveries on loans previously charged to the allowance
Loans to individuals-residential mortgages 173 249 64
Loans to individuals-other 1,300 1,308 907
Commercial, financial and other 918 1,030 1,083
Real estate-commercial mortgages 281 302 133
Real estate-construction and other 5 53 156
Credit card loans 948 912 834
------- ------- -------
Total recoveries 3,625 3,854 3,177
------- ------- -------
Net charge-offs 13,141 11,872 5,136
------- ------- -------
Balance at end of period $81,690 $81,606 $74,534
======= ======= =======
Gross annualized charge-offs as a percent of average loans 1.08% 1.05% 0.64%
Recoveries as a percent of gross charge-offs 21.62% 24.51% 38.22%
Net annualized charge-offs as a percent of average loans 0.85% 0.79% 0.40%
Allowance for loan losses as a percent of loans at end of period 1.31% 1.31% 1.46%
======== ======= =======
</TABLE>
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, 1996. There were no
material developments in the first quarter of
1997.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
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., Trustee, (trusteeship since
transferred to The Bank of New York)
including the form of 12 3/4% Convertible
Debentures 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., Trustee, (trusteeship since
transferred to The Bank of New York)
including the form of 12 3/4% Convertible
Debentures 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.
4.3 - Rights Agreement between FCC and First
Chicago Trust Company of New York as Rights
Agent included as Exhibit 4.3 to FCC's Annual
Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by
reference.
10.1 - Form of Employment Agreement between FCC and
Messrs. Arnof, Brooks, Flick, Gaines, Ryan,
Thompson, Wilson and Ms. Lee included as
Exhibit 10.1 to FCC's Annual Report on Form
10-K for the year ended December 31,1995, and
incorporated herein by reference.
10.2 - Amended and Restated FCC Supplemental Tax-
Deferred Savings Plan included as Exhibit
10.1 to FCC's Annual Report on Form 10-K for
the year ended December 31, 1994, and
incorporated herein by reference.
10.3 - FCC Retirement Benefit Restoration Plan
included as Exhibit 10.3 to FCC's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1996, and incorporated herein
by reference.
10.4 - Form of Nonqualified Stock Option Agreement
under the FCC 1992 Stock Incentive Plan and
Form of Restricted Stock Agreement under the
FCC 1992 Stock Incentive Plan included as
Exhibit 10.2 to FCC's Annual Report on Form
10-K for the year ended December 31, 1992,
and incorporated herein by reference.
10.5 - FCC Amended and Restated 1992 Stock Incentive
Plan included as Exhibit 10.4 to FCC's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated
herein by reference.
10.6 - FCC Supplemental Executive Retirement Plan
included as Exhibit 10.6 to FCC's Annual
Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by
reference.
10.7 - FCC Directors' Phantom Stock Plan included as
Exhibit 10.7 to FCC's Annual Report on Form
10-K for the year ended December 31, 1996,
and incorporated herein by reference.
10.8 - FCC Change in Control Severance Plan included
as Exhibit 10.8 to FCC's Annual Report on
Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
10.9 - FCC 1997 Stock Option Plan
11 - Statement Re: Computation of Earnings Per
Share
15 - Letter regarding unaudited interim financial
information
27 - Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K dated January 24, 1997
was filed by the Registrant under Item 5,
Other Events. The document was filed to
disclose FCC's issuance of a press release
dated January 14, 1997, announcing FCC's
earnings for the Fourth Quarter of 1996.
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 14, 1997 /s/ Thomas L. Callicutt,Jr.
------------ ---------------------------
Thomas L. Callicutt, Jr.
Executive Vice President, Controller and
Principal Accounting Officer
FIRST COMMERCE CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. The purpose of the 1997 Stock Option Plan
(the "Plan") of First Commerce Corporation (the "Company") is
to authorize the issuance of a sufficient number of stock
options in order that all currently outstanding stock
appreciation rights ("SARs") of the Company may be exchanged
for stock options granted under the Plan (the "Options"). As
used in the Plan, the term "subsidiary" means any corporation
of which the Company owns (directly or indirectly) within the
meaning of Section 425(f) of the Internal Revenue Code of 1986,
as amended (the "Code"), 50% or more of the total combined
voting power of all classes of stock. No Options shall be
granted hereunder unless the Plan is first approved by the
shareholders of the Company.
2. Administration.
2.1. Composition. The Plan shall be administered
by the compensation committee of the Board of Directors of
the Company, or by a subcommittee of the compensation
committee. The committee or subcommittee that administers
the Plan shall hereinafter be referred to as the
"Committee." The Committee shall consist of not fewer
than two members of the Board of Directors, each of whom,
to the extent necessary to comply with Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "1934
Act"), is a "non-employee director" within the meaning of
Rule 16b-3 and, to the extent necessary to comply with
Section 162(m) of the Code, is an "outside director" under
Section 162(m).
