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, 1997 Commission File No. 0-14277
FIRST COMMERCE BANCSHARES, INC.
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NEBRASKA 47-0683029
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1248 O STREET, LINCOLN, NEBRASKA 68508-1424
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (402) 434-4110
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NONE
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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
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Common stock, $.20 par value; outstanding at September 30, 1997
Class A Common 2,591,336 shares.
Class B Common 10,938,951 shares.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(UNAUDITED)
SEPTEMBER 30, 1997 DECEMBER 31, 1996
Cash and due from banks $154,285 $131,309
Federal funds sold 38,448 28,528
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Cash and cash equivalents 192,733 159,837
Loans held for sale 32,107 16,293
Securities available for sale (cost of
$285,659,000 and $366,181,000) 319,165 379,849
Securities held to maturity (fair value of
$336,328,000 and $271,886,000) 332,380 270,012
Loans 1,173,637 1,121,239
Less allowance for loan losses 22,316 20,157
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Net loans 1,151,321 1,101,082
Premises and equipment 51,477 48,695
Other assets 57,370 52,244
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$2,136,553 $2,028,012
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Deposits:
Non-interest bearing $330,519 $328,826
Interest bearing 1,275,114 1,245,718
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1,605,633 1,574,544
Securities sold under agreement to
repurchase 123,674 134,212
Fed funds purchased and other short-term
borrowings 90,322 45,980
Accrued expenses and other liabilities 31,030 22,905
Long-term debt 58,170 52,973
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Total liabilities 1,908,829 1,830,614
Stockholders' equity:
Common stock:
Class A voting, $.20 par value;
authorized 10,000,000 shares;
issued 2,591,336 and 2,606,336 shares; 518 521
Class B non-voting, $.20 par value;
authorized 40,000,000 shares;
issued 10,938,951 and 10,940,651 shares 2,188 2,188
Paid in capital 21,601 21,628
Retained earnings 181,638 164,176
Net unrealized gains/(losses) on securities
available for sale 21,779 8,885
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Total stockholders' equity 227,724 197,398
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$ 2,136,553 $ 2,028,012
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See notes to consolidated condensed financial statements.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In Thousands Except Per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1997 1996 1997 1996
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Interest income:
Loans $26,001 $24,558 $ 75,935 $ 72,242
Investment securities:
Taxable 10,187 8,290 30,180 23,984
Non-taxable 326 329 1,042 1,148
Dividends 197 232 530 615
Mortgages held for sale 474 437 1,073 1,607
Short-term investments 794 668 2,003 1,670
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Total interest income 37,979 34,514 110,763 101,266
Interest expense:
Deposits 15,159 13,645 44,668 41,135
Short-term borrowings 2,820 2,104 7,172 5,350
Long-term debt 874 920 2,469 2,793
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Total interest expense 18,853 16,669 54,309 49,278
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Net interest income 19,126 17,845 56,454 51,988
Provision for loan losses 1,840 1,502 6,064 4,678
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Net interest income after provision
for loan losses 17,286 16,343 50,390 47,310
Noninterest income:
Service charges and fees to
customers 10,459 8,828 29,399 25,524
Trust services 1,416 1,289 5,081 4,629
Gains/(losses) on securities sales 389 189 5,002 1,730
Other income 660 305 1,294 717
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Total noninterest income 12,924 10,611 40,776 32,600
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Noninterest expense:
Salaries and employee benefits 9,689 8,830 29,086 26,518
Occupancy and equipment 2,672 2,608 7,170 7,298
Fees and insurance 2,876 2,967 8,133 7,105
Other expenses 4,986 4,409 14,381 12,932
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Total noninterest expense 20,223 18,814 58,770 53,853
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Income before income taxes 9,987 8,140 32,396 26,057
Income tax provision 3,608 2,915 11,554 9,046
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Net income $ 6,379 $ 5,225 $ 20,842 $17,011
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Weighted average shares outstanding 13,539 13,569 13,544 13,570
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Net income per share $ .47 $ .39 $ 1.54 $ 1.25
