_____________________________________________________________________________
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 September 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 (I.R.S. Employer
of incorporation 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 October 31, 1995
_____ __________________________________
Common Stock, $5.00 par value 37,800,730
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) September 30 December 31
==================================================================================================
1995 1994 1994
__________________________________________________________________________________________________
ASSETS
Cash and due from banks $ 348,295 $ 360,369 $ 424,699
Interest-bearing deposits in other banks 151 6,447 4,205
Securities
Held to maturity (market value $10,643,
$162,039 and $50,487, respectively) 10,642 163,883 52,736
Available for sale, at market 2,618,363 2,847,834 2,501,314
Trading account securities 12,096 134 8,970
Federal funds sold and securities purchased
under resale agreements 3,500 26,020 71,530
Loans and leases, net of unearned income of
$6,254, $10,068 and $9,093, respectively 4,154,367 3,224,600 3,478,929
Allowance for loan losses (63,364) (61,262) (58,973)
_________________________________________________________________________________________________
Net loans and leases 4,091,003 3,163,338 3,419,956
_________________________________________________________________________________________________
Premises and equipment 143,168 125,764 131,365
Accrued interest receivable 69,315 58,776 63,677
Other real estate 1,252 6,843 5,924
Goodwill and other intangibles 19,831 14,431 15,118
Other assets 48,882 99,534 277,690
_________________________________________________________________________________________________
Total assets $7,366,498 $6,873,373 $6,977,184
=================================================================================================
LIABILITIES
Noninterest-bearing deposits $1,232,946 $1,269,968 $1,316,604
Interest-bearing deposits 4,539,550 4,261,642 4,514,844
_________________________________________________________________________________________________
Total deposits 5,772,496 5,531,610 5,831,448
_________________________________________________________________________________________________
Short-term borrowings 771,349 651,311 470,917
Accrued interest payable 34,747 20,514 23,084
Accounts payable and other accrued liabilities 68,804 48,421 54,184
Long-term debt 88,373 89,010 89,031
_________________________________________________________________________________________________
Total liabilities 6,735,769 6,340,866 6,468,664
=================================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible, $25 stated value
Issued--2,353,806, 2,398,170 and 2,398,170 shares,
respectively 58,845 59,954 59,954
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--30,512,515, 29,852,490 and 29,882,072
shares, respectively 152,563 149,262 149,410
Capital surplus 141,322 127,547 127,641
Retained earnings 274,522 246,741 244,550
Treasury stock -- 491,330 common shares, at cost (13,263) - -
Unearned restricted stock compensation (1,797) (921) (592)
Net unrealized gain (loss) on securities available
for sale 18,537 (50,076) (72,443)
_________________________________________________________________________________________________
Total stockholders' equity 630,729 532,507 508,520
_________________________________________________________________________________________________
Total liabilities and stockholders' equity $7,366,498 $6,873,373 $6,977,184
=================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these
Consolidated Balance Sheets.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
(dollars in thousands except per share data) September 30 September 30
============================================================================================================
1995 1994 1995 1994
____________________________________________________________________________________________________________
INTEREST INCOME
Interest and fees on loans and leases $90,473 $68,187 $253,208 $192,978
Interest on tax-exempt securities 1,565 1,839 5,133 5,569
Interest and dividends on taxable securities 41,893 40,669 124,876 119,679
Interest on money market investments 363 534 1,910 2,143
____________________________________________________________________________________________________________
Total interest income 134,294 111,229 385,127 320,369
____________________________________________________________________________________________________________
INTEREST EXPENSE
Interest on deposits 46,867 31,594 131,410 89,362
Interest on short-term borrowings 9,053 5,816 22,578 15,218
Interest on long-term debt 2,794 2,809 8,301 8,412
____________________________________________________________________________________________________________
Total interest expense 58,714 40,219 162,289 112,992
____________________________________________________________________________________________________________
NET INTEREST INCOME 75,580 71,010 222,838 207,377
PROVISION FOR LOAN LOSSES 4,629 (2,550) 10,442 (11,089)
____________________________________________________________________________________________________________
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 70,951 73,560 212,396 218,466
============================================================================================================
OTHER INCOME
Deposit fees and service charges 12,763 12,428 37,886 35,958
Credit card fee income 7,314 6,356 20,910 18,252
Trust fee income 3,769 3,432 11,178 10,626
Broker/dealer revenue 2,090 1,755 6,134 5,632
ATM fee income 1,981 1,640 5,760 4,091
Other operating revenue 7,738 2,866 16,314 11,677
Securities transactions - (19,577) (13,286) (25,160)
____________________________________________________________________________________________________________
Total other income 35,655 8,900 84,896 61,076
____________________________________________________________________________________________________________
OPERATING EXPENSE
Salary expense 30,827 29,440 91,007 85,473
Employee benefits 6,065 5,899 18,894 18,019
____________________________________________________________________________________________________________
Total personnel expense 36,892 35,339 109,901 103,492
Net occupancy expense 4,910 4,637 14,136 13,448
Equipment expense 5,384 4,630 15,647 12,961
Professional fees 4,280 3,904 11,130 10,691
FDIC insurance expense 279 3,146 6,594 9,395
Other operating expense 17,716 13,624 49,468 40,283
____________________________________________________________________________________________________________
Total operating expense 69,461 65,280 206,876 190,270
____________________________________________________________________________________________________________
INCOME BEFORE INCOME TAX EXPENSE 37,145 17,180 90,416 89,272
INCOME TAX EXPENSE 12,700 5,316 30,473 28,787
____________________________________________________________________________________________________________
NET INCOME 24,445 11,864 59,943 60,485
PREFERRED DIVIDEND REQUIREMENTS 1,086 1,086 3,259 3,260
____________________________________________________________________________________________________________
INCOME APPLICABLE TO COMMON SHARES $23,359 $10,778 $56,684 $57,225
============================================================================================================
EARNINGS PER COMMON SHARE
Primary $ .77 $ .36 $1.88 $1.91
Fully diluted $ .73 $ .36 $1.81 $1.83
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 30,156,501 30,010,466 30,111,244 30,006,847
Fully diluted 36,064,608 30,010,466 36,045,942 35,938,314
============================================================================================================
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 $148,758 $125,881 $210,751 $ - $ (817) $ - $544,552
Net income - - - 60,485 - - - 60,485
Cash dividends
Series 1992 preferred stock
($1.36 per share) - - - (3,260) - - - (3,260)
Common stock ($.80 per share) - - - (20,925) - - - (20,925)
Pooled acquisitions - - - (275) - - - (275)
Conversion of 1,000 shares of
preferred stock into 1,164 shares
of common stock (25) 6 19 - - - - -
Common stock issuances -
32,552 shares - 161 634 (35) - - - 760
Stock options exercised, net of shares
surrendered in payment and tax
benefit - 57,567 shares - 288 533 - - - - 821
Restricted stock activity - 49 480 - - (104) - 425
Change in net unrealized gain (loss)
on securities available for sale - - - - - - (50,076) (50,076)
