__________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 0-7931
FIRST COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0701203
(State or other jurisdiction of (I.R.S. Employer
incorportion or organization) Identification No.)
210 Baronne Street 70112
New Orleans, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 561-1371
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___X__ No ______
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of the last practicable
date.
Class Outstanding as of July 31, 1995
_________ __________________________________
Common Stock, $5.00 par value 29,000,406
FIRST COMMERCE CORPORATION
INDEX
Part 1: Financial Information
Item 1. Financial Statements Page No.
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Changes
in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Report of Independent Public Accountants 15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 16
Part II: Other Information 32
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) June 30 December 31
______________________________________________________________________________________________
1995 1994 1994
______________________________________________________________________________________________
ASSETS
Cash and due from banks $ 370,317 $ 342,126 $ 408,343
Interest-bearing deposits in other banks 151 36,403 281
Securities
Held to maturity (market value $10,170, $324,121
and $12,984, respectively) 10,170 323,701 12,973
Available for sale, at market 2,622,667 2,621,293 2,492,578
Trading account securities 14,928 526 8,970
Federal funds sold and securities purchased under
resale agreements 52,625 31,955 66,230
Loans and leases, net of unearned income
of $7,765, $10,501 and $8,147, respectively 3,773,585 2,968,880 3,387,415
Allowance for loan losses (58,358) (61,063) (55,933)
______________________________________________________________________________________________
Net loans and leases 3,715,227 2,907,817 3,331,482
==============================================================================================
Premises and equipment 130,804 116,503 123,159
Accrued interest receivable 72,753 57,661 62,442
Other real estate 1,749 7,031 5,913
Goodwill and other intangibles 20,398 14,899 15,118
Other assets 48,955 94,846 274,936
_______________________________________________________________________________________________
Total assets $7,060,744 $6,554,761 $6,802,425
===============================================================================================
LIABILITIES
Noninterest-bearing deposits $1,232,092 $1,251,308 $1,270,130
Interest-bearing deposits 4,513,707 4,200,574 4,406,240
_______________________________________________________________________________________________
Total deposits 5,745,799 5,451,882 5,676,370
===============================================================================================
Short-term borrowings 538,464 437,550 470,974
Accrued interest payable 29,347 18,050 22,907
Accounts payable and other accrued liabilities 58,350 44,582 51,499
Long-term debt 88,640 89,056 88,956
_______________________________________________________________________________________________
Total liabilities 6,460,600 6,041,120 6,310,706
===============================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible,
$25 stated value
Issued--2,397,370, 2,398,170 and 2,398,170
shares respectively 59,934 59,954 59,954
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--29,468,248, 28,867,664 and
28,898,051 shares respectively 147,341 144,339 144,491
Capital surplus 140,767 128,699 128,811
Retained earnings 246,068 230,969 231,305
Treasury stock -- 493,425 common shares, at cost (13,115) - -
Unearned restricted stock compensation (1,590) (1,042) (592)
Net unrealized gain (loss) on securities
available-for-sale 20,739 (49,278) (72,250)
_______________________________________________________________________________________________
Total stockholders' equity 600,144 513,641 491,719
===============================================================================================
Total liabilities and stockholders' equity $7,060,744 $6,554,761 $6,802,425
===============================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Balance Sheets.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
(dollars in thousands except per share data) June 30 June 30
==============================================================================================================
1995 1994 1995 1994
______________________________________________________________________________________________________________
INTEREST INCOME
Interest and fees on loans and leases $ 82,371 $ 60,908 $ 158,358 $ 120,679
Interest on tax-exempt securities 1,728 1,809 3,568 3,716
Interest and dividends on taxable securities 41,670 38,097 81,713 77,541
Interest on money market investments 530 653 1,414 1,475
______________________________________________________________________________________________________________
Total interest income 126,299 101,467 245,053 203,411
==============================================================================================================
INTEREST EXPENSE
Interest on deposits 43,554 28,536 83,271 56,423
Interest on short-term borrowings 7,467 4,557 13,519 9,398
Interest on long-term debt 2,768 2,768 5,507 5,604
______________________________________________________________________________________________________________
Total interest expense 53,789 35,861 102,297 71,425
==============================================================================================================
NET INTEREST INCOME 72,510 65,606 142,756 131,986
PROVISION FOR LOAN LOSSES 2,956 (4,782) 5,963 (8,539)
______________________________________________________________________________________________________________
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 69,554 70,388 136,793 140,525
==============================================================================================================
OTHER INCOME
Deposit fees and service charges 12,528 11,308 24,182 22,456
Credit card fee income 6,993 6,205 13,364 11,675
Trust fee income 3,516 3,548 7,267 7,031
Broker/dealer revenue 2,128 1,675 4,044 3,877
ATM fee income 1,966 1,402 3,752 2,423
Other operating revenue 4,365 3,707 8,413 8,580
Securities transactions 36 (6,705) (13,286) (5,583)
______________________________________________________________________________________________________________
Total other income 31,532 21,140 47,736 50,459
==============================================================================================================
OPERATING EXPENSE
Salary expense 28,746 27,320 58,514 54,218
Employee benefits 5,777 5,901 12,342 11,679
______________________________________________________________________________________________________________
Total personnel expense 34,523 33,221 70,856 65,897
Net occupancy expense 4,633 4,367 9,022 8,584
Equipment expense 4,914 4,133 9,740 7,806
Professional fees 3,292 3,441 6,591 6,504
FDIC insurance expense 3,072 3,008 6,144 6,016
Other operating expense 14,995 13,189 30,744 25,464
______________________________________________________________________________________________________________
Total operating expense 65,429 61,359 133,097 120,271
==============================================================================================================
INCOME BEFORE INCOME TAX EXPENSE 35,657 30,169 51,432 70,713
INCOME TAX EXPENSE 11,934 9,877 17,076 22,993
==============================================================================================================
NET INCOME 23,723 20,292 34,356 47,720
PREFERRED DIVIDEND REQUIREMENTS 1,086 1,087 2,173 2,174
==============================================================================================================
INCOME APPLICABLE TO COMMON SHARES $ 22,637 $ 19,205 $ 32,183 $ 45,546
==============================================================================================================
EARNINGS PER COMMON SHARE
Primary $ .78 $ .66 $ 1.11 $ 1.57
Fully diluted $ .73 $ .63 $ 1.08 $ 1.46
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 29,104,529 29,034,168 29,104,220 29,020,986
Fully diluted 35,041,681 34,965,376 31,911,423 34,968,219
==============================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Net
Unrealized
Unearned Gain (Loss)
Preferred Restricted on Securities
(dollars in thousands Stock Common Capital Retained Treasury Stock Available
except per share data) Series 1992 Stock Surplus Earnings Stock Compensation for Sale Total
________________________________________________________________________________________________________________________________
Balance at January 1, 1994 $59,979 $143,839 $127,051 $198,515 $ - ($817) $ - $528,567
Net income - - - 47,720 - - - 47,720
Cash dividends
Series 1992 preferred stock
($.91 per share) - - - (2,174) - - - (2,174)
Common stock ($.50 per share) - - - (13,077) - - - (13,077)
Conversion of 1,000 shares of
preferred stock into 1,164 shares
of common stock (25) 6 19 - - - - -
Common stock issuances to plans -
32,552 shares - 161 632 (15) - - - 778
Stock options exercised, net of shares
surrendered in payment and tax
benefit - 56,762 shares - 284 526 - - - - 810
Restricted stock activity - 49 471 - - (225) - 295
Change in net unrealized gain (loss)
on securities available for sale - - - - - - (49,278) (49,278)
