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, 1998 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 March 31, 1998
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)
March 31, 1998 December 31, 1997
-------------- -----------------
Cash and due from banks $ 160,242 $ 156,664
Federal funds sold 50,200 36,495
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Cash and cash equivalents 210,442 193,159
Mortgages held for sale 73,389 31,360
Securities available for sale (cost of
$295,894,000 and $303,172,000) 326,767 336,857
Securities held to maturity (fair value of
$365,181,000 and $367,489,000) 360,127 362,768
Loans 1,225,470 1,236,443
Less allowance for loan losses 22,504 22,458
----------- -----------
Net loans 1,202,966 1,213,985
Premises and equipment 56,483 54,468
Other assets 62,494 58,503
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$ 2,292,668 $ 2,251,100
=========== ===========
Deposits:
Noninterest bearing $ 353,336 $ 353,109
Interest bearing 1,364,994 1,296,385
----------- -----------
1,718,330 1,649,494
Securities sold under agreement to repurchase and
other short-term borrowings 179,395 198,395
Federal Home Loan Bank borrowings 105,600 120,450
Accrued expenses and other liabilities 35,499 34,011
Long-term debt 16,170 16,170
----------- -----------
Total liabilities 2,054,994 2,018,520
Stockholders' equity:
Common stock:
Class A voting, $.20 par value; authorized
10,000,000 shares; issued and outstanding
2,591,336 shares; 518 518
Class B non-voting, $.20 par value; authorized
40,000,000 shares; issued and outstanding
10,938,951 shares 2,188 2,188
Paid in capital 21,601 21,601
Retained earnings 192,846 186,377
Net unrealized gains on securities available for
sale (net of tax) 20,521 21,896
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Total stockholders' equity 237,674 232,580
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$ 2,292,668 $ 2,251,100
=========== ===========
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
March 31,
1998 1997
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Interest income:
Loans $27,618 $ 24,553
Investment securities:
Taxable 9,998 9,671
Non-taxable 351 359
Dividends 450 206
Mortgages held for sale 713 274
Short-term investments 374 455
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Total interest income 39,504 35,518
Interest expense:
Deposits 15,281 14,404
Short-term borrowings 2,283 1,680
Federal Home Loan Bank borrowings 1,470 804
Long-term debt 345 396
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Total interest expense 19,379 17,284
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Net interest income 20,125 18,234
Provision for loan losses 1,496 2,584
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Net interest income after provision for loan losses 18,629 15,650
Noninterest income:
Service charges and fees to customers 11,908 9,495
Trust services 1,736 1,975
Gains on securities sales 839 3,255
Other income 509 466
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Total noninterest income 14,992 15,191
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Noninterest expense:
Salaries and employee benefits 10,704 9,702
Occupancy and equipment 2,328 2,158
Fees and insurance 3,402 2,657
Other expenses 5,407 4,632
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Total noninterest expense 21,841 19,149
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Income before income taxes 11,780 11,692
Income tax provision 4,160 4,129
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Net income $ 7,620 $ 7,563
======== ========
Weighted average shares outstanding 13,530 13,547
======== ========
Basic net income per share $ .56 $ .56
======== ========
See notes to consolidated condensed financial statements.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited) (In Thousands)
Three Months Ended
---------------------
March 31,
---------------------
1998 1997
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Net cash flows from operating activities $ (33,661) $ 4,471
Cash flows from investing activities:
Proceeds from maturities of held to maturity securities 28,620 13,663
Purchase of held to maturity securities (25,979) (34,117)
Proceeds from maturities of available for sale securities 7,081 8,466
Proceeds from sales of available for sale securities 6,019 12,910
Purchase of available for sale securities (4,848) (5,564)
Net decrease in loans 9,523 8,963
Capital expenditures (3,233) (2,468)
Proceeds from derivative financial instrument 697 -
Other (5) (12)
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Net cash flows from investing activities 17,875 1,841
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Cash flows from financing activities:
Increase in deposits 68,836 11,717
(Decrease)/Increase in securities sold under agreement
to repurchase and other short-term borrowings (19,000) 22,919
Net decrease in Federal Home Loan Bank borrowings (14,850) (45,194)
Cash dividends paid (1,151) (1,018)
Other (766) (21)
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Net cash flows from financing activities 33,069 (11,597)
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Net increase/(decrease) in cash and cash equivalents 17,283 (5,285)
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Cash and cash equivalents at January 1 193,159 159,837
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Cash and cash equivalents at March 31 $210,442 $154,552
======== ========
See notes to consolidated condensed financial statements.
