<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-5945
THE CHASE MANHATTAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2633613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Chase Manhattan Plaza, New York, New York 10081
(Address of principal executive offices) (Zip Code)
(2l2) 552-2222
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
The number of shares outstanding of the registrant's common stock was
185,052,955 at June 30, 1994.
Exhibit Index Located on Page 40
<PAGE> 2
The Chase Manhattan Corporation
June 30, 1994 Form 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Chase Manhattan Corporation and Subsidiaries:
Consolidated Statement of Condition . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Stockholders' Equity . . . . . . . . 6
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . 9
Comparative Financial Information:
Financial Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Stockholder Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Chase Manhattan Bank, N.A. and Subsidiaries Consolidated
Statement of Condition . . . . . . . . . . . . . . . . . . . . . . . 26
Average Balances, Interest and Average Rates - Taxable Equivalent . . . 27
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . 31
Average Loan Balances . . . . . . . . . . . . . . . . . . . . . . . . . 33
Analysis of Credit Loss Experience . . . . . . . . . . . . . . . . . . . 33
Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . . . . . . 34
Consolidated Statement of Income (Five Quarters) . . . . . . . . . . . . 35
PART II. - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . 36
Item 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . 38
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
2
<PAGE> 3
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Statement of Condition of The Chase Manhattan Corporation (the
Company) and its subsidiaries (the Corporation or Chase) at June 30, 1994,
December 31, 1993 and June 30, 1993, the Consolidated Statement of Income for
the quarters and six months ended June 30, 1994 and 1993, the Consolidated
Statement of Changes in Stockholders' Equity for the six months ended June 30,
1994 and 1993 and the Consolidated Statement of Cash Flows for the six months
ended June 30, 1994 and 1993 are set forth on the following pages.
The interim consolidated financial statements are unaudited. However,
in the opinion of Management, all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the financial
position, results of operations and cash flows for such periods, have been
made. For further information, refer to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1993 (the 1993 Annual Report). Prior periods'
financial statements have been reclassified to conform with the current
financial statement presentations.
Throughout this report, the term Corporation refers to The Chase
Manhattan Corporation and its direct and indirect subsidiaries, including the
following mentioned in this report: The Chase Manhattan Bank, N.A. (the Bank),
The Chase Manhattan Bank (USA) (Chase USA), and The Chase Manhattan Bank of
Maryland (Chase Maryland). The term banking subsidiaries, as used in this
report, includes any of the following commercial banks: the Bank, Chase USA,
The Chase Manhattan Bank of Connecticut, N.A., Chase Maryland, and The Chase
Manhattan Bank of Florida, N.A. The term Bank, as used in this report, refers
to The Chase Manhattan Bank, N.A. and its subsidiaries, including Chase
Manhattan Overseas Banking Corporation, which holds investments in overseas
commercial banking and financial services subsidiaries. The term nonbanking
subsidiaries, as used in this report, refers to subsidiaries of the Company not
chartered as commercial banks that are engaged in investment banking,
commercial and consumer financing and other financial services.
3
<PAGE> 4
Consolidated Statement of Condition
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
---------- ------------ --------
<S> <C> <C> <C>
Assets
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,937 $ 6,068 $ 4,844
Interest-Bearing Deposits Placed with Banks . . . . . . . . . . . . . . . . . . . 5,968 5,309 6,045
Federal Funds Sold and Securities Purchased Under Resale Agreements . . . . . . . 6,986 6,586 5,974
Trading Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,939 6,933 4,877
Investment Securities:
Held to Maturity (Market Value of $1,647, $1,417 and $1,459, Respectively) . . 1,651 1,384 1,419
Available for Sale Carried at Fair Value . . . . . . . . . . . . . . . . . . . 5,475 7,690 --
At Lower of Cost or Market (Market Value of $6,454) . . . . . . . . . . . . . -- -- 6,044
--------- --------- -------
Total Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . 7,126 9,074 7,463
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,482 60,493 61,236
Less: Reserve for Possible Credit Losses . . . . . . . . . . . . . . . . . . 1,435 1,425 1,918
--------- --------- -------
Loans, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,047 59,068 59,318
Assets Held for Accelerated Disposition . . . . . . . . . . . . . . . . . . . . . 45 222 884
Customers' Liability on Acceptances . . . . . . . . . . . . . . . . . . . . . . . 633 689 745
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 901 871 841
Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,791 1,782 1,942
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,122 5,501 6,152
--------- --------- -------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114,495 $ 102,103 $99,085
--------- --------- -------
Liabilities, Redeemable Preferred Stock and Stockholders' Equity
Deposits:
Domestic Offices: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,835 $ 14,217 $11,556
Interest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,147 27,648 28,206
Overseas Offices: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,859 2,473 1,961
Interest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,067 27,171 26,885
--------- --------- -------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,908 71,509 68,608
Federal Funds Purchased and Securities Sold Under Repurchase Agreements . . . . . 7,032 7,890 6,763
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,487 1,465 1,475
Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,631 1,813 1,824
Trading Account Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,052 -- --
Acceptances Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644 696 755
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 416 480
Accounts Payable, Accrued Expenses and Other Liabilities . . . . . . . . . . . . 5,852 4,551 5,238
Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . 4,825 5,641 6,220
--------- --------- -------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,902 93,981 91,363
--------- --------- -------
Redeemable Preferred Stock (Without Par Value, None and 530,369 Shares
Outstanding, Respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 53
--------- --------- -------
Stockholders' Equity:
Nonredeemable Preferred Stock (Without Par Value, 60,539,738,
51,439,738 and 56,439,738 Shares Outstanding, Respectively) . . . . . . . . 1,627 1,399 1,649
Common Stock ($2.00 Par Value):
6/30/94 12/31/93 6/30/93
----------- ----------- -----------
Number of Shares:
Authorized 500,000,000 500,000,000 500,000,000
Outstanding 185,052,955 184,290,491 183,194,093 370 369 366
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,935 3,922 3,889
Net Unrealized Gains on Investment Securities-Available for Sale . . . . . . . 9 264 --
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,652 2,168 1,765
---------- --------- -------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 8,593 8,122 7,669
---------- --------- -------
Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity . . $ 114,495 $ 102,103 $99,085
---------- --------- -------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
</TABLE>
4
<PAGE> 5
Consolidated Statement of Income
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------- ------------------
($ in millions, except per common share data) 1994 1993 1994 1993
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Revenue
Interest and Fees on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,376 $ 1,383 $ 2,677 $ 2,911
Interest on Deposits Placed with Banks . . . . . . . . . . . . . . . . . . . . . . . 127 191 257 339
Interest and Dividends on Investment Securities:
Held to Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 42 83 84
Available for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 -- 343 --
At Lower of Cost or Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 130 -- 263
Interest on Federal Funds Sold and Securities Purchased Under Resale Agreements . . . 490 265 815 522
Interest on Trading Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . 92 47 211 99
-------- ------- ------- -------
Total Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,305 2,058 4,386 4,218
-------- ------- ------- -------
Interest Expense
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654 493 1,178 1,032
Federal Funds Purchased and Securities Sold Under Repurchase Agreements . . . . . . . 176 155 300 293
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 12 30 22
Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 344 856 619
Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 77 160 153 311
-------- ------- ------- -------
Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,387 1,164 2,517 2,277
-------- ------- ------- -------
Net Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 918 894 1,869 1,941
Provision for Possible Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . 150 225 310 585
Provision for Loans Held for Accelerated Disposition . . . . . . . . . . . . . . . . -- -- -- 566
-------- ------- ------- -------
Net Interest Revenue After Provisions for Possible Credit Losses and
Loans Held for Accelerated Disposition . . . . . . . . . . . . . . . . . . . . . . 768 669 1,559 790
-------- ------- ------- -------
Other Operating Revenue
Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 388 926 755
Foreign Exchange Trading Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 78 85 163 188
Trading Account Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 102 168 175
Investment Securities Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 14 80 20
Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 104 318 214
-------- ------- ------- -------
Total Other Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . 800 693 1,655 1,352
-------- ------- ------- -------
Other Operating Expenses
Salaries and Employee Benefits:
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 387 833 762
Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 115 247 240
-------- ------- ------- -------
536 502 1,080 1,002
Net Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 93 199 198
Equipment Rentals, Depreciation and Maintenance . . . . . . . . . . . . . . . . . . . 74 69 145 140
Provision for Other Real Estate Held for Accelerated Disposition . . . . . . . . . . -- -- -- 318
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 331 707 638
-------- ------- ------- -------
Total Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,073 995 2,131 2,296
-------- ------- ------- -------
Income (Loss) Before Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 367 1,083 (154)
Applicable Income Taxes (Benefits) . . . . . . . . . . . . . . . . . . . . . . . . . 188 134 412 (40)
-------- ------- ------- -------
Income (Loss) Before Cumulative Effect of Change in Accounting Principle . . . . . . 307 233 671 (114)
Cumulative Effect of Change in Accounting Principle--Adoption of SFAS 109 . . . . . . -- -- -- 500
-------- ------- ------- -------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 307 $ 233 $ 671 $ 386
-------- ------- ------- -------
Net Income Applicable to Common Stock . . . . . . . . . . . . . . . . . . . . . . . . $ 272 $ 196 $ 606 $ 313
-------- ------- ------- -------
Average Common and Common Equivalent Shares Outstanding (in millions) . . . . . . . . 186.2 162.4 185.6 160.0
Primary Earnings (Loss) Per Common Share, Before Cumulative Effect of Change in
Accounting Principle, Based on Average Shares Outstanding . . . . . . . . . . . . $ 1.46 $ 1.20 $ 3.27 $ (1.17)
Cumulative Effect of Change in Accounting Principle--Adoption of SFAS 109 . . . . . . -- -- -- 3.12
Primary Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.46 $ 1.20 $ 3.27 $ 1.95
-------- ------- ------- -------
Cash Dividends Declared Per Common Share . . . . . . . . . . . . . . . . . . . . . . $ 0.33 $ 0.30 $ 0.66 $ 0.60
-------- ------- ------- -------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
</TABLE>
5
<PAGE> 6
Consolidated Statement of Changes in Stockholders' Equity
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
($ in millions) 1994 1993
-------- --------
<S> <C> <C>
Nonredeemable Preferred Stock
Balance at Beginning of Year (51,439,738 and 49,539,738 Shares, Respectively) . . . . . . . . . . . . $ 1,399 $ 1,477
Issuance of Preferred Stock Series M (6,900,000 Shares) . . . . . . . . . . . . . . . . . . . . . -- 172
Issuance of Preferred Stock Series N (9,100,000 Shares) . . . . . . . . . . . . . . . . . . . . . 228 --
-------- --------
Balance at End of Period (60,539,738 and 56,439,738 Shares, Respectively) . . . . . . . . . . . . . 1,627 1,649
-------- --------
Common Stock
Balance at Beginning of Year (184,290,491 and 156,096,382 Shares, Respectively) . . . . . . . . . . . 369 312
Shares Issued Pursuant to Common Stock Offering (25,300,000 Shares) . . . . . . . . . . . . . . . -- 50
Shares Issued Pursuant to Dividend Reinvestment and Stock Purchase Plan
(316,924 and 1,285,210 Shares, Respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3
Shares Issued Pursuant to Stock Option and Incentive Plans (444,146 and 512,501 Shares,
Respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1
Shares Issued Pursuant to Stock Warrants (1,394 Shares and No Shares, Respectively) . . . . . . . -- --
-------- --------
Balance at End of Period (185,052,955 and 183,194,093 Shares, Respectively) . . . . . . . . . . . . . 370 366
-------- --------
Surplus
Balance at Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,922 3,174
Shares Issued Pursuant to Common Stock Offering . . . . . . . . . . . . . . . . . . . . . . . . . -- 696
Shares Issued Pursuant to Dividend Reinvestment and Stock Purchase Plan . . . . . . . . . . . . . 10 36
Shares Issued Pursuant to Stock Option and Incentive Plans . . . . . . . . . . . . . . . . . . . . 9 9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (26)
--------- --------
Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,935 3,889
-------- --------
Net Unrealized Gains on Investment Securities--Available for Sale
Balance at Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 --
Net Unrealized Losses on Investment Securities--Available for Sale (Net of Deferred
Tax Benefits of $177). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (255) --
--------- --------
Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 --
-------- --------
Retained Earnings
Balance at Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,168 1,548
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 386
Cash Dividends:
Redeemable Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2)
Nonredeemable Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65) (72)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (122) (94)
Aggregate Foreign Exchange Translation Gain (Loss) . . . . . . . . . . . . . . . . . . . . . . . . -- (1)
-------- --------
Balance at End of Period (Includes Exchange Translation Adjustments of $12 and $12, Respectively) . . 2,652 1,765
-------- --------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,593 $ 7,669
-------- --------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
</TABLE>
6
<PAGE> 7
Consolidated Statement of Cash Flows
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
($ in millions) 1994 1993
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 671 $ 386
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Cumulative Effect of Change in Accounting Principle--Adoption of SFAS 109 . . . . . . . . . . . . -- (500)
Provision for Possible Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 585
Provision for Loans Held for Accelerated Disposition . . . . . . . . . . . . . . . . . . . . . . . -- 566
Provision for Other Real Estate Held for Accelerated Disposition . . . . . . . . . . . . . . . . . -- 318
Depreciation and Amortization of Premises and Equipment . . . . . . . . . . . . . . . . . . . . . 134 127
Accretion and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 97
Other Real Estate Valuation Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 64
Accelerated Disposition Portfolio Valuation Losses . . . . . . . . . . . . . . . . . . . . . . . . - 11
Deferred Income Taxes (Benefits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 (105)
Net Gains on Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (371) (234)
Net (Increase) Decrease in Operating Assets:
Trading Account Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 (62)
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) 136
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) 239
Net Increase (Decrease) in Operating Liabilities:
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 (98)
Accounts Payable, Accrued Expenses and Other Liabilities . . . . . . . . . . . . . . . . . . . . . 1,207 1,028
Other--Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97) (63)
-------- --------
Net Cash Provided by Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,130 2,495
-------- --------
Cash Flows from Investing Activities:
Net Increase in Interest-Bearing Deposits Placed with Banks . . . . . . . . . . . . . . . . . . . . . (506) (272)
Net Increase in Federal Funds Sold and Securities Purchased Under Resale Agreements . . . . . . . . . (401) (1,785)
Investment Securities--Held to Maturity:
Payments for Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (600) (334)
Proceeds from Maturities, Calls and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 340 336
Investment Securities--Available for Sale Carried at Fair Value:
Payments for Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,873) --
Proceeds from Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,086 --
Proceeds from Maturities, Calls and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 860 --
Investment Securities at Lower of Cost or Market:
Payments for Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (5,079)
Proceeds from Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 2,489
Proceeds from Maturities, Calls and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,288
Loans:
Net Increase in Loans Made to Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,253) (5,964)
Payments for Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,995) (289)
Proceeds from Sales and Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,038 5,413
Proceeds from Sales and Repayments of Assets Held for Accelerated Disposition . . . . . . . . . . . . 246 168
Net Purchases of Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143) (205)
Acquisition of Mortgage Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (202)
-------- --------
Net Cash Provided (Used) by Investing Activities . . . . . . . . . . . . . . . . . . . . . . 799 (4,436)
-------- --------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,245) 1,465
Net Decrease in Federal Funds Purchased and Securities Sold Under Repurchase Agreements . . . . . . . (862) (192)
Net Increase in Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 331
Net Increase in Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775 39
Intermediate- and Long-Term Debt:
Proceeds from Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 267
Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,133) (906)
Stockholders' Equity:
Cash Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (187) (168)
Proceeds from Issuance of Nonredeemable Preferred Stock . . . . . . . . . . . . . . . . . . . . . 222 167
Proceeds from Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 772
-------- --------
Net Cash Provided (Used) by Financing Activities . . . . . . . . . . . . . . . . . . . . . . (4,088) 1,775
-------- --------
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2
-------- --------
Net Decrease in Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,131) (164)
Cash and Due from Banks at Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,068 5,008
-------- --------
Cash and Due from Banks at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,937 $ 4,844
-------- --------
Cash Paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,462 $ 2,375
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 88
Noncash Investing and Financing Activities:
Net Loan Transfers to Other Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 153 $ 397
-------- --------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
</TABLE>
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Chase Manhattan Corporation and Subsidiaries
NOTE 1. REGULATORY LIMITATIONS
The Company's ability to pay dividends on its preferred and common stock is
derived from several sources, including, among other sources, dividends from
the Bank, Chase USA, Chase Maryland and the Company's nonbanking subsidiaries.
As discussed below, the ability of the Company's banking subsidiaries to pay
dividends is subject to certain restrictions. On July 20, 1994, the Board of
Directors of the Company declared a quarterly dividend of $.40 per common
share, payable on August 15, 1994.
As more fully explained on page 71 of the 1993 Annual Report, national
banks are subject to various legal limitations on the amount of dividends that
may be paid to their stockholders. Under these limitations, a national bank
may not pay a dividend in an amount greater than its net profits then on hand
after deducting therefrom its losses and bad debts. For this purpose, "bad
debts" is defined to include generally the principal amount of matured loans
which are in arrears with respect to payment of interest for six months or more
and "net profits" has been construed by the Comptroller of the Currency to mean
retained earnings plus that portion of a bank's capital surplus which was
transferred from retained earnings. Generally, a debt is considered "matured"
when all or a part of the principal is due and payable as a result of demand,
arrival of a stated maturity date, or acceleration by contract or operation of
law. The approval of the Comptroller of the Currency is required if the total
of all dividends declared by a national bank in any calendar year exceeds such
bank's net profits for that year, combined with its retained net profits for
the preceding two calendar years, less any required transfers to surplus.
At June 30, 1994, under the more restrictive of these limitations, the
Bank could declare dividends during the remainder of 1994 of approximately $1.1
billion, combined with an additional amount equal to its retained net profits
from June 30, 1994 up to the date of any dividend declaration. Under
applicable state and federal laws, Chase USA and Chase Maryland could declare
dividends during the remainder of 1994 of approximately $960 million and $2
million, respectively, combined with an additional amount equal to their
respective retained net profits from June 30, 1994 up to the date of any
dividend declaration. The payment of dividends by bank holding companies and
their banking subsidiaries may also be limited by other factors, including
applicable regulatory capital guidelines and leverage limitations.
Various rules and regulations have been promulgated by the federal
banking agencies pursuant to the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA). Chase expects that these rules and
regulations will result in increased costs to the Company, the Bank and their
affiliates; however, based upon its assessment of the overall impact of these
rules and regulations, Chase does not expect any of them to have a material
effect on its operations. At June 30, 1994, the capital ratios of all of the
Company's banking subsidiaries exceeded the minimum capital ratios required of
a "well capitalized" institution as defined in the prompt corrective action
rule under FDICIA.
Further rules proposed or to be proposed under FDICIA, governing such
matters as operational and managerial standards and capital requirements, are
expected to be finalized and become effective in 1994. Until the various
regulations are adopted in final form, however, it is difficult to assess how
they will impact Chase's financial condition or operations.
NOTE 2. SUBSEQUENT EVENT
The Bank entered into a definitive merger agreement dated August 3, 1994 with
American Residential Holding Corporation (American Residential) pursuant to
which a subsidiary of the Bank will seek to acquire through a tender offer all
of the outstanding common stock of American Residential for a total of
approximately $348 million. American Residential is the parent company of
American Residential Mortgage Corporation, a residential mortgage lender which
originates and services single-family and multi-family residential mortgages.
The tender offer will be subject to, among other things, the valid tender of
not less than 80% of American Residential's outstanding common stock.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INDEX
<TABLE>
<S> <C>
Earnings Analysis
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Net Interest Revenue--Taxable Equivalent Basis . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Provision for Possible Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Credit Risk Management
Loan Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Consumer Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Wholesale Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Reserve for Possible Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Net Loan Charge-offs and Annualized Credit Loss Experience Ratios . . . . . . . . . . . . . . . . 14
Nonaccrual, Restructured and Past Due Outstandings and Domestic Other Real Estate (ORE) Acquired . 15
Asset/Liability Management
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Liquidity Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Interest Rate Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Trading Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Fair Value Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
EARNINGS ANALYSIS
EARNINGS SUMMARY AND SELECTED FINANCIAL RATIOS
<TABLE>
<CAPTION>
Second Quarter Six Months
-----------------------------------------
($ in millions, except per share data) 1994 1993 1994 1993
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Net Interest Revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 918 $ 894 $ 1,869 $ 1,941
Provision for Possible Credit Losses . . . . . . . . . . . . . . . . 150 225 310 585
Provision for Loans Held for Accelerated Disposition . . . . . . . . -- -- -- 566
Other Operating Revenue:
Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . 480 388 926 755
Other Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 320 305 729 597
Other Operating Expenses:
Provision for Other Real Estate Held for Accelerated Disposition . -- -- -- 318
Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . 1,073 995 2,131 1,978
------- ------- -------- ---------
Income (Loss) Before Taxes . . . . . . . . . . . . . . . . . . . . . 495 367 1,083 (154)
Applicable Income Taxes (Benefits) . . . . . . . . . . . . . . . . . 188 134 412 (40)
------- ------- -------- ---------
Income (Loss) Before Cumulative Effect of Change in
Accounting Principle . . . . . . . . . . . . . . . . . . . . . . . 307 233 671 (114)
Cumulative Effect of Change in Accounting Principle --
Adoption of SFAS 109 . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 500
------- ------- -------- ---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 307 $ 233 $ 671 $ 386
------- ------- -------- ---------
Selected Financial Ratios
Net Income Per Common Share . . . . . . . . . . . . . . . . . . . $ 1.46 $ 1.20 $ 3.27 $ 1.95
Return on Average Common Stockholders' Equity . . . . . . . . . . 16.1% 15.0% 18.1% 12.2%
Return on Average Total Assets . . . . . . . . . . . . . . . . . . 1.05% .93% 1.16% .78%
Book Value (Period End)
Common Stockholders' Equity per Common Share . . . . . . . . . . . $ 37.64 $ 32.86
------- -------
</TABLE>
9
<PAGE> 10
OVERVIEW
The Corporation reported second quarter 1994 net income of $307 million ($1.46
per share), up 32% from the $233 million ($1.20 per share) reported for the
second quarter of 1993.
Second quarter results included:
-- return on assets and return on common equity of 1.05% and 16.1%,
respectively;
-- growth in fees and commissions - up 24% over the same period last
year; increases in consumer banking - up 44%, trust and fiduciary - up
26%, and investment banking - up 36% over the same period last year;
-- trading revenue of $151 million;
-- provision for possible credit losses of $150 million, down $75 million
over the same period last year; and
-- decline of nonperforming assets, including a 28% decrease in domestic
commercial real estate nonperforming assets during the quarter.
For the first six months of 1994, Chase reported consolidated net
income of $671 million ($3.27 per share), up 74% from the $386 million ($1.95
per share) reported for the same period of 1993.
During second quarter 1994, Chase exchanged its eligible loans for
Brady bonds and past-due interest (PDI) bonds pursuant to the Brazilian debt
restructuring. The Brady bonds are included in Chase's Trading Account Assets.
The PDI bonds are carried in the investment securities available for sale
portfolio and resulted in an unrealized gain of approximately $46 million after
taxes, being reflected in stockholders' equity.
NET INTEREST REVENUE -- TAXABLE EQUIVALENT BASIS
Net interest revenue, on a taxable equivalent basis, was $924 million for the
second quarter of 1994, compared with $902 million for the second quarter of
1993. Net interest margin was 3.91%, compared with 4.10% reported for the
second quarter of 1993. Average interest-earning assets were $94.8 billion,
compared with $88.2 billion for the same period last year. Average loans
increased to $60.6 billion for the current quarter from the $59.8 billion level
reported for the second quarter of 1993.
For the first six months of 1994, net interest revenue, on a taxable
equivalent basis, was $1,882 million, compared with $1,958 million for the same
period last year, which included $142 million of interest revenue from Brazil
PDI bonds. The net interest margin was 4.05% for the first six months of 1994,
compared with 4.52% (4.19% excluding Brazil PDI bonds) for the same period last
year. Excluding the impact of the Brazil PDI bonds, net interest revenue
increased by $66 million over the same period last year primarily due to a $6.4
billion increase in average interest-earning assets to $93.8 billion and the
favorable impact from the reduction of nonperforming loans. The increase in
average interest-earning assets reflected the growth in securities and other
liquid assets to support trading businesses. Average loans of $60.9 billion
were flat period to period. The growth in lower-spread liquid assets has also
caused a reduction in the overall net yield on average interest-earning assets.
In addition, net interest revenue is affected by a number of other factors,
including the impact of competition on loan pricing and the prevailing interest
rate environment. Management expects such factors to continue to impact net
interest revenue for the remainder of 1994.
