Annual Report (Form 10-K), fiscal year 1994

Item 1 Description of Business
General _______ First Commerce Corporation (FCC) is a multi-bank holding company with five wholly-owned bank subsidiaries in Louisiana: First National Bank of Commerce (FNBC) in New Orleans, City National Bank of Baton Rouge (CNB), Rapides Bank & Trust Company in Alexandria (RB&T), The First National Bank of Lafayette (FNBL) and The First National Bank of Lake Charles (FNBLC). Effective February 17, 1995, First Bancshares, Inc. (First), the parent company of First Bank, Slidell, Louisiana, was acquired by FCC for 2,705,220 shares of FCC common stock. First Bank was merged with FNBC. The acquisition was accounted for as a pooling-of-interests. Also effective February 17, 1995, City Bancorp, Inc. (City), the parent company of City Bank & Trust Company (City Bank), New Iberia, Louisiana, was acquired by FCC for 516,252 shares of FCC common stock. City Bank was merged with FNBL. The acquisition was accounted for as a purchase. The five banks accounted for 99.3% of the assets of FCC at December 31, 1994, and substantially all of the net income for 1994. The banks offer customary services of banks of similar size and similar markets, including numerous types of interest- bearing and noninterest-bearing deposit accounts, commercial and consumer loans, trust services, correspondent banking services and safe deposit facilities. For further discussion of FCC's operations, see the Financial Review section of FCC's 1994 Annual Report, which is incorporated by reference into Item 7 of this Annual Report on Form 10-K. FCC has a number of non-bank subsidiaries none of which, individually or in the aggregate with other non-bank subsidiaries account for a significant amount of assets, revenues or earnings.
Regulation __________ Like other bank holding companies in Louisiana, FCC is subject to regulation by the Louisiana Commissioner of Financial Institutions and the Federal Reserve Board. Under the terms of the Bank Holding Company Act of 1956 (the "Act"), as amended, FCC is restricted to only banking or bank-related activities specifically allowed by the Act or the Federal Reserve Board. The Act requires FCC to file required reports with the Federal Reserve Board. Each of FCC's subsidiary banks is a member of the Federal Reserve System and is subject to regulation by the Federal Reserve Board and the FDIC. The four national bank subsidiaries are also subject to regulation and supervision by the Comptroller of the Currency, while the state-chartered bank subsidiary is subject to regulation and supervision by the Louisiana Commissioner of Financial Institutions.
Payment of Dividends The primary source of funds for debt service obligations and the dividends paid by FCC to its stockholders is the dividends it receives from the bank subsidiaries. The payment of dividends by FCC's national banks is regulated by the Comptroller of the Currency. The payment of dividends by FCC's state bank is regulated by the Louisiana Commissioner of Financial Institutions and the Federal Reserve Board. Prior approval must be obtained from the appropriate regulatory authorities before dividends can be paid if the amount of defined capital, surplus and retained earnings is below defined regulatory limits. Additionally, the national bank subsidiaries may not pay dividends in excess of their retained net profits (net income less dividends for the current and prior two years) without prior regulatory approval. The state bank subsidiary may not pay dividends in excess of retained net profits (net income less dividends for the current year and one prior year) without prior regulatory approval. Under certain circumstances, regulatory authorities may prohibit the payment of dividends by a bank or its parent holding company. See Note 17 of Notes to Consolidated Financial Statements, which is incorporated by reference into Item 8 of this Annual Report on Form 10-K.
Borrowings by the Company Federal law prohibits FCC or any of its non-bank subsidiaries from borrowing from its bank subsidiaries, unless the borrowings are secured by specified amounts and types of collateral. Additionally, such secured loans are generally limited to 10% of each subsidiary bank's capital and surplus and, in the aggregate with respect to FCC and all of its subsidiaries, to 20% of each subsidiary bank's capital and surplus. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services.
