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 March 31, 1997 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 March 31, 1997
Class A Common 2,606,336 shares.
Class B Common 10,940,651 shares.
<PAGE>
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
~Consolidated~Condensed~Balance~Sheets
~~(In~Thousands)
[CAPTION]
<TABLE>
~
~
~ (UNAUDITED)
MARCH 31, 1997 DECEMBER 31, 1996
------------------------------
<S> <C> <C>
Cash and due from banks $107,997 $131,309
Federal funds sold 46,555 28,528
---------- ---------
Cash and cash equivalents 154,552 159,837
Mortgages held for sale 17,202 16,293
Securities available for sale (cost
of $353,703,000 and $366,181,000) 362,645 379,849
Securities held to maturity (fair value of
$288,399,000 and $271,886,000) 290,466 270,012
Loans 1,110,821 1,121,239
Less allowance for loan losses 21,286 20,157
---------- ---------
Net loans 1,089,535 1,101,082
Premises and equipment 50,052 48,695
Other assets 57,794 52,244
---------- ----------
$2,022,246 $2,028,012
========= ==========
Deposits:
Non-interest bearing $295,649 $328,826
Interest bearing 1,290,612 1,245,718
--------- ---------
1,586,261 1,574,544
Securities sold under agreement
to repurchase 152,102 134,212
Fed funds purchased and other
short-term borrowings 19,584 45,980
Accrued expenses and other liabilities 24,224 22,905
Long-term debt 39,204 52,973
-------- ---------
Total liabilities 1,821,375 1,830,614
Stockholders' equity:
Common stock:
Class A voting, $.20 par value;
authorized 10,000,000 shares; issued
and outstanding 2,606,336 shares; 521 521
Class B non-voting, $.20 par value;
authorized 40,000,000 shares; issued and
outstanding 10,940,651 2,188 2,188
Paid in capital 21,628 21,628
Retained earnings 170,721 164,176
Net unrealized gains (losses) on securities
available for sale (net of tax) 5,813 8,885
--------- ---------
Total stockholders' equity 200,871 197,398
--------- ---------
$2,022,246 $2,028,012
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
~Consolidated~Condensed~Statements~of~Income
~~(Unaudited)
~
~(IN~THOUSANDS~EXCEPT~PER~SHARE~DATA)
[CAPTION]
<TABLE>
~
THREE MONTHS ENDED
------------------
MARCH 31,
---------
1997 1996
----------------
Interest income:
<S> <C> <C>
Loans $ 24,553 $ 23,705
Investment securities:
Taxable 9,790 7,740
Non-taxable 359 416
Dividends 87 76
Mortgages held for sale 274 518
Short-term investments 455 542
----------------
Total interest income 35,518 32,997
Interest expense:
Deposits 14,404 14,037
Short-term borrowings 1,985 1,321
Long-term debt 895 953
----------------
Total interest expense 17,284 16,311
----------------
Net interest income 18,234 16,686
Provision for loan losses 2,584 1,821
----------------
Net interest income after provision for loan losses 15,650 14,865
Noninterest income:
Service charges and fees to customers 9,495 8,212
Trust services 1,975 1,764
Gains/(losses) on securities sales 3,255 767
Other income 466 430
----------------
Total noninterest income 15,191 11,173
----------------
Noninterest expense:
Salaries and employee benefits 9,702 8,764
Net occupancy and equipment expenses 2,158 2,420
Fees and insurance 2,657 2,112
Other expenses 4,632 4,259
----------------
Total noninterest expense 19,149 17,555
----------------
Income before income taxes 11,692 8,483
Income tax provision 4,129 2,756
----------------
Net income $ 7,563 $ 5,727
================
Weighted average shares outstanding 13,547 13,570
================
Net income per share $ .56 $ .42
================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
FIRST COMMERCE BANCSHARES, INC.
