##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 
 FORM 10-KSB
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 FIRST COMMERCE BANCORP, INC.
  Tennessee
    
    20-5565433(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)500 North Ellington ParkwayLewisburg, Tennessee
    
    37091(Address of principal executive offices)
    
    (Zip Code)
   Title of each class:
    
    Name of each exchange on which registered:None
    
    None
  
 þ
 þ o
 o
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
   o þ




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##### 



FIRST COMMERCE BANCORP, INC.
 ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 2006
 TABLE OF CONTENTS
 Part I
    
    Cautionary Warning Regarding Forward-Looking Statements
    
    
    1Item 1.
    
    Description of Business
    
    
    1Item 2.
    
    Description of Property
    
    
    23Item 3.
    
    Legal Proceedings
    
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    24Part II
    
    
    
    
    25Item 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    
    25Item 6.
    
    Management's Discussion and Analysis or Plan of Operation
    
    
    26Item 7.
    
    Consolidated Financial Statements
    
    
    38Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    38Item 8A.
    
    Controls and Procedures
    
    
    38Item 8B.
    
    Other Information
    
    
    38Part III
    
    
    
    
    39Item 9.
    
    Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
    
    
    39Item 10.
    
    Executive Compensation
    
    
    39Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    39Item 12.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 13.
    
    Exhibits
    
    
    41Item 14.
    
    Principal Accountant Fees and Services
    
    
    41Signatures
    
    
    
    
    42Appendix F - 2006 Annual Financial Disclosures and Index to Annual Financial DisclosuresEx-10.2 First Commerce Bank Supplemental Executive Retirment PlanEx-10.3 First Commerce Bank Supplemental Executive Retirment Plan Participation Agreement for Robert E. Wiles, Jr.Ex-10.4 First Commerce Bank Supplemental Executive Retirment Plan Participation Agreement for D. Glenn HardisonEx-10.4 First Commerce Bank Supplemental Executive Retirment Plan Participation Agreement for William B. MarshEx-21.1 Subsidiaries of the CompanyEx-23.1 Consent of Maggart & Associates, P.C.Ex-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32.1 Section 906 Certification of the CEOEx-32.2 Section 906 Certification of the CFO




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PART I
 Cautionary Warning Regarding Forward-Looking Statements
  
 ITEM 1. DESCRIPTION OF BUSINESS.
 Description of First Commerce Bancorps Business
 Business Development in the Last Three Years.
  1




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Business of the Company and the Bank.
  2




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
    
    Accepting time and demand deposits,
    
    Providing personal and business checking accounts at competitive rates, and
    
    Making secured and unsecured commercial and consumer loans.
    
    
    personalized service
    
    
    
    automatic bill payment service
    
    telephone banking
    
    
    
    safe deposit boxes
    
    night deposit boxes
    
    
    
    drive-up banking
    
    on-line banking
    
    
    
    U.S. Savings Bonds
    
    direct deposit
    
    
    
    travelers checks
  3




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Financial Summary of the Company and the Bank
  AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004,
(Dollars in Thousands Except Per Share Data)
 2006
    
    2005
    
    2004Total Assets
    
    $
    174,398
    
    
    $
    146,718
    
    
    $
    115,873Total Earning Assets
    
    
    165,089
    
    
    
    138,118
    
    
    
    111,549Deposits
    
    
    153,682
    
    
    
    132,513
    
    
    
    102,811Stockholders Equity
    
    
    14,401
    
    
    
    13,089
    
    
    
    12,628Gross Revenues
    
    
    10,929
    
    
    
    7,843
    
    
    
    5,253Interest Income
    
    
    10,081
    
    
    
    7,322
    
    
    
    4,949Non-Interest Income
    
    
    848
    
    
    
    521
    
    
    
    304Earnings Before Taxes
    
    
    1,687
    
    
    
    1,464
    
    
    
    950Net Earnings
    
    
    1,078
    
    
    
    965
    
    
    
    837Basic Earnings Per Share
    
    $
    0.85
    
    
    $
    0.76
    
    
    $
    0.67Diluted Earnings Per Share
    
    $
    0.80
    
    
    $
    0.72
    
    
    $
    0.65Cash Dividends Paid Per Share
    
    $
    -0-
    
    
    $
    0.17
    
    
    $
    -0-
 4




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Financial Comparison of 2005 and 2006
  FOR THE YEAR ENDED DECEMBER 31
(Dollars in Thousands Except Per Share Data)
 Percentage Increase2006
    
    2005
    
    from 2005 to 2006Total Assets
    
    $
    174,398
    
    
    $
    146,718
    
    
    
    18.87
    %Total Earning Assets
    
    
    165,089
    
    
    
    138,118
    
    
    
    19.53
    %Net Loans
    
    
    113,083
    
    
    
    98,230
    
    
    
    15.12
    %Deposits
    
    
    153,682
    
    
    
    132,513
    
    
    
    15.98
    %Stockholders Equity
    
    
    14,401
    
    
    
    13,089
    
    
    
    10.02
    %Gross Revenues
    
    
    10,929
    
    
    
    7,843
    
    
    
    39.35
    %Interest Income
    
    
    10,081
    
    
    
    7,322
    
    
    
    37.68
    %Non-Interest Income
    
    
    848
    
    
    
    521
    
    
    
    62.76
    %Earnings Before Taxes
    
    
    1,687
    
    
    
    1,464
    
    
    
    15.23
    %Net Earnings
    
    
    1,078
    
    
    
    965
    
    
    
    11.71
    %Basic Earnings per Share
    
    $
    0.85
    
    
    $
    0.76
    
    
    
    11.84
    %Diluted Earnings per
Share
    
    $
    0.80
    
    
    $
    0.72
    
    
    
    11.11
    %
  5




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Capital Requirements Applicable to the Company and the Bank
  Capital Level MeetingRegulatory Definition ofWell Capitalized
    
    Company
    
    BankTier I Ratio
    
    
    4.0
    %
    
    
    12.5
    %
    
    
    12.5
    %Total Risk-Based Ratio
    
    
    8.0
    %
    
    
    13.6
    %
    
    
    13.6
    %Leverage Ratio
    
    
    4.0
    %
    
    
    8.6
    %
    
    
    8.6
    %
  Efficiency
   Subsidiary
  Services To and Transactions with Affiliates
  6




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Expansion Strategy
  Supervision and Regulation
  General
   Bank Holding Company Regulation
  7




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De novo
 8




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Bank Regulation
    Payment
of Dividends
   9




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Tennessee Banking Regulation
     10




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Regulation by the FDIC
    11




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Capital Adequacy
       12




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Prompt Corrective Action
     General Regulatory Considerations
 FDICIA.
 13




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FIRREA
  The Community Reinvestment Act
  Safety and Soundness Standards
  14




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Capital Adequacy Developments
     Financial Services Modernization Act
   15




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USA PATRIOT Act
      Competition
  16




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Personnel
  Economic Conditions and Governmental Policy; Laws and Regulations
   17




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Environmental Matters
  Dependence Upon a Single Customer
  Line of Business
  Off-Balance Sheet Financing
  Factors That May Affect Future Results of Operation
  18




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19




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Selected Financial Data and Statistical Information
  Certain Risk Factors Related to the Company
  Future loan losses may exceed our allowance for loan losses.
  Rapidly changing interest rate environments could reduce our net interest margin, net interest
income, fee income and net income.
  Slower than anticipated growth in new product and service offerings could result in reduced net
income.
  20




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The shares of our common stock are not listed or traded on any recognized or established securities
market, thus potentially reducing the marketability of the stock.
  The financial services industry is very competitive in general and it is extremely competitive in
the Marshall County Market.
  We have a concentration of our assets in commercial real estate in the Marshall County Market.
  Reputational risk is inherent in the financial services business, especially in community banking.
  An inability to hire or retain certain key professionals, management and staff could adversely
affect our revenues and net income.
  21




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We are subject to extensive regulatory requirements and restrictions.
  Our charter and bylaws contain some anti-takeover provisions.
  Our charter and bylaws govern voting rights and the ability to call special meetings of the
shareholders.
     Our rapid growth can require us to raise additional capital.
  There are legal restrictions on our and the Banks ability to pay dividends.
 22




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Our shares are not insured.
  Where to Find Additional Information
  
 ITEM 2. DESCRIPTION OF PROPERTY.
 Offices and Properties
  Use of Property
    
    Property Location and OwnershipMain Office of the Bank
    
    500 North Ellington ParkwayLewisburg, Tennessee 37091Cornersville Road Office
    
    701 Cornersville RoadLewisburg, Tennessee 37091Chapel Hill Office
    
    4650 Nashville HighwayChapel Hill, Tennessee 37034
   23




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ITEM 3. LEGAL PROCEEDINGS.
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  24




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PART II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
   High Price
    
    Low PriceCalendar Quarter
    
    Per Share
    
    Per Share2006First Quarter
    
    $
    26.00
    
    
    $
    26.00Second Quarter
    
    
    27.00
    
    
    
    26.00Third Quarter
    
    
    27.00
    
    
    
    27.00Fourth Quarter
    
    
    27.00
    
    
    
    27.002005First Quarter
    
    $
    22.00
    
    
    $
    22.00Second Quarter
    
    
    30.00
    
    
    
    22.00Third Quarter
    
    
    25.00
    
    
    
    25.00Fourth Quarter
    
    
    26.00
    
    
    
    25.00
    25




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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
 Forward-looking Statements
  26




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General
    Formation of Holding Company
  27




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Critical Accounting Policies
      Results of Operations
  28




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Net Interest Income
  Provision for Loan Losses
   Non-Interest Income
  Non-Interest Expense
  29




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Income Taxes
  Financial Condition
 Balance Sheet Summary
  Loans.
  December 31, 2006
    
    
    December 31, 2005Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage(In Thousands)
    
    
    (In Thousands)Commercial, financial and
agricultural
    
    $
    53,278
    
    
    
    46.6
    %
    
    $
    45,307
    
    
    
    45.6
    %Consumer
    
    
    7,450
    
    
    
    6.5
    
    
    
    7,260
    
    
    
    7.3Real estate  mortgage
    
    
    37,269
    
    
    
    32.6
    
    
    
    34,440
    
    
    
    34.6Real estate  construction
    
    
    16,426
    
    
    
    14.3
    
    
    
    12,420
    
    
    
    12.5Total
    
    $
    114,423
    
    
    
    100.0
    %
    
    $
    99,427
    
    
    
    100.0
    %
    30




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31




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2006
    
    
    2005Past Due
    
    
    
    
    
    
    Past Due90 Days
    
    
    Non-Accrual
    
    
    90 Days
    
    
    Non-Accrual(In Thousands)
    
    
    (In Thousands)Real estate loans
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    25Consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    3$
    
    
    
    
    2
    
    
    $
    
    
    
    
    28Renegotiated loans
    
    $
    
    
    
    
    
    
    
    $
    
     Securities
  32




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
    
    Debt securities and the enterprise has the positive intent and ability to hold to
maturity are classified as held-to-maturity securities and reported at amortized costs.
    
    Debt and equity securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings.
    
    Debt and equity securities not classified as either held-to-maturity securities or
trading securities are classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders equity.
  Held-To-Maturity
    
    
    Held-To-Maturity2006
    
    
    2005Estimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)
    
    
    (In Thousands)U.S. Treasury and other U.S.
government agencies and
corporations
    
    $
    2,200
    
    
    
    2,154
    
    
    $
    2,200
    
    
    
    2,138Mortgage-backed securities
    
    
    320
    
    
    
    310
    
    
    
    396
    
    
    
    386$
    2,520
    
    
    
    2,464
    
    
    $
    2,596
    
    
    
    2,524
 Available-For-Sale
    
    
    Available-For-Sale2006
    
    
    2005Estimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)
    
    
    (In Thousands)U.S. Treasury and other U.S.
government agencies and
corporations
    
    $
    30,483
    
    
    
    30,213
    
    
    $
    21,638
    
    
    
    21,225Mortgage-backed securities
    
    
    9,993
    
    
    
    9,700
    
    
    
    12,580
    
    
    
    12,180Collateralized mortgage
obligation
    
    
    282
    
    
    
    272
    
    
    
    399
    
    
    
    385Obligations of states and
political subdivisions
    
    
    1,151
    
    
    
    1,150
    
    
    
    
    
    
    
    $
    41,909
    
    
    
    41,335
    
    
    $
    34,617
    
    
    
    33,790
  Deposits
  33




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Liquidity and Asset Management
     Interest Rate Sensitivity Gaps
 One YearDecember 31, 2006
    
    1-90
    
    
    91-180
    
    
    181-365
    
    
    and(In Thousands)
    
    Days
    
    
    Days
    
    
    Days
    
    
    Longer
    
    
    TotalInterest-earning assets
    
    $
    48,662
    
    
    
    7,772
    
    
    
    11,872
    
    
    
    98,123
    
    
    
    166,429Interest-bearing liabilities
    
    
    56,092
    
    
    
    23,830
    
    
    
    21,933
    
    
    
    27,655
    
    
    
    129,510Interest-rate sensitivity gap
    
    $
    (7,430
    )
    
    
    (16,058
    )
    
    
    (10,061
    )
    
    
    70,468
    )
    
    
    36,919Cumulative gap
    
    $
    (7,430
    )
    
    
    (23,488
    )
    
    
    (33,549
    )
    
    
    36,919
 Capital Position and Dividends
  34




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35




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FDICIA
      36




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Monetary Policy
 Contractual Obligations
  Less
    
    
    
    
    
    
    
    
    
    
    MoreThan
    
    
    1 - 3
    
    
    3 - 5
    
    
    Than(In Thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years
    
    
    TotalPurchases
    
    $
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Long-term debt
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Capital leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    12
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,012
  Off Balance Sheet Arrangements
  Impact of Inflation
  Quantitative and Qualitative Disclosures About Market Risk
  37




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##### Table of Contents



ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS.
  
    
    Independent Auditors Report;
    
    Consolidated Balance Sheets  December 31, 2006 and 2005;
    
    Consolidated Statements of Operations  Three years ended December 31, 2006;
    
    Consolidated Statements of Comprehensive Earnings  Three years ended December 31, 2006;
    
    Consolidated Statements of Changes in Stockholders Equity  Three years ended December 31, 2006;
    
    Consolidated Statements of Cash Flows  Three years ended December 31, 2006; and
    
    Notes to Consolidated Financial Statements.
 
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 8A CONTROLS AND PROCEDURES.
  
 ITEM 8B. OTHER INFORMATION.
  38




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PART III
 
 ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT.
    
 ITEM 10. EXECUTIVE COMPENSATION.
  
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
   39




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Number ofSecuritiesRemaining AvailableNumber of
    
    
    
    for Future IssuanceSecurities to be
    
    
    
    Under EquityIssued upon
    
    Weighted-Average
    
    Compensation PlansExercise of
    
    Exercise Price of
    
    (ExcludingOutstanding
    
    Outstanding
    
    SecuritiesOptions, Warrants
    
    Options, Warrants
    
    Reflected in Columnand Rights*
    
    and Rights*
    
    (a))(a)
    
    (b)
    
    (c)Equity Compensation
Plan Approved by
Security Holders
    
    153,470
    
    $12.73
    
    38,420Equity Compensation
Plans Not Approved
by Security Holders
    
    None
    
    Not Applicable
    
    NoneTotal
    
    153,470
    
    $12.73
    
    38,420
 
 *
    
    The Company currently has no outstanding warrants or rights. Please refer to Notes 13 and 16 to
the Consolidated Financial Statements included in Item 7. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
   40




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##### Table of Contents



ITEM 13. EXHIBITS.
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Charter of First Commerce Bancorp, Inc.(1)3.2
    
    Bylaws of First Commerce Bancorp, Inc.(1)4.1
    
    Charter of First Commerce Bancorp, Inc.(1)4.2
    
    Bylaws of First Commerce Bancorp, Inc.(1)4.3
    
    Specimen Stock Certificate10.1
    
    First Commerce Bank 2002 Stock Option Plan(1)*10.2
    
    First Commerce Bank Supplemental Executive Retirement Plan*10.3
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for Robert E. Wiles, Jr.*10.4
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for D. Glenn Hardison*10.5
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for William B. Marsh*21.1
    
    Subsidiaries of the Company23.1
    
    Consent of Maggart & Associates, P.C.31.1
    
    Rule 13a-14(a) Certification by Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification by Chief Financial Officer32.1
    
    Section 1350 Certification by Chief Executive Officer32.2
    
    Section 1350 Certification by Chief Financial Officer
 
 *
    
    Management compensatory plan or arrangement.(1)
    
    Incorporated herein by reference to the Companys
Current Report on Form 8-K12G3 as filed
with the SEC on October 10, 2006. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  41




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SIGNATURES
  FIRST COMMERCE BANCORP, INC.By:
    /s/ William B. MarshWilliam B. Marsh, Chairman,President and Chief Executive Officer   Name
    
    Title
    
    DateBy:
    
    /s/ Walter W. Bussart
    
    Director
    
    March 30, 2007Walter W. BussartBy:
    
    /s/ John O. Chunn
    
    Director
    
    March 30, 2007John O. ChunnBy:
    
    /s/ D. Glenn Hardison
    
    Chief Financial Officer
and Director
(Principal Financial and
    
    March 30, 2007D. Glenn Hardison
    
    Accounting Officer)By:
    
    /s/ Thomas H. Hawkins, III
    
    Director
    
    March 30, 2007Thomas H. Hawkins, IIIBy:
    
    /s/ Allen L. Henderson, Jr.
    