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See notes to consolidated condensed financial statements.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
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1997 1996
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Net cash flows from operating activities $ 5,097 $23,714
Cash flows from investing activities:
Proceeds from maturities of held to
maturity securities 40,005 90,901
Proceeds from sales of held to maturity
securities -- 500
Purchase of held to maturity securities (102,373) (98,287)
Proceeds from maturities of available
for sale securities 49,982 59,787
Proceeds from sales of available
for sale securities 79,317 7,380
Purchase of available for sale securities (42,968) (82,357)
Net increase in loans (56,303) (83,805)
Capital expenditures (6,472) (3,116)
Other (12) (69)
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Net cash flows from investing activities (38,824) (109,066)
Cash flows from financing activities:
Increase/(decrease) in deposits 31,089 (382)
Increase/(decrease) in other
short-term borrowings (10,538) 23,208
Net increase in federal funds purchased 44,342 60,759
Cash dividends paid (3,050) (2,647)
Repayment of long term debt (31,803) (2,546)
Proceeds from long term debt 37,000 -
Purchase of common stock (360) (16)
Other (57) 494
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Net cash flows from financing activities 66,623 78,870
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Net increase/(decrease) in cash
and cash equivalents 32,896 (6,482)
Cash and cash equivalents at January 1 159,837 135,189
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Cash and cash equivalents at September 30 $ 192,733 $ 128,707
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See notes to consolidated condensed financial statements.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
1997 1996
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(Amounts in Thousands)
Balance, January 1 $197,398 $180,021
Purchase and retirement of stock (360) (16)
Increase (Decrease) in net unrealized
gains on securities available for sale 12,894 (3,496)
Cash dividends declared ($.225 and
$.195 per share) (3,050) (2,647)
Net income 20,842 17,011
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Balance, September 30 $227,724 $190,873
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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, 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 nine-month period ended
September 30, 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:
1997 1996
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(Amounts in Thousands)
Balance, January 1 $20,157 $19,017
Provision for loan losses 6,064 4,678
Charge-offs (6,059) (5,119)
Recoveries 2,154 1,641
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Balance, September 30 $22,316 $20,217
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C. INVESTMENT SECURITIES
During the first nine months of 1997 and 1996, the Company realized
$5,002,000 and $1,728,000, respectively, in profits on the sale
of securities available for sale. During the first nine months of 1997, the
Company did not sell any held to maturity securities. During the first nine
months of 1996, the Company realized $2,000 in profits on the sale or early
call of securities held to maturity; any sold were within 90 days of the
maturity date on those securities.
D. ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No.128 Earnings Per
Share, SFAS No.130 Reporting Comprehensive Income, and SFAS No. 131 Disclo-
sures About Segments of an Enterprise and Related Information (the State-
ments). The Statements are not expected to materially impact the Company's
reported results of operations or earnings per share. However, additional
financial statement disclosures may result from the Statements upon imple-
mentation. SFAS No. 128 is effective for periods ending after December 15,
1997. SFAS No.' s 130 and 131 are effective for years beginning after
December 15, 1997.
FINANCIAL REVIEW
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
RESULTS OF OPERATIONS
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Net income for the nine months ended September 30, 1997, was $20,842,000 or $1.54 per share as compared to $17,011,000 or $1.25 per
share for the same period one year ago. Net income for the three months ended September 30, 1997, was $6,379,000 or $.47 per share
as compared to $5,225,000 or $.39 per share for the same period one year ago. Net income for the first nine months of 1997 includes
$5,002,000 in gains primarily from the sale of investments in the Company's Global fund, as compared to gains of only $1,730,000 for
the same period one year ago. If the securities gains were excluded for both periods, net income would have been $17,590,000 and
$15,887,000, respectively. On a per share basis, earnings would have been $1.30 per share and $1.17 per share respectively.