~Consolidated~Condensed~Statements~of~Cash~Flows
~~(Unaudited)~~(In~Thousands)
[CAPTION]
<TABLE>
~
~
~
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
---- -----
<S> <C> <C>
Net cash from operating activities $ 4,471 $ (3,142)
Cash flows from investing activities:
Proceeds from maturities of held to maturity securities 13,663 20,624
Purchase of held to maturity securities (34,117) (7,568)
Proceeds from maturities of available for sale securities 8,466 12,682
Proceeds from sales of available for sale securities 12,910 2,509
Purchase of available for sale securities (5,564) (46,992)
Net decrease/(increase) in loans 8,963 (13,556)
Capital expenditures (2,468) (1,213)
Other (12) (9)
------------- -------------
Net cash from investing activities 1,841 (33,523)
Cash flows from financing activities:
Increase in deposits 11,717 7,721
Increase in other short term borrowings 17,890 42,782
Net (decrease)/increase in federal funds purchased (26,396) 2,126
Cash dividends paid (1,018) (882)
Repayment of long term debt (13,769) -
Other (21) 84
------------- -------------
Net cash from financing activities (11,597) 51,831
------------- -------------
Net (decrease) increase in cash and cash equivalents (5,285) 15,166
Cash and cash equivalents at January 1 159,837 135,189
------------- -------------
Cash and cash equivalents at March 31 $ 154,552 $ 150,355
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY~(UNAUDITED)
[CAPTION]
<TABLE>
~
1997 1996
----- -----
~ (AMOUNTS~IN~THOUSANDS)
~
<S> <C> <C>
Balance, January 1 $197,398 $180,021
Decrease in net unrealized gains
on securities available for sale (3,072) (2,122)
Cash dividends declared
($.075 and $.065 per share) (1,018) (882)
Net income 7,563 5,727
--------- --------
Balance, March 31 $200,871 $182,744
========== ========
</TABLE>
~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 March 31, 1997, 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 1996 annual report and Form 10-K. The results of operations
for the unaudited three-month period ended March 31, 1997, are not necessarily
indicative of the results which may be expected for the entire calendar year
1997.
B. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for the loan losses are summarized as follows:
[CAPTION]
<TABLE>
1997 1996
----- -----
~ (Amounts~in~Thousands)
~
<S> <C> <C>
Balance, January 1, $20,157 $19,017
Provision for loan losses 2,584 1,821
Charge-offs (2,097) (1,266)
Recoveries 642 695
----- -----
Balance, March 31, $21,286 $20,267
======= =======
</TABLE>
C. INVESTMENT SECURITIES
During the first three months of 1997 and 1996, the Company realized $3,255,000
and $767,000, respectively, in profits on the sale of securities available for
sale. During the first three months of 1997 and 1996, the Company did not sell
any held to maturity securities.
<PAGE>
FINANCIAL REVIEW
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
RESULTS OF OPERATIONS~
- ----------------------
~Net income for the three months ended March 31,1997, was $7,563,000 or $.56 per
share as compared to $5,727,000 or $.42 per share for the same period one year
ago. Net income for the three months ended December 31, 1996 was $4,745,000.
Net income for the first three months of 1997 includes $3.3 million in gains
primarily from the sale of investments in the Company's Global fund, as compared
to gains of only $767,000 for the same period one year ago. If the securities
gains were excluded for both periods, net income would have been $5,447,000 and
$5,229,000, respectively. On a per share basis, earnings would have been $.40
per share and $.39 per share respectively.
NET INTEREST INCOME
- -------------------
Net interest income (interest income less interest expense) was $18,234,000 for
the first quarter of 1997, compared to $16,686,000 for the first quarter of 1996
and $18,118,000 for the fourth quarter of 1996. The increase in net interest
income from the first quarter of 1996, can be primarily attributed to an
increase in earning assets although the Company has also had an increase in the
net yield on earning assets. Loans were $1.11 billion at the end of March 1997,
as compared to $1.03 billion at the same time a year ago. Investments were $653
million at March 31, 1997 as compared to $583 million at March 31, 1996.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses was $2,584,000 for the first quarter of 1997, as
compared to $1,821,000 for the first quarter of 1996, a 42% increase. The
increase was necessary to keep pace with the increased loan growth and
management's desire to maintain the reserve at adequate levels. As a percentage
of loans outstanding, the loan loss reserve was 1.9 % and 2.0% as of March 31,
1997 and 1996. Total first quarter 1997 net charge-offs were $1,455,000
compared to $571,000 for the same period a year ago. Net credit card charge
offs totaled $1,100,000 as compared to $876,000 in the first quarter of 1996.