________________________________________________________________________________________________________________________________
Balance at September 30, 1994 $59,954 $149,262 $127,547 $246,741 $ - $ (921) $(50,076) $532,507
________________________________________________________________________________________________________________________________
Balance at January 1, 1995 $59,954 $149,410 $127,641 $244,550 $ - $ (592) $(72,443) $508,520
Net income - - - 59,943 - - - 59,943
Cash dividends
Series 1992 preferred stock
($1.36 per share) - - - (3,259) - - - (3,259)
Common stock ($.90 per share) - - - (26,378) - - - (26,378)
Pooled acquisitions - - - (275) - - - (275)
Conversion of 44,364 shares of preferred
stock into 51,665 shares of
common stock (1,109) 258 851 - - - - -
Common stock issuances -
24,770 shares - - 231 (59) 497 - - 669
Stock options exercised, net of shares
surrendered in payment and tax
benefit - 28,503 shares - 143 343 - - - - 486
Restricted stock activity - 172 1,343 - - (1,205) - 310
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 - - - - - - 90,980 90,980
________________________________________________________________________________________________________________________________
Balance at September 30, 1995 $58,845 $152,563 $141,322 $274,522 $(13,263) $(1,797) $18,537 $630,729
================================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
(dollars in thousands) September 30
===================================================================================================
1995 1994
___________________________________________________________________________________________________
OPERATING ACTIVITIES
Net income $ 59,943 $ 60,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 10,442 (11,089)
Depreciation and amortization 14,133 11,542
Amortization of intangibles 1,997 1,713
Deferred income tax (benefit) expense (1,440) 5,743
Net loss from securities transactions 13,286 25,160
Net (gain) loss on loan sales (648) 57
(Gain) on divestiture of branches (3,054) -
(Increase) decrease in trading account securities (3,126) 348
(Increase) in accrued interest receivable (5,432) (960)
Decrease in other assets 8,813 22,485
Increase in accrued interest payable 11,500 3,076
Increase (decrease) in accounts payable and
other accrued liabilities 16,475 (12,163)
Other, net (1,433) (619)
___________________________________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 120,456 105,778
===================================================================================================
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in other banks 4,054 49,141
Proceeds from sales and calls of securities held to maturity 344 65
Proceeds from maturities of securities held to maturity 38,068 666,621
Purchases of securities held to maturity (574) (5,893)
Proceeds from sales and calls of securities available for sale 648,581 1,423,012
Proceeds from maturities of securities available for sale 108,096 219,468
Purchases of securities available for sale (544,434) (2,001,074)
Net decrease in federal funds sold and securities purchased
under resale agreements 72,580 4,580
Proceeds from sales of loans 66,943 2,228
Net (increase) in loans (735,469) (296,804)
Cash and due from banks of purchased bank 4,081 -
Divestiture of branches (4,897) -
Purchases of premises and equipment (26,761) (20,631)
Proceeds from sales of foreclosed assets 9,376 5,732
Other, net 239 685
___________________________________________________________________________________________________
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (359,773) 47,130
===================================================================================================
FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (254,637) (219,501)
Net increase in time deposits 159,069 61,056
Net increase (decrease) in short-term borrowings 300,432 (27,525)
Payments on long-term debt (658) (2,165)
Proceeds from sales of common stock 557 1,219
Cash dividends (29,587) (22,810)
Treasury stock acquired, net of issuances (13,263) -
___________________________________________________________________________________________________
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 161,913 (209,726)
===================================================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (76,404) (57,818)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 424,699 417,187
===================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 348,295 $ 360,369
===================================================================================================
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 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 financial information has been restated to include First Bancshares,
Inc. and Lakeside Bancshares, Inc. Note 3 includes selected information
regarding acquisitions.
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 October 2, 1995, Peoples Bancshares, Inc. (Peoples), the parent
company of Peoples Bank & Trust Company of St. Bernard (Peoples Bank) merged
into FCC in exchange for approximately 956,184 shares of FCC common stock.
Peoples Bank was merged into First National Bank of Commerce, a wholly owned
subsidiary of FCC. The Peoples acquisition will add approximately $172 million
in assets. The acquisition was accounted for as a pooling-of-interests;
accordingly, prior period financial information will be restated in
subsequent reports.
On October 20, 1995, FCC acquired Central Corporation (Central) of Monroe,
Louisiana, the parent company of Central Bank in exchange for approximately
6,790,939 shares of FCC common stock. Central Bank will retain separate bank
status and will be a wholly owned subsidiary of FCC. Central had $830 million
in assets at September 30, 1995. The acquisition was accounted for as a
pooling-of-interests; accordingly, prior period financial information will be
restated in subsequent reports.
Selected separate and combined financial information of FCC, Peoples and
Central for the nine months ended September 30, 1995 are presented below
(in thousands, except per share amounts).
FCC Peoples Central Combined
___________________________________________________________________________
Nine Months Ended September 30, 1995
Net interest income $222,838 $5,292 $28,417 $256,547
Other income, excluding
securities transactions $ 98,182 $1,563 $12,953 $112,698
Net income $ 59,943 $ 347 $ 8,925 $ 69,215
Earnings per common share
Primary $ 1.88 $14.82 $ 2.19 $ 1.74
Fully diluted $ 1.81 $14.82 $ 2.19 $ 1.70
____________________________________________________________________________
NOTE 3
Acquisitions
On February 17, 1995, FCC acquired 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 acquired City Bancorp, Inc. (City) on February 17, 1995 in exchange
for 516,100 shares of FCC's 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.
On August 3, 1995, FCC completed its acquisition of Lakeside Bancshares,
Inc. (Lakeside) in exchange for 984,021
shares of FCC common stock. The acquisition was accounted for as a
pooling-of-interests; accordingly prior period financial information has
been restated.
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).
FCC Lakeside Combined
___________________________________________________________________________
Six Months Ended June 30, 1995
Net interest income $142,756 $4,502 $147,258
Other income, excluding
securities transactions $ 61,022 $1,505 $ 62,527
Net income $ 34,356 $1,142 $ 35,498
Earnings per common share
Primary $ 1.11 $ 2.28 $ 1.11
Fully diluted $ 1.08 $ 2.28 $ 1.08
___________________________________________________________________________
NOTE 4
Securities Held to Maturity
An analysis of securities held to maturity follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
===============================================================================
September 30, 1995
_______________________________________________________________________________
Obligations of states
and political
subdivisions $ 112 $ 1 $ - $ 113
Other debt securities 500 - - 500
Equity securities 10,030 - - 10,030
_______________________________________________________________________________
Total securities held
to maturity $10,642 $ 1 $ - $10,643
===============================================================================
September 30, 1994
_______________________________________________________________________________
U.S. Treasury securities $145,305 $106 ($1,720) $143,691
Obligations of U.S.
