______________________________________________________________________________
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 March 31, 1996
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 Identification No.)
incorporation or organization)
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 April 30, 1996
_______ _________________________________
Common Stock, $5.00 par value 38,889,088
FIRST COMMERCE CORPORATION
INDEX
Page No.
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Report of Independent Public Accountants 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II: Other Information 22
FIRST COMMERCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) March 31 December 31
========================================================================================================================
1996 1995
________________________________________________________________________________________________________________________
ASSETS
Cash and due from banks $ 422,067 $ 497,268
Interest-bearing deposits in other banks 345 788
Securities available for sale, at fair value 2,308,290 2,599,767
Trading account securities 26,821 19,630
Federal funds sold and securities purchased under resale agreements 19,400 33,900
Loans and leases, net of unearned income of $5,078 and $7,070, respectively 5,104,047 5,122,726
Allowance for loan losses (74,534) (75,845)
________________________________________________________________________________________________________________________
Net loans and leases 5,029,513 5,046,881
========================================================================================================================
Premises and equipment 165,169 165,813
Accrued interest receivable 84,423 95,787
Other assets 193,090 70,973
________________________________________________________________________________________________________________________
Total assets $8,249,118 $8,530,807
========================================================================================================================
LIABILITIES
Noninterest-bearing deposits $1,344,904 $1,481,795
Interest-bearing deposits 5,541,393 5,472,606
________________________________________________________________________________________________________________________
Total deposits 6,886,297 6,954,401
========================================================================================================================
Short-term borrowings 400,764 635,728
Accrued interest payable 44,504 41,952
Accounts payable and other accrued liabilities 94,065 77,331
Long-term debt 85,992 88,346
________________________________________________________________________________________________________________________
Total liabilities 7,511,622 7,797,758
========================================================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible, $25 stated value
Issued--1,572,731 and 2,348,806 shares, respectively 39,318 58,720
Common stock, $5 par value
Authorized--100,000,000 shares
Issued--39,351,399 and 38,281,519 shares, respectively 196,757 191,408
Capital surplus 145,157 125,405
Retained earnings 354,959 337,782
Treasury stock -- 469,653 and 471,403 common shares, at cost, respectively (12,680) (12,727)
Unearned restricted stock compensation (4,341) (1,123)
Net unrealized gain on securities available for sale 18,326 33,584
________________________________________________________________________________________________________________________
Total stockholders' equity 737,496 733,049
========================================================================================================================
Total liabilities and stockholders' equity $8,249,118 $8,530,807
========================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(dollars in thousands except per share data) March 31
=====================================================================================================================
1996 1995
_____________________________________________________________________________________________________________________
INTEREST INCOME
Interest and fees on loans and leases $114,142 $ 93,831
Interest and dividends on taxable securities 38,408 42,954
Interest on tax-exempt securities 1,601 1,961
Interest on money market investments 923 2,241
_____________________________________________________________________________________________________________________
Total interest income 155,074 140,987
=====================================================================================================================
INTEREST EXPENSE
Interest on deposits 55,113 47,790
Interest on short-term borrowings 8,317 6,170
Interest on long-term debt 2,719 2,767
_____________________________________________________________________________________________________________________
Total interest expense 66,149 56,727
=====================================================================================================================
NET INTEREST INCOME 88,925 84,260
PROVISION FOR LOAN LOSSES 3,825 3,162
_____________________________________________________________________________________________________________________
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 85,100 81,098
=====================================================================================================================
OTHER INCOME
Deposit fees and service charges 14,419 14,206
Credit card fee income 9,938 7,757
Trust fee income 4,578 4,277
Broker/dealer revenue 2,565 1,918
ATM fee income 2,391 1,929
Other operating revenue 6,909 4,908
Securities transactions 1,207 (13,322)
_____________________________________________________________________________________________________________________
Total other income 42,007 21,673
=====================================================================================================================
OPERATING EXPENSE
Salary expense 36,017 35,228
Employee benefits 8,079 8,086
_____________________________________________________________________________________________________________________
Total personnel expense 44,096 43,314
Equipment expense 6,788 5,928
Net occupancy expense 5,623 5,324
Communications and delivery expense 4,970 4,137
FDIC insurance expense 577 3,637
Other operating expense 17,732 18,562
_____________________________________________________________________________________________________________________
Total operating expense 79,786 80,902
=====================================================================================================================
INCOME BEFORE INCOME TAX EXPENSE 47,321 21,869