Other consumer loan charge-offs increased as well when compared to the first
quarter of 1996. Recoveries decreased which contributed to the overall increase
in net charge-offs. Overall, management feels the credit quality of the loan
portfolio remains sound, with no major change in the overall quality of the loan
portfolio since December 31, 1996, although it is expected that credit card
charge-offs will remain high in the near-term future.
The following table presents the amount of non performing loans:
March 31, 1997 December 31, 1996
-------------- -----------------
Loans accounted for on a non
accrual basis $4,307,000 $3,429,000
Accruing loans which are contractually
past due 90 days or more as to
principal or interest payment 873,000 846,000
Loans not included above which
are "troubled debt restructurings" 1,525,000 1,597,000
<PAGE>
The increase in non accrual loans is primarily due to one commercial loan, which
is in the process of resolution. Accruing loans past due 90 days or more and
troubled debt restructurings have remained stable since December 31, 1996.
Virtually all of the Company's loans are to Nebraska-based organizations,
although the loan portfolio is well diversified by industry. The Nebraska
economy is dependent upon the general state of the agricultural economy.
NONINTEREST INCOME
- ------------------
Noninterest income for the first three months was $15,191,000 as compared to
$11,173,000 for the first three months of 1996, a 36.0% increase. If securities
gains were excluded noninterest income would have been $11,936,000 as compared
to $10,406,000, a 14.7%, increase. Credit card fees increased $1.1 million
primarily due to an increase in interchange and merchant income. Discount
brokerage fee income and bond investment fees purchased through the National
Bank of Commerce are primarily responsible for a $170,000 increase in other
service charges and fees. First quarter 1997 trust services fees increased over
$211,000 compared to the same period a year ago due primarily to an increase in
activity and an increase in the value of assets being managed. Gains on the
sale of available for sale securities were $3,255,000 in the first quarter of
1997 as compared to $767,000 in the first quarter of 1996, a $2,488,000
increase. These gains were the result of selling certain positions held in the
Company's Global Fund.
The following table shows the breakdown of noninterest income and the percentage
change:
[CAPTION]
<TABLE>
(In Thousands) Percent
March 31, Increase/
-------------
1997 1996 (Decrease)
-------------- ----------
<S> <C> <C> <C>
Computer services $ 2,102 $2,200 (4.5)%
Credit card 3,139 2,003 56.7
Mortgage banking 1,199 1,184 1.3
Service charges on deposits 1,294 1,234 4.9
Other service charges and fees 1,761 1,591 10.7
Trust services 1,975 1,764 12.0
Gains on securities sales 3,255 767 324.4
Other income 466 430 8.4
------- -------
Total noninterest income $15,191 $11,173 36.0
======= =======
</TABLE>
NONINTEREST EXPENSE
- -------------------
Noninterest expenses were $19.1 million for the quarter ended March 31, 1997 as
compared to $17.6 million for the same time period one year ago. This is an
increase of $1.6 million or 9.1% from a year ago. Salaries and employee
benefits increased $939,000 or 10.7% generally due to increases in the levels of
pay and number of employees. Fees and insurance expenses decreased 8.4%
primarily due to lower legal and credit report and filing fees. Bank card
processing fees increased $629,000 due to increased activity and an increase in
Cabela's bucks expense (points earned from using the Cabela's credit card, which
can be redeemed for merchandise at Cabela's). Communications expense increased
$119,000 due primarily to long distance telephone line expenses in the computer
company related to a new data center in Florida. The increase of 13.2% in other
expenses is due to an increase in amortization of intangible assets (service
release fees and premiums paid for credit card receivables).