Company Support of Bank Subsidiaries The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") contains a "cross-guarantee" provision which could result in any insured depository institution owned by FCC (i.e., any bank subsidiary) being assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other depository institution owned by FCC. In addition, under Federal Reserve Board policy, FCC is expected to act as a source of financial strength to each of its bank subsidiaries and to commit resources to support each such bank in circumstances in which such bank might need such outside support. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "1991 Act") provides, among other things, that undercapitalized institutions, as defined by regulatory authorities, must submit recapitalization plans, and a parent company of such an institution must either (i) guarantee the institution's compliance with the capital plan, up to an amount equal to the lesser of five percent of the institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan, or (ii) suffer certain adverse consequences such as a prohibition of dividends by the parent company to its shareholders.
Prompt Corrective Action The 1991 Act and implementing regulations classify banks into five categories generally relating to their regulatory capital ratios and institutes a system of supervisory actions indexed to particular classification. Generally, banks that are classified as "well capitalized" or "adequately capitalized" are not subject to the supervisory actions specified in the 1991 Act for prompt corrective action, but may be restricted from taking certain actions that would lower their classification. Banks classified as "undercapitalized", "significantly undercapitalized" or "critically undercapitalized" are subject to restrictions and supervisory actions of increasing stringency based on the level of classification. Under the present regulation, all five of FCC's Banks are "well-capitalized". While such a classification would exclude the Banks from the restrictions and actions envisioned by the prompt corrective action provisions of the 1991 Act, the regulatory agencies have broad powers under other provisions of federal law that would permit them to place restrictions on the Banks or take other supervisory action regardless of such classification.
Other Provisions of the 1991 Act In general, the 1991 Act subjected banks and bank holding companies to significantly increased regulation and supervision. Other significant provisions of the 1991 Act require the federal regulators to draft non-capital regulatory measures to assure bank safety, including underwriting standards and minimum earnings levels. The legislation further requires regulators to perform annual on-site bank examinations, places limits on real estate lending and tightens audit requirements. The 1991 Act and implementing regulations also impose disclosure requirements relating to fees charged and interest paid on checking and deposit accounts.
Interstate Banking and Branching Efficiency Act In 1994, the Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act") was enacted. Among other things, the Interstate Act (i) allows bank holding companies after September, 1995 to acquire a bank located in any state, subject to certain limitations that may be imposed by the state, (ii) allows banks after June 1, 1997 (or earlier if permitted by state law) to merge across state lines unless the home state has enacted prior to June 1, 1997 a law opting out of interstate bank mergers, and (iii) permits banks to establish branches outside their state of domicile if expressly permitted by the law of the state in which the branch is to be located. Registrant is unable to predict at this time the effect of the Interstate Act on competition or the extent to which the Louisiana legislature will enact laws governing interstate bank acquisitions or branching.
Annual Insurance Assessment FCC's bank subsidiaries are subject to deposit insurance assessment by the FDIC. The FDIC is currently considering the reduction of the deposit insurance premium; the timing and amount of any reduction cannot be predicted.
Miscellaneous Federal and Louisiana law provide for the enforcement of any pro rata assessment of stockholders of a bank to cover impairment of capital stock by sale, to the extent necessary, of the stock of any assessed stockholder failing to pay the assessment. FCC, as the stockholder of its bank subsidiaries, is subject to these provisions.
Item 2