    Director
    
    March 30, 2007Allen L. Henderson, Jr.By:
    
    /s/ David H. Jent
    
    Director
    
    March 30, 2007David H. JentBy:
    
    /s/ W. B. Marsh
    
    Chairman, President,
CEO and Director
    
    March 30, 2007W. B. Marsh
    
    (Principal Executive Officer)
 42




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Name
    
    Title
    
    DateBy:
    
    /s/ James P. Moon
    
    Director
    
    March 30, 2007James P. MoonBy:
    
    /s/ James L. Russell, Jr.
    
    Director
    
    March 30, 2007James L. Russell, Jr.By:
    
    /s/ Robert E. Wiles, Jr.
    
    Chief Operating OfficerRobert E. Wiles, Jr.
    
    and Director
    
    March 30, 2007
 43




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Appendix F
 2006 Annual Financial Disclosures




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FIRST COMMERCE BANCORP, INC.
Lewisburg, Tennessee
  December 31, 2006 and 2005
 (With Independent Auditors Report Thereon)




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The Board of Directors
First Commerce Bancorp, Inc.
    /s/ MAGGART & ASSOCIATES, P.C.
 
 F - 1




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FIRST COMMERCE BANCORP, INC.
 Consolidated Balance Sheets  December 31, 2006 and 2005
 (In Thousands)
    
    2006
    
    
    2005ASSETSLoans, less allowance for loan losses of $1,340,000 and $1,197,000,
respectively
    
    $
    113,083
    
    
    $
    98,230Securities held-to-maturity, at amortized cost (market value $2,464,000
and $2,524,000, respectively)
    
    
    2,520
    
    
    
    2,596Securities available-for-sale, at market (amortized cost of $41,909,000
and $34,617,000, respectively)
    
    
    41,335
    
    
    
    33,790Restricted equity securities
    
    
    602
    
    
    
    335Interest-bearing deposits in financial institutions
    
    
    158
    
    
    
    101Federal funds sold
    
    
    7,391
    
    
    
    3,066Total earning assets
    
    
    165,089
    
    
    
    138,118Cash and due from banks
    
    
    2,235
    
    
    
    1,781Premises and equipment, net
    
    
    3,621
    
    
    
    3,776Accrued interest receivable
    
    
    1,321
    
    
    
    941Deferred income taxes
    
    
    420
    
    
    
    446Other assets
    
    
    1,712
    
    
    
    1,656Total assets
    
    $
    174,398
    
    
    $
    146,718LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    153,682
    
    
    $
    132,513Accrued interest payable
    
    
    997
    
    
    
    555Accounts payable and other liabilities
    
    
    318
    
    
    
    561Advances from Federal Home Loan Bank
    
    
    5,000
    
    
    
    Total liabilities
    
    
    159,997
    
    
    
    133,629Stockholders equity:Preferred stock, no par, authorized 20,000,000 shares
    
    
    
    
    
    
    Common stock, par value $1 per share, authorized 20,000,000 shares,
1,302,245 and 1,271,948 shares issued and outstanding, respectively
    
    
    1,302
    
    
    
    1,272Additional paid-in capital
    
    
    12,184
    
    
    
    11,448Net unrealized losses on available-for-sale securities net of taxes of,
$220,000 and $316,000, respectively
    
    
    (354
    )
    
    
    (511
    )Retained earnings
    
    
    1,269
    
    
    
    880Total stockholders equity
    
    
    14,401
    
    
    
    13,089COMMITMENTS AND CONTINGENCIESTotal liabilities and stockholders equity
    
    $
    174,398
    
    
    $
    146,718
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Consolidated Statements of Earnings  For the Years Ended December 31, 2006, 2005 and 2004
 (In Thousands, Except Per Share Amounts)
    
    2006
    
    
    2005
    
    
    2004Interest income:Interest and fees on loans
    
    $
    7,821
    
    
    $
    5,745
    
    
    $
    4,241Interest and dividends on securities:Taxable securities
    
    
    1,980
    
    
    
    1,421
    
    
    
    645Exempt from Federal income taxes
    
    
    3
    
    
    
    
    
    
    
    Interest on restricted equity securities
    
    
    20
    
    
    
    10
    
    
    
    4Interest on Federal funds sold
    
    
    256
    
    
    
    143
    
    
    
    56Interest on interest-bearing deposits in financial
institutions
    
    
    1
    
    
    
    3
    
    
    
    3Total interest income
    
    
    10,081
    
    
    
    7,322
    
    
    
    4,949Interest expense:Interest on negotiable order of withdrawal accounts
    
    
    85
    
    
    
    78
    
    
    
    55Interest on savings accounts
    
    
    27
    
    
    
    18
    
    
    
    11Interest on money market accounts
    
    
    610
    
    
    
    497
    
    
    
    261Interest on certificates of deposit over $100,000
    
    
    2,454
    
    
    
    1,432
    
    
    
    818Interest on certificates of deposits  other
    
    
    1,646
    
    
    
    933
    
    
    
    519Interest on Federal Funds purchased
    
    
    
    
    
    
    1
    
    
    
    Interest on Federal Home Loan Bank advances
    
    
    240
    
    
    
    
    
    
    
    Total interest expense
    
    
    5,062
    
    
    
    2,959
    
    
    
    1,664Net interest income before provision for loan losses
    
    
    5,019
    
    
    
    4,363
    
    
    
    3,285Provision for loan losses
    
    
    168
    
    
    
    215
    
    
    
    236Net interest income after provision for loan losses
    
    
    4,851
    
    
    
    4,148
    
    
    
    3,049Non-interest income
    
    
    848
    
    
    
    521
    
    
    
    304Non-interest expense
    
    
    4,012
    
    
    
    3,205
    
    
    
    2,403Earnings before income taxes
    
    
    1,687
    
    
    
    1,464
    
    
    
    950Income taxes
    
    
    609
    
    
    
    499
    
    
    
    113Net earnings
    
    $
    1,078
    
    
    $
    965
    
    
    $
    837Basic earnings per common share
    
    $
    .85
    
    
    $
    .76
    
    
    $
    .67Diluted earnings per common share
    
    $
    .80
    
    
    $
    .72
    
    
    $
    .65Weighted average common shares outstanding:Basic
    
    
    1,275,118
    
    
    
    1,267,462
    
    
    
    1,252,864Diluted
    
    
    1,353,890
    
    
    
    1,338,037
    
    
    
    1,278,886
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Consolidated Statements of Comprehensive Earnings  For the Years Ended December 31, 2006, 2005 and 2004
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Net earnings
    
    $
    1,078
    
    
    $
    965
    
    
    $
    837Other comprehensive earnings (loss), net of tax:Unrealized gain (losses) on available-for-sale securities
arising during period, net of taxes of $57,000, $276,000
and $40,000, respectively
    
    
    93
    
    
    
    (448
    )
    
    
    77Reclassification adjustments for losses included
in net earnings, net of taxes of $39,000 in 2006
    
    
    64
    
    
    
    
    
    
    
    Other comprehensive earnings (loss)
    
    
    157
    
    
    
    (448
    )
    
    
    77Comprehensive earnings
    
    $
    1,235
    
    
    $
    517
    
    
    $
    914
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Consolidated Statements of Changes in Stockholders Equity  For the Years Ended December 31, 2006, 2005 and 2004
 Net UnrealizedLosses onAdditional
    
    
    Retained
    
    
    SecuritiesCommon
    
    
    Paid-In
    
    
    Earnings
    
    
    Available-(In Thousands)
    
    Stock
    
    
    Capital
    
    
    (Deficit)
    
    
    For-Sale
    
    
    TotalBalance December 31, 2003
    
    $
    1,250
    
    
    
    11,250
    
    
    
    (706
    )
    
    
    (140
    )
    
    
    11,654Issuance of 6,099 shares of $1 par
value common stock pursuant to
exercise of stock options
    
    
    6
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    60Net change in unrealized loss on
securities available-for-sale, net
of taxes of $40,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    77Earnings for the year
    
    
    
    
    
    
    
    
    
    
    837
    
    
    
    
    
    
    
    837Balance December 31, 2004
    
    
    1,256
    
    
    
    11,304
    
    
    
    131
    
    
    
    (63
    )
    
    
    12,628Issuance of 15,849 shares of $1 par
value common stock pursuant to
exercise of stock options
    
    
    16
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    160Net change in unrealized loss on
securities available-for-sale, net
of taxes of $276,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (448
    )
    
    
    (448
    )Cash dividends paid at $.17 per
share
    
    
    
    
    
    
    
    
    
    
    (216
    )
    
    
    
    
    
    
    (216
    )Earnings for the year
    
    
    
    
    
    
    
    
    
    
    965
    
    
    
    
    
    
    
    965Balance December 31, 2005
    
    
    1,272
    
    
    
    11,448
    
    
    
    880
    
    
    
    (511
    )
    
    
    13,089Issuance of 4,810 shares of $1 par
value common stock pursuant to
exercise of stock options and
related tax benefit
    
    
    5
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    63Stock based compensation expense
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15Cash payment of $27 per share
related to fractional shares
of stock dividend
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Net change in unrealized loss on
securities available-for-sale, net
of taxes of $96,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    157Issuance of 25,487 shares of
stock pursuant to a 2% stock
dividend
    
    
    25
    
    
    
    663
    
    
    
    (688
    )
    
    
    
    
    
    
    Earnings for the year
    
    
    
    
    
    
    
    
    
    
    1,078
    
    
    
    
    
    
    
    1,078Balance December 31, 2006
    
    $
    1,302
    
    
    $
    12,184
    
    
    $
    1,269
    
    
    $
    (354
    )
    
    $
    14,401
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Consolidated Statements of Cash Flows  For the Years Ended December 31, 2006, 2005 and 2004  Increase (Decrease) in Cash and Cash Equivalents
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Interest received
    
    $
    9,730
    
    
    $
    6,961
    
    
    $
    4,771Fees and commissions received
    
    
    679
    
    
    
    462
    
    
    
    258Interest paid
    
    
    (4,620
    )
    
    
    (2,680
    )
    
    
    (1,563
    )Cash paid to suppliers and employees
    
    
    (3,880
    )
    
    
    (2,901
    )
    
    
    (2,170
    )Income taxes paid
    
    
    (665
    )
    
    
    (230
    )
    
    
    (207
    )Net cash provided by operating activities
    
    
    1,244
    
    
    
    1,612
    
    
    
    1,089Cash flows from investing activities:Increase in interest-bearing deposits in financial
institutions
    
    
    (57
    )
    
    
    (1
    )
    
    
    Purchase of held-to-maturity securities
    
    
    
    
    
    
    (1,000
    )
    
    
    (2,201
    )Calls, sales and maturities of held-to-maturity securities
    
    
    
    
    
    
    1,000
    
    
    
    400Proceeds from paydowns of held-to-maturity securities
    
    
    76
    
    
    
    108
    
    
    
    89Purchase of available-for-sale securities
    
    
    (14,599
    )
    
    
    (16,164
    )
    
    
    (14,886
    )Calls, sales and maturities of available-for-sale securities
    
    
    1,000
    
    
    
    1,500
    
    
    
    400Proceeds from paydowns of available-for-sale securities
    
    
    2,428
    
    
    
    2,776
    
    
    
    2,175Proceeds from sales of available-for-sale securities
    
    
    3,730
    
    
    
    
    
    
    
    Proceeds from sale of restricted stock
    
    
    264
    
    
    
    
    
    
    
    Purchase of restricted stock
    
    
    (404
    )
    
    
    (42
    )
    
    
    (137
    )Loans made to customers, net of repayments
    
    
    (15,027
    )
    
    
    (21,407
    )
    
    
    (15,787
    )Purchase of premises and equipment
    
    
    (115
    )
    
    
    (1,136
    )
    
    
    (274
    )Proceeds on sale of fixed assets
    
    
    16
    
    
    
    7
    
    
    
    Proceeds from sale of repossessed asset
    
    
    6
    
    
    
    Proceeds on sale of other real estate
    
    
    
    
    
    
    103
    
    
    
    Purchase of bank-owned life insurance
    
    
    
    
    
    
    (1,500
    )
    
    
    Net cash used in investing activities
    
    
    (22,682
    )
    
    
    (35,756
    )
    
    
    (30,221
    )Cash flows from financing activities:Net increase in non-interest-bearing money market
demand, savings and NOW accounts
    
    
    3,048
    
    
    
    10,564
    
    
    
    10,686Net increase in time deposits
    
    
    18,121
    
    
    
    19,138
    
    
    
    25,521Increase in FHLB borrowings, net of repayments
    
    
    5,000
    
    
    
    
    
    
    
    Proceeds from sale of common stock issued pursuant
to stock option plan
    
    
    49
    
    
    
    160
    
    
    
    60Cash dividends paid
    
    
    
    
    
    
    (216
    )
    
    
    Dividend paid related to fractional shares of stock
dividend
    
    
    (1
    )
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    26,217
    
    
    
    29,646
    
    
    
    36,267Net increase (decrease) in cash and cash equivalents
    
    
    4,779
    
    
    
    (4,498
    )
    
    
    7,135Cash and cash equivalents at beginning of year
    
    
    4,847
    
    
    
    9,345
    
    
    
    2,210Cash and cash equivalents at end of year
    
    $
    9,626
    
    
    $
    4,847
    
    
    $
    9,345
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Consolidated Statements of Cash Flows, Continued  For the Years Ended December 31, 2006, 2005 and 2004  Increase (Decrease) in Cash and Cash Equivalents
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Reconciliation of earnings to net cash provided by
operating activities:Net earnings
    
    $
    1,078
    
    
    $
    965
    
    
    $
    837Adjustments to reconcile earnings to net cash
provided by operating activities:Depreciation
    
    
    244
    
    
    
    200
    
    
    
    170Amortization and accretion
    
    
    46
    
    
    
    53
    
    
    
    40Provision for loan losses
    
    
    168
    
    
    
    215
    
    
    
    236Loss on sale of fixed assets
    
    
    10
    
    
    
    6
    
    
    
    Loss on sale of securities
    
    
    103
    
    
    
    
    
    
    
    Gain on sale of restricted stock
    
    
    (110
    )
    
    
    
    
    
    
    FHLB dividend reinvestment
    
    
    (17
    )
    
    
    (8
    )
    
    
    (2
    )Excess tax benefit from stock-based compensation
arrangements
    
    
    14
    
    
    
    
    
    
    
    Increase in accrued interest receivable
    
    
    (380
    )
    
    
    (406
    )
    
    
    (216
    )Increase in deferred taxes
    
    
    (70
    )
    
    
    (35
    )
    
    
    (94
    )Increase in accrued interest payable
    
    
    442
    
    
    
    279
    
    
    
    101Decrease (increase) in other assets
    
    
    3
    
    
    
    (60
    )
    
    
    (46
    )Increase (decrease) in other liabilities
    
    
    (243
    )
    
    
    403
    
    
    
    63Stock based compensation expense
    
    
    15
    
    
    
    
    
    
    
    Increase in cash surrender value of bank
owned life insurance
    
    
    (59
    )
    
    
    
    
    
    
    Total adjustments
    
    
    166
    
    
    
    647
    
    
    
    252Net cash provided by operating activities
    
    $
    1,244
    
    
    $
    1,612
    
    
    $
    1,089Supplemental Schedule of Non-Cash Activities:Decrease (increase) in net unrealized loss on available-
for-sale securities, net of taxes of $96,000,
$276,000 and $40,000
    
    $
    157
    
    
    $
    (448
    )
    
    $
    77Net non-cash transfer from loans to other real estate
    
    $
    
    
    
    $
    103
    
    
    $
    Net non-cash transfer from loans to other assets
    
    $
    6
    
    
    $
    8
    
    
    $
    
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements  December 31, 2006 and 2005
 (1)
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accounting and reporting policies of First Commerce Bancorp, Inc. and Subsidiaries (the
Company) are in accordance with accounting principles generally accepted in the United
States of America and conform to general practices within the banking industry. The
following is a brief summary of the more significant policies.
 (a)
    
    Principles of ConsolidationThe consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiary, First Commerce Bank and the Banks wholly-owned subsidiary,
First Commerce Mortgage Company, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation. On September 26, 2006 the
shareholders of First Commerce Bank (the Bank) approved a share exchange between
the Company and the Bank on a one for one basis (the Share Exchange) pursuant to
which the Company acquired 100% of the outstanding common stock of the Bank and the
shareholders of the Bank exchanged their shares of Bank common stock for a like
number of shares of Company common stock. This transaction was consummated on
October 6, 2006 and has been accounted for as a reorganization.(b)
    