2.2. Authority. The Committee shall have plenary
authority to award Options under the Plan, to interpret
the Plan, to establish any rules or regulations relating
to the Plan that it determines to be appropriate, to enter
into agreements with participants as to the terms of the
Options (the "Option Agreements") and to make any other
determination that it believes necessary or advisable for
the proper administration of the Plan. Its decisions in
matters relating to the Plan shall be final and conclusive
on the Company and participants. The Committee may
delegate its authority hereunder to the extent provided in
Section 3 hereof.
3. Eligible Participants. Employees of the Company
(including officers who also serve as directors of the Company)
and its subsidiaries who currently hold SARs shall receive
Options under the Plan when designated by the Committee. With
respect to participants not subject to Section 16 of the 1934
Act and not covered employees under Section 162(m) of the Code,
the Committee may delegate to the Chief Executive Officer of
the Company its authority to designate participants.
4. Shares Subject to the Plan.
4.1. Number of Shares. Subject to adjustment as
provided in Section 6.5, up to 1,100,000 shares of the
$5.00 par value common stock ("Common Stock") of the
Company are authorized to be issued under the Plan.
Options with respect to no more than 60,000 shares of
Common Stock may be granted through the Plan to a single
participant.
4.2. Type of Common Stock. Common Stock issued
under the Plan in connection with the exercise of Options
may be authorized and unissued shares or issued shares
held as treasury shares.
5. Stock Options. An Option is a right to purchase
shares of Common Stock from the Company. Options granted under
this Plan will be non-qualified stock options. Each Option
granted by the Committee under this Plan shall be subject to
the following terms and conditions:
5.1. Price. The exercise price per share shall be
equal to the Fair Market Value of a share of Common Stock
on the date of grant of the SAR in replacement for which
an Option is being granted, subject to adjustment under
Section 6.5.
5.2. Number. The number of shares of Common Stock
subject to an Option shall be equal to the number of SARs
that the Option will replace, subject to Section 4.1 and
subject to adjustment as provided in Section 6.5.
5.3. Duration and Time for Exercise. Subject to
earlier termination as provided in Section 6.3, the term
of each Option shall be the same as the remaining term of
the SAR that the Option replaces. Each Option shall
become exercisable at the same time or times during its
term as the SAR that it replaces. The Committee may
accelerate the exercisability of any Option at any time,
except to the extent of any automatic acceleration of
Options under Section 6.10.
5.4. Repurchase. Upon approval of the Committee,
the Company may repurchase a previously granted Option
from the holder thereof by mutual agreement before such
Option has been exercised by payment to such holder of the
amount per share by which: (i) the Fair Market Value of
the Common Stock subject to the Option on the business day
immediately preceding the date of purchase exceeds (ii)
the exercise price of such Option.
5.5. Manner of Exercise. An Option may be
exercised, in whole or in part, by giving written notice
to the Company, specifying the number of shares of Common
Stock to be purchased. The exercise notice shall be
accompanied by the full purchase price for such shares.
The Option exercise price shall be payable in United
States dollars and may be paid by (a) cash; (b)
uncertified or certified check; (c) unless otherwise
determined by the Committee, by delivery of shares of
Common Stock held by the person exercising such Option for
at least six months, which shares shall be valued for this
purpose at the Fair Market Value on the business day
immediately preceding the date such Option is exercised;
(d) by the simultaneous exercise of Options and sale of
the shares of Common Stock acquired upon exercise,
pursuant to a brokerage arrangement approved by the
Company, with the proceeds from such sale delivered in
payment of the exercise price; or (e) in such other manner
as may be authorized from time to time by the Committee.
In the case of delivery of an uncertified check upon
exercise of an Option, no shares shall be issued until the
check has been paid in full. Prior to the issuance of
shares of Common Stock upon the exercise of an Option, a
participant shall have no rights as a shareholder.
6. General.
6.1. Duration. Subject to Section 6.8, the Plan
shall remain in effect until all Options granted under the
Plan have either been satisfied by the issuance of shares
of Common Stock or been terminated under the terms of the
Plan.
6.2 Transferability of Options. Options granted
hereunder shall not be transferable other than by will or
by the laws of descent and distribution and may be
exercised during the lifetime of the participant only by
the participant or the participant's guardian or legal
representative. Any attempt at assignment, transfer,
pledge, hypothecation or other disposition of an Option
or levy of attachment or similar process upon an Option
shall be null and void and without effect.
6.3. Effect of Termination of Employment or Death.
In the event that a participant ceases to be an employee
of the Company for any reason, including death,
disability, early retirement or normal retirement, any
Options may be exercised, shall vest or shall expire on
the same terms as the SARs that they replace.
