______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 1996
_______ ________________________________
Common Stock, $5.00 par value 37,961,686
FIRST COMMERCE CORPORATION
TABLE OF CONTENTS
Page No.
________
Part I: Financial Information
Item 1. Consolidated 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 Accounts 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II: Other Information 21
FIRST COMMERCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) June 30 December 31
===============================================================================================================================
1996 1995
_______________________________________________________________________________________________________________________________
ASSETS
Cash and due from banks $ 407,407 $ 497,268
Interest-bearing deposits in other banks 247 788
Securities available for sale, at fair value 2,238,302 2,599,767
Trading account securities 35,336 19,630
Federal funds sold and securities purchased under resale agreements 10,840 33,900
Loans and leases, net of unearned income of $2,554 and $7,070, respectively 5,421,105 5,122,726
Allowance for loan losses (75,332) (75,845)
_______________________________________________________________________________________________________________________________
Net loans and leases 5,345,773 5,046,881
===============================================================================================================================
Premises and equipment 166,905 165,813
Accrued interest receivable 97,733 95,787
Other assets 96,298 70,973
_______________________________________________________________________________________________________________________________
Total assets $8,398,841 $8,530,807
===============================================================================================================================
LIABILITIES
Noninterest-bearing deposits $1,323,034 $1,481,795
Interest-bearing deposits 5,518,127 5,472,606
_______________________________________________________________________________________________________________________________
Total deposits 6,841,161 6,954,401
===============================================================================================================================
Short-term borrowings 603,468 635,728
Accrued interest payable 40,829 41,952
Accounts payable and other accrued liabilities 88,570 77,331
Long-term debt 85,964 88,346
_______________________________________________________________________________________________________________________________
Total liabilities 7,659,992 7,797,758
===============================================================================================================================
STOCKHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
Series 1992, 7.25% cumulative convertible, $25 stated value
Issued -- 1,556,331 and 2,348,806 shares, respectively 38,908 58,720
Common stock, $5 par value
Authorized--100,000,000 shares
Issued -- 39,375,975 and 38,281,519 shares, respectively 196,880 191,408
Capital surplus 146,136 125,405
Retained earnings 372,272 337,782
Treasury stock -- 596,653 and 471,403 common shares, at cost, respectively (17,171) (12,727)
Unearned restricted stock compensation (4,298) (1,123)
Net unrealized gain on securities available for sale 6,122 33,584
_______________________________________________________________________________________________________________________________
Total stockholders' equity 738,849 733,049
===============================================================================================================================
Total liabilities and stockholders' equity $8,398,841 $8,530,807
===============================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Balance Sheets.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
(dollars in thousands except per share data) June 30 June 30
=============================================================================================================================
1996 1995 1996 1995
_____________________________________________________________________________________________________________________________
INTEREST INCOME
Interest and fees on loans and leases $116,803 $100,130 $230,945 $193,961
Interest and dividends on taxable securities 34,380 45,467 72,788 88,421
Interest on tax-exempt securities 1,585 1,833 3,186 3,794
Interest on money market investments 1,282 1,296 2,205 3,537
_____________________________________________________________________________________________________________________________
Total interest income 154,050 148,726 309,124 289,713
=============================================================================================================================
INTEREST EXPENSE
Interest on deposits 54,929 52,402 110,042 100,192
Interest on short-term borrowings 5,545 7,566 13,862 13,736
Interest on long-term debt 2,608 2,799 5,327 5,566
_____________________________________________________________________________________________________________________________
Total interest expense 63,082 62,767 129,231 119,494
=============================================================================================================================
NET INTEREST INCOME 90,968 85,959 179,893 170,219
PROVISION FOR LOAN LOSSES 7,465 2,971 11,290 6,133
_____________________________________________________________________________________________________________________________
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 83,503 82,988 168,603 164,086
=============================================================================================================================
OTHER INCOME
Deposit fees and service charges 14,790 15,123 29,209 29,329
Credit card fee income 11,165 8,463 21,103 16,220
Trust fee income 5,339 4,066 9,917 8,343
Broker/dealer revenue 2,580 2,129 5,145 4,047
ATM fee income 2,507 2,142 4,898 4,071
Other operating revenue 6,120 5,165 13,029 10,073
Securities transactions (84) 36 1,123 (13,286)
_____________________________________________________________________________________________________________________________
Total other income 42,417 37,124 84,424 58,797
=============================================================================================================================
OPERATING EXPENSE
Salary expense 37,376 34,248 73,393 69,476
Employee benefits 7,375 7,364 15,454 15,450