    Nature of OperationsThe Bank operates under a state bank charter and provides full banking services. As
a state bank, the Bank is subject to regulations of the Tennessee Department of
Financial Institutions and the Federal Deposit Insurance Corporation. The area
served by the Bank is Marshall and adjacent counties of Middle Tennessee. Services
are provided at the main office, one branch in Lewisburg, Tennessee, and one branch
in Chapel Hill, Tennessee.(c)
    
    EstimatesThe preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly susceptible to
significant change in the near term relate to determination of the allowance for loan
losses and the valuation of debt and equity securities and the related deferred
taxes.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements Continued  December 31, 2006 and 2005
 (d)
    
    LoansLoans are stated at the principal amount outstanding. Unearned discount, deferred
loan fees net of loan acquisition costs, and the allowance for loan losses are shown
as reductions of loans. Loan origination and commitment fees and certain
loan-related costs are being deferred and the net amount amortized as an adjustment
of the related loans yield over the contractual life of the loan. Interest income
on loans is accrued based on the principal amount outstanding.The Company follows the provisions of Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors for Impairment of a Loan and SFAS No. 118,
Accounting by Creditors for Impairment of a Loan  Income Recognition and
Disclosures. These pronouncements apply to impaired loans except for large groups
of smaller-balance homogeneous loans that are collectively evaluated for impairment
including residential mortgage and installment loans.A loan is impaired when it is probable that the Company will be unable to collect the
scheduled payments of principal and interest due under the contractual terms of the
loan agreement. Impaired loans are measured at the present value of expected future
cash flows discounted at the loans effective interest rate, at the loans observable
market price, or the fair value of the collateral if the loan is collateral
dependent. If the measure of the impaired loan is less than the recorded investment
in the loan, the Company shall recognize an impairment by creating a valuation
allowance with a corresponding charge to the provision for loan losses or by
adjusting an existing valuation allowance for the impaired loan with a corresponding
charge or credit to the provision for loan losses.The Companys installment and residential mortgage loans are divided into various
groups of smaller-balance homogeneous loans that are collectively evaluated for
impairment and, thus, are not subject to the provisions of SFAS Nos. 114 and 118.
Substantially all other loans of the Company are evaluated for impairment under the
provisions of SFAS Nos. 114 and 118.The Company considers all loans subject to the provisions of SFAS Nos. 114 and 118
that are on a nonaccrual status to be impaired. Loans are placed on nonaccrual
status when doubt as to timely collection of principal or interest exists, or when
principal or interest is past due 90 days or more unless such loans are well-secured
and in the process of collection. Delays or shortfalls in loan payments are
evaluated along with various other factors to determine if a loan is impaired.
Generally, delinquencies under 90 days are considered insignificant unless certain
other factors are present which indicate impairment is probable. The decision to
place a loan on nonaccrual status is also based on an evaluation of the borrowers
financial condition, collateral, liquidation value, and other factors that affect the
borrowers ability to pay.Generally, at the time a loan is placed on nonaccrual status, all interest accrued
and uncollected on the loan in the current fiscal year is reversed from income, and
all interest accrued and uncollected from the prior year is charged off against the
allowance for loan losses. Thereafter, interest on nonaccrual loans is recognized as
interest income only to the extent that cash is received and future collection of
principal is not in doubt. If the collectibility of outstanding principal is
doubtful, such cash received is applied as a reduction of principal. A nonaccrual
loan may be restored to an accruing status when principal and interest are no longer
past due and unpaid and future collection of principal and interest on a timely basis
is not in doubt.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Loans not on nonaccrual status are classified as impaired in certain cases when there
is inadequate protection by the current net worth and financial capacity of the
borrower or of the collateral pledged, if any. In those cases, such loans have a
well-defined weakness or weaknesses that jeopardize the liquidation of the debt, and
if such deficiencies are not corrected, there is a probability that the Company will
sustain some loss. In such cases, interest income continues to accrue as long as the
loan does not meet the Companys criteria for nonaccrual status.Generally, the Company also classifies as impaired any loans the terms of which have
been modified in a troubled debt restructuring. Interest is generally accrued on
such loans that continue to meet the modified terms of their loan agreements.The Companys charge-off policy for impaired loans is similar to its charge-off
policy for all loans in that loans are charged off in the month when they are
considered uncollectible.(e)
    
    Allowance for Loan LossesThe provision for loan losses represents a charge to earnings necessary, after loan
charge-offs and recoveries, to maintain the allowance for loan losses at an
appropriate level which is adequate to absorb estimated losses inherent in the loan
portfolio. Such estimated losses arise primarily from the loan portfolio but may
also be derived from other sources, including commitments to extend credit and
standby letters of credit. The level of the allowance is determined on a quarterly
basis using procedures which include: (1) categorizing commercial and commercial
real estate loans into risk categories to estimate loss probabilities based primarily
on the historical loss experience of those risk categories and current economic
conditions; (2) analyzing significant commercial and commercial real estate credits
and calculating specific reserves as necessary; (3) assessing various homogeneous
consumer loan categories to estimate loss probabilities based primarily on historical
loss experience; (4) reviewing unfunded commitments (included in other liabilities if
significant); and (5) considering various other factors, such as changes in credit
concentrations, loan mix, and economic conditions which may not be specifically
quantified in the loan analysis process.The allowance for loan losses consists of an allocated portion and an unallocated, or
general portion. The allocated portion is maintained to cover estimated losses
applicable to specific segments of the loan portfolio. The unallocated portion is
maintained to absorb losses which probably exist as of the evaluation date but are
not identified by the more objective processes used for the allocated portion of the
allowance due to risk of errors or imprecision. While the total allowance consists
of an allocated portion and an unallocated portion, these terms are primarily used to
describe a process. Both portions of the allowance are available to provide for
inherent loss in the entire portfolio.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 The allowance for loan losses is increased by provisions for loan losses charged to
expense and is reduced by loans charged off net of recoveries on loans previously
charged off. The provision is based on managements determination of the amount of
the allowance necessary to provide for estimated loan losses based on its evaluation
of the loan portfolio. Determining the appropriate level of the allowance and the
amount of the provision involves uncertainties and matters of judgment and therefore
cannot be determined with precision.
 (f)
    
    SecuritiesThe Company applies the provisions of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities.
Under the provisions of the Statement, securities are to be classified in three
categories and accounted for as follows:
 
    
    Securities Held-to-MaturityDebt securities that the enterprise has the positive intent and ability to hold
to maturity are classified as held-to-maturity securities and reported at
amortized cost. Amortization of premiums and accretion of discounts are
recognized by the interest method.
    
    Trading SecuritiesDebt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities and
reported at fair value, with unrealized gains and losses included in earnings.
    
    Securities Available-for-SaleDebt and equity securities not classified as either
held-to-maturity securities or trading securities are classified
as available-for-sale securities and reported at estimated fair
value, with unrealized gains and losses excluded from earnings and
reported in a separate component of stockholders equity.
Premiums and discounts are recognized by the interest method.
 No securities have been classified as trading securities.Realized gains or losses from the sale of debt and equity securities are recognized
based upon the specific identification method.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (g)
    
    Other Real EstateReal estate acquired in settlement of loans is initially recorded at the lower of
cost (loan value of real estate acquired in settlement of loans plus incidental
expense) or estimated fair value, less estimated cost of disposal. Based on periodic
evaluations by management, the carrying values are reduced by a direct charge to
earnings when they exceed net realizable value. Costs relating to the development
and improvement of the property are capitalized, while holding costs of the property
are charged to expense in the period incurred. The Company had no other real estate
as of December 31, 2006 or 2005.(h)
    
    Premises and EquipmentPremises and equipment are stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the related assets. Gain or
loss on items retired and otherwise disposed of is credited or charged to operations
and cost and related accumulated depreciation are removed from the asset and
accumulated depreciation accounts.Expenditures for major renewals and improvements of bank premises and equipment are
capitalized and those for maintenance and repairs are charged to earnings as
incurred.(i)
    
    Cash and Cash EquivalentsFor purposes of reporting cash flows, cash and cash equivalents include cash on hand,
amounts due from banks, and Federal funds sold. Generally, Federal funds sold are
purchased and sold for one-day periods. The Company maintains deposits in excess of
the Federal insurance amounts with other financial institutions. Management makes
deposits only with financial institutions it considers to be financially sound.(j)
    
    Long-Term AssetsPremises and equipment, intangible assets, and other long-term assets are reviewed
for impairment when events indicate their carrying amount may not be recoverable from
future undiscounted cash flows. If impaired, the assets are recorded at fair value.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (k)
    
    Stock OptionsIn December, 2004, the Financial Accounting Standards Board FASB issued SFAS
No. 123 (Revised 2004) Share-Based Payment (SFAS No. 123R). The Securities and
Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 107 (SAB 107) in
March, 2005 to assist preparers by simplifying some of the implementation challenges
of SFAS No. 123R while enhancing the information investors receive. The FASB has
also issued various Staff Positions clarifying certain provisions of the new
accounting standard. SFAS No. 123R addresses all forms of share-based payment
awards, including shares issued under employee stock purchase plans, stock options,
restricted stock and stock appreciation rights. SFAS No. 123R requires the Company
to expense share-based payment awards with compensation cost measured at the fair
value of the award. In addition, SFAS No. 123R requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a financing
cash flow, rather than an operating cash flow. Effective January 1, 2006, the
Company adopted SFAS No. 123R under the modified prospective method.Under the modified prospective method, the accounting standards of SFAS No. 123R have
been applied as of January 1, 2006 and the consolidated financial statements for
prior periods have not been restated to reflect, and do not include, the impact of
SFAS No. 123R. See note 13 to the consolidated financial statements for more
information.Under the provisions of SFAS No. 123R stock-based compensation expense recognized
during the period is based on the value of the portion of stock-based payment awards
that is ultimately expected to vest. Stock-based compensation expense recognized in
the accompanying consolidated statement of income during 2006 included compensation
expense for stock-based payment awards granted prior to, but not yet vested, as of
January 1, 2006 and for the stock-based awards granted after January 1, 2006, based
on the grant date fair value estimated in accordance with SFAS No. 123R. As
stock-based compensation expense recognized in the accompanying statement of income
for 2006 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. For 2005 and 2004 the impact of stock-based
compensation expense is disclosed on a proforma basis. (See note 13 to the
consolidated financial statements).The fair value of each option award is estimated on the date of grant using a
Black-Scholes Option Pricing model that uses the following assumptions. Expected
volatility is based on implied volatility from comparable publicly traded banks. The
Company uses historical data to estimate option exercise and employee termination
within the valuation model; separate groups of employees that have similar historical
exercise behavior are considered separately for valuation purposes. The expected
term of options granted is derived from the average of: 1) the weighted average
vesting term and 2) contractual term as permitted under SAB 107. The risk-free rate
is based on the U.S. Treasury yield curve in effect at the time of grant and the
weighted average expected life of the grant.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (l)
    
    Income TaxesProvisions for income taxes are based on taxes payable or refundable for the current
year (after exclusion of non-taxable income such as interest on state and municipal
securities) and deferred
taxes on temporary differences between the amount of taxable and pretax financial
income and between the tax bases of assets and liabilities and their reported amounts
in the financial statements. Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to the period
in which the deferred tax asset and liabilities are expected to be realized or
settled as prescribed in Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. As changes in tax laws or rates are enacted, deferred
tax assets and liabilities are adjusted through the provision for income taxes.The Company and its wholly-owned subsidiaries file consolidated Federal and State
income tax returns.(m)
    
    Advertising CostsAdvertising costs are expensed when incurred by the Company.(n)
    
    Stock DividendThe Companys Board of Directors approved a 2% stock dividend for stockholders of
record as of December 1, 2006 payable December 20, 2006. Each stockholder received
two (2) additional shares for each hundred 100 shares owned with cash paid for
fractional shares. Per share data included in these consolidated financial
statements has been restated to give effect to the stock dividend.(o)
    
    Off-Balance-Sheet Financial InstrumentsIn the ordinary course of business the Company has entered into off-balance-sheet
financial instruments consisting of commitments to extend credit, commitments under
credit card arrangements, commercial letters of credit and standby letters of credit.
Such financial instruments are recorded in the financial statements when they are
funded or related fees are incurred or received.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (p)
    
    Impact of New Accounting StandardsIn June, 2003, the American Institute of Certified Public Accountants issued an
exposure draft on a Proposed Statement of Position (SOP) on Allowance for Credit
Losses. If approved, the Proposed SOP would significantly change the way the
allowance for loan losses is calculated. Under the Proposed SOP, any loans
determined to be impaired, as defined in FASB Statement No. 114, would be assigned a
specific reserve based on facts and circumstances surrounding the particular loan and
no loss percentage would be assigned. If a loan is determined not to be impaired, it
would be assigned to a pool of similar homogeneous loans. A loss percentage would
then be assigned to the pool based on historical charge-offs adjusted for internal or
external factors such as the economy, changes in underwriting standards, etc.
Management has
not yet determined the impact this Proposed SOP would have on the Companys financial
statements. Under the Proposal, any changes resulting from the initial application
of this Proposed SOP would be treated as a change in accounting estimate.On June 30, 2005, the FASB issued an exposure draft Business Combinations  a
replacement of SFAS No. 141 (141 Revised). The 141 Revised would require the
acquirer to measure the fair value of the acquiree, as a whole, as of the acquisition
date as opposed to the definitive agreement date. The proposal also requires that
contingent consideration be estimated and recorded at the acquisition which is in
conflict with SFAS No. 5 Accounting for Contingencies. SFAS No. 5 would be amended
for this exception.Acquisition related costs incurred in connection with the business combination would
generally be expensed. This proposed Statement would require the acquirer in a
business combination in which the acquisition-date fair value of the acquirers
interest in the acquiree exceeds the fair value of the consideration transferred for
that interest (referred to as a bargain purchase) to account for that excess by first
reducing the goodwill related to that business combination to zero, and then by
recognizing any excess in income. Statement 141 requires that excess to be allocated
as a pro rata reduction of the amounts that would have been assigned to particular
assets acquired. The 141 Revised is expected to be effective for acquisitions after
January 1, 2007.In November, 2005, the FASB issued FASB Staff Position Statement of Financial
Accounting Standards 115-1 and 124-1 (FSP 115-1) which codified existing guidance
addressing the determination as to when an investment is considered impaired, whether
that impairment is other than temporary and the measurement of an impairment loss.
This FSP also includes accounting considerations subsequent to the recognition of an
other-than-temporary impairment and requires certain disclosures about unrealized
losses that have not been recognized as other-than-temporary impairments. The
guidance in this FSP amends FASB Statements No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and No. 124, Accounting for Certain
Investments Held by Not-For-Profit Organizations and APB Opinion No. 18, The Equity
Method of Accounting for Investments in Common Stock. The FSP was effective for
2006. The Company has considered this FSP in its testing for other-than-temporary
impairment.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 In December, 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123-R), which requires recognition of expense over the requisite service
period for awards of share-based compensation to employees. SFAS No. 123-R was
adopted by First Commerce Bancorp, Inc. as of January 1, 2006. As permitted by the
original SFAS No. 123 prior to January 1, 2006, First Commerce Bancorp accounted for
its equity awards under the provisions of APB No. 25 prior to January 1, 2006. Under
the provisions of SFAS No. 123-R, the grant date fair value of an award has been used
to measure the compensation expense recognized for the award. For any unvested
awards granted prior to the adoption of SFAS 123-R, the fair values used in
preparation of the disclosures required under the original SFAS 123 have been
utilized. Compensation expense recognized after adoption of SFAS 123-R incorporates
an estimate of awards expected to ultimately vest, which requires estimation of
forfeitures as well as projections related to the satisfaction of performance
conditions that determine vesting. The substance of the revised statement is to
require companies to record as an expense amortization of the fair market value of
stock options determined as of the grant date. The offsetting credit is to
additional paid-in capital unless there is an obligation to buy back the stock or
exchange other assets for the stock. If such an obligation exists the offsetting
credit would be to a liability account. The adoption of Statement 123-R has had an
impact on First Commerce Bancorps results of operations for 2006, although it has
had no significant
impact on First Commerce Bancorps overall financial position. See note 13 to the
consolidated financial statements for additional discussion.On June 1, 2005, the FASB issued Statement No. 154, Accounting Changes and Error
Corrections, a replacement of Accounting Principles Board Option No. 20, Accounting
Changes and Statement of Financial Accounting Standards No. 3, Reporting Accounting
Changes in Interim Financial Statements. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements for accounting for and
reporting of a change in accounting principle. In the absence of specific transition
requirements to the contrary in the adoption of an accounting principle, Statement
154 requires retrospective application to prior periods financial statements of a
voluntary change in accounting principle unless it is impracticable for comparability
and consistency of financial information between periods. Statement 154 is effective
for accounting changes and corrections of errors made in fiscal years beginning in
2006.On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109. The interpretation
requires that only benefits from tax positions that are more-likely-than-not of being
sustained upon examination by the IRS should be recognized in the financial
statements. These benefits would be recorded at amounts considered to be the maximum
amounts more-likely-than-not of being sustained. At the time these positions become
more likely than not to be disallowed under audit, their recognition would be
reversed. The Company has reviewed the potential impact of this Interpretation, and
has determined that it should not have any material impact on the consolidated
financial statements.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 On March 17, 2006, the FASB issued Statement No. 156, Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140 (SFAS No. 156),
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. The Statement requires that all servicing assets and liabilities be
initially measured at fair value and allows for two alternatives in the subsequent
accounting for servicing assets and liabilities: the amortization method and the
fair value method. The amortization method requires that the servicing assets and
liabilities be amortized over the remaining estimated lives of the serviced assets
with impairment testing to be performed periodically. The fair value method requires
the servicing assets and liabilities to be measured at fair value each period with an
offset to income. This Statement is to be adopted in the first fiscal year that
begins after September 15, 2006 and early adoption is permitted. An entity can elect
the fair value method at the beginning of any fiscal year provided the entity has not
yet issued financial statements, including interim financial statements, for any
period of that fiscal year. However, once the fair value election is made, an entity
cannot revert back to the amortization method. The Company has determined that there
is no impact to the Company related to SFAS No. 156.On September 15, 2006, the FASB issued, FASB Statement No. 157 on fair value
measurement. The standard provides guidance for using fair value to measure assets
and liabilities. The standard also responds to investors requests for expanded
information about the extent to which companies measure assets and liabilities at
fair value, the information used to measure fair value, and the effect of fair value
measurements on earnings. Under the standard, fair value refers to the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting entity
transacts. It clarifies the principle that fair value should be based on the
assumptions market participants would use when pricing the asset or liability. In
support of this principle, the standard establishes a fair value hierarchy that
prioritizes the information used to develop those
assumptions. The fair value hierarchy gives the highest priority to quoted prices in
active markets and the lowest priority to unobservable data, for example, the
reporting entitys own data. Under the standard, fair value measurements would be
separately disclosed by level within the fair value hierarchy. Statement 157 is
effective for financial statements issued for fiscal years beginning after November
15, 2007, and interim periods within those fiscal years. Early adoption is
permitted. Management is currently reviewing the potential impact of this statement.(q)
    