________________________________________________________________________________________________________________________________
Balance at June 30, 1994 $59,954 $144,339 $128,699 $230,969 $ - ($1,042) ($49,278) $513,641
________________________________________________________________________________________________________________________________
Balance at January 1, 1995 $59,954 $144,491 $128,811 $231,305 $ - ($592) ($72,250) $491,719
Net income - - - 34,356 - - - 34,356
Cash dividends
Series 1992 preferred stock
($.91 per share) - - - (2,173) - - - (2,173)
Common stock ($.60 per share) - - - (17,379) - - - (17,379)
Conversion of 800 shares of preferred
stock into 931 shares of
common stock (20) 5 15 - - - - -
Common stock issuances to plans -
22,675 shares - - - (41) 645 - - 604
Stock options exercised, net of shares
surrendered in payment and tax
benefit-19,991 shares - 100 211 - - - - 311
Restricted stock activity - 165 817 - - (998) - (16)
Issuance and repurchase of
equal number of shares to acquire
City Bancorp, Inc.-516,100 shares - 2,580 10,913 - (13,760) - - (267)
Change in net unrealized gain (loss)
on securities available for sale - - - - - - 92,989 92,989
________________________________________________________________________________________________________________________________
Balance at June 30, 1995 $59,934 $147,341 $140,767 $246,068 ($13,115) ($1,590) $20,739 $600,144
________________________________________________________________________________________________________________________________
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(dollars in thousands) June 30
_______________________________________________________________________________________
1995 1994
_________________________________________________________________________________________
OPERATING ACTIVITIES
Net income $ 34,356 $ 47,720
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 5,963 (8,539)
Depreciation and amortization 8,995 6,859
Amortization of intangibles 1,221 1,244
Deferred income tax expense 588 3,352
Net loss from securities transactions 13,286 5,583
Net (gain) on loan sales (55) (1,087)
(Increase) in trading account securities (5,958) (44)
(Increase) in accrued interest receivable (9,999) (1,155)
Decrease in other assets 2,775 26,901
Increase in accrued interest payable 6,236 804
Increase (decrease) in accounts payable and other
accrued liabilities 8,248 (12,076)
Other, net (1,703) 463
_________________________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 63,953 70,025
=========================================================================================
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in other banks 130 19,019
Proceeds from sales and calls of securities held to maturity 344 65
Proceeds from maturities of securities held to maturity 38,033 454,448
Purchases of securities held to maturity (16) (6)
Proceeds from sales and calls of securities available
for sale 644,124 936,971
Proceeds from maturities of securities available for sale 60,075 162,466
Purchases of securities available for sale (542,196) (1,222,468)
Net (increase) decrease in federal funds sold and
securities purchased under resale agreements 18,155 (1,355)
Proceeds from sales of loans 12,662 -
Net (increase) in loans (363,399) (134,587)
Cash and due from banks of acquired City Bancorp, Inc. 4,081 -
Purchases of premises and equipment (16,025) (14,938)
Proceeds from sales of foreclosed assets 7,560 3,528
Other, net 14 424
_______________________________________________________________________________________
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (136,458) 203,567
=======================================================================================
FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (138,831) (63,464)
Net increase (decrease) in time deposits 137,757 (9,904)
Net increase (decrease) in short-term borrowings 67,490 (241,266)
Payments on long-term debt (316) (2,099)
Proceeds from sales of common stock 218 1,227
Cash dividends (18,724) (14,907)
Treasury stock acquired, net of sales (13,115) -
_________________________________________________________________________________________
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 34,479 (330,413)
=========================================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (38,026) (56,821)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 408,343 398,947
=========================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $370,317 $ 342,126
=========================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Financial Statements.
Note 1
Summary of Significant Accounting Policies
The consolidated financial statements include the accounts
of First Commerce Corporation (FCC) and all of its subsidiaries.
All significant intercompany accounts and transactions are
eliminated.
The consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the consolidated financial condition, results of
operations and cash flows for the interim periods. Adjustments
included herein are of a normal recurring nature and include
appropriate estimated provisions. The consolidated financial
statements for the interim periods have not been independently
audited. However, the interim consolidated financial statements
have been reviewed by FCC's independent public accountants in
accordance with standards for such reviews established by the
American Institute of Certified Public Accountants, and their
review report is included herein.
Certain prior year amounts have been reclassified to conform
with current year financial statement presentation.
FCC's 1994 financial information has been restated to include
First Bancshares, Inc.
The Notes to Consolidated Financial Statements included herein
should be read in conjunction with the Notes to Consolidated
Financial Statements included in FCC's 1994 Annual Report to
Stockholders.
NOTE 2
Subsequent Events
Effective August 3, 1995, Lakeside Bancshares, Inc.
(Lakeside), the parent company of Lakeside National Bank of Lake
Charles (LNB), merged into FCC in exchange for approximately
984,220 shares of FCC common stock. LNB was merged into The
First National Bank of Lake Charles, a wholly owned subsidiary of
FCC. The acquisition was accounted for as a pooling-of-interests.
On June 30, 1995, Lakeside had $170 million in assets. Immediately
prior to consummation of the merger and as part of an agreement
with the United States Department of Justice to eliminate any
concern about the competitive effect of the merger, two branches
of LNB were divested. The sale of the two branches included loans
(approximately $25 million), deposits (approximately $34
million), premises and equipment and cash related to the
branches. The branches were sold for a pretax premium of $3.1
million.
Selected separate and combined financial information of FCC
and Lakeside for the six months ended June 30, 1995 are presented
below (in thousands, except per share amounts). The financial
information presented does not reflect any adjustments for the
divestiture.
FCC Lakeside Combined
_____________________________________________________________________
Six Months Ended June 30, 1995
Net interest income $142,756 $4,524 $147,280
Other income, excluding
securities transactions $ 61,022 $1,481 $62,503
Net income $ 34,356 $1,141 $35,497
Earnings per common share
Primary $ 1.11 $ 2.28 $ 1.11
Fully diluted $ 1.08 $ 2.28 $ 1.08
______________________________________________________________________
NOTE 3
Acquisitions
On February 17, 1995 FCC completed its merger with First
Bancshares, Inc. (First) in exchange for 2,705,537 shares of FCC
common stock. The acquisition was accounted for as a
pooling-of-interests; accordingly, prior period financial
information has been restated to include this acquisition.
FCC completed its merger with City Bancorp, Inc. (City) on
February 17, 1995. City merged with FCC in exchange for 516,100
shares of its common stock. FCC repurchased an equal number of
shares of its common stock. The acquisition was accounted for as
a purchase. The results of operations of City, which are not
material, are included in the financial statements from the
acquisition date.
FCC has mergers pending with Central Corporation (Central) of
Monroe, Louisiana and Peoples Bancshares, Inc. (Peoples) in
Chalmette, Louisiana. Both mergers are subject to various
conditions including regulatory and shareholder approval. It is
expected that both mergers will be completed in the fourth
quarter of 1995. At June 30, 1995, Central and Peoples had total
assets of $825 million and $177 million, respectively.
NOTE 4
Securities Held to Maturity
An analysis of securities held to maturity follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
===============================================================================
June 30, 1995
_______________________________________________________________________________
Obligations of states
and political
subdivisions $ 117 $ - $ - $ 117
Other debt securities 500 - - 500
Equity securities 9,553 - - 9,553
_______________________________________________________________________________
Total securities held
to maturity $ 10,170 $ - $ - $ 10,170
===============================================================================
June 30, 1994
_______________________________________________________________________________
U.S. Treasury securities $ 305,436 $ 477 $ (64) $305,849
Obligations of U.S.
