SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Quarter ended September 30, 1995 Commission File No. 0-14277
First Commerce Bancshares, Inc.
Nebraska 47-0683029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1248 O Street, Lincoln, Nebraska 68508-1424
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (402) 434-4110
None
Former name, former address, and former fiscal year, if changes since
last report.
"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 and
Exchange Act of 1934 during the preceding twelve 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
Common stock, $.20 par value; outstanding at September 30, 1995
Class A Common 2,606,336 shares.
Class B Common 10,963,348 shares.
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<TABLE>
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In Thousands)
(Unaudited)
September 30, 1995 December 31, 1994
<S> <C> <C>
Cash and due from banks $ 85,112 $ 89,305
Federal funds sold 30,173 79,000
Cash and cash equivalents 115,285 168,305
Mortgages held for sale 25,748 4,803
Securities available for sale (cost of
$355,533,000 and $275,171,000) 365,304 270,213
Securities held to maturity (fair value of
$225,099,000 and $259,249,000) 226,069 267,584
Loans 940,982 850,292
Less allowance for loan losses 18,544 17,190
Net loans 922,438 833,102
Premises and equipment 46,907 44,451
Other assets 42,555 35,680
$1,744,306 $1,624,138
Deposits:
Non-interest bearing $ 248,691 $ 288,306
Interest bearing 1,163,441 1,067,659
1,412,132 1,355,965
Securities sold under agreement to
repurchase 78,711 73,132
Fed funds purchased 21,380 -
Accrued expenses and other liabilities 16,819 12,687
Long-term debt 41,500 33,000
Total liabilities 1,570,542 1,474,784
Stockholders' equity:
Common stock:
Class A voting, $.20 par value;
authorized 10,000,000 shares;
issued 2,606,473 shares; 521 521
Class B non-voting, $.20 par value;
authorized 40,000,000 shares;
issued 11,060,029 and 10,750,763 shares 2,212 2,150
Paid in capital 21,819 18,012
Retained earnings 144,031 132,908
Net unrealized gains/(losses) on secur-
ities available for sale (net of tax) 6,351 (3,149)
174,934 150,442
Less cost of 137 Class A, 96,681
and 89,541 Class B shares of
treasury stock 1,170 1,088
Total stockholders' equity 173,764 149,354
$1,744,306 $1,624,138
See notes to consolidated condensed financial statements.
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FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
Consolidated Condensed Statements of Income
(Unaudited)
(In Thousands Except Per Share Data)
<CAPTION>
Three Months endedNine Months ended
September 30, September 30,
1995 1994 1995 1994
Interest income:
<S> <C> <C> <C> <C>
Loans, including fees $22,145 $ 17,281 $62,817 $ 49,971
Investment securities:
Taxable 8,258 7,057 24,011 21,109
Non-taxable 443 374 1,164 1,130
Dividends 215 189 519 419
Mortgages held for sale 458 182 777 719
Short-term investments 765 589 2,413 1,601
Total interest income 32,284 25,672 91,701 74,949
Interest expense:
Deposits 14,709 9,865 40,864 27,847
Short-term borrowings 1,368 1,009 3,548 2,394
Long-term debt 777 475 2,129 1,465
Total interest expense 16,854 11,349 46,541 31,706
Net interest income 15,430 14,323 45,160 43,243
Provision for loan losses 700 81 2,082 233
Net interest income after
provision for loan losses 14,730 14,242 43,078 43,010
Noninterest income:
Service charges and fees to
customers 8,342 6,705 22,256 20,423
Trust services 1,166 988 4,136 3,960
Gains/(losses) on securities sales (30) 74 307 285
Other income 342 302 584 407
Total noninterest income 9,820 8,069 27,283 25,075
Noninterest expense:
Salaries and employee
benefits 8,300 7,425 24,488 22,050
Fees and insurance 3,649 2,994 9,893 8,961
Other expenses 5,294 4,973 15,522 15,015
Total noninterest expense 17,243 15,392 49,903 46,026
Income before income taxes 7,307 6,919 20,458 22,059
Income tax provision 2,568 2,400 7,154 7,670
Net income $4,739 $4,519 $13,304 $14,389
Weighted average shares
outstanding 13,572 12,971 13,473 13,001
Net income per share $ .35 $ .35 $ .99 $ 1.11
See notes to consolidated condensed financial statements.