_____________________________________________________________________________________________________________________________
Total personnel expense 44,751 41,612 88,847 84,926
Equipment expense 6,008 6,004 12,796 11,932
Net occupancy expense 5,186 5,544 10,809 10,868
Communications and delivery expense 4,673 4,170 9,643 8,307
Professional fees 3,119 4,589 6,650 8,494
FDIC insurance expense 638 3,637 1,215 7,274
Other operating expense 13,769 14,068 27,970 28,725
_____________________________________________________________________________________________________________________________
Total operating expense 78,144 79,624 157,930 160,526
=============================================================================================================================
INCOME BEFORE INCOME TAX EXPENSE 47,776 40,488 95,097 62,357
INCOME TAX EXPENSE 16,109 13,317 31,897 20,694
=============================================================================================================================
NET INCOME 31,667 27,171 63,200 41,663
PREFERRED DIVIDEND REQUIREMENTS 705 1,086 1,418 2,173
=============================================================================================================================
INCOME APPLICABLE TO COMMON SHARES $30,962 $26,085 $61,782 $39,490
=============================================================================================================================
EARNINGS PER COMMON SHARE
Primary $0.79 $0.69 $1.58 $1.05
Fully diluted $0.76 $0.66 $1.51 $1.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Primary 39,114,461 37,835,673 39,006,498 37,835,364
Fully diluted 43,971,989 43,772,825 44,020,801 40,642,567
=============================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
FIRST COMMERCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(dollars in thousands) June 30
============================================================================================================================
1996 1995
____________________________________________________________________________________________________________________________
OPERATING ACTIVITIES
Net income $63,200 $41,663
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 11,290 6,133
Depreciation and amortization 11,133 10,820
Amortization of intangibles 1,461 1,288
Deferred income tax (benefit) expense (733) 31
Net (gain) loss from securities transactions (1,123) 13,286
Net (gain) on loan sales (623) (471)
Net (gain) on branch divestiture (1,137) -
(Increase) in trading account securities (15,706) (5,958)
(Increase) in accrued interest receivable (1,950) (13,056)
(Increase) decrease in other assets (11,009) 3,095
Increase (decrease) in accrued interest payable (1,027) 7,109
Increase in accounts payable and other accrued liabilities 6,469 8,115
(Increase) decrease in loans held for sale 4,097 (2,586)
Other, net (566) (1,499)
_____________________________________________________________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 63,776 67,970
=============================================================================================================================
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits in other banks 541 3,916
Proceeds from maturities/calls of securities held to maturity - 55,762
Purchases of securities held to maturity - (28,181)
Proceeds from sales of securities available for sale 5 638,265
Proceeds from maturities/calls of securities available for sale 517,377 75,323
Purchases of securities available for sale (196,712) (595,141)
Net decrease in federal funds sold and securities purchased under resale agreements 23,060 87,405
Proceeds from sales of loans 5,370 32,099
Net (increase) in loans (327,093) (391,428)
Net cash acquired in acquisitions - 4,081
Divestiture of branch (14,410) -
Purchases of premises and equipment (13,831) (19,552)
Proceeds from sales of foreclosed assets 7,169 7,854
Other, net 1,360 467
_____________________________________________________________________________________________________________________________
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 2,836 (129,130)
=============================================================================================================================
FINANCING ACTIVITIES
Net (decrease) in demand deposits, NOW accounts,
money market accounts and savings accounts (142,351) (180,584)
Net increase in time deposits 47,705 190,935
Net increase (decrease) in short-term borrowings (32,260) 43,447
Payments on long-term debt (67) (154)
Cash dividends (28,588) (20,592)
Common stock (repurchases) issuances (912) (12,897)
_____________________________________________________________________________________________________________________________
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (156,473) 20,155
=============================================================================================================================
(DECREASE) IN CASH AND CASH EQUIVALENTS (89,861) (41,005)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 497,268 472,142
=============================================================================================================================
CASH AND CASH EQUIVALENTS AT END OF PERIOD $407,407 $431,137
=============================================================================================================================
Cash paid during the period for:
Interest expense $130,354 $112,181
Income taxes $30,620 $15,140
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
Stockholders' Equity
On May 20, 1996, FCC announced its intent to
repurchase up to 1,814,000 shares of its common stock in
anticipation of conversion of its 7.25% convertible
preferred stock. FCC issued the convertible preferred
stock in January, 1992, and the earliest redemption date
possible is January 1, 1997. FCC currently expects to
call the preferred stock in the fourth quarter of 1996
for redemption in early 1997. The preferred stock is
redeemable for $25 per share, plus accrued dividends, and
is convertible into 1.1646 shares of common stock. FCC
expects most holders of the preferred stock to convert to
common stock instead of electing to receive the cash
redemption payment. As of June 30, 1996, 127,000 shares
had been repurchased.
NOTE 3
Nonperforming Assets
Total nonperforming assets declined to $33.4 million
at June 30, 1996 from $59.8 million at December 31, 1995.