agencies and
corporations 6,390 - (31) 6,359
Obligations of states
and political
subdivisions 1,997 38 - 2,035
Other debt securities 500 - - 500
Equity securities 9,378 - - 9,378
_______________________________________________________________________________
Total securities held
to maturity $ 323,701 $ 515 $ (95) $324,121
===============================================================================
An analysis of the amortized cost and the fair values of securities held
to maturity by contractual maturity periods follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
__________________________________________________________________________
June 30, 1995
__________________________________________________________________________
Within one year $ 45 $ - $ - $ 45
One to five years 572 - - 572
Five to ten years - - - -
After ten years 9,553 - - 9,553
__________________________________________________________________________
Total securities held
to maturity $10,170 $ - $ - $10,170
__________________________________________________________________________
NOTE 5
Securities Available for Sale
An analysis of securities available for sale follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
____________________________________________________________________________
June 30, 1995
____________________________________________________________________________
U. S. Treasury securities $1,458,060 $25,440 $ (320) $1,483,180
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 908,513 4,645 (11,769) 901,362
Notes 119,922 4,248 - 124,170
Obligations of states
and political
subdivisions 90,229 10,374 (351) 100,252
Equity securities 14,037 - (334) 13,703
____________________________________________________________________________
Total securities
available for sale $2,590,761 $44,707 $ (12,801) $2,622,667
============================================================================
June 30, 1994
____________________________________________________________________________
U. S. Treasury securities $1,169,604 $ 1,624 $ (24,538) $1,146,690
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 1,387,334 46 (61,197) 1,326,183
Notes 6,489 95 (20) 6,564
Obligations of states
and political
subdivisions 95,899 10,101 (769) 105,231
Other debt securities 4,079 41 (3) 4,117
Equity securities 33,690 - (1,182) 32,508
____________________________________________________________________________
Total securities
available for sale $2,697,095 $11,907 $(87,709) $2,621,293
============================================================================
An analysis of the amortized cost and fair values of the securities
available for sale by contractual maturity periods follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
____________________________________________________________________________
June 30, 1995
____________________________________________________________________________
Within one year $ 371,872 $ 587 $ (324) $ 372,135
One to five years 1,256,960 29,924 (863) 1,286,021
Five to ten years 96,409 2,939 (410) 98,938
After ten years 865,520 11,257 (11,204) 865,573
____________________________________________________________________________
Total securities
available for sale $2,590,761 $44,707 $(12,801) $2,622,667
============================================================================
NOTE 6
Loans and Leases
The composition of loans and leases was as follows (in thousands):
June 30 December 31
_____________________________________________________________________________
1995 1994 1994
_____________________________________________________________________________
Loans to individuals
- residential mortgages
First lien $638,851 $ 506,976 $560,990
Junior lien 88,907 84,241 88,340
Loans to individuals - other 1,049,605 835,426 902,716
Commercial, financial and
agricultural 764,580 507,834 716,193
Real estate 731,813 588,723 613,026
Credit card loans 430,579 371,281 426,224
Other loans 77,015 84,900 88,073
_____________________________________________________________________________
Total loans and leases 3,781,350 2,979,381 3,395,562
Unearned income (7,765) (10,501) (8,147)
_____________________________________________________________________________
Loans and leases, net
of unearned income $3,773,585 $2,968,880 $3,387,415
=============================================================================
NOTE 7
Impaired Loans
A loan is considered to be impaired when, based on current
information and events, it is probable that FCC will be unable to
collect all amounts due according to the contractual terms of the
loan agreement. As of June 30, 1995, impaired loans totaled
$31.9 million, of which $4.9 million required a total impairment
allowance of $4.6 million. During the second quarter of 1995,
impaired loans averaged $20.6 million.
NOTE 8
Debt
Total cash payments for interest expense on long-term debt,
short-term borrowings and deposits were $95,857,000 and
$70,608,000 for the six-month periods ended June 30, 1995 and
1994, respectively.
NOTE 9
Off-Balance Sheet Instruments
A summary of obligations under financial instruments which are
not reflected in the consolidated financial statements follows
(in thousands):
June 30
_________________________________________________________________________
1995 1994
_________________________________________________________________________
Commitments to extend credit for loans and
leases (excluding credit card plans) $1,175,647 $ 804,007
Commitments to extend credit for credit
card plans $1,637,182 1,283,875
Commercial letters of credit $ 6,727 $ 5,045
Financial letters of credit $ 52,124 $ 49,655
Performance letters of credit $ 22,363 $ 19,728
Foreign exchange contracts
Commitments to purchase $ 991 $ 1,217
Commitments to sell $ 1,095 $ 1,350
When-issued securities
Commitments to purchase $ 875 $ 1,750
Commitments to sell $ 850 $ 880
Interest rate contracts (notional amounts)
Swaps $ 210,000 $ 50,000
Amortizing interest rate swaps $ 200,000 $ 200,000
Caps $ 350,000 $ -
Cap corridors $ 100,000 $ 100,000
__________________________________________________________________________
NOTE 10
Income Taxes
The components of income tax expense in the consolidated statements
of income were as follows (in thousands):
Three Months Ended Six Months Ended
June 30 June 30
___________________________________________________________________________
1995 1994 1995 1994
___________________________________________________________________________
Current $11,619 $8,413 $16,488 $19,641
Deferred 315 1,464 588 3,352
___________________________________________________________________________
Total $11,934 $9,877 $17,076 $22,993
===========================================================================
Income tax expense related to state and foreign income taxes is included
above and was insignificant in all periods presented. Income tax expense
(benefit) related to securities transactions was $13,000 and $(2,349,000)
for the three-month periods ended June 30, 1995 and 1994, respectively and
$(4,650,000) and $(1,956,000) for the six-month periods ended June 30, 1995
and 1994, respectively.
NOTE 10, continued
Income Taxes
Total income tax expense was different from the amount computed by applying
the statutory federal income tax rates to pretax income as follows
(in percentages):
Three Months Ended Six Months Ended
June 30 June 30
___________________________________________________________________________
1995 1994 1995 1994
___________________________________________________________________________
Federal income tax expense 35.00% 35.00% 35.00% 35.00%
Increase (decrease) resulting
from:
Benefits attributable to
tax-exempt interest (2.49) (2.89) (3.41) (2.48)
Nondeductible expenses .90 .78 1.56 .63
Other items, net .06 (.15) .05 (.63)
___________________________________________________________________________
Actual income tax expense 33.47% 32.74% 33.20% 32.52%
===========================================================================
Current income taxes payable were $2.39 million and $1.57 million at
June 30, 1995 and 1994, 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 $4.72 million and $47.73 million on June 30, 1995
and 1994, respectively. The major temporary differences which created
deferred tax assets and liabilities were as follows (in thousands):
June 30
___________________________________________________________________________
1995 1994
___________________________________________________________________________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
___________________________________________________________________________
Allowance for loan losses $19,849 $ - $20,905 $ -
Amortization of intangibles 2,819 - 3,471 -
Employee benefits 2,669 - 1,921 -
Interest on nonaccrual loans 1,238 - 2,819 -
Allowance for losses on
foreclosed assets 1,054 - 3,578 -
Unrealized gain/loss on
securities - 11,020 26,526 -
Accumulated depreciation - 4,733 - 4,223
Accrued liabilities - 4,261 - 3,947
Bond accretion - 3,062 - 4,110
Other 1,488 1,322 3,470 2,684
___________________________________________________________________________
Total deferred taxes $29,117 $24,398 $62,690 $14,964
===========================================================================
FCC's cash payments for federal income tax liabilities were $10.89
million and $27.27 million for the six months ended June 30, 1995 and 1994,
respectively.