    ReclassificationsCertain reclassifications have been made to the 2005 and 2004 figures to conform to
the presentation for 2006.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005 (2)
    
    LOANS AND ALLOWANCE FOR LOAN LOSSESThe classification of loans at December 31, 2006 and 2005 is as follows:
 (In Thousands)
    
    2006
    
    
    2005Commercial, financial and agricultural
    
    $
    53,278
    
    
    $
    45,307Real estate  construction
    
    
    16,426
    
    
    
    12,420Real estate  mortgage
    
    
    37,269
    
    
    
    34,440Consumer
    
    
    7,450
    
    
    
    7,260114,423
    
    
    
    99,427Allowance for loan losses
    
    
    (1,340
    )
    
    
    (1,197
    )Net loans
    
    $
    113,083
    
    
    $
    98,230
 The principal maturities on loans at December 31, 2006 are as follows:
 (In Thousands)CommercialFinancialand
    
    
    Real Estate -
    
    
    Real Estate -Maturity
    
    Agricultural
    
    
    Construction
    
    
    Mortgage
    
    
    Consumer
    
    
    Total3 months or less
    
    $
    5,007
    
    
    $
    2,735
    
    
    $
    1,697
    
    
    $
    745
    
    
    $
    10,1843 to 12 months
    
    
    10,646
    
    
    
    8,347
    
    
    
    2,953
    
    
    
    2,367
    
    
    
    24,3131 to 5 years
    
    
    35,060
    
    
    
    4,865
    
    
    
    30,632
    
    
    
    4,179
    
    
    
    74,736Over 5 Years
    
    
    2,565
    
    
    
    479
    
    
    
    1,987
    
    
    
    159
    
    
    
    5,190$
    53,278
    
    
    $
    16,426
    
    
    $
    37,269
    
    
    $
    7,450
    
    
    $
    114,423
 At December 31, 2006 variable rate and fixed rate loans total $32,137,000 and $82,286,000,
respectively. Variable rate and fixed rate loans at December 31, 2005 were $30,782,000 and
$68,645,000, respectively.In the normal course of business, the Companys subsidiary has made loans at prevailing
interest rates and terms to directors and executive officers of the Company and their
affiliates. The aggregate amount of these loans was $6,654,000 and $6,098,000,
respectively, at December 31, 2006 and 2005. As of December 31, 2006 none of these loans
were restructured, nor were any related party loans charged off in during the past three
years nor did they involve more than the normal risk of collectibility or present other
unfavorable features.An analysis of activity with respect to such loans to related parties is as follows:
 (In Thousands)
    
    2006
    
    
    2005Balance, January 1
    
    $
    6,098
    
    
    $
    4,337New loans during year
    
    
    5,440
    
    
    
    1,978Repayment during year
    
    
    (4,884
    )
    
    
    (217
    )Balance, end of year
    
    $
    6,654
    
    
    $
    6,098
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Transactions in the allowance for loan losses for the years ended December 31, 2006, 2005
and 2004 are summarized as follows:
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Balance, January 1
    
    $
    1,197
    
    
    $
    1,001
    
    
    $
    785Provision charged to operating expense
    
    
    168
    
    
    
    215
    
    
    
    236Loans charged off
    
    
    (29
    )
    
    
    (27
    )
    
    
    (22
    )Recoveries
    
    
    4
    
    
    
    8
    
    
    
    2Balance, end of year
    
    $
    1,340
    
    
    $
    1,197
    
    
    $
    1,001
 The Companys principal customers are basically in the Middle Tennessee area with a
concentration in Marshall and adjacent counties. Credit is extended to businesses and
individuals and is evidenced by promissory notes. The terms and conditions of the loans
including collateral varies depending upon the purpose of the credit and the borrowers
financial condition.Impaired loans and related loan loss reserve amounts at December 31, 2006 and 2005 were as
follows:
 (In Thousands)
    
    2006
    
    2005Recorded investment
    
    $
    57
    
    
    $
    64Loan loss allocation
    
    $
    6
    
    
    $
    6
 The average recorded investment in impaired loans for the years ended December 31, 2006 and
2005 was $60,000 and $84,000, respectively.The related total amount of interest income recognized on the accrual basis for the period
that such loans were impaired was $4,000 for 2006 and 2005.Non-accrual loans totaled $2,000 and $28,000 as of December 31, 2006 and 2005, respectively.
Had interest on these loans been accrued, interest income would have increased by an
insignificant amount for reporting purposes in 2006 and 2005. There were no loans that are
past due 90 days or more and are still accruing interest at December 31, 2006 or 2005.
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (3)
    
    DEBT AND EQUITY SECURITIESDebt and equity securities have been classified in the balance sheet according to
managements intent. The Companys classification of securities at December 31, 2006 and
2005 is as follows:
 Securities Held-To-Maturity2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
government agencies and
corporation
    
    $
    2,200
    
    
    $
    
    
    
    $
    46
    
    
    $
    2,154Mortgage-backed securities
    
    
    320
    
    
    
    
    
    
    
    10
    
    
    
    310$
    2,520
    
    
    $
    
    
    
    $
    56
    
    
    $
    2,464
 Securities Available-For-Sale2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
government agencies and
corporations
    
    $
    30,483
    
    
    $
    63
    
    
    $
    333
    
    
    $
    30,213Mortgage-backed securities
    
    
    9,993
    
    
    
    
    
    
    
    293
    
    
    
    9,700Collateralized mortgage
obligations
    
    
    282
    
    
    
    
    
    
    
    10
    
    
    
    272Obligations of states and political
subdivisions
    
    
    1,151
    
    
    
    
    
    
    
    1
    
    
    
    1,150$
    41,909
    
    
    $
    63
    
    
    $
    637
    
    
    $
    41,335
 Securities Held-To-Maturity2005Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
government agencies and
corporations
    
    $
    2,200
    
    
    $
    
    
    
    $
    62
    
    
    $
    2,138Mortgage-backed securities
    
    
    396
    
    
    
    
    
    
    
    10
    
    
    
    386$
    2,596
    
    
    $
    
    
    
    $
    72
    
    
    $
    2,524
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FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Securities Available-For-Sale2005Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Market(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
government agencies and
corporations
    
    $
    21,638
    
    
    $
    
    
    
    $
    413
    
    
    $
    21,225Mortgage-backed securities
    
    
    12,580
    
    
    
    
    
    
    
    400
    
    
    
    12,180Collateralized mortgage
obligations
    
    
    399
    
    
    
    
    
    
    
    14
    
    
    
    385$
    34,617
    
    
    $
    
    
    
    $
    827
    
    
    $
    33,790
 The amortized cost and estimated market value of debt and equity securities at December 31,
2006, by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
 (In Thousands)EstimatedAmortized
    
    
    MarketSecurities Held-To-Maturity
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    400
    
    
    
    387Due after five years through ten years
    
    
    400
    
    
    
    387Due after ten years
    
    
    1,400
    
    
    
    1,380Mortgage-backed securities
    
    
    320
    
    
    
    310$
    2,520
    
    
    $
    2,464
 (In Thousands)EstimatedAmortized
    
    
    MarketSecurities Available-For-Sale
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    500
    
    
    $
    499Due after one year through five years
    
    
    16,995
    
    
    
    16,714Due after five years through ten years
    
    
    8,997
    
    
    
    8,966Due after ten years
    
    
    5,142
    
    
    
    5,184Collateralized mortgage obligations
    
    
    282
    
    
    
    272Mortgage-backed securities
    
    
    9,993
    
    
    
    9,700$
    41,909
    
    
    $
    41,335
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Results from sales of debt and equity securities are as follows:
 (In Thousands)For the Year
    
    
    For the Year
    
    
    For the YearEnded
    
    
    Ended
    
    
    EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2004Gross proceeds
    
    $
    3,730
    
    
    $
    
    
    
    $
    Gross realized gain
    
    $
    
    
    
    $
    
    
    
    $
    Gross realized losses
    
    
    103
    
    
    
    
    
    
    
    Net realized losses
    
    $
    103
    
    
    $
    
    
    
    $
    
 Investment securities carried in the balance sheet of $17,044,000 (amortized cost of
$17,430,000) as of December 31, 2006 were pledged to secure public and trust deposits and
for other purposes as required or permitted by law. Investments securities carried in the
balance sheet of $16,977,000 (amortized cost of $17,489,000) as of December 31, 2005 were
pledged to secure public and trust deposits and for the purposes as required or permitted by
law. Management purchases only obligations of such political subdivisions it considers to
be financially sound.There were no securities that have rates that adjust prior to maturity at December 31, 2006
and 2005.The following table shows the Companys investments gross unrealized losses and fair value,
aggregated by investment category and length of time that individual securities have been in
a continuous unrealized loss position, at December 31, 2006:
 In Thousands, Except Number of SecuritiesLess than 12 Months
    
    12 Months or More
    
    TotalEstimated
    
    
    
    
    
    Number of
    
    Estimated
    
    
    
    
    
    Number of
    
    EstimatedMarket
    
    Unrealized
    
    Securities
    
    Market
    
    Unrealized
    
    Securities
    
    Market
    
    UnrealizedValue
    
    Losses
    
    Included
    
    Value
    
    Losses
    
    Included
    
    Value
    
    LossesU.S. Treasury
and other U.S.
Government
agencies and
corporations
    
    $
    6,471
    
    
    $
    28
    
    
    
    6
    
    
    $
    20,862
    
    
    $
    351
    
    
    
    38
    
    
    $
    27,333
    
    
    $
    379Mortgage-backed
securities
    
    
    406
    
    
    
    2
    
    
    
    1
    
    
    
    9,604
    
    
    
    301
    
    
    
    34
    
    
    
    10,010
    
    
    
    303Obligations of
states and
political
subdivisions
    
    
    349
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    349
    
    
    
    1Collateralized
mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272
    
    
    
    10
    
    
    
    2
    
    
    
    272
    
    
    
    10Total
temporarily
impaired
securities
    
    $
    7,226
    
    
    $
    31
    
    
    
    8
    
    
    $
    30,738
    
    
    $
    662
    
    
    
    74
    
    
    $
    37,964
    
    
    $
    693
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 The impaired securities are considered high quality investments in line with normal
industry investing practices. The unrealized losses are primarily the result of changes in
the interest rate and sector environments. Consistent with the original classification, as
available-for-sale or held-to-maturity securities, the Company intends and has the ability
to hold the above securities until the value is realized.
 The Company may sell the above or other securities in the ordinary course of business in
response to unexpected and significant changes in liquidity needs, unexpected and
significant changes in interest rates and/or sector spreads that significantly extend the
securitys holding period, or when conducting a small volume of security transactions.(4)
    
    RESTRICTED EQUITY SECURITIESRestricted equity securities consists of stock of the Bankers Bank amounting to $268,000 and
$155,000 at December 31, 2006 and 2005, respectively and stock of the Federal Home Loan Bank
amounting to $334,000 and $180,000 at December 31, 2006 and 2005, respectively. The stock
can be sold back to the Federal Home Loan Bank only at par. The Bankers Bank stock can be
sold back only at a value as determined by the issuing institution and only to the
respective financial institution or to other member institutions at market. These
securities are recorded at cost.The Company sold shares of Bankers Bank stock during the year for a gain of $110,000. The
total proceeds of the sale totaled $264,000.(5)
    
    PREMISES AND EQUIPMENTThe classification of premises and equipment at December 31, 2006 and 2005 are as follows:
 (In Thousands)
    
    2006
    
    
    2005Land
    
    $
    452
    
    
    $
    452Land improvements
    
    
    14
    
    
    
    14Buildings
    
    
    2,538
    
    
    
    2,526Furniture and fixtures
    
    
    768
    
    
    
    713Equipment and vehicles
    
    
    530
    
    
    
    508Construction-in-progress
    
    
    
    
    
    
    124,302
    
    
    
    4,225Less accumulated depreciation
    
    
    (681
    )
    
    
    (449
    )$
    3,621
    
    
    $
    3,776
 Depreciation expense was $244,000, $200,000 and $170,000 for the years ended December 31,
2006, 2005 and 2004.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (6)
    
    DEPOSITSDeposits at December 31, 2006 and 2005 are summarized as follows:
 (In Thousands)
    
    2006
    
    
    2005Demand deposits
    
    $
    22,146
    
    
    $
    15,323Negotiable order of withdrawal accounts
    
    
    7,026
    
    
    
    6,404Savings deposits
    
    
    4,239
    
    
    
    2,888Money market demand accounts
    
    
    21,216
    
    
    
    26,964Certificates of deposit $100,000 or greater
    
    
    54,220
    
    
    
    45,536Individual retirement accounts $100,000 or greater
    
    
    3,078
    
    
    
    2,097Other individual retirement accounts
    
    
    4,401
    
    
    
    3,161Other certificates of deposit
    
    
    37,356
    
    
    
    30,140$
    153,682
    
    
    $
    132,513
 Principal maturities of certificates of deposit and individual retirement accounts at
December 31, 2006 are as follows:
 Maturity
    
    (In Thousands)2007
    
    $
    76,4012008
    
    
    19,0192009
    
    
    1,0842010
    
    
    1,1582011
    
    
    1,393$
    99,055
 At December 31, 2006 and 2005 certificates of deposit and individual retirements accounts in
denominations of $100,000 or more amounted to $57,298,000 and $78,428,000, respectively.The aggregate amount of overdrafts reclassified as loans receivable was $17,000 and $26,000
at December 31, 2006 and 2005, respectively.(7)
    
    ADVANCE FROM FEDERAL HOME LOAN BANKThe advance from the Federal Home Loan Bank at December 31, 2006 and 2005 consists of the
following:
 December 31,2006
    
    
    2005Weighted
    
    
    
    
    
    
    Weighted(In Thousands)
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average RateFixed-rate advance
    
    $
    5,000
    
    
    
    4.86
    %
    
    
    
    
    
    
    
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
  (In Thousands)
    
    Amount2011
    
    
    5,000$
    5,000
 This advance is collateralized by a required blanket pledge of qualifying mortgage loans.
 (8)
    
    NON-INTEREST INCOME AND NON-INTEREST EXPENSEThe significant components of non-interest income and non-interest expense for the years
ended December 31 are presented below:
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Non-interest income:Service charge on deposit accounts
    
    $
    256
    
    
    $
    171
    
    
    $
    144Fees on mortgage originations
    
    
    213
    
    
    
    196
    
    
    
    46Gain on sale of restricted stock
    
    
    110
    
    
    
    
    
    
    
    Other fees and commissions
    
    
    269
    
    
    
    154
    
    
    
    114Total non-interest income
    
    $
    848
    
    
    $
    521
    
    
    $
    304Non-interest expense:Employee salaries and benefits
    
    $
    2,221
    
    
    $
    1,834
    
    
    $
    1,323Occupancy expenses
    
    
    241
    
    
    
    192
    
    
    
    161Furniture and equipment expense
    
    
    262
    
    
    
    228
    
    
    
    178Professional fees
    
    
    200
    
    
    
    138
    
    
    
    91Advertising and promotional expense
    
    
    53
    
    
    
    61
    
    
    
    54Data processing expense
    
    
    482
    
    
    
    359
    
    
    
