SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported): May 5, 1995
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
LOUISIANA 0-7931 72-0701203
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
210 BARONNE ST., NEW ORLEANS, LOUISIANA 70112
(Address of principal executive offices - Zip Code)
Registrant's telephone number, including area code: (504) 561-1371
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
Pursuant to an Agreement and Plan of Merger between First
Commerce Corporation ("FCC") and its wholly-owned
subsidiary, First National Bank of Commerce ("FNBC"), on the
one hand, and First Bancshares, Inc. ("Bancshares") and its
wholly-owned subsidiary, First Bank ("First"), on the other
hand, dated as of May 27, 1994 (the "Plan"), FCC acquired
Bancshares and First on February 17, 1995. The acquisition
was accomplished by the merger of First into FNBC and the
merger of Bancshares into FCC (collectively, the "Mergers"),
and upon consummation of the Mergers, each outstanding share
of common stock of Bancshares was converted into 3.19141
shares of common stock, $5.00 par value per share, of FCC
(the "FCC Common Stock").
The shares of FCC Common Stock issued pursuant to the
Mergers were registered pursuant to a registration statement
on Form S-4 (Commission File No. 33-54865) which was filed
by FCC with the SEC on August 2, 1994 and declared effective
on August 9, 1994. The Plan was approved by the
shareholders of Bancshares at a special meeting held on
September 21, 1994. Information regarding the consummation
of the transaction and disclosure of certain historical and
pro forma financial data can be found in FCC's Current
Report on Form 8-K filed on March 3, 1995, as amended by
Form 8-K/A filed on April 3, 1995.
The Mergers were accounted for as a pooling-of-interests and
therefore the audited financial statements of FCC set forth
below are being filed to restate FCC's consolidated balance
sheets as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-
year period ended December 31, 1994.
FIRST COMMERCE CORPORATION
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS (dollars in thousands)
December 31
=======================================================================================
1994 1993
- ---------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 408,343 $ 398,947
Interest-bearing deposits in other banks 281 55,422
Securities
Held to maturity (market value $12,983 and
$1,603,422, respectively) 12,973 1,578,744
Available for sale, at market 2,492,578 -
Held for sale, at lower of aggregate
amortized cost or market - 1,779,927
Trading account securities 8,970 482
Federal funds sold and securities purchased
under resale agreements 66,230 30,600
Loans and leases, net of unearned income of
$8,147 and $15,736, respectively 3,387,415 2,835,104
Allowance for loan losses (55,933) (70,459)
- ---------------------------------------------------------------------------------------
Net loans and leases 3,331,482 2,764,645
=======================================================================================
Premises and equipment 123,159 108,864
Accrued interest receivable 62,442 56,506
Other real estate 5,913 8,869
Goodwill and other intangibles 15,118 16,143
Other assets 274,936 98,561
- ---------------------------------------------------------------------------------------
Total assets $6,802,425 $ 6,897,710
=======================================================================================
LIABILITIES
Noninterest-bearing deposits $1,270,130 $ 1,240,724
Interest-bearing deposits 4,406,240 4,284,526
- ---------------------------------------------------------------------------------------
Total deposits 5,676,370 5,525,250
=======================================================================================
Short-term borrowings 470,974 678,816
Accrued interest payable 22,907 17,246
Accounts payable and other accrued liabilities 51,499 56,676
Long-term debt 88,956 91,155
- ---------------------------------------------------------------------------------------
Total liabilities 6,310,706 6,369,143
=======================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible,
$25 stated value Issued--2,398,170 and
2,399,170 shares, respectively 59,954 59,979
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--28,898,051 and 28,767,604 shares,
respectively 144,491 143,839
Capital surplus 128,811 127,051
Retained earnings 231,305 198,515
Unearned restricted stock compensation (592) (817)
Net unrealized (loss) on securities
available for sale (72,250) -
- ---------------------------------------------------------------------------------------
Total stockholders' equity 491,719 528,567
=======================================================================================
Total liabilities and stockholders' equity $6,802,425 $ 6,897,710
=======================================================================================
The accompanying Notes to Supplemental Consolidated Financial Statements are an
integral part of these Supplemental Consolidated Balances Sheets.
FIRST COMMERCE CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands except
per share data)
Years Ended December 31
===================================================================================================
1994 1993 1992
- ---------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans and leases $ 257,054 $ 231,516 $ 228,767
Interest on tax-exempt securities 7,383 9,159 10,237
Interest and dividends on taxable securities 159,967 162,899 163,321
Interest on money market investments 3,386 10,399 16,871
- ---------------------------------------------------------------------------------------------------
Total interest income 427,790 413,973 419,196
===================================================================================================
INTEREST EXPENSE
Interest on deposits 122,010 121,201 149,782
Interest on short-term borrowings 23,296 15,063 7,916
Interest on long-term debt 11,216 12,089 12,333
- ---------------------------------------------------------------------------------------------------
Total interest expense 156,522 148,353 170,031
===================================================================================================
NET INTEREST INCOME 271,268 265,620 249,165
PROVISION FOR LOAN LOSS (11,443) (5,804) 22,720
===================================================================================================
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 282,711 271,424 226,445
===================================================================================================
OTHER INCOME
Deposit fees and service charges 46,188 45,582 42,276
Credit card fee income 24,857 22,430 21,582
Trust fee income 13,738 11,371 9,439
Broker/dealer revenue 7,377 8,775 7,225
ATM fee income 5,476 2,137 1,360
Other operating revenue 15,413 15,092 16,456
Securities transactions (43,485) (423) 344
- ---------------------------------------------------------------------------------------------------
Total other income 69,564 104,964 98,682
===================================================================================================
352,275 376,388 325,127
OPERATING EXPENSE
Salary expense 114,857 101,692 88,417
Employee benefits 23,284 22,491 17,725
- ---------------------------------------------------------------------------------------------------
Total personnel expense 138,141 124,183 106,142
Net occupancy expense 17,129 16,178 15,183
Equipment expense 16,921 13,873 13,300
Professional fees 14,202 11,975 8,914
FDIC insurance expense 12,073 12,183 10,846
Other operating expense 55,193 53,273 59,130
- ---------------------------------------------------------------------------------------------------
Total operating expense 253,659 231,665 213,515
===================================================================================================
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST 98,616 144,723 111,612
INCOME TAX EXPENSE 31,854 43,521 34,539
===================================================================================================
INCOME BEFORE MINORITY INTEREST 66,762 101,202 77,073
EARNINGS OF MINORITY INTEREST - - 918
===================================================================================================
NET INCOME 66,762 101,202 76,155
PREFERRED DIVIDEND REQUIREMENTS 4,347 4,348 4,076
===================================================================================================
INCOME APPLICABLE TO COMMON SHARES $ 62,415 $ 96,854 $ 72,079
===================================================================================================
EARNINGS PER COMMON SHARE
Primary $ 2.15 $ 3.36 $ 2.73
Fully diluted $ 2.10 $ 3.11 $ 2.58
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary 29,022,779 28,837,748 26,434,077
Fully diluted 31,817,158 34,830,540 32,273,902
===================================================================================================
The accompanying Notes to Supplemental Consolidated Financial Statements are an
integral part of these Supplemental Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
Net
Unrealized
Unearned (Loss) on
Preferred Restricted Securities
Stock Common Capital Retained Stock Available
Series 1992 Stock Surplus Earnings Compensation for Sale Total
=========================================================================================================================
Balance at January 1, 1992 $ - $ 72,401 $ 71,135 $ 117,244 $ (1,146) - $ 259,634
Net income - - - 76,155 - - 76,155
Cash dividends
Series 1992 preferred stock
($1.70 per share) - - - (4,076) - - (4,076)
Common stock ($.70 per share) - - - (16,251) - - (16,251)
Stock split effected in the
form of a 50% dividend - 32,568 - (32,610) - - (42)
Series 1992 preferred stock
issued in public offering
- 2,400,000 shares 60,000 - (2,403) - - - 57,597
Conversion of 360 shares of
preferred stock into 223
shares of common stock (9) 1 8 - - - -
Public offering of common
stock - 1,000,000 shares - 5,000 40,852 - - - 45,852
Common stock issuances to
plans - 62,429 shares - 312 2,261 - - - 2,573
Stock options exercised,
net of shares surrendered in
payment and tax benefit -
233,679 shares - 1,168 4,869 - - - 6,037
Restricted stock activity - (164) 776 - 540 - 1,152
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 59,991 111,286 117,498 140,462 (606) - 428,631
=========================================================================================================================
Pooling of interests with FANB - 6,124 3,400 8,092 - - 17,616
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 59,991 117,410 120,898 148,554 (606) - 446,247
Net income - - - 101,202 - - 101,202
Cash dividends
Series 1992 preferred stock
($1.81 per share) - - - (4,348) - - (4,348)
Common stock ($.85 per share) - - - (22,049) - - (22,049)
Stock split effected in the
form of a 25% dividend - 24,780 - (24,844) - - (64)
Conversion of 470 shares of
preferred stock into 437
shares of common stock (12) 2 10 - - - -
Common stock issued in exchange
for FANB convertible debt -
65,877 shares - 329 301 - - - 630
Common stock issuances to plans
- 145,485 shares - 727 4,312 - - - 5,039
Stock options exercised, net of
shares surrendered in payment
and tax benefit - 98,565 shares - 493 942 - - - 1,435
Restricted stock activity - 98 588 - (211) - 475
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 59,979 143,839 127,051 198,515 (817) - 528,567
=========================================================================================================================
Net income - - - 66,762 - - 66,762
Cash dividends:
Series 1992 preferred stock
($1.8125 per share) - - - (4,347) - - (4,347)
Common stock ($1.10 per share) - - - (29,590) - - (29,590)
Conversion of 1,000 shares of
preferred stock into 1,164
shares of common stock (25) 6 19 - - - -
Common stock issuances to plans -
58,718 shares - 292 1,124 (35) - - 1,381
Stock options exercised, net of
shares surrendered in payment
and tax benefit - 64,537 shares - 323 558 - - - 881
Restricted stock activity - 31 59 - 225 - 315
Net unrealized (loss) on securities
available for sale - - - - - (72,250) (72,250)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $ 59,954 $ 144,491 $ 128,811 $ 231,305 $ (592) $(72,250) $ 491,719
