TEXAS COMMERCE <TCB> SEES IMPROVEMENT IN 1987 Texas Commerce Bancshares Inc said that relatively stable oil prices and the bank's planned merger with Chemical New York Corp <CHL> would help 1987 earnings increase from last year's profits of 20 mln dlrs. Texas Commerce chairman Ben Love, in an interview with Reuters, did not elaborate on how much the bank expected earnings to increase. "We would anticipate that this year would be an improvement over last because we are stronger," Love said, referring to Texas Commerce's pending 1.19 billion dlr merger with Chemical. The merger, which may be finalized as early as May 1, will lower Texas Commerce's cost of funding by an estimated 10 to 15 basis points, Love said. The Texas Commerce-Chemical merger is the only acquisition by a major out-of-state bank since Texas lawmakers approved interstate banking effective January 1. Hard-hit by loan losses in energy and real estate in Texas' struggling economy, the only major Texas banks able to report profits in 1986 were Texas Commerce and RepublicBank which earned 54.0 mln dlrs. Allied Bancshares Inc <ALBN> lost 17.6 mln dlrs, MCorp <M> lost 82.1 mln dlrs, InterFirst lost 326.5 mln dlrs and First City Bancorporation <FBT>, which is actively seeking a merger or other form of new capital, lost 402.0 mln dlrs. Love said Texas Commerce had turned the corner on its energy loan portfolio problems, but added that the bank's nonperforming real estate loans may increase during 1987. "I think the tidal wave in energy has passed over us," he said. "The fact that the real estate market is still moving away suggests there could be some continuing growth of nonperforming loans." In 1986, about 42 pct of Texas Commerce's net loan losses related to real estate lending and 13 pct was due to energy loan losses. That compares to 1985 when only 17 pct of the bank's losses were in real estate and energy accounted for 43 pct. More than half of Texas Commerce's nonperforming loans, which totaled 968 mln dlrs at yearend 1986, up from 840 mln dlrs the year before, were in real estate. Love said he believed the real estate loan problems for Texas Commerce and other major state banks would peak by the third or fourth quarter of 1987. Absorption of empty office buildings in Houston, which has a current vacancy rate of about 30 pct, will be a gradual process that could take up to four years, he said. "I think we may be beginning to stabilize this economy. Oil at 18 dlrs a barrel brings much more confidence than 10 dlrs a barrel," he said. Texas Commerce will retain its name as a separate subsidiary of Chemical and plans to aggressively expand its holdings throughout Texas, offering additional products to build up its consumer banking business, Love said. "We are resuming what we did best for years -- an offensive position," he said. In January, Texas Commerce acquired a failed bank in Montgomery County, adjacent to the Houston metropolitan area, and earlier this month opened a new bank in San Antonio. Texas Commerce plans to add more banks in San Antonio and in the Dallas-Fort Worth area where it currently has only 16 member banks, he said. One day after the Texas Commerce acquisition was announced in December, InterFirst Corp <IFC> and RepublicBank Corp <RPT>, both headquartered in Dallas, agreed to merge in a deal valued at 570 mln dlrs. The combination of former archrivals RepublicBank and InterFirst, giving the two banks a virtual lock on the Dallas banking market, has not changed Texas Commerce's expansion plans for the state's second-largest city, Love said. "We think we can try to get a little part of their roost," he said. The Chemical partnership will also give Texas Commerce an edge in developing new consumer products, he said. "We have always been a wholesale bank but we have more than one million customers all over the state. Chemical will show us how to take advantage of enhancing our consumer products," he said, referring to expansion of such existing products as credit cards and investment banking.