INCOME TAX EXPENSE 15,788 7,377
=====================================================================================================================
NET INCOME 31,533 14,492
PREFERRED DIVIDEND REQUIREMENTS 713 1,087
=====================================================================================================================
INCOME APPLICABLE TO COMMON SHARES $30,820 $13,405
=====================================================================================================================
EARNINGS PER COMMON SHARE
Primary $ .79 $ .36
Fully diluted $ .75 $ .36
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 38,898,536 37,835,050
Fully diluted 44,007,862 37,835,050
=====================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
(dollars in thousands) March 31
================================================================================================================================
1996 1995
________________________________________________________________________________________________________________________________
OPERATING ACTIVITIES
Net income $ 31,533 $ 14,492
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 3,825 3,162
Depreciation and amortization 6,031 5,360
Amortization of intangibles 729 581
Deferred income tax (benefit) (538) (80)
Net (gain) loss from securities transactions (1,207) 13,322
Net (gain) on loan sales (438) (212)
Net (gain) on branch divestiture (1,137) -
(Increase) in trading account securities (7,191) (4,643)
(Increase) decrease in accrued interest receivable 11,360 (705)
(Increase) decrease in other assets (7,506) 10,493
Increase in accrued interest payable 2,648 6,653
Increase in accounts payable and other accrued liabilities 15,202 7,520
(Increase) decrease in loans held for sale (6,067) 1,162
Other, net (78) (183)
________________________________________________________________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 47,166 56,922
================================================================================================================================
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in other banks 443 3,893
Proceeds from maturities/calls of securities held to maturity - 46,697
Purchases of securities held to maturity - (16,346)
Proceeds from sales of securities available for sale - 518,629
Proceeds from maturities/calls of securities available for sale 164,694 40,376
Purchases of securities available for sale (781) (566,677)
Net decrease in federal funds sold and securities purchased under resale agreements 14,500 82,720
Proceeds from sales of loans 1,412 20,011
Net (increase) decrease in loans 12,947 (173,005)
Net cash acquired in acquisitions - 4,081
Divestiture of branch (14,410) -
Purchases of premises and equipment (7,493) (11,570)
Proceeds from sales of foreclosed assets 3,263 5,530
Other, net 1,745 -
_______________________________________________________________________________________________________________________________
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 176,320 (45,661)
===============================================================================================================================
FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (149,457) (222,502)
Net increase in time deposits 99,947 161,001
Net (decrease) in short-term borrowings (234,964) (3,108)
Payments on long-term debt (39) (302)
Cash dividends (14,297) (9,591)
(Repurchase) sales of common stock 123 (13,650)
_______________________________________________________________________________________________________________________________
NET CASH (USED) BY FINANCING ACTIVITIES (298,687) (88,152)
===============================================================================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (75,201) (76,891)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 497,268 472,142
===============================================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $422,067 $395,251
===============================================================================================================================
Cash paid during the period for:
Interest expense $63,597 $49,870
Income taxes $5,100 $90
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Basis of Presentation
The accounting and reporting policies of First Commerce
Corporation and its subsidiaries (FCC) conform with generally
accepted accounting principles and with general practices
within the financial services industry. In preparing the
consolidated financial statements, FCC is required to make
estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
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 presented. 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.
The Notes to Consolidated Financial Statements included
herein should be read in conjunction with the Notes to
Consolidated Financial Statements included in FCC's 1995
Annual Report to Shareholders.
NOTE 2
Stock Incentive Plan
The following table summarizes the activity related to
stock options and stock appreciation rights (SARs) during the
first quarter of 1996:
Options SARs
_____________________________________________
Weighted Weighted
Number Average Number Average
of Price per of Shares Price per
Shares Share Share
================================================================
Outstanding at
December 31, 1995 726,730 $22.97 1,186,940 $26.96
Granted 245,789 $33.25 - -
Exercised (10,650) $15.38 (3,388) $26.68
Canceled (4,214) $28.19 (12,154) $27.00
________________________________________________________________
Outstanding at
March 31, 1996 957,655 $25.67 1,171,398 $26.96
================================================================
Exercisable at
March 31, 1996 397,387 320,258
==============================================================
The following table summarizes the activity related to
restricted stock during the first quarter of 1996:
Number
of
Shares
==================================
Outstanding at
December 31, 1995 88,227
Granted 101,185
Earned (17,815)
Canceled (26,949)
==================================
Outstanding at
March 31, 1996 144,648
==================================
Stock options are granted at market value at the date of
grant. The options granted during the first quarter of 1996
are not exercisable for one year from the date of grant and
become exercisable thereafter in one-fourth increments each
year. FCC's stock options expire eight years from the date
of grant. The restricted stock granted may vest, in whole or
in part, three years from the date of grant based on certain
performance criteria.