=========================================================================================================================
The accompanying Notes to Supplemental Consolidated Financial Statements are
an integral part of these Supplemental Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Years Ended December 31
====================================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 66,762 $ 101,202 $ 76,155
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses (11,443) (5,804) 22,720
Depreciation and amortization 15,286 11,936 10,661
Amortization of intangibles 2,195 2,829 2,445
Deferred income tax (benefit) expense 6,667 (7,979) (2,751)
Net (gain) loss from securities transactions 43,485 423 (344)
Net (gain) on loan sales (546)
(Increase) decrease in trading account securities (8,488) 1,894 (1,736)
(Increase) decrease in accrued interest receivable (5,936) 1,856 (9,392)
(Increase) in other assets (1,580) (22,914) (16,536)
Increase (decrease) in accrued interest payable 5,661 1,002 (6,611)
Increase (decrease) in accounts payable and other
accrued liabilities (7,329) 15,650 3,221
Other, net 422 1,389 12,803
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 105,156 101,484 90,635
====================================================================================================
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits
in other banks 55,141 328,264 (84,449)
Proceeds from sales and calls of securities held to
maturity and held for sale 3,625 469,616 238,303
Proceeds from maturities of securities held to
maturity and held for sale 760,979 1,045,090 1,059,264
Purchases of securities held to maturity and held
for sale (22) (1,763,279) (2,431,302)
Proceeds from sales and calls of securities
available for sale 1,654,120 - -
Proceeds from maturities of securities available
for sale 258,328 - -
Purchases of securities available for sale (2,123,021) - -
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements (35,630) 7,026 60,874
Proceeds from sales of loans 97,315
Net (increase) decrease in loans (653,924) (367,426) 22,083
Purchase of minority interest - - (8,288)
Purchase of Wolcott Mortgage Group, Inc., net of
cash acquired (1,194) - -
Proceeds provided (used) by acquisition of Pelican
deposits and selected marketable assets:
Purchases of assets, net of cash acquired - - (213,780)
Proceeds from sale of selected acquired assets - - 204,222
Assumption of deposits and other liabilities - - 1,416,415
Repayment of deposits in branches not reopened - - (275,434)
Purchases of premises and equipment (30,432) (20,409) (15,418)
Proceeds from sales of foreclosed assets 6,587 18,566 20,181
Other, net 1,839 1,599 (138)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (6,289) (280,953) (7,467)
====================================================================================================
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (117,529) 107,626 249,793
Net increase (decrease) in time deposits 268,649 (77,175) (648,119)
Net increase (decrease) in short-term borrowings (208,761) 198,679 248,029
Payments on long-term debt (2,199) (8,450) (4,774)
Proceeds from common stock issued in public offering - - 45,852
Proceeds from sales of common stock 1,840 5,385 6,167
Proceeds from Series 1992 preferred stock sold in
public offering - - 57,597
Cash dividends (31,471) (24,995) (17,872)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (89,471) 201,070 (63,327)
====================================================================================================
INCREASE IN CASH AND CASH EQUIVALENTS 9,396 21,601 19,841
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 398,947 377,346 348,819
====================================================================================================
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 408,343 $ 398,947 $ 368,660
====================================================================================================
The accompanying Notes to Supplemental Consolidated Financial Statements are
an integral part of these Supplemental Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Summary of Significant Accounting Policies
The accounting and reporting policies of First Commerce
Corporation (FCC) and its subsidiaries conform with generally
accepted accounting principles and with general practices within
the financial services industry. The principles and policies
followed by FCC and its subsidiaries and the methods of applying
those principles and policies which materially affect the
determination of the consolidated financial position, results of
operations or cash flows are summarized below and in the
following notes.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of FCC
and all of its subsidiaries, of which the banking subsidiaries
are collectively "the Banks". All significant intercompany
accounts and transactions have been eliminated.
BASIS OF PRESENTATION
Certain prior years' amounts have been reclassified to conform
with current year financial statement presentation.
SECURITIES
Effective January 1, 1994, FCC adopted Statement of Financial
Accounting Standards No. 115 (SFAS No. 115) "Accounting for
Certain Investments in Debt and Equity Securities" which requires
the classification of securities as trading, available for sale
or held to maturity. Management determines the classification of
its securities when they are purchased. FCC's trading account
securities are classified in the money market investment
portfolio, and are carried at market value.
Securities which FCC has the intent and ability to hold until
maturity are classified as held to maturity. These securities
are stated at cost, adjusted for amortization of premiums and
accretion of discounts using either the interest method or the
straight-line method, which produces approximately the same
results.
Securities which may be sold in response to changes in interest
rates, liquidity needs or asset/liability management strategies
are classified as available for sale. These securities are
reflected at market value, and net unrealized gains or losses are
shown as a separate component of stockholders' equity, net of the
tax effect. Realized gains or losses are recognized, using the
specific identification method, at the time of sale or call of a
security, and are shown as a separate component of other income
in the consolidated statements of income.
Prior to adoption of SFAS No. 115, certain securities were
classified as held for sale, and were stated at the lower of
aggregate amortized cost or market and adjustment to market and
realized gains or losses were shown as a separate component of
other income in the consolidated statements of income.
MONEY MARKET INVESTMENTS
Money market investments include interest-bearing deposits in
other banks, federal funds sold, securities purchased under
resale agreements and trading account securities. They are
stated at cost, which approximates market value, with the
exception of trading account securities, which are carried at
market value. Adjustments to market value and trading account
gains and losses are included in other operating revenue in the
consolidated statements of income. Interest and dividend income
on trading account securities is included in interest income on
money market investments.
LOANS AND LEASES
Interest income on most loans is accrued based on the principal
amounts outstanding. Unearned income on loans made on a
discounted basis is recognized as interest income using either
the rule of 78s (sum-of-the-months' digits) or the interest
method, which result in approximately level rates of return over
the terms of the loans.
Most loans and leases are held to maturity and are stated at
cost. Loans which are held for sale, principally residential
mortgage loans, are reflected at the lower of cost or market
value in the consolidated balance sheets.
Loan origination fees and costs are deferred and amortized as an
adjustment of the yield using the interest method for commercial
loans and the straight-line method for consumer and residential
mortgage loans. The amortization period for commercial and
consumer loans is the actual life of the loans; for residential
mortgage loans, the amortization period is the average life of
the loan. Loan origination costs on credit card loans are not
deferred due to the immaterial effect on FCC's financial
statements. Annual credit card fees are recognized on a
straight-line basis over the twelve-month period that cardholders
may use the card.
NONPERFORMING LOANS AND LEASES
Nonperforming loans and leases consist of nonaccrual loans and
restructured loans. Loans and leases past due 90 days or more
are considered to be performing loans and leases until placed on
nonaccrual status. Loans and leases are placed on nonaccrual
status when, in the opinion of management, there is sufficient
uncertainty as to timely collection of interest or principal so
as to preclude the recognition in reported earnings of some or
all of the contractual interest. When a loan is placed on
nonaccrual status, interest accrued but not collected is usually
reversed against interest income. Generally, any payments
received on nonaccrual loans and leases are first applied to
reduce outstanding principal amounts. Loans are not reclassified
as accruing until interest and principal payments are brought
current and future payments are reasonably assured. Delinquent
credit card loans are charged-off within 180 days. Student
loans, which are 100% government guaranteed, are not placed on
nonaccrual status.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents management's best
estimate of potential losses in the loan and lease portfolios.
This estimate is based on an ongoing assessment of the
portfolios. Factors which are considered include significant
changes in the character of the portfolios, loan concentrations,
current year charge-offs, historic ratios of charge-offs to
average loans and leases, trends in portfolio volumes,
delinquencies, nonaccruals and economic conditions. Ultimate
losses may vary from the current estimates. These estimates are
reviewed periodically and, as adjustments become necessary, they
are reported in earnings in the periods in which they become
known.
FORECLOSED ASSETS
Property transferred to foreclosed assets is recorded at fair
value at the time of transfer. Fair value is the anticipated
sales price of the assets, less estimated costs to sell, based
upon independent appraisals and other relevant factors. When a
loan is reclassified as a foreclosed asset, the reduction of the
carrying value to the fair value is charged to the allowance for
loan losses. Subsequent to foreclosure, foreclosed assets are
reflected at the lower of current fair value or the fair value at
the date of transfer to foreclosed assets. Any subsequent
reductions are charged to nonperforming assets expense. Revenues
and expenses associated with operating or disposing of foreclosed
assets are recorded during the period in which they are incurred.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed using
various methods, principally straight-line, over the estimated
useful lives of each type of asset. Leasehold improvements are
amortized using the straight-line method over the periods of the
leases or the estimated useful lives, whichever is shorter.
Additions to premises and equipment and major replacements or
improvements are capitalized. Gains and losses on dispositions,
maintenance, repairs and minor replacements are reflected in
current operations.
INCOME TAXES
FCC and its subsidiaries file a consolidated federal income tax
return. Income tax expense or benefit is based on income
reported for financial accounting purposes. FCC accounts for
income taxes under the asset and liability method. Deferred
assets and liabilities are established for the temporary
differences between the financial reporting basis and the tax
basis of FCC's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are realized or
settled.
FOREIGN EXCHANGE CONTRACTS
Generally, sales or purchases of foreign exchange contracts are
covered with offsetting transactions. FCC uses foreign exchange
contracts as commercial service products and does not intend to
speculate with open positions in the foreign exchange market.