The decrease primarily resulted from the sale of a
riverboat casino securing a nonaccrual loan and the
payoff of a large nonaccrual loan secured by real estate.
NOTE 4
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 June 30, 1996, and the related consolidated
statements of income and cash flows for the three-month and six-
month periods ended June 30, 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
July 10, 1996
FIRST COMMERCE CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(dollars in thousands except per share data) 1996 1995
===================================================================================================================
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
___________________________________________________________________________________________________________________
AVERAGE BALANCE SHEET DATA
Total assets $8,284,388 $8,442,698 $8,367,588 $8,264,744 $8,046,797
Earning assets 7,576,406 7,699,873 7,677,557 7,569,424 7,369,312
Loans and leases 5,277,895 5,170,534 4,935,576 4,651,921 4,385,841
Securities 2,197,283 2,457,394 2,689,239 2,854,503 2,897,752
Deposits 6,917,697 6,889,954 6,741,690 6,737,925 6,689,394
Long-term debt 85,980 87,028 88,950 90,095 89,904
Stockholders' equity 738,940 740,091 726,349 717,016 679,713
___________________________________________________________________________________________________________________
INCOME STATEMENT DATA
Total interest income $154,050 $155,074 $154,671 $154,110 $148,726
Net interest income 90,968 88,925 86,086 87,039 85,959
Net interest income (FTE) 92,289 90,384 87,596 88,442 87,493
Provision for loan losses 7,465 3,825 19,808 4,659 2,971
Other income (exclusive of securities transactions) 42,501 40,800 38,674 40,522 37,088
Securities transactions (84) 1,207 1,868 5 36
Operating expense 78,144 79,786 95,635 81,043 79,624
Operating income 31,722 30,748 5,703 27,367 27,148
Net income 31,667 31,533 6,917 27,371 27,171
___________________________________________________________________________________________________________________
KEY RATIOS
Return on average assets 1.54% 1.50% .33% 1.31% 1.35%
Return on average total equity 17.24% 17.14% 3.78% 15.14% 16.03%
Return on average common equity 17.79% 17.82% 3.48% 15.86% 16.88%
Operating return on average assets 1.54% 1.46% .27% 1.31% 1.35%
Operating return on average total equity 17.27% 16.71% 3.12% 15.14% 16.02%
Operating return on average common equity 17.82% 17.37% 2.76% 15.86% 16.87%
Net interest margin 4.89% 4.71% 4.54% 4.65% 4.76%
Efficiency ratio 57.97% 60.82% 75.74% 62.84% 63.91%
Overhead ratio 1.89% 2.04% 2.94% 2.12% 2.32%
Average loans to deposits ratio 76.30% 75.04% 73.21% 69.04% 65.56%
Allowance for loan losses to loans and leases 1.39% 1.46% 1.48% 1.55% 1.61%
Nonperforming assets to loans and leases
plus foreclosed assets .61% 1.09% 1.17% .87% .84%
Equity ratio 8.80% 8.94% 8.59% 8.66% 8.64%
Leverage ratio 8.65% 8.33% 8.16% 8.33% 8.31%
___________________________________________________________________________________________________________________
EARNINGS PER COMMON SHARE
Net income-primary $0.79 $0.79 $0.15 $0.69 $0.69
Net income-fully diluted $0.76 $0.75 $0.15 $0.66 $0.66
Operating income-primary $0.79 $0.77 $0.12 $0.69 $0.69
Operating income-fully diluted $0.76 $0.74 $0.12 $0.66 $0.66
Average primary shares (in thousands) 39,114 38,899 38,017 37,904 37,836
Average fully diluted shares (in thousands) 43,972 44,008 38,017 43,812 43,773
COMMON STOCK DIVIDENDS
Cash dividends $0.35 $0.35 $0.35 $0.30 $0.30
Dividend payout ratio 44.30% 44.30% 233.33% 43.48% 43.48%
BOOK VALUES (end of period)
Book value $18.11 $18.02 $17.86 $17.66 $17.25
Tangible book value $17.61 $17.51 $17.32 $17.11 $16.68
COMMON STOCK DATA
High stock price $36.00 $34.25 $33.75 $34.50 $29.75
Low stock price $32.25 $30.25 $30.63 $29.25 $24.00
Closing stock price $35.38 $33.00 $32.00 $31.50 $29.50
Trading volume 5,498,461 5,051,242 5,046,101 6,815,541 4,711,340
Number of stockholders (end of period) 9,257 9,286 9,951 9,100 9,053
NUMBER OF EMPLOYEES (end of period) 4,053 4,080 4,211 4,198 4,269
===================================================================================================================
SECOND QUARTER IN REVIEW
First Commerce Corporation's (FCC's) net income for the second
quarter of 1996 was $31.7 million, an increase of 17% over the
$27.2 million earned in last year's second quarter. Fully
diluted earnings per share were $.76 this quarter, compared to
$.66 for 1995's second quarter. Return on equity was 17.24% and
return on assets was 1.54% for the current quarter, compared to
16.03% and 1.35%, respectively, last year. The increase in
earnings for the quarter reflected revenue growth coupled with
lower expenses. Net interest income (FTE) was up 5% from last
year's second quarter, while the net interest margin at 4.89%
was 13 basis points higher. Both improvements were mainly due
to loan growth. Other income rose 14% over the second quarter of
last year, while operating expense, excluding merger-related
charges in 1995, rose less than 1%.