The increase in minority interest expense is directly related to the increase in
profits in the Cabela's credit card joint venture.
<PAGE>
The following table shows the breakdown of noninterest expense and the
percentage change:
[CAPTION]
<TABLE>
(In Thousands) Percent
March 31, Increase/
------------------
1997 1996 (Decrease)
------- ------------
<S> <C> <C> <C>
Salaries and employee benefits $ 9,702 $ 8,764 10.7%
Net occupancy expense 1,057 1,075 (1.7)
Equipment expense 1,101 1,345 (18.1)
Fees and insurance 923 1,008 (8.4)
Bank card fees 1,734 1,104 57.1
Communications 1,108 989 12.0
Supplies 615 643 (4.4)
Business development 842 872 (3.4)
Other expenses 1,705 1,505 13.3
Minority interest 372 120 210.0
Goodwill amortization 127 128 0.1
Net cost of other real
estate owned (137) 2 ---
-------- ------
Total noninterest expense $19,149 $17,555 9.1
======= =======
</TABLE>
The Company's efficiency ratio -- noninterest expense (excluding net cost of
other real estate, minority interest and goodwill amortization) divided by the
sum of net interest income and noninterest income (excluding securities
gains/losses) -- was 62.3% and 63.9% at March 31, 1997 and 1996, respectively.
FINANCIAL CONDITION AT MARCH 31, 1997
- -------------------------------------
Total assets at March 31, 1997, were $2,022 million, compared to $1,873 million
at March 31, 1996, an 8.0% increase. Total assets at December 31, 1996, were
$2,028 million.
Since March 31, 1996, loans have increased from $1,030 million to $1,111
million, a 7.8% increase. This does not include $58 million of credit card
loans which have been securitized. Managed loans are up by 13.4% since the same
date.
[CAPTION]
<TABLE>
Loans are summarized as follows: March 31, 1997 March 31, 1996
-------------- ---------------
(In thousands)
<S> <C> <C>
Real estate mortgage $343,761 $296,836
Consumer 273,678 268,408
Commercial and financial 254,976 216,726
Agricultural 109,946 100,798
Credit card 92,042 118,246
Real estate construction 36,418 29,338
------- -------
$1,110,821 $1,030,352
======== ========
</TABLE>
The decline in credit card volume is due to the securitization mentioned above.
Agricultural loan volume has increased since March 1996, due to lower feed
prices which has prompted increased numbers of cattle on feed. While volume is
ahead of last year, outstanding dollars have declined since December 1996, as
the heavy feedyard placements from last fall have been marketed. Ag volume is
expected to increase during the next quarter as grain farmers go into the
planting season. While real estate construction loans are up from one year ago,
a 12% decline has been realized since year-end as large construction projects
have been completed and long term financing placed in the secondary market.
Deposits have increased from $1,471 million at March 31, 1996 to $1,586 million
at March 31, 1997, a 7.8% increase. The loan to deposit ratio was 70% as of
both dates.
<PAGE>
Short-term borrowings consisting chiefly of repurchase agreements totaled $172
million at March 31, 1997, compared to $143 million at March 31, 1996 and $180
million at December 31, 1996. Long-term debt has decreased $13.8 million since
December 31, 1996, due to borrowings from the Federal Home Loan Bank by the
subsidiary banks being allowed to mature without being replaced.
Stockholders' equity to assets was 9.6% as of March 31, 1997. The net
unrealized gains on available for sale securities decreased $3,072,000 since
December 31, 1996, due to an increase in interest rates and the resultant
decline in the value of the investment portfolio.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of Tier I capital (as defined in the regulations) to total average
assets (as defined), and minimum ratios of Tier I and total capital (as defined)
to risk-weighted assets (as defined).