NOTE 11
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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
and Board of Directors of
First Commerce Corporation:
We have reviewed the accompanying consolidated balance
sheets of FIRST COMMERCE CORPORATION (a Louisiana corporation)
and subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of income for the three-month and six-
month periods ended June 30, 1995 and 1994, and the consolidated
statements of changes in stockholders' equity and cash flows for
the six-month periods ended June 30, 1995 and 1994. These
financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding
the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
First Commerce Corporation and subsidiaries as of December 31,
1994 and the related statements of income, changes in
stockholders' equity and cash flows for the year then ended (not
presented herein) and, in our report dated January 11, 1995 and
February 17, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying consolidated balance sheet as of
December 31, 1994 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
July 12, 1995
SELECTED FINANCIAL DATA (dollars in thousands except per share data)
1995 1994
_____________________________________________________________________________________________________
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
_____________________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $6,884,142 $6,722,307 $6,758,027 $6,616,987 $6,562,902
Earning assets 6,298,874 6,165,016 6,252,583 6,096,066 6,012,760
Loans and leases 3,646,685 3,445,077 3,202,692 3,043,151 2,860,632
Securities 2,616,789 2,656,089 2,950,532 3,008,704 3,079,505
Deposits 5,653,911 5,609,016 5,439,220 5,402,500 5,422,006
Long-term debt 88,654 88,717 88,989 89,039 89,349
Stockholders' equity 571,914 522,006 506,455 517,783 516,655
_____________________________________________________________________________________________________
INCOME STATEMENT DATA
Total interest income $ 126,299 $ 118,754 $ 115,948 $ 108,437 $ 101,467
Net interest income 72,510 70,246 70,454 68,828 65,606
Net interest income (FTE) 73,889 71,620 71,866 70,275 66,978
Provision for loan losses 2,956 3,007 (354) (2,550) (4,782)
Other income (exclusive of securities
transactions) 31,496 29,526 29,398 27,609 27,845
Securities transactions 36 (13,322) (18,326) (19,576) (6,705)
Operating expense 65,429 67,668 70,883 62,505 61,359
Operating income 23,700 19,292 19,236 24,443 24,648
Net income 23,723 10,633 7,325 11,717 20,292
_____________________________________________________________________________________________________
KEY RATIOS
Return on average assets 1.38% .64% .43% .70% 1.24%
Return on average total equity 16.64% 8.26% 5.74% 8.98% 15.75%
Return on average common equity 17.73% 8.38% 5.54% 9.21% 16.87%
Operating return on average assets 1.38% 1.16% 1.13% 1.50% 1.51%
Operating return on average total equity 16.62% 14.99% 15.07% 19.23% 19.14%
Operating return on average common equity 17.72% 15.98% 16.13% 20.80% 20.69%
Net interest margin 4.70% 4.68% 4.58% 4.59% 4.46%
Efficiency ratio 62.09% 66.90% 70.00% 63.86% 64.71%
Overhead ratio 2.16% 2.51% 2.63% 2.27% 2.24%
Allowance for loan losses to loans
and leases 1.55% 1.62% 1.65% 1.86% 2.06%
Nonperforming assets to loans and leases
plus foreclosed assets .90% .51% .58% .74% .88%
Average loans to deposits ratio 64.50% 61.42% 58.88% 56.33% 52.76%
Equity ratio 8.50% 7.96% 7.23% 7.69% 7.84%
Leverage ratio 8.14% 8.06% 8.07% 8.29% 8.33%
_____________________________________________________________________________________________________
EARNINGS PER COMMON SHARE
Net income-primary $ .78 $ .33 $ .21 $ .37 $ .66
Operating income-primary $ .78 $ .63 $ .63 $ .80 $ .81
Net income-fully diluted $ .73 $ .33 $ .21 $ .37 $ .63
Operating income-fully diluted $ .73 $ .60 $ .60 $ .75 $ .75
Average primary shares outstanding
(in thousands) 29,105 29,104 29,023 29,026 29,034
Average fully diluted shares
outstanding (in thousands) 35,042 29,104 29,023 29,026 34,965
BOOK VALUES (end of period)
Book value $ 18.67 $ 16.87 $ 14.95 $ 15.81 $ 15.73
Tangible book value $ 17.96 $ 16.14 $ 14.43 $ 15.31 $ 15.22
COMMON STOCK DIVIDENDS
Cash dividends $ .30 $ .30 $ .30 $ .30 $ .25
Dividend payout ratio 38.46% 90.91% 142.86% 81.08% 37.88%
COMMON STOCK DATA
High stock price $ 29.75 $ 27.25 $ 26.76 $ 28.75 $ 30.00
Low stock price $ 24.00 $ 22.00 $ 21.75 $ 25.75 $ 23.50
Closing stock price $ 29.50 $ 25.00 $ 22.00 $ 26.75 $ 28.25
Trading volume 4,711,340 5,826,590 5,723,897 4,857,105 7,313,633
Number of stockholders (end of period) 7,902 8,014 7,808 7,825 7,812
NUMBER OF EMPLOYEES (end of period) 3,482 3,462 3,575 3,638 3,725
=====================================================================================================
SECOND QUARTER IN REVIEW
First Commerce Corporation's (FCC's) net income for the second
quarter of 1995 was $23.7 million, compared to $10.6 million in
the first quarter of 1995 and $20.3 million in last year's second
quarter. Securities transactions resulted in minimal gains in
the second quarter, compared to after tax losses of $8.7 million
in the first quarter of 1995 and $4.4 million in 1994's second
quarter. Operating income, which excludes securities
transactions, was $23.7 million for the current quarter, $19.3
million last quarter and $24.6 million in the second quarter of
1994.
Fully diluted earnings per share were $.73 this quarter, $.33
for the first quarter of 1995 and $.63 for 1994's second quarter.
Excluding the effect of securities transactions, fully diluted
earnings per share were $.73 for the second quarter of 1995, $.60
last quarter and $.75 for the second quarter of 1994.
FCC's earnings fundamentals improved during the second quarter.
- Net interest income (FTE) rose 3% from the previous quarter and
10% from 1994's second quarter mainly on the strengths of loan
growth and a higher securities yield.
- Other income, excluding securities transactions, was 7% higher
than in the first quarter and 13% better than 1994's second
quarter. Improvements in most categories of fee income reflected
higher volumes of transactions and accounts.
- Operating expense growth was a moderate 2% from the first
quarter (excluding last quarter's severance and merger-related
charges) and 7% from 1994's second quarter.
During the second quarter, FCC received all required approvals
for its acquisition of Lakeside Bancshares, Inc. in Lake Charles,
Louisiana, and completed the merger on August 3, 1995. FCC has
mergers pending with Central Corporation of Monroe, Louisiana,
and Peoples Bancshares, Inc. in Chalmette, Louisiana. Both of
these pending mergers are subject to regulatory approval and
certain other conditions; they are expected to be completed in
the fourth quarter of 1995. Following the completion of all
three mergers, FCC will have total assets of approximately $8.0
billion and deposits of approximately $6.7 billion.
A more detailed review of FCC's financial condition and earnings
for the second quarter follows. This review should be read in
conjunction with the consolidated financial statements of First
Commerce Corporation and Subsidiaries, which follows and the
Financial Review in the 1994 Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for the second quarter was $73.9
million, a 3% increase from the first quarter of 1995 and 10%
higher than last year's second quarter. The net interest margin
was 4.70% for the second quarter, compared to 4.68% in the first
quarter and 4.46% in 1994's second quarter.
In comparing the first and second quarters of 1995, improvements
in net interest income and the net interest margin reflected loan
growth and higher yields on securities and loans. A 2% higher
volume of earning assets also contributed to the rise in net
interest income.
Average loans grew 6% in 1995's second quarter from the prior
quarter. Loans were 58% of average earning assets in the current
quarter, compared to 56% last quarter. Yields on securities and
loans continued to increase, up 29 basis points and 14 basis
points, respectively, compared to the prior quarter. The growth
in earning assets was funded by higher levels of short-term
borrowings and time deposits of $100,000 and over, plus a 2% rise
in interest-free funds. These positive factors were partially
offset by higher rates paid on deposits. The cost of funds was
3.42% for 1995's second quarter, 23 basis points higher than last
quarter.
When compared to last year's second quarter, the most significant
items leading to the rise in net interest income and the net
interest margin were 27% loan growth and a higher securities
yield. Loans increased to 58% of average earning assets in the
current quarter, compared to 48% in the same period of last year.
The yield on the securities portfolio was 146 basis points higher
than in 1994's second quarter. These favorable items more than
offset a 103 basis point increase in the cost of funds.
For the first six months, net interest income was $145.5 million,
an 8% increase from 1994's same period. The net interest margin
was 4.69% for the first half of 1995, compared to 4.42% last
year. These improvements reflect 26% growth in average loans and
a 143 basis point rise in the yield on the securities portfolio.
Increases in the cost of both short-term borrowings and interest-
bearing deposits partially offset these improvements.
Table 1 presents average balance sheets, net interest income
(FTE) and interest rates for the second quarters of 1995 and
1994, the first quarter of 1995 and the first six months of 1995
and 1994. Table 2 analyzes the components of changes in net
interest income (FTE) between these same periods.
Provision For Loan Losses
The provision for loan losses was a positive $3.0 million in
the second and first quarters of this year and a negative $4.8
million in 1994's second quarter. For the six-month periods, the
provision was a positive $6.0 million in 1995, compared to a
negative $8.5 million last year. The return to a positive provision
reflected continued strong loan growth. The provision is expected
to remain positive for the remainder of 1995.
For discussion of the allowance for loan losses, net charge-offs
and nonperforming assets, see the Credit Risk Management section
of this Financial Review.
Other Income
Other income, excluding securities transactions, was $31.5
million for the second quarter, up 7% from last quarter and 13%
over the second quarter of 1994. Higher volumes of transactions
and accounts were the principal causes of the increase from both
prior periods.
When compared to last quarter, growth was experienced in most
categories of other income. The most significant improvements
were in deposit account ($874,000, or 8%) and credit card
($622,000, or 10%) fees. Additionally, broker/dealer revenue
rose $212,000, while ATM fees increased $180,000. Trust fees
were lower, primarily due to seasonal variances.
The improvement from last year's second quarter reflected higher
deposit account, credit card, ATM and broker/dealer fees.
Deposit account fees rose $1.2 million, primarily due to higher
volumes of overdraft charges and commercial account fees.
Increased credit card ($788,000), ATM ($564,000) and
broker/dealer ($453,000) fees were related to higher volumes of
transactions.
For the six-month period, other income, excluding securities
transactions, was $61.0 million, 9% higher than in 1994.