agencies and
corporations 6,765 28 (285) 6,508
Obligations of states
and political
subdivisions 1,797 26 - 1,823
Other debt securities 500 - - 500
Equity securities 9,516 1 - 9,517
_______________________________________________________________________________
Total securities held
to maturity $163,883 $161 ($2,005) $162,039
===============================================================================
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
===============================================================================
September 30, 1995
_______________________________________________________________________________
Within one year $ 40 $- $- $ 40
One to five years 572 1 - 573
Five to ten years - - - -
After ten years 10,030 - - 10,030
_______________________________________________________________________________
Total securities held
to maturity $10,642 $1 $- $10,643
===============================================================================
NOTE 5
Securities Available for Sale
An analysis of securities available for sale follows (in thousands):
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
===============================================================================
September 30, 1995
_______________________________________________________________________________
U. S. Treasury securities $1,504,031 $20,709 $ (594) $1,524,143
Obligations of U. S. agencies
and corporations
Mortgage-backed securities 864,449 3,971 (11,766) 856,654
Notes 120,376 4,437 - 124,813
Obligations of states
and political
subdivisions 85,597 10,638 (112) 96,123
Equity securities 15,391 1,239 - 16,630
_______________________________________________________________________________
Total securities
available for sale $2,589,844 $40,991 $ (12,472) $2,618,363
===============================================================================
September 30, 1994
_______________________________________________________________________________
U. S. Treasury securities $1,416,155 $ 1,096 $ (11,852) $1,405,399
Obligations of U. S. agencies and corporations
Mortgage-backed securities 1,373,418 82 (75,536) 1,297,964
Notes 4,130 89 (20) 4,199
Obligations of states
and political
subdivisions 97,023 10,706 (1,014) 106,715
Other debt securities 7,623 10 (6) 7,627
Equity securities 26,512 - (582) 25,930
_______________________________________________________________________________
Total securities
available for sale $2,924,861 $ 11,983 $(89,010) $2,847,834
===============================================================================
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
===============================================================================
September 30, 1995
_______________________________________________________________________________
Within one year $ 386,328 $ 422 $ (182) $ 386,568
One to five years 1,282,782 25,463 (1,125) 1,307,120
Five to ten years 82,437 2,226 (341) 84,322
After ten years 838,297 12,880 (10,824) 840,353
_______________________________________________________________________________
Total securities
available for sale $2,589,844 $40,991 $(12,472) $2,618,363
===============================================================================
NOTE 6
Loans and Leases
The composition of loans and leases was as follows (in thousands):
September 30 December 31
===============================================================================
1995 1994 1994
______________________________________________________________________________
Loans to individuals - residential mortgages
First lien $ 740,974 $ 563,120 $ 590,760
Junior lien 98,129 88,660 90,109
Loans to individuals - other 1,124,337 884,378 921,850
Commercial, financial and
agricultural 895,034 607,840 725,689
Real estate 767,718 617,949 640,618
Credit card loans 455,135 389,477 430,509
Other loans 79,294 83,244 88,487
______________________________________________________________________________
Total loans and leases 4,160,621 3,234,668 3,488,022
Unearned income (6,254) (10,068) (9,093)
______________________________________________________________________________
Loans and leases, net
of unearned income $4,154,367 $3,224,600 $3,478,929
==============================================================================
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. Loans that are
considered to be impaired also meet FCC's criteria for nonaccrual status, and
no interest income is accrued on impaired loans.
As of September 30, 1995, impaired loans totaled $37.5 million, of which
$5.1 million required a total impairment allowance of $4.6 million. Impaired
loans for 1995 averaged $34.7 million for the third quarter and $22.9 million
for the nine-month period.
NOTE 8
Debt
Total cash payments for interest expense on long-term debt, short-term
borrowings and deposits were $150,626,000 and $109,887,000 for the nine-month
periods ended September 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):
September 30
==============================================================================
1995 1994
______________________________________________________________________________
Commitments to extend credit for loans and
leases (excluding credit card plans) $1,172,852 $ 947,797
Commitments to extend credit for credit
card plans $1,759,062 $1,316,725
Commercial letters of credit $ 5,730 $3,917
Financial standby letters of credit $ 68,631 $ 53,779
Performance standby letters of credit $ 21,651 $ 17,435
Foreign exchange contracts
Commitments to purchase $ 1,046 $ 572
Commitments to sell $ 960 $ 486
When-issued securities
Commitments to purchase $ - $ 25
Commitments to sell $ - $ 25
Interest rate contracts (notional amounts)
Swaps $ - $ 160,000
Amortizing interest rate swaps $ 196,061 $ 200,000
Caps $ 350,000 $ -
Cap corridors $ - $ 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 Nine Months Ended
September 30 September 30
==============================================================================
1995 1994 1995 1994
______________________________________________________________________________
Current $14,728 $2,925 $31,913 $23,044
Deferred (2,028) 2,391 (1,440) 5,743
______________________________________________________________________________
Total $12,700 $5,316 $30,473 $28,787
==============================================================================
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 zero and $(6,852,000) for
the three-month periods ended September 30, 1995 and 1994, respectively, and
$(4,650,000) and $(8,806,000) for the nine-month periods ended September 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 Nine Months Ended
September 30 September 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 (2.19) (5.17) (2.84) (2.96)
Nondeductible expenses 1.06 1.64 1.40 .80
Other items, net .32 (.53) .14 (.59)
______________________________________________________________________________
Actual income tax expense 34.19% 30.94% 33.70% 32.25%
==============================================================================
Current income taxes payable (receivable) were $4.26 million and $(2.60)
million at September 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 $7.81 million and $45.14 million on September 30, 1995
and 1994, respectively. The major temporary differences which created deferred
tax assets and liabilities were as follows (in thousands):
September 30
==============================================================================
1995 1994
______________________________________________________________________________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
______________________________________________________________________________
Allowance for loan losses $21,355 $ - $20,578 $ -
Amortization of intangibles 2,710 - 3,137 -
Employee benefits 2,882 - 2,087 -
Interest on nonaccrual loans 1,650 - 2,862 -
Allowance for losses on
foreclosed assets 1,054 - 3,631 -
Unrealized gain/loss on
securities - 9,835 26,551 -
Accumulated depreciation - 4,837 - 5,151
Accrued liabilities - 4,568 - 3,944
Bond accretion - 2,835 - 4,182
Other 1,763 1,534 3,600 4,034
______________________________________________________________________________
Total deferred taxes $31,414 $23,609 $62,446 $17,311
==============================================================================
FCC's cash payments for federal income tax liabilities were $24.27 million