A more detailed review of FCC's financial condition and earnings
for the second 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 the second quarter was $92.3
million, 5% higher than last year's second quarter. The net
interest margin was 4.89% this quarter, compared to 4.76% in the
second quarter of 1995. The rise in net interest income and the
net interest margin reflected 20% average loan growth. Loans
increased to 70% of average earning assets in the current
quarter, compared to 60% in the same period of last year. A
decline in the yield on loans, due to the lower interest rate
environment, partially offset this improvement.
For the first six months of 1996, net interest income (FTE) was
$182.7 million, a 5% increase from 1995's same period. The net
interest margin was 4.80% for the first half of 1996, compared to
4.77% last year. These improvements reflect 22% growth in average
loans, causing average loans to increase as a percent of earning
assets from 59% to 68%.
Table 1 presents average balance sheets, net interest income
(FTE) and interest rates for the second quarters of 1996 and
1995, and the first six months of 1996 and 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 $7.5 million in the second
quarter of this year, compared to $3.0 million in 1995's second
quarter. For the six-month periods, the provision was $11.3
million in 1996, compared to $6.1 million last year. Higher net
charge-offs and loan growth caused 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 $42.5
million for the second quarter, an increase of 15% compared to
the second quarter of 1995. Improvements were experienced in
most categories and mainly reflected higher volumes of
transactions and accounts. The strongest growth was in credit
card income, which was up $2.7 million, or 32%, and trust income,
which increased $1.3 million, or 31%.
For the six-month period, other income, excluding securities
transactions, was $83.3 million, 16% higher than in 1995.
Improvements in credit card ($4.9 million, or 30%), trust ($1.6
million, or 19%) and broker/dealer ($1.1 million, or 27%) income
mainly reflected a continuing increase in business volumes. A
$3.0 million rise in other operating revenue was primarily due to
a $1.1 million gain on a branch divestiture in the first quarter
of 1996 and higher loan-related fees.
Securities transactions resulted in minimal gains/losses for the
second quarters of 1996 and 1995. For the six-month period,
securities transactions resulted in pretax net gains of $1.1
million in 1996, compared to pretax net losses of $13.3 million
in 1995. The loss recorded in 1995 was related to FCC's
securities portfolio restructuring.
Operating Expense
Operating expense was $78.1 million for the second quarter of
1996, compared to $79.6 million in the second quarter of 1995.
Lower FDIC insurance premium ($3.0 million) and professional fees
($1.5 million) expenses were the main causes of the decrease in
operating expense. The decline in FDIC insurance expense
reflected lower premium rates due to strengthened FDIC reserves.
Professional fees fell due to merger-related charges included in
1995, plus legal fees reimbursements received in 1996 related to
certain nonperforming loans. Higher personnel costs reflected
higher incentive expense, partially offset by a 5% reduction in
the number of employees.
For the six-month period, operating expense fell $2.6 million,
or 2%. The decline reflected lower FDIC insurance expense, plus
1995's merger-related and process innovation charges ($4.5
million). Partially offsetting these decreases was a 5% rise in
personnel costs, mainly related to higher expense for an
incentive pay plan tied to stock performance.
FINANCIAL CONDITION ANALYSIS
Loans
At June 30, 1996, loans were $5.4 billion, compared to $4.5
billion at June 30, 1995 and $5.1 billion at year-end 1995.
Average loans were $5.3 billion for the current quarter, up 20%
from the second quarter of 1995. Loan growth was in all
categories with the most significant increases in credit card,
indirect automobile and residential mortgage loans.
Securities
The securities portfolio totaled $2.2 billion at June 30, 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
$6.1 million at June 30, 1996, compared to $33.6 million at year-
end. The change in market values mainly reflected changes in
market interest rates.
Average securities were $2.2 billion for the current quarter,
down 24% from 1995's second quarter. Proceeds from maturing
securities were used to fund loan growth.
Money Market Investments
As of June 30, 1996, money market investments were $46 million
and averaged $101 million for the quarter. Average money market
investments were $86 million in last year's second quarter. For
both periods, money market investments were approximately 1% of
average earning assets.