FIRST COMMERCE BANCSHARES, INC. & SUBSIDIARIES
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, 1998, 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 1997 annual report and Form 10-K. Certain 1997 amounts have
been reclassified to conform to 1998 classifications. The results of operations
for the unaudited three-month period ended March 31, 1998, are not necessarily
indicative of the results which may be expected for the entire calendar year
1998.
B. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for the loan losses are summarized as follows:
1998 1997
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(Amounts in Thousands)
Balance, January 1 $22,458 $20,157
Provision for loan losses 1,496 2,584
Charge-offs (2,045) (2,097)
Recoveries 595 642
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Balance, March 31 $22,504 $21,286
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C. INVESTMENT SECURITIES
During the first three months of 1998 and 1997, the Company realized $839,000
and $3,255,000, respectively, in profits on the sale of securities available for
sale. During the first three months of 1998 and 1997, the Company did not sell
any held to maturity securities.
D. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS130), "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements. The Company's "other
comprehensive income" is comprised of unrealized gains and losses on debt and
equity securities classified as available for sale. "Other comprehensive income"
for the first quarters of 1998 and 1997 was a negative $1,375,000, net of tax;
and a negative $3,072,000, net of tax, respectively. Thereby, total
"comprehensive income" for the first quarter of 1998 was $6,245,000 as compared
to book net income of $7,620,000. For the first quarter of 1997 total
"comprehensive income" was $4,491,000 as compared to book net income of
$7,563,000.
The first quarter 1998 decrease in unrealized gains and losses on debt and
equity securities classified as available for sale, was due principally to the
decline in the market value of Transcrypt International, Inc., a Lincoln,
Nebraska based company that first sold shares in the public stock market in
1997. At December 31, 1997, the Company's original investment of $429,000 had a
market value of $17 million; at March 31, 1998, the stock had a market value of
$7 million. The decline in the market value of Transcrypt was partially offset
by a net increase in market value of other available for sale securities of
$6,688,000. During the first quarter of 1998, the Company settled a collar on
200,000 shares of Transcrypt and realized $697,000. Under the deferral method of
accounting, the gain, net of tax, was deferred and will be recognized in the
same period as the gains or losses on the item being hedged.
On April 27, 1998, Transcrypt was informed by NASDAQ that it would effect a
temporary qualification trading halt in the Transcrypt common stock through at
least May 7, 1998, the date on which NASDAQ has scheduled a hearing to determine
whether the stock will continue to be listed on the NASDAQ National Market.
Transcrypt has not filed its annual report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 1997.
FINANCIAL REVIEW
Three Months Ended March 31, 1998 and 1997
Results of Operations
Net income for the three months ended March 31, 1998, was $7,620,000 or $.56 per
share as compared to $7,563,000 or $.56 per share for the same period one year
ago. Net income for the three months ended December 31, 1997, was $5,755,000 or
$.43 per share. Net income for the first three months of 1998 includes $839,000
in gains primarily from the sale of investments in the Company's Global fund, as
compared to gains of $3,255,000 for the same period one year ago. If the
securities gains were excluded for both periods, net income would have been
$7,074,000 and $5,447,000, respectively. On a per share basis, earnings would
have been $.52 per share and $.40 per share respectively.
Net Interest Income
Net interest income (interest income less interest expense) was $20,125,000 for
the first quarter of 1998, compared to $18,234,000 for the first quarter of
1997, and $20,132,000 for the last quarter of 1997. The primary reason for the
increase in net interest income was an increase in earning assets. Earning
assets at March 31, 1998, March 31, 1997, and December 31, 1997 were $2,036
million, $1,828 million, and $2,004 million, respectively. The net yield on
earning assets (net interest income divided by earning assets) was approximately
4.2% as of March 31, 1998 and 1997. Loans were $1.225 billion at the end of
March 1998, as compared to $1.111 billion at the same time a year ago, a 10.3%
increase. Investments were $687 million at March 31, 1998 as compared to $653
million at March 31, 1997, a 5.2% increase.
Provision for Loan Losses
The provision for loan losses was $1,496,000 for the first three months of 1998,
as compared to $2,584,000 for the first three months of 1997, a 42.1% decrease.