and $34.53 million for the nine months ended September 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 September 30, 1995 and 1994, and the
related consolidated statements of income for the three-month and
nine-month periods ended September 30, 1995 and 1994, and the
consolidated statements of changes in stockholders' equity and
cash flows for the nine-month periods ended September 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
October 20, 1995
________________________
SELECTED FINANCIAL DATA
_______________________
(dollars in thousands except per share data) 1995 1994
====================================================================================================
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
____________________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $7,266,131 $7,044,462 $6,886,622 $6,930,036 $6,793,847
Earning assets 6,444,870 6,441,380 6,313,411 6,400,232 6,248,499
Loans and leases 3,999,128 3,738,754 3,537,547 3,292,689 3,133,749
Securities 2,619,341 2,665,455 2,704,852 3,001,955 3,066,514
Deposits 5,850,232 5,794,724 5,755,009 5,585,481 5,554,365
Long-term debt 88,597 88,654 88,717 88,990 89,038
Stockholders' equity 623,909 589,770 538,870 528,838 538,850
____________________________________________________________________________________________________
INCOME STATEMENT DATA
Total interest income $ 134,294 $ 129,124 $ 121,709 $ 118,754 $ 111,229
Net interest income 75,580 74,710 72,548 72,657 71,010
Net interest income (FTE) 76,849 76,087 73,925 74,105 72,460
Provision for loan losses 4,629 2,881 2,932 (354) (2,550)
Other income (exclusive of securities
transactions) 35,655 32,250 30,277 30,171 28,477
Securities transactions - 36 (13,322) (18,325) (19,577)
Operating expense 69,461 67,606 69,809 73,177 65,280
Operating income 24,445 24,207 19,927 19,750 24,589
Net income 24,445 24,230 11,268 7,838 11,864
____________________________________________________________________________________________________
KEY RATIOS
Return on average assets 1.33% 1.38% .66% .45% .69%
Return on average total equity 15.54% 16.48% 8.48% 5.88% 8.74%
Return on average common equity 16.42% 17.52% 8.62% 5.71% 8.93%
Operating return on average assets 1.33% 1.38% 1.17% 1.13% 1.44%
Operating return on average total equity 15.54% 16.46% 15.00% 14.82% 18.10%
Operating return on average common equity 16.42% 17.50% 15.95% 15.79% 19.47%
Net interest margin 4.60% 4.73% 4.72% 4.61% 4.62%
Efficiency ratio 61.74% 62.40% 66.99% 70.18% 64.67%
Overhead ratio 2.02% 2.20% 2.54% 2.67% 2.34%
Allowance for loan losses to loans and 1.53% 1.58% 1.66% 1.70% 1.90%
Nonperforming assets to loans and leases
plus foreclosed assets .94% .90% .52% .59% .76%
Average loans to deposits ratio 68.36% 64.52% 61.47% 58.95% 56.42%
Equity ratio 8.56% 8.56% 8.02% 7.29% 7.75%
Leverage ratio 8.20% 8.21% 8.12% 8.11% 8.32%
____________________________________________________________________________________________________
EARNINGS PER COMMON SHARE
Net income-primary $ .77 $ .77 $ .34 $ .22 $ .36
Operating income-primary $ .77 $ .77 $ .63 $ .62 $ .78
Net income-fully diluted $ .73 $ .72 $ .34 $ .22 $ .36
Operating income-fully diluted $ .73 $ .72 $ .60 $ .60 $ .73
Average primary shares
outstanding (in thousands) 30,157 30,089 30,088 30,007 30,010
Average fully diluted shares
outstanding (in thousands) 36,065 36,026 30,088 30,007 30,010
BOOK VALUES (end of period)
Book value $ 19.09 $ 18.66 $ 16.90 $ 15.02 $ 15.85
Tangible book value $ 18.42 $ 17.98 $ 16.20 $ 14.52 $ 15.36
COMMON STOCK DIVIDENDS
Cash dividends $ .30 $ .30 $ .30 $ .30 $ .30
Dividend payout ratio 38.96% 38.96% 88.24% 136.36% 83.33%
COMMON STOCK DATA
High stock price $ 34.50 $ 29.75 $ 27.25 $ 26.76 $ 28.75
Low stock price $ 29.25 $ 24.00 $ 22.00 $ 21.75 $ 25.75
Closing stock price $ 31.50 $ 29.50 $ 25.00 $ 22.00 $ 26.75
Trading volume 6,815,541 4,711,340 5,826,590 5,723,897 4,857,105
Number of stockholders (end of period) 7,949 7,902 8,014 7,808 7,825
NUMBER OF EMPLOYEES (end of period) 3,561 3,615 3,622 3,730 3,787
====================================================================================================
All prior period financial information has been restated to include Lakeside Bancshares, Inc.
THIRD QUARTER IN REVIEW
First Commerce Corporation's (FCC's) net income for the
third quarter of 1995 was $24.4 million. Net income was $24.2
million in 1995's second quarter and $11.9 million in the third
quarter of 1994. There were no securities transactions in the
current quarter. Securities transactions resulted in minimal
gains in the second quarter and after tax losses of $12.7 million
in last year's third quarter.
Fully diluted earnings per share were $.73 this quarter,
compared to $.72 last quarter and $.36 for the third quarter of
1994. Return on average assets was 1.33% in this quarter, and
return on average total equity was 15.54%.
On August 3, 1995, FCC completed its acquisition of Lakeside
Bancshares, Inc. (Lakeside), the parent company of Lakeside
National Bank (LNB), Lake Charles, Louisiana. FCC was required
by regulators to divest two LNB branches. The branches were sold
for a pretax premium of $3.1 million. The quarter also included
Lakeside-related merger charges of $2.6 million. The acquisition
was accounted for as a pooling-of-interests; accordingly, FCC's
prior period financial information has been restated.
Several additional items impacted the third quarter's
results.
- Net interest income (FTE) rose 1% over the second quarter
and was 6% higher than 1994's third quarter, mainly
on the strength of loan growth.
- Other income, excluding securities transactions and the
gain on the LNB branch divestiture, increased 1% from the
prior quarter and was 14% higher than 1994's third quarter.
- The third quarter's operating expense was $69.5 million,
compared to $67.6 million last quarter and $65.3
million in 1994. The current quarter included the $2.6 million
in merger-related charges and a $1.1 million expense
for an incentive pay plan tied to stock performance. A $2.9
million refund of FDIC insurance premiums, resulting from the
lowering of the FDIC premium on insured deposits, also
impacted operating expense this quarter.
During the third quarter, FCC received all required
approvals for its mergers with Central Corporation (Central) of
Monroe, Louisiana, and Peoples Bancshares, Inc. (Peoples) in
Chalmette, Louisiana. The Peoples merger was completed on
October 2, 1995 and the Central merger was completed on October
20, 1995. Both mergers will be accounted for as poolings-of-
interest; accordingly, FCC's financial information will be
restated. One-time pretax expenses related to these mergers are
expected to be approximately $17 million in the fourth quarter.
These mergers increased FCC's assets to approximately $8.4
billion and deposits to approximately $6.8 billion.
A more detailed review of FCC's financial condition and
earnings for the third quarter follows. This review should be
read in conjunction with the consolidated financial statements of
First Commerce Corporation and Subsidiaries, included in this report
and the Financial Review in the 1994 Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for the third quarter of 1995 was
$76.8 million, a 1% increase from last quarter and 6% higher than
the third quarter of 1994. The net interest margin was 4.60%
this quarter, compared to 4.73% in the second quarter and 4.62%
last year.
The increase in net interest income from the second quarter
reflected loan growth and a 3% higher level of average earning
assets. The primary reason for the decline in the net interest
margin was higher deposit costs. Average loans grew 7% in 1995's
third quarter from the prior quarter. Loans increased to 60% of
average earning assets this quarter, compared to 58% in the
second quarter. These positive factors were partially offset by
higher rates paid on deposits and an increase in short-term
borrowings. The cost of funds was 3.51% for the third quarter,
12 basis points higher than last quarter.
When compared to last year's same quarter, the principal
cause of the rise in net interest income was 28% average loan
growth. Loans were 60% of average earning assets in the current
quarter, compared to 50% in the same period of last year. A 107
basis point increase in the securities yield and 6% growth in
average earning assets also contributed to the improvement. A 96
basis point increase in the cost of funds partially offset these
favorable items and caused the decline in the net interest
margin.