Unrealized gains or losses in the foreign exchange portfolio are
recognized upon the maturity of the contracts.
INTEREST RATE CONTRACTS
FCC enters into a variety of interest rate contracts such as
caps, collars and floors in the management of its interest rate
exposure. These instruments are typically entered into as hedges
against interest rate risk on specific assets and liabilities.
The premium paid or received for any of these instruments is
amortized over the expected remaining term of the agreement.
Cash flows relative to these instruments are recorded as
adjustments to interest income or expense. Gains and losses on
any contracts sold are deferred and amortized over the expected
remaining term of the hedged asset or liability. If the asset or
liability is disposed of, any unamortized gain or loss on the
hedging instrument is included in the determination of the gain
or loss from the disposition.
INTEREST RATE SWAP AGREEMENTS
FCC enters into interest rate swap agreements primarily as a
means to manage its interest rate exposure. Adjusted revenues or
expenses related to interest rate swaps are recognized over the
lives of the agreements. Fees related to swap agreements are
amortized using the interest method over the life of the swap.
If an interest rate swap which qualifies for deferral accounting
is terminated, the gain or loss is deferred and amortized over
the remaining life of the specific asset or liability it was
hedging. If the instrument being hedged by a swap is disposed
of, the swap agreement is marked to market with any resulting
gain or loss included in the determination of the gain of loss
included in the determination of the gain or loss from the
disposition. Interest rate swap agreements not qualifying
for deferral accounting are recorded at market value. Any changes
in the market value are recognized in other income.
RETIREMENT PLAN
FCC and its subsidiaries have established a retirement plan
covering substantially all employees. Pension expense is charged
to current operations and consists of service costs and interest
costs reduced by the expected return on plan assets and
amortization of initial unrecognized net assets. Current policy
is to pay into the trust fund only that portion of the accrued
liability which is currently tax deductible.
POSTRETIREMENT BENEFITS
FCC accrues the expected costs of postretirement benefits during
the years that an eligible employee renders service to the
employer.
INTANGIBLE ASSETS
Unamortized costs of purchased subsidiaries in excess of the fair
value of the acquired net tangible assets are included in
goodwill and other intangibles in the consolidated balance
sheets. Also included in goodwill and other intangibles are
premiums paid on the purchase of loan portfolios and deposit
assumptions. Identifiable intangible assets, principally related
to "depositor and borrower relationships," are being amortized
using the straight-line method over the estimated periods
benefited. The remaining costs (goodwill) are being amortized
using the straight-line method over periods ranging from 5 to 20
years.
EARNINGS PER COMMON SHARE
Income for primary earnings per share is adjusted for preferred
stock dividends. Primary earnings per share are computed based
on the weighted average number of common shares outstanding and
common stock equivalents arising from the assumed exercise of
outstanding stock options, unless their effect would be
antidilutive. Fully diluted earnings per share are computed
using average common shares and equivalents. Common stock
equivalents are increased by the assumed conversion of
convertible debentures and preferred stock into common stock as
if converted at the beginning of the period, unless their effect
would be antidilutive. Income for fully diluted earnings per
share is adjusted for interest expense related to the debentures,
net of the related income tax effect, and preferred stock
dividends.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and noninterest-bearing amounts due from
banks.
OTHER
Assets held by the Banks in fiduciary capacities (assets under
trust agreements) are not assets of the Banks and are not
included in the supplemental consolidated balance sheets.
Generally, certain minor sources of income are recorded when
payment is received. Results of these activities on the cash
basis do not differ materially from those that would be
reported using the accrual basis of accounting.
NOTE 2
Subsequent Events
Effective February 17, 1995, First Bancshares, Inc. (First), the parent
company of First Bank, Slidell, Louisiana, merged with FCC in exchange for
approximately 2,705,537 shares of FCC common stock. First Bank was merged with
First National Bank of Commerce (FNBC), a wholly owned subsidiary of FCC.
The acquisition was accounted for as a pooling-of-interests; accordingly,
prior period financial information has been restated to include this
acquisition. On December 31, 1994, First Bancshares, Inc. had $244 million
in assets. Selected separate and combined financial information of FCC and
First for the year ended December 31, 1994 are presented below (in thousands,
except per share amounts).
FCC First Combined
===============================================================================
Year Ended December 31, 1994
Net interest income $ 256,261 $ 15,007 $ 271,268
Other income, excluding
securities transactions $ 110,434 $ 2,615 $ 113,049
Net income $ 63,684 $ 3,078 $ 66,762
Earnings per common share
Primary $ 2.25 $ 3.63 $ 2.15
Fully diluted $ 2.19 $ 3.63 $ 2.10
===============================================================================
On February 17, 1995, FCC acquired City Bancorp, Inc. (City), the parent
company of City Bank & Trust Company (City Bank), New Iberia, Louisiana, for
approximately 516,100 shares of FCC common stock. City Bank was merged with
The First National Bank of Lafayette, a wholly owned subsidiary of FCC. The
acquisition was accounted for as a purchase. FCC repurchased in the
open market the number of shares of its common stock issued for the City Bank
acquisition. Related intangibles will be amortized over periods not to exceed
fifteen years. On December 31, 1994, City had $79 million in assets. Proforma
results of City have been excluded due to the immaterial impact on FCC's
consolidated results of operations.
NOTE 3
Aquisitions
Pending at December 31, 1994, was FCC's proposed aquisition of
Lakeside Bancshares, Inc. (Lakeside), the parent company of
Lakeside National Bank of Lake Charles (LNB). It is the intent of FCC
to acquire Lakeside and merge LNB into the First National Bank of
Lake Charles, a wholly owned subsidiary of FCC. At December 31,
1994, Lakeside had $177 million in assets. The acquisition is subject to
various approvals and conditions, including regualtory approval. The
acquisition of Lakeside is expected to be completed in the third quarter
of 1995.
On October 5, 1994, FNBC acquired Wolcott Mortgage Group, Inc.
(Wolcott), a mortgage company which originates and sells residential
mortgages. Wolcott's shareholders received $1.39 million in cash. A
contingent payment may be made in October 1995, based on certain
conditions. The acquisition was accounted for as a purchase.
Goodwill related to this transaction is amoritized using the
straight-line method over 15 years. The results of operations of
Wolcott since the date of acquisition have been included in FCC's
consolidated financial statements. Proforma results of operations
have been excluded due to the immaterial impact on FCC's
consolidated results of operations.
Effective January 1, 1994, First Acadiana National Bancshares,
Inc. (FANB), the parent company of First Acadiana National Bank,
Opelousas, Louisiana, merged with FCC in exchange for 1,290,145
shares of FCC common stock. First Acadiana National Bank was merged
with The First National Bank of Lafayette, a wholly owned
subsidiary of FCC. The acquisition was accounted for as a pooling-
of-interests. All 1993 financial information reported reflects the
pooling-of-interests with FANB. Financial information prior to
1993 was not restated, since the effect would be immaterial.
On January 13, 1992, FCC's banks in New Orleans, Baton Rouge
and Alexandria acquired from the Resolution Trust Corporation
approximately $1.5 billion of insured deposits and other marketable
securities of Pelican Homestead and Savings Association
("Pelican"). $275 million of these deposits were immediately paid
out.
NOTE 4
Restrictions on Cash and Due from Banks
The Banks are required to maintain average reserve balances with
the Federal Reserve Bank based on a percentage of deposits. Average
balances maintained for such purposes were $65,547,000 and $95,163,000
during 1994 and 1993 respectively.
NOTE 5
Securities Held to Maturity
An analysis of securities held to maturity follows (in thousands):
Amortized Unrealize Unrealized Fair
Cost Gains (Losses) Value
==================================================================================
December 31, 1994
- ----------------------------------------------------------------------------------
Obligations of U. S. agencies
and corporations $ 1,503 $ 0 (1) $ 1,502
Obligations of states
and political
subdivisions 1,733 11 0 1,744
Other debt securities 500 0 0 500
Equity securities 9,237 0 0 9,237
- ----------------------------------------------------------------------------------
Total securities held
to maturity $ 12,973 $ 11 (1) $ 12,983
==================================================================================
December 31, 1993
- ----------------------------------------------------------------------------------
U.S. Treasury securities $ 796,884 $ 6,182 (2) $ 803,064
Obligations of U.S.
agencies and
corporations 701,463 6,976 (1,227) 707,212
Obligations of states
and political
subdivisions 65,513 12,728 0 78,241
Other bonds, notes,
debentures and stock 14,884 33 (12) 14,905
- ----------------------------------------------------------------------------------
Total securities held
to maturity $1,578,744 $ 25,919 (1,241) $1,603,422
==================================================================================
December 31, 1992
- ----------------------------------------------------------------------------------
U.S. Treasury securities $1,351,337 $ 19,195 (226) $1,370,306
Obligations of U.S.
agencies and
corporations 1,080,709 3,492 (8,979) 1,075,222
Obligations of states
and political
subdivisions 70,167 11,826 (51) 81,942
Other bonds, notes,
debentures and stock 41,164 161 (590) 40,735
- ----------------------------------------------------------------------------------
Total securities held
to maturity $2,543,377 $ 34,674 (9,846) $2,568,205
==================================================================================
Upon adoption of SFAS No. 115 on January 1, 1994, $805 million of
securities previously classified as held to maturity were reclassified
as available for sale.
An analysis of the amortized cost and the fair values of securities
held to maturity by maturity periods follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
- ----------------------------------------------------------------------------
December 31, 1994
- ----------------------------------------------------------------------------
Within one year $ 481 $ 2 (1) $ 482
One to five years 2,753 6 - 2,759
Five to ten years 502 3 - 505
After ten years 9,237 - - 9,237
- ----------------------------------------------------------------------------
Total securities held
to maturity $ 12,973 $ 11 (1) $ 12,983
- ----------------------------------------------------------------------------
Securities with carrying values of approximately $969,319,000,
$830,552,000 and $590,727,000 at December 31, 1994, 1993 and 1992,
respectively, were required to be pledged to secure public and trust
deposits, and for other purposes.