6.4. Legal and Other Requirements. The obligation
of the Company to sell and deliver Common Stock under the
Plan shall be subject to all applicable laws, regulations,
rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement
under the Securities Act of 1933 if deemed necessary or
appropriate by the Company.
6.5 Adjustment. In the event of any merger,
consolidation or reorganization of the Company with any
other corporation or corporations, there shall be
substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to Options,
the number and kind of shares of stock or other securities
to which the holders of the shares of Common Stock will be
entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination
of shares or other change in the Common Stock, the number
of shares of Common Stock then subject to the Plan,
including shares subject to Options, shall be adjusted in
proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase
price of any Option shall be adjusted as and to the extent
appropriate, in the reasonable discretion of the
Committee, to provide participants with the same relative
rights before and after such adjustment.
6.6. Withholding. At any time that a participant is
required to pay to the Company an amount required to be
withheld under the applicable income tax laws in
connection with the exercise of an Option, the participant
may, subject to the Committee's right of disapproval,
satisfy this obligation in whole or in part by electing
(the "Election") to have the Company withhold from the
exercise shares of Common Stock having a value equal to
the amount required to be withheld. The value of the
shares withheld shall be based on the Fair Market Value of
the Common Stock on the date that the amount of tax to be
withheld shall be determined (the "Tax Date"). Each
Election must be made prior to the Tax Date. The
Committee may disapprove of any Election or may suspend or
terminate the right to make Elections.
A participant may also satisfy his or her total tax
liability related to an Option by delivering shares of
Common Stock that have been owned by the participant for
at least six months. The value of the shares delivered
shall be based on the Fair Market Value of the Common
Stock on the Tax Date.
6.7. No Continued Employment. No participant under
the Plan shall have any right, because of his par-
ticipation, to continue in the employ of the Company for
any period of time or to any right to continue his present
or any other rate of compensation.
6.8. Amendment of the Plan. The Board may amend or
discontinue the Plan at any time; provided, however, that
no amendment or discontinuance shall, subject to
adjustments permitted under Section 6.5, impair, without
the consent of the holder thereof, an Option previously
granted.
6.9. Immediate Acceleration of Incentives.
Notwithstanding any provision in this Plan or in any
Option Agreement to the contrary, all outstanding Options
shall become exercisable immediately upon the occurrence
of a "Change of Control."
A "Change of Control" shall be defined as:
(a) The acquisition by any individual, entity or
group within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "34 Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the 34 Act) of 40% or more of
either (i) the Company's then outstanding common
stock ("Outstanding Stock") or (ii) the combined
voting power of its then outstanding voting
securities entitled to vote generally in the election
of directors ("Outstanding Voting Securities") other
than any acquisition (i) by any employee benefit plan
(or related trust) sponsored or maintained by the
Company or any entity controlled by it or (ii) by any
entity pursuant to a transaction which complies with
Section 6.9(c)(i), (ii) or (iii); or
(b) Individuals who as of the date hereof
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority
thereof; provided, however, that any individual
becoming a director subsequent to the date hereof
whose election, or nomination was approved by a vote
of at least a majority of the directors then
comprising the Incumbent Board shall be considered as
a member of the Incumbent Board unless his or her
initial assumption of office occurs as a result of an
actual or threatened contest with respect to the
election or removal of directors or other actual or
threatened solicitation of proxies by or on behalf of
a Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation, share exchange or sale or other
disposition of all or substantially all of the
Company's assets (a "Combination"), unless
immediately thereafter (i) all or substantially all
of the beneficial owners of the Outstanding Stock and
the Outstanding Voting Securities immediately prior
to such Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the entity
resulting from such Combination (including, without
limitation, an entity which as a result of such
transaction owns the Company or all or substantially
all of its assets either directly or through one or
more subsidiaries) in substantially the same
proportions as their ownership immediately prior to
such Combination of the Outstanding Stock and
Outstanding Voting Securities, as the case may be,
(ii) no Person (excluding any entity resulting from
such Combination or any employee benefit plan (or
related trust) of the Company or such resulting
entity) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding
shares of common stock of the resulting entity or the
combined voting power of the then outstanding voting
securities of such entity except to the extent that
such ownership existed prior to the Combination and
(iii) at least a majority of the members of the board
of directors of the resulting entity were members of
the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board
providing for such Combination; or
(d) Approval by the shareholders of the
Company's complete liquidation or dissolution,
provided, however, that, if a participant directs the
Committee in writing prior to the occurrence of a
Change of Control (an "Acceleration Notice") then,
with respect to Options held by such participant,
Options shall become exercisable only to the extent
specified in the Acceleration Notice.
6.10 Definition of Fair Market Value. "Fair Market
Value" of the Common Stock on any date shall be deemed to be
the final closing sale price per share of Common Stock on the
trading day immediately prior to such date. If the Common
Stock is listed upon an established stock exchange or exchanges
or any automated quotation system that provides sale
quotations, such fair market value shall be deemed to be the
closing price of the Common Stock on such exchange or quotation
system, or if no sale of the Common Stock shall have been made
on that day, on the next preceding day on which there was a
sale of such stock. If the Common Stock is not listed on any
exchange or quotation system, but bid and asked prices are
quoted and published, such fair market value shall be the mean
between the quoted bid and asked price on the day the option is
granted, and if bid and asked quotations are not available on
such day, on the latest preceding day. If the Common Stock is
not actively traded, or quoted, such fair market value shall be
established by the Committee based upon a good faith effort to
value the Common Stock.
6.11 Loans. In order to assist a participant to exercise
an Option granted under the Plan and to assist a participant to
satisfy his tax liabilities arising in connection with such
Option, the Committee may authorize, at either the time of the
grant of the Option or at the time of the acquisition of Common
Stock pursuant to the Option, the extension of a loan to the
participant by the Company. The terms of any loans, including
the interest rate, collateral and terms of repayment, will be
subject to the discretion of the Committee. The maximum credit
available hereunder shall be the exercise price of the Option,
plus the maximum tax liability that may be incurred in
connection with the exercise.
FIRST COMMERCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
EXHIBIT 11
First Quarter
1997 1996
----------- -----------
<S> <C> <C>
Primary earnings per share
- ------------------------------------------
Net income $29,020,000 $31,533,000
Preferred dividend requirements 0 713,000
----------- -----------
Income applicable to common shares $29,020,000 $30,820,000
=========== ===========
Weighted average number of common shares
outstanding, net of shares held in treasury 38,937,460 38,710,669
Shares from assumed exercise of options,
net of treasury stock method 331,357 187,867
----------- -----------
39,268,817 38,898,536
=========== ===========
Primary earnings per common share $ 0.74 $ 0.79
Fully diluted earnings per share
- ------------------------------------------
Income applicable to common shares $29,020,000 $30,820,000
Expenses that would not have been incurred
if assumed conversions had occurred:
Preferred dividend requirements 0 713,000
Interest expense on convertible
debentures, net of tax 1,667,000 1,686,000
----------- -----------
Income applicable to common shares plus
expenses that would not have been incurred
if assumed conversions had occurred $30,687,000 $33,219,000
=========== ===========
Weighted average number of shares
outstanding, net of shares held in treasury 38,937,460 38,710,669
Shares from assumed exercise of options,
net of treasury stock method 331,357 198,776
Shares from assumed conversion of dilutive
convertible stock and debentures:
Preferred stock 0 2,067,175
Convertible debentures 3,017,276 3,031,242
----------- -----------
42,286,093 44,007,862
=========== ===========
Fully diluted earnings per common share $ 0.73 $ 0.75
</TABLE>
EXHIBIT 15
First Commerce Corporation
New Orleans, Louisiana
Gentlemen:
RE: March 31, 1997 Quarterly Report on Form 10-Q
With respect to the subject Quarterly Report, we acknowledge our
awareness of the inclusion therein of our report dated April 25, 1997
related to our review of interim financial information and that said
report will be included in any registration statement filed by First
Commerce Corporation through incorporation by reference of the subject
Quarterly Report into such registration statements.
Pursuant to Rule 436(c) under the Securities Act, such report is not
considered a part of a Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
May 14, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDING MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 398,944
<INT-BEARING-DEPOSITS> 59
<FED-FUNDS-SOLD> 32,125
<TRADING-ASSETS> 34,445
<INVESTMENTS-HELD-FOR-SALE> 2,262,360
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,215,904
<ALLOWANCE> (81,690)
<TOTAL-ASSETS> 9,251,158
<DEPOSITS> 7,516,728
<SHORT-TERM> 392,330
<LIABILITIES-OTHER> 281,309
<LONG-TERM> 340,185
0
0
<COMMON> 195,152
<OTHER-SE> 525,454
<TOTAL-LIABILITIES-AND-EQUITY> 9,251,158
<INTEREST-LOAN> 135,466
<INTEREST-INVEST> 35,012
<INTEREST-OTHER> 679
<INTEREST-TOTAL> 171,157
<INTEREST-DEPOSIT> 62,503
<INTEREST-EXPENSE> 75,324
<INTEREST-INCOME-NET> 95,833
<LOAN-LOSSES> 13,225
<SECURITIES-GAINS> 23
<EXPENSE-OTHER> 82,842
<INCOME-PRETAX> 43,334
<INCOME-PRE-EXTRAORDINARY> 29,020
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,020
<EPS-PRIMARY> .74
<EPS-DILUTED> .73
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