Improvements in deposit account ($1.7 million, or 8%) and credit
card ($1.7 million, or 14%) fees were mainly related to higher
volumes of transactions. ATM fee income rose $1.3 million,
primarily reflecting additional ATMs in service.
Securities transactions resulted in pretax net gains of $36,000
in the second quarter of 1995, compared to pretax net losses for
both last quarter ($13.3 million) and 1994's second quarter ($6.7
million). For the six-month period, securities transactions
reflected pretax net losses for both 1995 ($13.3 million) and
last year ($5.6 million).
Operating Expense
Operating expense was $65.4 million for the second quarter of
1995. In 1995's first quarter, operating expense was $67.7
million and included $2.3 million of merger-related charges and
$1.1 million in severance expense. Operating expense was $61.4
million in last year's second quarter.
Excluding last quarter's severance and merger-related charges,
operating expense rose 2% from the first quarter. The most
significant increases were in stationary and supplies ($408,000),
occupancy ($244,000) and nonperforming assets ($203,000)
expenses. Higher stationary and supplies expense mainly related
to increased volumes associated with acquisitions. Occupancy
expense reflected higher utilities expense and repairs and
maintenance costs. Lower gains on sales of foreclosed properties
caused the increase in nonperforming assets expense.
Operating expense increased 7% from the second quarter of 1994.
Annual merit raises for employees, higher incentive compensation,
depreciation of branch automation equipment and higher
advertising costs were the primary causes of the increase. The
addition of City's expenses in 1995 also contributed to the rise.
Partially offsetting these increases was a 6% reduction in
staffing, related to FCC's ongoing delivery system redesign and
other strategic initiatives.
For the six-month period, operating expense was $133.1 million
in 1995, compared to $120.3 million last year. 1995's severance
and merger-related charges were the most significant causes of the
rise from last year. Additional increases included higher
personnel, equipment and advertising expenses, plus the addition
of City's expenses.
The FDIC has announced that it will reduce the rates paid for
deposit insurance to the Bank Insurance Fund by "well capitalized"
banks, which includes all five of FCC's banks, by approximately
83%. The determination of the timing and exact amounts of the
rate reductions are expected durng the third quarter.
FINANCIAL CONDITION ANALYSIS
Securities
The securities portfolio totaled $2.6 billion as of both June
30, 1995 and March 31, 1995, compared to $2.9 billion at June 30,
1994. Average securities were $2.6 billion for the second
quarter of 1995, $2.7 billion last quarter and $3.1 billion in
1994's second quarter. The lower level of average securities was
related to significant loan growth. Securities were 42% of
average earning assets in the second quarter of 1995, compared to
43% in the first quarter and 51% in last year's second quarter.
Securities transactions resulted in minimal gains in the second
quarter compared to pretax losses of $13.3 million in the first
quarter and $6.7 million in 1994's second quarter; a bond market
rally did not present opportunities to improve the yield on the
securities portfolio as was the case in previous quarters. At
the end of 1995's second quarter, the securities portfolio
average yield was 6.77%, compared to 6.70% at the end of last
quarter and 5.45% at June 30, 1994.
Notes 4 and 5 contain additional information on securities held
to maturity and available for sale.
Securities Available for Sale
99.6% of FCC's securities portfolio was classified as available
for sale at the end of both 1995 quarters, compared to 89.0% at
June 30, 1994. Securities available for sale were $2.6 billion
at the end of both the second and first quarters of 1995 and at
June 30, 1994.
Improving bond prices caused a significant change in the market
values of these securities during the second quarter. A net
unrealized gain, net of tax, increased stockholders' equity $20.7
million at June 30, 1995, including gross unrealized gains of
$44.7 million and gross unrealized losses of $12.8 million.
Stockholders' equity reflected reductions for net unrealized
losses, net of tax, of $17.4 million at the end of last quarter
and $49.3 million at June 30, 1994.
Securities Held to Maturity
Securities held to maturity were $10.2 million at June 30, 1995
and March 31, 1995, compared to $323.7 million a year ago. The
decline from last year reflects maturities of securities in the
held to maturity category.
Money Market Investments
As of June 30, 1995, money market investments were $67.7 million
and averaged $35.4 million for the quarter. Average money market
investments were $63.9 million in the prior quarter and $72.6
million in 1994's second quarter. The decrease in average money
market investments was the result of significant loan growth.
Loans
Strong loan growth continued in the second quarter, reflecting
improved activity in many sectors of Louisiana's economy. Loans
and leases, net of unearned income, were $3.8 billion as of June
30, 1995, a 5% increase from March 31, 1995 and 27% higher than a
year ago. Average loans rose 6% from last quarter and were up
27% from last year's second quarter.
Loan growth was across all sectors of the portfolio. Compared
to last quarter, the most significant increases were in loans to
individuals, commercial real estate loans and residential
mortgage loans. The rise in loans to individuals reflected
increased automobile loans, plus a seasonal increase in
education-related loans. Compared to 1994's second quarter, the
strongest loan growth was in commercial loans and loans to
individuals, primarily automobile loans. Commercial loan growth
came from virtually all industry categories. Strong loan growth
is a trend that is expected to continue throughout 1995.
Deposits
As of June 30, 1995, deposits were $5.7 billion. During the
second quarter, deposits averaged $5.7 billion, up 1% from last
quarter and 4% above the second quarter of 1994. The most
significant growth from both prior periods was in time deposits
of $100,000 and over. Compared to last year, this growth was
mainly due to a rise in public funds deposits reflecting FCC's
renewed interest in that market. The growth from last quarter
resulted from increases in both public and nonpublic sources.
Core deposits were 89% of average deposits for the current
quarter, compared to 90% last quarter and 93% in 1994's second
quarter.
Short-Term Borrowings
Short-term borrowings were $538.5 million at June 30, 1995.
Average short-term borrowings were $485.0 million, compared to
$421.9 million last quarter and $465.5 million in the second
quarter of 1994. As a percent of average interest-bearing
liabilities, short-term borrowings were 10% in the second quarter
of both 1995 and 1994, compared to 9% in the first quarter of
1995.
Off-Balance Sheet Instruments
FCC enters into interest rate contracts with the objective of
reducing the sensitivity of net interest income to changes in
interest rates. FCC does not use off-balance sheet instruments
for speculative purposes. Note 9 provides additional information
about off-balance sheet instruments.
The total notional amount of FCC's interest rate contracts was
$860 million as of June 30, 1995, compared to $810 million at the
end of last quarter. The estimated fair value of FCC's interest
rate contracts at June 30, 1995 was a loss of $3.0 million,
compared to a loss of $9.5 million at March 31, 1995. The change
reflected declining interest rates.
During the second quarter, FCC entered into swap contracts with
a total notional amount of $200 million, and terminated swap
contracts with a total notional amount of $150 million. The new
interest rate swaps, which mature in June 1997, serve as hedges
against interest rate fluctuations on $200 million in U.S.
Treasury securities. The terminated swaps converted certificates
of deposit at fixed rates into floating rates and would have
matured in August ($100 million) and November ($50 million) of
1996. The loss of $444,000 related to these terminated swaps is
being amortized over the remaining lives of the original swaps.
Table 3 summarizes FCC's interest rate swaps as of June 30,
1995, while Table 4 presents the changes in FCC's derivative
products by type during 1995.
Interest rate contracts reduced FCC's net interest income $1.2
million this quarter and $2.2 million for the six-month period of
1995. This expense was related to cash payments on amortizing
interest rate swaps, combined with the amortization of the
premiums paid for interest rate caps. Table 5 shows the impact
of derivative products by type on net interest income for the
second quarter and first six months of 1995.
Capital and Dividends
As of June 30, 1995, stockholders' equity was 8.50% of total
assets, compared to 7.96% at March 31. The unrealized gain or
loss on securities available for sale (SFAS 115 adjustment) is
reflected as an adjustment to stockholders' equity, net of the
tax effect. This adjustment was a $20.7 million net unrealized
gain at June 30, 1995, compared to a $17.4 million net unrealized
loss at March 31, 1995.
Regulatory ratios, including leverage, tier 1 and total capital,
are calculated excluding the effect of the SFAS 115 adjustment.
The regulatory leverage ratio was 8.14% as of June 30, 1995, and
8.06% at the end of last quarter. Table 6 presents FCC's risk-
based and other capital ratios as of June 30, 1995 and 1994 and
December 31, 1994. All ratios remain well above regulatory
minimums. Under present regulations, all five of FCC's banks are
classified as "well-capitalized."