Excluding securities issued by the U. S. government of by U. S.
government agencies and corporations, no securities of any issuer
exceeded 10 percent of consolidated stockholders' equity as of
December 31, 1994 and 1993, when securities held to maturity and
available for sale were combined for 1994 and held to maturity and
held for sale were combined for 1993.
During 1994, proceeds from the sales and calls of securities held
to maturity were $3,625,000 resulting in gross realized gains of $6,000
and gross realized losses of $467,000.
NOTE 6
Securities Available for Sale
An analysis of securities available for sale follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
======================================================================================
December 31, 1994
- --------------------------------------------------------------------------------------
U. S. Treasury securities $ 1,275,319 $ 160 $ (31,241) $ 1,244,238
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 1,093,553 51 (84,244) 1,009,360
Notes 118,063 4 (387) 117,680
Obligations of states
and political
subdivisions 97,082 6,896 (1,792) 102,186
Other debt securities 7,291 - (5) 7,286
Equity securities 12,410 - (582) 11,828
- --------------------------------------------------------------------------------------
Total securities
available for sale $ 2,603,718 $ 7,111 $ (118,251) $ 2,492,578
======================================================================================
During 1994, proceeds from the sales and calls of securities available
for sale were $1,654,120,000 resulting in gross realized gains of $2,697,000
and gross realized losses of $46,721,000. Gross realized gains from the
redemption of First Continental Bancshares, Inc. debentures were $1,000,000.
An analysis of the amortized cost and fair values of the securities
available for sale by maturity periods follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
======================================================================================
December 31, 1994
- --------------------------------------------------------------------------------------
Within one year $ 41,726 $ 141 $ (122) $ 41,745
One to five years 1,545,497 754 (42,283) 1,503,968
Five to ten years 44,359 947 (2,944) 42,362
After ten years 972,136 5,269 (72,902) 904,503
- --------------------------------------------------------------------------------------
Total securities
available for sale $ 2,603,718 $ 7,111 $ (118,251) $ 2,492,578
======================================================================================
Maturities of mortgage-backed securities are classified by contractual
maturity dates. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without penalties. At December 31, 1994, the weighted average contractual
maturity of the U.S. agency mortgage-backed securities was 22 years,
compared to an average expected maturity of approximately 5 years.
During 1994, $207 million of mortgage-backed securities were paid out prior
to maturity.
Prior to the adoption of SFAS No. 115, FCC had classified certain
securities as held for sale.
An analysis of securities held for sale as of December 31, 1993 and 1992
follows (in thousands):
Carrying Unrealized Unrealized Market
Value Gains (Losses) Value
=================================================================================
December 31, 1993
- ---------------------------------------------------------------------------------
U.S. Treasury securities $ 713,558 $ 5,019 $ (17) $ 718,560
Obligations of U.S.
agencies and
corporations 1,005,358 1,852 (6,449) 1,000,761
Obligations of states
and political
subdivisions 41,011 3,024 (50) 43,985
Other bonds, notes,
debentures and stock 20,000 - - 20,000
- ---------------------------------------------------------------------------------
Total securities held
for sale $ 1,779,927 $ 9,895 $ (6,516) $1,783,306
=================================================================================
December 31, 1992
- ---------------------------------------------------------------------------------
U.S. Treasury securities $ 131,458 $ 4,415 $ (785) $ 135,088
Obligations of U.S.
agencies and
corporations 274,611 3,813 (534) 277,890
Obligations of states
and political
subdivisions 38,688 2,123 (20) 40,791
Other bonds, notes,
debentures and stock 18,600 - - 18,600
- ---------------------------------------------------------------------------------
Total securities held
for sale $ 463,357 $ 10,351 $ (1,339) $ 472,369
=================================================================================
NOTE 7
Loans and Leases
The composition of loans and leases was as follows (in thousands):
December 31
==================================================================
1994 1993
- ------------------------------------------------------------------
Loans to individuals $ 1,552,046 $ 1,251,343
Commercial, financial and
agricultural 716,193 492,355
Real estate 613,026 609,047
Credit card loans 426,224 383,932
Other loans 88,073 114,163
- ------------------------------------------------------------------
Total loans and leases 3,395,562 2,850,840
Unearned income (8,147) (15,736)
- ------------------------------------------------------------------
Loans and leases, net
of unearned income $ 3,387,415 $ 2,835,104
==================================================================
The following tables provide a further classification of certain
categories of loans and leases (dollars in thousands):
December 31
=====================================================================================================
Loans to Individuals by Type as a
Percent of Total Loans and Leases 1994 1993
- -----------------------------------------------------------------------------------------------------
Residential (1-4 family) - first lien $ 560,990 16.52 % $ 463,691 16.27 %
Residential (1-4 family) - junior lien 88,340 2.60 80,156 2.81
Automobile 512,040 15.08 389,933 13.68
Education 186,039 5.48 146,516 5.14
Personal expenditures 157,178 4.63 115,453 4.05
Other 47,459 1.40 55,594 1.95
=====================================================================================================
$ 1,552,046 45.71 % $1,251,343 43.90 %
=====================================================================================================
December 31
=====================================================================================================
Commercial, Financial and Agricultural
Loans by Industry as a Percent of
Total Loans and Leases 1994 1993
- -----------------------------------------------------------------------------------------------------
Services $ 199,401 5.87 % $ 130,593 4.58 %
Mining 90,557 2.67 29,057 1.02
Transportation 70,785 2.08 63,236 2.22
Wholesale trade 69,683 2.05 53,021 1.86
Manufacturing 66,166 1.95 44,806 1.57
Financial 55,550 1.64 46,595 1.63
Retail trade 43,612 1.28 40,833 1.43
Construction 40,619 1.20 27,865 0.98
Communications 25,843 0.76 19,237 0.67
Other 53,977 1.59 37,113 1.30
- -----------------------------------------------------------------------------------------------------
$ 716,193 21.09 % $ 492,356 17.27 %
=====================================================================================================
December 31
=====================================================================================================
Real Estate Loans by Type as a
Percent of Total Loan 1994 1993
- -----------------------------------------------------------------------------------------------------
Commercial $ 533,997 15.73 % $ 525,515 18.43 %
Construction and land development 51,884 1.53 59,870 2.10
Multi-family 22,913 0.67 20,387 0.72
Farmland 4,232 0.12 3,275 0.11
- -----------------------------------------------------------------------------------------------------
$ 613,026 18.05 % $ 609,047 21.36 %
=====================================================================================================
In the ordinary course of business, the Banks make loans to
directors and executive officers of FCC and its subsidiaries and
to their associates. In the opinion of management, related party
loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated parties and do not
involve more than normal risks of collectibility. The amount of
such related party loans was $107,700,000 and $50,237,000 at
December 31, 1994 and 1993, respectively. An analysis of 1994
activity with respect to these loans follows (in thousands):
1994
====================================================================
Beginning balance $ 50,237
Additions 197,101
Repayments (142,216)
Increase due to change in related parties 2,578
- --------------------------------------------------------------------
Ending balance $ 107,700
=====================================================================
NOTE 8
Allowance for Loan Losses
A summary analysis of the transactions in the allowance for loan losses
follows (dollars in thousands):
Years Ended December 31
==================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------
Balance at beginning of year $ 70,459 $ 83,227 $ 73,888
Provision charged to expense (11,443) (5,804) 22,720
Loans and leases charged to the allowance (13,348) (16,478) (24,820)
Recoveries on loans and leases previously
charged to the allowance 10,265 9,514 8,493
- ----------------------------------------------------------------------------------
Net charge-offs (3,083) (6,964) (16,327)
- ----------------------------------------------------------------------------------
Balance at end of year $ 55,933 $ 70,459 $ 80,281
==================================================================================
Net charge-offs as a percent of
average loans and leases (a) .10 % .27 % .70 %
Allowance for loan losses as a percent of
loans and leases (a) at end of year 1.65 % 2.49 % 3.37 %
==================================================================================
(a) Net of unearned income.
NOTE 9
Nonperforming Assets
Nonperforming assets include loans and leases on nonaccrual
status, loans and leases that have been restructured with borrowers as
to interest rates or repayment terms for credit reasons, real estate
acquired through foreclosures, loans classified as in-substance
foreclosures, unused bank premises and other foreclosed assets.
Loans past due 90 days or more are considered to be performing
assets until placed on nonaccrual status. Nonperforming assets
included in the consolidated balance sheets were as follows
(dollars in thousands):
December 31
======================================================
1994 1993
- ------------------------------------------------------
Nonaccrual loans $13,544 $25,566
Foreclosed assets
Other real estate 9,786 14,762
Other foreclosed assets 91 96
Allowance for losses
on foreclosed assets (3,898) (5,918)
- ------------------------------------------------------
5,979 8,940
- ------------------------------------------------------
Total nonperforming
assets $19,523 $34,506
======================================================
Loans past due 90 days
or more and not
on nonaccrual status $10,310 $12,673
======================================================
Ratios at end of year
Nonperforming assets
as a percent of loans
and leases plus
foreclosed assets .58 % 1.21 %
Allowance for loan losses
as a percent of non-
performing loans 412.97 % 275.60 %
Loans and leases past
due 90 days or more
and not on nonaccrual
status as a percent of
loans and leases .30 % .45 %
======================================================
The loss of income associated with nonperforming loans and leases, and
the cost of carrying foreclosed assets were (in thousands except per share
amounts):
Years Ended December 31
================================================================================
1994 1993 1992
- --------------------------------------------------------------------------------
Effect on pretax income
Nonperforming loans
Contractual interest income $ 1,810 $ 4,408 $ 6,064
Income actually received and recorded
on loans on nonaccrual status
during the year (306) (248) (81)
- --------------------------------------------------------------------------------
Loss of interest income on loans 1,504 4,160 5,983
- --------------------------------------------------------------------------------
Foreclosed assets
Cost of operations 1,609 1,734 1,969
Interest cost (average funds
sold rate) 353 535 960
Net (gains) on foreclosed assets (1,326) (2,011) (1,762)
Provision for losses on foreclosed assets 496 2,342 7,499
================================================================================
Cost to carry foreclosed assets 1,132 2,600 8,666
================================================================================
Total effect on pretax income $ 2,636 $ 6,760 $ 14,649
================================================================================
Cost per common share after tax $ 0.06 $ 0.15 $ 0.36
================================================================================
Additionally, interest of $2,367,000 was recovered on loans previously on
nonaccrual, but not on nonaccrual status in 1994.