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FIRST COMMERCE BANCSHARES, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited) (In Thousands)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Net cash from operating activities $(5,937) $35,509
Cash flows from investing activities:
Proceeds from maturities of held to maturity
securities 65,894 98,717
Proceeds from sales of held to maturity
securities 1,502 18,440
Purchase of held to maturity securities (25,671) (128,756)
Proceeds from maturities of available for sale
securities 68,975 40,749
Proceeds from sales of available for sale
securities 14,981 64,311
Purchase of available for sale securities (157,693) (102,570)
Net increase in loans (62,749) (33,760)
Capital expenditures (5,548) (2,894)
Cash and cash equivalents from bank acquisition,
net of cash expenses and cash paid 1,775 -
Other (168) 177
Net cash from investing activities (98,702) (45,586)
Cash flows from financing activities:
Increase/(decrease) in deposits 18,477 (63,870)
Increase in other short term borrowings 5,579 10,600
Net increase in federal funds purchased 21,380 4,250
Cash dividends paid (2,181) (2,107)
Proceeds from long term debt 10,500 -
Repayment of long term debt (2,000) (2,000)
Payment for treasury stock (82) (775)
Other (54) (64)
Net cash from financing activities 51,619 (53,966)
Net decrease in cash and cash equivalents (53,020) (64,043)
Cash and cash equivalents at January 1 168,305 190,913
Cash and cash equivalents at September 30 $115,285 $126,870
See notes to consolidated condensed financial statements.
</TABLE>
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Consolidated Condensed Statements of Stockholders' Equity (Unaudited)
[CAPTION]
1995 1994
(Amounts in Thousands)
[S] [C] [C]
Balance, January 1 $149,354 $137,293
Issue Class B common stock in bank
acquisition, net of cost of $35,000 3,869 -
Increase/(decrease) in net unrealized
gains on securities available for sale 9,500 (4,649)
Purchase 7,140 and 62,295 shares
treasury stock (82) (775)
Cash dividends declared ($.162 per share) (2,181) (2,107)
Net income 13,304 14,389
Balance, September 30 $173,764 $144,151
[CAPTION]
Notes To Consolidated Condensed Financial Statements
A. GENERAL
The accompanying unaudited consolidated condensed financial statements and
notes thereto contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of the
Company and its subsidiaries as of September 30, 1995, and the results of
their operations. The consolidated condensed financial statements should be
read in conjunction with the annual consolidated financial statements and the
notes thereto included in the Company's 1994 annual report and Form 10-K.
The results of operations for the unaudited nine-month period ended September
30, 1995, are not necessarily indicative of the results which may be expected
for the entire calendar year 1995.
B: ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for the loan losses are summarized as follows:
[CAPTION]
1995 1994
(Amounts in Thousands)
[S] [C] [C]
Balance, January 1 $17,190 $18,461
Provision for loan losses 2,082 233
Increase from acquisition 843 -
Net charge-offs (1,571) (1,256)
Balance, September 30 $18,544 $17,438
C. INVESTMENT SECURITIES
During the first nine months of 1995 and 1994, the Company realized $305,000
and $242,000, respectively, in profits on the sale of securities available
for sale. During the first nine months of 1995 and 1994, the Company
realized $2,000 and $43,000 in profits on the sale or early call of
securities held to maturity. Any held to maturity securities sold were
within 90 days of the maturity date on those securities.
D. ACQUISITION
As of the close of business March 31, 1995, the Company acquired Western
Banshares, Inc. (Western) in Alliance and Bridgeport, Nebraska. Western's
subsidiary bank was immediately merged into the North Platte National Bank
with the two facilities being operated as branches starting April 1, 1995.