NET INTEREST REVENUE AND INTEREST RATE SPREADS--TAXABLE EQUIVALENT BASIS*
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------------------------------------------------------------------
1994 1993 1994 1993
--------------- --------------- --------------- --------------
($ in millions) Amount Rate Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earned . . . . . . . . $2,311 9.78% $2,066 9.40% $4,399 9.46% $4,235 9.77%
Interest Paid . . . . . . . . . 1,387 6.93 1,164 6.24 2,517 6.40 2,277 6.17
------ ---- ------ ---- ------ ---- ------ ----
Net Interest Revenue . . . . . $ 924 2.85% $ 902 3.16% $1,882 3.06% $1,958 3.60%
--as a % of Average Gross
Interest-Earning Assets ** . 3.91% 4.10% 4.05% 4.52%
---- ---- ---- ----
<FN>
* Net interest revenue is the amount by which interest revenue from
interest-earning assets exceeds the interest expense applicable to
interest-bearing liabilities. Taxable equivalency adjusts interest
revenue which is fully or partially exempt from income taxes to an
amount equivalent to an amount of interest revenue which would be
fully taxable. Net interest revenue, on a taxable equivalent basis,
as a percentage of average gross interest-earning assets, yields a
ratio described as the net interest margin. Net interest revenue, on
a taxable equivalent basis, was higher by $6 million and $8 million
for the second quarter of 1994 and 1993, respectively, and $13 million
and $17 million for the first six months of 1994 and 1993,
respectively, than comparable net interest revenue amounts reported on
a financial statement basis. Taxable equivalent amounts have been
adjusted (by applying a combined U.S. federal, state and local income
tax rate of approximately 41%) to recognize the differential between
interest revenue that is fully or partially exempt from income taxes
and interest revenue that is fully taxable.
** See pages 27 and 29 for components of Average Gross Interest-Earning
Assets.
</TABLE>
10
<PAGE> 11
PROVISION FOR POSSIBLE CREDIT LOSSES
The provision for possible credit losses was $150 million, or $10 million lower
than the first quarter of 1994 and $75 million lower than the second quarter of
last year.
The provision for possible credit losses for the first six months of 1994
was $310 million, compared with $585 million (excluding the accelerated
disposition portfolio) for the same period last year. See Credit Risk
Management section starting on page 12 for a discussion of the Reserve for
Possible Credit Losses and asset quality.
OTHER OPERATING REVENUE
<TABLE>
<CAPTION>
Second Quarter Six Months
----------------------------------------
($ in millions) 1994 1993 1994 1993
----------------------------------------
<S> <C> <C> <C> <C>
Fees and Commissions:
Consumer Banking . . . . . . . . . . . . . . . . . . $164 $114 $ 309 $ 231
Trust and Fiduciary . . . . . . . . . . . . . . . . 140 111 282 218
Investment Banking . . . . . . . . . . . . . . . . . 68 50 115 88
Other . . . . . . . . . . . . . . . . . . . . . . . 108 113 220 218
---- ---- ------- -------
Total Fees and Commissions 480 388 926 755
---- ---- ------- -------
All Other Operating Revenue:
Foreign Exchange Trading . . . . . . . . . . . . . . 78 85 163 188
Trading Account . . . . . . . . . . . . . . . . . . 73 102 168 175
Investment Securities Gains . . . . . . . . . . . . 1 14 80 20
Corporate Finance-Related Equity Investment Gains . . 55 21 139 97
Accelerated Disposition Portfolio Gains . . . . . . . 15 28 68 28
Other . . . . . . . . . . . . . . . . . . . . . . . 98 55 111 89
---- ---- ------- -------
Total Other Operating Revenue $800 $693 $ 1,655 $ 1,352
---- ---- ------- -------
</TABLE>
Fees and commissions were $480 million for the second quarter of 1994, up 24%
over the second quarter of 1993. Total consumer banking fees, including credit
card and mortgage banking fees, increased 44%. Mortgage banking fees improved
over the same period last year due to the 1993 acquisition of Troy & Nichols,
Inc. and the absence of accelerated writedowns of mortgage servicing assets in
1994 versus $38 million of such writedowns in 1993.
Trust and fiduciary fee revenue increased 26% over the second quarter of
1993 due to increased customer transaction volumes in the Global Securities
Services and Global Private Banking businesses. Investment banking fee revenue
from global corporate finance activities increased 36% over the same period last
year. This increase reflected improved transaction volumes, particularly in
loan syndication and project finance.
For the first six months of 1994, fees and commissions were $926 million,
up 23%, reflecting increases in all categories of fee revenue.
As a result of the generally unsettled condition of the global markets,
total trading revenue declined for the current quarter to $151 million or 19%,
compared with $187 million for the same period last year. For the first six
months of 1994, total trading revenue was $331 million, compared with $363
million for the same period last year. If these market conditions continue,
trading revenues may be adversely affected. See the Trading Activities section
starting on page 22 for a further discussion.
Other revenue for the second quarter of 1994 was $98 million, up $43
million, from the same period in 1993, and included a $55 million gain from the
sale of Chase Bank of Arizona, a domestic banking subsidiary.
OTHER OPERATING EXPENSES
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------------------------------------------------
($ in millions) 1994 1993 1994 1993
-------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Employee Benefits . . . . . . . . . . . . . . . . $ 536 $502 $1,080 $1,002
Net Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . 98 93 199 198
Equipment Rentals, Depreciation and Maintenance . . . . . . . . 74 69 145 140
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 365 331 707 638
------- ---- ------ ------
Subtotal 1,073 995 2,131 1,978
------- ---- ------ ------
Provision For Other Real Estate Held For Accelerated Disposition -- -- -- 318
------- ---- ------ ------
Total Other Operating Expenses $ 1,073 $995 $2,131 $2,296
------- ---- ------ ------
</TABLE>
Total operating expenses were $1,073 million for the second quarter of 1994 and
$995 million for the second quarter of 1993. Operating expenses for the second
quarter of 1994 included $23 million of ORE valuation losses and expenses,
compared with $37 million for the same period last year. The expense to revenue
ratio, excluding ORE expenses, was 61% for the current quarter.
11
<PAGE> 12
Operating expenses for the second quarter of 1994 reflected Chase's
continued funding of strategic growth programs in its core businesses. These
programs contributed to the fee revenue growth realized this year. For the
first six months of 1994, other operating expenses were $2,131 million, compared
with $1,978 million (excluding first quarter 1993 provision for ORE held for
accelerated disposition) for the same period of 1993.
PROVISION FOR INCOME TAXES
The second quarter of 1994 provision for income taxes was $188 million
representing an effective tax rate of 38%, compared with a tax provision of
$134 million for the second quarter of 1993.
For the first six months of 1994, the provision for income taxes was $412
million, compared with a net income tax benefit of $40 million for the same
period last year. Excluding the tax benefits applicable to the special
provision for the accelerated disposition portfolio, Chase's tax provision for
the first six months of 1993 would have been approximately $271 million. In
addition, Chase adopted SFAS 109 in the first quarter of 1993 resulting in a
$500 million net benefit reflected as a cumulative effect of a change in
accounting principle.
CREDIT RISK MANAGEMENT
As further discussed on pages 38 and 39 of the 1993 Annual Report, Chase has
established and implemented policies and procedures to actively manage credit
risk, both on- and off-balance sheet. All tables in this section exclude the
accelerated disposition portfolio, unless otherwise noted.
LOAN COMPOSITION
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
-------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,011 $28,561 $24,547
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . 15,400 15,599 18,541
Less: Unearned Discount and Fee Revenue . . . . . . . . . . . 154 188 274
------- ------- -------
Total Domestic Offices 43,257 43,972 42,814
------- ------- -------
Overseas Offices:
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,606 2,283 2,541
Wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . 14,666 14,279 15,926
Less: Unearned Discount and Fee Revenue . . . . . . . . . . . 47 41 45
------- ------- -------
Total Overseas Offices 17,225 16,521 18,422
------- ------- -------
Total Loans $60,482 $60,493 $61,236
------- ------- -------
</TABLE>
Key data on the worldwide consumer loan portfolio are summarized below.
CONSUMER LOANS
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
-------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Secured by 1-4 Family Residential Properties . . . . . . . . . . $13,254 $14,126 $11,715
Credit Card . . . . . . . . . . . . . . . . . . . . . . . . . . 6,408 6,426 5,773
Other Consumer . . . . . . . . . . . . . . . . . . . . . . . . . 8,349 8,009 7,059
------- ------- -------
Total Domestic Offices . . . . . . . . . . . . . . . . . . . . . 28,011 28,561 24,547
Overseas Offices . . . . . . . . . . . . . . . . . . . . . . . . 2,606 2,283 2,541
------- ------- -------
Total Consumer Loans $30,617 $30,844 $27,088
------- ------- -------
</TABLE>
The increase in domestic consumer loans from June 30, 1993 to June 30, 1994 was
due to increased demand for 1-4 family loans experienced during the second half
of 1993 and increased credit card and auto finance outstandings throughout the
period. Chase securitized or sold $2.3 billion of residential mortgage loans
from December 31, 1993 to June 30, 1994, approximately $2.0 billion of which
had been held for sale and carried at lower of cost or market. Chase
securitized or sold $4.9 billion of residential mortgage loans from June 30,
1993 to June 30, 1994, approximately $4.6 billion of which had been held for
sale and carried at lower of cost or market. Included in the $28.0 billion of
total domestic consumer loans at June 30, 1994 were approximately $0.7 billion
of residential mortgage and other consumer loans that were held for sale.
12
<PAGE> 13
Key data on the worldwide wholesale loan portfolio are summarized below.
WHOLESALE LOANS
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
---------------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . $ 2,428 $ 3,099 $ 4,155
Commercial and Industrial . . . . . . . . . . . . . . . . . . . 7,975 8,032 8,982
Other Wholesale . . . . . . . . . . . . . . . . . . . . . . . . 4,997 4,468 5,404
------- ------- -------
Total Domestic Offices . . . . . . . . . . . . . . . . . . . . . . 15,400 15,599 18,541
------- ------- -------
Overseas Offices:
Commercial and Industrial . . . . . . . . . . . . . . . . . . . 9,931 10,002 9,221
Other Wholesale . . . . . . . . . . . . . . . . . . . . . . . . 4,735 4,277 6,705
------- ------- -------
Overseas Offices . . . . . . . . . . . . . . . . . . . . . . . . . 14,666 14,279 15,926
------- ------- -------
Total Wholesale Loans $30,066 $29,878 $34,467
------- ------- -------
</TABLE>
Wholesale loans in overseas offices decreased from $15.9 billion at June 30,
1993 to $14.7 billion at June 30, 1994 primarily through sales, charge-offs and
the transfers at December 31, 1993 of approximately $1 billion of cross-border
extensions of credit and Mexican Brady bonds to the investment securities
available for sale portfolio and of $418 million of cross-border extensions of
credit to the trading account, partially offset by new lending.
Chase's domestic commercial real estate loan portfolio decreased to $2.4
billion at June 30, 1994 from $3.1 billion and $4.2 billion at December 31, 1993
and June 30, 1993, respectively. The reduction in the first six months of 1994
was the result of gross loan charge-offs of $140 million, transfers to ORE of
$152 million and net repayments of outstanding loans of $379 million.
At June 30, 1994, approximately $1.6 billion of the total $2.4 billion of
domestic commercial real estate loans have been identified as being consistent
with Chase's ongoing core real estate portfolio activities. The remaining
noncore real estate loans of approximately $820 million consist of approximately
$490 million of performing loans and approximately $330 million of nonaccrual
loans. The carrying value of these nonaccrual loans at June 30, 1994 was
approximately 70% of their contractual amount. Chase generally allocates a
portion of its total reserve for possible credit losses to its real estate
portfolio. At June 30, 1994, the reserve for possible credit losses for
this noncore real estate portfolio segment was $250 million and Management
expects this reserve to cover any potential future losses related to these
loans. Giving effect to this allocation, the net carrying value of the noncore
domestic commercial real estate portfolio is 59% of the original contractual
amount.
As previously reported, Chase established an accelerated disposition
portfolio of selected lower quality domestic commercial real estate assets at
March 31, 1993. These assets had a net carrying value at that date of $1,024
million. Through June 30, 1994, the net carrying value of assets in this
portfolio was reduced by $979 million, or 96%, to $45 million. Proceeds from
collections and dispositions of assets in this portfolio through June 30, 1994
resulted in approximately 54% of the original contractual amounts being
recovered.
13
<PAGE> 14
RESERVE FOR POSSIBLE CREDIT LOSSES
RECONCILIATION OF RESERVE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
Second Quarter First Quarter Second Quarter
---------------------------------------------------------
($ in millions) 1994 1994 1993
---------------------------------------------------------
<S> <C> <C> <C>
Balance at Beginning of Period . . . . . . . . . . . . . . . . . . . . $1,429 $1,425 $1,912
Additions:
Provision for Possible Credit Losses Charged to Expense . . . . . . 150 160 225
Deductions:
Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 203 254
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47) (47) (32)
------ ------ ------
Net Loan Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . 146 156 222
Reserves of Disposed Subsidiaries and Other Adjustments. . . . . . . . 2 -- 3
------ ------ ------
Balance at End of Period $1,435 $1,429 $1,918
------ ------ ------
- - --As a % of Total Loans . . . . . . . . . . . . . . . . . . . . . . . 2.37% 2.32% 3.13%
- - --As a % of Nonaccrual and Restructured Outstandings . . . . . . . . . 166% 134% 82%
------ ------ ------
</TABLE>
Of the $1.4 billion reserve for possible credit losses at June 30, 1994, $250
million of this reserve was allocated to cover the remaining losses on
performing and nonaccrual loans in the noncore domestic commercial real estate
portfolio. The ratios of the reserve for possible credit losses to nonaccrual
loans in both the core loan portfolio and the noncore domestic commercial real
estate portfolio are as follows:
RESERVE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
Noncore
Domestic
Commercial
June 30, 1994 Core Real Estate
($ in millions) Total Loan Portfolio Portfolio
-----------------------------------------------------
<S> <C> <C> <C>
Nonaccrual and Restructured Outstandings . . . . . . . . . . . . $ 863 $ 533 $ 330
Reserve Balance at End of Period . . . . . . . . . . . . . . . . $1,435 $ 1,185 $ 250
- - --As a % of Nonaccrual and Restructured Outstandings . . . . . . 166% 222% 76%
------ ------- -------
</TABLE>
NET LOAN CHARGE-OFFS AND ANNUALIZED CREDIT LOSS EXPERIENCE RATIOS
<TABLE>
<CAPTION>
Second Quarter Six Months
---------------------------------------------------
($ in millions) 1994 1993 1994 1993
---------------------------------------------------
<S> <C> <C> <C> <C>
Net Loan Charge-offs:
Domestic:
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90 $ 95 $184 $198
Commercial Real Estate. . . . . . . . . . . . . . . . . . . . 51 74 102 165
Commercial and Other. . . . . . . . . . . . . . . . . . . . . 5 55 16 83
---- ----- ---- ----
Total Domestic 146 224 302 446
---- ----- ---- ----
Total International -- (2) -- (4)
---- ----- ---- ----
Total $146 $ 222 $302 $442
---- ----- ---- ----
Net Loan Charge-offs as a Percentage of Average Loans:
Domestic:
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27% 1.59% 1.31% 1.66%
Commercial Real Estate. . . . . . . . . . . . . . . . . . . . 6.98 6.68 6.80 6.04
Commercial and Other. . . . . . . . . . . . . . . . . . . . . .14 1.66 .27 1.26
---- ----- ---- ----
Total Domestic Credit Loss Ratio 1.36 2.16 1.40 2.10
---- ----- ---- ----
Total International Credit Loss Ratio -- (.04) -- (.04)
---- ----- ---- ----
Total Credit Loss Ratio .97% 1.49% 1.00% 1.46%
---- ----- ---- ----
</TABLE>
Net loan charge-offs for the second quarter of 1994 were $146 million, down $76
million from the second quarter of 1993. Domestic commercial real estate and
commercial and other net loan charge-offs declined $23 million and $50 million,
respectively, from the second quarter of 1993. Net loan charge-offs for the
first six months of 1994 were $302 million, down $140 million from the first
six months of 1993. For further details on the reserve for possible credit
losses and net loan charge-offs, see Analysis of Credit Loss Experience on page
33.
14
<PAGE> 15
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 114, "Accounting by Creditors
for Impairment of a Loan," which is effective January 1, 1995, with early
adoption permitted. In March 1994, the FASB issued a proposed amendment of SFAS
114 which would permit a creditor to use existing methods for recognizing
interest income on impaired loans. Chase is studying the impact of adopting
SFAS 114, including the proposed amendment, but does not expect it to have a
material effect based on the loan portfolio and market conditions as of June 30,
1994.
NONACCRUAL, RESTRUCTURED AND PAST DUE OUTSTANDINGS AND DOMESTIC ORE ACQUIRED
NONACCRUAL AND RESTRUCTURED OUTSTANDINGS AND DOMESTIC ORE
<TABLE>
<CAPTION>
June 30, March 31, December 31, June 30,
($ in millions) 1994 1994 1993 1993
---------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic Outstandings:
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . $330 $ 469 $ 475 $ 947
Commercial and Industrial . . . . . . . . . . . . . . . . . . . 173 195 226 308
Financial Institutions . . . . . . . . . . . . . . . . . . . . . 11 19 37 39
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 185 144 170
---- ------ ------ ------
Total Domestic Outstandings 699 868 882 1,464
---- ------ ------ ------
International Outstandings:
Restructured Refinancing Countries . . . . . . . . . . . . . . . 60 69 74 747
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . 10 11 14 22
Commercial and Industrial . . . . . . . . . . . . . . . . . . . 38 45 22 45
Financial Institutions . . . . . . . . . . . . . . . . . . . . . 36 51 41 43
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 24 21 26
---- ------ ------ ------
Total International Outstandings 164 200 172 883
---- ------ ------ ------
Total Nonaccrual and Restructured Outstandings $863 $1,068 $1,054 $2,347
---- ------ ------ ------
Domestic ORE $589 $ 810 $ 895 $ 763
---- ------ ------ ------
As a % of Total Gross Assets:
Nonaccrual and Restructured Outstandings .74% .94% 1.02% 2.32%
Nonaccrual and Restructured Outstandings and Domestic ORE 1.25 1.65 1.88 3.08
---- ------ ------ ------
</TABLE>
The substantial decrease in nonaccrual and restructured outstandings at June 30,
1994, as compared with June 30, 1993, was due to repayments, charge-offs,
transfers to accrual status and ORE, and the transfer at December 31, 1993 of
certain refinancing countries outstandings to the trading account.
Nonaccrual loans that have been restructured but remain in nonaccrual
status amounted to $52 million, $107 million and $308 million at June 30, 1994,
December 31, 1993 and June 30, 1993, respectively, and continue to be included
in the preceding table.
RECONCILIATION OF NONACCRUAL AND RESTRUCTURED OUTSTANDINGS
<TABLE>
<CAPTION>
($ in millions)
<S> <C>
Balance at December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,054
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510
Deductions:
Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Interest Applied to Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Transfers to ORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Transfers to Accrual Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
------
Balance at June 30, 1994 $ 863
------
</TABLE>
15
<PAGE> 16
The increase in the negative impact of nonaccrual and restructured outstandings
on interest revenue for the first six months of 1994, as shown in the following
table, resulted primarily from the realization of $142 million due to the sale
of Brazilian PDI bonds in the first quarter of 1993.
NEGATIVE (POSITIVE) IMPACT OF NONACCRUAL AND RESTRUCTURED OUTSTANDINGS*
<TABLE>
<CAPTION>
Second Quarter Six Months
($ in millions) 1994 1993 1994 1993**
--------------------------------------------
<S> <C> <C> <C> <C>
Interest Revenue That Would Have Been
Recorded Under Original Terms . . . . . . . . . $18 $39 $34 $ 67
Interest Revenue Actually Realized . . . . . . . 2 12 6 179
--- --- --- -----
Negative (Positive) Impact on Interest Revenue $16 $27 $28 $(112)
--- --- --- -----
<FN>
* Excludes the positive impact on interest revenue of accruing bonds that have been restructured pursuant to The Brady Proposals.
** Includes during the first quarter of 1993 loans transferred to the accelerated disposition portfolio since they were
transferred as of March 31, 1993.
</TABLE>
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
--------------------------------------------------
<S> <C> <C> <C>
Domestic Loans:
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . $163 $186 $188
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . 5 42 9
Commercial and Other . . . . . . . . . . . . . . . . . . . . . . 19 21 46
---- ---- ----
Total Domestic Loans . . . . . . . . . . . . . . . . . . . . . . . 187 249 243
---- ---- ----
International Loans . . . . . . . . . . . . . . . . . . . . . . . . 37 12 17
---- ---- ----
Total Accruing Loans Past Due 90 Days or More $224 $261 $260
---- ---- ----
</TABLE>
Accruing loans that are contractually past due 90 days or more are loans that
are both well secured or guaranteed by financially responsible third parties
and are in the process of collection. Past due consumer loans, with the
exception of 1-4 family residential property loans, are generally charged off
according to internally established delinquency schedules which do not permit
delinquencies to exceed 180 days. Such 1-4 family residential property loans
are placed in nonaccrual status if reasonable doubt exists as to timely
collectibility or if payment of principal or interest is contractually past due
90 days or more and the loan is not well secured or guaranteed by financially
responsible third parties and in the process of collection.
RECONCILIATION OF DOMESTIC REAL ESTATE ACQUIRED IN SATISFACTION OF LOANS
<TABLE>
<CAPTION>
($ in millions)
<S> <C>
Balance at December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $895
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Deductions:
Repayments/Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354
Valuation Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
----
Balance at June 30, 1994* $589
----
<FN>
*Includes in-substance foreclosure amounts of $499 million. ORE at June 30, 1994 was carried at approximately 41% of original
outstandings, primarily as a result of $853 million of cumulative charge-offs, interest applied to principal and valuation losses.
</TABLE>
16
<PAGE> 17
ASSET/LIABILITY MANAGEMENT
Asset/liability management (ALM) is an important ongoing process, which
requires the management of both liquidity risk and interest rate risk
particularly as financial products become increasingly more complex. The
policies and guidelines for management of Chase's liquidity and interest rate
risks are discussed further on pages 48 and 77 of Chase's 1993 Annual Report.
INVESTMENT SECURITIES
Information regarding Chase's investment securities portfolio and related
accounting policies is contained on pages 48, 49, 63, 66 and 67 of the 1993
Annual Report. On December 31, 1993, Chase adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities," which requires investment
securities to be classified as either Held to Maturity or Available for Sale.
SFAS 115 changed the accounting for investment securities available for sale
from the lower of cost or market to fair value. In addition, approximately
$1 billion of Mexican Brady bonds and cross-border refinancing countries
securities previously classified as Loans were reclassified to Investment
Securities Available for Sale at December 31, 1993 as a result of the
adoption of SFAS 115.
At June 30, 1994, net unrealized losses in the investment securities held
to maturity portfolio were $4 million, compared with net unrealized gains of
$33 million and $40 million at December 31, 1993 and June 30, 1993,
respectively. With respect to those investment securities that are available
for sale and carried at fair value, the net unrealized gains reflected in
stockholders' equity, net of taxes, were $9 million at June 30, 1994 compared
with $264 million at December 31, 1993. This change resulted from various
factors, including gains of approximately $79 million from sales, declines in
bond values due to rising domestic interest rates and, in the case of Brady
bonds, other political and economic factors which negatively impacted the
value of such emerging markets securities. It is possible that Chase will
continue to experience volatility in stockholders' equity from changes in the
fair values of its investment securities available for sale portfolio.
For further information on the investment securities portfolios, see pages
31 and 32.
LIQUIDITY RISK MANAGEMENT
As discussed on pages 48 to 50 of the 1993 Annual Report, Chase manages its
liquidity to achieve two principal objectives. One is to ensure that the
Company and its subsidiaries have sufficient liquid assets to meet the normal
transaction requirements of their customers and to provide a cushion against
unforeseen liquidity needs. The second is to maintain a stable,
cost-effective, relationship-based source of financing that is diversified
over geographic locations and customer segments. Chase's financing is built
on a strong base of customer deposits from its strategic businesses.
The Company also finances itself with a mixture of common and preferred
stock, intermediate- and long-term senior and subordinated debt, and
commercial paper.
Chase's primary liquidity sources include a large portfolio of assets,
including cash and due from banks, interest-bearing deposits placed with
banks, federal funds sold and securities purchased under resale agreements,
trading account assets and investment securities available for sale. At June
30, 1994, these assets totaled $44.3 billion, or approximately $31.5 billion
before the effect of adoption of FASB Interpretation 39, "Offsetting of
Amounts Related to Certain Contracts" (FIN 39), compared with $32.6 billion
at December 31, 1993. In addition to maintaining this portfolio of liquid
assets, Chase also has core consumer assets, such as 1-4 family residential
loans, credit card receivables and automobile loans, that can be sold or
securitized.
The Company maintains a $750 million revolving credit agreement that
expires on October 28, 1994; no borrowings have ever been made under this
credit facility.