NET INTEREST INCOME
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Net interest income (interest income less interest expense) was $19,126,000 for the third quarter of 1997, compared to $17,845,000
for the third quarter of 1996, $18,234,000 for the first quarter of 1997, and $19,094,000 for the second quarter of 1997. On a year-
to-date basis, net interest income was $56,454,000 compared to $51,988,000 one year ago, an 8.6% increase. The primary reason for
the increase in net interest income was an increase in earning assets combined with an increase in the net yield on earning assets.
Earning assets at September 30, 1997, September 30, 1996, and December 31, 1996 were $1,952 million, $1,735 million, and $1,816
million, respectively. The net yield on earning assets (net interest income divided by earning assets) was approximately 4.2% and
4.1% as of September 30, 1997 and 1996, respectively. Loans were $1.230 billion at the end of September 1997, as compared to $1.098
billion at the same time a year ago, a 12.0% increase. Investments were $652 million at September 30, 1997 as compared to $585
million at September 30, 1996, an 11.4% increase.
PROVISION FOR LOAN LOSSES
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The provision for loan losses was $6,064,000 for the first nine months of 1997, as compared to $4,678,000 for the first nine months
of 1996, a 29.6% 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 1.8% as of September 30,
1997 and 1996. For the first nine months of 1997 net charge-offs were $3,905,000 compared to $3,478,000 for the same period a year
ago. Net credit card charge offs totaled $3.7 million as compared to $3.1 million for the same period one year ago. Other consumer
loan charge-offs increased as well when compared to the first nine months of 1996. However, recoveries also increased for the
period ended September 30, 1997 as compared to the first nine months of 1996. 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:
September 30, 1997 December 31, 1996
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Loans accounted for on a non
accrual basis $1,563,000 $3,429,000
Accruing loans which are contractually
past due 90 days or more as to
principal or interest payment 742,000 846,000
Loans not included above which
are "troubled debt restructurings" 1,662,000 1,597,000
Non accrual loans have decreased due to partial payment on one commercial loan and an agricultural loan (both in process of full
resolution). Accruing loans past due in excess of ninety days are stable. Troubled restructured loans have increased due to one
additional restructuring. The overall strength of the Nebraska economy continues to have a favorable impact on the level of non
performing loans.
NONINTEREST INCOME
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Noninterest income for the first nine months was $40,776,000 as compared to $32,600,000 for the first nine months of 1996, a 25.1%
increase. If securities gains were excluded noninterest income would have been $35,774,000 as compared to $30,870,000, a 15.9%
increase. Credit card fees increased $2.6 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
$793,000 increase in other service charges and fees. Trust services fees for the first nine months of 1997 increased over $452,000
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 securities were $5,002,000 in the first nine months of 1997 as compared to $1,730,000 in the first
nine months of 1996, a $3,272,000 increase. These gains were primarily 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:
(In Thousands) Percent
September 30,
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Increase/
1997 1996 (Decrease)
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Computer services $ 6,358 $6,467 (1.7)%
Credit card 9,598 6,998 37.2
Mortgage banking 3,933 3,594 9.4
Service charges on deposits 4,120 3,868 6.5
Other service charges and fees 5,390 4,597 17.3
Trust services 5,081 4,629 9.8
Gains on securities sales 5,002 1,730 189.1
Other income 1,294 717 80.5
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Total noninterest income $40,776 $32,600 25.1
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NONINTEREST EXPENSE
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Noninterest expenses were $58,770,000 for the first nine months of 1997 as compared to $53,853,000 for the same period one year ago.
This is an increase of $4.9 million or 9.1% from a year ago. Salaries and employee benefits increased $2,568,000 or 9.7% generally
due to increases in the levels of pay and number of employees. Bank card processing fees increased $960,000 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. The increase of $1,216,000 in other expenses is primarily due to an increase in amortization of intangible
assets (service release fees and premiums paid for credit card receivables) and additional consulting expenses associated with First
Commerce Technologies.