In addition to a decline in charge offs on loans other than credit cards, credit
card charge offs stabilized in the last few months. For the first three months
of 1998 net charge-offs were $1,450,000 compared to $1,455,000 for the same
period a year ago. Net credit card charge offs totaled $1.3 million for the last
quarter of 1997 and the first quarter of 1998, compared to $1.1 million for the
first quarter of 1997. Other consumer loan net charge-offs decreased when
compared to the first three months of 1997. As a percentage of loans
outstanding, the loan loss reserve was 1.8% as of March 31, 1998 and 1997.
Overall, management believes the credit quality of the loan portfolio remains
sound, with no major change in the overall quality of the loan portfolio since
December 31, 1997, although management will continue to monitor credit card
quality and other loan trends.
The following table presents the amount of non-performing loans:
March 31, 1998 December 31, 1997
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Loans accounted for on a non
accrual basis $1,334,000 $1,581,000
Accruing loans which are contractually
past due 90 days or more as to
principal or interest payment 1,392,000 1,106,000
Loans not included above which
are "troubled debt restructurings" 1,509,000 1,530,000
The increase in accruing loans that are contractually past due 90 days or more
is primarily due to one commercial real estate loan and two agricultural loans
to one borrower, all of which are in the process of resolution. Non accrual
loans and troubled debt restructurings have decreased since December 31, 1997.
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 $14,992,000 compared to
$15,191,000 for the first three months of 1997, a 1.3% decrease. If securities
gains were excluded, noninterest income would have been $14,153,000 compared to
$11,936,000, an 18.6% increase. Computer fees increased $633,000 or 30.1% due to
an increase in conversion and annual processing fees. Credit card fees increased
$423,000 primarily due to an increase in interchange and merchant income.
Mortgage banking income increased 55.6% over the same period one year ago
because of the large volume of mortgage refinancings in first quarter 1998. In
September 1997, the Company converted its common trust funds to mutual funds,
the "Great Plains Family of Funds." Fees earned from these mutual funds are
included in other service charges and fees which accounts for the 39.1% increase
in this income category. This also accounts for the 12.1% decrease in trust
services income. Gains on the sale of securities were $839,000 in the first
three months of 1998 as compared to $3,255,000 in the first three months of
1997, a $2,416,000 decrease. 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
March 31, Increase/
1998 1997 (Decrease)
------- ------- ----------
Computer services $ 2,735 $ 2,102 30.1%
Credit card 3,562 3,139 13.5
Mortgage banking 1,866 1,199 55.6
Service charges on deposits 1,296 1,294 .2
Other service charges and fees 2,449 1,761 39.1
Trust services 1,736 1,975 (12.1)
Gains on securities sales 839 3,255 (74.2)
Other income 509 466 9.2
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Total noninterest income $14,992 $15,191 (1.3)
======= =======
Noninterest Expense
Noninterest expenses were $21,841,000 for the first three months of 1998 as
compared to $19,149,000 for the same period one year ago. This is an increase of
$2.7 million or 14.1% from a year ago. Salaries and employee benefits increased
$1,002,000 or 10.3% generally due to increases in the levels of pay and number
of employees. Equipment expenses increased $237,000 or 21.5% due to additional
equipment purchases, primarily computer related. Fees and insurance increased
$145,000 or 15.7% from the same period one year ago primarily due to increased
legal, credit report and filing fees. Credit card processing fees increased
$600,000 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 decrease in minority interest expense is directly
related to the decrease in profits in the Cabela's credit card joint venture.
Amortization of mortgage servicing rights increased $600,000 or 137.3% due to an
increase in the volume of mortgages serviced by First Commerce Mortgage combined
with a significant increase in refinancings during the first quarter of 1998,
which results in the early write-off of capitalized mortgage servicing rights on
loans being refinanced.
The following table shows the breakdown of noninterest expense and the
percentage change:
(In Thousands) Percent
March 31, Increase/
1998 1997 (Decrease)
-------- --------- ----------
Salaries and employee benefits $10,704 $9,702 10.3%
Net occupancy expense 990 1,057 (6.3)
Equipment expense 1,338 1,101 21.5
Fees and insurance 1,068 923 15.7
Credit card fees 2,334 1,734 34.6
Communications 1,058 1,108 (4.5)
Supplies 673 615 9.4
Business development 885 842 5.1
Other expenses 1,390 1,268 9.6
Minority interest 231 372 (37.9)
Goodwill amortization 127 127 --
Amortization of mortgage servicing rights 1,037 437 137.3
Net cost of other real estate owned 6 (137) (104.4)
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Total noninterest expense $21,841 $19,149 14.1
======= =======
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 62.7% and 62.3% at March 31, 1998 and 1997, respectively.