Deposits
Deposits were $6.8 billion at June 30, 1996. Average deposits
for the second quarter were $6.9 billion, 3% over 1995's second
quarter. The most significant growth was in money market
investment deposits as customers invested in higher-yielding
deposit products.
Short-Term Borrowings
Short-term borrowings were $603 million at June 30, 1996. During
the second quarter, short-term borrowings averaged $419 million,
compared to $492 million in the second quarter of 1995. As a
percent of average earning assets, short-term borrowings were 6%
in the current quarter, compared to 7% in 1995's second quarter.
Interest Rate Contracts
FCC uses interest rate contracts to manage interest rate risk.
As shown in Table 3, the total notional amount of FCC's interest
rate contracts was $850 million at June 30, 1996, unchanged from
the prior quarter-end. For the second quarter and first six
months of 1996, interest rate contracts increased FCC's interest
expense $454,000 and $1.2 million, respectively. At the end of
the second quarter, the estimated fair value of FCC's interest
rate contracts was $399,000.
Capital and Dividends
At June 30, 1996, stockholders' equity was 8.80% of total assets,
compared to 8.59% at year-end 1995. Table 4 presents FCC's risk-
based and other capital ratios as of June 30, 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 June 30, 1996, the Parent Company had $54 million of net
working capital. Additionally, the Parent Company could receive
dividends from the banks without prior regulatory approval of $74
million, plus an amount equal to the banks' adjusted net profits
for the remainder of the year.
During the second quarter, FCC announced its intent to repurchase
up to 1.8 million shares of its common stock in anticipation of
conversions of its 7.25% convertible preferred stock. FCC
currently expects to call the preferred stock in 1996's fourth
quarter for redemption in early 1997. It is expected that most
holders of the preferred stock will convert to common stock.
Through the end of the second quarter, 127,000 shares had been
repurchased.
Credit Risk Management
Nonperforming Assets
Nonperforming assets were $33.4 million at the end of the second
quarter, compared to $59.8 million at year-end. This improvement
reflected the sale of a riverboat casino securing a nonaccrual
loan and the payoff of a large nonaccrual loan secured by real
estate. As a percent of loans and foreclosed assets,
nonperforming assets were .61% at quarter-end, compared to 1.17%
at the end of 1995. At June 30, 1996, 38% of nonperforming loans
were contractually current or no more than 30 days past due,
compared to 58% at the end of 1995. The decline was primarily
caused by a $10.3 million loan which moved from the contractually
current category to the 30-59 days past due category.
Loans past due 90 days or more and not on nonaccrual status were
$22.2 million, or .41% of loans, at June 30, 1996, compared to
$20.7 million, or .40%, at December 31, 1995. Watch list loans
and foreclosed assets were $153 million at June 30, 1996,
compared to $190 million at December 31, 1995. The decline was
primarily caused by the drop in nonaccrual loans discussed above.
Table 5 presents information on nonperforming assets, detailed
by type, as of June 30, 1996 and December 31, 1995.
Allowance for Loan Losses
The allowance for loan losses was $75.3 million, or 266% of
nonperforming loans, at June 30, 1996, compared to $75.8 million,
or 142% of nonperforming loans, at the end of 1995. As a percent
of loans, the allowance was 1.39% 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 .51% for the
current quarter, compared to .27% in the second quarter of 1995.
Similar to national trends, FCC's credit card charge-offs
increased this quarter, partially due to an increase in personal
bankruptcies; however, the net charge-off ratio remains well
below national averages. Credit card net charge-offs were 3.08%
in the current quarter, compared to 2.42% in last year's same
quarter. A rise in net charge-offs of loans to individuals also
contributed to the increase.
Table 6 presents the activity in the allowance for loan losses
for the second quarters and first six months of 1996 and 1995.