In the event of a change in control of FCC, all
outstanding options and SARs become exercisable immediately,
and the restrictions on all shares of restricted stock lapse
immediately.
NOTE 3
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 sheet
of FIRST COMMERCE CORPORATION (a Louisiana corporation) and
subsidiaries as of March 31, 1996, and the related consolidated
statements of income and cash flows for the three-month periods
ended March 31, 1996 and 1995. 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,
1995 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 15, 1996, 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, 1995
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
April 10, 1996
FIRST COMMERCE CORPORATION
SELECTED FINANCIAL DATA
(dollars in thousands except per share data) 1996 1995
==================================================================================================================
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
__________________________________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $8,442,698 $8,367,588 $8,264,744 $8,046,797 $7,878,868
Earning assets 7,699,873 7,677,557 7,569,424 7,369,312 7,233,936
Loans and leases 5,170,534 4,935,576 4,651,921 4,385,841 4,187,960
Securities 2,457,394 2,689,239 2,854,503 2,897,752 2,888,217
Deposits 6,889,954 6,741,690 6,737,925 6,689,394 6,641,827
Long-term debt 87,028 88,950 90,095 89,904 90,015
Stockholders' equity 740,091 726,349 717,016 679,713 625,624
________________________________________________________________________________________________________________
INCOME STATEMENT DATA
Total interest income $155,074 $154,671 $154,110 $148,726 $140,987
Net interest income 88,925 86,086 87,039 85,959 84,260
Net interest income (FTE) 90,384 87,596 88,442 87,493 85,786
Provision for loan losses 3,825 19,808 4,659 2,971 3,162
Other income (exclusive of securities transactions) 40,800 38,674 40,522 37,088 34,995
Securities transactions 1,207 1,868 5 36 (13,322)
Operating expense 79,786 95,635 81,043 79,624 80,902
Operating income 30,748 5,703 27,367 27,148 23,151
Net income 31,533 6,917 27,371 27,171 14,492
__________________________________________________________________________________________________________________
KEY RATIOS
Return on average assets 1.50% .33% 1.31% 1.35% .75%
Return on average total equity 17.14% 3.78% 15.14% 16.03% 9.39%
Return on average common equity 17.82% 3.48% 15.86% 16.88% 9.61%
Operating return on average assets 1.46% .27% 1.31% 1.35% 1.19%
Operating return on average total equity 16.71% 3.12% 15.14% 16.02% 15.01%
Operating return on average common equity 17.37% 2.76% 15.86% 16.87% 15.82%
Net interest margin 4.71% 4.54% 4.65% 4.76% 4.78%
Efficiency ratio 60.82% 75.74% 62.84% 63.91% 66.98%
Overhead ratio 2.04% 2.94% 2.12% 2.32% 2.57%
Average loans to deposits ratio 75.04% 73.21% 69.04% 65.56% 63.05%
Allowance for loan losses to loans and leases 1.46% 1.48% 1.55% 1.61% 1.69%
Nonperforming assets to loans and leases
plus foreclosed assets 1.09% 1.17% .87% .84% .52%
Equity ratio 8.94% 8.59% 8.66% 8.64% 8.12%
Leverage ratio 8.33% 8.16% 8.33% 8.31% 8.21%
__________________________________________________________________________________________________________________
EARNINGS PER COMMON SHARE
Net income-primary $ .79 $ .15 $ .69 $ .69 $ .36
Net income-fully diluted $ .75 $ .15 $ .66 $ .66 $ .36
Operating income-primary $ .77 $ .12 $ .69 $ .69 $ .58
Operating income-fully diluted $ .74 $ .12 $ .66 $ .66 $ .57
Average primary shares (in thousands) 38,899 38,017 37,904 37,836 37,835
Average fully diluted shares (in thousands) 44,008 38,017 43,812 43,773 37,835
COMMON STOCK DIVIDENDS
Cash dividends $ .35 $ .35 $ .30 $ .30 $ .30
Dividend payout ratio 44.30% 233.33% 43.48% 43.48% 83.33%
BOOK VALUES (end of period)
Book value $18.02 $17.86 $17.66 $17.25 $15.77
Tangible book value $17.51 $17.32 $17.11 $16.68 $15.18
COMMON STOCK DATA
High stock price $34.25 $33.75 $34.50 $29.75 $27.25
Low stock price $30.25 $30.63 $29.25 $24.00 $22.00
Closing stock price $33.00 $32.00 $31.50 $29.50 $25.00
Trading volume 5,051,242 5,046,101 6,815,541 4,711,340 5,826,590
Number of stockholders (end of period) 9,286 9,951 9,100 9,053 9,165
NUMBER OF EMPLOYEES (end of period) 4,080 4,211 4,198 4,269 4,268
==================================================================================================================
FIRST QUARTER IN REVIEW
First Commerce Corporation (FCC) reported net income of
$31.5 million for the first quarter of 1996. Net income was $6.9
million last quarter and $14.5 million in 1995's first quarter.