The name of North Platte National Bank was changed to Western Nebraska
National Bank. The Company issued 309,266 shares of First Commerce
Bancshares Class B common stock (fair value of $3,904,483) and paid
$1,989,317 in cash and cash in lieu of fractional shares, for all the
outstanding common stock of Western. The transaction has been accounted for
as a purchase with resulting goodwill being amortized over 15 years. As of
the close of business on March 31, 1995, Western had total assets of $41
million.
<PAGE>
E. CHANGE IN ACCOUNTING PRINCIPLE
In May, 1995, the FASB issued Statement of Financial Accounting Standards No.
122 (SFAS 122), "Accounting for Mortgage Servicing Rights", an amendment to
SFAS No. 65. The Company adopted SFAS 122 effective July 1, 1995. SFAS 122
requires that an institution recognize as separate assets rights to service
mortgage loans for others regardless of whether their servicing rights are
acquired through either the purchase or origination of mortgage loans. The
statement also requires that the enterprise assess its capitalized mortgage
servicing rights for impairment based upon the fair value of those rights,
including those rights purchased before the adoption of SFAS 122.
As a result of the adoption of SFAS 122, third quarter net income increased
approximately $151,000, or $0.01 per share. As of September 30, 1995, the
fair value of the Company's capitalized mortgage servicing rights (including
mortgage servicing rights purchased) was approximately $9.5 million. There
was no valuation allowance for impairment relative to such rights. Fair
value was estimated primarily based on observable market prices for the
mortgage servicing rights. The Company stratifies mortgage servicing rights
based on the predominant risk characteristics of the underlying loans, which
is primarily loan type and interest rate.
F. CONTINGENT LIABILITIES
The Company and certain subsidiaries have been engaged in prolonged
litigation concerning the failure of an unrelated Nebraska industrial loan
and investment company. The same plaintiffs brought all of these cases, and
all of them have been dismissed by the courts. In all instances except one
the dismissals have been affirmed by the appellate courts and the cases have
been finally concluded. The remaining case, filed in 1988, alleges that the
Company's subsidiaries and other defendants violated the Racketeer Influenced
and Corrupt Organizations (RICO) Act. Damages sought by the plaintiffs are
$58 million, which could be trebled under the provisions of RICO. The case
is similar to a previous RICO suit that has already been finally dismissed,
except that the plaintiffs claim that the defects in the prior case have been
corrected by an assignment of claims they received from the receiver of the
failed financial institution. The case was stayed for several years pending
the resolution in defendants' favor of the related suits brought by the
plaintiffs. When the stay was lifted, the Company and other defendants moved
to dismiss this final action. Defendants' motion was granted by the United
States District Court on January 5, 1995, on the basis that the statute of
limitations had expired before the plaintiffs filed their action. The
plaintiffs have appealed this decision to the United States Court of Appeals.
Since the case was dismissed before it progressed past the preliminary stage,
and because of the complex issues involved, the Company's ultimate liability,
if any, cannot presently be determined. Due to the size of the damages
sought, an unfavorable outcome could have a significant effect on the
Company's financial position. At this point in the proceedings, however, the
action has been won by the Company. Although that ruling could be reversed,
legal counsel and management do not believe that an unfavorable outcome is
probable.
<PAGE>
FINANCIAL REVIEW
Nine months ended September 30, 1995 and 1994
Results of Operations
Net income for the three months ended September 30, 1995, was $4,739,000 or
$.35 per share as compared to $4,519,000 or $.35 per share for the same
period one year ago. For the nine months ended September 30, 1995, net
income was $13,304,000 or $.99 per share, as compared to $14,389,000 or $1.11
per share a year ago.
Net interest income (interest income less interest expense) was $15,430,000
for the third quarter of 1995, compared to $14,323,000 for the third quarter
of 1994, $14,617,000 for the first quarter and $15,113,000 for the second
quarter of 1995. On a year-to-date basis, the net interest income was
$45,160,000 versus $43,243,000 a year ago. The increase in net interest
income can be primarily attributed to an increase in earnings assets. Loans
were $941 million at the end of September 1995, as compared to $810 million
at the same time a year ago. Investments were $591 million as compared to
$522 million at September 30, 1994.