TABLE 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE)(F1) AND INTEREST RATES
======================================================================================================================
Second Quarter 1996 Second Quarter 1995
_______________________________________________________________________________________________________________________
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
_______________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases<F2> $5,277,895 $117,420 8.94% $4,385,841 $100,856 9.22%
Securities
Taxable 2,109,071 34,425 6.55 2,796,222 45,501 6.53
Tax-exempt 88,212 2,242 10.17 101,530 2,605 10.26
_______________________________________________________________________________________________________________________
Total securities 2,197,283 36,667 6.70 2,897,752 48,106 6.65
_______________________________________________________________________________________________________________________
Money market investments 101,228 1,284 5.10 85,719 1,298 6.07
_______________________________________________________________________________________________________________________
Total earning assets 7,576,406 $155,371 8.24% 7,369,312 $150,260 8.17%
_______________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets<F3> 783,071 750,606
Allowance for loan losses (75,089) (73,121)
_______________________________________________________________________________________________________________________
Total assets $8,284,388 $8,046,797
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $1,097,870 $ 5,016 1.84% $1,019,359 $ 4,795 1.89%
Money market investment deposits 872,893 6,467 2.98 662,413 4,016 2.43
Savings and other consumer time deposits 2,803,482 32,893 4.72 2,833,847 33,204 4.70
Time deposits $100,000 and over 796,395 10,553 5.33 745,251 10,387 5.59
_______________________________________________________________________________________________________________________
Total interest-bearing deposits 5,570,640 54,929 3.97 5,260,870 52,402 3.99
_______________________________________________________________________________________________________________________
Short-term borrowings 418,792 5,545 5.33 492,037 7,566 6.17
Long-term debt 85,980 2,608 12.20 89,904 2,799 12.49
_______________________________________________________________________________________________________________________
Total interest-bearing liabilities 6,075,412 $ 63,082 4.18% 5,842,811 $ 62,767 4.31%
_______________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,347,057 1,428,524
Other liabilities 122,979 95,749
Stockholders' equity 738,940 679,713
_______________________________________________________________________________________________________________________
Total liabilities and stockholders' equity $8,284,388 $8,046,797
=======================================================================================================================
Net interest income (FTE) and margin $ 92,289 4.89% $ 87,493 4.76%
=======================================================================================================================
Net earning assets and spread $1,500,994 4.06% $1,526,501 3.86%
=======================================================================================================================
Cost of funds 3.35% 3.41%
=======================================================================================================================
<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 1. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME (FTE)(F1) AND INTEREST RATES (continued)
======================================================================================================================
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
_______________________________________________________________________________________________________________________
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
_______________________________________________________________________________________________________________________
ASSETS
EARNING ASSETS
Loans and leases<F2> $5,224,210 $232,310 8.94% $4,287,447 $195,343 9.18%
Securities
Taxable 2,238,131 72,888 6.54 2,788,826 88,486 6.38
Tax-exempt 89,209 4,497 10.08 104,183 5,405 10.38
_______________________________________________________________________________________________________________________
Total securities 2,327,340 77,385 6.67 2,893,009 93,891 6.52
_______________________________________________________________________________________________________________________
Money market investments 86,586 2,209 5.13 121,540 3,539 5.87
_______________________________________________________________________________________________________________________
Total earning assets 7,638,136 $311,904 8.20% 7,301,996 $292,773 8.07%
_______________________________________________________________________________________________________________________
NONEARNING ASSETS
Other assets<F3> 800,912 734,076
Allowance for loan losses (75,510) (72,750)
_______________________________________________________________________________________________________________________
Total assets $8,363,538 $7,963,322
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
Interest-bearing deposits
NOW account deposits $1,116,580 $ 10,735 1.93% $1,050,495 $ 10,131 1.94%
Money market investment deposits 839,561 12,378 2.96 679,003 7,709 2.29
Savings and other consumer time deposits 2,803,438 66,046 4.74 2,804,091 63,288 4.55
Time deposits $100,000 and over 781,951 20,883 5.37 707,378 19,064 5.43
_______________________________________________________________________________________________________________________
Total interest-bearing deposits 5,541,530 110,042 3.99 5,240,967 100,192 3.85
_______________________________________________________________________________________________________________________
Short-term borrowings 511,110 13,862 5.45 461,512 13,736 6.00
Long-term debt 86,504 5,327 12.38 89,960 5,566 12.48
_______________________________________________________________________________________________________________________
Total interest-bearing liabilities 6,139,144 $129,231 4.23% 5,792,439 $119,494 4.16%
_______________________________________________________________________________________________________________________
NONINTEREST-BEARING LIABILITIES
AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits 1,362,294 1,424,773
Other liabilities 122,587 93,292
Stockholders' equity 739,513 652,818
_______________________________________________________________________________________________________________________
Total liabilities and stockholders' equity $8,363,538 $7,963,322
=======================================================================================================================
Net interest income (FTE) and margin $182,673 4.80% $173,279 4.77%
=======================================================================================================================
Net earning assets and spread $1,498,992 3.97% $1,509,557 3.91%
=======================================================================================================================
Cost of funds 3.40% 3.30%
=======================================================================================================================
<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>
================================================================================================================================
Six Months Ended June 30, 1996
Second Quarter 1996 Compared to Six Months Ended
Compared to Second Quarter 1995 June 30, 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 $16,564 $19,938 $(3,374) $36,967 $41,757 $(4,790)
Securities
Taxable (11,076) (11,215) 139 (15,598) (17,880) 2,282
Tax-exempt (363) (339) (24) (908) (758) (150)
________________________________________________________________________________________________________________________________
Total securities (11,439) (11,554) 115 (16,506) (18,638) 2,132
________________________________________________________________________________________________________________________________
Money market investments (14) 180 (194) (1,330) (1,015) (315)
________________________________________________________________________________________________________________________________
Total interest income (FTE) $ 5,111 $ 8,564 $(3,453) $19,131 $22,104 $(2,973)
================================================================================================================================
INTEREST EXPENSE
Interest-bearing deposits
NOW account deposits $ 221 $ 362 $ (141) $ 604 $ 635 $ (31)
Money market investment deposits 2,451 1,443 1,008 4,669 2,063 2,606
Savings and other consumer time deposits (311) (356) 45 2,758 (15) 2,773
Time deposits $100,000 and over 166 692 (526) 1,819 1,993 (174)
________________________________________________________________________________________________________________________________
Total interest-bearing deposits 2,527 2,141 386 9,850 4,676 5,174
________________________________________________________________________________________________________________________________
Short-term borrowings (2,021) (1,045) (976) 126 1,404 (1,278)
Long-term debt (191) (120) (71) (239) (213) (26)
________________________________________________________________________________________________________________________________
Total interest expense $ 315 $ 976 $ (661) $9,737 $ 5,867 $ 3,870
________________________________________________________________________________________________________________________________
Change in net interest income (FTE) $ 4,796 $ 7,588 $(2,792) $9,394 $16,237 $(6,843)
================================================================================================================================
<FN>
<F1> Based on a 35% tax rate.