    247Office supplies and stationary expense
    
    
    77
    
    
    
    78
    
    
    
    69Other operating expenses
    
    
    363
    
    
    
    309
    
    
    
    280Loss on sale of securities
    
    
    103
    
    
    
    
    
    
    
    Loss on sale of fixed assets
    
    
    10
    
    
    
    6
    
    
    
    Total non-interest expense
    
    $
    4,012
    
    
    $
    3,205
    
    
    $
    2,403
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (9)
    
    INCOME TAXESThe components of the net deferred tax asset at December 31, 2006 and 2005 are as follows:
 (In Thousands)
    
    2006
    
    
    2005Deferred tax asset:Federal
    
    $
    611
    
    
    $
    632State
    
    
    125
    
    
    
    129736
    
    
    
    761Deferred tax liability:Federal
    
    
    (262
    )
    
    
    (262
    )State
    
    
    (54
    )
    
    
    (53
    )(316
    )
    
    
    (315
    )Total net deferred tax assets
    
    $
    420
    
    
    $
    446
 The tax effects of each type of significant item that gave rise to deferred taxes at
December 31, 2006 and 2005 are as follows:
 (In Thousands)
    
    2006
    
    
    2005Financial statement allowance for loan losses in excess of
tax allowance
    
    $
    446
    
    
    $
    382Excess of depreciation deducted for tax purposes over amounts
deducted in the financial statements
    
    
    (305
    )
    
    
    (311
    )Unrealized loss on investment securities available-for-sale
    
    
    220
    
    
    
    316Pre-opening costs of wholly-owned bank subsidiary amortized over a
five-year period for tax purposes, expensed for financial statements
in initial year
    
    
    30
    
    
    
    63Pre-opening costs of parent amortized over a fifteen-year
period for tax purposes expensed for financial statements in
initial year
    
    
    8
    
    
    
    Supplemental executive retirement plan expense
    
    
    26
    
    
    
    Stock based compensation expense
    
    
    6
    
    
    
    Financial statement income on FHLB stock dividends not
recognized for tax purposes
    
    
    (11
    )
    
    
    (4
    )$
    420
    
    
    $
    446
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 The components of income tax expense for the years ended December 31, 2006, 2005 and
2004 are summarized as follows:
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    570
    
    
    $
    474
    
    
    $
    212State
    
    
    109
    
    
    
    60
    
    
    
    54679
    
    
    
    534
    
    
    
    266Deferred:Federal
    
    
    (58
    )
    
    
    (29
    )
    
    
    149State
    
    
    (12
    )
    
    
    (6
    )
    
    
    20(70
    )
    
    
    (35
    )
    
    
    169Benefits from utilization of net operating loss
carryforwards:Federal
    
    
    
    
    
    
    
    
    
    
    (89
    )State
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89
    )Adjustment of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (233
    )Actual tax expense
    
    $
    609
    
    
    $
    499
    
    
    $
    113
 A reconciliation of actual income tax expense in the financial statements to the
expected tax expense (computed by applying the statutory Federal income tax rate of 34% to
earnings before income taxes) is as follows:
 (In Thousands)
    
    2006
    
    
    2005
    
    
    2004Computed expected tax expense
    
    $
    571
    
    
    $
    497
    
    
    $
    323State income taxes, net of effect of Federal
income taxes
    
    
    68
    
    
    
    59
    
    
    
    49Other, net
    
    
    (30
    )
    
    
    (57
    )
    
    
    (26
    )Deferred tax benefits recognized
    
    
    
    
    
    
    
    
    
    
    (233
    )$
    609
    
    
    $
    499
    
    
    $
    113
 (10)
    
    COMMITMENT AND CONTINGENCIESThe Company is party to litigation and claims arising in the normal course of business.
Management, after consultation with legal counsel, believes that the liabilities, if any,
arising from such litigation and claims will not be material to the consolidated financial
position.The Company entered into several agreements for account processing and various other item
processing services. The agreements expire January, 2007. The monthly fee is based on the
number of accounts
held by the Company and transactions processed. Total fees paid under this agreement in
2006 approximated $410,000.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Total rent expense amounted to $7,000, $4,000 and $5,000, respectively, during the three
years ended December 31, 2006, 2005 and 2004.The Company has entered into two separate federal funds guidelines facilities with certain
time restriction on outstanding borrowings. The lines are generally renewable annually and
bear interest at a variable rate equivalent to the Companys daily internal lending rate.
The combined lines provide for up to $5,000,000 in borrowings.(11)
    
    FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
 The Company is party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of its customers. These financial
instruments consist primarily of commitments to extend credit. These instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of those instruments reflect
the extent of involvement the Company has in particular classes of financial instruments.The Companys exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit is represented by the contractual
notional amount of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet instruments.
 Contract orNotional Amount(In Thousands)
    
    2006
    
    
    2005Financial instruments whose contract amount represent credit risk:Unused commitments to extend credits
    
    $
    15,976
    
    
    $
    10,915Standby letters of credit
    
    
    667
    
    
    
    261Total
    
    $
    16,643
    
    
    $
    11,176
 Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since many
of the commitments are expected to be drawn upon, the total commitment amounts generally
represent future cash requirements. The Company evaluates each customers credit-worthiness
on a case-by-case basis. The amount of collateral, if deemed necessary by the Company upon
extension of credit, is based on managements credit evaluation of the counterparty.
Collateral normally consists of real property.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Standby letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. Those guarantees are primarily issued to
support public and private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. Most guarantees extend from one to two years. The
credit risk involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The fair value of standby letters of credit is
estimated using the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements, the likelihood of the counter parties drawing
on such
financial instruments and the present creditworthiness of such counter parties. Such
commitments have been made on terms which are competitive in the markets in which the
Company operates, thus, the fair value of standby letters of credit equals the carrying
value for the purposes of this disclosure. The maximum potential amount of future payments
that the Company could be required to make under the guarantees totaled $667,000 at December
31, 2006.
 (12)
    
    CONCENTRATION OF CREDIT RISKPractically all of the Companys loans, commitments, and commercial and standby letters of
credit have been granted to customers in the Companys market area. Practically all such
customers are depositors of the subsidiary bank. Investment in state and municipal
securities also include governmental entities within the Companys market area. The
concentrations of credit by type of loan are set forth in note 2 to the financial
statements.At December 31, 2006, the Companys cash and due from banks included commercial bank deposit
aggregating $1,476,000 in excess of the Federal Deposit Insurance Corporation limit of
$100,000 per institution.Federal funds sold were deposited with two banks at December 31, 2006.
 (13)
    
    STOCK OPTION ARRANGEMENTSIn December, 2002, the Board of Directors of the Companys subsidiary bank approved the
First Commerce Bank 2002 Stock Option Plan (the Plan). In conjunction with the Share
Exchange, the Plan and all options outstanding under the Plan were assumed by the Company
and now represent options to purchase a like number of shares of the Companys common stock.
The Plan provides for the granting of stock options, and authorizes the issuance of common
stock upon the exercise of such options, for up to 146,666 shares of common stock to
employees and organizers of the Company and up to 73,334 shares of common stock for future
use as decided by the Board of Directors.Under the Stock Option Plan, stock option awards may be granted in the form of incentive
stock options or nonstatutory stock options, and are generally exercisable for up to ten
years following the date such option awards are granted. Exercise prices of incentive stock
options must be equal to or greater than 100% of the fair market value of the common stock
on the grant date and generally vest at the end of four years. In general, the forfeited
options are available for reissuance.
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Statement of Financial Accounting Standards No. 123 (Revised 2004) (Statement 123R),
Share-Based Payment was adopted by the Company as of January 1, 2006. This accounting
standard revises Statement of Financial Accounting Standards No. 123 (Statement 123),
Accounting for Stock-Based Compensation by requiring that all share-based payments to
employees, including grants of employee stock options, be recognized in the financial
statements based on their fair values at the date of grant. See additional discussion of
this new accounting standard in note 1, Impact of New Accounting Standards.
 Prior to January 1, 2006, the Company accounted for those stock-based employee compensation
plans under the recognition and measurement provisions of APB Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, and related Interpretations, as permitted by
Statement 123; therefore, no stock-based employee compensation cost was recognized in the
consolidated statement of earnings for the years ended December 31, 2005 and 2004; rather,
pro forma compensation cost amounts were disclosed in the notes to the consolidated
financial statements. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of Statement 123-R using the modified-prospective transition method.
Under that transition method, compensation cost recognized in the years ended December 31,
2005 and 2004 includes: (a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated
in accordance with the original provisions of Statement 123, and (b) compensation cost for
all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of Statement 123-R. As the
modified-retrospective transition method was not selected, results for prior periods have
not been restated.The fair value of each grant is estimated on the date of grant using the Black-Scholes
Option Pricing model. For 2004 the minimum value method permitted under SFAS No. 123 with
an expected volatility of zero was used. The following weighted average assumptions used
for grants in 2004. No options were granted in 2006 and 2005.
 2004Expected dividends
    
    
    2.46
    %Expected term (in years)
    
    
    10Expected volatility
    
    
    0
    %Risk-free rate
    
    
    3.40
    %
 A summary of the stock option activity for 2006, 2005 and 2004 is as follows:
 2006
    
    2005
    
    2004Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at
beginning of year
    
    
    158,280
    
    
    $
    12.65
    
    
    
    175,481
    
    
    $
    12.39
    
    
    
    146,665
    
    
    $
    10.00Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,915
    
    
    
    22.00Exercised
    
    
    (4,810
    )
    
    
    10.15
    
    
    
    (15,849
    )
    
    
    10.00
    
    
    
    (6,099
    )
    
    
    10.00Forfeited
    
    
    
    
    
    
    
    
    
    
    (1,352
    )
    
    
    10.00
    
    
    
    
    
    
    
    Outstanding at end
of year
    
    
    153,470
    
    
    $
    12.73
    
    
    
    158,280
    
    
    $
    12.65
    
    
    
    175,481
    
    
    $
    12.39Options exercisable
at year end
    
    
    125,525
    
    
    $
    10.66
    
    
    
    109,183
    
    
    $
    10.00
    
    
    
    86,789
    
    
    $
    10.00
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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 The following table summarizes information about fixed stock options outstanding at
December 31, 2006:
 Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    WeightedAverage
    
    
    Average
    
    
    
    
    
    
    WeightedRange of
    
    Number
    
    
    Remaining
    
    
    Remaining
    
    
    Number
    
    
    AverageExercise
    
    Outstanding
    
    
    Exercise
    
    
    Contractual
    
    
    Exercisable
    
    
    ExercisePrices
    
    at 12/31/06
    
    
    Price
    
    
    Life
    
    
    at 12/31/06
    
    
    Price$ 10
    
    
    118,615
    
    
    $
    10
    
    
    6.0 years
    
    
    118,615
    
    
    $
    10$ 22
    
    
    34,855
    
    
    $
    22
    
    
    7.8 years
    
    
    6,910
    
    
    $
    22153,470
    
    
    
    
    
    
    
    
    
    
    
    125,525Aggregate
intrinsic
value (in
thousands)
    
    $
    2,191
    
    
    
    
    
    
    
    
    
    
    $
    2,051
 The weighted fair value of options granted during the year 2004 was $0.95. The total
intrinsic value of options exercised during the years 2006, 2005 and 2004 was $78,000,
$234,000 and $73,000, respectively.As a result of adopting SFAS No. 123R on January 1, 2006, the Companys earnings before
taxes and net earnings were $15,000 lower than if it had continued to account for
share-based compensation expense under APB No. 25. Basic and diluted earnings per share
were reduced by $.01 per share by the adoption of SFAS No. 123-R during the year ended
December 31, 2006.Prior to the adoption of Statement 123-R, the Company presented all tax benefits of
deductions resulting from the exercise of stock options as operating cash flows in the
statement of cash flows. Statement 123-R requires the cash flows resulting from the tax
benefits of tax deductions in excess of the compensation cost recognized for those options
to be classified as financing cash flows. The Company had no excess tax benefits to reflect
as financing cash inflows for the three years ended December 31, 2006.
 F - 31




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Prior to the adoption of Statement 123-R on January 1, 2006, Statement 123 allowed for the
choice of continuing to follow APB 25, and the related interpretations, or selecting the
fair value method of expense recognition as described in Statement 123. The Company elected
to follow APB 25 in accounting for its employee stock options in prior periods. Proforma
net earnings and net earnings per share data is presented below for the years 2005 and 2004,
as if the fair-value method has been applied in measuring compensation costs (note:
Proforma amounts for the year 2006 are not applicable based upon the adoption of Statement
123-R during the first quarter of 2006):
 In Thousands,(In Thousands,
    
    
    
    Except Per Share AmountsExcept Per Share Amounts)
    
    
    
    2005
    
    
    2004Net earnings
    
    As Reported
    
    $
    965
    
    
    $
    837Proforma
    
    $
    949
    
    
    $
    835Basic earnings per
common share
    
    As Reported
    
    $
    0.76
    
    
    $
    0.67Proforma
    
    $
    0.75
    
    
    $
    0.67Diluted earnings per
common share
    
    As Reported
    
    $
    0.72
    
    
    $
    0.65Proforma
    
    $
    0.71
    
    
    $
    0.65
 As of December 31, 2006 there was $21,000 of total unrecognized cost related to non-vested
share-based compensation arrangements grant under the Plan. The cost is expected to be
recognized over a weighted-average period of 1.85 years.The Company did not approve the acceleration of vesting of any of its stock options prior to
the adoption of SFAS No. 123-R.(14)
    
    REGULATORY MATTERS AND RESTRICTIONS ON DIVIDENDSThe Company is subject to regulatory capital requirements administered by the Federal
Deposit Insurance Corporation, the Federal Reserve and the Tennessee Department of Financial
Institutions. Failure to meet capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that could, in that event, have a
direct material effect on the institutions financial statements. The relevant regulations
require the Company to meet specific capital adequacy guidelines that involve quantitative
measures of the Companys assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting principles. The Companys capital classifications
are also subject to qualitative judgments by the Companys regulators about components, risk
weightings and other factors. Those qualitative judgments could also affect the Companys
capital status and the amount of dividends the Company may distribute.On October 18, 2006, the Board of Directors approved a 2% stock dividend on voting common
stock outstanding at December 1, 2006. On December 20, 2006, 25,487 shares of common stock
were issued pursuant to this stock dividend.
 F - 32




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 The Company and the Bank are required to maintain minimum amounts of capital to total risk
weighted asserts, as defined by the banking regulators. At December 31, 2006, the Company
and its bank subsidiary are required to have minimum Tier I and total risk-based capital
ratios of 4% and 8%, respectively, and a leverage ratio of 4%. The capital ratios required
to be well-capitalized under the Prompt Correction Action Provisions of the Regulations
administered by the federal banking agencies are 6%, 10% and 5%, respectively. The actual
ratios of the Company and the Bank were as follows:
 First CommerceBancorp
    
    First Commerce Bank2006
    
    2006
    
    2005Tier I ratio
    
    
    12.5
    %
    
    
    12.5
    %
    
    
    13.5
    %Total risk-based ratio
    
    
    13.6
    %
    
    
    13.6
    %
    
    
    16.5
    %Leverage ratio
    
    
    8.6
    %
    
    
    8.6
    %
    
    
    9.5
    %
 As of December 31, 2006, the most recent notification from the banking regulators
categorized the Company and the Bank as well capitalized under the regulatory framework for
prompt corrective action.There are no conditions or events since the notification that management believes have
changed the Companys category.No capital ratios were shown for 2005 related to First Commerce Bancorp due to the share
exchange between the Company and the Bank being effective October 1, 2006. Under the terms
of an agreement with the Banks regulatory agency, the Bank was restricted from paying
dividends for a period of three years from the date of inception (December 2, 2002) to
December 2, 2005.
 (15)
    
    RETIREMENT PLANThe Company has adopted a 401(K) profit sharing plan for its employees. To participate in
the Plan an employee must have been an employee at the adoption date. Subsequent to the
initial enrollment an employee must complete one year of service and have attained the age
of twenty-one to be eligible. The Company made $103,313, $88,047 and $30,375, respectively,
in contributions to the Plan during 2006, 2005 and 2004. The Company pays all expenses of
the Plan which were minimal in 2006, 2005 and 2004.In December, 2005, the Company adopted a Supplemental Executive Retirement Plan (SERP) for
the benefit of certain offices of the Company. The Plan provides for retirement benefits
for 180 months after the executives retires. The Plan is not qualified under Section 401 of
the Internal Revenue Code. At December 31, 2006, the SERP liability totaled $67,000. The
Company expensed $64,000 in 2006 and $3,000 in 2005 related to the Plan.
 F - 33




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (16)
    
    EARNINGS PER SHAREStatement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share establishes
uniform standards for computing and presenting earnings per share. The computation of basic
earnings per share is based on the weighted average number of common shares outstanding
during the period. For the Company the computation of diluted earnings per share begins
with the basic earnings per share plus the effect of common shares contingently issuable
from stock options.The following is a summary of the components comprising basic and diluted earnings per share
(EPS):
 (In Thousands, Except Share and Per Share Amounts)
    