The following table shows the breakdown of noninterest expense and the percentage change:
(In Thousands) Percent
September 30, Increase/
-----------------
1997 1996 (Decrease)
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Salaries and employee benefits $29,086 $26,518 9.7%
Net occupancy expense 3,266 3,039 7.5
Equipment expense 3,904 4,259 (8.3)
Fees and insurance 2,737 2,670 2.5
Bank card fees 5,396 4,435 21.6
Communications 3,245 3,045 6.6
Supplies 1,861 1,820 2.3
Business development 2,543 2,385 6.6
Other expenses 5,349 4,134 29.4
Minority interest 1,135 1,164 (2.5)
Goodwill amortization 383 383 --
Net cost of other
real estate owned (135) 1 --
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Total noninterest expense $58,770 $53,853 9.1
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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 62.2% and
63.1% at September 30, 1997 and 1996, respectively.
FINANCIAL CONDITION AT SEPTEMBER 30, 1997
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Total assets at September 30, 1997, were $2,137 million, compared to $1,907 million at September 30, 1996, a 12.% increase. Total
assets at December 31, 1996, were $2,028 million.
Since September 30, 1996, loans have increased from $1,098 million to $1,174 million, a 7% increase. This does not include $75
million of credit card loans which have been securitized.
Loans are summarized as follows:
September 30, 1997 September 30, 1996
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(In thousands)
Real estate mortgage $ 361,215 $ 326,364
Consumer 287,703 274,983
Commercial and financial 260,091 243,852
Agricultural 139,412 120,246
Credit card 87,775 86,751
Real estate construction 37,441 45,498
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$1,173,637 $1,097,694
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The increase in real estate, consumer and commercial loans reflects the strong level of economic activity occurring on a statewide
basis. The increase in agricultural loans is due primarily to increased cattle placements and increased feeder prices. Credit card
outstandings were stable.
Deposits have increased from $1,463 million at September 30, 1996 to $1,606 million at September 30, 1997, a 9.8% increase. The
loan to deposit ratio was 73.1% as of September 30, 1997, compared to 75.0% at September 30, 1996. Short-term borrowings consisting
chiefly of repurchase agreements totaled $214 million at September 30, 1997, compared to $182 million at September 30, 1996, and
$180 million at December 31, 1996. Long-term debt has increased $5.2 million since December 31, 1996. The net change is due to
additional borrowings from the Federal Home Loan Bank by the subsidiary banks less the annual principal payment on the Company's
capital notes. In addition to the Federal Home Loan Bank borrowings, the Company has utilized the securitization of credit card
receivables to provide liquidity.
Stockholders' equity to assets was 9.6% as of September 30, 1997. The net unrealized gains on available for sale securities
increased $12,894,000 since December 31, 1996, due to the incorporation, public offering, and resultant increase in market value of
an investment owned by the Company.
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). The Company's and the National Bank
of Commerce's (the Company's most significant bank subsidiary) actual capital amounts and ratios are presented in the following
table:
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
AS OF SEPTEMBER 30, 1997:
Total Capital (to Risk Weighted Assets):
Consolidated $220,589 15.1% $116,787 8.0% N/A
National Bank of Commerce 107,096 12.7 67,426 8.0 $84,283 10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 200,205 13.7 58,393 4.0 N/A
National Bank of Commerce 96,561 11.5 33,713 4.0 50,570 6.0
Tier I Capital (to Quarterly Average Assets):
Consolidated 200,205 9.7 82,789 4.0 N/A
National Bank of Commerce 96,561 8.1 47,412 4.0 59,265 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
NEBRASKA ECONOMY
The outlook for the Nebraska economy is for favorable growth in employment (low
unemployment, tight skilled labor market), 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 are satisfactory. 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. Stock prices of Nebraska-based
companies have shown strong gains.
The outlook of the Nebraska farm sector is favorable. Crop prices have improved
and crop yields should be within historical averages. Cattle feeders and
ranchers have been operating at profits for most of the year. Agricultural real
estate values are higher. Personal bankruptcy filings have materially increased
during the past two years (overextended credit), but appear to be stabilizing.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(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 12, 1997 By: James Stuart Jr.
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James Stuart, Jr., Chairman and CEO
Date: November 12, 1997 By: Donald Kinley
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Donald Kinley, Vice President and
Treasurer (Chief Accounting Officer)