Financial Condition at March 31, 1998
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Total assets at March 31, 1998, were $2,293 million, compared to $2,022 million
at March 31, 1997, a 13.4% increase. Total assets at December 31, 1997, were
$2,251 million.
Since March 31, 1997, loans have increased from $1,111 million to $1,225 mil-
lion, a 10.3% increase. Managed loans at March 31, 1998 were $1,308 million.
Loans are summarized as follows: March 31, 1998 March 31, 1997
-------------- --------------
(In thousands)
Real estate mortgage $ 377,225 $ 343,761
Consumer 276,409 273,678
Commercial and financial 272,270 254,976
Agricultural 175,673 109,946
Credit card 86,751 92,042
Real estate construction 37,142 36,418
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$1,225,470 $1,110,821
========== ==========
The increase in agricultural loans is primarily in the cattle feeding sector
reflecting higher cattle inventories at March 31, 1998. Increases in the balance
of the loan portfolio are attributable to the overall good economic growth in
the State of Nebraska.
Deposits have increased from $1,586 million at March 31, 1997 to $1,718 million
at March 31, 1998, an 8.3% increase. The loan to deposit ratio was 71.3% as of
March 31, 1998, compared to 70.0% at March 31, 1997. Repurchase agreements and
other short-term borrowings totaled $179 million at March 31, 1998, compared to
$198 million at March 31, 1997, and $198 million at December 31, 1997. Federal
Home Loan Bank borrowings totaled $106 million at March 31, 1998, compared to
$140 million at March 31, 1997, and $120 million at December 31, 1997. Long-term
debt consisting of Company capital notes decreased $2.5 million since March 31,
1997 because of the annual principal payment but did not change from December
31, 1997. In addition to repurchase agreements and Federal Home Loan Bank
borrowings, the Company has utilized commercial paper and the securitization of
credit card receivables to provide liquidity.
Stockholders' equity to assets was 9.5% as of March 31, 1998. The net unrealized
gains on available for sale securities decreased $1,375,000 since December 31,
1997.
The first quarter 1998 decrease in unrealized gains and losses on debt and
equity securities classified as available for sale, was due principally to the
decline in the market value of Transcrypt International, Inc., a Lincoln,
Nebraska based company that first sold shares in the public stock market in
1997. At December 31, 1997, the Company's original investment of $429,000 had a
market value of $17 million; at March 31, 1998, the stock had a market value of
$7 million. The decline in the market value of Transcrypt was partially offset
by a net increase in market value of other available for sale securities of
$6,688,000. During the first quarter of 1998, the Company settled a collar on
200,000 shares of Transcrypt and realized $697,000. Under the deferral method of
accounting, the gain, net of tax, was deferred and will be recognized in the
same period as the gains or losses on the item being hedged.
On April 27, 1998, Transcrypt was informed by NASDAQ that it would effect a
temporary qualification trading halt in the Transcrypt common stock through at
least May 7, 1998, the date on which NASDAQ has scheduled a hearing to determine
whether the stock will continue to be listed on the NASDAQ National Market.
Transcrypt has not filed its annual report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 1997.
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 March 31, 1998:
Total Capital (to Risk Weighted Assets):
Consolidated $233,111 15.1% $123,903 8.0% N/A
National Bank of Commerce 110,864 12.1 73,423 8.0 $91,778 10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 211,603 13.7 61,951 4.0 N/A
National Bank of Commerce 99,392 10.8 36,711 4.0 55,067 6.0
Tier I Capital (to Quarterly Average Assets):
Consolidated 211,603 9.7 87,171 4.0 N/A
National Bank of Commerce 99,392 8.3 48,046 4.0 60,058 5.0
As of December 31, 1997:
Total Capital (to Risk Weighted Assets):
Consolidated $226,623 14.9% $121,724 8.0% N/A
National Bank of Commerce 108,772 12.1 71,956 8.0 $89,945 10.0%
Tier I Capital (to Risk Weighted Assets):
Consolidated 205,459 13.5 60,862 4.0 N/A
National Bank of Commerce 97,499 10.8 35,978 4.0 53,967 6.0
Tier I Capital (to Quarterly Average Assets):
Consolidated 205,459 9.7 84,362 4.0 N/A
National Bank of Commerce 97,499 8.1 48,046 4.0 60,058 5.0
Nebraska Economy
The outlook for the Nebraska economy is for favorable growth in employment (low
unemployment, tight skilled labor market), personal income (less growth than
national averages), and retail sales. Construction activity has stabilized. The
manufacturing base in the state continues to operate at expanded production. 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.