The activity in the allowance for foreclosed assets was as follows
(in thousands):
Years Ended December 31
===============================================================================
1994 1993 1992
- -------------------------------------------------------------------------------
Balance at beginning
of year $ 5,918 $ 9,120 $ 4,351
Allowance provisions 496 2,342 7,499
Sales and dispositions (2,516) (5,544) (2,730)
- -------------------------------------------------------------------------------
Net change (2,020) (3,202) 4,769
- -------------------------------------------------------------------------------
Balance at end of year $ 3,898 $ 5,918 $ 9,120
===============================================================================
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114 (SFAS No. 114),
"Accounting by Creditors for Impairment of a Loan". In October 1994,
FASB issued Statement of Financial Accounting Standards No. 118 (SFAS
No. 118), "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which amends SFAS No. 114. These
standards require the measurement of impairment on certain loans based
on the present value of expected future cash flows discounted at the loan's
effective interest rate. Adoption of SFAS Nos. 114 and 118 is required for
fiscal years beginning after December 15, 1994. FCC adopted these
statements beginning January 1, 1995. Adoption will not have a material
impact on FCC's supplemental consolidated financial statements.
NOTE 10
Premises and Equipment
An analysis of premises and equipment by asset classification follows
(in thousands):
December 31
=================================================================
1994 1993
- -----------------------------------------------------------------
Land $ 23,388 $ 21,041
Buildings 74,859 72,637
Leasehold improvements 19,621 18,813
Furniture, fixtures and equipment 101,227 81,592
Capitalized leased equipment 390 390
Construction in progress 6,824 7,746
- -----------------------------------------------------------------
226,309 202,219
Accumulated depreciation
and amortization (103,150) (93,355)
- -----------------------------------------------------------------
$ 123,159 $ 108,864
=================================================================
Provisions for depreciation and amortization charged to operating
expense were $15,286,000, $11,936,000, and $10,661,000 for 1994, 1993,
and 1992 respectively.
At December 31, 1994, the Banks and a service subsidiary
were obligated under a number of noncancelable leases for land and
buildings used for continuing operations and for automobiles and equipment
on a short-term basis. Future minimum rental payments under operating
leases having an initial or remaining noncancelable lease term in excess of
one year were as follows (in thousands):
Premises Equipment Total
===================================================================
1995 $ 7,140 $ 183 $ 7,323
1996 6,419 173 6,592
1997 5,505 38 5,543
1998 5,175 0 5,175
1999 5,021 0 5,021
Later years 52,626 0 52,626
- -------------------------------------------------------------------
$ 81,886 $ 394 $ 82,280
===================================================================
Generally, operating leases contain various renewal options and some
contain a provision for increased rentals under cost of living escalation
clauses. Total rental expense, net of immaterial sublease rentals, was
$6,608,000, $6,080,000 and $5,858,000 for 1994, 1993 and 1992, respectively.
NOTE 11
Goodwill and Other Intangibles
Tangible and identifiable intangible assets and liabilities of
acquisitions accounted for as purchases were recorded at their fair
values at the dates of acquisition. The excess of purchase price over
the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. Also included in goodwill and other
intangibles are premiums which were paid on the purchase of loan portfolios
and deposits purchased from the Federal Deposit Insurance Corporation and
the Resolution Trust Corporation. Selected information concerning
intangibles follows (in thousands):
December 31
=======================================================================
1994 1993
- -----------------------------------------------------------------------
Favorable leasehold interests $ 704 $ 737
Borrower relationships 238 415
Depositor relationships 2,776 3,724
Goodwill 11,400 11,267
- -----------------------------------------------------------------------
Total $ 15,118 $ 16,143
=======================================================================
Pretax Amortization
Years Ended December 31
=======================================================================
1994 1993 1992
- -----------------------------------------------------------------------
Favorable leasehold interests $ 34 $ 34 $ 40
Borrower relationships 179 389 581
Depositor relationships 945 1,386 961
Goodwill 1,037 1,020 863
- -----------------------------------------------------------------------
Total $ 2,195 $ 2,829 $ 2,445
=======================================================================
NOTE 12
Deposits
The composition of deposits was as follows (in thousands):
December 31
=========================================================================
1994 1993
- -------------------------------------------------------------------------
Demand deposits $ 1,262,143 $ 1,227,193
NOW account deposits 938,719 937,525
Money market investment deposits 701,859 823,083
Savings deposits 604,076 636,847
Other consumer time deposits 1,592,233 1,491,018
- -------------------------------------------------------------------------
Total core deposits 5,099,030 5,115,666
Time deposits $100,000 and over (a) 577,340 409,584
- -------------------------------------------------------------------------
Total $ 5,676,370 $ 5,525,250
==========================================================================
(a) Foreign branch time deposits included are immaterial in each period
presented.
NOTE 13
Short-Term Borrowings
An analysis of short-term borrowings follows (in thousands):
December 31
=========================================================================
1994 1993 1992
- -------------------------------------------------------------------------
Federal funds purchased
and securities sold under
agreements to repurchase $ 461,255 $ 636,145 $ 467,433
Commercial paper - - 500
Other short-term borrowings 9,719 42,671 12,204
- -------------------------------------------------------------------------
Total $ 470,974 $ 678,816 $ 480,137
=========================================================================
Information regarding federal funds purchased and securities sold
under agreements to repurchase follows (dollars in thousands):
==========================================================================
1994 1993 1992
- --------------------------------------------------------------------------
Average interest rate
on December 31 5.32 % 2.66 % 2.51 %
- --------------------------------------------------------------------------
Year-to-date averages
Interest rate 4.03 % 2.85 % 2.93 %
Balance $ 571,325 $ 516,058 $ 265,873
- --------------------------------------------------------------------------
Maximum amount
outstanding at any
month-end during
the year $ 650,015 $ 775,178 $ 467,433
==========================================================================
Federal funds purchased arise principally from transactions
with other banks. At December 31, 1994, federal funds
purchased had maturities ranging from three to four days.
Securities sold under agreements to repurchase had
maturities up to twenty-two days as of December 31, 1994,
and were investment transactions with other national banks,
public entities, corporate customers and securities dealers.
To the extent that the proceeds of these transactions exceed
funding requirements of the Banks, the excess funds are sold
in the money markets.
FCC maintains lines of credit with several large banks,
totaling $30 million at December 31, 1994 to support the
issuance of commercial paper and pays fees to maintain these
lines. No lines of credit were in use at December 31, 1994,
1993 or 1992.
NOTE 14
Long-Term Debt
Long-term debt consisted of (in thousands):
December 31
================================================================
1994 1993
- ----------------------------------------------------------------
First Commerce Corporation
12 3/4% convertible debentures,
due in December 2000; unsecured (a)
Series A $ 26,846 $ 26,846
Series B 56,492 57,122
12% subordinated debentures,
due in September 1994 - 1,451
- ----------------------------------------------------------------
83,338 85,419
- ----------------------------------------------------------------
Subsidiaries
9% mortgage note payable,
due in installments, balance
due in November 1996 5,295 5,370
10% mortgage note payable,
due in installments through
July 2003 25 49
Obligations under capitalized
leases, due in installments
through August 2003 298 317
- ----------------------------------------------------------------
Total long-term debt $ 88,956 $ 91,155
================================================================
(a) At December 31, 1994, approximately $15,434,000 was held by directors
and executive officers of FCC.
Annual principal repayment requirements for the
years 1995 through 1999 follow (in thousands):
Subsidiaries
==========================================================
1995 $ 109
- ----------------------------------------------------------
1996 5,240
- ----------------------------------------------------------
1997 31
- ----------------------------------------------------------
1998 35
- ----------------------------------------------------------
1999 38
- -----------------------------------------------------------
The 12 3/4% Convertible Debentures due 2000, Series A and B, were
issued in exchange for all of the capital stock held by stockholders of
The First National Bank of Lake Charles and Rapides Bank & Trust
Company in Alexandria, respectively. FCC is required to redeem Series
B Debentures at the principal amount upon the death of the original
holder; Series A Debentures allow redemption upon the death of their
original holder at the option of the holder's estate. At the option of the
holder, each of the Series A or B Debentures may be converted into
FCC common stock at the conversion price of $26.66 principal amount
for one share of stock.
Total cash payments for interest expense on long-term debt,
short-term borrowings and deposits were $150,863,000, $147,524,000
and $171,240,000 in 1994, 1993 and 1992, respectively.
NOTE 15
Employee Benefit Plans
Retirement Plans--The Retirement Plan for Employees of First Commerce
Corporation (Retirement Plan) is a defined benefit plan covering
substantially all employees who have attained age 21 and completed one year
of employment. Benefits are based on years of service and the employees'
highest average monthly compensation for any 60-month period during the
last 120-month period of service. FCC's funding policy is to contribute
annually the maximum that can be deducted for federal income tax purposes.