In managing liquidity, Chase takes into account the various legal
limitations, including the extent to which banks may pay dividends to their
parent companies or finance or otherwise supply funds to certain of their
affiliates, as discussed in Note 1, Regulatory Limitations, in Notes to
Consolidated Financial Statements on page 8.
17
<PAGE> 18
INTEREST RATE RISK MANAGEMENT
As discussed on pages 50 and 51 of the 1993 Annual Report, Chase's net interest
revenue is affected by fluctuations in market interest rates as a result of
timing differences in the repricing of its assets and liabilities. These
repricing differences are quantified in specific time intervals and are
referred to as interest rate sensitivity gaps. Chase manages the interest rate
risk of current and future earnings to a level that is consistent with Chase's
mix of businesses and seeks to limit such risk exposure to a percentage of
earnings. During the first six months of 1994, the quarterly exposures in the
tactical time horizon averaged 1.5% of quarterly core net income compared with
2.0% for 1993. The objective in managing interest rate risk is to support the
achievement of business strategies, while protecting earnings and liquidity.
At June 30, 1994, as shown in the chart below, Chase's near-term interest
rate risk is to a rising rate environment, that is, assuming no Management
action, net interest revenue would be expected to be adversely affected by a
rise in interest rates. Conversely, interest rate risk exposure beyond the
near term is to a declining rate scenario, principally due to Chase's high
level of core wholesale and consumer deposits, which exceed the level of
fixed-rate assets.
In managing interest rate risk, Chase uses both on-balance sheet products
and derivatives, including interest rate swaps, futures, forwards and
option-related products. Derivative products used for asset/liability
management purposes are linked to assets, liabilities or groups of similar
assets and liabilities and are specifically related to balance sheet management
strategies. Correlation and hedge effectiveness tests between the derivative
product and the linked balance sheet position are also performed.
The following chart provides a quantification of Chase's interest rate
sensitivity gap as of June 30, 1994, based upon the known repricing dates of
certain assets and liabilities and the assumed repricing dates of others. This
chart illustrates the impact of including and excluding the related derivative
products on these gaps. This chart also displays only a static view of Chase's
interest rate sensitivity gap and does not capture the dynamics of balance
sheet, rate and spread movements, nor Management's actions that may be taken to
manage this position.
[GRAPH SEE EDGAR APPENDIX]
Notes to chart:
(1) Cumulative interest rate gaps are defined as the average cumulative fixed
rate positions (assets less liabilities) for a given calendar period. The gaps
measure the time weighted dollar equivalent volume of positions fixed for a
particular calendar period. The gap positions reflect a stock concept, rather
than the traditional flow concept as measured by runoff. For example, a $100
million certificate of deposit made on July 1 and maturing on August 28 would
have a gap impact of $64 million ($100 million x 59 days/92 days) in the 1 to 3
month repricing time frame.
(2) Variable rate balances are reported based on their repricing dates. Fixed
rate balances are reported based on their scheduled contractual maturity dates,
except for certain investment securities and loans secured by 1-4 family
residential properties that are based on anticipated prepayments. Given the
indeterminate date of any sales, investment securities that may be sold prior
to maturity are similarly reported, depending on their variable or fixed rate
terms.
(3) Prime-priced loans are considered as 1 to 3 month assets, fixed-rate credit
card receivables are classified as 2-year maturities, while stockholders'
equity is assigned a 5-year maturity.
(4) Trading Account Assets are considered overnight assets.
(5) Core demand deposits, noninterest-bearing time deposits, savings accounts
and money market accounts are classified as 7-year maturities. The balance, or
noncore portions of these deposits, are tranched from overnight to 1-year
maturities. The interest rate sensitivity assumptions presented for these
deposits are based on historical and current experiences regarding product
portfolio retention and interest rate repricing behavior.
At June 30, 1994, Chase had approximately $44 billion and $11 billion,
respectively, of notional swap principal and other ALM contracts outstanding
related to such activities, compared with $37 billion and $14 billion,
respectively, at December 31, 1993. The following table summarizes certain of
Chase's assets and liabilities at June 30, 1994, the corresponding interest
revenue earned on such assets or interest expense incurred on such liabilities
for the six months ended June 30, 1994, as well as the notional or contract
amounts of related derivative
18
<PAGE> 19
products used for ALM purposes. Also disclosed is the favorable or unfavorable
percentage impact these derivative products had on the related interest amounts
reflected in Chase's Consolidated Statement of Income. As shown, Chase's use
of derivative products reduced interest expense on deposits and long-term debt
and interest revenue on placings by the percentages indicated.
DERIVATIVE PRODUCTS AND RELATED BALANCE SHEET POSITIONS AND INTEREST REVENUE
(EXPENSE)
<TABLE>
<CAPTION>
Six Months Ended
Contract/ June 30, 1994
Notional Amount Income Statement
--------------- ----------------
Published Published Favorable
Balance Interest Other Interest (Unfavorable)
Sheet Rate ALM Revenue Percentage
($ in millions) Amount Swaps Contracts (Expense) Impact*
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 30, 1994
Interest-Bearing Deposits
Placed with Banks . . . . . . . $ 5,968 $ -- $ 200 $ 257 (2)%
Investment Securities . . . . . . . 7,126 1,100 1,600 426 --
Loans . . . . . . . . . . . . . . . 60,482 13,000 1,200 2,677 --
Deposits . . . . . . . . . . . . . . 68,908 27,000 7,800 (1,178) 12
Intermediate- and Long-Term Debt . . 4,825 2,800 500 (153) 21
------- -------
$43,900 $11,300
<FN>
* Represents the favorable (unfavorable) percentage impact of the interest revenue or interest expense arising from ALM derivative
products on the related interest revenue or interest expense amount prior to the impact of derivative products.
</TABLE>
The following table summarizes the outstanding ALM contract/notional amounts
of interest rate swaps and other ALM contracts at June 30, 1994 by yearly
intervals. The decrease in notional amounts from one period to the next period
represents maturities of the underlying contracts. At June 30, 1994, the
weighted average duration of fixed receive swaps and fixed pay swaps was
approximately 1.9 years and 1.1 years, respectively, compared to 2.4 years and
1.8 years, respectively, at December 31, 1993. The weighted average interest
rates to be received and paid on such swaps are presented for each yearly
interval. The variable rates, which are generally based on London Interbank
Offered Rate (LIBOR), are presented using the forward yield curve at June 30,
1994. However, actual repricings are generally based on the 3 month or 6 month
LIBOR rates in effect at the actual repricing dates, not the forward yield
curve. To the extent that the current 3 month and 6 month LIBOR rates change,
the variable rates of interest received or paid will change. Future interest
rate changes are not known, but could materially impact the variable rates
presented below. However, Chase expects the impact of these changes to be
mitigated by corresponding changes in the interest rates and values associated
with the linked assets and liabilities. In addition, net interest revenue will
be affected by the amortization of net deferred gains/(losses) and premiums paid
on open ALM option products purchased, as reflected in the tables on pages 20
and 21.
OUTSTANDING ALM CONTRACT/NOTIONAL AMOUNTS BY YEARLY INTERVALS
<TABLE>
<CAPTION>
June 30,
---------------------------------------------------------------------------------
($ in millions) 1994 1995 1996 1997 1998 Thereafter
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps:
Contract/Notional
Amount . . . . . . . $27,200 $15,900 $ 7,600 $ 4,900 $ 2,700 $1,700
Weighted Average:
Receive Rate . . . . 5.73% 6.33% 6.31% 6.50% 6.80% 6.58%
Pay Rate . . . . . . 5.70% 7.13% 7.45% 7.79% 8.09% 8.42%
Pay Fixed Swaps:
Contract/Notional
Amount . . . . . . . $16,700 $ 9,600 $ 1,200 $ 700 $ 600 $ 200
Weighted Average:
Receive Rate . . . . 5.75% 7.08% 7.47% 7.83% 7.97% 8.00%
Pay Rate . . . . . . 5.05% 5.86% 5.48% 5.40% 6.34% 8.40%
Other ALM Contracts $11,300 $ 8,500 $ 6,500 $ 6,400 $ 6,100 $5,100
------- ------- ------- ------- ------- ------
</TABLE>
As discussed on page 51 of the 1993 Annual Report, Chase uses derivative
products as part of its ALM activities to manage the earnings risk arising from
timing differences in repricing characteristics principally arising from its
customer-related assets and liabilities. Consistent with Chase's overall ALM
objectives to reduce its longer-term exposure to a decline in interest rates,
fixed-rate liabilities are
19
<PAGE> 20
hedged using derivative products. Given the volatile interest rate environment
prevailing during the first six months of 1994, an ALM strategy was initiated
to replace certain receive fixed-rate swap contracts by the purchase of
long-term option (floor) contracts. This action was taken to mitigate a
possible decline in value of such swaps which occurs in a period of rising
interest rates. By utilizing option contracts, the possible loss in value is
limited to the amount of the option premium paid.
The rise in interest rates during the first six months of 1994 resulted in a
decline in the value of Chase's ALM derivative positions. This decline in ALM
derivative values was more than offset by an increase in value to Chase of the
related linked balance sheet positions during the first half of 1994. This net
increase in balance sheet value substantially reflected the higher economic
value of Chase's core deposit funding base. The benefits of this low cost
funding are currently being recognized in income as a lower cost of interest
expense. As interest rates rise, core deposits increase in value as they
provide a less costly funding source versus other funding alternatives. During
the first half of 1994, the value of such deposits increased by approximately
$1,235 million as compared with a decrease of $556 million in the value of the
related ALM derivatives linked to such core deposits. The difference between
the change in value of the linked balance sheet positions and the related ALM
derivatives resulted primarily from Chase's strategy to hedge less than 100% of
its balance sheet positions as shown in the Derivative Products and Related
Balance Sheet Positions and Interest Revenue (Expense) table on page 19. Of
the remaining linked balance sheet positions, the only other significant change
in value related to intermediate- and long-term debt of the Company. Most of
this debt was issued at a fixed rate of interest and, therefore, improves in
value as interest rates rise. The change in value of the derivative products
related to such debt correspondingly declined in value. This activity is
consistent with Chase's overall ALM strategy of providing floating rate funding
to match Chase's predominant base of floating rate assets. Significant changes
in value to Chase's ALM derivative products and related linked balance sheet
positions for the first six months of 1994 are presented below.
CHANGE IN VALUE OF CERTAIN ALM DERIVATIVE PRODUCTS AND LINKED BALANCE SHEET
POSITIONS
<TABLE>
<CAPTION>
For Six Months Ended
June 30, 1994
-----------------------------
Change in Value Change in
of Linked Value of
Balance Sheet Related ALM
($ in millions) Positions Derivatives
-----------------------------
<S> <C> <C>
Balance Sheet Assets/Liabilities:
Deposits* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,235 $ (556)
Company's Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 (231)
------ ------
<FN>
* Core deposits are valued by a model that forecasts future core deposit costs versus alternative source of funds using
simulation techniques. Key assumptions include alternative cost of funds of 3-month LIBOR, core deposit operating costs,
reserve requirement of 10%, inflation of 3% per annum, and an interest elasticity of demand for balances of (0.4). This
valuation is performed on a "going concern" basis, which assumes new business will replace any runoff. This valuation
methodology differs from that used for SFAS 107, "Disclosures About Fair Value of Financial Instruments", which
considers only the existing portfolio.
</TABLE>
The change in value of Chase's ALM derivative products from December 31, 1993
to June 30, 1994 is as follows:
CHANGE IN VALUE OF ALM DERIVATIVE PRODUCTS
<TABLE>
<CAPTION>
June 30, December 31, Change in
($ in millions) 1994 1993 Value
-----------------------------------------------------
<S> <C> <C> <C>
ALM Derivative Contracts:
Net Deferred Gains (Losses) . . . . . . . . . . . . . . . . . . $ (149) $ 359 $ (508)
Net Unrealized Gains (Losses)* . . . . . . . . . . . . . . . . . (164) 117 (281)
------ ------- ------
Net ALM Derivative Gains/(Losses) $ (313) $ 476 $ (789)
------ ------- ------
<FN>
* Includes $142 million and $23 million of premiums on open ALM option products purchased at June 30, 1994 and December 31, 1993,
respectively, and variation margin on open futures contracts.
</TABLE>
The net deferred losses at June 30, 1994 are expected to be amortized over
the periods indicated below. The amortization of deferred gains and losses are
recognized as yield adjustments to the interest income or expense associated
with the linked assets or liabilities.
AMORTIZATION OF NET DEFERRED GAINS/(LOSSES) RELATED TO CLOSED ALM DERIVATIVE
CONTRACTS
<TABLE>
<CAPTION>
($ in millions) 1994 1995 1996 1997 1998 1999 Thereafter Total
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Gains/(Losses)
Amortization $4 $40 $3 $(37) $(59) $(59) $(41) $(149)
------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
In addition, Chase's Consolidated Statement of Condition included unamortized
premiums on open ALM option products purchased amounting to $142 million and $23
million at June 30, 1994 and December 31, 1993, respectively. The premiums at
June 30, 1994 will be amortized over the periods indicated below.
AMORTIZATION OF PREMIUMS ON OPEN ALM OPTION PRODUCTS PURCHASED
<TABLE>
<CAPTION>
($ in millions) 1994 1995 1996 1997 1998 1999 Thereafter Total
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premium Amortization $9 $17 $16 $16 $16 $15 $53 $142
-- --- --- --- --- --- --- ----
</TABLE>
CAPITAL MANAGEMENT
As discussed on pages 51 and 52 of the 1993 Annual Report, capital management is
an ongoing process that consists of providing equity and long-term debt for both
current and future financial positioning. Chase manages its capital to execute
its strategic business plans and to support its growth and investments,
including acquisition strategies, in its core businesses. Chase and its banking
subsidiaries are subject to the capital adequacy requirements of various federal
banking agencies, such as the Federal Reserve Board and the Office of the
Comptroller of the Currency. At June 30, 1994, the capital ratios of all of the
Company's banking subsidiaries exceeded the minimum ratios required of a well
capitalized institution under FDICIA and are expected to be in excess of the
minimum ratios required of a well capitalized institution in the future.
Chase's total stockholders' equity at June 30, 1994 was $8,593 million (or
7.32% of total assets after adjustment to reflect the redemption of all $227
million of Chase's outstanding Series F Preferred Stock on July 15, 1994),
compared with $8,122 million, or 7.95% at December 31, 1993, and $7,669
million (or 7.51% after adjustment to reflect the redemption of all $250
million of Chase's outstanding Series E Preferred Stock, announced in July
1993) at June 30, 1993.
In June 1994, Chase announced a stock repurchase program, under which up to
8.5 million shares of its common stock may be purchased over the next 12 to 18
months. The shares will be utilized to help offset the effects on total
outstanding shares of approximately 3.3 million shares of common stock issuable
upon the exercise of outstanding warrants that expire in June 1996 and shares
issuable upon exercise of various outstanding employee stock option and
incentive plans. Through June 30, 1994, no shares had been repurchased. On
July 20, 1994, the Company's Board of Directors increased the quarterly common
stock dividend from 33 cents to 40 cents per share.
TIER I AND TIER II CAPITAL
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
---------------------------------------------------
<S> <C> <C> <C>
Tier I Capital . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,852 $ 7,528 $ 7,050
Tier II Capital . . . . . . . . . . . . . . . . . . . . . . . . . 4,148 4,259 3,971
-------- -------- --------
Total Capital $ 12,000 $ 11,787 $ 11,021
-------- -------- --------
</TABLE>
Chase's Tier I risk-based capital ratio was 8.71% at June 30, 1994 as compared
with 8.44% at December 31, 1993 and 7.74% at June 30, 1993. The improvement in
the Tier I capital ratio since December 31, 1993 reflects the increase in Tier I
capital primarily from retained earnings, offset by investments and commitments
to invest during the first quarter of 1994 in Chase Securities, Inc. (CSI), the
Company's U.S. securities underwriting and dealing subsidiary. The Tier I
capital ratio was also impacted by higher net risk- weighted assets of $90.1
billion at June 30, 1994, compared with $89.2 billion at December 31, 1993.
During the first six months of 1994, Tier II capital decreased due to the
discount applicable to subordinated debt with remaining maturities of five years
or less and the increase in the investment in CSI, primarily offset by the
issuance of $300 million of subordinated debt.
The bank regulatory agencies are currently evaluating proposed amendments to
their regulatory capital guidelines that could include in Tier I Capital net
unrealized gains and losses on investment securities available for sale. Net
unrealized gains on such securities continue to be excluded from Tier I and
Total Capital until such amendments are finalized.
In the second quarter of 1994, the Company issued $150 million of 8%
subordinated notes due 2004.
On August 10, 1994, the Company issued $150 million of 7 7/8% subordinated
notes. The notes mature on August 1, 2004 and may not be redeemed prior
to August 1, 1999; the notes will be redeemable on such date and thereafter at
the option of the Company, in whole or in part, at their principal amount plus
accrued interest.
The net proceeds from both issuances are used for general corporate
purposes, including advances to or investments in banking and nonbanking
subsidiaries of the Company and the repayment of commercial paper or other
indebtedness of the Company. Both issuances qualify as Tier II capital.
21
<PAGE> 22
CAPITAL RATIOS*
<TABLE>
<CAPTION>
Minimum
June 30, December 31, June 30, Regulatory
1994 1993 1993 Guidelines
----------------------------------------------------------
<S> <C> <C> <C> <C>
Tier I Leverage Ratio (a) . . . . . . . . . . . . . . . . . . . . . 7.47%** 7.81% 7.67% 3.00-5.00%
Risk-Based Capital Ratios: (b)
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.71** 8.44 7.74 4.00
Total Capital . . . . . . . . . . . . . . . . . . . . . . . . 13.32** 13.22 12.10 8.00
<FN>
* Based on Federal Reserve Board definitions. Risk-based capital and
leverage ratios exclude the assets and off-balance sheet financial
instruments of CSI. For capital calculations, one-half of the investment,
including any commitment to invest, in CSI is deducted from both Tier I and
Tier II Capital.
** On May 10, 1994, the Company announced its intention to redeem on July
15, 1994 the $227 million of Series F Preferred Stock outstanding, which,
on a proforma basis, had the effect of reducing Chase's June 30, 1994, Tier
I leverage ratio from 7.68% to 7.47%, Tier I capital ratio from 8.97% to
8.71% and Total capital ratio from 13.57% to 13.32%. The Tier I leverage
ratio at June 30, 1994 was decreased by 51 basis points (bp) from the
redemption of Series F Preferred Stock and the adoption of FIN 39 at
January 1, 1994. Chase's Trading Account Assets and Liabilities increased
approximately $13 billion at June 30, 1994 as a result of such adoption.
(a) Tier I Capital divided by adjusted average assets. Adjusted average
assets are defined as total quarterly average assets less the assets of CSI
and other adjustments.
(b) Tier I Capital or Total Capital divided by net risk-weighted assets.
Net risk-weighted assets include assets and off- balance sheet positions,
weighted by the type of instrument and the risk weight of the counterparty,
collateral or guarantor.
</TABLE>
TRADING ACTIVITIES
As discussed on pages 53 to 55 of the 1993 Annual Report, Chase conducts its
trading activities predominantly in two business sectors: Global Risk
Management (GRM) and Global Capital Markets (GCM). GRM designs and markets a
broad range of risk management products that provide customers with the
ability to manage currency, interest rate and other financial exposures. The
net portfolio exposures created as a result of providing this service to
customers are managed by GRM as part of Chase's trading portfolio. As a
secondary business objective, GRM creates proprietary positions in its
trading portfolio to take advantage of market opportunities that are not
associated with customer activities. GRM's trading activity is concentrated
in major currencies and products, including foreign currency, precious
metals, and interest rate, commodity and equity derivative products.
GCM functions as an intermediary between customers (both issuers and
investors) and the capital markets worldwide. Issuer needs are met through
primary market activities, including underwriting, private placement and
syndication. In order to meet investor needs, as well as to provide
secondary market support to primary market activity, GCM sells and trades a
variety of instruments in the U.S. and international capital markets,
including Brady bonds and restructured loans of emerging market countries,
U.S. government and government agency securities, money market instruments,
and investment grade and noninvestment grade fixed income securities.
Trading and trading-related revenues (including revenue classified as net
interest revenue for financial statement purposes) for GRM and GCM are set
forth below:
TOTAL TRADING AND TRADING-RELATED REVENUES
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
($ in millions) 1994 1993
-------------------------
<S> <C> <C>
Income Statement Classification:
Foreign Exchange Trading Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $163 $188
Trading Account Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 175
Net Interest Revenue* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 44
---- ----
Total $395 $407
---- ----
Business Diversification:
Foreign Exchange and Precious Metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $165 $203
Interest Rate and Commodity Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 109
Global Capital Markets Trading and Underwriting . . . . . . . . . . . . . . . . . . . . . . . 142 95
---- ----
Total $395 $407
---- ----
Geographic Distribution:
The Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $239 $203
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 119
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 85
---- ----
Total $395 $407
---- ----
<FN>
* Includes accruals on interest-earning and interest-bearing trading-related
positions, as well as allocated amounts reflecting the cost or benefit,
based on short-term interest rates, associated with net trading-related
positions.
</TABLE>
As shown above, total trading and trading-related revenues for the six months
ended June 30, 1994 were below the comparable period of last year reflecting
the unsettled conditions in the foreign exchange and derivative markets, and
higher domestic interest rates. The Global Capital Markets trading and
underwriting business realized substantial revenue from the sale of emerging
markets trading positions earlier in the year, as well as the recognition of
market valuation gains that arose when certain Brazilian loans were exchanged
for securities pursuant to the Brazilian debt
22
<PAGE> 23
restructuring in the second quarter. These positive factors were partially
offset by a downturn in the emerging markets, in particular as investors
reacted to the general weakness in the global bond markets.
TRADING ACCOUNT ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
($ in millions) 1994 1993
-------- ------------
<S> <C> <C>
Securities and Loans . . . . . . . . . . . . . . . . $ 7,735 $6,171
Other, Principally Derivative Contracts* . . . . . . 13,204** 762
------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . $20,939 $6,933
------- ------
<FN>
* Includes foreign exchange, interest rate and commodity contracts.
** Includes approximately $13 billion resulting from the adoption of FIN 39
at January 1, 1994.
</TABLE>
TRADING ACCOUNT LIABILITIES
<TABLE>
<CAPTION>
June 30, December 31,
($ in millions) 1994 1993
-------- ------------
<S> <C> <C>
Securities Sold, Not Yet Purchased . . . . . . . $ 1,274 $736*
Derivative Contracts** . . . . . . . . . . . . . 12,778*** --
------- ----
Total . . . . . . . . . . . . . . . . . . . . . . $14,052 $736
------- ----
<FN>
* Classified as Accounts Payable, Accrued Expenses and Other Liabilities
prior to the adoption of FIN 39.
** Includes foreign exchange, interest rate and commodity contracts.
*** Results from the adoption of FIN 39 at January 1, 1994.
</TABLE>
MATURITY OF TRADING ACCOUNT DERIVATIVE CONTRACTS*
<TABLE>
<CAPTION>
Interest Foreign
Rate Exchange
At June 30, 1994 Contracts Contracts
--------- ---------
<S> <C> <C>
Less than 3 months . . . . . . . . . . . . . . 19% 62%
3 to 6 months . . . . . . . . . . . . . . . . 11 21
6 to 12 months . . . . . . . . . . . . . . . . 18 15
1 to 3 years . . . . . . . . . . . . . . . . . 34 2
3 to 5 years . . . . . . . . . . . . . . . . . 10 --
Over 5 years . . . . . . . . . . . . . . . . . 8 --
--- ---
Total . . . . . . . . . . . . . . . . . . . . 100% 100%
--- ---
<FN>
* Percentages are based upon remaining life of notional principal amounts.
</TABLE>
TRADING ACCOUNT DERIVATIVE CONTRACTS
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------------------------------------------------------------------
Contract/Notional Credit Risk Contract/Notional Credit Risk
($ in millions) Amount* Amount** Amount* Amount**
----------------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Interest Rate Contracts:
Interest Rate Swaps . . . . . . . . . . $234,700 $ 4,100 $178,700 $ 5,600
Currency Exchange Agreements . . . . . . 16,900 1,200 13,900 700
Forwards and Futures . . . . . . . . . . 215,300 200 123,200 70
Options, Caps and Floors Purchased . . . 56,500 1,000 61,400 900
Options, Caps and Floors Written . . . . 67,100 *** 57,500 ***
Foreign Exchange Contracts:
Spot, Forwards and Futures . . . . . . . 598,300 12,400 418,300 5,400
Options Purchased . . . . . . . . . . . 39,300 900 29,600 600
Options Written . . . . . . . . . . . . 47,700 *** 33,200 ***
Commodity Contracts**** . . . . . . . . . . 10,400 700 9,600 800
-------- ------- -------- -------
Total Gross Amount . . . . . . . . . . . $20,500 $14,070
Less: Master Netting Agreements . . . 7,300 3,100
-------- ------- -------- -------
Trading Account Derivative Assets . . . . . $13,200 $10,970*****
-------- ------- -------- -------
<FN>
* Contract or notional amounts of these instruments, which are not included
in the Consolidated Statement of Condition, are indicators of the level
of Chase's activities in particular classes of financial instruments.