Personal bankruptcy filings have materially increased during the past three
years (overextended credit), but may be stabilizing.
The outlook of the Nebraska farm sector is more uncertain. Crop prices have
declined and crop yields will be dependent on growing season conditions. Cattle
feeders have been incurring material losses during the past several months due
to high industry inventory levels. Agricultural real estate values are higher
(cash rents are also higher). Agricultural exports have been lower due to Asian
economic difficulties.
Forward Looking Information
When used or incorporated by reference in disclosure documents, the words
"anticipate," "estimate," "expect," "project," "target," "goal," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933. Such forward-looking
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, expected or projected. These forward-looking statements
speak only as of the date of the document. The Company expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Company's expectation with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 1 - Amendments to Sections 2.02, 5.01, and 5.02 of the
First Commerce Supplemental Executive Retirement and Deferred
Compensation Plan.
(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, 1998 By: James Stuart Jr.
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James Stuart, Jr., Chairman and CEO
Date: May 12, 1998 By: Donald Kinley
--------------------- -------------
Donald Kinley, Vice President and
Treasurer (Chief Accounting Officer)
EXHIBIT 1
SECTION 2.02. Executive Officer. An Employee who either:
(1) holds the title of Senior Vice President or some
higher title and who receives a base annual salary equal to or
in excess of the contribution and benefit base established by
the Commissioner of Social Security for such year pursuant to
42 U.S.C. ss.430; or
(2) received from the Company, during the calendar
year immediately preceding the period of deferral, total
remuneration for services (including commissions, bonuses and
incentives in addition to other Compensation) in excess of the
amount specified or calculated pursuant to Internal Revenue
Code ss. 414(q)(1)(B), as the same may hereafter be increased
from time to time.
Provided, an Employee who was an Executive Officer within the meaning
of this section prior to its amendment effective as of January 1, 1997, and who
was a Participant in this Plan at the time of its amendment effective January 1,
1997, shall continue to be considered an "Executive Officer" thereafter
regardless of whether said Executive Officer continues to satisfy the definition
set forth in the foregoing subsection (1). In addition, once an Employee becomes
an Executive Officer within the meaning of subsection (1) and becomes a
Participant in the Plan, such Participant shall continue to be considered an
Executive Officer for purposes of participation in this Plan even though such
individual's base salary no longer equals or exceeds the contribution and
benefit base established pursuant to 42 U.S.C. ss.430, as long as the
individual's base salary has not been reduced.
EXHIBIT 1
SECTION 5.01. Deferral Contributions for Executive Officers. Each
Participant who is an Executive Officer may elect, on forms furnished by the
Sponsoring Company, to reduce his or her Compensation and/or any bonuses or
commissions or incentives otherwise payable to said Participant by the
percentage(s) specified by the Participant in an appropriate election form;
provided, however, that a Participant may not defer more than twenty percent
(20%) of his or her Compensation (excluding bonuses, commissions and
incentives), and provided, further, that an Executive Officer who is a
participant in the Thrift Plan may only elect to reduce his or her compensation
and/or bonuses, commissions or incentives pursuant to this Section if such
Executive Officer shall also be making the maximum amount of elective deferrals
permissible for such Executive Officer under the terms of said Thrift Plan. The
amounts of such reductions in Compensation or bonuses, commissions or incentives
shall be contributed to the Plan on behalf of such Participant by the Company
which employs such Participant. In addition, each Participant who is an
Executive Officer may elect to defer his or her right to receive any
distribution of Excess Contributions, Excess Aggregate Contributions or Excess
Amounts pursuant to the Thrift Plan or any Excess Amounts pursuant to the
Retirement Accumulation Plan (or, if such distributions cannot be deferred, an
amount from other compensation and/or bonuses, commissions or incentives payable
by the Company to the Participant which is equal to the amount of such Excess
Contributions, Excess Aggregate Contributions or Excess Amounts), and in such
event, the Company shall contribute any such amounts so deferred to this Plan on
behalf of such Participant. Each such election shall be made prior to the period
of deferral specified in the election and shall be irrevocable as to such period
of deferral. A period of deferral shall commence on January 1 and shall not be
shorter than twelve months long. Provided, an Executive Officer who becomes
eligible to participate in the Plan as a result of the March 1, 1998 amendment
to the Plan may make an election pursuant to this paragraph within 30 days after
March 1, 1998, but such election shall apply only to Compensation and/or
bonuses, commissions or incentives for services to be performed subsequent to
the election. All contributions due on behalf of a Participant under this
paragraph shall be called "Deferral Contributions," and shall be in addition to
any contribution due pursuant to paragraphs 6.01 and 6.02 hereof with respect to
the same Participant. For purposes hereof, the terms "Excess Contributions",
"Excess Aggregate Contributions" and "Excess Amounts" shall have the meanings
set forth in the Thrift Plan and Retirement Accumulation Plan.
