For First Commerce, The Good Times Roll

After years spent in the shadow of a high-flying rival, First Commerce Corp. now has a shot at becoming the dominant banking company in Louisiana.

"Our strategy was to be the first Louisiana bank to get the recession behind us, and that's where we are now," said Ian Arnof, president and chief executive of First Commerce, which has $4.6 billion of assets.

It helped that First Commerce, in New Orleans, never sank as far as the state's biggest banking company, Hibernia Corp., also based in New Orleans, or the No. 3, Premier Bancorp, Baton Rouge.

All through the economic downturn, First Commerce was the only big bank in the battered Energy Belt to earn steady profits and pay regular dividends.

Securities analysts are impressed. "First Commerce is better positioned than any of its competitors to take advantage of the unrest in Louisiana," said Gerard O'Meara, an analyst with Atlanta-based Robinson-Humphrey Co.

On Friday, the stock closed at $25.50, up 25 cents.

Rivals in a Bind

The potential for a big payoff emerged this year as rival Hibernia Corp. suffered a crippling $83 million loss in the first half.

First Commerce, its stock soaring and its vaults swelling with deposits that have grown 10% in the past 12 months and the stock soaring, is the only local competitor poised to expand.

Premier is constrained by a stakeout agreement under which muscular Banc One Corp. of Columbus, Ohio, has invested in the Louisiana bank and obtained an option to buy it out in three years. Meanwhile, Premier has some housecleaning to do.

And Hibernia, far from being positioned to add $6 billion of assets, would do well just to survive.

One reason First Commerce can consider expansion is that shares are fetching a high premium - more than 25% - over book value. That could facilitate mergers financed through exchanges of stock.

Moreover, earnings are expected to keep growing at a healthy pace.

In the first half of 1991, First Commerce racked up $15.6 million of income, a 13.7% annualized return on average equity. John Works, an analyst with Keefe, Bruyette & Woods, New York, estimates that First Commerce will earn roughly $2.80 per share this year and $3.10 in 1992, up from $1.77 in 1990.

Mr. Arnof said he has no appetite for acquisitions outside Louisiana. And he made it clear that the company would not try to swallow any of its big ailing rivals. "That would be like trying to catch falling knives," he said.

Instead, First Commerce will apparently step up scouting at government auctions of failed banks and thrifts and court healthy banks to help round out its Louisiana franchise. If necessary, Mr. Arnof said, his bank may tap Wall Street for additional capital.

The one uncertainty at First Commerce is asset quality.

Though the company's ratio of problem assets to gross loans - 4.54% on June 30 - is a badge of honor compared with other Louisiana competitors, it still signifies a degree of vulnerability, said Lisa Todora, an analyst with SNL Securities, New York.

However, many observers believe First Commerce has absorbed most of the hits stemming from realty loan problems surfacing over the past 18 months. In the second quarter, First Commerce recorded a $623,000 decline in problem assets, compared with a $49 million increase at Hibernia.

Bank stocks were mixed Friday in relatively light trading, even though the overall market was down 12.52 points, to 3,001.34.

Chemical Banking Corp. and Manufacturers Hanover Corp. continued to lead the sector in volume, with 855,000 shares and 540,000 shares traded respectively by 3:45 p.m.

However, both lost a little ground after the big gains on Thursday. And their volume was less than half Thursday's total.

Chemical lost 12.5 cents, to $27, and Manufacturers lost 12.5 cents, to $30.375.

Other stocks like BankAmerica Corp. and Wells Fargo & Co., which normally trade many shares, had light days. BankAmerica traded about 350,000 shares and was up 62.5 cents, to $37.50. Wells traded only about 200,000 shares. It rose 50 cents, to $72.75. It was up $2.50, to $72.125, on Thursday.

PHOTO : The Steady And the Wobbly Sources: Company reports

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