Contract or notional amounts related to ALM activities are shown on page
19.
** Credit risk (defined by SFAS 105, "Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial
Instruments with Concentrations of Credit Risk," as the accounting loss
that may occur from counterparty failure) exists when derivative
contracts have positive market values. These amounts do not consider the
value of any collateral. The impact of master netting agreements is
reflected on an aggregated basis as a reduction to the credit risk
amount.
*** Options, caps and floors written have no credit risk.
**** Commodity contracts for purposes of this presentation include
contracts that contain the right or obligation to exchange a financial
instrument for a physical asset. Contract or notional amounts include
options written of $2.4 billion and $1.5 billion for June 30, 1994 and
December 31,1993, respectively. Such options written have no credit
risk.
***** Trading Account Derivative Assets for December 31, 1993 are shown on
a proforma basis, as prior to the adoption of FIN 39, trading account
contracts were reported in the Consolidated Statement of Condition on a
net basis.
</TABLE>
23
<PAGE> 24
The credit risk amount of interest rate swap contracts was lower at June 30,
1994 than at December 31, 1993 due to an increase in domestic interest rates.
The change in the credit risk amount of foreign exchange contracts reflected a
higher volume of contracts outstanding at June 30, 1994 and the decline, during
the month of June, in the value of the U.S. dollar against most major
currencies.
Chase's actual credit losses arising from derivative contracts
have not been material during the first half of 1994 and for 1993.
FAIR VALUE DISCLOSURES
Chase monitors the estimated fair values of its on- and off- balance-sheet
financial instruments as discussed on pages 80 and 81 of the 1993 Annual
Report. Based upon market and other conditions existing at June 30, 1994, as
compared with year-end 1993, with the exception of derivative instruments as
discussed on page 20, the estimated fair values of Chase's on- and
off-balance-sheet financial instruments in the aggregate were not adversely
impacted in the second quarter of 1994.
FINANCIAL RATIOS
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
1994 1993 June 30,
-----------------------------------------------------------
2nd Qtr. 1st Qtr. 2nd Qtr. 1994 1993
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Ratios
Net Income as a Percentage of Average:
Total Assets. . . . . . . . . . . . . . . . . . . . . . 1.05% 1.28% 0.93% 1.16% 0.78%
Common Stockholders' Equity*. . . . . . . . . . . . . . 16.11 20.15 14.95 18.11 12.21
Total Stockholders' Equity. . . . . . . . . . . . . . . 14.80 18.21 13.46 16.48 11.41
------ ------ ------ ----- -----
Leverage Ratios--Averages
Common Stockholders' Equity as a % of Total Assets. . . . 5.80% 5.80% 5.21% 5.80% 5.15%
Total Stockholders' Equity as a % of Total Assets . . . . 7.11 7.00 6.85 7.06 6.77
------ ------ ------ ----- -----
Common Stockholders' Equity Per Common Share. . . . . . . $37.64 $36.55 $32.86
------ ------ ------
Capital Ratios at Quarter End**
Common Stockholders' Equity as a % of Total Assets. . . . 6.08%*** 6.00%**** 6.08%
Total Stockholders' Equity as a % of Total Assets . . . . 7.32*** 7.24**** 7.51*****
Tier I Leverage . . . . . . . . . . . . . . . . . . . . . 7.47*** 7.28**** 7.67*****
Tier I Capital as a % of Net Risk-Weighted Assets . . . . 8.71*** 8.43 7.74*****
Total Capital as a % of Net Risk-Weighted Assets . . . . 13.32*** 12.94 12.10*****
------ ------ ------
<FN>
* Based on Net Income, adjusted as applicable.
** Based on Federal Reserve Board definition.
*** On May 10, 1994, the Company announced its intention to redeem on July
15, 1994 the $227 million of Series F Preferred Stock outstanding,
which, on a proforma basis, had the effect of reducing Chase's June 30,
1994 Total stockholders' equity ratio from 7.51% to 7.32%, Tier I
leverage ratio from 7.68% to 7.47%, Tier I capital ratio from 8.97% to
8.71% and Total capital ratio from 13.57% to 13.32%. The total equity
ratio and the Tier I leverage ratio at June 30, 1994 was decreased by
73 bp and 51 bp, respectively, from the redemption of Series F
Preferred Stock and the adoption of FIN 39 at January 1, 1994. The
common equity ratio at June 30, 1994 also decreased by 77 bp from the
adoption of FIN 39. Chase's Trading Account Assets and Liabilities
increased approximately $13 billion at June 30, 1994 as a result of such
adoption.
**** The common and total equity ratios and the Tier I leverage ratio at
March 31, 1994 decreased 59 bp, 71 bp and 72 bp, respectively, from the
adoption of FIN 39 at January 1, 1994. Chase's Trading Account Assets
and Liabilities increased approximately $10 billion as a result of such
adoption.
***** On July 16, 1993, the Company announced its intention to redeem the
$250 million of Series E Preferred Stock outstanding, which, on a pro
forma basis, had the effect of reducing Chase's June 30, 1993 Total
stockholders' equity ratio from 7.74% to 7.51%, Tier I leverage ratio
from 7.95% to 7.67%, Tier I capital ratio from 7.99% to 7.74% and Total
capital ratio from 12.34% to 12.10%.
Note: As discussed on page 21, the Tier I and Total capital ratios for 1994
exclude the Net Unrealized Gains on Investment Securities-Available for
Sale component of stockholders' equity. All other ratios include such
impact that arose from the adoption of SFAS 115.
</TABLE>
<TABLE>
<CAPTION>
The Chase Manhattan Bank, N.A. and Subsidiaries
Capital Ratios at Quarter End*
<S> <C> <C> <C>
Tier I Leverage. . . . . . . . . . . . . . . . . . . . 6.93%** 6.51%** 6.85%
Tier I Capital as a % of Net Risk-Weighted Assets. . . 8.24 7.74 7.05
Total Capital as a % of Net Risk-Weighted Assets . . . 12.08 11.66 11.15
----- ----- -----
<FN>
* Based on Office of the Comptroller of the Currency definition.
** The Tier I leverage ratio decreased 77 bp and 73 bp at June 30, 1994 and
March 31, 1994, respectively, from the adoption of FIN 39 at January 1,
1994.
Note: As discussed on page 21, the Tier I and Total capital ratios for 1994
exclude the Net Unrealized Gains on Investment Securities-Available for
Sale component of stockholders' equity. All other ratios include such
impact that arose from the adoption of SFAS 115.
</TABLE>
24
<PAGE> 25
Stockholder Data
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
1994 1993 June 30,
-------------------------------------------------------------
($ in millions, except per share data) 2nd Qtr. 1st Qtr. 2nd Qtr. 1994 1993
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarterly Cash Dividends:
Common Stock:
Per Share . . . . . . . . . . . . . . . . . . . . $ .33 $ .33 $ .30 $ .66 $ .60
Aggregate . . . . . . . . . . . . . . . . . . . . $ 61.0 $ 60.9 $ 47.3 $121.9 $ 94.2
Preferred Stock:
6 3/4% Series B . . . . . . . . . . . . . . . . . -- -- .4 -- .8
7.60% Series C . . . . . . . . . . . . . . . . . -- -- .5 -- 1.0
Floating Rate Series E . . . . . . . . . . . . . . -- -- 4.9 -- 10.1
Floating Rate Series F . . . . . . . . . . . . . . 5.2 3.4 4.1 8.6 8.4
10 1/2% Series G . . . . . . . . . . . . . . . . . 3.7 3.7 3.7 7.4 7.4
9.76% Series H . . . . . . . . . . . . . . . . . 2.5 2.5 2.5 5.0 5.0
10.84% Series I . . . . . . . . . . . . . . . . . 5.4 5.4 5.4 10.8 10.8
9.08% Series J . . . . . . . . . . . . . . . . . 3.4 3.4 3.4 6.8 6.8
8-1/2% Series K . . . . . . . . . . . . . . . . . 3.6 3.6 3.6 7.2 7.2
8.32% Series L . . . . . . . . . . . . . . . . . 5.0 5.0 5.0 10.0 10.0
8.40% Series M . . . . . . . . . . . . . . . . . 3.6 3.6 3.6 7.2 6.0
Floating Rate Series N . . . . . . . . . . . . . . 2.0 -- -- 2.0 --
------ ------ ------ ------ ------
Total Preferred Stock . . . . . . . . . . . . . . . 34.4 30.6 37.1 65.0 73.5
------ ------ ------ ------ ------
Total Cash Dividends . . . . . . . . . . . . . . . $ 95.4 $ 91.5 $ 84.4 $186.9 $167.7
------ ------ ------ ------ ------
Cash Dividends Paid on Common Stock as Percentage of Net
Income Applicable to Common Stock 22.4% 18.3% 24.2% 20.1% 30.1%
Total Cash Dividends Paid as a Percentage of Net Income 31.1 25.1 36.2 27.9 43.4
------ ------ ------ ------ ------
</TABLE>
25
<PAGE> 26
Consolidated Statement of Condition
The Chase Manhattan Bank, N.A. and Subsidiaries
<TABLE>
<CAPTION>
June 30, December 31, June 30,
($ in millions) 1994 1993 1993
----------------------------------------
<S> <C> <C> <C>
Assets
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,658 $ 5,772 $ 4,496
Interest-Bearing Deposits Placed with Banks . . . . . . . . . . . . . . . . 6,139 5,431 6,168
Federal Funds Sold and Securities Purchased Under Resale Agreements . . . . 3,552 4,439 3,779
Trading Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 18,831 6,309 3,955
Investment Securities:
Held to Maturity (Market Value of $1,094, $684 and $714, Respectively). . 1,086 657 684
Available for Sale Carried at Fair Value . . . . . . . . . . . . . . . . 4,775 6,766 --
At Lower of Cost or Market (Market Value of $5,137) . . . . . . . . . . . -- -- 4,982
------- -------- --------
Total Investment Securities . . . . . . . . . . . . . . . . . . . . . . 5,861 7,423 5,666
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,765 48,109 48,700
Less: Reserve for Possible Credit Losses . . . . . . . . . . . . . . . . 1,107 1,085 1,567
------- -------- --------
Loans, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,658 47,024 47,133
Assets Held for Accelerated Disposition . . . . . . . . . . . . . . . . . . 44 219 758
Customers' Liability on Acceptances . . . . . . . . . . . . . . . . . . . 633 689 745
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . . . . . 597 566 522
Premises and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 1,653 1,617 1,765
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,080 4,514 4,713
------- -------- --------
Total Assets $94,706 $ 84,003 $ 79,700
------- -------- --------
Liabilities and Stockholder's Equity
Deposits:
Domestic Offices:
Noninterest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $11,442 $ 13,740 $ 11,078
Interest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,003 21,276 21,383
Overseas Offices:
Noninterest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . 2,859 2,473 1,961
Interest-Bearing . . . . . . . . . . . . . . . . . . . . . . . . . . 30,475 28,120 27,267
------- -------- --------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,779 65,609 61,689
Federal Funds Purchased and Securities Sold Under Repurchase Agreements . . 1,456 3,534 2,412
Other Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 2,027 1,253 1,482
Trading Account Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 12,831 -- --
Acceptances Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 644 696 755
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . 399 347 412
Accounts Payable, Accrued Expenses and Other Liabilities . . . . . . . . . 4,276 3,088 3,659
Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . 2,544 3,032 3,435
------- -------- --------
Total Liabilities 87,956 77,559 73,844
------- -------- --------
Stockholder's Equity:
Capital Stock ($15 Par Value):
6/30/94 12/31/93 6/30/93
------------ ------------ ------------
Number of Shares Authorized 81,744,445 81,744,445 81,744,445
Number of Shares Outstanding 60,874,205 60,699,597 60,480,218 . 913 910 907
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,615 4,383 4,297
Net Unrealized Gains (Losses) on Investment
Securities - Available for Sale . . . . . . . . . . . . . . . . . . . . (25) 187 --
Undivided Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,247 964 652
------- -------- --------
Total Stockholder's Equity 6,750 6,444 5,856
------- -------- --------
Total Liabilities and Stockholder's Equity $94,706 $ 84,003 $ 79,700
------- -------- --------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
Member Federal Deposit Insurance Corporation
</TABLE>
26
<PAGE> 27
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Second Quarter
-----------------------------------------------------------------
1994 1993
-----------------------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Interest-Bearing Deposits Placed with Banks . . . . . . . . . $ 6,931 $ 127 7.35% $ 7,276 $ 191 10.51%
Federal Funds Sold and Securities Purchased Under Resale
Agreements . . . . . . . . . . . . . . . . . . . . . . . . 13,594 490 14.45 10,379 265 10.25
Trading Account Assets-Interest-Earning*. . . . . . . . . . . 6,175 92 5.97 3,457 47 5.49
Investment Securities:
Held to Maturity
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . 1,124 35 12.50 1,020 33 13.28
Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . . . 369 11 11.47 459 14 11.45
-------- ------ ----- -------- ------ -----
Total Held to Maturity 1,493 46 12.24 1,479 47 12.71
Available for Sale. . . . . . . . . . . . . . . . . . . . . 5,970 178 11.96** 5,098 130 10.23**
-------- ------ ----- -------- ------ -----
Total Investment Securities . . . . . . . . . . . . . . . . 7,463 224 12.02 6,577 177 10.79
Loans:
Domestic Offices. . . . . . . . . . . . . . . . . . . . . . 43,456 915 8.45 41,584 882 8.51
Overseas Offices. . . . . . . . . . . . . . . . . . . . . . 17,128 461 10.79 18,190 484 10.67
-------- ------ ----- -------- ------ -----
Total Loans . . . . . . . . . . . . . . . . . . . . . . . . 60,584 1,376 9.11 59,774 1,366 9.17
Less: Reserve for Possible Credit Losses*** . . . . . . . 1,445 - - 1,902 - -
-------- ------ ----- -------- ------ -----
Loans, Net. . . . . . . . . . . . . . . . . . . . . . . . 59,139 1,376 9.11 57,872 1,366 9.17
-------- ------ ----- -------- ------ -----
Accelerated Disposition Portfolio-Interest-Earning. . . . . 45 2 15.90 692 20 11.47
-------- ------ ----- -------- ------ -----
Total Interest-Earning Assets***, Net . . . . . . . . . . 93,347 2,311 9.78 86,253 2,066 9.40
-------- ------ ----- -------- ------ -----
Summary--Gross Interest-Earning Assets:
Domestic Offices. . . . . . . . . . . . . . . . . . . . . . . 63,993 1,150 7.21 57,876 1,069 7.41
Overseas Offices. . . . . . . . . . . . . . . . . . . . . . . 30,799 1,161 15.12 30,279 997 13.21
-------- ------ ----- -------- ------ -----
Total Gross Interest-Earning Assets . . . . . . . . . . . 94,792 $2,311 9.78% 88,155 $2,066 9.40%
-------- ------ ----- -------- ------ -----
Noninterest-Earning Assets:
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . 5,847 6,169
Trading Account Assets-Noninterest-Earning**** . . . . . . . 9,325 -
Customers' Liability on Acceptances . . . . . . . . . . . . . 696 808
Premises and Equipment. . . . . . . . . . . . . . . . . . . . 1,798 1,922
Accrued Interest Receivable . . . . . . . . . . . . . . . . . 904 724
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . 5,007 4,806
-------- --------
Total Noninterest-Earning Assets 23,577 14,429
-------- --------
Total Assets $116,924 $100,682
-------- --------
<FN>
* Includes only trading securities.
** Average rate based on average amortized cost.
*** Reserve for Possible Credit Losses excluded from calculations of average
balances and average rates, as appropriate.
**** Includes foreign exchange, interest rate, and commodity derivative
contracts.
Note: Loan and other asset amounts include nonaccrual and restructured
loans and ORE, as applicable, but exclude assets held in
the accelerated disposition portfolio. Accruing, nonaccruing and
restructured loans in the accelerated disposition portfolio were treated
as interest-earning in the above table, while ORE in the accelerated
disposition portfolio was treated as noninterest-earning.
Note: Average rates for overseas offices in the above table reflect the
extraordinarily high level of local interest rates prevailing in certain
Latin American countries with highly inflationary economies.
</TABLE>
27
<PAGE> 28
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Second Quarter
------------------------------------------------------------
1994 1993
------------------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
-------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Liabilities, Redeemable Preferred Stock and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Domestic Offices:
Savings and Negotiable Order of Withdrawal Deposits.......... $ 5,595 $ 26 1.88% $ 5,350 $ 26 1.93%
Money Market Deposits........................................ 10,918 47 1.73 11,088 46 1.68
Negotiable Certificates of Deposit........................... 1,358 25 7.48 2,009 36 7.20
Other Time Deposits.......................................... 8,348 86 4.09 9,477 78 3.32
-------- ------- ------ --------- ------ ------
Total Domestic Offices 26,219 184 2.81 27,924 186 2.68
Overseas Offices 30,116 470 6.26 26,233 307 4.70
-------- ------- ------ --------- ------ ------
Total Interest-Bearing Deposits................................ 56,335 654 4.65 54,157 493 3.66
Federal Funds Purchased and Securities Sold Under
Repurchase Agreements.......................................... 14,317 176 4.93 10,834 155 5.72
Other Short-Term Borrowings:
Domestic Offices............................................... 3,013 48 6.43 2,503 26 4.09
Overseas Offices............................................... 1,282 432 135.22 808 330 163.86
-------- ------- ------ --------- ------ ------
Total Other Short-Term Borrowings 4,295 480 44.86 3,311 356 43.09
Intermediate- and Long-Term Debt 5,360 77 5.73 6,544 160 9.79
-------- ------- ------ --------- ------ ------
Total Interest-Bearing Liabilities 80,307 1,387 6.93 74,846 1,164 6.24
-------- ------- ------ --------- ------ ------
Summary--Interest-Bearing Liabilities:
Domestic Offices................................................. 50,628 468 3.71 46,146 381 3.31
Overseas Offices................................................. 29,679 919 12.42 28,700 783 10.94
-------- ------- ------ --------- ------ ------
Noninterest-Bearing Liabilities:
Deposits in Domestic Offices..................................... 13,271 13,456
Deposits in Overseas Offices..................................... 2,574 1,923
Trading Account Liabilities*..................................... 8,859 --
Acceptances Outstanding.......................................... 705 816
Accounts Payable, Accrued Expenses and Other Liabilities......... 2,896 2,688
-------- ------- ------ --------- ------ ------
Total Noninterest-Bearing Liabilities 28,305 18,883
-------- ------- ------ --------- ------ ------
Total Liabilities 108,612 93,729
-------- ------- ------ --------- ------ ------
Redeemable Preferred Stock - 53
-------- ------- ------ --------- ------ ------
Stockholders' Equity:
Nonredeemable Preferred Stock.................................... 1,532 1,649
Common Stockholders' Equity...................................... 6,780 5,251
-------- ------- ------ --------- ------ ------
Total Stockholders' Equity 8,312 6,900
-------- ------- ------ --------- ------ ------
Total Liabilities, Redeemable Preferred Stock and
Stockholders' Equity $116,924 $ 100,682
-------- ------- ------ --------- ------ ------
Taxable Equivalent Net Interest Revenue and Average
Interest Rate Spread $ 924 2.85% $ 902 3.16%
-------- ------- ------ --------- ------ ------
Net Interest Revenue as a Percentage of Gross
Interest-Earning Assets 3.91% 4.10%
-------- ------- ------ --------- ------ ------
<FN>
* Includes short sales, and foreign exchange, interest rate, and commodity
derivative contracts.
Note: Average rates for overseas offices in the above
table reflect the extraordinarily high level of local interest rates
prevailing in certain Latin American countries with highly inflationary
economies.
</TABLE>
28
<PAGE> 29
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------------------------------------
June 30, 1994 June 30, 1993
------------------------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Interest-Bearing Deposits Placed with Banks. . . . . . . $ 6,571 $ 257 7.89% $ 6,809 $ 339 10.04%
Federal Funds Sold and Securities Purchased Under Resale
Agreement. . . . . . . . . . . . . . . . . . . . . . . 12,199 815 13.48 9,699 522 10.87
Trading Account Assets-Interest-Earning* . . . . . . . . 6,039 211 7.03 3,379 99 5.91
Investment Securities:
Held to Maturity
Taxable. . . . . . . . . . . . . . . . . . . . . . . 1,040 69 13.37 1,015 66 13.31
Tax-Exempt . . . . . . . . . . . . . . . . . . . . . 382 22 11.60 467 28 11.57
-------- ------ ----- -------- ------ -----
Total Held to Maturity 1,422 91 12.90 1,482 94 12.76
Available for Sale . . . . . . . . . . . . . . . . . . 6,556 343 10.54** 4,765 263 11.14**
-------- ------ ----- -------- ------ -----
Total Investment Securities. . . . . . . . . . . . . . 7,978 434 10.96 6,247 357 11.52
Loans:
Domestic Offices . . . . . . . . . . . . . . . . . . . 43,803 1,807 8.32 42,841 1,827 8.60
Overseas Offices . . . . . . . . . . . . . . . . . . . 17,122 870 10.25 18,113 1,071 11.92
-------- ------ ----- -------- ------ -----
Total Loans. . . . . . . . . . . . . . . . . . . . . . 60,925 2,677 8.86 60,954 2,898 9.59
Less: Reserve for Possible Credit Losses***. . . . . 1,443 - - 1,941 - -
-------- ------ ----- -------- ------ -----
Loans, Net . . . . . . . . . . . . . . . . . . . . . 59,482 2,677 8.86 59,013 2,898 9.59
-------- ------ ----- -------- ------ -----
Accelerated Disposition Portfolio-Interest-Earning . . 73 5 14.12 348 20 11.47
-------- ------ ----- -------- ------ -----
Total Interest-Earning Assets***, Net 92,342 4,399 9.46 85,495 4,235 9.77
-------- ------ ----- -------- ------ -----
Summary--Gross Interest-Earning Assets:
Domestic Offices. . . . . . . . . . . . . . . . . . . . . 63,139 2,225 7.11 58,090 2,171 7.54
Overseas Offices. . . . . . . . . . . . . . . . . . . . . 30,646 2,174 14.31 29,346 2,064 14.19
-------- ------ ----- -------- ------ -----
Total Gross Interest-Earning Assets 93,785 $4,399 9.46% 87,436 $4,235 9.77%
-------- ------ ----- -------- ------ -----
Noninterest-Earning Assets:
Cash and Due from Banks . . . . . . . . . . . . . . . . . 6,009 6,227
Trading Account Assets-Noninterest-Earning****. . . . . . 9,362 -
Customers' Liability on Acceptances . . . . . . . . . . . 701 772
Premises and Equipment. . . . . . . . . . . . . . . . . . 1,794 1,900
Accrued Interest Receivable . . . . . . . . . . . . . . . 864 752
Other Assets. . . . . . . . . . . . . . . . . . . . . . . 5,324 5,042
-------- --------
Total Noninterest-Earning Assets 24,054 14,693
-------- --------
Total Assets $116,396 $100,188
-------- --------
<FN>
* Includes only trading securities.
** Average rate based on average amortized cost.
*** Reserve for Possible Credit Losses excluded from calculations of average
balances and average rates, as appropriate.
**** Includes foreign exchange, interest rate, and commodity derivative contracts.
Note: Loan and other asset amounts include nonaccrual and restructured loans and ORE, as
applicable, and amounts attributable during the first quarter of 1993 to assets held
in the accelerated disposition portfolio since they were transferred as of March 31, 1993.
Subsequent to this date, accruing, nonaccruing and restructured loans in
the accelerated disposition portfolio were treated as interest-earning in
the above table, while ORE in the accelerated disposition portfolio was
treated as noninterest-earning.
Note: Average rates for overseas offices in the above table reflect the
extraordinarily high level of local interest rates prevailing in certain
Latin American countries with highly inflationary economies.