For the nine months, net interest income (FTE) was $226.9
million, a 7% increase from 1994's same period. The net interest
margin was 4.68% for the first nine months of 1995, compared to
4.51% last year. These improvements reflect 26% growth in average
loans and a 129 basis point rise in the yield on the securities
portfolio. Higher deposit costs partially offset these
improvements.
Table 1 presents average balance sheets, net interest income
(FTE) and interest rates for the third quarters of 1995 and 1994,
the second quarter of 1995 and the first nine months of 1995 and
1994. Table 2 analyzes the components of changes in net interest
income between these same periods.
Provision For Loan Losses
The provision for loan losses was $4.6 million in the third
quarter of this year, compared to $2.9 million last quarter and a
negative $2.6 million in 1994's third quarter. For the nine-
month periods, the provision was a positive $10.4 million in
1995, compared to a negative $11.1 million last year. The
continuing pace of loan growth led to the increase in the
provision.
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 $35.7
million for the third quarter, compared to $32.3 million last
quarter and $28.5 million in 1994's third quarter. In 1995's
third quarter, other income included a $3.1 million gain on the
regulator required divestiture of two LNB branches. Excluding
the gain on divestiture and securities transactions, other income
rose 1% from last quarter and 14% over the third quarter of 1994.
The most significant increases from 1995's second quarter
were in loan-related ($250,000), credit card ($206,000, or 3%)
and trust ($182,000, or 5%) fee income. Higher loan-related fees
primarily reflected increased servicing fee and insurance income.
Higher volumes of transactions and accounts were the principal
causes of the increases in credit card and trust fee income.
The improvement from last year's third quarter reflected
increases in all categories of other income. Higher credit card
fee income ($958,000) and the absence of unrealized losses on
mortgage loans held for sale ($1.1 million in 1994's third
quarter) were the most significant increases. The rise in credit
card fee income reflected a continuing increase in business
volumes.
For the nine-month period, other income, excluding
securities transactions, was $98.2 million, compared to $86.2
million last year. The rise reflected the gain on the LNB branch
divestiture and higher credit card, deposit account and ATM fee
income. Improvements in credit card ($2.7 million) and deposit
account ($1.9 million) fees were mainly related to higher volumes
of transactions. ATM fee income rose $1.7 million, reflecting
additional ATMs in service.
There were no securities transactions in the current
quarter. Securities transactions resulted in minimal gains in
the second quarter and pretax losses of $19.6 million in last
year's third quarter. For the nine-month period, securities
transactions were netted pretax losses of $13.3 million in 1995
and $25.2 million in 1994.
Operating Expense
Operating expense was $69.5 million for the third quarter of
1995, compared to $67.6 million in the second quarter and $65.3
million in last year's third quarter. 1995's third quarter
included $2.6 million in merger-related charges and a $1.1
million expense for an incentive pay plan tied to stock
performance. Operating expense for 1995's third quarter was also
impacted by a $2.9 million refund of FDIC insurance premiums
resulting from the lowering of the FDIC insurance premiums on
insured deposits.
When compared to the prior quarter, the increase in
operating expense was mainly due to the current quarter's above-
mentioned merger-related and incentive pay charges.
Additionally, increases were experienced in professional fees
($617,000) and nonperforming assets expense ($328,000). Higher
professional fees were mainly due to expenses associated with
FCC's ongoing strategic initiatives and recruitment expenses.
Nonperforming assets expense reflected lower gains on sales of
foreclosed properties.
Operating expense rose $4.2 million from last year's same
quarter. The increase mainly reflected 1995's merger-related
charges and higher incentive pay expense. Higher advertising
costs and depreciation of branch automation equipment also
contributed to the rise.
For the nine-month period, operating expense was $206.9
million in 1995, compared to $190.3 million last year. The most
significant cause of the rise from last year was $5.1 million in
merger-related charges included in 1995's nine-month period.
Additional increases included higher advertising and incentive
pay expenses, plus depreciation of branch automation equipment.
Partially offsetting these increases was the lower FDIC insurance
cost for 1995. The FDIC has announced that effective
January 1, 1996 the rate paid for deposit insurance to the Bank
Insurance Fund (BIF) by "well capitalized" banks, which includes
all five of FCC's banks, has been reduced to zero from the current
four basis points. Additionally, legislation is pending regarding
a special one-time assessment on deposits insured by the Savings
Association Insurance Fund (SAIF). FCC has approximately $1.0
billion in SAIF insured deposits. The determination of the timing
and exact amount of any special SAIF assessment is expected during
the fourth quarter.
FINANCIAL CONDITION ANALYSIS
Securities
The securities portfolio totaled $2.6 billion at September
30, 1995, compared to $2.7 billion at June 30, 1995 and $3.0
billion at September 30, 1994. Average securities were $2.6
billion for the current quarter of 1995, $2.7 billion in the
second quarter and $3.1 billion in 1994's third quarter.
Securities were 39% of average earning assets in this quarter,
compared to 41% in the prior quarter and 49% for last year's
third quarter. Proceeds from maturities of securities were used
to fund the loan growth.
There were no securities transactions net gains or losses in
the current quarter. Securities transactions resulted in minimal gain
in the second quarter of 1995 and pretax losses of $19.6 million in
last year's third quarter. For the nine-month period, securities
transactions resulted in pretax net losses of $13.3 million in 1995
and $25.2 million in 1994. The securities portfolio yield was 6.71%
for the third quarter of 1995, compared to 6.73% for the second
quarter and 5.64% for the third quarter of 1994.
Notes 4 and 5 contain additional information on securities
held to maturity and available for sale.
Securities Available for Sale
As of September 30, 1995, 99.6% of FCC's securities
portfolio was classified as available for sale. Securities
available for sale were $2.6 billion at the end of both 1995
quarters, compared to $2.8 billion at September 30, 1994.
A net unrealized gain, net of tax, increased stockholders'
equity $18.5 million at September 30, 1995, including gross
unrealized gains of $41.0 million and gross unrealized losses of
$12.5 million. At June 30, 1995, there was a net unrealized
gain, net of tax, of $21.0 million, and at September 30, 1994
there was a net unrealized loss of $50.1 million, net of tax.
Securities Held to Maturity
Securities held to maturity were $10.6 million at September
30, 1995, compared to $49.8 million at June 30, 1995 and $163.9
million at September 30, 1994. The decline from last year
primarily reflects maturities of securities in the held to
maturity category.
Money Market Investments
As of September 30, 1995, money market investments were
$15.7 million and averaged $26.4 million for the quarter.
Average money market investments were $37.2 million in the second
quarter and $48.2 million in last year's third quarter. Money
market investments were allowed to decline to fund
significant loan growth.
Loans
Strong loan growth continued in the third quarter with
increases across all sectors of the portfolio. Loans and leases,
net of unearned income, were $4.2 billion as of September 30,
1995, a 7% rise from June 30, 1995 and 29% higher than a year
ago. Average loans increased 7% from the second quarter and were
up 28% over last year's third quarter.
Compared to last quarter, the strongest loan growth was in
commercial, residential mortgage and automobile loans. Virtually
all types of loans increased from the third quarter of 1994.
Commercial loan growth from both periods came from almost all
industry categories. Strong loan growth is a trend that is
expected to continue throughout 1995. Note 6 contains
additional information on loan concentrations.