</FN>
TABLE 3. INTEREST RATE CONTRACTS
==============================================================================================================================
Weighted Floating
Notional Maturity Average Rate Reset Liability
(dollars in thousands) Amount Date Strike 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 7.88 LIBOR Quarterly Short-term borrowings
Interest rate cap 50,000 November 1996 8.00 LIBOR Semi-annually Short-term borrowings
_____________________________________________________________________________________________________________________________
Total at June 30, 1996 $850,000 5.99%
=============================================================================================================================
* These contracts will become effective in December 1996.
TABLE 4. RISK-BASED CAPITAL AND CAPITAL RATIOS
=====================================================================
June 30 December 31
(dollars in thousands) 1996 1995
_____________________________________________________________________
Tier 1 capital $ 713,475 $ 679,003
Tier 2 capital 150,228 149,769
_____________________________________________________________________
Total capital $ 863,703 $ 828,772
=====================================================================
Risk-weighted assets $5,570,133 $5,343,946
=====================================================================
Ratios at end of period
Tier 1 capital 12.81% 12.71%
Total capital 15.51% 15.51%
Equity ratio 8.80% 8.59%
Tangible equity ratio 8.59% 8.37%
Leverage ratio 8.65% 8.16%
=====================================================================
TABLE 5. NONPERFORMING ASSETS
===========================================================================================
June 30 December 31
(dollars in thousands) 1996 1995
___________________________________________________________________________________________
Nonaccrual loans by type
Loans to individuals-residential mortgages $ 7,261 $ 6,897
Loans to individuals-other 280 335
Commercial, financial and agricultural 12,290 27,610
Real estate-commercial mortgages 6,788 15,455
Real estate-construction and other 1,703 3,064
___________________________________________________________________________________________
Total nonaccrual loans 28,322 53,361
___________________________________________________________________________________________
Total foreclosed assets 5,046 6,470
___________________________________________________________________________________________
Total nonperforming assets $33,368 $59,831
===========================================================================================
Loans past due 90 days or more and not on nonaccrual status $22,196 $20,668
===========================================================================================
End of period ratios
Nonperforming assets as a percent of loans and leases
plus foreclosed assets .61% 1.17%
Allowance for loan losses as a percent of nonperforming loans 265.98% 142.14%
Loans and leases past due 90 days or more and not on
nonaccrual status as a percent of loans and leases .41% .40%
===========================================================================================
TABLE 6. SUMMARY OF LOAN AND LEASE LOSS EXPERIENCE
====================================================================================================================
Three Months Ended Six Months Ended
June 30 June 30
====================================================================================================================
(dollars in thousands) 1996 1995 1996 1995
====================================================================================================================
Balance at beginning of period $74,534 $73,083 $75,845 $71,052
Allowance acquired in bank purchase - - - 1,142
Provision charged to expense 7,465 2,971 11,290 6,133
Loans and leases charged to the allowance
Loans to individuals-residential mortgages 46 51 52 128
Loans to individuals-other 3,269 1,618 6,547 2,775
Commercial, financial and agricultural 204 197 281 638
Real estate-commercial mortgages - 175 1 195
Credit card loans 5,904 3,867 10,855 7,144
____________________________________________________________________________________________________________________
Total charge-offs 9,423 5,908 17,736 10,880
____________________________________________________________________________________________________________________
Recoveries on loans and leases previously charged to the allowance
Loans to individuals-residential mortgages 84 182 148 450
Loans to individuals-other 1,168 673 2,075 1,255
Commercial, financial and agricultural 392 835 1,474 1,478
Real estate-commercial mortgages 144 321 277 531
Real estate-construction and other 6 11 162 248
Credit card loans 961 884 1,795 1,633
Other 1 5 2 15
____________________________________________________________________________________________________________________
Total recoveries 2,756 2,911 5,933 5,610
____________________________________________________________________________________________________________________
Net charge-offs 6,667 2,997 11,803 5,270
____________________________________________________________________________________________________________________
Balance at end of period $75,332 $73,057 $75,332 $73,057
====================================================================================================================
Gross annualized charge-offs as a percent of average loans and leases .71% .54% .68% .51%
Recoveries as a percent of gross charge-offs 29.25% 49.27% 33.45% 51.56%
Net annualized charge-offs as a percent of average loans and leases .51% .27% .45% .25%
Allowance for loan losses as a percent of loans and leases at end of
period 1.39% 1.61% 1.39% 1.61%
====================================================================================================================
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.