</TABLE>
29
<PAGE> 30
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------------------------------
June 30, 1994 June 30, 1993
-----------------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liabilities, Redeemable Preferred Stock and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Domestic Offices:
Savings and Negotiable Order of Withdrawal Deposits $ 5,603 $ 50 1.82% $ 5,370 $ 55 2.05%
Money Market Deposits. . . . . . . . . . . . . . . . . . . 11,215 81 1.45 10,838 95 1.78
Negotiable Certificates of Deposit . . . . . . . . . . . . 1,439 52 7.27 2,182 78 7.20
Other Time Deposits . . . . . . . . . . . . . . . . . . . 8,490 159 3.78 9,721 188 3.91
-------- ------ ------ -------- ------ ------
Total Domestic Offices 26,747 342 2.58 28,111 416 2.99
Overseas Offices 29,385 836 5.74 25,663 616 4.84
-------- ------ ------ -------- ------ ------
Total Interest-Bearing Deposits. . . . . . . . . . . . . . . 56,132 1,178 4.23 53,774 1,032 3.87
Federal Funds Purchased and Securities Sold Under Repurchase
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 13,545 300 4.47 10,734 293 5.49
Other Short-Term Borrowings:
Domestic Offices . . . . . . . . . . . . . . . . . . . . . . 2,922 91 6.24 2,397 60 5.08
Overseas Offices . . . . . . . . . . . . . . . . . . . . . . 1,239 795 129.46 877 581 133.59
-------- ------ ------ -------- ------ ------
Total Other Short-Term Borrowings . . . . . . . . . . . . . 4,161 886 42.93 3,274 641 39.49
Intermediate- and Long-Term Debt . . . . . . . . . . . . . . . 5,461 153 5.65 6,606 311 9.50
-------- ------ ------ -------- ------ ------
Total Interest-Bearing Liabilities 79,299 2,517 6.40 74,388 2,277 6.17
-------- ------ ------ -------- ------ ------
Summary--Interest-Bearing Liabilities:
Domestic Offices . . . . . . . . . . . . . . . . . . . . . . . 50,485 856 3.42 45,737 798 3.52
Overseas Offices . . . . . . . . . . . . . . . . . . . . . . . 28,814 1,661 11.62 28,651 1,479 10.41
-------- ------ ------ -------- ------ ------
Noninterest-Bearing Liabilities:
Deposits in Domestic Offices . . . . . . . . . . . . . . . . . 13,676 13,216
Deposits in Overseas Offices . . . . . . . . . . . . . . . . . 2,526 1,870
Trading Account Liabilities* . . . . . . . . . . . . . . . . . 8,781 -
Acceptances Outstanding . . . . . . . . . . . . . . . . . . . 709 787
Accounts Payable, Accrued Expenses and Other Liabilities 3,191 3,087
-------- ------ ------ -------- ------ ------
Total Noninterest-Bearing Liabilities 28,883 18,960
-------- ------ ------ -------- ------ ------
Total Liabilities 108,182 93,348
-------- ------ ------ -------- ------ ------
Redeemable Preferred Stock - 53
-------- ------ ------ -------- ------ ------
Stockholders' Equity:
Nonredeemable Preferred Stock. . . . . . . . . . . . . . . . . 1,466 1,624
Common Stockholders' Equity . . . . . . . . . . . . . . . . . 6,748 5,163
-------- ------ ------ -------- ------ ------
Total Stockholders' Equity 8,214 6,787
-------- ------ ------ -------- ------ ------
Total Liabilities, Redeemable Preferred Stock and
Stockholders' Equity $116,396 $100,188
-------- ------ ------ -------- ------ ------
Taxable Equivalent Net Interest Revenue and Average Interest Rate
Spread $1,882 3.06% $1,958 3.60%
-------- ------ ------ -------- ------ ------
Net Interest Revenue as a Percentage of Gross Interest-Earning
Assets 4.05% 4.52%
-------- ------ ------ -------- ------ ------
<FN>
* Includes short sales, and foreign exchange, interest rate, and commodity
derivative contracts.
Note: Average rates for overseas offices in the above table reflect the
extraordinarily high level of local interest rates prevailing in
certain Latin American countries with highly inflationary economies.
</TABLE>
30
<PAGE> 31
INVESTMENT SECURITIES
The Chase Manhattan Corporation and Subsidiaries
SECURITIES--HELD TO MATURITY
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993 June 30, 1993
---------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair Amortized Fair
($ in millions) Cost Gains Losses Value* Cost Value* Cost Value*
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities. . . . . $ 120 $ -- $ -- $ 120 $ 31 $ 33 $ 44 $ 46
Federal Agency Securities** . . . 511 -- 14 497 662 666 630 640
State and Political Subdivision
Securities. . . . . . . . . . . 366 11 1 376 419 446 454 485
Other Bonds, Notes and
Debentures:
Securities Issued by OECD
Central Governments
and their Agencies*** . . 204 -- 2 202 16 16 18 18
Securities Issued by Other
Foreign Central
Governments and
their Agencies . . . . 9 -- -- 9 10 10 9 9
Privately-Issued Mortgage-
Backed Securities . . . . 32 1 -- 33 35 35 42 39
Corporate and Other Debt
Securities. . . . . . . . . . 230 1 -- 231 35 35 46 46
------ --- --- ------ ------ ------ ------ ------
Total Other Bonds, Notes
and Debentures 475 2 2 475 96 96 115 112
------ --- --- ------ ------ ------ ------ ------
Federal Reserve Bank and
Other Stock Investments . . . . 179 -- -- 179 176 176 176 176
------ --- --- ------ ------ ------ ------ ------
Total $1,651 $13 $17 $1,647 $1,384 $1,417 $1,419 $1,459
------ --- --- ------ ------ ------ ------ ------
<FN>
* The fair values of securities are estimated utilizing independent pricing
services and are based on available market data, which often reflect
transactions of relatively small size and are not necessarily indicative of
the prices at which large amounts of particular issues could be sold.
** Primarily Mortgage-Backed Federal Agency Securities.
*** OECD includes all countries that are members of the Organization for
Economic Cooperation and Development, excluding the United States.
Note: Interest and dividends on investment securities held to maturity in
terms of taxable interest income, nontaxable interest income, and
dividends for the second quarter and the first six months of 1994 were:
$32 million, $7 million and $3 million; and $64 million, $14 million and
$5 million, respectively; and for the second quarter and first six months
of 1993, such amounts were: $31 million, $9 million and $2 million; and
$62 million, $18 million and $4 million, respectively.
</TABLE>
31
<PAGE> 32
INVESTMENT SECURITIES
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
SECURITIES--AT LOWER
SECURITIES--AVAILABLE FOR SALE AT FAIR VALUE OF COST OR MARKET
--------------------------------------------------------------------------------------------------
June 30, 1994 December 31, 1993 June 30, 1993
--------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair Amortized Fair
($ in millions) Cost Gains Losses Value* Cost Value* Cost Value*
--------- ---------- ---------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities . . . $2,393 $ 24 $ 35 $2,382 $2,273 $2,307 $2,228 $2,282
Federal Agency Securities** . . 668 1 21 648 1,202 1,213 875 899
State and Political Subdivision
Securities . . . . . . . . . 23 -- -- 23 -- -- -- --
Other Bonds, Notes and
Debentures:
Securities Issued by OECD
Central Governments
and their Agencies*** . . 636 -- 14 622 1,535 1,564 1,570 1,577
Securities Issued by Other
Foreign Central
Governments and
their Agencies . . . . . 1,105 1 100 1,006 1,476 1,618 312 311
Privately-Issued Mortgage-
Backed Securities . . . . . 83 -- 1 82 136 139 257 264
Corporate and Other Debt
Securities . . . . . . . . . 213 16 -- 229 318 338 515 520
------ ---- ---- ------ ------ ------ ------ ------
Total Other Bonds, Notes
and Debentures 2,037 17 115 1,939 3,465 3,659 2,654 2,672
------ ---- ---- ------ ------ ------ ------ ------
Other Stock Investments . . . . 348 135 -- 483 312 511 287 601
------ ---- ---- ------ ------ ------ ------ ------
Total $5,469 $177 $171 $5,475 $7,252 $7,690 $6,044 $6,454
------ ---- ---- ------ ------ ------ ------ ------
<FN>
* The fair/market values of securities are estimated utilizing independent
pricing services and are based on available market data, which often
reflect transactions of relatively small size and are not necessarily
indicative of the prices at which large amounts of particular issues could
be sold.
** Primarily Mortgage-Backed Federal Agency Securities.
*** OECD includes all countries that are members of the Organization for
Economic Cooperation and Development, excluding the United States.
Note: Interest and dividends on investment securities available for sale in
terms of taxable interest income and dividends for the second quarter and
first six months of 1994 were: $177 million and $1 million; and $340
million and $3 million, respectively. Interest and dividends on
investment securities at lower of cost or market for the second quarter
and first six months of 1993 were: $125 million and $5 million; and $257
million and $6 million, respectively.
</TABLE>
32
<PAGE> 33
Average Loan Balances
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
1994 1993 Six Months Ended June 30,
--------------------------------------------------------------------------
($ in millions, based on daily averages) 2nd Quarter 1st Quarter 2nd Quarter 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic Offices:
Wholesale:
Commercial Real Estate . . . . . . . . . $ 2,953 $ 3,076 $ 4,443 $ 3,014 $ 5,501*
Commercial and Industrial . . . . . . . . 8,459 8,370 8,662 8,415 8,787
Financial Institutions . . . . . . . . . . 1,049 1,204 1,716 1,126 1,665
Lease Financings . . . . . . . . . . . . 1,497 1,484 1,564 1,490 1,614
Other . . . . . . . . . . . . . . . . . . 1,230 1,683 1,670 1,455 1,609
Consumer:
Secured by 1-4 Family Residential
Properties . . . . . . . . . . . . . . 13,891 13,937 10,848 13,914 10,617
Credit Card . . . . . . . . . . . . . . 6,283 6,245 5,763 6,265 5,890
Other Consumer . . . . . . . . . . . . . 8,275 8,328 7,218 8,301 7,470
------- ------- ------- ------- -------
Total Domestic Offices, Gross . . . . . . . . 43,637 44,327 41,884 43,980 43,153
Less: Unearned Discount and Fee Revenue . . . 181 174 300 177 312
------- ------- ------- ------- -------
Total Domestic Offices . . . . . . . . . . . 43,456 44,153 41,584 43,803 42,841
------- ------- ------- ------- -------
Overseas Offices, Gross . . . . . . . . . . . 17,175 17,159 18,237 17,167 18,158
Less: Unearned Discount and Fee Revenue . . . 47 43 47 45 45
------- ------- ------- ------- -------
Total Overseas Offices . . . . . . . . . . . 17,128 17,116 18,190 17,122 18,113
------- ------- ------- ------- -------
Total Average Loans . . . . . . . . . . . . $60,584 $61,269 $59,774 $60,925 $60,954
------- ------- ------- ------- -------
<FN>
* Includes during the first quarter of 1993 the loans transferred to the
accelerated disposition portfolio since they were transferred as of March
31, 1993.
</TABLE>
Analysis of Credit Loss Experience
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
1994 1993 Six Months Ended June 30,
----------------------------------------------------------------------
($ in millions) 2nd Quarter 1st Quarter 2nd Quarter 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for Possible Credit Losses at
Beginning of Period . . . . . . $1,429 $1,425 $1,912 $1,425 $1,913
Net Loan Charge-Offs:
Domestic Loans:
Commercial Real Estate . . . . 51 51 74 102 165
Commercial and Industrial . . 2 (2) 50 -- 68
Financial Institutions . . . . -- 12 2 12 11
Lease Financings . . . . . . . 3 1 3 4 4
Consumer . . . . . . . . . . . 90 94 95 184 198
------- ------- ------- -------- --------
Total Domestic Net Loan Charge-Offs 146 156 224 302 446
International Loans:
Commercial and Industrial . . . -- 11 (2) 11 2
Financial Institutions . . . . -- (1) (1) (1) (2)
Consumer . . . . . . . . . . . -- -- 1 -- 1
Foreign Governments and
Official Institutions . . . . -- (10) -- (10) (5)
------- ------- ------- --------- --------
Total International Net
Loan Charge-Offs* . . . . . -- -- (2) -- (4)
-------- ------- ------- --------- --------
Total Net Loan Charge-Offs. . . 146 156 222 302 442
-------- ------- ------- --------- --------
Provision for Credit Losses
Charged to Expenses . . . . . . . 150 160 225 310 585
Provision for Loans Held for
Accelerated Disposition . . . . -- -- -- -- 566
Writedown of Loans Transferred
to Accelerated Disposition
Portfolio . . . . . . . . . . . -- -- -- -- (701)
Reserves of Disposed Subsidiaries
and Other Adjustments . . . . . -- -- 4 -- (2)
Foreign Exchange Translation
Adjustments . . . . . . . . . . . 2 -- (1) 2 (1)
-------- ------- -------- --------- --------
Reserve For Possible Credit Losses
at End of Period . . . . . . . . . $1,435 $1,429 $1,918 $1,435 $1,918
-------- ------- -------- --------- --------
<FN>
* Includes net loan recoveries applicable to refinancing countries of $1
million, $2 million, $2 million, $3 million and $9 million, respectively.
</TABLE>
33
<PAGE> 34
INTERMEDIATE- AND LONG-TERM DEBT
The Chase Manhattan Corporation and Subsidiaries
Intermediate- and Long-Term Debt consists of obligations having an original
maturity at issuance of more than one year. A summary of Intermediate- and
Long-Term Debt, net of unamortized original issue discount, outstanding at June
30, 1994 and December 31, 1993 and certain applicable terms is presented below.
The distribution of maturities is based on contractual maturity or the earliest
date which the debt can be redeemed at the option of the holder.
<TABLE>
<CAPTION>
Amount Outstanding
Maturity Interest June 30, December 31, Other
($ in millions) Date Rate* 1994 1993 Data**
---------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
COMPANY:
Medium-Term Notes . . . . . . . . . . . . . . . . . 1994--1997 5.52--9.61% $ 336 $ 530
Floating Rate Medium-Term Notes . . . . . . . . . . 1994--1995 4.35--5.65 146 409
Floating Rate Oil-Linked Notes . . . . . . . . . . . 1994 5.88 10 10
Notes . . . . . . . . . . . . . . . . . . . . . . . 1994 7.38 -- 158 T
Notes . . . . . . . . . . . . . . . . . . . . . . . 1996 8.50 250 250 T
Notes . . . . . . . . . . . . . . . . . . . . . . . 1997 7.88 227 227 T
Floating Rate Subordinated Notes . . . . . . . . . . 1997 4.88 175 175 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 1997 7.50 200 200 S,T
Non-U.S. Currency Borrowings . . . . . . . . . . . . 1998 5.30 51 45
Floating Rate Notes . . . . . . . . . . . . . . . . 1999 4.10 11 11 R
Subordinated Medium-Term Notes . . . . . . . . . . . 1999 7.58--9.00 175 175 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 1999 10.00 275 275 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 1999 8.00 200 200 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 1999 7.75 200 200 S,T
Floating Rate Subordinated Notes . . . . . . . . . . 2000 5.00 250 250 S,R,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2001 9.38 200 200 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2001 9.75 150 150 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2003 7.50 200 200 S,T
Floating Rate Subordinated Notes (Three Issues) . . 2003 4.35--5.50 341 341 S,T
Fixed Rate Subordinated Note . . . . . . . . . . . . 2004 8.00 149 -- S,R,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2005 6.50 198 198 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2008 6.75 199 199 S,T
Subordinated Notes . . . . . . . . . . . . . . . . . 2008 6.13 99 99 S,T
Fixed Rate Subordinated Note . . . . . . . . . . . . 2009 6.50 149 -- S,T
Floating Rate Subordinated Notes . . . . . . . . . . 2009 5.25 321 321 S,R,T
Other Borrowings . . . . . . . . . . . . . . . . . . 1994--1996 *** 7 13
---------- ---------- -------- -------- -----
Total 4,519 4,836
---------- ---------- -------- -------- -----
BANK:
Student Loan Marketing Association Borrowings . . . 1994 3.48--4.26 -- 500
Floating Rate Subordinated Note . . . . . . . . . . 1996 8.50 400 400 S,C
Subordinated Note Issued with Equity Contract . . . 1999 9.25 150 150 S,C
Subordinated Note . . . . . . . . . . . . . . . . . 1999 6.25 260 260 S,C
Fixed Rate Subordinated Notes (Three Issues) . . . 2010 9.00 1,100 1,100 S,C
Subordinated Notes (Two Issues) . . . . . . . . . . 2012 9.00 450 450 S,C
Other Borrowings . . . . . . . . . . . . . . . . . . 1994--2013 *** 184 172
---------- ---------- -------- -------- -----
Total 2,544 3,032
---------- ---------- -------- -------- -----
OTHER SUBSIDIARIES:
Subordinated Note . . . . . . . . . . . . . . . . . 1997 5.63 200 -- S,C
Subordinated Note . . . . . . . . . . . . . . . . . 2012 9.00 250 250 S,C
Other Borrowings . . . . . . . . . . . . . . . . . . 1994--1997 *** 122 133
---------- ---------- -------- -------- -----
Total 572 383
---------- ---------- -------- -------- -----
Less: Investment by the Company in a Subordinated Note
Issued with Equity Contract of the Bank and other 2,810 2,610 S,C
Subordinated Debentures . . . . . . . . . . . . . . .
---------- ---------- -------- -------- -----
Total Intermediate-and Long-Term Debt $4,825 $5,641
---------- ---------- -------- -------- -----
<FN>
* The interest rates shown for floating rate issues are those in effect at
June 30, 1994, or in the case of those issues redeemed in 1994 at the date
of redemption. Such floating interest rates are determined by formulas,
subject to certain minimum rates.
** Issues indicated by:
"S"--Subordinated in right of payment to claims of depositors and certain
other creditors, as applicable.
"C"--Held by the Company.
"R"--Redeemable in whole, or in part, at the option of Chase, prior to
maturity.
"T"--Qualifies as Tier II capital under the Risk-based Capital guidelines.
*** Consists of numerous borrowings which bear interest at rates generally
reflecting market conditions in the applicable countries at the time of
issuance or repricing.
</TABLE>
34
<PAGE> 35
Consolidated Statement of Income (Five Quarters)
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------
($ in millions, except per share data) 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Revenue
Interest and Fees On Loans . . . . . . . . . . . . . $1,376 $1,301 $1,479 $1,405 $1,383
Interest On Deposits Placed With Banks . . . . . . . 127 130 164 214 191
Interest and Dividends on Investment Securities:
Held to Maturity . . . . . . . . . . . . . . . . . 42 41 42 42 42
Available for Sale . . . . . . . . . . . . . . . . 178 165 -- -- --
At Lower of Cost or Market . . . . . . . . . . . . -- -- 133 121 130
Interest On Federal Funds Sold and Securities
Purchased Under Resale Agreements . . . . . . . . . 490 326 245 261 265
Interest On Trading Account Assets . . . . . . . . . 92 119 92 51 47
------ ------ ------ ------ ------
Total Interest Revenue 2,305 2,082 2,155 2,094 2,058
------ ------ ------ ------ ------
Interest Expense
Deposits . . . . . . . . . . . . . . . . . . . . . . 654 525 469 513 493
Federal Funds Purchased and Securities Sold Under
Repurchase Agreements . . . . . . . . . . . . . . 176 124 127 150 155
Commercial Paper . . . . . . . . . . . . . . . . . . 17 13 11 13 12
Other Short-Term Borrowings . . . . . . . . . . . . 463 393 460 405 344
Intermediate- and Long-Term Debt . . . . . . . . . . 77 76 86 94 160
------ ------ ------ ------ ------
Total Interest Expense 1,387 1,131 1,153 1,175 1,164
------ ------ ------ ------ ------
Net Interest Revenue 918 951 1,002 919 894
Provision for Possible Credit Losses . . . . . . . . . 150 160 195 215 225
------ ------ ------ ------ ------
Net Interest Revenue After Provision for Possible Credit
Losses 768 791 807 704 669
------ ------ ------ ------ ------
Other Operating Revenue
Fees and Commissions . . . . . . . . . . . . . . . . 480 446 401 406 388
Foreign Exchange Trading Revenue . . . . . . . . . . 78 85 75 93 85
Trading Account Revenue . . . . . . . . . . . . . . 73 94 93 93 102
Investment Securities Gains . . . . . . . . . . . . 1 79 12 15 14
Other Revenue . . . . . . . . . . . . . . . . . . . 168 149 297 113 104
------ ------ ------ ------ ------
Total Other Operating Revenue 800 853 878 720 693
------ ------ ------ ------ ------
Other Operating Expenses
Salaries and Employee Benefits:
Salaries . . . . . . . . . . . . . . . . . . . . . 418 415 417 409 387
Employee Benefits . . . . . . . . . . . . . . . . 118 129 130 117 115
------ ------ ------ ------ ------
536 544 547 526 502
------ ------ ------ ------ ------
Net Occupancy . . . . . . . . . . . . . . . . . . . 98 100 112 93 93
Equipment Rentals, Depreciation and Maintenance . . 74 71 85 73 69
Other Expenses . . . . . . . . . . . . . . . . . . . 365 342 455 333 331
------ ------ ------ ------ ------
Total Other Operating Expenses 1,073 1,057 1,199 1,025 995
------ ------ ------ ------ ------
Income Before Taxes . . . . . . . . . . . . . . . . 495 587 486 399 367
Applicable Income Taxes . . . . . . . . . . . . . . 188 223 173 132 134
------ ------ ------ ------ ------
Net Income $ 307 $ 364 $ 313 $ 267 $ 233
------ ------ ------ ------ ------
Net Income Applicable to Common Stock $ 272 $ 333 $ 282 $ 231 $ 196
------ ------ ------ ------ ------
Average Common and Common Equivalent Shares Outstanding
(in millions) 186.2 185.4 184.8 184.3 162.4
------ ------ ------ ------ ------
Primary Earnings Per Common Share $ 1.46 $ 1.80 $ 1.53 $ 1.25 $ 1.20
------ ------ ------ ------ ------
Cash Dividends Declared Per Common Share $ .33 $ .33 $ .30 $ .30 $ .30
------ ------ ------ ------ ------
</TABLE>
35
<PAGE> 36
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of stockholders of the registrant was held on April
19, 1994. Information concerning matters voted upon at the Annual
Meeting is set forth below.
Election of Directors
Management nominees for the Board of Directors each received at least
143,701,231 votes and were all elected directors of the Corporation.
The following represents a break-down of votes cast for and withheld
with respect to each nominee for office:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
M. Anthony Burns 143,843,938 590,944
Jairo A. Estrada 143,824,464 610,418
James L. Ferguson 143,853,871 581,011
William H. Gray, III 143,701,231 733,651
David T. McLaughlin 143,807,315 627,567
Henry B. Schacht 143,878,128 556,754
</TABLE>
Resolutions Approved
1. Approval of Price Waterhouse as auditor for fiscal year
beginning January 1, 1994.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
143,017,231 327,615 1,090,036
</TABLE>
2. Approval of 1994 Long-Term Incentive Plan, effective May 1, 1994.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
111,172,094 31,510,850 1,751,938
</TABLE>
Resolutions Defeated
1. Resolution by Evelyn Y. Davis to reinstate annual election of all
directors.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NONVOTES
<S> <C> <C> <C>
54,930,221 56,786,853 1,373,180 31,344,628
</TABLE>
2. Resolution by John J. Gilbert to institute cumulative voting in
the election of all directors.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NONVOTES
<S> <C> <C> <C>
34,835,762 77,027,894 1,524,097 31,047,129
</TABLE>
36
<PAGE> 37
3. Resolution by the General Board of Pensions of the United
Methodist Church and others to develop certain policies
relating to South Africa and establish a transitional
representative interim government.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NONVOTES
<S> <C> <C> <C>
6,798,107 96,839,832 9,749,815 31,047,128
</TABLE>
4. Resolution by The Sisters of Charity of Cincinnati and others,
regarding the Corporation's policies on loans to developing
countries.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NONVOTES
<S> <C> <C> <C>
3,387,729 104,553,940 5,446,084 31,047,129
</TABLE>
37
<PAGE> 38
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4
Certificate of Designation, Preferences and Rights of Preferred
Stock, Adjustable Rate Series N (incorporated by reference from
Exhibit (4) (e) to the Company's Current Report on Form 8-K dated
April 29, 1994).
Exhibit 10 N
The Chase Manhattan Stock Option Program for Employees
Exhibit 10 O
The Chase Manhattan 1994 Long-Term Incentive Plan
Exhibit 11
Statement re: Computation of Earnings Per Common Share
Exhibit 12
Statement re: Computation of Ratios of Earnings to Fixed Charges
(b) Report on Form 8-K
The registrant filed the following reports on Form 8-K during the
quarter ended June 30, 1994:
Date of
Report Items Reported
------- --------------
4/18/94 -- The items reported by the Registrant in this Current
Report on Form 8-K were Item 5 (Other Events) and Item 7
(Financial Statements, Pro forma Financial Information
and Exhibits). The following financial statements of
Registrant were filed therewith:
(i) Statement of Condition of The Chase Manhattan
Corporation at March 31, 1994 and 1993.
(ii) Statement of Income of The Chase Manhattan
Corporation for the quarters ended March 31, 1994
and 1993.
(iii) Statement of Condition of The Chase Manhattan Bank,
N.A. at March 31, 1994 and 1993.
4/29/94 -- The items reported by the Registrant in this Current
Report on Form 8-K were Item 5 (Other Events) and Item 7
(Financial Statements, Pro forma Financial Information and
Exhibits) relating to the issuance and sale of 9,100,000
shares of Preferred Stock, Adjustable Rate Series N. The
following financial statement of Registrant was filed
therewith:
(i) Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements for the
quarters ended March 31, 1994 and 1993 and each of
the five years in the period ended December 31,
1993.