Deposits
At September 30, 1995 deposits were $5.8 billion. Average
deposits for the third quarter were $5.9 billion, 1% over 1995's
second quarter and 5% above the third quarter of 1994. The most
significant growth from the second quarter was in money market
investment deposits. The increase from 1994's third quarter was
mainly due to higher public funds time deposits of $100,000 and
over, reflecting FCC's renewed interest in that market. Core
deposits were 89% of average deposits for both the current and
prior quarter, compared to 93% in last year's third quarter.
Short-Term Borrowings
Short-term borrowings were $771.3 million at September 30,
1995. During the third quarter, short-term borrowings averaged
$608.7 million, up 25% from last quarter and 13% above the third
quarter of 1994. As a percent of average interest-bearing
liabilities, short-term borrowings were 12% in the current
quarter, compared to 10% last quarter and 11% in 1994's third
quarter.
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 $546 million at September 30, 1995, compared to $860 million
at the end of last quarter. At the end of both periods, the
estimated fair value of FCC's interest rate contracts was a loss
of $3.0 million.
FCC's generic interest rate swap portfolio had a total
notional amount of $210 million as of June 30, 1995. FCC had no
generic interest rate swaps as of September 30, 1995 as $10
million matured and the remainder of the portfolio was
terminated. This portfolio primarily served as a hedge against
interest rate fluctuations on U.S. Treasury securities.
Additionally, a $100 million cap corridor, which hedged the cost
of money market deposits, matured in the third quarter. Table 3
summarizes FCC's interest rate swaps as of September 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
$1.0 million this quarter and $3.2 million for the nine-month
period. 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
third quarter and first nine months of 1995.
Capital and Dividends
As of September 30, 1995, stockholders' equity was 8.56% of
total assets, unchanged from June 30, 1995. The net 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 net
unrealized gain of $18.5 million and $21.0 million at September
30, 1995 and June 30, 1995, respectively.
Regulatory ratios, including leverage, tier 1 and total
capital, are calculated excluding the effect of the SFAS 115
adjustment. Table 6 presents FCC's risk-based and other capital
ratios as of September 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 September 30, 1995,
the Parent Company had $86.6 million of net working capital.
Additionally, the Parent Company could receive dividends from the
banks without prior regulatory approval of $102.7 million, plus
an amount equal to the bank's adjusted net profits for the
remainder of the year.
Credit Risk Management
Nonperforming Assets
Nonperforming assets were $39.0 million at the end of the
third quarter, compared to $34.8 million at June 30, 1995 and
$24.6 million at September 30, 1994. The increase from the prior
quarter was primarily related to commercial and residential real
estate loans. The most significant contributor to the rise from
last year was certain gaming-related loans which were placed on
nonaccrual status during 1995's second quarter. As a percent of
loans and foreclosed assets, nonperforming assets were .94% at
quarter-end, .90% at the end of the prior quarter and .76% at
September 30, 1994.
At the end of 1995's third quarter, 41% of nonperforming
loans were contractually current or no more than 30 days past
due, compared to 86% last quarter. The change was primarily
related to certain gaming-related loans which were placed on
nonaccrual status during the second quarter. At September 30,
1995, loans related to the gaming industry were $108 million, or
2.6% of total loans.
Loans and leases past due 90 days or more and not on
nonaccrual status were $17.9 million at September 30, 1995,
compared to $13.9 million at the end of last quarter and $11.0
million at September 30, 1994. The rise from the end of the
prior quarter was related to government-guaranteed student loans.
Watch list loans and foreclosed assets were $169.5 million at
September 30, 1995, compared to $139.8 million at June 30, 1995.
The increase was mostly in the Type 3, or substandard,
classification and reflected the acquisition of Lakeside,
combined with the impact of continued loan growth.
Table 7 presents information on nonperforming assets,
detailed by type, as of September 30, 1995 and 1994 and December
31, 1994.
Allowance for Loan Losses
The allowance for loan losses was $63.4 million at September
30, 1995, compared to $61.2 million at the end of last quarter.
As a percent of loans and leases, the allowance was 1.53% at the
end of this quarter, compared to 1.58% at June 30, 1995 and 1.90%
at September 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 .25% for
the current quarter, compared to .27% last quarter and .01% in
the third quarter of 1994. The increase in net charge-offs from the
third quarter of 1994 was primarily caused by an increase in net
charge-offs on loans to individuals. For the nine-month period,
net charge-offs on credit card loans were 2.3% of average credit
card loans in 1995 compared to 1.8% last year.
Table 8 presents the activity for the third quarters and
first nine months of 1995 and 1994.
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) <F1> AND
INTEREST RATES
===============================================================================================================================
Third Quarter 1995 Second Quarter 1995 Third Quarter 1994
_______________________________________________________________________________________________________________________________
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
_______________________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases $3,999,128 $ 91,054 9.04% $3,738,754 $ 85,175 9.13% $3,133,749 $ 68,727 8.71%
Securities
Taxable 2,532,709 41,934 6.59 2,571,954 42,324 6.59 2,968,535 40,766 5.47
Tax-exempt 86,632 2,211 10.21 93,501 2,442 10.45 97,979 2,648 10.81
_______________________________________________________________________________________________________________________________
Total securities 2,619,341 44,145 6.71 2,665,455 44,766 6.73 3,066,514 43,414 5.64
_______________________________________________________________________________________________________________________________
Interest-bearing deposits
in banks 277 4 5.72 310 4 5.17 15,422 152 3.91
Federal funds sold and
securities purchased under
resale agreements 12,083 174 5.71 21,472 334 6.28 31,402 358 4.52
Trading account securities 14,041 186 5.29 15,389 222 5.79 1,412 28 7.88
_______________________________________________________________________________________________________________________________
Total money market investments 26,401 364 5.49 37,171 560 6.07 48,236 538 4.43
_______________________________________________________________________________________________________________________________
Total earning assets 6,644,870 $135,563 8.11% 6,441,380 $130,501 8.12% 6,248,499 $112,679 7.17%
_______________________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets <F2> 683,765 664,040 607,761
Allowance for loan losses (62,504) (60,958) (62,413)
_______________________________________________________________________________________________________________________________
Total assets $7,266,131 $7,044,462 $6,793,847
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 906,377 $ 4,090 1.79% $ 928,261 $ 4,269 1.85% $ 899,265 $ 3,342 1.47%
Money market investment deposits 704,997 5,372 3.02 622,667 3,673 2.37 766,714 3,898 2.02
Savings and other consumer
time deposits 2,300,411 27,922 4.81 2,319,717 27,210 4.70 2,205,720 20,306 3.65
Time deposits $100,000 and over 665,515 9,483 5.65 642,988 9,021 5.63 414,903 4,048 3.88
_______________________________________________________________________________________________________________________________
Total interest-bearing deposits 4,577,300 46,867 4.06 4,513,633 44,173 3.92 4,286,602 31,594 2.93
______________________________________________________________________________________________________________________________
Short-term borrowings 608,738 9,053 5.90 485,557 7,473 6.18 538,357 5,816 4.29
Long-term debt 88,597 2,794 12.51 88,654 2,768 12.52 89,038 2,809 12.52
_______________________________________________________________________________________________________________________________
Total interest-bearing
liabilities 5,274,635 $ 58,714 4.42% 5,087,844 $ 54,414 4.29% 4,913,997 $ 40,219 3.25%
_______________________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,272,932 1,281,091 1,267,763
Other liabilities 94,655 85,757 73,237
Stockholders' equity 623,909 589,770 538,850
_______________________________________________________________________________________________________________________________
Total liabilities and
stockholders' equity $7,266,131 $7,044,462 $6,793,847
===============================================================================================================================
Net interest income (FTE)
and margin $ 76,849 4.60% $ 76,087 4.73% $ 72,460 4.62%
===============================================================================================================================
Net earning assets and spread $1,370,235 3.69% $1,353,536 3.83% $1,334,502 3.92%