Item 2 Properties
FCC's executive offices are located in leased facilities in the Central Business District of New Orleans. Through its subsidiaries, FCC also owns or leases its principal banking facilities and offices in New Orleans, Baton Rouge, Alexandria, Lafayette and Lake Charles. Of the 105 banking offices open at the end of 1994, 63 are owned and 42 are leased. Data processing services for FCC and each of its subsidiaries are performed in a facility in the Metropolitan New Orleans area, which is owned by a subsidiary of FCC. Management considers all properties owned or leased to be suitable and adequate for their intended purposes and considers the leases to be fair and reasonable. For additional information concerning premises and information concerning FCC's obligations under long-term leases, see Note 10 of Notes to Consolidated Financial Statements, which is incorporated by reference into Item 8 of this Annual Report on Form 10-K.
Item 3

Item 3 Legal Proceedings
In the quarter ended March 31, 1989, suit was filed against Registrant's wholly owned subsidiary, First National Bank of Commerce (FNBC) in the matter entitled Guidrey v. Bank of LaPlace and others, Civil Distric Court for the Parish of Orleans. Plaintiff seeks to recover losses on certain investments, claiming that the devendants breached duties owned to him. On April 22, 1994, a jury found that FNBC had breached a state law duty to plaintiff, Robert J. Guidry, and found it partially responsible for plaintiff's loss, which it determined to be $4.54 million, plus interest from April 17, 1989. On May 3, 1994, the court entered judgment against FNBC for 15% of the damages (approximately $681,000) plus interest from April 17, 1989. Both the plaintiff and FNBC have since appealed to the Louisiana Court of Appeals. Plaintiff seeks to hold FNBC responsible, jointly with other devendants, for his damages up to $4.54 million plus interest. FNBC has appealed on the basis that it is not responsible to the plaintiff for any amount. In the opinion of management, after consulting with counsel, the ultimate outcome of the litigation will not result in a material adverse effect upon the Registrant.
FCC and its subsidiaries have been named as defendants in various other legal actions arising from normal business activities in which damages of various amounts are claimed. The amount, if any, of ultimate liability with respect to such matters cannot be determined. However, after consulting with legal counsel, management believes any such liability will not have a material effect on FCC's consolidated financial condition.
Item 4:

Item 4: Submission of Matters to a Vote of Securites Holders, Not Applicable
PART II
Information required for Items 5 through 8 are included in First Commerce Corporation's 1994 Annual Report to stockholders filed as Exhibit 13 herewith and incorporated herein on the pages indicated below.
Item 5:

Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters 36-38 Item 6:

Item 6: Selected Financial Data 36-38 Item 7:

Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations 16-35 Item 8:


Item 8: Financial Statements and Supplementary Data 39-60 Item 9:

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure, Not Applicable -
PART III
Item 10:



Item 10: Directors and Executive Officers of the Registrant
Ian Arnof, 55--President, Chief Executive Officer and Director of FCC since 1983. R. Jeffrey Brooks, 46--Executive Vice President since 1993; Director of Strategic Support of FCC from 1993 to 1994; President and Chief Operating Officer of FNBL from 1992 to 1993; Senior Vice President and Bankcard Group Manager of FNBC from 1986 to 1992. Thomas L. Callicutt, Jr., 47--Senior Vice President, Controller and Principal Accounting Officer of FCC since 1987. Michael A. Flick, 46--Executive Vice President of FCC since 1985; Chief Administrative Officer of FCC since 1994; Chief Credit Policy Officer of FCC from 1985 to 1994; Chief Financial Officer from 1988 to 1992; Secretary to the Board of Directors since 1987. Howard C. Gaines, 54--Chairman of the Board of Directors of FNBC since 1988; Chief Executive Officer of FNBC from 1988 to 1994. Thomas C. Jaeger, 44--Executive Vice President and Chief Financial Officer of FCC since 1994; Senior Vice President and Chief Internal Auditor of FCC from 1989 to 1994. Mr. Jaeger served as Senior Vice President and Chief Financial Officer of FNBC from 1987 to 1989. Kimberly Y. Lee, 34--Executive Vice President and Chief Internal Auditor of FCC since 1994. Ms. Lee served as Senior Vice President and Manager of Audit and Credit Review of FCC from 1992 to 1994, and served as a national bank examiner for the Office of the Comptroller of the Currency from 1982 to 1992. Ashton J. Ryan, Jr., 47--President of FNBC since 1991; Chief Executive Officer of FNBC since 1994; Chief Operating Officer of FNBC from 1991 to 1994; Senior Executive Vice President of FCC since 1993. From 1981 to 1991, Mr. Ryan was a partner with Arthur Andersen LLP, New Orleans, Louisiana. E. Graham Thompson, 58--Executive Vice President, Chief Credit Policy Officer and Director of Risk Management of FCC since 1994; Chief Executive Officer of FNBL from 1992 to 1994; Chairman of FNBL from 1993 to 1994; President of FNBL from 1992 to 1993; Chief Executive Officer of RBT from 1992 to 1994; President and Chief Executive Officer of CNB from 1987 to 1992. Joseph V. Wilson III, 45--Senior Executive Vice President of FCC since 1993; Executive Vice President of FCC from 1989 to 1992; Executive Vice President--Retail Group of FNBC from 1984 to 1989.
The remaining information required under Item 10, and the information required by Items 11 through 13 is incorporated by reference to the Registrant's definitive Proxy Statement for the 1995 Annual Meeting of Stockholders filed with the Securities and Exchange Commission.
PART IV
Item 14:




Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements - See Item 8. 2. Financial Statement Schedules - All schedules are omitted, since they are either not applicable or the required information is shown in the financial statements or notes thereto.
Item 14.
(a) 3. Exhibits
2. Agreement and Plan of Merger dated May 27, 1994 between First Commerce Corporation and First Bancshares, Inc., included as Exhibit 2 to First Commerce Corporation's Registration Statement on Form S-4 (Registration Number 33-54865) and incorporated herein by referece.
3.1 Amended and Restated Articles of Incorporation of First Commerce Corporation, included as Exhibit 3.1 to First Commerce Corporation's Annual Report on Form 10- K for the year ended December 31, 1993, and incorporated herein by reference.
3.2 Amended By-laws of First Commerce Corporation, included as Exhibit 3.2 to First Commerce Corporation's Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated herein by reference.
4.1 Indenture between First Commerce Corporation and Republic Bank Dallas, N.A. (now NationsBank Texas, N. A.), Trustee, including the form of 12 3/4% Convertible Debenture due 2000, Series A included as Exhibit 4.1 to First Commerce Corporation's Annual Report on Form 10-K for the year ended December 31, 1985 and incorporated herein by reference.
4.2 Indenture between First Commerce Corporation and Republic Bank Dallas, N.A. (now NationsBank Texas, N. A.), Trustee, including the form of 12 3/4% Convertible Debenture due 2000, Series B included as Exhibit 4.2 to First Commerce Corporation's Annual Report on Form 10-K for the year ended December 31, 1986 and incorporated herein by reference.
10.1 Amended and Restated First Commerce Corporation Supplemental Tax-Deferred Savings Plan.
10.2 First Commerce Corporation Retirement Benefit Restoration Plan.
10.3 Restatement of First Commerce Corporation Supplemental Tax-Deferred Savings Trust Agreement.
10.4 First Commerce Corporation Amended and Restated 1992 Stock Incentive Plan, Form of Nonqualified Stock Option Agreement and Form of Restricted Stock Agreement.
11 Statement Re: Computation of Earnings Per Share.
13 First Commerce Corporation's 1994 Annual Report to Stockholders.
21 Subsidiaries of First Commerce Corporation.
23 Consent of Arthur Andersen LLP.
24 Power of Attorney.
27 Financial Data Schedule.
(b) Reports on Form 8-K - The Registrant was not required to file any reports on Form 8-K during the three-month period ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
First Commerce Corporation (Registrant)
By /s/ Thomas L. Callicutt, Jr. _________________________ Thomas L. Callicutt, Jr. Senior Vice President, Controller and Principal Accounting Officer
Date March 20, 1995 _______________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated.
Signatures Title __________ _____
Ian Arnof President and Chief Executive Officer
Hermann Moyse, Jr. Chairman of the Board
Thomas C. Jaeger Executive Vice President and Chief Financial Officer
James J. Bailey III Director
Sydney J. Besthoff III Director
Robert H. Bolton Director
Frances B. Davis Director
Laurance Eustis, Jr. Director By /s/ Thomas L. Callicutt, Jr. William P. Fuller Director ____________________________ Thomas L. Callicutt, Jr. Arthur Hollins III Director Attorney-in-Fact
F. Ben James, Jr. Director
Erik F. Johnsen Director Date: March 20, 1995
J. Merrick Jones, Jr. Director
Edwin Lupberger Director
O. Miles Pollard, Jr. Director
G. Frank Purvis, Jr. Director
Edward M. Simmons Director
H. Leighton Steward Director
J. B. Storey Director
Robert A. Weigle Director