Fully diluted earnings per share were $.75 for the first quarter,
compared to $.15 in the fourth quarter and $.36 for the first
quarter of 1995. Several items led to the improved results in the
current quarter:
- Net interest income (FTE) was 3% higher than the fourth
quarter and was up 5% from 1995's first quarter, mainly on the
strength of loan growth.
- Other income, excluding securities transactions and a $1.1
million gain from the divestiture of a branch, rose 3% over the
prior quarter and was 13% higher than the first quarter of last
year.
- Excluding nonrecurring items in the fourth and first
quarters of 1995, operating expense growth was a moderate 1% from
the fourth quarter and 3% from 1995's first quarter.
- Results in both 1995 periods reflected several significant
items. The fourth quarter was impacted by merger-related and
process innovation charges of $18.7 million, plus a higher
provision for loan losses. 1995's first quarter included a $13.3
million pretax loss on securities transactions, plus $3.6 million
in merger-related and process innovation charges.
A more detailed review of FCC's financial condition and
earnings for the first quarter of 1996 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 1995
Annual Report.
EARNINGS ANALYSIS
Net Interest Income
Net interest income (FTE) for 1996's first quarter was $90.4
million, a 3% increase from last quarter and 5% higher than the
first quarter of 1995. The net interest margin was 4.71% this
quarter, compared to 4.54% in the fourth quarter and 4.78% in
1995's first quarter.
The improvements from the fourth quarter were principally
related to 5% average loan growth, resulting in an improved mix
of earning assets, lower rates on interest-bearing liabilities,
and a reduction in short-term borrowings. Loans increased as a
percent of average earning assets to 67%, compared to 64% in the
fourth quarter. Loan growth was primarily funded by a reduction
in securities. Average securities fell 9% and were 32% of average
earning assets, compared to 35% last quarter. A 17 basis point
decline in the interest-bearing liability rate reflected a lower
interest rate environment. Higher-cost short-term borrowings
fell 13%, while interest-bearing deposits rose 3%. These
positive factors were partially offset by a 4% decline in average
interest-free funds.
When compared to last year's first quarter, the rise in net
interest income reflected 23% average loan growth. Loans were
67% of average earning assets in the current quarter, compared to
58% in the first quarter of 1995. A 27 basis point increase in
the cost of funds partially offset this improvement and caused
the decline in the net interest margin.
Table 1 presents average balance sheets, net interest income
(FTE) and interest rates for the first quarters of 1996 and 1995
and the fourth quarter of 1995. 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 $3.8 million in the first
quarter of this year, compared to $19.8 million last quarter and
$3.2 million in 1995's first quarter. The provision level for
the first quarter of 1996 was favorably impacted by improvements
in the credit quality of commercial loans and a slight decline in
commercial loans during the quarter. The fourth quarter
provision included $10 million in response to a $10 million
charge-off related to the closure of the temporary New Orleans
land-based casino and suspension of construction on the permanent
casino.
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 $40.8
million for the first quarter, compared to $38.7 million and
$35.0 million in the fourth and first quarters of 1995,
respectively. In 1996's first quarter, other income included a
$1.1 million gain on a branch divestiture. Excluding the gain on
divestiture and securities transactions, other income rose 3%
from last quarter and 13% over the first quarter of 1995.
The most significant increases from the prior quarter were
in broker/dealer ($506,000), credit card ($385,000) and loan-
related ($335,000) fee income. Higher volumes of transactions
and accounts were the principal causes of the increases in
broker/dealer and credit card fee income. Higher loan-related
fees primarily reflected increased insurance and loan sales
income. These improvements were partially offset by lower
deposit fee income.