5/18/94 -- The items reported by the Registrant in this Current
Report on Form 8-K were Item 5 (Other Events) and Item 7
(Financial Statements, Pro forma Financial Information and
Exhibits) relating to the Registrant's issuance and sale
of $150,000,000 aggregate principal amount of 8%
Subordinated Notes Due 2004.
38
<PAGE> 39
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CHASE MANHATTAN CORPORATION
(Registrant)
Date: August 12, 1994 By: /s/ LESTER J. STEPHENS, JR.
Lester J. Stephens, Jr.
(Senior Vice President and Controller)
39
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT PAGE
<S> <C> <C>
4 Certificate of Designation, Preferences and Rights of Preferred Stock, Adjustable Rate Series N (incorporated
by reference from Exhibit (4) (e) to the Company's Current Report on Form 8-K dated April 29, 1994).
10 N The Chase Manhattan Stock Option Program for Employees 41
10 O The Chase Manhattan 1994 Long-Term Incentive Plan 55
11 Statement re: Computation of Earnings Per Common Share for the
quarters and six months ended June 30, 1994 and 1993 77
12 Statement re: Computation of Ratios of Earnings to Fixed Charges for the
six months ended June 30, 1994 and 1993 and for each of the five years in
the period ended December 31, 1993 78
</TABLE>
40
<PAGE> 41
EDGAR Graphics Appendix
Pursuant to Regulation S-T Item 304, the following is a description of the
graphic image material identified in the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations by the word (Graph)
followed by the number of the graphic or image.
<TABLE>
<CAPTION>
Graphic Page Description
- - ------- ---- -----------
<S> <C> <C>
1. 18. Bar graph entitled "Cumulative Interest Rate
Gaps June 30, 1994 $ in millions" showing the
net assets or net liabilities, in separate bars
titled including derivatives and excluding
derivatives, respectively, for the following
periods: net assets of $5,623 and $1,625,
respectively, for 3rd Quarter 1994; net assets
of $5,377 and net liabilities of $1,313,
respectively, for 4th Quarter 1994; net assets
of $3,770 and net liabilities of $2,199,
respectively, for 1995; net liabilities of $668
and $6,895, respectively, for 1996; net
liabilities of $6,702 and $11,656,
respectively, for 1997; net liabilities of
$9,126 and $12,425, respectively, for 1998; net
liabilities of $9,415 and $11,776,
respectively, for 1999; and net liabilities of
$8,571 and $10,351, respectively, for 2000.
</TABLE>
<PAGE> 1
EXHIBIT 10 N
THE CHASE MANHATTAN
STOCK OPTION PROGRAM FOR EMPLOYEES
Effective January 19, 1994
The Chase Manhattan Corporation ("CMC") has adopted The Chase
Manhattan Stock Option Program for Employees (the "Program") to
advance CMC's interests by providing stock ownership opportunities
to employees of CMC and its Subsidiaries, thereby further aligning
the interests of employees with the interests of CMC's
shareholders. The definitions of capitalized terms used but not
otherwise defined in the Program appear in Section 8 below.
SECTION 1. STOCK OPTIONS.
(a) Grants to Current Employees.
Effective January 19, 1994, CMC shall grant to each Current
Employee who is a Full Time Employee on such date Options to
purchase from CMC 400 shares of Common Stock. Effective January
19, 1994, CMC shall grant to each Current Employee who is a Part
Time Employee on such date Options to purchase from CMC 200 shares
of Common Stock. The exercise price for each Option shall be
$35.50 per share of Common Stock.
(b) Grants to Future Employees.
Each Future Employee, effective the last day of the calendar
quarter in which such Employee becomes a Future Employee, shall be
granted Options by CMC to purchase from CMC such number of shares
of Common Stock as are determined under the following applicable
formula (rounded down to the nearest whole number of Option
Shares):
Formula
Number of Option Shares 400 X [36 - Y]
for Full Time Future --------
Employees 36
Number of Option Shares 200 X [36 - Y]
for Part Time Future --------
Employees 36
In the foregoing formulas, the term "Y" equals the number of full
or partial calendar months elapsed from January 19, 1994, through
the effective date of the grant. The exercise price of any Option
granted to a Future Employee shall be the Market Value per Share on
the effective date of such grant.
Grants to Future Employees shall be made effective the last
day of the calendar quarter in which such Employee becomes a Future
41
<PAGE> 2
Employee. If the Fifty Two Dollar Trigger is reached after a
Future Employee becomes employed but on or before the end of the
then current calendar quarter, such Future Employee shall not be
entitled to the grant of any Options hereunder.
(c) Exercise Periods.
(i) Fifty Two Dollar Trigger. In the event that the Fifty
Two Dollar Trigger is reached on or before March 31, 1997, an
Eligible Employee may exercise up to one half of such Eligible
Employee's Options (rounded down, if necessary, to the nearest
whole Option) during the period commencing on the later to occur of
(x) the first date the Fifty Two Dollar Trigger is reached and (y)
January 19, 1997. The Eligible Employee's remaining Options may be
exercised only on and after January 19, 2003, unless the Sixty
Dollar Trigger is reached on or before March 31, 1997.
(ii) Sixty Dollar Trigger. In the event that the Sixty Dollar
Trigger is reached on or before March 31, 1997, an Eligible
Employee may exercise all of such Eligible Employee's remaining
Options at any time during the period commencing on the later to
occur of (x) the first date the Sixty Dollar Trigger is reached and
(y) January 19, 1997.
(iii) Triggers Not Reached. In the event neither the Fifty Two
Dollar Trigger nor the Sixty Dollar Trigger has been reached on or
before March 31, 1997, each Option may be exercised only on and
after January 19, 2003.
(iv) Expiration Date. In no event may any Option be exercised
after January 19, 2004, whether or not either Trigger has been
reached.
(v) Right to Require Exercise of All Exercisable Options if
Any Are Exercised. The Executive from time to time and at any time
may require any Eligible Employee or beneficiary exercising Options
to exercise all of such Eligible Employee's Options that are
exercisable at the time of such exercise.
(d) Termination; Retirement; Death.
(i) Termination of Employment By Chase or Employee. In the
event an Eligible Employee's employment by CMC or any Subsidiary
terminates, the Eligible Employee's Options, to the extent
exercisable immediately prior to such termination, shall remain
exercisable for a period of 90 days following such termination but
shall terminate thereafter if not exercised.
(ii) Retirement. The following provisions shall govern
exercise periods for retired Eligible Employees.
42
<PAGE> 3
(A) Retirement Before January 19, 1997 When Trigger is Not Met.
If an Eligible Employee enters into Retirement before January 19,
1997 and neither the Fifty Two Dollar Trigger nor the Sixty Dollar
Trigger has been reached on or before the date of Retirement, the
retiree may exercise his Options at any time during the period
beginning on January 19, 1997 and ending 36 months after the date
of Retirement. This provision applies even if one or both Triggers
are met after the date of Retirement but on or before March 31,
1997.
(B) Retirement Before January 19, 1997 When Trigger Has Been
Met. If an Eligible Employee enters into Retirement before January
19, 1997, and the Sixty Dollar Trigger has been reached on or
before the date of Retirement, the retiree may exercise his Options
at any time during the period beginning January 19, 1997 and ending
January 19, 2004. If only the Fifty Two Dollar Trigger (as opposed
to the Sixty Dollar Trigger) has been reached on or before the date
of Retirement, the retiree may exercise only one half of his
Options on this extended basis. The balance of the Options, in
this case, must be exercised during the period beginning on January
19, 1997 and ending 36 months after the date of Retirement.
(C) Retirement On and After January 19, 1997 When Triggers Not
Met. If an Eligible Employee enters into Retirement on or after
January 19, 1997, and neither the Fifty Two Dollar Trigger nor the
Sixty Dollar Trigger has been reached on or before the date of
Retirement, the retiree may exercise his Options at any time during
the period of 36 months from the date of Retirement. This
provision applies even if one or both Triggers are met after the
date of Retirement but on or before March 31, 1997. No Options may
be exercised after January 19, 2004.
(D) Retirement On and After January 19, 1997 When Triggers Have
Been Met. If an Eligible Employee enters into Retirement on or
after January 19, 1997, and the Sixty Dollar Trigger has been
reached by March 31, 1997 and on or before the date of Retirement,
the retiree may exercise his Options at any time until January 19,
2004. If only the Fifty Two Dollar Trigger (as opposed to the
Sixty Dollar Trigger) has been reached by March 31, 1997, and on or
before the date of Retirement, the retiree may exercise only one
half of his Options on this extended basis. The balance of the
Options, in this case, must be exercised during the 36 month period
beginning on the date of Retirement. No Options may be exercised
after January 19, 2004.
(iii) Death.
(A) In the event an Eligible Employee (other than a retired
Eligible Employee) dies while entitled to exercise an Option, the
Eligible Employee's estate, personal representative or beneficiary
shall have the right to exercise such Option at any time within 36
months from the date of the Eligible Employee's death (but in no
43
<PAGE> 4
event more than 36 months from the date of the Eligible Employee's
Retirement), to the extent that the Eligible Employee was entitled
to exercise such Options immediately prior to the Eligible
Employee's death.
(B) In the event an Eligible Employee in Retirement dies while
entitled to exercise an Option, the retiree's estate, personal
representative or beneficiary shall have the right to exercise such
Option at any time during the period ending 36 months from the date
of the retiree's Retirement, unless, at the time of death, the
Option was exercisable by the retiree at any time until January 19,
2004, in which case the estate, personal representative or
beneficiary shall be entitled to exercise such Option during the
period ending 36 months from the date of such retiree's death. No
Options may be exercised after January 19, 2004. If at the time of
death an Option was not exercisable by the retiree or was not
exercisable until January 19, 1997, such Option terminates at death
and may not be exercised by the estate, personal representative or
beneficiary.
(iv) No Extension of Expiration Date. Nothing in this
paragraph (d) shall extend the expiration date for Options set
forth in paragraph (c) (iv) above or limit the discretion of the
Executive set forth in paragraph (c) (v) above.
(e) Manner of Exercise and Payment; Withholding for Taxes.
(i) Manner of Exercise and Payment. Options may be exercised
only upon submission of such completed forms and compliance with
such procedures as are required from time to time by the Executive.
Such forms shall contain such agreements and representations as the
Executive shall require. Upon exercise of an Option, the exercise
price shall be payable to CMC in United States dollars by personal
or certified check payable to the order of CMC (or such other forms
of payment as the Executive may determine to be acceptable).
Checks and other payment instruments will be received subject to
collection.
(ii) Withholding for Taxes. No distribution or delivery of
shares of Common Stock upon exercise of an Option shall occur until
arrangements satisfactory to the Executive have been made for the
payment of any amounts which may be required to be withheld or paid
in connection with such exercise. Such arrangements may include
withholding the distribution of a portion of the shares of Common
Stock otherwise issuable or the tendering of such shares back to
CMC (under such rules as may be established by the Executive) in
order to satisfy all or a portion of the required withholdings or
payments.
44
<PAGE> 5
SECTION 2. ADMINISTRATION.
The Executive shall have the authority to interpret the
Program, to adopt, amend and rescind rules and regulations for the
administration of the Program and the Options granted under the
Program and to make all determinations under the Program that may
be necessary or advisable. The day-to-day administration of the
Program shall be carried out by such officers and employees of CMC
or such Subsidiaries as the Executive shall designate from time to
time.
The interpretation and construction by the Executive of any
provision of the Program and any determination by the Executive
under any provision of the Program shall be final and conclusive,
unless otherwise determined by the Board of Directors, in which
event the determination of the Board of Directors shall be final
and conclusive. None of the Board of Directors, the Executive and
any officer or employee designated by the Executive to administer
the Program shall be liable for any act, omission, interpretation,
construction or determination made in connection with the Program
in good faith.
SECTION 3. AMENDMENT AND TERMINATION.
The Board of Directors or the Executive may from time to time
and at any time alter, amend, suspend, discontinue or terminate
(collectively, a "Change") this Program and any Options granted
hereunder; provided, however, that no Change may materially
adversely affect any Option granted hereunder prior to such action
without consent of the affected Eligible Employee. Notwithstanding
the foregoing, any Change made (i) to cure any ambiguity, to
correct any errors herein, to correct any provision herein that may
be inconsistent with any other provision herein or to adopt any
provision, not inconsistent with the existing provisions hereof,
with respect to matters or questions arising under the Program or
(ii) to comply with present or future laws, rules, regulations,
orders or requirements of any governmental authority shall not be
deemed to materially adversely affect any Option.
SECTION 4. PREEMPTION BY APPLICABLE LAWS AND REGULATIONS.
Notwithstanding anything to the contrary in the Program, if,
at any time for the making of any determination or the issue or
other distribution of shares of Common Stock, any law, rule,
regulation, order or requirement of any governmental authority
shall require either CMC or the employee to take any action in
connection with any such determination, issuance or distribution,
the shares then to be issued or distributed or the issue or
distribution of such shares or the making of such determination, as
the case may be, shall be deferred until such action shall have
been taken.
45
<PAGE> 6
Notwithstanding anything to the contrary in the Program, the
as applied to Eligible Employees located outside the United States
and all Options granted to such Employees shall be subject to
applicable laws, rules, regulations, orders and requirements from
time to time in effect in such jurisdictions that limit, restrict
or prevent such awards or the exercise of any Options. CMC shall
have no obligation to take any action required to comply with any
such laws, rules, regulations, orders or requirements in order to
grant any Option to, or to make any Option exercisable by, any
employee.
SECTION 5. CERTAIN OTHER ADMINISTRATIVE PROVISIONS.
(a) Termination Followed by Subsequent Employment.
In the event an Eligible Employee whose employment by CMC or
any Subsidiary has terminated and whose Options have terminated as
provided in Section 1(d)(i) above is subsequently re-employed by
CMC or any Subsidiary in a capacity that qualifies such employee as
a Future Employee, such employee shall be treated as a Future
Employee and granted new Options in accordance with Section 1(b)
above as if such employee had never been previously employed by CMC
or any Subsidiary.
(b) Disability; Approved, Unpaid Absence.
(i) In the event an employee is on short or long term
disability on January 19, 1994, as determined by the Executive, and
was a Full Time Employee or a Part Time Employee prior to such
disability, and such employee returns to work in a capacity that
qualifies such employee as a Future Employee, such employee shall
be granted the number of Options to which such employee would have
been entitled if such employee had been a Current Employee as of
January 19, 1994, but the exercise price for such Options shall be
the Market Price per Share as of the last day of the calendar
quarter in which such employee returns to work.
(ii) In the event an Eligible Employee shall go on short or
long term disability after January 19, 1994, as determined by the
Executive, such Eligible Employee's outstanding Options hereunder
shall not terminate but such Options shall not be exercisable until
such time, if any, as such Employee returns to work as a Full Time
Employee or a Part Time Employee. Any such employee returning to
full or part time employment shall not be deemed a Future Employee.
(iii) If any person shall be on an approved, unpaid leave of
absence on January 19, 1994, as determined by the Executive, such
person shall not be deemed a Current Employee but may be deemed a
Future Employee if such person returns to employment in a capacity
that otherwise entitles such person to be deemed a Future Employee.
If any Eligible Employee goes on an approved, unpaid leave of
absence after January 19, 1994, as determined by the Executive,
46
<PAGE> 7
such Employee's employment shall not be deemed terminated for a
period of time, if any, to be determined by the Executive, after
which time such Employee's employment shall be deemed terminated
and the provisions of Section 1(d)(i) shall apply.
(iv) Nothing in this paragraph (b) shall extend the exercise
periods for Options set forth in Section 1(c) hereof.
(c) Determination of Full Time or Part Time Status.
The Executive shall be entitled, after consideration of the
purposes of the Program and the facts and circumstances of the
particular case, to deem any Eligible Employee who would otherwise
be considered a Part Time Employee as of any date to be a Full Time
Employee as of such date for purposes of the Program and to deem
any Eligible Employee who would otherwise be considered a Full Time
Employee as of any date to be a Part Time Employee as of such date
for purposes of the Program.
A change in any Eligible Employee's status after commencement
of employment from part time to full time status or from full time
to part time status shall not affect any Options previously granted
to such employee hereunder, unless otherwise determined by the
Executive.
SECTION 6. CHANGE IN CONTROL PROVISIONS.
(a) Stock Options.
Notwithstanding any provision in the Program to the contrary,
if there is Change in Control, as defined in paragraph (b) below,
any Option which is not otherwise exercisable at the date of the
Change in Control may be exercised, subject to the provisions of
Section 1(c)(iv) and (d), at any time after date of the Change in
Control.
(b) Definitions for Change of Control Provisions.
For purposes of this Section 6, the following words and
phrases shall have the meaning specified:
(1) "Beneficial Owner" shall have the meaning defined
in Rule 13d-3 of the Exchange Act.
(2) A "Change in Control" shall be deemed to have
occurred if any one of the following conditions shall have been
satisfied:
(i) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of CMC (not
including in the securities beneficially owned by such
Person any securities acquired directly from CMC or its
47
<PAGE> 8
affiliates) representing 25 percent or more of the
combined voting power of CMC's then outstanding
securities; or
(ii) during any period of twenty-four consecutive
months (not including any period prior to January 19,
1994), individuals who at the beginning of such period
constitute the Board of Directors and any new director
(other than a director designated by Person who has
entered into an agreement with CMC to effect a
transaction described in subsections (i), (iii) or (iv)
of this Section) whose election by the Board of Directors
or nomination for election by CMC's stockholders was
approved by a vote of at least two-thirds of the
directors then still in office who either were directors
at the beginning of the period or whose election or
nomination for election was previously so approved, cease
for any reason to constitute a majority of the Board of
Directors; or
(iii) the stockholders of CMC approve a merger or
consolidation of CMC with any other corporation, or a
plan of complete liquidation of CMC, other than (A) a
merger, consolidation or liquidation which would result
in the voting securities of CMC outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or being converted into voting
securities of the surviving entity), in combination with
the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of CMC or a
Subsidiary, at least 80 percent of the combined voting
power of the voting securities of CMC or such surviving
entity outstanding immediately after such merger,
consolidation or liquidation, or (B) a merger,
consolidation or liquidation effected to implement a
recapitalization of CMC (or similar transaction) in which
no Person acquires more than 50 percent of the combined
voting power of CMC's then outstanding securities; or
(iv) the stockholders of CMC approve an agreement
for the sale or disposition by CMC (other than to a
Subsidiary) of all or substantially all CMC's assets.
Notwithstanding the foregoing, with respect to a particular
employee, a Change in Control shall not include any event,
circumstance or transaction occurring during the twelve-month
period following a Potential Change in Control which results from
the action of any entity or group which includes, is affiliated
with or is wholly or partly controlled by one or more executive
officers of CMC in which the employee participates (a "Management
Group"); provided, however, that such action shall not be taken
into account for this purpose if it occurs within a twelve-month
48
<PAGE> 9
period following a Potential Change in Control resulting from the
action of any Person which is not a Management Group.
(3) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(4) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include
(i) CMC or any Subsidiary, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of CMC or a
Subsidiary, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of CMC in
substantially the same proportions as their ownership of stock of
CMC.
(5) "Potential Change in Control" shall be deemed to
have occurred if any one of the following conditions shall have
been satisfied:
(i) CMC enters into an agreement, the consummation
of which would result in the occurrence of a Change in
Control;
(ii) CMC or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(iii) any Person who is or becomes the Beneficial
Owner, directly or indirectly, of securities of CMC
representing 15 percent or more of the combined voting
power of CMC's then outstanding securities, increases
such Person's beneficial ownership of such securities by
5 percentage points or more over the percentage so owned
by such Person on January 19, 1994; or
(iv) the Board of Directors adopts a resolution to
the effect that, for purposes of the Program, a Potential
Change in Control has occurred.
SECTION 7. MISCELLANEOUS.
(a) No Employment Contract.
Nothing contained in the Program shall be construed as
conferring upon an employee the right to continue in the employ of
CMC or any Subsidiary.
49
<PAGE> 10
(b) Subsidiaries.
The sale of any Subsidiary shall be deemed a termination of
employment of the Eligible Employees of such Subsidiary, unless the
Executive determines otherwise.
(c) No Rights as a Stockholder.
An employee shall have no rights as a stockholder with respect
to Option Shares covered by the employee's Options until the date
of the issuance of such shares. No adjustment will be made for
dividends or other distributions or rights for which the record
date is prior to the date of such issuance.
(d) No Right to Corporate Assets.
Nothing contained in the Program shall be construed as giving
an employee, the employee's beneficiaries or any other person any
equity or interest of any kind in any assets of CMC or a Subsidiary
or creating a trust of any kind or a fiduciary relationship of any
kind between CMC or a Subsidiary and any such person.
(e) No Restriction on Corporate Action.
Nothing contained in the Program shall be construed to prevent
CMC or any Subsidiary from taking any corporate action which is
deemed by CMC or such Subsidiary to be appropriate or in its best
interest, whether or not such action would have an adverse effect
on the Program or any award made under the Program. No employee,
beneficiary or other person shall have any claim against CMC or any
Subsidiary as a result of any such action.
(f) Non-assignability.
Neither an employee nor an employee's beneficiary shall have
the power or right to sell, exchange, pledge, transfer, assign or
otherwise encumber or dispose of such employee's or beneficiary's
interest in the Program or in any award received under the Program;
nor shall such interest be subject to seizure for the payment of an
employee's or beneficiary's debts, judgments, alimony, or separate
maintenance or be transferable by operation of law in the event of
an employee's or beneficiary's bankruptcy or insolvency.
(g) Other Benefit Plans.
No awards or payments under the Program shall be taken into
account in determining any benefits under any retirement,
profit-sharing or other plan maintained by CMC or a Subsidiary.
50
<PAGE> 11
(h) Recapitalization.
The number of Option Shares to which each outstanding Option
relates, the exercise price in respect of each such Option, the
Fifty Two Dollar Trigger price, the Sixty Dollar Trigger price and
the numbers 400 and 200 used in the calculation in Section 1(b)
above for Options for Future Employees, shall all be
proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a subdivision or
consolidation of shares or other capital adjustments, or the
payment of a stock dividend or other increase or decrease in such
shares, effected without receipt of consideration by CMC or a
Subsidiary; provided, however, that any fractional shares resulting
from any such adjustment shall be eliminated.
(i) Merger or Consolidation.
After a merger of one or more corporations into CMC, or after
a consolidation of CMC and one or more corporations, in which CMC
shall be the surviving or resulting corporation, an Eligible
Employee shall, at the same cost, be entitled upon the exercise of
an Option, to receive (subject to any required action by
stockholders) such securities of the surviving or resulting
corporation as the board of directors of such corporation, in its
sole discretion and without liability to any person, shall
determine to be equivalent, as nearly as practicable, to the
nearest whole number and class of shares of stock or other
securities, to the Option Shares which were then subject to such
Option, and such shares of stock or other securities shall, after
such merger or consolidation, be deemed to be Option Shares for all
purposes of the Program and of the Options granted under the
Program ; provided, however, that, anything herein contained to the
contrary notwithstanding, upon any shareholder approval, which
approval does not constitute a Change of Control under Section 6
hereof, of the dissolution or liquidation of CMC, or a merger or
consolidation in which CMC is not the surviving or resulting
corporation, every Option outstanding hereunder shall become
immediately exercisable, subject to the provisions of Section
1(c)(iv) and (d) hereof.
(j) Eligible Employee's Agreement.
If, at the time of the exercise of any Option, in the opinion
of counsel for CMC, it is necessary or desirable, in order to
comply with any then applicable laws, rules, regulations, orders or
requirements relating to the issuance or sale of securities or any
other matters, that the Eligible Employee exercising the Option
shall agree to hold any Option Shares issued to the Eligible
Employee for investment and without any present intention to resell
or distribute the same and that the Eligible Employee will dispose
of such shares only in compliance with such laws, rules,
regulations, orders and requirements, the Eligible Employee will,
51
<PAGE> 12
upon the request of CMC, execute and deliver to CMC a further
agreement to such effect.
(k) Governing Law; Construction.
All rights and obligations under the Program shall be governed
by, and the Program shall be construed in accordance with, the laws
of the State of New York. Titles and headings to Sections herein
are for purposes of reference only, and shall in no way limit,
define or otherwise affect the meaning or interpretation of any
provisions of the Program.
SECTION 8. DEFINITIONS.
As used in the Program, the following terms have the following
meanings:
"Common Stock" means CMC's authorized but unissued common stock,
par value $2.00 per share, and shares, if any, of such Common Stock
held as treasury stock by CMC. In the event of a change in the
Common Stock that is limited to a change in the designation thereof
to "Capital Stock" or other similar designation, or to a change in
the par value thereof, or from par value to no par value, without
increase or decrease in the number of issued shares, the shares
resulting from any such change shall be deemed to be Common Stock
within the meaning of the Program.