EXHIBIT 1
SECTION 5.02. Company Contributions for Executive Officers. Company
contributions are made to the Thrift Plan and Retirement Accumulation Plan on
behalf of Executive Officers who participate in such plans. Generally, such
contributions are calculated as a percentage of the elective deferrals made by
such participants under the Thrift Plan and as a percentage of the participants'
compensation under the Retirement Accumulation Plan. Because of a variety of
restrictions placed on the Thrift Plan and Retirement Accumulation Plan by
Internal Revenue Code requirements, the amount of Company contributions made to
the Thrift Plan and Retirement Accumulation Plan for the account of such
participants is reduced from the amount which would otherwise be contributed
using the straight percentage formulas applicable to less highly compensated
employees. In addition, any Deferral Contributions under Section 5.01 of this
Plan have the effect of reducing a participant's "compensation" for purposes of
the Thrift Plan and Retirement Accumulation Plan, and therefore may have the
effect of further reducing or curtailing the amount of company contributions
made to such plans on behalf of Participants who make deferral contributions
hereunder. It is the purpose and intention of this Plan to provide for a company
Contribution on behalf of Executive Officers whose contributions under the
Thrift Plan and Retirement Accumulation Plan have been so reduced, the amount of
which Company Contribution shall be so calculated as to make up for any such
reduction or curtailment of contributions under the Thrift Plan and Retirement
Accumulation Plan.
Therefore, each Plan Year each Company shall make a
contribution to the Plan on behalf of each Participant who is an Executive
Officer in an amount, if any, calculated pursuant to this section. The amount of
such Company Contribution shall be calculated as follows:
a) First, there shall be calculated the sum of the following:
1) the Employer Contributions which would have been allocated
to a Participant's account under the Retirement Accumula-
tion Plan plus;
2) the Matching Contributions which would have been allocated
to a Participant's account under the Thrift Plan, assuming
such Participant elected to contribute 6% of his or her
compensation as a Basic Pre-Tax Contribution under such Thrift
Plan.
For purposes of the foregoing calculations, the amounts of Employer
Contributions and Matching Contributions shall be calculated as if
"Compensation" for purposes of such Retirement Accumulation Plan and
Thrift Plan had not been limited to $150,000 (as adjusted under
Internal Revenue Code Section 404(l)) and had not been reduced by the
amount of any Deferral Contributions under this Plan.
b) Second, the amount calculated under a) above shall be reduced by the
sum of the amounts of Employer Contributions and Matching Contributions
actually allocated to the Participant's accounts under the Retirement
Accumulation Plan and the Thrift Plan, and shall be further reduced by
the amounts of Excess Contributions, Excess Aggregate Contributions and
Excess Amounts distributed to the Participant under such Retirement
Accumulation Plan and Thrift Plan (and by any payments made to the
Participant which are attributable to or made in lieu of such Excess
Contributions, Excess Aggregate Contributions or Excess Amounts).
For purposes hereof, the terms "Employer Contributions," "Matching
Contributions," "Basic Pre-Tax Contribution," "Excess Contributions," "Excess
Aggregate Contributions" and "Excess Amounts" shall have the meanings set forth
in the Thrift Plan and Retirement Accumulation Plan.