    2006
    
    
    2005
    
    
    2004Basic EPS Computation:Numerator  Net earnings for the period
    
    $
    1,078
    
    
    $
    965
    
    
    $
    837Denominator  Weighted average number
of common shares outstanding
    
    
    1,275,118
    
    
    
    1,261,462
    
    
    
    1,252,864Basic net earnings per common share
    
    $
    .85
    
    
    $
    .76
    
    
    $
    .67Diluted EPS Computation:Numerator  Net earnings for the period
    
    $
    1,078
    
    
    $
    965
    
    
    $
    837Denominator:Weighted average number of common
shares outstanding
    
    
    1,275,118
    
    
    
    1,261,462
    
    
    
    1,252,864Dilutive effect of stock options
    
    
    78,772
    
    
    
    76,575
    
    
    
    26,0221,353,890
    
    
    
    1,338,037
    
    
    
    1,278,886Diluted net earnings per common share
    
    $
    .80
    
    
    $
    .72
    
    
    $
    .65
 F - 34




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (17)
    
    FIRST COMMERCE BANCORP, INC. -
      Parent Company Financial Information
 FIRST COMMERCE BANCORP, INC.
(Parent Company Only)
 Balance Sheet
 December 31, 2006
 (In Thousands)
    
    2006ASSETSInvestment in wholly-owned commercial bank subsidiary
    
    $
    14,384
    *Deferred tax asset
    
    
    10Receivable from wholly-owned commercial bank subsidiary
    
    
    12
    *Total assets
    
    $
    14,406LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    5Stockholders equity:Preferred stock, no par, authorized 20,000,000 shares
    
    
    Common stock, par value $1.00 per share, authorized 20,000,000 shares,
1,302,245 shares issued and outstanding
    
    
    1,302Additional paid-in capital
    
    
    12,184Retained earnings
    
    
    1,269Unrealized losses on available-for-sale securities net of income taxes of $220,000
    
    
    (354
    )Total stockholders equity
    
    
    14,401Total liabilities and stockholders equity
    
    $
    14,406
 
 *
    
    Eliminated in consolidation. F - 35




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (17)
    
    FIRST COMMERCE BANCORP, INC. -
     Parent Company Financial Information, Continued
 FIRST COMMERCE BANCORP, INC.
(Parent Company Only)
 Statement of Earnings and Comprehensive Earnings
 For the Period October 1, 2006 (Inception) through December 31, 2006
 (In Thousands)
    
    2006Operating expense
    
    $
    36Loss before Federal and State income tax benefits and
equity in undistributed earnings of wholly-owned commercial
bank subsidiary
    
    
    (36
    )Federal and state income tax benefits
    
    
    14Equity in undistributed earnings of wholly-owned commercial bank subsidiary
    
    
    270
    *Net earnings
    
    
    248Other comprehensive earnings, net of tax:Unrealized earnings on available-for-sale-securities arising during period, net
of taxes of $105,000
    
    
    169Other comprehensive earnings
    
    
    169Comprehensive earnings
    
    $
    417
 
 *
    
    Eliminated in consolidation. F - 36




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (17)
    
    FIRST COMMERCE BANCORP, INC. -
      Parent Company Financial Information, Continued
 FIRST COMMERCE BANCORP, INC.
(Parent Company Only)
 Statement of Changes in Stockholders Equity
 For the Period October 1, 2006 (Inception) through December 31, 2006
 Net UnrealizedLoss onAdditional
    
    
    
    
    
    
    Available-Common
    
    
    Paid-In
    
    
    Retained
    
    
    For-Sale-(In Thousands)
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Securities
    
    
    TotalAcquisition by share
exchange with
First Commerce Bank,
October 1, 2006
    
    $
    1,275
    
    
    $
    11,483
    
    
    $
    1,710
    
    
    $
    (523
    )
    
    $
    13,945Issuance of 2,220 shares
of stock pursuant to
exercise of stock options
and related tax benefit
    
    
    2
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    36Issuance of 25,487
shares of stock
pursuant to a 2%
stock dividend
    
    
    25
    
    
    
    663
    
    
    
    (688
    )
    
    
    
    
    
    
    Cash payment related to
fractional shares of
stock dividend
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Stock based compensation
expense
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Net change in unrealized
loss on available-for-
sale securities during
the year, net of taxes
of $105,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    169Net earnings for the
period October 1, 2006
(Inception) through
December 1, 2006
    
    
    
    
    
    
    
    
    
    
    248
    
    
    
    
    
    
    
    248Balance December 31,
2006
    
    $
    1,302
    
    
    $
    12,184
    
    
    $
    1,269
    
    
    $
    (354
    )
    
    $
    14,401
 F - 37




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (17)
    
    FIRST COMMERCE BANCORP, INC. 
      Parent Company Financial Information, Continued
 FIRST COMMERCE BANCORP, INC.
(Parent Company Only)
 Statement of Cash Flows
 For the Period October 1, 2006 (Inception) through December 31, 2006
 Increase (Decrease) in Cash and Cash Equivalents
 (In Thousands)
    
    2006Cash flows from operating activities:Cash paid to suppliers and other
    
    $
    (22
    )Net cash used in operating activities
    
    
    (22
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    22Net cash provided by financing activities
    
    
    22Net change in cash and cash equivalents
    
    
    Cash and cash equivalents at beginning of period
    
    
    Cash and cash equivalents at end of period
    
    $
    
 F - 38




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (17)
    
    FIRST COMMERCE BANCORP, INC. -
      Parent Company Financial Information, Continued
 FIRST COMMERCE BANCORP, INC.
(Parent Company Only)
 Statement of Cash Flows, Continued
 For the Year Ended December 31, 2006
 Increase (Decrease) in Cash and Cash Equivalents
 (In Thousands)
    
    2006Reconciliation of net earnings to net cash used in operating activities:Net earnings
    
    $
    248Adjustments to reconcile net earnings to net cash used in operating activities:Equity in earnings of wholly-owned commercial bank subsidiary
    
    
    (270
    )Stock option-based compensation expense
    
    
    4Increase in accounts payable to wholly-owned commercial bank subsidiary
    
    
    10Decrease (increase) in refundable income taxes
    
    
    (14
    )(270
    )Net cash used in operating activities
    
    $
    (22
    )
 F - 39




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 (18)
    
    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTSStatement of Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of
Financial Instruments requires that the Company disclose estimated fair values for its
financial instruments. Fair value estimates, methods, and assumptions are set forth below
for the Companys financial instruments.
 Cash and short-term investments
 For those short-term instruments, the carrying amount is a reasonable estimate of
fair value.
 Federal Funds Sold
 The fair value of Federal funds purchased approximates the carrying amount since
they are payable on demand.
 Securities
 The carrying amounts for short-term securities approximate fair value because they
mature in 90 days or less and do not present unanticipated credit concerns. The
fair value of longer-term securities and mortgage-backed securities, except certain
state and municipal securities, is estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers. The fair
value of certain state and municipal securities is not readily available through
market sources other than dealer quotations, so fair value estimates are based on
quoted market prices of similar instruments, adjusted for differences between the
quoted instruments and the instruments being valued.
 Loans
 Fair value are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, mortgage and
other consumer. Each loan category is further segmented into fixed and adjustable
rate interest terms.The fair value of the various categories of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining average estimated
maturities.The estimated maturity for mortgages is modified from the contractual terms to give
consideration to managements experience with prepayments. Management has made
estimates of fair value discount rates that it believes to be reasonable. However,
because there is no market for many of these financial instruments, management has
no basis to determine whether the fair value presented would be indicative of the
value negotiated in an actual sale.The value of the loan portfolio is also discounted in consideration of the credit
quality of the loan portfolio as would be the case between willing buyers and
sellers. Particular emphasis has been given to loans on the Banks internal watch
list. Valuation of these loans is based upon borrower performance, collateral
values (including external appraisals), etc.
 F - 40




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Deposit Liabilities
  Advances from Federal Home Loan Bank
  Commitments to Extend Credit, Standby Letters of Credit and Financial Guarantees
Written
   (In Thousands)2006
    
    
    2005Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assets:Cash and short-term investments
    
    $
    2,393
    
    
    $
    2,393
    
    
    $
    1,882
    
    
    $
    1,882Federal funds sold
    
    
    7,391
    
    
    
    7,391
    
    
    
    3,066
    
    
    
    3,066Securities
    
    
    43,855
    
    
    
    43,799
    
    
    
    36,386
    
    
    
    36,314Restricted equity securities
    
    
    602
    
    
    
    640
    
    
    
    335
    
    
    
    438Loans
    
    
    114,423
    
    
    
    
    
    
    
    99,427Less: allowance for loan losses
    
    
    (1,340
    )
    
    
    
    
    
    
    (1,197
    )Loans, net of allowance
    
    
    113,083
    
    
    
    109,722
    
    
    
    98,230
    
    
    
    95,217Financial liabilities:Deposits
    
    
    153,682
    
    
    
    154,098
    
    
    
    132,513
    
    
    
    132,409Advances from Federal Home Loan Bank
    
    
    5,000
    
    
    
    5,088
    
    
    
    
    
    
    
    Unrecognized financial instruments:Unused commitments to extend credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 F - 41




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Notes to Consolidated Financial Statements, Continued  December 31, 2006 and 2005
 Limitations
   (19) QUARTERLY FINANCIAL DATA (UNAUDITED)
  (In Thousands, except per share data)2006
    
    2005Fourth
    
    Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    FirstQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterInterest income
    
    $
    2,758
    
    
    $
    2,602
    
    
    $
    2,451
    
    
    $
    2,270
    
    
    $
    2,109
    
    
    $
    1,934
    
    
    $
    1,721
    
    
    $
    1,558Net interest income
    
    
    1,287
    
    
    
    1,259
    
    
    
    1,248
    
    
    
    1,225
    
    
    
    1,219
    
    
    
    1,123
    
    
    
    1,032
    
    
    
    989Provision for loan
losses
    
    
    52
    
    
    
    74
    
    
    
    24
    
    
    
    18
    
    
    
    40
    
    
    
    93
    
    
    
    45
    
    
    
    37Earnings before income
taxes
    
    
    395
    
    
    
    389
    
    
    
    477
    
    
    
    426
    
    
    
    447
    
    
    
    287
    
    
    
    355
    
    
    
    375Net earnings
    
    
    247
    
    
    
    256
    
    
    
    312
    
    
    
    263
    
    
    
    335
    
    
    
    174
    
    
    
    225
    
    
    
    231Basic earnings per
common share
    
    
    .20
    
    
    
    .20
    
    
    
    .24
    
    
    
    .21
    
    
    
    0.26
    
    
    
    0.14
    
    
    
    0.18
    
    
    
    0.18Diluted earnings per
common share
    
    
    .19
    
    
    
    .19
    
    
    
    .23
    
    
    
    .19
    
    
    
    0.24
    
    
    
    0.13
    
    
    
    0.17
    
    
    
    0.18
 F - 42




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 I.
    
    Distribution of Assets, Liabilities and Stockholders Equity:Interest Rate and Interest DifferentialThe Schedule which follows indicates the average balances for each major balance sheet item,
an analysis of net interest income and the change in interest income and interest expense
attributable to changes in volume and changes in rates.The difference between interest income on interest-earning assets and interest expense on
interest-bearing liabilities is net interest income, which is the Companys gross margin.
Analysis of net interest income is more meaningful when income from tax-exempt earning
assets is adjusted to a tax equivalent basis. Accordingly, the following schedule includes
a tax equivalent adjustment of tax-exempt earning assets, assuming a weighted average
Federal income tax rate of 34%.In this Schedule change due to volume is the change in volume multiplied by the interest
rate for the prior year. Change due to rate is the change in interest rate multiplied by
the volume for the prior year. Changes in interest income and expense not due solely to
volume or rate changes have been allocated to the change due to volume and change due to
rate in proportion to the relationship of the absolute dollar amounts of the change in each
category.Non-accrual loans have been included in the loan category for 2006, 2005 and 2004,
respectively. Loan fees of $225,000, $168,000 and $143,000 for 2006, 2005 and 2004,
respectively, are included in loan income and represent an adjustment of the yield on these
loans.
 F - 43




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 
 In Thousands, Except Interest Rates2006
    
    
    2005
    
    
    2006/2005 ChangeAverage
    
    
    Interest
    
    
    Income/
    
    
    Average
    
    
    Interest
    
    
    Income/
    
    
    Due to
    
    
    Due toBalance
    
    
    Rate
    
    
    Expense
    
    
    Balance
    
    
    Rate
    
    
    Expense
    
    
    Volume
    
    
    Rate
    
    
    TotalLoans, net of unearned interest
    
    $
    105,795
    
    
    
    7.39
    %
    
    
    7,821
    
    
    
    87,326
    
    
    
    6.58
    %
    
    
    5,744
    
    
    
    1,313
    
    
    
    764
    
    
    
    2,077Investment securities  taxable
    
    
    42,701
    
    
    
    4.64
    
    
    
    1,980
    
    
    
    34,091
    
    
    
    4.17
    
    
    
    1,421
    
    
    
    387
    
    
    
    172
    
    
    
    559Investments securities  tax-
exempt
    
    
    87
    
    
    
    3.45
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Taxable equivalent adjustment
    
    
    
    
    
    
    1.95
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Total tax-exempt
investment securities
    
    
    87
    
    
    
    5.75
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Federal funds sold
    
    
    4,905
    
    
    
    5.22
    
    
    
    256
    
    
    
    4,613
    
    
    
    3.10
    
    
    
    143
    
    
    
    10
    
    
    
    103
    
    
    
    113Interest-bearing deposits in
financial institutions
    
    
    297
    
    
    
    .34
    
    
    
    1
    
    
    
    100
    
    
    
    3.00
    
    
    
    3
    
    
    
    3
    
    
    
    (5
    )
    
    
    (2
    )Restricted equity securities
    
    
    477
    
    
    
    4.19
    
    
    
    20
    
    
    
    320
    
    
    
    3.13
    
    
    
    10
    
    
    
    6
    
    
    
    4
    
    
    
    10Total earning assets
    
    
    154,262
    
    
    
    6.54
    
    
    
    10,083
    
    
    
    126,450
    
    
    
    5.79
    
    
    
    7,321
    
    
    
    1,738
    
    
    
    1,024
    
    
    
    2,762Cash and due from banks
    
    
    2,325
    
    
    
    
    
    
    
    
    
    
    
    1,883Allowance for loan losses
    
    
    (1,245
    )
    
    
    
    
    
    
    
    
    
    
    (1,099
    )Bank premises and equipment
    
    
    3,707
    
    
    
    
    
    
    
    
    
    
    
    3,262Other assets
    
    
    3,306
    
    
    
    
    
    
    
    
    
    
    
    1,535Total assets
    
    $
    162,355
    
    
    
    
    
    
    
    
    
    
    
    132,031
 F - 44




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 In Thousands, Except Interest Rates2006
    
    
    2005
    
    
    2006/2005 ChangeAverage
    
    
    Interest
    
    
    Income/
    
    
    Average
    
    
    Interest
    
    
    Income/
    
    
    Due to
    
    
    Due toBalance
    
    
    Rate
    
    
    Expense
    
    
    Balance
    
    
    Rate
    
    
    Expense
    
    
    Volume
    
    
    Rate
    
    
    TotalDeposits:Negotiable order of
withdrawal accounts
    
    $
    6,845
    
    
    
    1.24
    %
    
    
    85
    
    
    
    6,569
    
    
    
    1.19
    %
    
    
    78
    
    
    
    4
    
    
    
    3
    
    
    
    7Money market demand
accounts
    
    
    22,312
    
    
    
    2.73
    
    
    
    610
    
    
    
    25,521
    
    
    
    1.95
    
    
    
    497
    
    
    
    (69
    )
    
    
    182
    
    
    
    113Individual retirement accounts
    
    
    6,635
    
    
    
    4.58
    
    
    
    304
    
    
    
    4,295
    
    
    
    3.45
    
    
    
    148
    
    
    
    97
    
    
    
    59
    
    
    
    156Other savings deposits
    
    
    3,599
    
    
    
    .75
    
    
    
    27
    
    
    
    2,357
    
    
    
    0.76
    
    
    
    18
    
    
    
    9
    
    
    
    
    
    
    
    9Certificates of deposit
$100,000 and over
    
    
    51,889
    
    
    
    4.47
    
    
    
    2,322
    
    
    
    40,846
    
    
    
    3.35
    
    
    
    1,368
    
    
    
    427
    
    
    
    527
    
    
    
    954Certificates of deposit
under $100,000
    
    
    34,124
    
    
    
    4.32
    
    
    
    1,474
    
    
    
    25,819
    
    
    
    3.29
    
    
    
    849
    
    
    
    317
    
    
    
    308
    
    
    
    625Total interest-bearing
deposits
    
    
    125,404
    
    
    
    3.85
    
    
    
    4,822
    
    
    
    105,407
    
    
    
    2.81
    
    
    
    2,958
    
    
    
    632
    
    
    
    1,232
    
    
    
    1,864Advances from Federal Home
Loan Bank
    
    
    4,932
    
    
    