"Current Employees" means all Full Time Employees and Part Time
Employees of CMC or of any Subsidiary who are so employed on
January 19, 1994, and who are determined by the Executive to be in
active status on such date. Current Employees shall not include
any Excluded Employees.
"Eligible Employees" means all Current Employees and all Future
Employees.
"Excluded Employees" means all (i) employees who are subject to
Section 16 of the Securities Exchange Act of 1934, (ii) employees
who received any award in 1994 pursuant to The Chase Manhattan
Long-Term Incentive Plan, (iii) employees whose compensation is
determined under or pursuant to the terms or provisions of any
collective bargaining or similar arrangement and (iv) seasonal,
temporary, seconded or leased employees, and independent
contractors, in each case as determined by the Executive.
"Executive" means the Corporate Human Resources Executive of CMC or
such person's designee or designees.
The "Fifty Two Dollar Trigger" shall be deemed to have been reached
on any date if on such date the average over the 10 consecutive
Trading Days ending on such date of the mean between the highest
and the lowest quoted selling prices for shares of Common Stock on
52
<PAGE> 13
the New York Stock Exchange, Inc. is at least $52.00. Each of such
10 days must fall within the period commencing on January 19, 1994,
and ending on March 31, 1997.
"Full Time Employee" means as of any date any employee scheduled to
work and who in fact regularly works all of the hours per week
designated as the number of hours constituting the regular work
week, as determined by the Executive.
"Future Employees" shall mean all persons who become Full Time
Employees or Part Time Employees of CMC or any Subsidiary after
January 19, 1994, but before the earlier to occur of (i) October 1,
1996, and (ii) the date the Fifty Two Dollar Trigger is reached.
Future Employees shall not include any Excluded Employees.
"Market Value per Share" as of any particular date shall be the
mean between the highest and lowest quoted selling prices for
shares of Common Stock as reported on the composite tape on such
date (or, if such date shall not be a business day, then the next
preceding day which shall be a business day); or, if no sale takes
place, then the mean between the bid and asked prices on such date;
and if no bid and asked prices are quoted for such date, then such
value as shall be determined by such method as the Executive shall
deem to reflect fair market value as of such date.
"Option" means an option granted under the Program to purchase a
share of Common Stock.
"Option Share" means a share of Common Stock that is subject to an
Option granted under the Program.
"Part Time Employee" means as of any date any employee of CMC or
any Subsidiary (other than a Full Time Employee) scheduled to work
at least 20 hours per week (in the United States) or at least 50%
of the normal work week (outside the United States), as determined
by the Executive.
"Retirement" means retirement by an Eligible Employee in accordance
with the provisions of the retirement plan of CMC or a Subsidiary
under which the Eligible Employee is then covered, as determined by
the Executive. Whether any other termination of employment is to
be considered Retirement shall be determined by the Executive.
The "Sixty Dollar Trigger" shall be deemed to have been reached on
any date if on such date the average over the 10 consecutive
Trading Days ending on such date of the mean between the highest
and the lowest quoted selling prices for shares of Common Stock on
the New York Stock Exchange, Inc. is at least $60.00. Each of such
10 days must fall within the period commencing on January 19, 1994,
and ending on March 31, 1997.
53
<PAGE> 14
"Subsidiary" is any corporation in which CMC has a direct or
indirect ownership interest, including any corporation in which CMC
acquires any such interest after the adoption of this Program, but
only if CMC owns or controls, directly or indirectly, not less than
75 percent of the total outstanding common equity securities of
such corporation.
"Trading Day" means any day on which the New York Stock Exchange,
Inc. is open for the trading of shares of Common Stock.
6/20/94
54
<PAGE> 1
EXHIBIT 10 O
THE CHASE MANHATTAN 1994 LONG-TERM INCENTIVE PLAN
EFFECTIVE MAY 1, 1994
1. PURPOSE
The purpose of The Chase Manhattan 1994 Long-Term Incentive Plan (the
"Plan") is to advance the interests of The Chase Manhattan Corporation ("CMC")
and its Subsidiaries by providing long-term incentive awards and stock ownership
opportunities to certain key employees (including officers and directors who are
employees) who contribute significantly to the longer term performance of CMC
and its Subsidiaries. In addition, the Plan is intended to enhance the ability
of CMC and its Subsidiaries to attract and retain individuals of superior
managerial ability and to motivate such key employees to exert their best
efforts towards the future progress and profitability of CMC and its
Subsidiaries.
For purposes of this Plan, a Subsidiary shall be any corporation in which
CMC has a direct or indirect ownership interest, including any corporation in
which CMC acquires any such interest after the adoption of this Plan, but only
if CMC owns or controls, directly or indirectly, stock possessing not less than
50 percent of the total combined voting power of all classes of stock in such
corporation.
2. ADMINISTRATION AND INTERPRETATION
a. ADMINISTRATION. The administration and operation of the Plan shall be vested
in the Compensation Committee of the Board of Directors of CMC, or such other
committee of such Board of Directors which shall succeed to the functions and
responsibilities, in whole or in part, of said Compensation Committee (the
"Committee"). The Committee shall consist of not less than three members of the
Board of Directors of CMC (the "Board of Directors") who are not officers or
employees of CMC or any Subsidiary and who are (i) "disinterested" within the
meaning of Rule 16b-3 as in effect from time to time under the Exchange Act (as
defined in Section 6(e)) ("Rule 16b-3") and (ii) "outside directors" under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations promulgated thereunder as in effect from time to time (the
"Section 162(m) Regulations"). No member of the Committee shall be entitled to
participate in the Plan.
55
<PAGE> 2
The Committee shall have the authority, consistent with the provisions of
the Plan, to determine the provisions of the awards to be granted under the
Plan; to determine the form of any such award; to interpret the Plan and any
award granted under the Plan; to adopt, amend and rescind rules and regulations
for the administration of the Plan and the awards granted under the Plan; and to
make all determinations in connection therewith which may be necessary or
advisable. The day-to-day administration of the Plan shall be carried out by
such officers and employees of The Chase Manhattan Bank (National Association)
as shall be designated from time to time by the Committee.
b. INTERPRETATION. The interpretation and construction by the Committee of any
provisions of the Plan or of any award granted under the Plan and any
determination by the Committee under any provision of the Plan or any such award
shall be final and conclusive.
c. LIMITATION ON LIABILITY. Neither the Board of Directors nor the Committee,
nor any member of either, shall be liable for any act, omission, interpretation,
construction or determination made by the Committee or any member thereof in
connection with the Plan in good faith, and the members of the Board of
Directors and the members of the Committee shall be entitled to indemnification
and reimbursement by CMC in respect of any claim, loss, damage or expense
(including counsel fees) arising therefrom to the full extent permitted by law
and under any directors and officers liability insurance coverage which may be
in effect from time to time.
d. RESERVED AUTHORITY OF THE BOARD OF DIRECTORS. The determinations by the
Committee as to:
(i) the Incentive Stock Options (as defined in Section 4(b)(2)) and/or
Non-qualified Stock Options (as defined in Section 4(b)(3)) to be granted
to a senior executive officer of CMC who is a member of the Board of
Directors and the aggregate number of Incentive Stock Options and/or
Non-qualified Stock Options to be granted to all other eligible employees
pursuant to Section 4(b)(1);
(ii) the Stock Appreciation Rights (as defined in Section 4(c)) to be
granted pursuant to Section 4(c) to any optionee who is a senior executive
officer of CMC and who is a member of the Board of Directors and who has
been granted Options (as defined in Section 4(b)(1)); and/or
(iii) the aggregate number of Restricted Stock Units (as defined in
Section 5) which may be granted to all eligible individuals under the Plan
pursuant to Section 5(b);
56
<PAGE> 3
shall be subject to the review and approval of the members of the Board of
Directors who are both "disinterested" under Rule 16b-3 and "outside directors"
under Section 162(m) of the Code and the Section 162(m) Regulations only if such
review and approval (a) shall not cause the administration of the Plan to be
other than "disinterested" under Rule 16b-3 and (b) shall allow CMC to maintain
the deductibility of certain compensation paid pursuant to this Plan under
Section 162(m) of the Code and the Section 162(m) Regulations, as determined by
counsel for CMC.
3. SHARES SUBJECT TO AWARDS UNDER THE PLAN
a. LIMITATION ON NUMBER OF SHARES. The shares subject to Options and authorized
for issuance upon the exercise of Stock Appreciation Rights ("Option Shares"),
and the shares subject to awards of Restricted Stock Units, shall be shares of
CMC's authorized but unissued common stock, par value $2.00 per share ("Common
Stock"), and shares, if any, of such Common Stock held as treasury stock by CMC.
The aggregate number of shares of Common Stock that may be made the subject of
awards under the Plan (a) during calendar year 1994 shall not exceed 100,000
shares and (b) during calendar year 1995 shall not exceed one and one-half
percent (1.5%) of the number of shares of Common Stock outstanding on December
31, 1994. The aggregate number of shares of Common Stock that may be made the
subject of awards under the Plan during any calendar year subsequent to calendar
year 1995 shall not exceed the sum of (i) one and one-half percent (1.5%) of the
number of shares of Common Stock outstanding on December 31 of the preceding
calendar year and (ii) the number of shares of Common Stock as to which awards
could have been made under the Plan on December 31 of the preceding calendar
year but as to which awards were not made during such year.
If any Option awarded under this Plan expires or terminates unexercised or
any award of Restricted Stock Units (or shares of Restricted Stock into which it
may be converted) under this Plan expires or is terminated for any reason, the
shares allocable to the unexercised or terminated portion of such Option or
award may again be made the subject of awards under the Plan. Such shares shall
be included in the amount determined pursuant to clause (ii) of the immediately
preceding paragraph as of the end of the year in which such termination or
expiration occurs.
b. ADJUSTMENTS OF NUMBER OF SHARES. The number of shares that may be made the
subject of awards as provided in Section 3(a) shall be subject to appropriate
adjustment, from time to time, in accordance with the provisions of Sections
4(d)(8) and 4(d)(9). In the event of a change in the Common Stock of CMC which
is limited to a change in the designation thereof to "Capital Stock" or other
similar designation, or to a change in the par value thereof, or from par value
to no par value, without increase or
57
<PAGE> 4
decrease in the number of issued shares, the shares resulting from any such
change shall be deemed to be Common Stock within the meaning of the Plan.
4. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
a. ELIGIBILITY. The individuals who shall be eligible to receive Options and
Stock Appreciation Rights under the Plan shall be all salaried employees
(including officers and directors who are salaried employees) of CMC or of any
Subsidiary as the Committee from time to time shall determine as provided below.
b. GRANTS OF OPTIONS.
(1) In General. Options granted under the Plan may be either "Incentive
Stock Options" or "Non-qualified Stock Options" (collectively referred to herein
as "Options"); provided, however, that no Option Shares under the Plan shall be
subject to more than one Option; and provided, further, that no Incentive Stock
Options may be granted under the Plan after February 15, 2004. Options granted
under the Plan shall be of such type and for such number of Option Shares
(subject to the limitation contained in Section 3), as the Committee shall
designate at the time of grant; provided, however, that the maximum number of
shares of Common Stock with respect to which Options or Stock Appreciation
Rights shall be granted in any calendar year to any individual under this Plan
shall not exceed ten percent (10%) of the total number of shares of Common Stock
that may be made the subject of awards during any calendar year under Section 3
of the Plan as determined on the effective date of the Plan for calendar year
1994 and for any calendar year thereafter, on the first day of such calendar
year; provided, further, that such maximum number of shares shall be subject to
appropriate adjustment, from time to time, in accordance with the provisions of
Sections 4(d)(8) and 4(d)(9). The Committee, at any time and from time to time,
may authorize the granting of Incentive Stock Options and/or Non-qualified Stock
Options to any individual eligible to receive the same.
(2) Incentive Stock Options. The term "Incentive Stock Option" shall mean
an Option which is intended to qualify as an incentive stock option under
Section 422 of the Code. Subject to adjustment as provided in Section 3(b), the
aggregate number of shares of Common Stock as to which Incentive Stock Options
may be granted under the Plan shall not exceed 5,000,000 shares of Common Stock.
Such number of shares shall be subject to appropriate adjustment, from time to
time, in accordance with the provisions of Sections 4(d)(8) and 4(d)(9).
58
<PAGE> 5
(3) Non-qualified Stock Options. The term "Non-qualified Stock Option"
shall mean any Option which is not an Incentive Stock Option. Except as
specifically provided herein, the provisions of this Plan shall apply in the
same manner to Incentive Stock Options and to Non-qualified Stock Options.
c. GRANTS OF STOCK APPRECIATION RIGHTS.
(1) In General. The term "Stock Appreciation Right" shall mean the right to
receive from CMC upon surrender of an Option or a portion thereof, but without
any payment to CMC, an amount equal to the value (based on Market Value Per
Share (as defined in Section 4(d)(4)), on the exercise date, of the total number
of Option Shares for which the Stock Appreciation Right is exercised, less the
option price which the optionee would have otherwise been required to pay upon
purchase of such Option Shares. The amount payable by CMC upon the exercise of a
Stock Appreciation Right may be paid in cash or in Option Shares or in any
combination thereof, as the Committee in its sole discretion shall determine. No
fractional shares shall be issuable pursuant to any Stock Appreciation Right.
The Committee in the same manner as is provided with respect to Options in
Section 4(b) may, from time to time, authorize the granting of Stock
Appreciation Rights to any optionee who has been granted Options. Each Stock
Appreciation Right shall relate only to Option Shares subject to a specific
Option granted under this Plan and may be granted concurrently with the Option
to which it relates or at any time prior to the exercise, termination or
expiration of such Option. However, at no time shall the total number of Option
Shares with respect to which Stock Appreciation Rights remain outstanding and
unexercised exceed the total number of Option Shares subject to Options then
outstanding and unexercised.
(2) Limitations on Stock Appreciation Rights. The Committee may fix, with
respect to Stock Appreciation Rights granted under the Plan, such waiting
periods, exercise dates or other limitations as it shall deem appropriate;
provided, however, that no Stock Appreciation Right shall be exercisable prior
to the date when the Option to which it relates first becomes exercisable or
after the expiration of such related Option. In addition, the Committee may
impose at any time after the grant of any Stock Appreciation Right a total
prohibition on the exercise of such Stock Appreciation Right for such period or
periods as it, in its sole discretion, deems to be in the best interest of CMC.
d. TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options granted pursuant to
this Plan shall be evidenced by agreements ("Stock Option Agreements"). Stock
Appreciation Rights, if any,
59
<PAGE> 6
shall be evidenced by agreements amending and forming a part of the Stock
Option Agreements to which such Stock Appreciation Rights relate.
Stock Option Agreements, and the Options and Stock Appreciation Rights, if
any, represented thereby, shall comply with and be subject to the following
terms and conditions and may contain such other provisions, consistent with the
terms of this Plan, as the Committee shall deem advisable.
(1) Medium of Payment. Upon exercise of an Option, the option price
shall be payable to CMC (i) in United States dollars in cash or by check,
bank draft or money order payable to the order of CMC (or such other forms
of payment as the Committee may determine to be acceptable) or (ii) by
tendering to CMC shares of Common Stock owned by the optionee having an
aggregate Market Value Per Share as of the date of exercise which is not
greater than the option price and by paying the remainder of the option
price as provided in (i) above. Payment instruments will be received
subject to collection.
(2) Number of Shares. Each Stock Option Agreement shall state the
total number of Option Shares which are subject to the Option and, if
applicable, the total number of Option Shares in respect of which any
related Stock Appreciation Right shall be exercisable.
(3) Option Price. The option price for each Option Share shall be not
less than the Market Value Per Share on the date of the granting of the
Option.
(4) Market Value Per Share. The Market Value Per Share as of any
particular date shall be the mean between the highest and lowest quoted
selling prices for shares of Common Stock as reported on the composite tape
on such date (or, if such date shall not be a business day, then the next
preceding day which shall be a business day); or, if no sale takes place,
then the mean between the bid and asked prices on such date; and if no bid
and asked prices are quoted for such date, then such value as shall be
determined by such method as the Committee shall deem to reflect fair
market value as of such date.
(5) Term. The term of each Option and related Stock Appreciation Right
shall be determined by the Committee at the date of grant; provided,
however, that each Option and related Stock Appreciation Right shall expire
not more than ten years from the date the Option is granted.
(6) Date of Exercise. Each Stock Option Agreement shall state that the
Option or Stock Appreciation Right granted therein may not be exercised in
whole or in part for any period or periods of time specified in such
agreement or otherwise as
60
<PAGE> 7
specified by the Committee. Except as may be so specified, any Option or
related Stock Appreciation Right may be exercised in whole at any time or
in part from time to time during its term; provided, however, that no
Option, or portion thereof, or related Stock Appreciation Right may be
exercisable until at least one year after the date of grant of such Option.
(7) Termination of Employment. In the event that an optionee's
employment by CMC or any of its Subsidiaries shall terminate, the
optionee's Options and related Stock Appreciation Rights, if any, shall
terminate immediately, except as hereinafter provided in this subsection.
The Committee, in its sole discretion, may determine that the
optionee's Options and/or related Stock Appreciation Rights, if any, to the
extent exercisable immediately prior to such termination of employment, may
remain exercisable for a designated period of time not to exceed 90 days
after such termination of employment.
If any termination of employment is due to retirement with the consent
of CMC, the optionee shall have the right, subject to the provisions of
subsections (5) and (6) above, to exercise each of his Options and related
Stock Appreciation Rights, if any, at any time until the end of the term of
each such Option and related Stock Appreciation Right to the extent that
the optionee was entitled to exercise the same immediately prior to such
retirement. Retirement by an optionee on or after the optionee's normal
retirement date in accordance with the provisions of the retirement plan of
CMC or one of its Subsidiaries under which the optionee is then covered
shall be deemed to be retirement with the consent of CMC. Termination of an
optionee's employment due to disability (as determined by the Committee in
its sole discretion) shall be deemed, solely for purposes of this Section
4(d)(7), to be a retirement with the consent of CMC; provided that if the
optionee thereafter returns to employment with CMC or any of its
Subsidiaries, the optionee's employment shall be deemed for purposes of
this Section 4(d)(7) to have never been terminated. Whether any other
termination of employment is to be considered a retirement with the
consent of CMC and whether an authorized leave of absence or absence on
military or government service or for other reasons shall constitute a
termination of employment for the purposes of the Plan shall be determined
by the Committee.
If an optionee shall die (whether in the employment of CMC or any of
its Subsidiaries or following the optionee's retirement with the consent of
CMC) while entitled to exercise an Option and related Stock Appreciation
Right, if any, the optionee's estate, personal representative, or
beneficiary, as the case may be, shall have the right, subject to the
provisions of subsections (5) and (6) above, to exercise the Option and
61
<PAGE> 8
related Stock Appreciation Right, if any, at any time within thirty-six
months after the date of the optionee's death (but in no event later than
the expiration of the term of each such Option and related Stock
Appreciation Right, if any), to the extent that the optionee was entitled
to exercise the same immediately prior to the optionee's death.
(8) Recapitalization. The aggregate number of shares determined under
Section 3 and stated in Section 4(b)(2), the maximum number of shares that
may be made the subject of awards of Options or Stock Appreciation Rights
to any individual in any calendar year, the number of Option Shares to
which each outstanding Option and Stock Appreciation Right relates, and the
option price in respect of each such Option and Stock Appreciation Right,
shall all be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a subdivision or
consolidation of shares or other capital adjustments, or the payment of a
stock dividend or other increase or decrease in such shares, effected
without receipt of consideration by CMC or a Subsidiary; provided, however,
that any fractional shares resulting from any such adjustment shall be
eliminated.
(9) Certain Mergers or Consolidations. After a merger of one or more
corporations into CMC, or after a consolidation of CMC and one or more
corporations (a "Merger Event"), in which CMC shall be the surviving or
resulting corporation, an optionee shall, at the same cost, be entitled
upon the exercise of an Option, to receive (subject to any required action
by stockholders) such securities of the surviving or resulting corporation,
as shall be equivalent, as nearly as practicable, to the nearest whole
number and class of shares of stock or other securities, to the Option
Shares which were then subject to such Option, and such shares of stock or
other securities shall, after such merger or consolidation, be deemed to be
Option Shares for all purposes of the Plan and of the Options and Stock
Appreciation Rights granted under the Plan.
(10) Other Transactions. If CMC enters into any agreement with respect
to any transaction which would, if consummated, result in a Merger Event in
which CMC will not be the surviving corporation, the Committee shall, in
its sole discretion, and without liability to any person, determine what
actions shall be taken with respect to outstanding Options and related
Stock Appreciation Rights, if any, including without limitation, the
payment of a cash amount in exchange for the cancellation of the Option and
any related Stock Appreciation Right or requiring the issuance of
substitute options, that will substantially preserve the value, rights and
benefits of any affected Options and/or related Stock Appreciation Rights
previously granted hereunder as of the date of the consummation of the
Merger Event.
62
<PAGE> 9
(11) Optionee's Agreement. If, at the time of the exercise of any
Option or Stock Appreciation Right, in the opinion of counsel for CMC, it
is necessary or desirable, in order to comply with any then applicable laws
or regulations relating to the sale of securities, that the optionee
exercising the Option or Stock Appreciation Right shall agree to hold any
Option Shares issued to the optionee for investment and without any present
intention to resell or distribute the same and that the optionee will
dispose of such shares only in compliance with such laws and regulations,
the optionee will, upon the request of CMC, execute and deliver to CMC a
further agreement to such effect.
e. EFFECT OF EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS. The right of an
optionee to exercise an Option shall terminate to the extent that such Option is
exercised and to the extent that the Option Shares subject to such Option are
used to calculate amounts receivable upon the exercise of a related Stock
Appreciation Right. The right of an optionee to exercise a Stock Appreciation
Right shall terminate to the extent that such Stock Appreciation Right is
exercised and, also, to the extent that such optionee exercises the Option to
which such Stock Appreciation Right is related.
f. OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options and Stock Appreciation Rights may be granted under the
Plan from time to time in substitution for stock options held by employees of
corporations who become salaried employees of CMC or of any Subsidiary as a
result of a merger or consolidation of the employing corporation with CMC or
such Subsidiary, or the acquisition by CMC or a Subsidiary of the assets of the
employing corporation, or the acquisition by CMC or a Subsidiary of stock of the
employing corporation with the result that such employing corporation becomes a
Subsidiary.
g. APPLICATION OF FUNDS. The proceeds received by CMC from the sale of Option
Shares pursuant to Options will be used for general corporate purposes.
5. RESTRICTED STOCK UNITS AND RESTRICTED STOCK
a. ELIGIBILITY. The individuals who shall be eligible to receive an award of
Restricted Stock Units under the Plan shall be all salaried employees (including
officers and directors who are salaried employees) of CMC, or of any Subsidiary,
as the Committee from time to time shall determine.
b. AWARDS OF RESTRICTED STOCK UNITS.
The Committee, at any time and from time to time, may determine (subject to
the limitation contained in Section 3):
63
<PAGE> 10
(i) those eligible individuals, if any, who shall receive an award of
Restricted Stock Units under the terms of the Plan;
(ii) the number of Restricted Stock Units that shall be awarded to
each such individual;
(iii) the terms and conditions which must be satisfied for the
restrictions and conditions on each Restricted Stock Unit to be removed,
and the period of time during which such terms and conditions shall apply,
which period shall be not less than three years from the date of the award,
unless the Committee otherwise determines, in which event such period shall
not be less than one year from the date of the award; and
(iv) the time and manner in which all or a portion of each award shall
be paid to such individual in accordance with the provisions of Section
5(e).
c. DESCRIPTION OF RESTRICTED STOCK UNITS. A Restricted Stock Unit awarded to an
employee shall entitle the employee to receive, upon the satisfaction of the
terms and conditions established under Section 5(b), a share of Common Stock.
The holder of a Restricted Stock Unit shall be entitled to receive a cash
payment on each dividend payment date for Common Stock as if such Restricted
Stock Unit were a share of Common Stock. The number of shares of Common Stock
subject to an award of Restricted Stock Units shall be appropriately adjusted,
from time to time, in the manner provided in Sections 4(d)(8) and 4(d)(9) for
any stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up or any similar change affecting the Common Stock.
After the satisfaction of the terms and conditions set by the Committee at
the time of the grant of an award of Restricted Stock Units to an employee, the
Secretary of CMC shall be so advised and a certificate for the appropriate
number of shares of Common Stock shall be delivered to the employee. The
remaining Restricted Stock Units granted under such award, if any, shall either
be canceled or, if appropriate under the terms of the award, shall continue to
be subject to the restrictions, terms and conditions set by the Committee at the
time of the grant of the award.
The Committee may from time to time before the satisfaction of the terms
and conditions established under Section 5(b) with respect to an award of
Restricted Stock Units determine to convert all or a portion of such Restricted
Stock Units into an equivalent number of shares of Restricted Stock.