The provision for loan losses was $2,082,000 for the nine months ended
September 30, 1995, compared to $233,000 for the same period a year ago. Net
charge-offs were $1,571,000 as compared to $1,256,000 a year ago. Nonaccrual
loans were approximately $.9 million at the end of September 30, 1995, as
compared to $1.2 million at December 31, 1994. As a percentage of loans
outstanding, the loan loss reserve was 2.0% as of those respective dates.
There has not been a significant change in the quality or status of the loan
portfolio since December 31, 1994. The increase in the provision for the
first nine months of 1995 is primarily due to the significant growth in loans
and management's desire to maintain the reserve at adequate levels.
Noninterest income for the first nine months was $27,283,000 as compared to
$25,075,000 for the first nine months of 1994, an increase of $2,208,000.
Losses on the sale of mortgages were $178,000 for the first nine months of
1994 while the first nine months of 1995 showed gains on the sale of
mortgages of $50,000. Service charges and other fees increased $1,833,000
primarily due to increased activity in the bank card area.
Noninterest expenses increased $3,877,000 or 8.4% from a year ago. Salaries
and employee benefits increased $2,438,000 or 11.1% due to increases in the
levels of pay and an increase in the number of employees due primarily to the
Company's acquisitions since September 30, 1994. Business development
expenses decreased $227,000 or 11.5% due to a decrease in bank card
advertising expenditures. Fees, due to an increase in bank card activities
and related processing fees, increased $1,797,000. FDIC refunds decreased
fees and insurance expense $828,000. The refunds were due to the lower
assessment rate of $.04 per hundred dollars of deposits beginning in June of
1995. Equipment expenses decreased $418,000 due mostly to a decrease in
depreciation expense.
Financial Condition at September 30, 1995
The loan to deposit ratio was 66.6% at September 30, 1995, compared to 62.7%
at December 31, 1994. The increase in this ratio is due to an increase in
loans by 10.7% since year end while deposits only increased 4.1%. The
increase in long term debt is due to additional borrowings from the Federal
Home Loan Bank by subsidiary banks.
Stockholders' equity to assets was 9.6% as of September 30, 1995, as
compared to 9.4% as of December 31, 1994. Due to the decrease in
interest rates during 1995, the net unrealized gains on securities
available for sale increased $9.5 million from December 31, 1994.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits - none
(b)None
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 BANCSHARES, INC.
Date: November 13, 1995 By: James Stuart, Jr.
James Stuart, Jr., Chairman and CEO
Date: November 13, 1995 By:Donald Kinley
Donald Kinley, Vice President and
Treasurer (Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000768532
<NAME> FIRST COMMERCE BANCSHARES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 85,112
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 30,173
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 365,304
<INVESTMENTS-CARRYING> 226,069
<INVESTMENTS-MARKET> 225,099
<LOANS> 966,730
<ALLOWANCE> 18,544
<TOTAL-ASSETS> 1,744,306
<DEPOSITS> 1,412,132
<SHORT-TERM> 100,091
<LIABILITIES-OTHER> 16,819
<LONG-TERM> 41,500
<COMMON> 2,733
0
0
<OTHER-SE> 171,031
<TOTAL-LIABILITIES-AND-EQUITY> 1,744,306
<INTEREST-LOAN> 63,594
<INTEREST-INVEST> 25,694
<INTEREST-OTHER> 2,413
<INTEREST-TOTAL> 91,701
<INTEREST-DEPOSIT> 40,864
<INTEREST-EXPENSE> 46,541
<INTEREST-INCOME-NET> 45,160
<LOAN-LOSSES> 2,082
<SECURITIES-GAINS> 307
<EXPENSE-OTHER> 49,903
<INCOME-PRETAX> 20,458
<INCOME-PRE-EXTRAORDINARY> 13,304
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,304
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
<YIELD-ACTUAL> 0
<LOANS-NON> 914
<LOANS-PAST> 1,307
<LOANS-TROUBLED> 717
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,190
<CHARGE-OFFS> 3,263
<RECOVERIES> 1,692
<ALLOWANCE-CLOSE> 18,544
<ALLOWANCE-DOMESTIC> 18,544
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