The Parent Company's sources of funds to pay cash dividends on
its common and preferred stock are its net working capital and
the dividends it receives from the banks. At June 30, 1995, the
Parent Company had $92.8 million of net working capital.
Additionally, the Parent Company could receive dividends from the
banks without prior regulatory approval of $76.1 million, plus an
amount equal to the banks' adjusted net profits for the remainder
of the year.
Credit Risk Management
Nonperforming Assets
Nonperforming assets were $33.8 million at the end of the second
quarter, compared to $18.2 million at March 31, 1995 and $26.1
million at June 30, 1994. FCC placed all loans related to a
riverboat casino project on nonaccrual during the second quarter,
leading to the increase from the first quarter. As a percent of
loans and foreclosed assets, nonperforming assets were .90% at
quarter-end, .51% at the end of the prior quarter and .88% at
June 30, 1994.
86% of nonperforming loans were contractually current or no
more than 30 days past due at the end of 1995's second quarter,
compared to 67% at March 31, 1995. Loans and leases past due 90
days or more and not on nonaccrual status were $13.9 million at
June 30, 1995, down $2.2 million from the prior quarter. Watch
list loans and foreclosed assets were $139.8 million at June 30,
1995, compared to $119.3 million at March 31, 1995. The increase
was mostly in the Type 3, or substandard, classification and
primarily reflected gaming-related loans. At June 30, 1995,
loans related to the gaming industry were $95 million, or 2.5% of
total loans.
Table 7 presents information on nonperforming assets, detailed
by type, as of June 30, 1995 and 1994 and December 31, 1994.
Allowance for Loan Losses
The allowance for loan losses was $58.4 million as of June 30,
1995, compared to $57.8 million at the end of last quarter. As a
percent of loans and leases, the allowance was 1.55% at the end
of this quarter, compared to 1.62% at March 31, 1995 and 2.06% at
June 30, 1994. Management believes that the allowance is
adequate to cover possible losses in the loan portfolio.
Net charge-offs as a percent of average loans were .27% for the
current quarter, compared to .26% last quarter and .03% in the
second quarter of 1994. The increase in net charge-offs from the
second quarter of 1994 primarily reflects the return to a lower
level of recoveries relative to gross charge-offs in 1995.
Recoveries as a percent of gross charge-offs were 51% for the
second quarter of 1995, compared to 92% in last year's second
quarter. For the second quarter, net charge-offs on credit card
loans were 2.4% of average credit card loans, compared to 2.1%
during last year's second quarter. Table 8 presents the activity
for the second quarters and first six months of 1995 and 1994.
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) <F1> AND INTEREST RATES
==================================================================================================================================
Second Quarter 1995 First Quarter 1995 Second Quarter 1994
__________________________________________________________________________________________________________________________________
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
__________________________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases $3,646,685 $ 82,994 9.13% $3,445,077 $ 76,554 8.99% $2,860,632 $ 61,427 8.61%
Securities
Taxable 2,523,293 41,709 6.62 2,558,139 40,070 6.31 2,984,343 38,170 5.12
Tax-exempt 93,496 2,441 10.44 97,950 2,621 10.71 95,162 2,588 10.88
__________________________________________________________________________________________________________________________________
Total securities 2,616,789 44,150 6.76 2,656,089 42,691 6.47 3,079,505 40,758 5.30
__________________________________________________________________________________________________________________________________
Interest-bearing deposits in banks 151 3 5.47 258 3 3.47 55,590 475 3.43
Federal funds sold and securities
purchased under resale agreements 19,860 308 6.22 53,434 769 5.84 15,569 159 4.11
Trading account securities 15,389 223 5.82 10,158 111 4.45 1,464 20 5.55
__________________________________________________________________________________________________________________________________
Total money market investments 35,400 534 6.04 63,850 883 5.61 72,623 654 3.62
__________________________________________________________________________________________________________________________________
Total earning assets 6,298,874 $127,678 8.12% 6,165,016 $120,128 7.88% 6,012,760 $102,839 6.85%
__________________________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets <F2> 643,266 614,420 614,880
Allowance for loan losses (57,998) (57,129) (64,738)
__________________________________________________________________________________________________________________________________
Total assets $6,884,142 $6,722,307 $6,562,902
==================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 890,532 $ 4,161 1.87% $ 940,037 $ 4,630 2.00% $ 891,520 $ 3,168 1.43%
Money market investment deposits 614,674 3,632 2.37 648,339 3,364 2.11 774,028 3,717 1.93
Savings and other consumer
time deposits 2,270,818 26,778 4.73 2,219,708 24,321 4.44 2,112,381 18,143 3.45
Time deposits $100,000 and over 639,551 8,983 5.63 566,048 7,402 5.31 391,014 3,508 3.60
__________________________________________________________________________________________________________________________________
Total interest-bearing deposits 4,415,575 43,554 3.96 4,374,132 39,717 3.68 4,168,943 28,536 2.75
__________________________________________________________________________________________________________________________________
Short-term borrowings 485,029 7,467 6.18 421,863 6,052 5.82 465,488 4,557 3.92
Long-term debt 88,654 2,768 12.52 88,717 2,739 12.53 89,349 2,768 12.43
__________________________________________________________________________________________________________________________________
Total interest-bearing liabilities 4,989,258 $ 53,789 4.32% 4,884,712 $ 48,508 4.03% 4,723,780 $ 35,861 3.04%
__________________________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,238,336 1,234,884 1,253,063
Other liabilities 84,634 80,705 69,404
Stockholders' equity 571,914 522,006 516,655
__________________________________________________________________________________________________________________________________
Total liabilities and
stockholders' equity $6,884,142 $6,722,307 $6,562,902
==================================================================================================================================
Net interest income (FTE)
and margin $ 73,889 4.70% $ 71,620 4.68% $ 66,978 4.46%
==================================================================================================================================
Net earning assets and spread $1,309,616 3.80% $1,280,304 3.85% $1,288,980 3.81%
==================================================================================================================================
Cost of funds 3.42% 3.19% 2.39%
==================================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
<F2> Includes mark-to-market adjustment on securities available for sale.
</FN>
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) <F1> AND INTEREST RATES (continued)
========================================================================================================================
Six Months Ended Six Months Ended
June 30, 1995 June 30, 1994
________________________________________________________________________________________________________________________
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
________________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases $3,546,437 $159,548 9.06% $2,824,366 $121,722 8.68%
Securities
Taxable 2,540,620 81,779 6.46 3,113,060 77,719 5.01
Tax-exempt 95,711 5,062 10.58 98,165 5,334 10.87
________________________________________________________________________________________________________________________
Total securities 2,636,331 86,841 6.62 3,211,225 83,053 5.19
________________________________________________________________________________________________________________________
Interest-bearing deposits in banks 204 4 4.25 64,506 1,083 3.39
Federal funds sold and securities purchased
under resale agreements 36,554 1,078 5.94 20,459 353 3.58
Trading account securities 12,788 335 5.28 1,606 43 5.39
________________________________________________________________________________________________________________________
Total money market investments 49,546 1,417 5.77 86,571 1,479 3.47
________________________________________________________________________________________________________________________
Total earning assets 6,232,314 $247,806 8.00% 6,122,162 $206,254 6.78%
________________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets <F2> 628,923 650,043
Allowance for loan losses (57,566) (67,245)
________________________________________________________________________________________________________________________
Total assets $6,803,671 $6,704,960
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 915,148 $ 8,791 1.94% $ 919,521 $ 6,437 1.41%
Money market investment deposits 631,413 6,996 2.24 780,650 7,514 1.94
Savings and other consumer time deposits 2,245,405 51,099 4.59 2,110,919 35,662 3.41
Time deposits $100,000 and over 603,002 16,385 5.48 391,945 6,810 3.50
________________________________________________________________________________________________________________________
Total interest-bearing deposits 4,394,968 83,271 3.82 4,203,035 56,423 2.71
________________________________________________________________________________________________________________________
Short-term borrowings 453,620 13,519 6.01 557,563 9,398 3.40
Long-term debt 88,685 5,507 12.52 90,234 5,604 12.52
________________________________________________________________________________________________________________________
Total interest-bearing liabilities 4,937,273 $102,297 4.18% 4,850,832 $ 71,425 2.97%
________________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,236,619 1,254,317
Other liabilities 82,916 68,233
Stockholders' equity 546,863 531,578
________________________________________________________________________________________________________________________
Total liabilities and stockholders' equity $6,803,671 $6,704,960
========================================================================================================================
Net interest income (FTE) and margin $145,509 4.69% $134,829 4.42%
========================================================================================================================
Net earning assets and spread $1,295,041 3.82% $1,271,330 3.81%
========================================================================================================================
Cost of funds 3.31% 2.35%
========================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
<F2> Includes mark-to-market adjustment on securities available for sale.