[CAPTION]
<TABLE>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIOAMOUNT RATIO AMOUNT RATIO
AS OF MARCH 31, 1997:
Total Capital (to Risk Weighted Assets):
<S> <C> <C> <C> <C> <C> <C>
Consolidated $207,351 15.3% $108,275 8.0% N/A
National Bank of Commerce 102,028 12.9 63,410 8.0 $79,263 10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 188,300 13.9 54,138 4.0 N/A
National Bank of Commerce 92,120 11.6 31,705 4.0 47,558 6.0
Tier I Capital (to Quarterly Average Assets):
Consolidated 188,300 9.5 79,412 4.0 N/A
National Bank of Commerce 92,120 8.0 46,106 4.0 57,633 5.0
AS OF DECEMBER 31, 1996:
Total Capital (to Risk Weighted Assets):
Consolidated $200,441 14.7% $108,954 8.0% N/A
National Bank of Commerce 99,860 12.3 65,170 8.0 $81,463 10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 181,269 13.3 54,477 4.0 N/A
National Bank of Commerce 89,677 11.0 32,585 4.0 48,878 6.0
Tier I Capital (to Quarterly Average Assets):
Consolidated 181,269 9.4 77,167 4.0 N/A
National Bank of Commerce 89,677 8.0 45,006 4.0 56,258 5.0
<PAGE>
</TABLE>
~Nebraska~Economy
~
The outlook for the Nebraska economy is for moderate growth in employment (low
unemployment), personal income, and retail sales. Construction activity has
stabilized. The manufacturing base in the state continues to operate at
expanded production. Motor vehicle and farm equipment sales have moderated.
The state's fiscal position is strong from the standpoint of tax receipts, as
the state's tax receipts have been exceeding projected receipts for the past
several months. Some of these excess tax receipts could be used to replace lost
property tax revenues when property tax relief legislation goes into effect in
1998, and a tax cut is being considered.
The outlook of the 1997 Nebraska farm sector is favorable. Crop prices are not
expected to reach the high levels of last year and crop yields will depend on
growing conditions. Cattle feeders and ranchers have been operating at profits
for the past few months, and the projection for the balance of the year is
optimistic. Agricultural real estate values are higher. Personal bankruptcy
filings have materially increased during the past year (overextended credit),
and it does not appear this trend will change in the near-term future.
<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: May 12, 1997 By: James Stuart, Jr.
--------------- --------------------------------------------
James Stuart, Jr., Chairman and CEO
Date: May 12, 1997 By: Donald Kinley
--------------- --------------------------------------------
Donald Kinley, Vice President and
Treasurer (Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 107,997
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 46,555
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 362,645
<INVESTMENTS-CARRYING> 290,466
<INVESTMENTS-MARKET> 288,399
<LOANS> 1,110,821
<ALLOWANCE> 21,286
<TOTAL-ASSETS> 2,022,246
<DEPOSITS> 1,586,261
<SHORT-TERM> 171,686
<LIABILITIES-OTHER> 24,224
<LONG-TERM> 39,204
0
0
<COMMON> 2,709
<OTHER-SE> 198,162
<TOTAL-LIABILITIES-AND-EQUITY> 2,022,246
<INTEREST-LOAN> 24,553
<INTEREST-INVEST> 10,236
<INTEREST-OTHER> 729
<INTEREST-TOTAL> 35,518
<INTEREST-DEPOSIT> 14,404
<INTEREST-EXPENSE> 17,284
<INTEREST-INCOME-NET> 18,234
<LOAN-LOSSES> 2,584
<SECURITIES-GAINS> 3,255
<EXPENSE-OTHER> 19,149
<INCOME-PRETAX> 11,692
<INCOME-PRE-EXTRAORDINARY> 7,563
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,563
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 0
<LOANS-NON> 4,307
<LOANS-PAST> 873
<LOANS-TROUBLED> 1,525
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,157
<CHARGE-OFFS> 2,097
<RECOVERIES> 642
<ALLOWANCE-CLOSE> 21,286
<ALLOWANCE-DOMESTIC> 21,286
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