The improvement from last year's first quarter reflected
increases in all categories of other income. Credit card ($2.2
million), broker/dealer ($647,000) and loan-related ($573,000)
fee income experienced the largest growth. The rise in credit
card and broker/dealer income reflected a continuing increase in
business volumes. Higher loan-related fees principally reflected
higher income from sales of mortgage loans.
Securities transactions resulted in pretax net gains of $1.2
million in the current quarter, compared to net gains of $1.9
million in the fourth quarter and net losses of $13.3 million in
1995's first quarter. The loss recorded in 1995's first quarter
was related to FCC's securities portfolio restructuring.
Operating Expense
Operating expense was $79.8 million for the first quarter of
1996, compared to $95.6 million last quarter and $80.9 million in
the first quarter of 1995. Both 1995 periods include merger-
related and process innovation charges. Excluding one-time
charges, operating expense rose 1% from the fourth quarter and 3%
from the first quarter of last year. The increase from the fourth
quarter was primarily due to higher incentive pay expense. When
compared to 1995's first quarter, the increase in operating
expense mainly reflected annual merit raises and expense for an
incentive pay plan tied to stock performance. These increases
were partially offset by a 4% reduction in the number of
employees as a result of process innovation and merger
efficiencies. Additionally, FDIC insurance premium expense fell
$3.1 million from last year's first quarter as strengthened FDIC
reserves resulted in lower premium rates.
The efficiency ratio, excluding one-time charges, was 61%
for the first quarter, 62% in the fourth quarter and 64% for the
first quarter of last year.
FINANCIAL CONDITION ANALYSIS
Loans
At March 31, 1996, loans were $5.1 billion, down less than
1% from year-end. This slight decline reflected commercial loan
payoffs received late in the quarter. Average loans increased 5%
from the fourth quarter and were up 23% over last year's first
quarter. Growth was in most categories with the most significant
increases in credit card, indirect automobile and residential
mortgage loans.
Securities
The securities portfolio totaled $2.3 billion at March 31,
1996, compared to $2.6 billion at December 31, 1995. For both
periods, all of FCC's securities were classified as available for
sale. An unrealized gain, net of tax, increased stockholders'
equity $18.3 million at March 31, 1996, compared to $33.6 million
at year-end.
Average securities were $2.5 billion for the current
quarter, $2.7 billion in the fourth quarter and $2.9 billion in
1995's first quarter. Proceeds from maturing securities were
used to fund loan growth.
Money Market Investments
As of March 31, 1996, money market investments were $47
million and averaged $72 million for the quarter. Average money
market investments were $53 million in the fourth quarter and
$158 million in last year's first quarter. Money market
investments were allowed to decline to fund loan growth.
Deposits
Deposits were $6.9 billion at March 31, 1996. Average
deposits for the first quarter were also $6.9 billion, 2% over
1995's fourth quarter and 4% above the first quarter of 1995.
The most significant growth from the fourth quarter was in NOW
account deposits, primarily due to seasonal increases in public
funds deposits. The increase from 1995's first quarter was
mainly due to higher money market investment deposits and public
funds time deposits of $100,000 and over.
Short-Term Borrowings
Short-term borrowings were $401 million at March 31, 1996.
During the first quarter, short-term borrowings averaged $603
million, compared to $691 million last quarter and $431 million
in the first quarter of 1995. As a percent of average earning
assets, short-term borrowings were 8% in the current quarter,
compared to 9% last quarter and 6% in 1995's first quarter.
Interest Rate Contracts
FCC uses interest rate contracts to manage interest rate
risk. Table 3 summarizes FCC's interest rate contracts at March
31, 1996. Table 4 summarizes the activity in interest rate
contracts during the first quarter of 1996, as well as their
impact on net interest income.
During the first quarter, FCC's amortizing interest rate
swaps, which amortized in relation to movements in interest
rates, fully amortized. Additionally, FCC purchased interest
rate floors with a total notional amount of $500 million during
the quarter. The floors will become effective in December 1996
and have a two-year maturity. These floors were purchased for a
premium of $1.1 million to hedge transaction deposits. At the
end of the first quarter, the estimated fair value of FCC's
interest rate contracts was $1.1 million.