The following table sets forth the plan's funded status at December 31,
1994 and 1993 (in thousands):
December 31
=======================================================================
1994 1993
- -----------------------------------------------------------------------
Projected benefit obligation
Vested benefits $ (52,261) $ (52,031)
Nonvested benefits (1,001) (1,021)
- -----------------------------------------------------------------------
Accumulated benefit obligation (53,262) (53,052)
Effect of projected future
compensation levels (15,627) (16,005)
- -----------------------------------------------------------------------
Projected benefit obligation (68,889) (69,057)
Plan assets at fair value 63,810 68,233
- -----------------------------------------------------------------------
Projected benefit obligation in excess of
plan assets (5,079) (824)
Unrecognized net loss due to past experience
different from assumptions made 2,839 841
Unrecognized prior service cost (962) (1,082)
Unrecognized net assets being recognized
over 15 years (3,866) (4,511)
- -----------------------------------------------------------------------
Unfunded accrued pension cost included
in other accrued liabilities $ (7,068) $ (5,576)
=======================================================================
The plan's assets at December 31, 1994 consisted primarily of U. S.
government securities, corporate bonds, and common stocks. At
December 31, 1994 and 1993 the plan's assets included $176,132 and
$201,157 of FCC common stock, at market value. As of December 31,
1994, the plan's assets included 8,006 shares of FCC common stock
with a market value of $22.00 per share. During 1994, dividends of
$8,400 were paid on FCC common shares held by the plan.
Net periodic pension cost for 1994, 1993 and 1992 included the
following (in thousands):
Years Ended December 31
===============================================================================
1994 1993 1992
- -------------------------------------------------------------------------------
Service cost-benefits earned during
the period $ 3,198 $ 2,524 $ 2,289
Interest cost on projected benefit
obligation 4,738 4,380 4,093
Loss (return) on plan assets 1,368 (5,657) (2,937)
Other components, net (7,812) (556) (3,296)
- -------------------------------------------------------------------------------
Net periodic pension cost $ 1,492 $ 691 $ 149
===============================================================================
In determining the plan's funded status, the weighted average discount
rate assumed was 7 1/2% at December 31, 1994 and 1992, and 7% at December 31,
1993. The rate of increase in future salary levels was 5 1/2% in each of the
three years. The expected long-term rate of return on assets was 8 1/2% in
1994, 1993 and 1992.
Tax-Deferred Savings Plan--FCC has a Tax-Deferred Savings Plan
covering substantially all full-time employees. Employees may voluntarily
contribute up to a maximum of 15%, with the limit depending on the salary
level. Employees receive matching contributions of 50% of voluntary
contributions up to a maximum of 2 1/2% of gross pay. Vesting in matching
employer contributions occurs at 25% per year after one year's participation
with full vesting after four years. Employer contributions were $1,719,000,
$1,777,000 and $1,273,000, in 1994, 1993 and 1992 respectively, on a restated
basis. First Bank had a 401(k) plan during all periods presented. This plan
has been merged into FCC's Tax-Deferred Savings Plan. First Bank's
contributions to the plan have been included in FCC's contribution.
Postretirement Benefits--Certain of FCC's subsidiaries provide
postretirement medical and life insurance coverage for specified groups of
employees who retired in prior years. The expected costs of postretirement
benefits are accrued during the years that an eligible employee renders
service to the employer, including a portion of the accumulated postretirement
benefit at January 1, 1993, amortized over a 20-year period. The estimated
current accumulated postretirement benefit obligation (APBO) was $1,592,000
and $2,323,000 at December 31, 1994 and 1993, respectively. The APBO
calculation assumes a discount rate of 7 1/2% at December 31, 1994 and 1993.
The health care cost trend rate assumed in the current calculation begins at
9% and declines in future periods, with an underlying inflation rate of 4%.
An increase in the health care cost trend rate of 1% would result in an
increase in the postretirement medical obligation portion of the APBO of
approximately 9.1% from $940,000 to $1,026,000. FCC's accumulated
postretirement benefit expense was $151,000 in 1994 and $371,000 in 1993,
including the 20-year amortization of the transition obligation. Retiree
medical insurance and life insurance expense was $30,000, $47,000 and $13,000
in 1994, 1993 and 1992, respectively.
Postemployment Benefits - In November 1992, Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" was issued. FCC adopted this standard on January 1, 1994. The
Statement requires the accrual of the expected costs of postemployment
benefits during the years in which an eligible employee renders service to
an employer. FCC's postemployment benefit obligation is immaterial.
NOTE 16
Stockholders' Equity
FCC issued 2,705,537 shares of common stock in connection with the
acquisition of First Bancshares Inc. on February 17, 1995.
FCC issued 516,100 shares of its common stock in connection with
the acquisition of City Bancorp, effective February 17, 1995. In the
first quarter of 1995, FCC repurchased an equal number of shares of its
common stock.
FCC issued 1,290,145 shares of common stock in connection with the
acquisition of First Acadiana National Bancshares, Inc. on January 1, 1994.
On December 30, 1993, FCC paid a five-for-four stock split effected in
the form of a 25% stock dividend to stockholders of record on December 17,
1993. On January 11, 1993, FCC paid a three-for-two stock split effected in
the form of a 50% stock dividend to stockholders of record on December 11,
1992. Fractional shares were paid in cash based on the closing price on the
payment date adjusted for the stock split. All average number of shares
outstanding and per share amounts were restated to reflect both splits.
On June 23, 1992, FCC issued an additional one million common shares,
which were sold in a public offering.
On January 23, 1992, FCC issued 2,400,000 shares of 7.25% preferred
stock, $25 stated value in a public offering. The preferred stock is
non-voting and cumulative as to dividends. Each share of preferred stock is
convertible into 1.1646 shares of common stock.
FCC's 1985 Stock Option Plan (the 1985 Plan) and Tandem Stock
Appreciation Rights Plan (the SAR Plan) were replaced with a new plan in
1992. The FCC 1992 Stock Incentive Plan (the 1992 Plan) covers up to 10%
of the outstanding shares of common stock. During 1994, 79,978 options were
granted at a price of $27.50 per share under the 1992 Plan. The exercise
price of the shares subject to each option granted under the 1985 Plan is
the higher of the fair market value of the stock on the date of grant or the
book value. Under the 1992 Plan the exercise price may not be less than the
fair market value of the common stock on the date of grant.
Options are exercisable in 25% increments beginning one year after the
date of grant and each year thereafter on a cumulative basis under the 1985
Plan. Under the 1992 Plan, no option may be exercised during the six-month
period immediately following the date of grant. The Compensation Committee
has the discretion to determine the term of each option, and the time or
times during its term when such option becomes exercisable. The income tax
effect of any difference between the market price at the exercise date and
the option price is credited to additional paid-in capital as the options
are exercised. Both plans allow the issuance of restricted stock;
restriction terms are determined at the time of grant. Under the SAR plan,
rights may be granted in conjunction with options granted under the option
plan. In 1994, 239,935 rights were granted at a price of $27.50 per
share under the 1992 plan. Compensation expense is recognized in connection
with stock appreciation rights based on the current market value of the
common stock. No compensation expense was recognized in 1994 related to
these rights. A summary of changes in stock options follows (dollars in
thousands except per share data):
=====================================================================
Option Price
- ---------------------------------------------------------------------
Number of
Shares Per Share Aggregate
- ---------------------------------------------------------------------
Outstanding
January 1, 1992 940,614 $9.13-$11.74 $ 9,392
Granted 122,607 $21.07 2,583
Exercised (475,231) $9.13-$11.74 (4,553)
Canceled (11,876) $10.40-$21.07 (174)
- ---------------------------------------------------------------------
Outstanding
December 31, 1992 576,114 $9.13-$21.07 $ 7,248
Granted 76,736 $28.20-$30.80 2,184
Exercised (168,555) $9.13-21.07 (1,684)
Canceled (4,245) $10.44-28.20 (64)
- ---------------------------------------------------------------------
Outstanding
December 31, 1993 480,050 $9.27-$30.80 $ 7,684
Granted
Options 79,978 $27.50 2,199
Rights 239,935 $27.50 6,598
Exercised
Options (81,067) $ 9.27-$28.20 (893)
Canceled
Options (19,390) $ 9.27-$28.20 (335)
Rights (7,569) $27.50 (208)
- ---------------------------------------------------------------------
Outstanding
December 31, 1994 691,937 $ 9.27-$30.80 $ 15,045
=====================================================================
Options for 245,602 shares were exercisable at December 31, 1994.
Restricted stock issued in 1988 and 1989 vested at 55% on January 31,
1992, based upon the level of cumulative earnings per share for the years
1989 to 1991. The restrictions on 100% of the 1991 grants lapsed on December
31, 1993, based upon the level of cumulative earnings per share for the
years 1991 through 1993. The restrictions on the 1993 grants will lapse in
full or in part in 1996, depending on the level of cumulative earnings per
share for the years 1993 through 1995. The restrictions on the 1994 grants
will lapse in full or in part in 1997, depending on the level of cumulative
earnings per share for the years 1994 through 1996 and FCC's average annual
return on equity for this same three year period. Additionally, a
performance share award, not to exceed 50% of the shares awarded, may be
earned based on certain peer group rankings. Those officers holding
restricted stock receive dividends and have the right to vote the shares
based on the assumption that all restrictions will lapse. A summary of
changes in restricted stock follows:
============================================================
Number of Shares
============================================================
Outstanding, January 1, 1992 234,414
Granted 5,625
Earned and issued unrestricted (73,963)
Canceled (67,408)
- ------------------------------------------------------------
Outstanding, December 31, 1992 98,668
Granted 47,814
Earned and issued unrestricted (82,293)
Canceled (16,375)
- ------------------------------------------------------------
Outstanding, December 31, 1993 47,814
Granted 9,792
Canceled (3,554)
- ------------------------------------------------------------
Outstanding, December 31, 1994 54,052
============================================================
FCC recorded $315,000, $944,000 and $1,152,000 of amortization expense in
1994, 1993, and 1992, respectively related to these resticted shares.