    4.86
    
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    240Federal funds purchased
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    2.27
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total interest-bearing
deposits and borrowed
funds
    
    
    130,359
    
    
    
    3.88
    
    
    
    5,062
    
    
    
    105,451
    
    
    
    2.81
    
    
    
    2,959
    
    
    
    805
    
    
    
    1,298
    
    
    
    2,103Demand deposits
    
    
    17,200
    
    
    
    
    
    
    
    
    
    
    
    12,523Other liabilities
    
    
    1,246
    
    
    
    
    
    
    
    
    
    
    
    1,195Stockholders equity
    
    
    13,550
    
    
    
    
    
    
    
    
    
    
    
    12,862Total liabilities and
stockholders equity
    
    $
    162,355
    
    
    
    
    
    
    
    
    
    
    
    132,031Net interest income
    
    
    
    
    
    
    
    
    
    
    5,021
    
    
    
    
    
    
    
    
    
    
    
    4,362
    
    
    
    
    
    
    
    
    
    
    
    659Net yield on earning assets
    
    
    
    
    
    
    3.25
    %
    
    
    
    
    
    
    
    
    
    
    3.45
    %Net interest spread
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %
 F - 45




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 In Thousands, Except Interest Rates2005
    
    
    2004
    
    
    2005/2004 ChangeAverage
    
    
    Interest
    
    
    Income/
    
    
    Average
    
    
    Interest
    
    
    Income/
    
    
    Due to
    
    
    Due toBalance
    
    
    Rate
    
    
    Expense
    
    
    Balance
    
    
    Rate
    
    
    Expense
    
    
    Volume
    
    
    Rate
    
    
    TotalLoans, net of unearned interest
    
    $
    87,326
    
    
    
    6.58
    %
    
    
    5,744
    
    
    
    72,115
    
    
    
    5.88
    %
    
    
    4,241
    
    
    
    960
    
    
    
    543
    
    
    
    1,503Investment securities  taxable
    
    
    34,091
    
    
    
    4.17
    
    
    
    1,421
    
    
    
    17,329
    
    
    
    3.72
    
    
    
    645
    
    
    
    690
    
    
    
    86
    
    
    
    776Federal funds sold
    
    
    4,613
    
    
    
    3.10
    
    
    
    143
    
    
    
    4,165
    
    
    
    1.34
    
    
    
    56
    
    
    
    7
    
    
    
    80
    
    
    
    87Interest-bearing deposits in
financial institutions
    
    
    100
    
    
    
    3.00
    
    
    
    3
    
    
    
    100
    
    
    
    3.00
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Restricted equity securities
    
    
    320
    
    
    
    3.13
    
    
    
    10
    
    
    
    203
    
    
    
    1.97
    
    
    
    4
    
    
    
    3
    
    
    
    3
    
    
    
    6Total earning assets
    
    
    126,450
    
    
    
    5.79
    
    
    
    7,321
    
    
    
    93,912
    
    
    
    5.27
    
    
    
    4,949
    
    
    
    1,847
    
    
    
    525
    
    
    
    2,372Cash and due from banks
    
    
    1,883
    
    
    
    
    
    
    
    
    
    
    
    1,447Allowance for loan losses
    
    
    (1,099
    )
    
    
    
    
    
    
    
    
    
    
    (924
    )Bank premises and equipment
    
    
    3,262
    
    
    
    
    
    
    
    
    
    
    
    2,670Other assets
    
    
    1,535
    
    
    
    
    
    
    
    
    
    
    
    868Total assets
    
    $
    132,031
    
    
    
    
    
    
    
    
    
    
    
    97,973
 F - 46




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 In Thousands, Except Interest Rates2005
    
    
    2004
    
    
    2005/2006 ChangeAverage
    
    
    Interest
    
    
    Income/
    
    
    Average
    
    
    Interest
    
    
    Income/
    
    
    Due to
    
    
    Due toBalance
    
    
    Rate
    
    
    Expense
    
    
    Balance
    
    
    Rate
    
    
    Expense
    
    
    Volume
    
    
    Rate
    
    
    TotalDeposits:Negotiable order of
withdrawal accounts
    
    $
    6,569
    
    
    
    1.19
    %
    
    
    78
    
    
    
    5,395
    
    
    
    1.02
    %
    
    
    55
    
    
    
    13
    
    
    
    10
    
    
    
    23Money market demand
accounts
    
    
    25,521
    
    
    
    1.95
    
    
    
    497
    
    
    
    17,688
    
    
    
    1.48
    
    
    
    261
    
    
    
    138
    
    
    
    98
    
    
    
    236Individual retirement accounts
    
    
    4,295
    
    
    
    3.45
    
    
    
    148
    
    
    
    2,214
    
    
    
    2.57
    
    
    
    57
    
    
    
    67
    
    
    
    24
    
    
    
    91Other savings deposits
    
    
    2,357
    
    
    
    0.76
    
    
    
    18
    
    
    
    1,796
    
    
    
    0.61
    
    
    
    11
    
    
    
    4
    
    
    
    3
    
    
    
    7Certificates of deposit
$100,000 and over
    
    
    40,846
    
    
    
    3.35
    
    
    
    1,368
    
    
    
    30,290
    
    
    
    2.64
    
    
    
    800
    
    
    
    321
    
    
    
    247
    
    
    
    568Certificates of deposit
under $100,000
    
    
    25,819
    
    
    
    3.29
    
    
    
    849
    
    
    
    18,587
    
    
    
    2.58
    
    
    
    480
    
    
    
    216
    
    
    
    153
    
    
    
    369Total interest-bearing
deposits
    
    
    105,407
    
    
    
    2.81
    
    
    
    2,958
    
    
    
    75,970
    
    
    
    2.19
    
    
    
    1,664
    
    
    
    748
    
    
    
    546
    
    
    
    1,294Federal funds purchased
    
    
    44
    
    
    
    2.27
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total interest-bearing
deposits and borrowed
funds
    
    
    105,451
    
    
    
    2.81
    
    
    
    2,959
    
    
    
    75,970
    
    
    
    2.19
    
    
    
    1,664
    
    
    
    749
    
    
    
    546
    
    
    
    1,295Demand deposits
    
    
    12,523
    
    
    
    
    
    
    
    
    
    
    
    9,340Other liabilities
    
    
    1,195
    
    
    
    
    
    
    
    
    
    
    
    669Stockholders equity
    
    
    12,862
    
    
    
    
    
    
    
    
    
    
    
    11,994Total liabilities and
stockholders equity
    
    $
    132,031
    
    
    
    
    
    
    
    
    
    
    
    97,973Net interest income
    
    
    
    
    
    
    
    
    
    
    4,362
    
    
    
    
    
    
    
    
    
    
    
    3,285
    
    
    
    
    
    
    
    
    
    
    
    1,077Net yield on earning assets
    
    
    
    
    
    
    3.45
    %
    
    
    
    
    
    
    
    
    
    
    3.50
    %Net interest spread
    
    
    
    
    
    
    2.98
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %
 F - 47




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 Investment Portfolio:
  2006Securities Held-To-Maturity(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
Government agencies and
corporation
    
    $
    2,200
    
    
    
    
    
    
    
    46
    
    
    
    2,154Mortgage-backed securities
    
    
    320
    
    
    
    
    
    
    
    10
    
    
    
    310$
    2,520
    
    
    
    
    
    
    
    56
    
    
    
    2,464
 2006Securities Available-For-Sale(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other
U.S. government agencies
and corporations
    
    $
    30,483
    
    
    
    63
    
    
    
    333
    
    
    
    30,213Mortgage-backed securities
    
    
    9,993
    
    
    
    
    
    
    
    293
    
    
    
    9,700Collateralized mortgage
obligations
    
    
    282
    
    
    
    
    
    
    
    10
    
    
    
    272Obligations of states and
political subdivisions
    
    
    1,151
    
    
    
    
    
    
    
    1
    
    
    
    1,150$
    41,909
    
    
    
    63
    
    
    
    637
    
    
    
    41,335
 F - 48




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 II.
    
    Investment Portfolio, Continued:A.
    
    Continued:Securities at December 31, 2005 consist of the following:
 2005Securities Held-To-Maturity(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
Government agencies and
corporation
    
    $
    2,200
    
    
    
    
    
    
    
    62
    
    
    
    2,138Mortgage-backed securities
    
    
    396
    
    
    
    
    
    
    
    10
    
    
    
    386$
    2,596
    
    
    
    
    
    
    
    72
    
    
    
    2,524
 2005Securities Available-For-Sale(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
Government agencies and
corporations
    
    $
    21,638
    
    
    
    
    
    
    
    413
    
    
    
    21,225Mortgage-backed securities
    
    
    12,580
    
    
    
    
    
    
    
    400
    
    
    
    12,180Collateralized mortgage
obligations
    
    
    399
    
    
    
    
    
    
    
    14
    
    
    
    385$
    34,617
    
    
    
    
    
    
    
    827
    
    
    
    33,790
 F - 49




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 II.
    
    Investment Portfolio, Continued:A.
    
    Continued:Investment securities at December 31, 2004 consist of the following:
 2004Securities Held-To-Maturity(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
Government agencies and
corporation
    
    $
    2,200
    
    
    
    7
    
    
    
    12
    
    
    
    2,195Mortgage-backed securities
    
    
    505
    
    
    
    3
    
    
    
    
    
    
    
    508$
    2,705
    
    
    
    10
    
    
    
    12
    
    
    
    2,703
 2004Securities Available-For-Sale(In Thousands)Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueU.S. Treasury and other U.S.
Government agencies and
corporations
    
    $
    12,167
    
    
    
    26
    
    
    
    14
    
    
    
    12,179Mortgage-backed securities
    
    
    10,039
    
    
    
    9
    
    
    
    115
    
    
    
    9,933Collateralized mortgage
obligations
    
    
    575
    
    
    
    
    
    
    
    9
    
    
    
    566$
    22,781
    
    
    
    35
    
    
    
    138
    
    
    
    22,678
 F - 50




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 II.
    
    Investment Portfolio, Continued:
 B.
    
    The following schedule details the estimated maturities and weighted average
yields of investment securities (including mortgage backed securities) of the Company
at December 31, 2006.
 Estimated
    
    
    WeightedAmortized
    
    
    Market
    
    
    AverageHeld-To-Maturity Securities
    
    Cost
    
    
    Value
    
    
    Yields(In Thousands, Except Yields)Obligations of U.S. Treasury and other U.S.
Government agencies and corporations:Less than one year
    
    $
    
    
    
    
    
    
    
    
    
    %One to five years
    
    
    400
    
    
    
    387
    
    
    
    3.35Over five years through 10 years
    
    
    400
    
    
    
    387
    
    
    
    4.65Over 10 years
    
    
    1,400
    
    
    
    1,380
    
    
    
    6.00Total securities of U.S. Treasury
and other U.S. Government
agencies and corporation
    
    
    2,200
    
    
    
    2,154
    
    
    
    5.27Other:Mortgage-backed securities
    
    
    320
    
    
    
    310
    
    
    
    4.22Total held-to-maturity securities
    
    $
    2,520
    
    
    
    2,464
    
    
    
    5.14
    %
 F - 51




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 II.
    
    Investment Portfolio, Continued:
 B.
    
    Continued:
 Estimated
    
    
    WeightedAmortized
    
    
    Market
    
    
    AverageAvailable-For-Sale Securities
    
    Cost
    
    
    Value
    
    
    Yields(In Thousands, Except Yields)U.S. Treasury and other U.S. Government
agencies and corporations:Less than one year
    
    $
    500
    
    
    
    499
    
    
    
    4.02
    %One to five years
    
    
    16,995
    
    
    
    16,714
    
    
    
    4.32Over five years through 10 years
    
    
    8,997
    
    
    
    8,966
    
    
    
    5.67Over 10 years
    
    
    3,991
    
    
    
    4,034
    
    
    
    5.59Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations
    
    
    30,483
    
    
    
    30,213
    
    
    
    4.88Obligations of states and political
subdivision:Less than one year
    
    
    
    
    
    
    
    
    
    
    One to five years
    
    
    
    
    
    
    
    
    
    
    Over five years through 10 years
    
    
    
    
    
    
    
    
    
    
    Over 10 years
    
    
    1,151
    
    
    
    1,150
    
    
    
    3.85Total obligations of states and
political subdivisions
    
    
    1,151
    
    
    
    1,150
    
    
    
    3.85Other:Collateralized mortgage obligations
    
    
    282
    
    
    
    272
    
    
    
    3.21Mortgage-backed securities
    
    
    9,993
    
    
    
    9,700
    
    
    
    4.09Total available-for-sale securities
    
    $
    41,909
    
    
    
    41,335
    
    
    
    4.66
    %
 F - 52




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 III.
    
    Loan Portfolio:
 A.
    
    Loan TypesThe following schedule details the loans of the Company at December 31, 2006, 2005,
2004, 2003 and 2002.
 In Thousands2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Commercial, financial and
agricultural
    
    $
    53,278
    
    
    
    45,307
    
    
    
    34,421
    
    
    
    27,602
    
    
    
    7,090Real estate  construction
    
    
    16,426
    
    
    
    12,420
    
    
    
    5,573
    
    
    
    3,149
    
    
    
    176Real estate  mortgage
    
    
    37,269
    
    
    
    34,440
    
    
    
    31,481
    
    
    
    26,152
    
    
    
    3,598Consumer
    
    
    7,450
    
    
    
    7,260
    
    
    
    6,675
    
    
    
    5,480
    
    
    
    928Total loans
    
    
    114,423
    
    
    
    99,427
    
    
    
    78,150
    
    
    
    62,383
    
    
    
    11,792Less allowance for loan
losses
    
    
    (1,340
    )
    
    
    (1,197
    )
    
    
    (1,001
    )
    
    
    (785
    )
    
    
    (147
    )Net loans
    
    $
    113,083
    
    
    
    98,230
    
    
    
    77,149
    
    
    
    61,598
    
    
    
    11,645
 B.
    
    Maturities and Sensitivities of Loans to Changes in Interest RatesThe following schedule details maturities and sensitivity to interest rates changes
for commercial loans of the Company at December 31, 2006:
 In Thousands1 Year toLess Than
    
    
    Less Than
    
    
    After 51 Year*
    
    
    5 Years
    
    
    Years
    
    
    TotalMaturity Distribution:Commercial, financial
and agricultural
    
    $
    15,653
    
    
    
    35,060
    
    
    
    2,565
    
    
    
    53,278Real estate  construction
    
    
    11,082
    
    
    
    4,865
    
    
    
    479
    
    
    
    16,426$
    26,735
    
    
    
    39,925
    
    
    
    3,044
    
    
    
    69,704Interest-Rate Sensitivity:Fixed interest rates
    
    $
    12,265
    
    
    
    28,132
    
    
    
    
    
    
    
    40,397Floating or adjustable
interest rates
    
    
    14,470
    
    
    
    11,793
    
    
    
    3,044
    
    
    
    29,307Total commercial,
financial and
agricultural loans
plus real estate -
construction loans
    
    $
    26,735
    
    
    
    39,925
    
    
    
    3,044
    
    
    
    69,704
 
 *
    
    Includes demand loans, bankers acceptances, commercial paper and deposit notes. F - 53




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 III.
    
    Loan Portfolio, Continued:
 C.
    
    Risk ElementsThe following schedule details selected information as to non-performing loans of the
Company at December 31, 2006, 2005, 2004, 2003 and 2002:
 In Thousands, Except Percentages2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Non accrual loans:Commercial, financial
and agricultural
    
    $
    2
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Real estate -
construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    25
    
    
    
    57
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-accrual
    
    $
    2
    
    
    
    28
    
    
    
    60
    
    
    
    
    
    
    
    Loans 90 days past due:Commercial, financial
and agricultural
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate -
construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total loans 90
days past due
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Renegotiated loans:Commercial, financial
and agricultural
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate -
construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lease financing
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total renegotiated
loans past due
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loans current  considered
uncollectible
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-
performing loans
    
    $
    2
    
    
    
    28
    
    
    
    60
    
    
    
    
    
    
    
    Total loans, net of
unearned interest
    
    $
    114,423
    
    
    
    99,427
    
    
    
    78,150
    
    
    
    62,383
    
    
    
    11,792Percent of total
loans outstanding,
net of unearned
interest
    
    
    
    %
    
    
    0.03
    
    
    
    0.08
    
    
    
    
    
    
    
    Other real estate
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 F - 54




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 III.
    
    Loan Portfolio, Continued:
 C.
    