Capital and Dividends
At March 31, 1996, stockholders' equity was 8.94% of total
assets, compared to 8.59% at year-end 1995. Table 5 presents
FCC's risk-based and other capital ratios as of March 31, 1996
and December 31, 1995. All ratios remain well above regulatory
minimums. Under present regulations, all six of FCC's banks are
classified as "well-capitalized."
At March 31, 1996, the Parent Company had $56 million of net
working capital. Additionally, the Parent Company could receive
dividends from the banks without prior regulatory approval of $61
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 $55.5 million at the end of the
first quarter, compared to $59.8 million at December 31, 1995.
The decrease was primarily related to paydowns on commercial and
real estate loans. As a percent of loans and foreclosed assets,
nonperforming assets were 1.09% at quarter-end, compared to 1.17%
at the end of 1995. At March 31, 1996, 55% of nonperforming
loans were contractually current or no more than 30 days past
due, compared to 58% last quarter. On May 3, 1996, a riverboat
casino securing certain of FCC's nonaccrual loans was sold in
bankruptcy, reducing nonaccrual loans by $16 million. Adjusted
for this improvement, the nonperforming assets ratio would have
been .77% at March 31, 1996.
Loans past due 90 days or more and not on nonaccrual status
were $26.0 million at March 31, 1996, compared to $20.7 million
at the end of last quarter. The rise was related to government-
guaranteed student loans. Watch list loans and foreclosed assets
were $186 million at March 31, 1996, compared to $190 million at
December 31, 1995. The watch list includes both performing and
nonperforming loans, as well as foreclosed assets, and consists
of classifications, identified as Type 1 through Type 4. Types
1, 2, 3 and 4 generally parallel the regulatory classifications
of loss, doubtful, substandard, and Other Assets Especially
Mentioned, respectively.
Table 6 presents information on nonperforming assets,
detailed by type, as of March 31, 1996 and December 31, 1995.
Allowance for Loan Losses
The allowance for loan losses was $74.5 million, or 150% of
nonperforming loans, at March 31, 1996, compared to $75.8 million
at the end of 1995. As a percent of loans, the allowance was
1.46% at the end of this quarter, compared to 1.48% at December
31, 1995. Management believes that the allowance is adequate to
cover losses inherent in the loan portfolio.
Net charge-offs as a percent of average loans were .40% for
the current quarter, compared to 1.51% last quarter and .22% in
the first quarter of 1995. The decrease from the fourth quarter
was primarily due to last quarter's $10 million charge-off
related to the New Orleans land-based casino, plus net recoveries
on commercial loans in the current quarter. When compared to
last year's first quarter, the rise primarily reflects an
increase in net charge-offs of loans to individuals and credit
card loans.
Table 7 presents the activity in the allowance for loan
losses for the first quarters of 1996 and 1995 and for the fourth
quarter of 1995.
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE) <F1>
AND INTEREST RATES
===============================================================================================================================
First Quarter 1996 Fourth Quarter 1995 First Quarter 1995
_______________________________________________________________________________________________________________________________
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
_______________________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases<F2> $5,170,534 $114,890 8.93% $4,935,576 $110,507 8.89% $4,187,960 $94,487 9.13%
Securities
Taxable 2,367,189 38,463 6.52 2,597,286 42,617 6.53 2,781,351 42,985 6.23
Tax-exempt 90,205 2,255 10.00 91,953 2,323 10.10 106,866 2,800 10.48
_______________________________________________________________________________________________________________________________
Total securities 2,457,394 40,718 6.65 2,689,239 44,940 6.65 2,888,217 45,785 6.39
_______________________________________________________________________________________________________________________________
Money market investments 71,945 925 5.17 52,742 734 5.52 157,759 2,241 5.76
_______________________________________________________________________________________________________________________________
Total earning assets 7,699,873 $156,533 8.17% 7,677,557 $156,181 8.09% 7,233,936 $142,513 7.96%
_______________________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets<F3> 818,757 771,922 717,306
Allowance for loan losses (75,932) (81,891) (72,374)
_______________________________________________________________________________________________________________________________
Total assets $8,442,698 $8,367,588 $7,878,868
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $1,135,291 $5,719 2.03% $998,832 $4,632 1.84% $1,081,976 $5,336 2.00%
Money market investment deposits 806,229 5,911 2.95 791,341 6,273 3.14 695,778 3,693 2.15
Savings and other consumer time
deposits 2,803,393 33,153 4.76 2,788,940 34,265 4.87 2,774,007 30,084 4.40
Time deposits $100,000 and over 767,508 10,330 5.41 753,087 10,480 5.52 669,084 8,677 5.26
_______________________________________________________________________________________________________________________________
Total interest-bearing deposits 5,512,421 55,113 4.02 5,332,200 55,650 4.14 5,220,845 47,790 3.71