At December 31, 1994, 910,618 shares of common stock were reserved for
issuance under the FCC Tax-Deferred and Supplemental Tax-Deferred Savings
Plans, in which participants can choose to invest in FCC common stock. FCC's
contributions to the plan are made in either cash or FCC common stock, with
cash contributions used to purchase FCC common stock. The plan trustee
purchased 19,839 shares in 1994, 115,001 shares in 1993 and 45,736 shares in
1992 of FCC common stock directly from FCC.
At December 31, 1994, 1,449,023 shares of common stock were reserved for
issuance under the FCC Dividend and Interest Reinvestment and Stock Purchase
Plan, which allows participants to reinvest their dividends (from both common
and preferred stock), interest (on the 12 3/4% Debentures, Series A and B) and
certain optional cash contributions in FCC common stock. The plan allows FCC,
at its discretion, to either issue new shares or purchase shares in the open
market on the reinvestment dates for the plan's participants. FCC issued
38,879 shares of common stock in 1994, 66,845 shares in 1993 and 71,318 shares
in 1992, directly to the plan for participants.
NOTE 17
Dividend and Loan Restrictions
The primary source of funds for the dividends paid by FCC to its
stockholders is dividends from the Banks. The payment of dividends
by national banks is regulated by the Comptroller of the Currency. The
payment of dividends by state banks in Louisiana that are members of
the Federal Reserve system is regulated by the Louisiana
Commissioner of Financial Institutions and the Federal Reserve Board.
The amount of retained earnings that could be paid to FCC after
December 31, 1994 without prior approval was approximately
$63,332,000, plus an amount equal to the Banks' net income for 1995.
The parent company's net working capital is another source for the
payment of dividends. Net working capital was $105,015,000 as of
December 31, 1994.
Under current Federal Reserve regulations, the Banks are limited in
the amounts they may loan to their affiliates, including FCC. Loans to
a single affiliate may not exceed 10% and loans to all affiliates may not
exceed 20% of an individual bank's net assets plus its allowance for
loan losses. Such loans must be collateralized by assets with market
values of 100% to 130% of loan amounts, depending upon the nature
of the collateral.
NOTE 18
Off-Balance Sheet Instruments
In the normal course of business, FCC is a party to financial instruments
which are not recorded in the consolidated financial statements. These
financial instruments include commitments to extend credit, letters of credit,
interest rate contracts and foreign exchange contracts.
Loan commitments and lines of credit represent commitments to lend
funds at specific rates, with fixed expiration or review dates and for specific
purposes. These commitments are agreements to fund loans if the
conditions in the agreements are met. For their credit card customers, the
Banks have the right to change or terminate any terms or conditions of the
credit card accounts at any time. Since many commitments and unused
credit card lines are never actually drawn upon, the unfunded amounts do
not necessarily represent future funding requirements. The Banks evaluate
each customer's creditworthiness on an individual basis. The amount of
collateral obtained, if any, upon extension of credit is based on the credit-
worthiness of the customer.
Standby letters of credit obligate the Banks to pay third parties if the
Banks' customers fail to perform under the agreements with those third
parties. Commercial letters of credit are used to finance contracts for the
shipment of goods from seller to buyer. Letters of credit are subject to
credit review, collateral requirements and debt covenants similar to those in
loan agreements. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to customers.
Foreign exchange contracts are commitments to purchase or deliver
foreign currency at a specified exchange rate. These contracts are used as
commercial service products and guarantee that at a future date, the
customer will receive the foreign currency at a specified rate. The market
risk from unfavorable movements in currency exchange rates is minimized
by offsetting transactions.
In order to manage interest rate risk on certain assets and liabilities,
the Banks may enter into interest rate contracts, including swaps, cap
corridors, caps, swaptions and floors. These agreements obligate one or both
parties to make interest rate payments based on designated or calculated
interest rates times the notional amounts of the contracts. The notional
amounts do not represent an amount at risk because they are only used as the
basis for determining the actual cash flows related to the interest rate
contracts. Normal credit reviews of the parties to these agreements are
performed to minimize the risk of default. A swaption is an option to either
enter into an interest rate swap at some future date or cancel an existing
swap. A cap corridor is the simultaneous purchase and sale of a cap; the cap
sold is for a higher rate than the one purchased.
A summary of obligations under financial instruments which are not
reflected in the consolidated financial statements follows (in thousands):
December 31
==================================================================================
1994 1993
- ----------------------------------------------------------------------------------
Commitments to extend credit for loans and
leases (excluding credit card plans) $ 944,155 $ 651,053
Commitments to extend credit for credit
card plans $ 1,437,709 $ 983,711
Commercial letters of credit $ 1,744 $ 2,140
Financial letters of credit $ 54,538 $ 47,066
Performance letters of credit $ 17,203 $ 17,277
Mortgage loans sold with recourse $ 848 $ 6,652
Foreign exchange contracts
Commitments to purchase $ 580 $ 1,228
Commitments to sell $ 660 $ 1,326
When-issued securities
Commitments to purchase $ 50 $ 470
Commitments to sell $ 50 $ 470
Interest rate contracts (a)
Swaps, including amortizing interest rate swaps $ 360,000 $ 263,000
Swaptions $ 0 $ 200,000
Caps $ 350,000 $ 5,000
Cap corridors $ 100,000 $ 550,000
==================================================================================
(a) Notional principal amounts.
NOTE 19
Fair Value of Financial Instruments
In December, 1991, the FASB issued Statement of Financial Accounting
Standards No. 107 (SFAS No. 107), "Disclosures about Fair Value of Financial
Instruments". In October, 1994, FASB issued Statement of Financial
Accounting Standards No. 119 (SFAS No. 119), "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments," which amends
SFAS No. 107. These standards require disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet,
for which it is practicable to estimate that value. Approximately 92% of
FCC's assets and liabilities are considered financial instruments as defined
in SFAS No. 107. Many of FCC's financial instruments, however, lack a
readily available trading market as characterized by a willing buyer and
willing seller engaging in an exhange transaction. Therefore, significant
estimations and present value calculations were used by FCC for the purpose
of this disclosure. Estimated fair values have been determined by FCC using
the best available data and an estimation methodology suitable for each
category of financial instrument.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without considering the value of future business and
the value of assets and liabilities that are not considered financial
instuments. Also, the tax ramifications related to unrealized gains and
losses have not been considered in any of the estimates.
Reasonable comparability between financial institutions may not be
likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets
for many of the financial instruments. This lack of uniform valuation
methodologies also introduces a greater degree of subjectivity to these
estimated fair values.
Certain financial instruments and all nonfinancial instruments are
excluded from the disclosure requirements of SFAS No. 107 and 119.
Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of FCC.
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument.
On-balance sheet financial instruments:
Cash and short-term investments - For cash and due from banks and money
market investments, the carrying amount is a reasonable estimate of fair
value.
Securities - The fair value of securities held to maturity, available for
sale and held for sale is the market value. The market value was
determined from quoted prices or quoted prices of similar securities of
comparable risk and maturity where no quoted market price exists.
Loans - The fair value of loans, except for credit card loans, was
calculated by discounting the scheduled principal and interest payments
to maturity using estimates of December 31, 1994 and 1993 rates. For
credit card loans, cash flows and maturities were estimated based on
historical experience and discounted using an average yield adjusted
for servicing costs and credit losses.
Deposits - Deposits with stated maturities were valued using a present
value of contractual cash flows with a discount rate approximating current
market rates for deposits of similar remaining maturities. SFAS No. 107
requires that deposits without stated maturities, such as noninterest-
bearing demand deposits, money market accounts and savings accounts, have
a fair value equal to the amount payable on demand as of December 31, 1994,
which is also their book value. However, these deposits do have an inherent
value due to the nature of the relationships with these long-term
depositors, which are reflected by the premiums that purchasers of deposits
have been willing to pay to sellers historically.
Short-term borrowings - The fair value of short-term borrowings is the book
value.
Long-term debt - The fair value of the long-term debt was estimated from
dealer quotes.
Off-balance sheet financial instruments:
Interest rate contracts - The fair values of interest rate contracts were
obtained from dealer quotes. The fair value of interest rate contracts is
not related to the notional amount. These values represent the estimated
amount that FCC would receive or pay to terminate the contracts, taking
into account current interest rates and, when appropriate, the current
creditworthiness of the counterparties.
Foreign exchange contracts - The fair value of foreign exchange contracts
is related to the cash flows arising from these contracts and will
fluctuate based on currency values. The fair value of foreign exchange
contracts was immaterial.
Commitments to extend credit and letters of credit - The fair value of
commitments to extend credit and all types of letters of credit were
established using the fees currently charged to enter into similar
agreements. The aggregate fair value of these committments and letters
of credit was immaterial.
When-issued securities - The fair value of when-issued securities is the
par value. The fair value of when-issued securities was immaterial.
The estimated fair values of FCC's financial instruments follows (in
thousands).
December 31, 1994 December 31, 1993
- -----------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -----------------------------------------------------------------------------------------------
On-balance sheet financial assets:
Cash and short-term
investments $ 483,824 $ 483,824 $ 485,451 $ 485,451
Securities available for sale/
held for sale $2,492,578 $ 2,492,578 $1,779,927 $1,783,306
Securities held to maturity $ 12,973 $ 12,983 $1,578,744 $1,603,422
Loans, net of unearned income and
the allowance for loan l $3,331,482 $ 3,287,479 $2,764,645 $2,762,191
On-balance sheet financial liabilities:
Deposits $5,676,370 $ 5,655,327 $5,525,250 $5,541,499
Short-term borrowings $ 470,974 $ 470,974 $ 678,816 $ 678,816
Long-term debt $ 88,956 $ 107,618 $ 91,155 $ 142,187
Off-balance sheet financial instruments:
Interest rate contracts $ 2,586 $ (12,977) $ 773 $ (1,109)
- -----------------------------------------------------------------------------------------------
NOTE 20
Contingencies
FCC and its subsidiaries have been named as defendants in various
legal actions arising from normal business activities in which damages
in various amounts are claimed. The amount, if any, of ultimate liability
with respect to such matters cannot be determined. However, after
consulting with legal counsel, management believes any such liability
will not have a material effect on FCC's consolidated financial condition
or results of operations.