(a) The annual meeting of the shareholders of FCC (the "Meeting")
was held on April 15, 1996.
(b) and (c)
_____________________________________________________________________________
DIRECTORS BROKER
ELECTED FOR AGAINST* ABSTAIN NONVOTE
_____________________________________________________________________________
Ian Arnof 29,778,850 111,173 0 0
_____________________________________________________________________________
James J. Bailey III 29,787,266 102,757 0 0
_____________________________________________________________________________
John W. Barton 29,792,769 97,254 0 0
_____________________________________________________________________________
Sydney J. Besthoff III 29,768,442 121,581 0 0
_____________________________________________________________________________
Robert H. Bolton 29,776,535 113,488 0 0
_____________________________________________________________________________
Robert C. Cudd III 29,778,360 111,663 0 0
_____________________________________________________________________________
Frances B. Davis 29,797,952 92,071 0 0
_____________________________________________________________________________
Laurance Eustis, Jr. 29,773,691 116,332 0 0
_____________________________________________________________________________
William P. Fuller 29,799,999 90,024 0 0
_____________________________________________________________________________
Arthur Hollins III 29,800,989 89,034 0 0
_____________________________________________________________________________
F. Ben James, Jr. 29,801,189 88,834 0 0
_____________________________________________________________________________
Erik F. Johnsen 29,797,488 92,535 0 0
_____________________________________________________________________________
J. Merrick Jones, Jr. 29,800,889 89,134 0 0
_____________________________________________________________________________
Edwin Lupberger 29,788,673 101,350 0 0
_____________________________________________________________________________
Mary Chavanne Martin 29,791,788 98,235 0 0
_____________________________________________________________________________
Hugh G. McDonald, Jr. 29,791,650 98,373 0 0
_____________________________________________________________________________
Saul A. Mintz 29,790,217 99,806 0 0
_____________________________________________________________________________
Hermann Moyse, Jr. 29,769,225 120,798 0 0
_____________________________________________________________________________
O. Miles Pollard, Jr. 29,800,689 89,334 0 0
_____________________________________________________________________________
G. Frank Purvis, Jr. 29,778,104 111,919 0 0
_____________________________________________________________________________
T. H. Scott 29,768,644 121,379 0 0
_____________________________________________________________________________
Edward M. Simmons 29,800,889 89,134 0 0
_____________________________________________________________________________
H. Leighton Steward 29,801,389 88,634 0 0
_____________________________________________________________________________
J.B. Storey 29,775,535 114,488 0 0
_____________________________________________________________________________
Robert A. Weigle 29,801,289 88,734 0 0
_____________________________________________________________________________
* With respect to the election of directors, amounts shown reflect
shares as to which authority to vote was withheld.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
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 Debentures 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 Debentures 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.
10.1 -Form of Employment Agreement between FCC and Messrs. Arnof,
Brooks, Flick, Gaines, Ryan, Thompson, Wilson and Ms. Lee
included as Exhibit 10.1 to FCC's Annual Report on Form 10-K for
the year ended December 31,1995, and incorporated herein by
reference.
10.2 -Amended and Restated FCC Supplemental Tax-Deferred Savings
Plan included as Exhibit 10.1 to FCC's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference.
10.3 -FCC Retirement Benefit Restoration Plan included as Exhibit
10.2 to FCC's Annual Report on Form 10-K for the year ended
December 31, 1994, and incorporated herein by reference.
10.4 -FCC Amended and Restated 1992 Stock Incentive Plan, Form of
Nonqualified Stock Option Agreement and Form of Restricted Stock
Agreement included as Exhibit 10.4 to FCC's Annual Report on
Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference.
11 -Statement Re: 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: August 9, 1996 /s/ Thomas L. Callicutt, Jr.
______________ ____________________________
Thomas L. Callicutt, Jr.
Executive Vice President,
Controller and Principal
Accounting Officer