_______________________________________________________________________________________________________________________________
Short-term borrowings 603,438 8,317 5.54 690,899 10,134 5.82 430,597 6,170 5.81
Long-term debt 87,028 2,719 12.57 88,950 2,801 12.49 90,015 2,767 12.47
_______________________________________________________________________________________________________________________________
Total interest-bearing liabilities 6,202,887 $66,149 4.29% 6,112,049 $68,585 4.46% 5,741,457 $56,727 4.00%
_______________________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES AND
STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,377,533 1,409,490 1,420,982
Other liabilities 122,187 119,700 90,805
Stockholders' equity 740,091 726,349 625,624
_______________________________________________________________________________________________________________________________
Total liabilities and
stockholders' equity $8,442,698 $8,367,588 $7,878,868
===============================================================================================================================
Net interest income (FTE) and margin $90,384 4.71% $87,596 4.54% $85,786 4.78%
===============================================================================================================================
Net earning assets and spread $1,496,986 3.88% $1,565,508 3.63% $1,492,479 3.96%
===============================================================================================================================
Cost of funds 3.45% 3.54% 3.18%
===============================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
<F2> Net of unearned income, prior to deduction of allowance for loan losses and including nonaccrual loans.
<F3> Includes mark-to-market adjustment on securities available for sale.
</FN>
TABLE 2. SUMMARY OF CHANGES IN NET INTEREST INCOME (FTE) <F1>
=============================================================================================================================
First Quarter 1996 First Quarter 1996
Compared to Fourth Quarter 1995 Compared to First Quarter 1995
_____________________________________________________________________________________________________________________________
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
_____________________________________________________________________________________________________________________________
INTEREST INCOME (FTE)
Loans and leases $4,383 $5,226 ($843) $20,403 $21,853 ($1,450)
Securities
Taxable (4,154) (3,742) (412) (4,522) (6,645) 2,123
Tax-exempt (68) (44) (24) (545) (421) (124)
_____________________________________________________________________________________________________________________________
Total securities (4,222) (3,786) (436) (5,067) (7,066) 1,999
_____________________________________________________________________________________________________________________________
Money market investments 191 247 (56) (1,316) (1,206) (110)
_____________________________________________________________________________________________________________________________
Total interest income (FTE) $352 $1,687 ($1,335) $14,020 $13,581 $439
==============================================================================================================================
INTEREST EXPENSE
Interest-bearing deposits
NOW account deposits $1,087 $666 $421 $383 $267 $116
Money market investment deposits (362) 116 (478) 2,218 652 1,566
Savings and other consumer time deposits (1,112) 177 (1,289) 3,069 322 2,747
Time deposits $100,000 and over (150) 198 (348) 1,653 1,315 338
_____________________________________________________________________________________________________________________________
Total interest-bearing deposits (537) 1,157 (1,694) 7,323 2,556 4,767
_____________________________________________________________________________________________________________________________
Short-term borrowings (1,817) (1,230) (587) 2,147 2,390 (243)
Long-term debt (82) (60) (22) (48) (93) 45
_____________________________________________________________________________________________________________________________
Total interest expense ($2,436) ($133) ($2,303) $9,422 $4,853 $4,569
_____________________________________________________________________________________________________________________________
Change in net interest income (FTE) $2,788 $1,820 $968 $4,598 $8,728 ($4,130)
=============================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
</FN>
TABLE 3. INTEREST RATE CONTRACTS
======================================================================================================================
Weighted
Average Floating
Notional Maturity Strike Rate Reset Liability
(dollars in thousands) Amount Date Rate Index Frequency Hedged
_______________________________________________________________________________________________________________________
Interest rate floors * $500,000 December 1998 4.65 % LIBOR Quarterly Transaction deposits
Interest rate caps 300,000 August-November 1996 7.81 LIBOR Quarterly Short-term borrowings
Interest rate caps 50,000 November 1996 7.73 LIBOR Semi-annually Short-term borrowings
________________________________________________________________________________________________________________________
Total at March 31, 1996 $850,000 5.95 %
========================================================================================================================
*These contracts will become effective in December 1996.