===============================================================================================================================
Cost of funds 3.51% 3.39% 2.55%
===============================================================================================================================
<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)
==============================================================================================================================
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
_____________________________________________________________________________________________________________________________
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
_____________________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases $3,760,167 $254,977 9.06% $2,990,402 $194,561 8.70%
Securities
Taxable 2,570,240 124,983 6.49 3,103,949 119,953 5.16
Tax-exempt 92,661 7,274 10.47 98,216 8,005 10.87
_____________________________________________________________________________________________________________________________
Total securities 2,662,901 132,257 6.63 3,202,165 127,958 5.34
_____________________________________________________________________________________________________________________________
Interest-bearing deposits
in banks 866 36 5.56 48,897 1,267 3.46
Federal funds sold and
securities purchased
under resale agreements 30,622 1,358 5.93 28,623 813 3.80
Trading account securities 13,210 522 5.28 1,541 71 6.16
_____________________________________________________________________________________________________________________________
Total money market investments 44,698 1,916 5.73 79,061 2,151 3.64
_____________________________________________________________________________________________________________________________
Total earning assets 6,467,766 $389,150 8.04% 6,271,628 $324,670 6.92%
_____________________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets<F2> 660,607 653,230
Allowance for loan losses (61,197) (67,421)
_____________________________________________________________________________________________________________________________
Total assets $7,067,176 $6,857,437
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 939,003 $ 13,153 1.87% $ 941,981 $ 10,062 1.43%
Money market investment
deposits 661,712 12,453 2.52 781,846 11,498 1.97
Savings and other consumer
time deposits 2,296,843 79,856 4.65 2,182,934 56,809 3.48
Time deposits $100,000
and over 626,534 25,948 5.54 405,102 10,993 3.63
_____________________________________________________________________________________________________________________________
Total interest-bearing
deposits 4,524,092 131,410 3.88 4,311,863 89,362 2.77
_____________________________________________________________________________________________________________________________
Short-term borrowings 506,085 22,578 5.97 551,120 15,218 3.69
Long-term debt 88,656 8,301 12.52 89,832 8,412 12.52
_____________________________________________________________________________________________________________________________
Total interest-bearing
liabilities 5,118,833 $162,289 4.24% 4,952,815 $112,992 3.05%
_____________________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,276,244 1,286,391
Other liabilities 87,575 70,892
Stockholders' equity 584,524 547,339
_____________________________________________________________________________________________________________________________
Total liabilities and
stockholders' equity $7,067,176 $6,857,437
=============================================================================================================================
Net interest income (FTE)
and margin $226,861 4.68% $211,678 4.51%
=============================================================================================================================
Net earning assets
and spread $1,348,933 3.80% $1,318,813 3.87%
=============================================================================================================================
Cost of funds 3.35% 2.41%
=============================================================================================================================
<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>
===================================================================================================================
Third Quarter 1995 Third Quarter 1995
Compared to Second Quarter 1995 Compared to Third 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 $5,879 $5,928 $ (49) $22,327 $19,615 $ 2,712
Securities
Taxable (390) (649) 259 1,168 (6,498) 7,666
Tax-exempt (231) (176) (55) (437) (295) (142)
___________________________________________________________________________________________________________________
Total securities (621) (825) 204 731 (6,793) 7,524
___________________________________________________________________________________________________________________
Interest-bearing deposits
in banks - - - (148) (196) 48
Federal funds sold and
securities purchased
under resale agreements (160) (137) (23) (184) (261) 77
Trading account securities (36) (19) (17) 158 170 (12)
___________________________________________________________________________________________________________________
Total money market
investments (196) (156) (40) (174) (287) 113
___________________________________________________________________________________________________________________
Total interest income $5,062 $4,947 $ 115 $22,884 $12,535 $10,349
====================================================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ (179) $ (100) $ (79) $ 748 $ 27 $ 721
Money market investment
deposits 1,699 530 1,169 1,474 (336) 1,810
Savings and other consumer
time deposits 712 (228) 940 7,616 905 6,711
Time deposits $100,000
and over 462 319 143 5,435 3,084 2,351
___________________________________________________________________________________________________________________
Total interest-bearing
deposits 2,694 521 2,173 15,273 3,680 11,593
___________________________________________________________________________________________________________________
Short-term borrowings 1,580 1,839 (259) 3,237 834 2,403
Long-term debt 26 (2) 28 (15) (14) (1)
___________________________________________________________________________________________________________________
Total interest expense $4,300 $2,358 $ 1,942 $18,495 $ 4,500 $13,995
___________________________________________________________________________________________________________________
Change in net interest
income (FTE) $ 762 $2,589 $(1,827) $ 4,389 $ 8,035 $ (3,646)
===================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
</FN>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) <F1> (continued)
======================================================================================================
Nine Months Ended September 30, 1995
Compared to Nine Months Ended
September 30, 1994
______________________________________________________________________________________________________
Total Due to Due to
Increase Change in Change in
(dollars in thousands) (Decrease) Volume Rate
______________________________________________________________________________________________________
EARNING ASSETS
Loans and leases $60,416 $ 51,900 $ 8,516
Securities
Taxable 5,030 (22,754) 27,784
Tax-exempt (731) (443) (288)
______________________________________________________________________________________________________
Total securities 4,299 (23,197) 27,496
______________________________________________________________________________________________________
Interest-bearing deposits in banks (1,231) (1,710) 479
Federal funds sold and securities
purchased under resale agreements 545 60 485
Trading account securities 451 463 (12)
______________________________________________________________________________________________________
Total money market investments (235) (1,187) 952
______________________________________________________________________________________________________
Total interest income $64,480 $27,516 $36,964
======================================================================================================
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $ 3,091 $ (32) $ 3,123
Money market investment deposits 955 (1,942) 2,897
Savings and other consumer time deposits 23,047 3,098 19,949
Time deposits $100,000 and over" 14,955 7,620 7,335
______________________________________________________________________________________________________
Total interest-bearing deposits 42,048 8,744 33,304
______________________________________________________________________________________________________
Short-term borrowings 7,360 (1,333) 8,693
Long-term debt (111) (110) (1)
______________________________________________________________________________________________________
Total interest expense $49,297 $ 7,301 $41,996
______________________________________________________________________________________________________
Change in net interest income (FTE) $15,183 $20,215 $(5,032)
======================================================================================================
<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
________________________________________________________________________________________________________________________________
Amortizing interest rate swaps -
receive fixed/pay floating
at September 30, 1995 $196,061 1.1 4.35% 5.88% LIBOR Quarterly Certificates of Deposit