    Risk Elements, ContinuedThe accrual of interest income is discontinued when it is determined that collection
of interest is less than probable or the collection of any amount of principal is
doubtful. The decision to place a loan on non-accrual status is based on an
evaluation of the borrowers financial condition, collateral liquidation value,
economic and business conditions and other factors that affect the borrowers ability
to pay. At the time a loan is placed on a non-accrual status, the accrued but unpaid
interest is also evaluated as to collectibility. If collectibility is doubtful, the
unpaid interest is charged off. Thereafter, interest on non-accrual loans is
recognized only as received. Non-accrual loans totaled $2,000 at December 31, 2006,
$28,000 at December 31, 2005 and $60,000 at December 31, 2004. There were no loans on
non-accrual status at December 31, 2003 or December 31, 2002. Gross interest income
on non-accrual loans that would have been recorded for the year ended December 31,
2004 if the loans had been current totaled $3,000. Had interest been recorded on
non-accrual loans for the years ended December 31, 2006 and 2005, interested income
would have increased by an insignificant amount for reporting purposes. The amount of
interest and fee income recognized on total loans during 2006 totaled $7,821,000 as
compared to $5,745,000 in 2005, $4,241,000 in 2004, $2,548,000 in 2003 and $41,000 in
2002.At December 31, 2006, loans totaling $288,000 were included in the Companys internal
classified loan list. Of these loans $57,000 are commercial, $200,000 are real estate
and $31,000 are consumer. The collateral value related to these loans approximated
$520,000 ($76,000 related to commercial, $409,000 related to real estate, and $35,000
related to installment). Loans are listed as classified when information obtained
about possible credit problems of the borrower has prompted management to question the
ability of the borrower to comply with the repayment terms of the loan agreement. The
loan classifications do not represent or result from trends or uncertainties which
management expects will materially impact future operating results, liquidity or
capital resources.At December 31, 2006, there were no loan concentrations that exceeded ten percent of
total loans other than as included in the preceding table of types of loans. Loan
concentrations are amounts loaned to a multiple number of borrowers engaged in similar
activities which would cause them to be similarly impacted by economic or other
conditions.There was no other real estate at December 31, 2006, 2005, 2004, 2003 and 2002.There were no material amounts of other interest-bearing assets (interest-bearing
deposits with other banks, municipal bonds, etc.) at December 31, 2006 which would be
required to be disclosed as past due, non-accrual, restructured or potential problem
loans, if such interest-bearing assets were loans.
 F - 55




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 
 IV.
    
    Summary of Loan Loss ExperienceThe following schedule details selected information related to the
allowance for loan loss account of the Company for the years ended
December 31, 2006, 2005, 2004, 2003 and 2002:
 In Thousands, Except Percentages2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Allowance for loan losses at
beginning of period
    
    $
    1,197
    
    
    
    1,001
    
    
    
    785
    
    
    
    147
    
    
    
    Less: net loan charge-offs:Charge-offs:Commercial, financial
and agricultural
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Real estate  construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    28
    
    
    
    25
    
    
    
    19
    
    
    
    18
    
    
    
    Lease financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    27
    
    
    
    22
    
    
    
    18
    
    
    
    Recoveries:Commercial, financial
and agricultural
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    4
    
    
    
    8
    
    
    
    2
    
    
    
    8
    
    
    
    Lease financing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    8
    
    
    
    2
    
    
    
    8
    
    
    
    Net loan charge-offs
    
    
    25
    
    
    
    19
    
    
    
    20
    
    
    
    10
    
    
    
    Provision for loan losses
charged to expense
    
    
    168
    
    
    
    215
    
    
    
    236
    
    
    
    648
    
    
    
    147Allowance for loan losses at
end of period
    
    $
    1,340
    
    
    
    1,197
    
    
    
    1,001
    
    
    
    785
    
    
    
    147Total loans, net of unearned
interest, at end of year
    
    $
    114,423
    
    
    
    99,427
    
    
    
    78,150
    
    
    
    62,383
    
    
    
    11,792Average total loans
outstanding, net of unearned
interest, during the year
    
    $
    105,795
    
    
    
    87,326
    
    
    
    72,115
    
    
    
    41,894
    
    
    
    6,050Net charge-offs as a percentage
of average total loans
outstanding, net of unearned
interest, during the year
    
    
    0.02
    %
    
    
    0.02
    
    
    
    0.03
    
    
    
    0.02
    
    
    
    Ending allowance for loan
losses as a percentage of
total loans outstanding, net
of unearned interest, at end
of year
    
    
    1.17
    %
    
    
    1.20
    
    
    
    1.28
    
    
    
    1.26
    
    
    
    1.25
 F - 56




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 IV.
    
    Summary of Loan Loss Experience, ContinuedThe allowance for loan losses is an amount that management believes will be adequate to absorb losses on existing
loans that may become uncollectible. The provision for loan losses charged to operating expense is based on past loan
loss experience and other factors which, in managements judgment, deserve current recognition in estimating loan
losses. Such other factors considered by management include growth and composition of the loan portfolio, review of
specific loan problems, the relationship of the allowance for loan losses to outstanding loans, adverse situations
that may affect the borrowers ability to repay, the estimated value of any underlying collateral and current economic
conditions that may affect the borrowers ability to pay.Management conducts a continuous review of all loans that are delinquent, previously charged down or loans which are
determined to be potentially uncollectible. Loan classifications are reviewed periodically by a person independent of
the lending function. The Board of Directors periodically reviews the adequacy of the allowance for loan losses.The Company maintains its allowance for loan losses at an amount considered by management to be adequate to provide
for the possibility of loan losses in the loan portfolio. Since the Company is a new organization, management has
taken a very conservative approach to the allowance for loan losses. Management was required to maintain a minimum of
1.25% of loans in the allowance for loan losses for its first three years of operation which restriction expired in
December, 2005.The following detail provides a breakdown of the allocation of the allowance for loan losses:
 December 31, 2006
    
    
    December 31, 2005Percent of
    
    
    
    
    
    
    Percent ofLoans in
    
    
    
    
    
    
    Loans inEach
    
    
    
    
    
    
    EachCategory
    
    
    
    
    
    
    CategoryIn
    
    
    To
    
    
    In
    
    
    ToThousands
    
    
    Total Loans
    
    
    Thousands
    
    
    Total LoansCommercial, financial and
agricultural
    
    $
    939
    
    
    
    46.6
    %
    
    $
    847
    
    
    
    45.6
    %Real estate  construction
    
    
    132
    
    
    
    14.3
    
    
    
    73
    
    
    
    12.5Real estate  mortgage
    
    
    149
    
    
    
    32.6
    
    
    
    143
    
    
    
    34.6Consumer
    
    
    120
    
    
    
    6.5
    
    
    
    134
    
    
    
    7.3$
    1,340
    
    
    
    100.0
    %
    
    $
    1,197
    
    
    
    100.0
    %
 F - 57




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 IV.
    
    Summary of Loan Loss Experience, Continued
 December 31, 2004
    
    
    December 31, 2003Percent of
    
    
    
    
    
    
    Percent ofLoans in
    
    
    
    
    
    
    Loans inEach
    
    
    
    
    
    
    EachCategory
    
    
    
    
    
    
    CategoryIn
    
    
    To
    
    
    In
    
    
    ToThousands
    
    
    Total Loans
    
    
    Thousands
    
    
    Total LoansCommercial, financial and
agricultural
    
    $
    443
    
    
    
    44.0
    %
    
    $
    150
    
    
    
    19.2
    %Real estate  construction
    
    
    71
    
    
    
    7.2
    
    
    
    15
    
    
    
    1.9Real estate  mortgage
    
    
    396
    
    
    
    40.3
    
    
    
    546
    
    
    
    70.0Consumer
    
    
    91
    
    
    
    8.5
    
    
    
    74
    
    
    
    8.9$
    1,001
    
    
    
    100.0
    %
    
    $
    785
    
    
    
    100.0
    %
 December 31, 2002Percent ofLoans inEachCategoryIn
    
    
    ToThousands
    
    
    Total LoansCommercial, financial and
agricultural
    
    $
    89
    
    
    
    60.1
    %Real estate  construction
    
    
    2
    
    
    
    1.5Real estate  mortgage
    
    
    45
    
    
    
    30.5Consumer
    
    
    11
    
    
    
    7.9$
    147
    
    
    
    100.0
    %
 F - 58




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 V.
    
    DepositsThe average amounts for deposits for the years 2006, 2005 and 2004 are detailed in the
following schedule:
 2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    
    
    
    
    Balance
    
    
    
    
    
    
    BalanceIn
    
    
    Average
    
    
    In
    
    
    Average
    
    
    In
    
    
    AverageThousands
    
    
    Rate
    
    
    Thousands
    
    
    Rate
    
    
    Thousands
    
    
    RateNon-interest bearing
deposits
    
    $
    17,200
    
    
    
    
    %
    
    
    12,523
    
    
    
    
    %
    
    
    9,340
    
    
    
    
    %Negotiable order of
withdrawal accounts
    
    
    6,845
    
    
    
    1.24
    
    
    
    6,569
    
    
    
    1.19
    
    
    
    5,395
    
    
    
    1.02Money market
demand accounts
    
    
    22,312
    
    
    
    2.73
    
    
    
    25,521
    
    
    
    1.95
    
    
    
    17,688
    
    
    
    1.48Individual retirement
accounts
    
    
    6,635
    
    
    
    4.58
    
    
    
    4,295
    
    
    
    3.45
    
    
    
    2,214
    
    
    
    2.57Other savings
    
    
    3,599
    
    
    
    0.75
    
    
    
    2,357
    
    
    
    0.76
    
    
    
    1,796
    
    
    
    0.61Certificates of deposit
$100,000 and over
    
    
    51,889
    
    
    
    4.47
    
    
    
    40,846
    
    
    
    3.35
    
    
    
    30,290
    
    
    
    2.64Certificates of deposit
under $100,000
    
    
    34,124
    
    
    
    4.32
    
    
    
    25,819
    
    
    
    3.29
    
    
    
    18,587
    
    
    
    2.58$
    142,604
    
    
    
    3.38
    %
    
    
    117,930
    
    
    
    2.51
    %
    
    
    85,310
    
    
    
    1.95
    %
 The following schedule details the maturities of certificates of deposit and individual
retirement accounts of $100,000 and over at December 31, 2006:
 In ThousandsCertificates
    
    
    Individualof
    
    
    RetirementDeposit
    
    
    Accounts
    
    
    TotalLess than three months
    
    $
    12,503
    
    
    
    
    
    
    
    12,503Three to six months
    
    
    13,866
    
    
    
    632
    
    
    
    14,498Six to twelve months
    
    
    17,401
    
    
    
    1,135
    
    
    
    18,536More than twelve months
    
    
    10,450
    
    
    
    1,311
    
    
    
    11,761$
    54,220
    
    
    
    3,078
    
    
    
    57,298
 F - 59




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 VI.
    
    Return on Equity and AssetsThe following schedule details selected key ratios of the Company at
December 31, 2006, 2005 and 2004:
 2006
    
    2005
    
    2004Return on assets
    
    
    0.66
    %
    
    
    0.73
    %
    
    
    0.85
    %(Net income divided by average total assets)Return on equity
    
    
    7.96
    %
    
    
    7.50
    %
    
    
    6.98
    %(Net income divided by average equity)Dividend payout ratio (1)
    
    
    
    %
    
    
    20.0
    %
    
    
    
    %(Dividends declared per share divided by net
income per share)Equity to asset ratio
    
    
    8.35
    %
    
    
    9.74
    %
    
    
    12.24
    %(Average equity divided by average total
assets)Leverage capital ratio
    
    
    8.63
    %
    
    
    9.47
    %
    
    
    11.43
    %(Equity divided by fourth quarter average
total
assets, excluding the net unrealized loss
on available-for-sale securities)
 The minimum leverage capital ratio required by the regulatory agencies is 4%.
 Beginning January 1, 1991, new risk-based capital guidelines were adopted by regulatory
agencies. Under these guidelines, a credit risk is assigned to various categories of assets
and commitments ranging from 0% to 100% based on the risk associated with the asset.
 (1)
    
    Under the terms of an agreement with the Banks regulatory agency, the Bank was
restricted from paying dividends for a period of three years from the date of inception
(December 2, 2002).
 F - 60




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 
 VI.
    
    Return on Equity and Assets, Continued:
 The following schedule details the Companys risk-based capital at
December 31, 2006 excluding the net unrealized loss on
available-for-sale securities which is shown as a reduction in
stockholders equity in the consolidated financial statements:
 In ThousandsTier I capital:Stockholders equity, excluding unrealized loss on
available-for-sale securities
    
    $
    14,755Total capital:Allowable allowance for loan losses (limited to 1.25%
of risk-weighted assets)
    
    
    1,340Total capital
    
    $
    16,095Risk-weighted assets
    
    $
    118,241Risk-based capital ratios:Tier I capital ratio
    
    
    12.48
    %Total risk-based capital ratio
    
    
    13.61
    %
 In order to be considered adequately capitalized, the Company is required to maintain a
Total capital to risk-weighted asset ratio of 8% and a Tier I capital to risk-weighted asset
ratio of 4%. At December 31, 2006, the Company and its subsidiary bank were in compliance
with these requirements.
 F - 61




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##### Table of Contents



FIRST COMMERCE BANCORP, INC.
 Form 10-KSB
 December 31, 2006
 
 VI.
    
    Return on Equity and Assets, Continued:
 The following schedule details the Companys interest rate sensitivity at December 31, 2006:
 Repricing Within(In Thousands)
    
    Total
    
    
    0-30 Days
    
    
    31-90 Days
    
    
    91-180 Days
    
    
    181-365 Days
    
    
    Over 1 YearEarning assets:Loans, net of
unearned interest
    
    $
    114,423
    
    
    
    33,977
    
    
    
    5,467
    
    
    
    7,205
    
    
    
    9,738
    
    
    
    58,036Securities
    
    
    43,855
    
    
    
    189
    
    
    
    878
    
    
    
    567
    
    
    
    2,134
    
    
    
    40,087Federal funds sold
    
    
    7,391
    
    
    
    7,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted equity
securities
    
    
    602
    
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest-bearing deposits
in financial institutions
    
    
    158
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total earning
assets
    
    
    166,429
    
    
    
    42,317
    
    
    
    6,345
    
    
    
    7,772
    
    
    
    11,872
    
    
    
    98,123Interest-bearing
liabilities:Money market demand
accounts
    
    
    21,216
    
    
    
    21,216
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Individual retirement
accounts $100,000
and over
    
    
    3,078
    
    
    
    776
    
    
    
    
    
    
    
    521
    
    
    
    470
    
    
    
    1,311Savings
    
    
    4,239
    
    
    
    4,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Individual retirement
accounts under $100,000
    
    
    4,401
    
    
    
    491
    
    
    
    514
    
    
    
    671
    
    
    
    514
    
    
    
    2,211Certificates of deposit,
$100,000 and over
    
    
    54,220
    
    
    
    9,432
    
    
    
    9,107
    
    
    
    13,217
    
    
    
    12,014
    
    
    
    10,450Certificates of deposit,
under $100,000
    
    
    37,356
    
    
    
    5,003
    
    
    
    5,314
    
    
    
    9,421
    
    
    
    8,935
    
    
    
    8,683Advances from Federal
Home Loan Bank
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000129,510
    
    
    
    41,157
    
    
    
    14,935
    
    
    
    23,830
    
    
    
    21,933
    
    
    
    27,655Interest-sensitivity gap
    
    $
    36,919
    
    
    
    1,160
    
    
    
    (8,590
    )
    
    
    (16,058
    )
    
    
    (10,061
    )
    
    
    70,468Cumulative gap
    
    
    
    
    
    
    1,160
    
    
    
    (7,430
    )
    
    
    (23,488
    )
    
    
    (33,549
    )
    
    
    36,919Interest-sensitivity gap
as % of total assets
    
    
    
    
    
    
    .67
    
    
    
    (4.93
    )
    
    
    (9.21
    )
    
    
    (5.77
    )
    
    
    40.41Cumulative gap as %
of total assets
    
    
    
    
    
    
    .67
    
    
    
    (4.26
    )
    
    
    (13.47
    )
    
    
    (19.24
    )
    
    
    21.17
 The Company presently maintains a liability sensitive position over the next twelve
months. However, management expects that liabilities of a demand nature will renew and that
it will not be necessary to replace them with significantly higher cost funds.
 F - 62




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description of Exhibit3.1
    
    Charter of First Commerce Bancorp, Inc.(1)3.2
    
    Bylaws of First Commerce Bancorp, Inc.(1)4.1
    
    Charter of First Commerce Bancorp, Inc.(1)4.2
    
    Bylaws of First Commerce Bancorp, Inc.(1)4.3
    
    Specimen Stock Certificate10.1
    
    First Commerce Bank 2002 Stock Option Plan(1)*10.2
    
    First Commerce Bank Supplemental Executive Retirement Plan*10.3
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for Robert E. Wiles, Jr.*10.4
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for D. Glenn Hardison*10.5
    
    First Commerce Bank Supplemental Executive Retirement Plan
Participation Agreement for William B. Marsh*21.1
    
    Subsidiaries of the Company23.1
    
    Consent of Maggart & Associates, P.C.31.1
    
    Rule 13a-14(a) Certification by Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification by Chief Financial Officer32.1
    
    Section 1350 Certification by Chief Executive Officer32.2
    
    Section 1350 Certification by Chief Financial Officer
 
 *
    
    Management compensatory plan or arrangement.(1)
    
    Incorporated herein by reference to the Companys
Current Report on Form 8-K12G3 as filed
with the SEC on October 10, 2006.