</FN>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) <F1>
==================================================================================================================================
Second Quarter 1995 Second Quarter 1995
Compared to First Quarter 1995 Compared to Second Quarter 1994
__________________________________________________________________________________________________________________________________
Total Due to Due to Total Due to Due to
Increase Change in Change in Increase Change in Change in
(dollars in thousands) (Decrease) Volume Rate (Decrease) Volume Rate
__________________________________________________________________________________________________________________________________
EARNING ASSETS
Loans and leases $6,440 $4,557 $1,883 $21,567 $17,709 $ 3,858
Securities
Taxable 1,639 (552) 2,191 3,539 (6,493) 10,032
Tax-exempt (180) (117) (63) (147) (45) (102)
__________________________________________________________________________________________________________________________________
Total securities 1,459 (669) 2,128 3,392 (6,538) 9,930
__________________________________________________________________________________________________________________________________
Interest-bearing deposits in banks - (2) 2 (472) (743) 271
Federal funds sold and securities purchased
under resale agreements (461) (517) 56 149 52 97
Trading account securities 112 69 43 203 202 1
__________________________________________________________________________________________________________________________________
Total money market investments (349) (450) 101 (120) (489) 369
__________________________________________________________________________________________________________________________________
Total interest income $7,550 $3,438 $4,112 $24,839 $10,682 $14,157
==================================================================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ (469) $ (237) $ (232) $ 993 $ (4) $ 997
Money market investment deposits 268 (181) 449 (85) (848) 763
Savings and other consumer time deposits 2,457 570 1,887 8,635 1,446 7,189
Time deposits $100,000 and over 1,581 1,007 574 5,475 2,897 2,578
__________________________________________________________________________________________________________________________________
Total interest-bearing deposits 3,837 1,159 2,678 15,018 3,491 11,527
__________________________________________________________________________________________________________________________________
Short-term borrowings 1,415 951 464 2,910 199 2,711
Long-term debt 29 (2) 31 - (22) 22
__________________________________________________________________________________________________________________________________
Total interest expense $5,281 $2,108 $3,173 $17,928 $ 3,668 $14,260
__________________________________________________________________________________________________________________________________
Change in net interest income (FTE) $2,269 $1,330 $ 939 $ 6,911 $ 7,014 $ (103)
==================================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
</FN>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) <F1> (continued)
====================================================================================
Six Months Ended June 30, 1995
Compared to Six Months Ended
June 30, 1994
____________________________________________________________________________________
Total Due to Due to
Increase Change in Change in
(dollars in thousands) (Decrease) Volume Rate
____________________________________________________________________________________
EARNING ASSETS
Loans and leases $37,826 $32,285 $ 5,541
Securities
Taxable 4,060 (15,898) 19,958
Tax-exempt (272) (132) (140)
____________________________________________________________________________________
Total securities 3,788 (16,030) 19,818
____________________________________________________________________________________
Interest-bearing deposits in banks (1,079) (1,235) 156
Federal funds sold and securities purchased
under resale agreements 725 381 344
Trading account securities 292 293 (1)
____________________________________________________________________________________
Total money market investments (62) (561) 499
____________________________________________________________________________________
Total interest income $41,552 $15,694 $25,858
====================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 2,354 $ (31) $ 2,385
Money market investment deposits (518) (1,558) 1,040
Savings and other consumer time deposits 15,437 2,394 13,043
Time deposits $100,000 and over 9,575 4,677 4,898
____________________________________________________________________________________
Total interest-bearing deposits 26,848 5,482 21,366
____________________________________________________________________________________
Short-term borrowings 4,121 (2,015) 6,136
Long-term debt (97) (96) (1)
____________________________________________________________________________________
Total interest expense $30,872 $ 3,371 $27,501
____________________________________________________________________________________
Change in net interest income (FTE) $10,680 $12,323 $(1,643)
====================================================================================
<FN>
<F1> Based on a 35% tax rate.
</FN>
TABLE 3. INTEREST RATE SWAPS
==================================================================================================================================
Weighted Weighted
Average Average Rate Floating
Notional Maturity ____________ Rate Reset Underlying
(dollars in thousands) Amount (years) Receive Pay Index Frequency Asset/Liability
__________________________________________________________________________________________________________________________________
Generic Swaps - receive floating/pay fixed $200,000 1.97 6.03% 5.85% LIBOR Quarterly U.S. Treasury Securities
Generic Swaps - receive fixed/pay floating 10,000 .03 5.74 6.25 LIBOR Quarterly Certificates of Deposit
Amortizing interest rate swaps -
receive fixed/pay floating 200,000 1.35 4.35 6.19 LIBOR Quarterly Certificates of Deposit
__________________________________________________________________________________________________________________________________
Total Interest Rate Swaps at June 30, 1995 $410,000 1.62 5.20% 6.02%
==================================================================================================================================
TABLE 4. CHANGES IN DERIVATIVE PRODUCTS (NOTIONAL AMOUNTS)
========================================================================================================
Option Amortizing
Based Generic Interest Callable
(in thousands) Instruments Swaps Rate Swaps Swaps Total
________________________________________________________________________________________________________
Balance, December 31, 1994 $450,000 $ 110,000 $200,000 $ 50,000 $ 810,000
Purchases - 200,000 - - 200,000
Terminations - (100,000) - (50,000) (150,000)
________________________________________________________________________________________________________
Balance, June 30, 1995 $450,000 $ 210,000 $200,000 $ - $ 860,000
========================================================================================================
TABLE 5. ANALYSIS OF DERIVATIVE PRODUCT INTEREST INCOME (EXPENSE)
========================================================================================================
Option Amortizing
Based Generic Interest Callable
(in thousands) Instruments Swaps Rate Swaps Swaps Total
________________________________________________________________________________________________________
Three months ended June 30, 1995
Interest income (expense) $ 284 $ 11 $ (948) $ (173) $ (826)
Premium amortization (379) - - - (379)
________________________________________________________________________________________________________
Interest income (expense) $ (95) $ 11 $ (948) $ (173) $ (1,205)
========================================================================================================
Six months ended June 30, 1995
Interest income (expense) $ 580 $ (8) $ (1,782) $ (358) $ (1,568)
Premium amortization (631) - - - (631)
________________________________________________________________________________________________________
Interest income (expense) $ (51) $ (8) $ (1,782) $ (358) $ (2,199)
========================================================================================================
TABLE 6. RISK-BASED CAPITAL AND CAPITAL RATIOS
======================================================================
June 30 December 31
(dollars in thousands) 1995 1994 1994
______________________________________________________________________
Tier 1 capital $ 559,007 $ 548,020 $ 548,851
Tier 2 capital 133,194 124,318 129,970
______________________________________________________________________
Total capital $ 692,201 $ 672,338 $ 678,821
======================================================================
Risk-weighted assets $3,999,392 $3,202,328 $3,717,600
======================================================================
Ratios at end of period
Tier 1 capital 13.98% 17.11% 14.76%
Total capital 17.31% 21.00% 18.26%
Equity ratio 8.50% 7.84% 7.23%
Tangible equity ratio 8.23% 7.63% 7.02%
Leverage ratio 8.14% 8.33% 8.07%
======================================================================
TABLE 7. NONPERFORMING ASSETS
========================================================================================================
June 30 December 31
(dollars in thousands) 1995 1994 1994
________________________________________________________________________________________________________
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 4,019 $ 4,358 $ 4,207
Loans to individuals-other 245 958 622
Commercial, financial and agricultural 16,259 1,632 910
Real estate-commercial mortgages 8,441 11,875 7,578
Real estate-other 2,904 164 227
Other - 13 -
________________________________________________________________________________________________________
31,868 19,000 13,544
________________________________________________________________________________________________________
Foreclosed assets
Other real estate 2,908 11,944 9,786
Other foreclosed assets 215 137 91
Allowance for losses on foreclosed assets (1,184) (4,938) (3,898)
________________________________________________________________________________________________________
1,939 7,143 5,979
________________________________________________________________________________________________________
Total nonperforming assets $33,807 $26,143 $19,523
========================================================================================================
Loans past due 90 days or more and not on nonaccrual status $13,900 $12,550 $10,310
========================================================================================================
End of period ratios
Nonperforming assets as a percent of loans and leases
plus foreclosed assets .90% .88% .58%
Allowance for loan losses as a percent of nonperforming loans 183.12% 321.38% 412.97%
Loans and leases past due 90 days or more and not on
nonaccrual status as a percent of loans and leases .37% .42% .30%
========================================================================================================
TABLE 8. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
============================================================================================================================
Three Months Ended Six Months Ended
June 30 June 30
============================================================================================================================
(dollars in thousands) 1995 1994 1995 1994
============================================================================================================================
Balance at beginning of period $57,828 $66,085 $55,933 $70,459
Purchased allowance - - 1,142 -
Provision charged to expense 2,956 (4,782) 5,963 (8,539)
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 45 7 94 85
Loans to individuals-other 1,352 587 2,339 1,133
Commercial, financial and agricultural 137 154 558 430
Real estate-commercial mortgages 150 9 167 62
Credit card loans 3,258 2,241 6,095 4,744
____________________________________________________________________________________________________________________________
Total charge-offs 4,942 2,998 9,253 6,454
___________________________________________________________________________________________________________________________
Recoveries on loans and leases previously charged to the allowance
Loans to individuals-residential mortgages 166 220 387 714
Loans to individuals-other 494 444 944 868
Commercial, financial and agricultural 800 979 1,378 2,011
Real estate-commercial mortgages 294 103 434 403
Real estate-other 11 357 38 377
Credit card loans 746 655 1,377 1,217
Other 5 - 15 7
____________________________________________________________________________________________________________________________
Total recoveries 2,516 2,758 4,573 5,597
____________________________________________________________________________________________________________________________
Net charge-offs 2,426 240 4,680 857
____________________________________________________________________________________________________________________________
Balance at end of period $58,358 $61,063 $58,358 $61,063
============================================================================================================================
Gross annualized charge-offs as a percent of average loans and leases .54% .42% .52% .46%
Recoveries as a percent of gross charge-offs 50.91% 91.99% 49.42% 86.72%
Net annualized charge-offs as a percent of average loans and leases .27% .03% .26% .06%
Allowance for loan losses as a percent of loans and leases at end of period 1.55% 2.06% 1.55% 2.06%
============================================================================================================================
Part II: Other Information
Item 1. Legal Proceedings.