TABLE 4. CHANGES IN INTEREST RATE CONTRACTS (NOTIONAL AMOUNTS)
=================================================================================================
Option Amortizing Generic and
Based Interest Callable
(in thousands) Instruments Rate Swaps Swaps Total
_________________________________________________________________________________________________
Balance, December 31, 1995 $350,000 $193,605 $ - $ 543,605
Purchases 500,000 - - 500,000
Amortization - (193,605) - (193,605)
__________________________________________________________________________________________________
Balance, March 31, 1996 $850,000 $ - $ - $ 850,000
==================================================================================================
Net interest (expense) for the
three months ended March 31, 1996 $ (379) $ (293) $ (75) $ (747)
==================================================================================================
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
=====================================================================
March 31 December 31
(dollars in thousands) 1996 1995
_____________________________________________________________________
Tier 1 capital $699,213 $679,003
Tier 2 capital 146,359 149,769
_____________________________________________________________________
Total capital $845,572 $828,772
=====================================================================
Risk-weighted assets $5,257,520 $5,343,946
=====================================================================
Ratios at end of period
Tier 1 capital 13.30% 12.71%
Total capital 16.08% 15.51%
Equity ratio 8.94% 8.59%
Tangible equity ratio 8.72% 8.37%
Leverage ratio 8.33% 8.16%
=====================================================================
TABLE 6. NONPERFORMING ASSETS
==========================================================================================
March 31 December 31
(dollars in thousands) 1996 1995
__________________________________________________________________________________________
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 6,590 $ 6,897
Loans to individuals-other 363 335
Commercial, financial and agricultural 26,595 27,610
Real estate-commercial mortgages 12,251 15,455
Real estate-construction and other 3,764 3,064
__________________________________________________________________________________________
Total nonaccrual loans 49,563 53,361
__________________________________________________________________________________________
Total foreclosed assets 5,906 6,470
__________________________________________________________________________________________
Total nonperforming assets $55,469 $59,831
==========================================================================================
Loans past due 90 days or more and not on nonaccrual status $26,049 $20,668
==========================================================================================
End of period ratios
Nonperforming assets as a percent of loans and leases
plus foreclosed assets 1.09% 1.17%
Allowance for loan losses as a percent of
nonperforming loans 150.38% 142.14%
Loans and leases past due 90 days or more and not on
nonaccrual status as a percent of loans and leases .51% .40%
===========================================================================================
TABLE 7. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
==========================================================================================
Three Months Ended
__________________________________________________________________________________________
March 31 December 31 March 31
(dollars in thousands) 1996 1995 1995
__________________________________________________________________________________________
Balance at beginning of period $75,845 $74,687 $71,052
Allowance acquired in bank purchases - - 1,142
Provision charged to expense 3,825 19,808 3,162
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 6 223 77
Loans to individuals-other 3,278 3,495 1,157
Commercial, financial and agricultural 77 12,623 441
Real estate-commercial mortgages 1 121 20
Credit card loans 4,951 4,466 3,277
Other - 9 -
__________________________________________________________________________________________
Total charge-offs 8,313 20,937 4,972
__________________________________________________________________________________________
Recoveries on loans and leases previously charged to the allowance
Loans to individuals-residential mortgages 64 63 268
Loans to individuals-other 907 901 582
Commercial, financial and agricultural 1,077 283 643
Real estate-commercial mortgages 133 175 210
Real estate-construction and other 156 12 237
Credit card loans 834 817 749
Other 6 36 10
__________________________________________________________________________________________
Total recoveries 3,177 2,287 2,699
__________________________________________________________________________________________
Net charge-offs 5,136 18,650 2,273
__________________________________________________________________________________________
Balance at end of period $74,534 $75,845 $73,083
==========================================================================================
Gross annualized charge-offs as a percent of average loans
and leases .64% 1.70% .47%
Recoveries as a percent of gross charge-offs 38.22% 10.92% 54.28%
Net annualized charge-offs as a percent of average loans
and leases .40% 1.51% .22%
Allowance for loan losses as a percent of loans and
leases at end of period 1.46% 1.48% 1.69%
===========================================================================================
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, 1995. 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.
Not Applicable
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., Trustee, (trusteeship since transferred to
The Bank of New York) 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., Trustee, (trusteeship since transferred to
The Bank of New York) 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: May 14, 1996 /s/ Thomas L. Callicutt, Jr.
________________________________
Thomas L. Callicutt, Jr.
Executive Vice President, Controller and
Principal Accounting Officer