NOTE 21
Other Operating Expense
The composition of other operating expense follows (in thousands):
Years Ended December 31
====================================================================
1994 1993 1992
- --------------------------------------------------------------------
Advertising and marketing $ 9,182 $ 8,440 $ 7,675
Stationery and supplies 6,920 6,663 6,057
Taxes, licenses and other fees 6,733 5,546 4,116
Computer-related services 6,638 6,044 5,566
Postage 5,184 5,271 5,328
Communications 4,166 4,084 3,536
Travel and entertainment 2,864 2,674 2,074
Credit card expense 2,689 2,714 1,806
Armored car, courier and freight 2,630 2,294 2,268
Nonperforming assets expense 779 2,065 7,706
Other 7,408 7,478 12,998
- --------------------------------------------------------------------
Total $ 55,193 $ 53,273 $ 59,130
====================================================================
NOTE 22
Income Taxes
The components of income tax expense in the supplemental consolidated
statements of income for the years ended December 31, 1994, 1993, and 1992
were as follows (in thousands):
Liability Method Deferred Method
- -----------------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------
Current $ 25,187 $ 51,539 $ 37,290
Deferred 6,667 (7,979) (2,751)
- -----------------------------------------------------------------------------------
Total $ 31,854 $ 43,560 $ 34,539
===================================================================================
Income tax expense related to state and foreign income taxes is included
above and was insignificant in all years presented. Income tax benefit
(expense) related to securities transactions was $15,220,000 in 1994,
$148,000 in 1993 and $(117,000) in 1992.
Total income tax expense for 1994, 1993 and 1992 was different from the
amount computed by applying the statutory federal income tax rates to pretax
income as follows (in percentages):
Years Ended December 31
=================================================================================================
Liability Method Deferred Method
- -------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------
Federal income tax expense 35.00 % 35.00 % 34.00 %
Increase (decrease) resulting from:
Benefits attributable to tax-exempt interest (3.58) (2.73) (3.91)
Deferred taxes no longer needed - (2.86) -
Effect of change in tax rate on beginning
deferred items - (0.33) -
Effect of adopting SFAS 109 - 0.43 -
Nondeductible expenses 1.43 0.44 0.69
Other items, net (0.55) 0.12 0.17
- -------------------------------------------------------------------------------------------------
Actual income tax expense 32.30 % 30.07 % 30.95 %
=================================================================================================
The current income tax (receivable) payable was $(2.67) million and $9.62
million on December 31, 1994 and 1993, respectively.
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. There were
net deferred tax assets of $55.21 million and $24.46 million on December 31,
1994 and 1993 respectively. The major temporary differences which created
deferred tax assets and liabilities as of December 31, 1994 and 1993 are as
follows (in thousands):
December 31, 1994 December 31, 1993
=========================================================================================================================
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Unrealized loss on securiti $ 38,890 $ - $ - $ -
Allowance for loan losses 19,556 - 24,713 -
Amortization of intangibles 3,039 - 3,703 -
Employee benefits 2,488 - 1,731 -
Interest on nonaccrual loans 1,310 - 2,431 -
Alowance for losses on foreclosed assets 845 - 3,034 -
Accumulated depreciation - 4,464 - 4,539
Accrued liabilities - 4,061 - 3,943
Bond accretion - 3,190 - 3,968
Other 1,430 630 3,430 2,128
- --------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $ 67,558 $ 12,345 $ 39,042 $ 14,578
==========================================================================================================================
Deferred income tax benefit for the year ended December 31, 1992 included
the following components
(in thousands):
==================================================
Provision for loan losses $ (1,957)
Provision for other losses (566)
Interest on nonaccrual loan (1,303)
Depreciation (550)
Direct lease financing income (1)
Bond accretion (45)
Other items, net 1,671
- --------------------------------------------------
Total deferred tax benefit $ (2,751)
==================================================
FCC's cash payments for federal income tax liabilities were $35.22
million, $40.13 million and $33.60 million for 1994, 1993 and 1992,
respectively.
Condensed Parent Company Only
Financial Information
Condensed Balance Sheets (in thousands)
December 31
============================================================================
1994 1993
- ----------------------------------------------------------------------------
ASSETS
Interest-bearing deposits in
subsidiary banks (a)
Cash and due from banks $ 98,166 $ 43,735
Time deposits 381 618
Loan receivable, net of unearned income 975 -
Investments in subsidiaries at equity (a)
Banks 461,641 550,502
Nonbanks 7,181 4,388
- ----------------------------------------------------------------------------
468,822 554,890
Other assets 22,966 32,143
- ----------------------------------------------------------------------------
Total assets $ 591,310 $ 631,386
============================================================================
LIABILITIES
Payables to subsidiaries (a) $ 3,751 $ 7,583
Long-term debt 83,338 85,419
Other liabilities 12,502 9,817
- ----------------------------------------------------------------------------
Total liabilities 99,591 102,819
STOCKHOLDERS' EQUITY 491,719 528,567
- ----------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 591,310 $ 631,386
============================================================================
(a) Eliminated in consolidation, except for goodwill and other intangibles.
Condensed Statements of Income (in thousands)
<CAPTION
Years Ended December 31
========================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------
INCOME
Interest and dividends on
securities $ 866 $ 290 $ 110
Interest on receivables from
subsidiaries (a) 1,667 1,798 2,546
Dividends from subsidiaries (a) 92,530 25,123 4,136
Other income 25 234 5
- ----------------------------------------------------------------------------------------
95,088 27,445 6,797
- ----------------------------------------------------------------------------------------
EXPENSES
Interest on debt to nonbank subsidiaries 165 183 -
Interest on debt to nonaffiliates 10,698 11,565 11,793
Other 1,956 1,226 1,643
- ----------------------------------------------------------------------------------------
12,819 12,974 13,436
- ----------------------------------------------------------------------------------------
Income before income taxes and
equity in undistributed earnings
of subsidiaries 82,269 14,471 (6,639)
Income tax benefit (3,714) (13,445) (3,230)
- ----------------------------------------------------------------------------------------
85,983 27,916 (3,409)
Equity in undistributed earnings
of subsidiaries (a) (19,221) 73,286 79,564
- ----------------------------------------------------------------------------------------
NET INCOME 66,762 101,202 76,155
PREFERRED DIVIDEND
REQUIREMENTS 4,347 4,348 4,076
- ----------------------------------------------------------------------------------------
INCOME APPLICABLE TO
COMMON SHARES $ 62,415 $ 96,854 $ 72,079
========================================================================================
(a) Eliminated in consolidation.
Parent Company
Statements of Cash Flows (in thousands)
Years Ended December 31
=============================================================================
1994 1993 1992
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 66,762 $ 101,202 $ 76,155
Adjustments to reconcile net income
to net cash provided by operating
activities
Equity in undistributed earnings
of subsidiaries (a) 19,221 (73,286) (79,564)
Deferred income tax (benefit)
expense (183) (13,394) 304
Decrease in interest payable (36) (87) (41)
Decrease in other assets 933 1,622 118
Increase (decrease) in other
liabilities 1,001 27 (9,688)
Other (456) 1,238 1,127
- -----------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 87,242 17,322 (11,589)
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES
Investment in subsidiaries (a) (5,000) 3,000 (38,288)
Purchase of interest-bearing
time deposits (a) - - (2,020)
Proceeds from maturity of interest-
bearing time deposits (a) 237 313 2,335
(Increase) in loans (975) - -
Purchase of securities (11,998) (85,000) (22,300)
Proceeds from sales of securities 20,000 83,975 3,700
Principal collected on advances (a) 77,392 86,002 73,161
Advances originated or acquired (a) (80,755) (81,289) (73,366)
- -----------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (1,099) 7,001 (56,778)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in commercial
paper - (500) 500
Payments on long-term debt (2,081) (8,322) (4,683)
Proceeds from issuance of stock
Common 1,840 5,385 52,019
Preferred - - 57,597
Cash dividends (31,471) (24,995) (17,872)
- -----------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (31,712) (28,432) 87,561
- -----------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 54,431 (4,109) 19,194
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 43,735 47,844 27,763
- -----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 98,166 43,735 46,957
=============================================================================
(a) Eliminated in consolidation.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
and Board of Directors of
First Commerce Corporation:
We have audited the supplemental consolidated balance sheets of
FIRST COMMERCE CORPORATION (a Louisiana corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related
supplemental consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1994. The supplemental
consolidated financial statements give retroactive effect to the
merger with First Bancshares, Inc. on February 17, 1995, which
has been accounted for as a pooling of interests as described in
Note 2. These supplemental financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these supplemental financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental financial statements
referred to above present fairly, in all material respects, z the
financial position of First Commerce Corporation and subsidiaries
as of December 31, 1994 and 1993 and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, after giving retroactive
effect to the merger with First Bancshares, Inc. as described in
Note 2, in conformity with generally accepted accounting
principles.
As discussed in Note 1, effective January 1, 1994 the
Company changed its method of accounting for investment
securities.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
May 4, 1995
Item 7. Financial Statements and Exhibits.
(c) Exhibits
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
FIRST COMMERCE CORPORATION
By: /s/ Thomas L. Callicutt, Jr.
Thomas L. Callicutt, Jr.
Senior Vice President,
Controller and
Principal Accounting Officer
Dated: May 5, 1995
EXHIBIT INDEX
Page
Exhibits Number
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule