SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported): October 14, 1997
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
LOUISIANA 0-7931 72-0701203
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
201 ST. CHARLES AVE., 29TH FLOOR, NEW ORLEANS, LOUISIANA 70170
(Address of principal executive offices - Zip Code)
Registrant's telephone number, including area code: (504) 623-1371
210 BARONNE ST., NEW ORLEANS, LOUISIANA 70112
(Former name or former address, if changed since last report)
Item 5. Other Events.
On October 14, 1997, First Commerce Corporation issued
the following press release:
OCTOBER 14, 1997
CONTACTS: MICHAEL A. FLICK (504) 623-1492
HOLLY E. HOBSON (504) 623-2917
FIRST COMMERCE ANNOUNCES THIRD QUARTER EARNINGS
New Orleans - First Commerce Corporation (NASDAQ - FCOM)
announced today its third quarter results, including the
following:
* Net income was $31.7 million, or $.77 per fully diluted
share. Net interest income (FTE) of $96.9 million and
$52.1 million of noninterest income resulted in total
revenue of $149.0 million for the quarter. The net
interest margin was 4.51%. Operating expense in the
third quarter of 1997 was $84.3 million.
* The provision for loan losses was $15.8 million in the
third quarter which exceeded net charge-offs by $5.5
million. This reflects both strong loan growth and the
impact on the experience factor of increasing charge-
offs during the last twelve months. Net charge-offs
were $10.4 million, or .65% of average loans. Managed
credit card net charge-offs decreased for the second
consecutive quarter to 3.95% of the quarter's average
credit card loans.
* Nonperforming assets were $40.3 million at September
30, 1997, or .64% of loans. The allowance for loan
losses was $84.4 million, or 1.33% of loans, at the end
of the quarter. Loans past due 90 days or more not on
nonaccrual declined to $25.6 million as of September
30, 1997.
* Average loans outstanding were $6.4 billion and average
deposits were $7.5 billion during 1997's third quarter.
* Total assets were $9.3 billion at September 30, 1997,
and deposits were $7.4 billion. The leverage ratio was
8.07% at the end of the third quarter.
In the past three years, loan growth has outpaced deposit
growth, causing First Commerce to use wholesale funding sources
since late 1996. On August 7, $300 million of credit card
receivables were securitized for additional funding. The
ongoing accounting effect of securitization is to reduce net
interest income and provision while increasing noninterest
income. The effect of securitization in the third quarter was
to increase earnings per share by $.03.
Included in the third quarter's noninterest income was
$3.8 million of securitization revenue, including $1.8 million
which would have been recorded as net interest income prior to
the securitization. The new noninterest income line item,
securitization revenue, represents the net effect of the
securitized credit card receivables' net interest income,
provision for loan losses, credit card fee income, and gains on
sale. The effect of the net interest income shift was to
reduce the net interest margin by 8 basis points. In addition,
the efficiency ratio increased 21 basis points due to the shift
of the provision to the securitization revenue line.
First Commerce's venture capital business realized
additional income this quarter from the sale of securities of
companies in which it invested. Gains of $3.5 million were
realized from sales of securities in the third quarter,
compared to a $3.0 million gain in the second quarter and a
$1.2 million loss in 1996's third quarter. As of September 30,
1997, remaining estimated unrealized gains were $5.6 million;
the quarter's sales decreased the estimated unrealized gain
only slightly from $6.1 million at June 30.
The following discussion compares this quarter's results
to 1997's second quarter and 1996's third quarter. To make the
quarters' results comparable, the following items have been
excluded:
* the effect of securitization was excluded from the
third quarter;
* venture capital securities transactions and investment
securities transactions have been excluded from all
quarters;
* a large commercial loan recovery, which reduced the
provision by $3.2 million and increased net interest
income by $922,000, was excluded from the second
quarter;
* the one-time SAIF recapitalization assessment of $5.3
million was excluded from 1996's third quarter.
Total revenue (FTE) was $145.8 million in the third
quarter, up 1.9% (7.4% annualized) from the second quarter and
5.2% higher than last year's third quarter. Net interest
income and noninterest income contributed to these improvements.
The efficiency ratio was 57.82% for the third quarter, 57.45% in
the second quarter, and 56.49% in last year's third quarter.
Net interest income (FTE) was $98.7 million for the third
quarter. The 1.4% (5.5% annualized) increase from the second
quarter and the 3.9% growth from 1996's third quarter resulted
from continued loan growth. Higher funding costs continue to
offset the effect of loan growth on net interest income.
Funding costs have been increasing for several quarters due to
the wholesale funding begun in 1996's fourth quarter, the
customer retention strategy of moving FCC's best clients into
higher yielding accounts, and the attrition of noninterest-
bearing accounts. FCC continues to be successful with the
strategy of retaining its most profitable clients as
demonstrated by a 94% retention rate this year of its best
retail clients. The net interest margin was 4.59% in the third
quarter, compared to 4.62% in the second quarter and 4.82% in
1996's third quarter.
Noninterest income was $47.1 million in the current
quarter, up 2.9% (11.5% annualized) from the second quarter and
8.2% better than last year's third quarter. Growth of
broker/dealer revenue and credit card fees were the most
significant causes of the increase from the second quarter.
Compared to the same quarter of 1996, the primary improvements
were in credit card fees, broker/dealer revenue, and trust
fees.
The provision for loan losses was $18.6 million in the
third quarter, $18.0 million for the second quarter, and $12.5
million in 1996's third quarter. Net charge-offs were $12.3
million in the third quarter, or .75% of average loans. For
the second consecutive quarter, credit card net charge-offs
declined. Net charge-offs of credit card loans totaled $8.6
million, or 3.95% of average credit card loans in the third
quarter, compared to $8.7 million, or 4.16% of loans, in the
second quarter and $9.0 million, or 4.40% of loans, in the
first quarter. Credit card net charge-offs were $5.6 million
in 1996's third quarter, or 3.20% of average credit card loans.
On a one year lagged basis, credit card net charge-offs were
4.88% in 1997's third quarter, down from 5.40% in the second
quarter. Consumer loan net charge-offs were $4.1 million for
the third quarter, or .82% of average consumer loans, compared
to .76% in both the second quarter and 1996's third quarter.
Commercial loans continue to experience net recoveries.
Operating expense was $84.3 million for the current
quarter. Virtually all of the 2.5% (10.1% annualized) increase
from the second quarter was related to stock-based incentive
pay, which rose in conjunction with 28% common stock price
appreciation. The principal causes of the 7.7%
increase in operating expense from 1996's third quarter were
stock-based incentive pay and pension expense, which together
accounted for 53% of the increase.
Average loans of $6.6 billion grew 17% from last year's
third quarter and 4% (16% annualized) from the prior quarter.
The average loan growth from the second quarter was strongest
in commercial real estate and commercial loans.
Average deposits of $7.5 billion were unchanged from the
second quarter and 10% higher than last year's third quarter.
The growth from 1996's third quarter was principally related to
brokered time deposits and public funds.
First Commerce Corporation is a New Orleans-based bank
holding company operating six Louisiana banks in Alexandria,
Baton Rouge, Lafayette, Lake Charles, Monroe, and New Orleans.
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FIRST COMMERCE CORPORATION AND SUBSIDIARIES
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FINANCIAL HIGHLIGHTS
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Third Third Nine Months Ended
Quarter Quarter September 30
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(dollars in thousands, except per share data) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
INCOME DATA
Net interest income $ 95,138 $ 93,617 $ 287,407 $ 273,510
Net interest income (tax equivalent) $ 96,910 $ 95,051 $ 292,794 $ 277,724
Provision for loan losses $ 15,806 $ 12,525 $ 43,806 $ 23,815
Other income (exclusive of investment
securities transactions) $ 51,875 $ 42,378 $ 144,244 $ 125,679
Investment securities transactions $ 182 $ (170) $ 985 $ 953
Operating expense $ 84,333 $ 83,614 $ 249,344 $ 241,544
Operating income $ 31,580 $ 26,642 $ 92,937 $ 89,112
Net income $ 31,698 $ 26,531 $ 93,577 $ 89,731
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AVERAGE BALANCE SHEET DATA
Loans - reported $ 6,396,330 $ 5,612,251 $ 6,311,130 $ 5,354,500
Loans - managed * $ 6,575,678 $ 5,612,251 $ 6,371,570 $ 5,354,500
Securities $ 2,073,360 $ 2,201,775 $ 2,089,435 $ 2,285,178
Earning assets $ 8,540,522 $ 7,857,391 $ 8,462,284 $ 7,711,752
Total assets $ 9,244,475 $ 8,526,062 $ 9,145,904 $ 8,418,109
Deposits $ 7,470,495 $ 6,792,549 $ 7,435,569 $ 6,866,463
Long-term debt $ 374,356 $ 85,912 $ 324,375 $ 86,305
Stockholders' equity $ 772,416 $ 709,896 $ 744,416 $ 729,569
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PER COMMON SHARE DATA
Net income - fully diluted $ 0.77 $ 0.66 $ 2.31 $ 2.17
Net income - primary $ 0.79 $ 0.68 $ 2.36 $ 2.26
Operating income - fully diluted $ 0.77 $ 0.66 $ 2.29 $ 2.16
Operating income - primary $ 0.79 $ 0.69 $ 2.35 $ 2.25
Book value (end of period) $ 20.29 $ 17.96 $ 20.29 $ 17.96
Closing stock price $ 56.13 $ 34.88 $ 56.13 $ 34.88
Cash dividends $ 0.40 $ 0.35 $ 1.20 $ 1.05
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RATIOS
Net income as a percent of:
Average assets 1.36% 1.24% 1.37% 1.42%
Average total equity 16.28% 14.87% 16.81% 16.43%
Average common equity 16.28% 15.31% 16.81% 16.99%
Net interest income (tax equivalent) as
a percent of average earning assets 4.51% 4.82% 4.62% 4.81%
Average loans as a percent of average deposits 85.62% 82.62% 84.88% 77.98%
Operating expense less other income
(excluding investment securities transactions)
as a percent of average earning assets 1.51% 2.09% 1.66% 2.01%
Operating expense as a percent of
total revenue (tax equivalent and excluding
investment securities transactions) 56.68% 60.84% 57.05% 59.88%
Other income (excluding investment securities
transactions) as a percent of total revenue 34.87% 30.84% 33.00% 31.15%
Allowance for loan losses as a percent of
loans, at end of period 1.33% 1.36% 1.33% 1.36%
Nonperforming assets as a percent of
loans plus foreclosed assets, at end
of period 0.64% 0.57% 0.64% 0.57%
Stockholders' equity as a percent
of total assets, at end of period 8.45% 8.03% 8.45% 8.03%
Leverage ratio at end of period 8.07% 7.90% 8.07% 7.90%
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* Managed portfolio represents the owned loan portfolio plus the securitized
credit card receivables.
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.
Executive Vice President, Controller and
Principal Accounting Officer
Dated: October 16, 1997