Legal proceedings involving FCC were previously reported in its
Annual Report on Form 10-K for the year ended December 31, 1994.
There have been no material developments since that filing.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of the stockholders of FCC (the
"Meeting") was held on April 17, 1995.
(b) and (c)
BROKER
SUBMISSION OF MATTERS FOR AGAINST * ABSTAIN NONVOTE
______________________________________________________________________
I. DIRECTORS ELECTED
Ian Arnof 21,589,254 1,077,824 0 0
James J. Bailey III 21,602,237 1,064,841 0 0
John W. Barton 21,591,400 1,075,678 0 0
Sydney J. Besthoff III 21,574,079 1,092,999 0 0
Robert H. Bolton 21,584,873 1,082,205 0 0
Frances B. Davis 21,592,841 1,074,237 0 0
Laurance Eustis, Jr. 21,586,907 1,080,171 0 0
William P. Fuller 21,592,607 1,074,471 0 0
Arthur Hollins III 21,606,462 1,060,616 0 0
F. Ben James, Jr. 21,606,363 1,060,715 0 0
Erik F. Johnsen 21,593,033 1,074,045 0 0
J. Merrick Jones, Jr. 21,606,589 1,060,489 0 0
Edwin Lupberger 21,428,831 1,238,247 0 0
Hermann Moyse, Jr. 21,591,318 1,075,760 0 0
O. Miles Pollard, Jr. 21,606,559 1,060,519 0 0
G. Frank Purvis, Jr. 21,580,776 1,086,302 0 0
Edward M. Simmons 21,591,895 1,075,183 0 0
H. Leighton Steward 21,606,575 1,060,503 0 0
J. B. Storey 21,581,213 1,085,865 0 0
Robert A. Weigle 21,606,519 1,060,559 0 0
______________________________________________________________________
II. Amendment and
restatement of FCC's
Supplemental Tax-Deferred
Savings Plan 21,165,341 332,266 1,169,471 0
______________________________________________________________________
* With respect to the election of directors, amounts shown
reflect shares as to which authority to vote was withheld.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3(ii) - Amended and restated FCC By-laws dated May 15, 1995.
4.1 - Indenture between FCC and Republic Bank Dallas, N.A. (now
NationsBank of Texas, N.A.), Trustee, including the form of
12 3/4% Convertible Debenture due 2000, Series A included as
Exhibit 4.1 to FCC's Annual Report on Form 10-K for the year
ended December 31, 1985 and incorporated herein by
reference.
4.2 - Indenture between FCC and Republic Bank Dallas, N.A. (now
NationsBank of Texas, N.A.), Trustee, including the form of
12 3/4% Convertible Debenture due 2000, Series B included as
Exhibit 4.2 to FCC's Annual Report on Form 10-K for the year
ended December 31, 1985 and incorporated herein by
reference.
11 - Computation of Earnings Per Share
15 - Letter regarding unaudited interim financial information -
Report of Independent Public Accountants on page 15 of
Part I, Item 1.
27 - Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K dated March 3, 1995, was filed by the
registrant reporting Item 2, Acquisition of Assets. The report
contained information regarding the consummation of FCC's
acquisition of First Bancshares, Inc.
A report on Form 8-K/A filed on April 3, 1995 amended the Form 8-K
filed on March 3, 1995. The report contained the following:
(1) Consolidated Financial Statements of First Bancshares, Inc.
and subsidiary:
Report of Independent Public Accountant
Consolidated Balance Sheet as of December 31, 1994
Consolidated Statement of Income for the year ended
December 31, 1994
Consolidated Statement of Shareholders' Equity for
the year ended December 31, 1994
Consolidated Statement of Cash Flows for the year
ended December 31, 1994
Notes to Consolidated Financial Statements
Item 6, Continued
(2) First Commerce Corporation Pro Forma Condensed Combined
Financial Statements (Unaudited):
Pro Forma Condensed Combined Balance Sheet as of
December 31, 1994
Pro Forma Condensed Combined Statements of Income for
the years ended December 31, 1994, 1993 and 1992
Notes to the Pro Forma Condensed Combined Financial
Statements
A report on Form 8-K dated May 8, 1995, was filed by the registrant
reporting Item 5, Other Events. This report included supplemental
consolidated financial statements of FCC and Subsidiaries which
had been restated to reflect the pooling-of-interests with First
Bancshares, Inc. as follows:
Report of Independent Public Accountant
Supplemental Consolidated Balance Sheets as of December 31,
1994 and 1993
Supplemental Consolidated Statements of Income for the years
ended December 31, 1994, 1993 and 1992
Supplemental Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1994, 1993 and 1992
Supplemental Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993, and 1992
Notes to the Supplemental Consolidated Financial Statements
A report on Form 8-K dated June 2, 1995, was filed by the
registrant reporting Item 5, Other Events. This report contained
information regarding a definitive agreement to merge Central
Corporation of Monroe, Louisiana into FCC as follows:
(1) Interim Consolidated Financial Statements of Central
Corporation (Unaudited):
Consolidated Statement of Condition as of March 31, 1995
Consolidated Statements of Income for the quarters ended
March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the quarters
ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Item 6, continued
(2) Consolidated Financial Statements of Central Corporation:
Consolidated Statements of Condition as of December 31,
1994 and 1993
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1994, 1993
and 1992
Notes to Consolidated Financial Statements
Independent Auditors' Report
(3) First Commerce Corporation Pro Forma Condensed Combined
Financial Information (Unaudited):
Pro Forma Condensed Combined Balance Sheet as of March
31, 1995
Pro Forma Condensed Combined Statement of Income for
the three months ended March 31, 1995
Pro Forma Condensed Combined Statements of Income for
the years ended December 31, 1994, 1993 and 1992
Notes to Pro Forma Condensed Combined Financial
Statements
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
First Commerce Corporation
(Registrant)
Date: August 14, 1995 By: /s/ Thomas L. Callicutt, Jr.
_____________________________
Thomas L. Callicutt, Jr.
Senior Vice President,
Controller and Principal
Accounting Officer