================================================================================================================================
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 - 400,000 - - 400,000
Amortization - - (3,939) - (3,939)
Terminations/Maturities (100,000) (510,000) - (50,000) (660,000)
_________________________________________________________________________________________________
Balance, September 30, 1995 $350,000 $ - $196,061 $ - $ 546,061
=================================================================================================
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
September 30, 1995
Interest income (expense) $ 31 $ 237 $ (832) $ (101) $ (665)
Premium amortization (380) - - - (380)
_________________________________________________________________________________________________
Interest income (expense) $ (349) $ 237 $ (832) $ (101) $(1,045)
=================================================================================================
Nine months ended
September 30, 1995
Interest income (expense) $ 611 $ 229 $(2,614) $ (459) $(2,233)
Premium amortization (1,011) - - - (1,011)
_________________________________________________________________________________________________
Interest income (expense) $ (400) $ 229 $(2,614) $ (459) $(3,244)
=================================================================================================
TABLE 6. RISK-BASED CAPITAL AND CAPITAL RATIOS
============================================================================================
September 30 December 31
(dollars in thousands) 1995 1994 1994
____________________________________________________________________________________________
Tier 1 capital $ 592,361 $ 568,152 $ 565,845
Tier 2 capital 137,004 127,478 131,098
____________________________________________________________________________________________
Total capital $ 729,365 $ 695,630 $ 696,943
=============================================================================================
Risk-weighted assets $4,322,432 $3,508,011 $3,805,925
=============================================================================================
Ratios at end of period
Tier 1 capital 13.70% 16.20% 14.87%
Total capital 16.87% 19.83% 18.31%
Equity ratio 8.56% 7.75% 7.29%
Tangible equity ratio 8.32% 7.55% 7.09%
Leverage ratio 8.20% 8.32% 8.11%
=============================================================================================
TABLE 7. NONPERFORMING ASSETS
=====================================================================================================
September 30 December 31
(dollars in thousands) 1995 1994 1994
_____________________________________________________________________________________________________
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 6,017 $ 3,747 $ 4,612
Loans to individuals-other 267 1,251 630
Commercial, financial and agricultural 17,463 2,029 910
Real estate-commercial mortgages 10,864 10,480 8,241
Real estate-other 2,903 159 250
_____________________________________________________________________________________________________
37,514 17,666 14,643
_____________________________________________________________________________________________________
Foreclosed assets
Other real estate 2,101 10,746 9,797
Other foreclosed assets 251 104 109
Allowance for losses on foreclosed assets (874) (3,927) (3,898)
_____________________________________________________________________________________________________
1,478 6,923 6,008
_____________________________________________________________________________________________________
Total nonperforming assets $38,992 $24,589 $20,651
=====================================================================================================
Loans past due 90 days or more and not
on nonaccrual status $17,897 $11,002 $10,629
=====================================================================================================
End of period ratios
Nonperforming assets as a percent
of loans and leases plus foreclosed
assets .94% .76% .59%
Allowance for loan losses as a percent
of nonperforming loans 168.91% 346.78% 402.74%
Loans and leases past due 90 days or
more and not on nonaccrual status
as a percent of loans and leases .43% .34% .31%
=====================================================================================================
TABLE 8. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
===================================================================================================================
Three Months Ended Nine Months Ended
September 30 September 30
____________________________________________________________________________________________________________________
(dollars in thousands) 1995 1994 1995 1994
____________________________________________________________________________________________________________________
Balance at beginning of period $61,247 $63,922 $58,973 $73,430
Purchased allowance - - 1,142 -
Provision charged to expense 4,629 (2,550) 10,442 (11,089)
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 28 105 134 250
Loans to individuals-other 1,540 595 3,961 1,834
Commercial, financial and agricultural 235 116 827 546
Real estate-commercial mortgages 100 88 294 176
Real estate-other 9 - 9 -
Credit card loans 3,441 2,048 9,592 6,833
____________________________________________________________________________________________________________________
Total charge-offs 5,353 2,952 14,817 9,639
____________________________________________________________________________________________________________________
Recoveries on loans and leases previously
charged to the allowance
Loans to individuals-residential mortgages 212 197 629 929
Loans to individuals-other 559 578 1,563 1,520
Commercial, financial and agricultural 1,177 891 2,604 2,914
Real estate-commercial mortgages 30 316 422 723
Real estate-other 99 171 237 548
Credit card loans 759 679 2,149 1,909
Other 5 10 20 17
____________________________________________________________________________________________________________________
Total recoveries 2,841 2,842 7,624 8,560
____________________________________________________________________________________________________________________
Net charge-offs 2,512 110 7,193 1,079
____________________________________________________________________________________________________________________
Balance at end of period $63,364 $61,262 $63,364 $61,262
====================================================================================================================
Gross annualized charge-offs as a percent
of average loans and leases .54% .38% .53% .43%
Recoveries as a percent of gross charge-offs 53.07% 96.27% 51.45% 88.81%
Net annualized charge-offs as a percent of
average loans and leases .25% .01% .26% .05%
Allowance for loan losses as a percent of loans
and leases at end of period 1.53% 1.90% 1.53% 1.90%
=====================================================================================================================
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. The only change since that time is related to a lawsuit
that was previously reported.
In the quarter ended March 31, 1989, suit was filed
against FCC's wholly-owned subsidiary, First National Bank of
Commerce (FNBC), among other defendants, in the matter entitled
Guidry v. Bank of LaPlace and others, Civil District Court for
the Parish of Orleans. Plaintiff sought to recover losses on
certain investments, claiming that the defendants breached
duties owed to him. On April 22, 1994, a jury found that FNBC
had breached a state law duty to the plaintiff, and found it
partially responsible for plaintiff's loss, which it determined
to be $4.5 million, plus interest from April 17, 1989. On May
3, 1994, the court entered judgement against FNBC for 15% of the
$4.5 million (approximately $681,000) plus interest from April
17, 1989. On September 15, 1995, the Louisiana Court of Appeal,
Fourth Circuit, reversed the lower court and held that FNBC was
not liable for any amount to the plaintiff. All parties have
applied for a review of the decision by the Louisiana Supreme
Court, and the applications were pending as of the date of
filing this Form 10-Q.
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) A special meeting of the shareholders of FCC was
held on September 18, 1995 for the purpose of approving an
Agreement and Plan of Merger (the "Plan") pursuant to which
Central Corporation would be merged into FCC. FCC's Proxy
Statement dated August 16, 1995 provided details of the terms of
the Plan. 68.02% of total voting shares were represented as
follows:
(b)
___________________________________________________________________
BROKER
SUBMISSION OF MATTERS FOR AGAINST ABSTAIN NONVOTE
___________________________________________________________________
___________________________________________________________________
I. Approval of the
merger of Central
Corporation
into FCC 20,152,743 149,663 95,824 0
___________________________________________________________________
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
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
27 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
First Commerce Corporation
___________________________
(Registrant)
Date: November 14, 1995 By: /s/ Thomas L. Callicutt, Jr.
__________________ ____________________________________
Thomas L. Callicutt, Jr.
Senior Vice President, Controller
and Principal Accounting Officer