64
<PAGE> 11
d. DESCRIPTION OF RESTRICTED STOCK. A share of Restricted Stock issued upon the
conversion of a Restricted Stock Unit is a share of Common Stock which may not
be sold, exchanged, pledged, transferred, assigned, hypothecated or otherwise
encumbered or disposed of until the terms and conditions set by the Committee at
the time of the award of the Restricted Stock Unit have been satisfied. A share
of Restricted Stock shall be subject to the same restrictions, terms and
conditions as applied to the converted Restricted Stock Unit.
If an employee receives shares of Restricted Stock, the employee shall be
the record owner of such shares and shall have all the rights of a stockholder
with respect to such shares, including the right to vote and the right to
receive dividends or other distributions made or paid with respect to such
shares. Any certificate or certificates representing shares of Restricted Stock
shall bear the following legend:
The shares represented by this certificate have been issued pursuant
to the terms of an award under The Chase Manhattan 1994 Long-Term Incentive
Plan and may not be sold, exchanged, pledged, transferred, assigned,
hypothecated or otherwise encumbered or disposed of in any manner until
such time as is set forth in the terms of such award dated .
Any new, additional or different securities that an employee may become entitled
to receive with respect to any shares of Restricted Stock by virtue of a stock
dividend, stock split, recapitalization, reorganization, merger, consolidation,
split-up, or any similar change affecting the Common Stock shall be subject to
the same restrictions, terms and conditions as apply to such shares of
Restricted Stock.
In order to enforce the restrictions, terms and conditions which may be
applicable to an employee's shares of Restricted Stock, the Committee may
require the employee, upon the receipt of a certificate or certificates
representing such shares, or at any time thereafter, to deposit such certificate
or certificates together with stock powers and other instruments of transfer,
appropriately endorsed in blank, with CMC or an escrow agent designated by CMC
under an escrow agreement in such form as shall be determined by the Committee.
After the satisfaction of the terms and conditions set by the Committee at
the time of an award of Restricted Stock Units to an employee which are
applicable to shares of Restricted Stock, a new certificate, without the legend
set forth above, for the number of shares which are no longer subject to such
restrictions, terms and conditions shall be delivered to the employee. The
remaining shares of Restricted Stock issued with respect to such award, if any,
shall either be canceled or, if
65
<PAGE> 12
appropriate under the terms of the award applicable to such shares, shall
continue to be subject to the restrictions, terms and conditions set by the
Committee at the time of the award.
e. PAYMENT OF RESTRICTED STOCK UNITS AND RESTRICTED STOCK.
(1) In General. The satisfaction of the terms and conditions set by the
Committee at the time of an award of Restricted Stock Units and the delivery of
a certificate, without the legend set forth above, for the portion of such award
which is no longer subject to such restrictions, terms and conditions is
hereinafter referred to as the "payment" of such portion of the award (or the
shares of Restricted Stock into which it may be converted). Subject to the
provisions of this Section 5(e) and Sections 5(c) and 5(d), each award shall be
paid at the time and in the manner specified by the Committee at the time of the
award.
(2) Payment in the Event of Termination of Employment. If the employment
with CMC of an employee to whom an award of Restricted Stock Units has been made
is terminated for any reason (including death, but excluding disability (as
determined by the Committee in its sole discretion), which for purposes of this
Section 5(e) shall not be deemed a termination of employment) before
satisfaction of the terms and conditions for the payment of all or a portion of
the award, then only such portion of the award, if any, shall be paid as shall
have been specified by the Committee at the time of the award and the remaining
portion of such award shall be canceled.
If an employee to whom Restricted Stock Units have been awarded dies after
satisfaction of the terms and conditions for the payment of all or a portion of
an award but prior to the actual payment of all or such portion of the award,
such payment shall be made to the employee's beneficiary or beneficiaries at the
time and in the same manner that such payment would have been made to the
employee.
6. CHANGE IN CONTROL PROVISIONS.
a. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Notwithstanding any provision in
the Plan or in any Stock Option Agreement to the contrary, the following
provisions shall apply if there is a Change in Control, as defined in Section
6(e):
(1) Any Option or Stock Appreciation Right, other than an Incentive
Stock Option and related Stock Appreciation Rights, which is not otherwise
exercisable at the date of the Change in Control may be exercised, subject
to the provisions of Sections 4(d)(5) and 4(d)(7), at any time after the
date of the Change in Control.
66
<PAGE> 13
(2) If an optionee's employment is terminated within twenty-four
months after a Change in Control, unless such termination is (i) for Cause
(as defined in Section 6(e)), (ii) by reason of death, Disability (as
defined in Section 6(e)), or retirement with the consent of CMC (as defined
in Section 4(d)(7)), or (iii) by the optionee without Good Reason (as
defined in Section 6(e)), the optionee shall have the right, subject to the
provisions of Section 4(d)(5), to exercise his Options and Stock
Appreciation Rights at any time within the twenty-four month period after
such termination of employment. After a Change in Control, any purported
termination of an employee's employment (other than by reason of death)
shall be communicated by a Notice of Termination (as defined in Section
6(e)) from CMC to the employee or from the employee to CMC, as the case may
be.
b. RESTRICTED STOCK UNITS AND RESTRICTED STOCK. Notwithstanding any provision of
the Plan or any terms or conditions relating to any Restricted Stock Units or
shares of Restricted Stock to the contrary, in the event of a Change of Control,
the terms and conditions set by the Committee at the time of an award of
Restricted Stock Units shall be deemed to have been satisfied and, within 15
days after the Change in Control, a certificate for the appropriate number of
shares of Common Stock shall be delivered to the employee to whom such
Restricted Stock Units were awarded. Further, at the time of a Change in Control
the terms and conditions with respect to any shares of Restricted Stock issued
under the Plan shall be deemed to have been satisfied and, within 15 days after
the Change in Control, the holder of such shares shall receive a new certificate
for such shares without the legend set forth in Section 5(d).
c. TERMINATION AS A RESULT OF A POTENTIAL CHANGE IN CONTROL. For purposes of
Section 6(a)(2), an employee's employment shall be deemed to have been
terminated following a Change in Control without Cause or by the employee with
Good Reason, if the employee's employment is terminated prior to a Change in
Control without Cause at the request of a Person (as defined in Section 6(e))
who has entered into an agreement with CMC the consummation of which will
constitute a Change in Control or if the employee terminates his employment with
Good Reason prior to a Change in Control (determined by treating a Potential
Change in Control (as defined in Section 6(e)), as a Change in Control in
applying the definition of Good Reason) if the circumstance or event which
constitutes Good Reason occurs at the request of such Person. Further, for all
purposes of Sections 6(a)(1), 6(b) and 6(d), in determining any such employee's
rights to exercise Options and Stock Appreciation Rights, to receive a
distribution of shares of Common Stock with respect to Restricted Stock Units,
or to have the restrictions on shares of Restricted Stock deemed satisfied, a
Change in Control shall be deemed to have occurred immediately prior to the
employee's termination of employment.
67
<PAGE> 14
d. RESTRICTION ON POWER TO AMEND AND TERMINATE. Notwithstanding any provision in
the Plan or in any award granted under the Plan to the contrary, while Section 9
of the Plan reserves to the Committee the right, subject to certain limitations
and restrictions, to from time to time and at any time alter, amend, suspend,
discontinue or terminate the Plan and any awards granted under the Plan, no such
action of the Committee, nor any action by the Board of Directors, shall
adversely affect an employee's rights under any award granted under the Plan
without the written consent of such employee if such action is within
twenty-four months after the month in which a Change in Control occurred or is
within twelve months after a Potential Change in Control.
e. DEFINITIONS. For purposes of this Section 6, the following words and phrases
shall have the meaning specified:
(1) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 of
the Exchange Act.
(2) "Cause" shall mean, unless otherwise defined in an employee's
individual severance agreement with CMC or, with respect to an employee who
is a participant in CMC's Special Severance Plan, in such Special Severance
Plan (in which case said definition shall govern), the termination of an
employee's employment, after a Change in Control, as a result of (i) the
willful and continued failure by the employee to substantially perform the
employee's duties, as they may be defined from time to time, with the
employee's employers or abide by the written policies of CMC or the
employee's primary employer (other than any such failure resulting from the
employee's incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for
Good Reason by the employee) after a written demand for substantial
performance is delivered to the employee by the Corporate Human Resources
Executive of CMC, which demand specifically identifies the manner in which
the Corporate Human Resources Executive believes that the employee has not
substantially performed the employee's duties or has not abided by such
written policies, or (ii) the willful engaging by the employee in conduct
which is demonstrably and materially injurious to CMC or its Subsidiaries,
monetarily or otherwise. For purposes of the preceding sentence, no act, or
failure to act, on a employee's part shall be deemed "willful" unless done,
or omitted to be done, by the employee not in good faith and without
reasonable belief that the employee's act, or failure to act, was in the
best interest of CMC and its Subsidiaries.
(3) A "Change in Control" shall be deemed to have occurred if any one
of the following conditions shall have been satisfied:
68
<PAGE> 15
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of CMC (not including in the securities
beneficially owned by such Person any securities acquired directly from
CMC or its affiliates) representing 25 percent or more of the combined
voting power of CMC's then outstanding securities; or
(ii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constitute the Board of
Directors and any new director (other than a director designated by a
Person who has entered into an agreement with CMC to effect a
transaction described in subsections (i), (iii) or (iv) of this Section)
whose election by the Board of Directors or nomination for election by
CMC's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of
the Board of Directors; or
(iii) the stockholders of CMC approve a merger or consolidation of
CMC with any other corporation, or a plan of complete liquidation of
CMC, other than (A) a merger, consolidation or liquidation which would
result in the voting securities of CMC outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or
being converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of CMC or a Subsidiary, at
least 80 percent of the combined voting power of the voting securities
of CMC or such surviving entity outstanding immediately after such
merger, consolidation or liquidation, or (B) a merger, consolidation or
liquidation effected to implement a recapitalization of CMC (or similar
transaction) in which no Person acquires more than 50 percent of the
combined voting power of CMC's then outstanding securities; or
(iv) the stockholders of CMC approve an agreement for the sale or
disposition by CMC (other than to a Subsidiary) of all or substantially
all CMC's assets.
Notwithstanding the foregoing, with respect to a particular employee, a
Change in Control shall not include any event, circumstance or transaction
occurring during the twelve-month period following a Potential Change in
Control which results from the action of any entity or group which
includes, is affiliated with or is wholly or partly controlled by one or
more executive officers of CMC in which the employee participates (a
"Management Group"); provided, however, that such action shall not be taken
69
<PAGE> 16
into account for this purpose if it occurs within a twelve-month period
following a Potential Change in Control resulting from the action of any
Person which is not a Management Group.
(4) "Date of Termination" shall mean (i) if an employee's employment
is terminated for Disability, 30 days after Notice of Termination is given
(provided that the employee shall not have returned to the full-time
performance of the employee's duties during such 30 day period), and (ii)
if an employee's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination
by the employee's employer, shall not be less than 30 days (except in the
case of a termination for Cause) and, in the case of a termination by the
employee, shall not be less than 15 days nor more than 60 days,
respectively, from the date such Notice of Termination is given).
(5) "Disability" shall be deemed to be the reason for the termination
of an employee's employment, if, as a result of the employee's incapacity
due to physical or mental illness, the employee shall have been absent from
the full-time performance of the employee's duties with the employee's
employer for a period of six consecutive months, a Notice of Termination
for Disability shall have been given to the employee, and, within 30 days
after such Notice of Termination is given, the employee shall not have
returned to the full-time performance of the employee's duties.
(6) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(7) "Good Reason" for termination by a employee of the employee's
employment shall mean, unless otherwise defined in an employee's individual
severance agreement with CMC or, with respect to an employee who is a
participant in CMC's Special Severance Plan, in such Special Severance Plan
(in which case said definition shall govern), the occurrence (without the
employee's express written consent) of any one of the following acts by the
employee's employer, or failure by the employee's employer to act, unless,
in the case of any act or failure to act described in subsection (i), (iii)
or (iv) of this subsection, such act or failure to act is corrected prior
to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(i) the assignment to the employee of any duties materially
inconsistent with the nature and status of the employee's
responsibilities immediately prior to a Change in Control, or a
substantial adverse alteration in the nature or status of the employee's
responsibilities from those in effect immediately prior to the Change in
Control; provided, however, that a redesignation of the employee's title
or employer among CMC and its Subsidiaries shall not constitute
70
<PAGE> 17
Good Reason if the employee's overall duties and status among CMC and
its Subsidiaries are not substantially adversely affected;
(ii) a reduction in the employee's annual base salary as in effect
on May 1, 1994 (or the employee's most recent date of hire, if later),
as the same may be increased from time to time, where "annual base
salary" is the employee's regular basic annual compensation prior to any
reduction therein under a salary reduction agreement pursuant to Section
401(k) or Section 125 of the Code, and, without limitation, shall not
include, cost of living allowances and post allowances for foreign
service, fees, retainers, reimbursements, bonuses, incentive awards,
prizes or similar payments;
(iii) the failure by the employee's primary employer to pay to the
employee any portion of the employee's current compensation, or to pay
to the employee any portion of an installment of deferred compensation
under any deferred compensation program, within seven days of the date
such compensation is due; or
(iv) any purported termination of the employee's employment which
is not effected pursuant to a Notice of Termination, and for purposes of
this Section, no such purported termination shall be effective.
An employee's right to terminate the employee's employment for Good Reason
shall not be effected by the employee's incapacity due to physical or
mental illness. The employee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to
act constituting Good Reason hereunder.
(8) "Notice of Termination" shall mean, unless otherwise defined in an
employee's individual severance agreement with CMC or, with respect to an
employee who is a participant in CMC's Special Severance Plan, in such
Special Severance Plan (in which case said definition shall govern), a
written notice which shall indicate the specific termination provision in
this Section 6 relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
employee's employment under the provision so indicated. A Notice of
Termination for Cause is required to include a statement signed by the
Corporate Human Resources Executive of CMC that, in the good faith opinion
of the Corporate Human Resources Executive, the employee engaged in conduct
set forth in Section 6(e)(2)(i) or 6(e)(2)(ii) (the definition of Cause),
and specifying the particulars thereof in detail.
71
<PAGE> 18
(9) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, a Person shall not include (i) CMC or any Subsidiary,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of CMC or a Subsidiary, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of CMC in
substantially the same proportions as their ownership of stock of CMC.
(10) "Potential Change in Control" shall be deemed to have occurred if
any one of the following conditions shall have been satisfied:
(i) CMC enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) CMC or any Person publicly announces an intention to take or
to consider taking actions which, if consummated, would constitute a
Change in Control;
(iii) any Person who is or becomes the Beneficial Owner, directly
or indirectly, of securities of CMC representing 15 percent or more of
the combined voting power of CMC's then outstanding securities,
increases such Person's beneficial ownership of such securities by 5
percentage points or more over the percentage so owned by such Person on
July 18, 1990; or
(iv) the Board of Directors adopts a resolution to the effect that,
for purposes of the Plan, a Potential Change in Control has occurred.
7. WITHHOLDING FOR TAXES
Any cash payment under the Plan shall be reduced by any amounts required to
be withheld or paid with respect thereto under all present or future federal,
state and local tax and other laws and regulations which may be in effect as of
the date of each such payment. Any distribution of shares of Common Stock under
the Plan shall not be made until appropriate arrangements have been made for the
payment of any amounts which may be required to be withheld or paid with respect
thereto, including, but not limited to, withholding the distribution of a
portion of the shares of Common Stock otherwise issuable or the tendering of
such shares back to CMC (under such rules and conditions as may be established
by the Committee) in order to satisfy all or a portion of the required
withholdings or payments.
72
<PAGE> 19
8. DESIGNATION OF BENEFICIARY
Each employee to whom an award or awards of Restricted Stock Units has been
made under this Plan may designate a beneficiary or beneficiaries (which
beneficiary may be an entity other than a natural person) to receive any payment
which under the terms of such award or awards may become payable on or after the
employee's death. At any time, and from time to time, any such designation may
be changed or canceled by the employee without the consent of any such
beneficiary. Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the Committee. If no beneficiary has been named by a deceased
employee, or the designated beneficiaries have predeceased the employee, the
beneficiary shall be the employee's estate. If an employee designates more than
one beneficiary, any payments under this Plan to such beneficiaries shall be
made in equal shares unless the employee has designated otherwise, in which case
the payments shall be made in the shares designated by the employee.
9. AMENDMENT AND TERMINATION
The Committee may from time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan and any awards granted hereunder; provided,
however, that no such action of the Committee may, without the approval of the
shareholders of CMC, alter the provisions of the Plan so as to (i) increase the
maximum number of shares of Common Stock which may be made the subject of awards
in any calendar year (except as provided in Section 3(b)) or increase the
maximum number of shares of Common Stock as to which awards of Options and Stock
Appreciation Rights may be made to any awardee in any calendar year (except as
provided in Section 4(b)(1)); (ii) change the class of employees eligible to
receive awards under the Plan; (iii) extend beyond ten years the maximum term of
Incentive Stock Options or related Stock Appreciation Rights granted under the
Plan or increase the aggregate number of shares of Common Stock as to which
Incentive Stock Options may be granted under the Plan (except as provided in
Section 4(b)(2)); (iv) permit the option price of any Option Share to be less
the Market Value Per Share on the date of the granting of the Option; (v)
withdraw the administration of the Plan from the Committee; or (vi) permit any
member of the Committee to be eligible to receive an award pursuant to the terms
of the Plan. No alteration, amendment, suspension, discontinuance or termination
of any individual award (as opposed to any such action with respect to this
Plan) shall, however, materially adversely affect the rights of any awardee
without the written consent of the awardee. Notwithstanding the proviso to the
first sentence of this Section 9 or the provisions of the second sentence of
this Section 9, the Committee may alter,
73
<PAGE> 20
amend, suspend, discontinue or terminate this Plan and any awards granted
hereunder without the approval of the shareholders of CMC or any awardee under
the Plan if necessary in order to enable the Plan or any award hereunder, or
any other plan of CMC or any Subsidiary intended to be so qualified or any
award thereunder, to qualify for (x) the exemption provided by Rule 16b-3, (y)
the benefits provided under Section 422 of the Code, or (z) the exclusion for
qualified performance-based compensation under Section 162(m) of the Code and
the Section 162(m) Regulations.
10. PREEMPTION BY APPLICABLE LAWS AND REGULATIONS
Anything in the Plan or any Stock Option Agreement or other agreement
entered into pursuant to the Plan to the contrary notwithstanding, if, at any
time specified herein or therein for the making of any determination, the issue
or other distribution of shares of Common Stock, or the payment of consideration
to an employee as a result of the exercise of any Stock Appreciation Right, as
the case may be, any law, regulation or requirement of any governmental
authority having jurisdiction in the premises shall require either CMC or the
employee (or the employee's beneficiary thereof), as the case may be, to take
any action in connection with any such determination, the shares then to be
issued or distributed, or such payment, the issue or distribution of such shares
or the making of such determination or payment, as the case may be, shall be
deferred until such action shall have been taken.
11. MISCELLANEOUS
a. NO EMPLOYMENT CONTRACT. Nothing contained in the Plan or any Stock Option
Agreement or other agreement shall be construed as conferring upon an employee
the right to continue in the employ of CMC or any Subsidiary.
b. EMPLOYMENT WITH SUBSIDIARIES. Employment by CMC for the purposes of this Plan
shall be deemed to include employment by, and to continue during any period in
which an employee is in the employment of, any Subsidiary.
c. NO RIGHTS AS A STOCKHOLDER. An employee shall have no rights as a stockholder
with respect to Option Shares covered by the employee's Options or Stock
Appreciation Rights until the date of the issuance of such shares to the
employee and only after such shares are fully paid. No adjustment will be made
for dividends or other distributions or rights for which the record date is
prior to the date of such issuance. An employee shall have no rights as a
stockholder with respect to any award of Restricted Stock Units under the Plan.
74
<PAGE> 21
d. NO RIGHT TO CORPORATE ASSETS. Nothing contained in the Plan shall be
construed as giving an employee, the employee's beneficiaries or any other
person any equity or interest of any kind in any assets of CMC or a Subsidiary
or creating a trust of any kind or a fiduciary relationship of any kind between
CMC or a Subsidiary and any such person.
e. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall be
construed to prevent CMC or any Subsidiary from taking any corporate action
which is deemed by CMC or such Subsidiary to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the Plan or
any award made under the Plan. No employee, beneficiary or other person shall
have any claim against CMC or any Subsidiary as a result of any such action.
f. NON-ASSIGNABILITY. Neither an employee nor an employee's beneficiary shall
have the power or right to sell, exchange, pledge, transfer, assign, hypothecate
or otherwise encumber or dispose of such employee's or beneficiary's interest in
the Plan or in any award received under the Plan, other than by will or the laws
of descent and distribution; nor shall such interest be subject to seizure for
the payment of an employee's or beneficiary's debts, judgments, alimony, or
separate maintenance or be transferable by operation of law in the event of an
employee's or beneficiary's bankruptcy or insolvency. Any Option or Stock
Appreciation Right granted under the Plan shall be exercisable during an
awardee's lifetime only by such awardee or his or her guardian or legal
representative.
CMC's or a Subsidiary's obligations under the Plan are not assignable or
transferable except to a corporation which acquires all or substantially all of
the assets of CMC or such Subsidiary or to any corporation into which CMC or
such Subsidiary may be merged or consolidated.
g. OTHER BENEFIT PLANS. No awards or payments under the Plan shall be taken into
account in determining any benefits under any retirement, profit-sharing or
other plan maintained by CMC or a Subsidiary.
h. GOVERNING LAW; CONSTRUCTION. All rights and obligations under the Plan shall
be governed by, and the Plan shall be construed in accordance with, the laws of
the State of New York. Titles and headings to Sections herein are for purposes
of reference only, and shall in no way limit, define or otherwise affect the
meaning or interpretation of any provisions of the Plan.
75
<PAGE> 22
i. EFFECTIVE DATE. The Plan shall be effective May 1, 1994, subject to the
approval of the Plan by the stockholders of CMC in accordance with Rule 16b-3
and Sections 162(m) and 422 of the Code.
76
<PAGE> 1
<TABLE>
Computation of Earnings Per Common Share Exhibit 11
The Chase Manhattan Corporation and Subsidiaries
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
---------------------------------------------------------
($ in millions, except per share amounts) 1994 1993 1994 1993
---------------------------------------------------------
<S> <C> <C> <C> <C>
Primary:
Net Income (Loss) Before Cumulative Effect of Change in
Accounting Principle . . . . . . . . . . . . . . . . . . . . . $307 $233 $671 $(114)
Cumulative Effect of Change in Accounting Principle - Adoption of
SFAS 109 . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 500
----------- ----------- ----------- -----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 233 671 386
Less: Preferred Stock Dividend Requirements . . . . . . . . . . 35 37 65 73
----------- ----------- ----------- -----------
Net Income Applicable to Common Stock $272 $196 $606 $313
----------- ----------- ----------- -----------
Average Common and Common Equivalent Shares Outstanding . . . . . 186,186,622 162,396,809 185,569,081 159,986,535
----------- ----------- ----------- -----------
Before Cumulative Effect of Change in Accounting Principle . . . $1.46 $1.20 $3.27 $(1.17)
----------- ----------- ----------- -----------
Cumulative Effect of Change in Accounting Principle - Adoption of
SFAS 109 . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- 3.12
----------- ----------- ----------- -----------
Primary Earnings Per Common Share . . . . . . . . . . . . . . . . $1.46 $1.20 $3.27 $1.95
----------- ----------- ----------- -----------
Assuming Full Dilution:
Net Income Applicable to Common Stock $272 $196 $606 $ 313
----------- ----------- ----------- -----------
Average Common and Common Equivalent Shares Outstanding . . . . . 186,186,622 162,396,809 185,569,081 159,986,535
Add: Shares Issuable Upon Exercise of Stock Options, Warrants and
Conversion of Restricted Stock Units . . . . . . . . . . . . . 1,982,315 1,388,962 1,697,665 1,386,070
----------- ----------- ----------- -----------
Shares of Common and Common Equivalent Stock Outstanding --
As Adjusted 188,168,937 163,785,771 187,266,746 161,372,605
----------- ----------- ----------- -----------
Earnings Per Common Share Assuming Full Dilution $1.45 $1.19 $3.24 $1.94
----------- ----------- ----------- -----------
</TABLE>
77
<PAGE> 1
<TABLE>
Computation of Ratios of Earnings to Fixed Charges EXHIBIT 12
The Chase Manhattan Corporation and Subsidiaries
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
------------------------------------------------------------------------------
($ in millions) 1994 1993 1993 1992 1991 1990 1989
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net Income (Loss) . . . . . . . . . . . . . . $ 671 $ 386 $ 966 $ 639 $ 520 $ (334) $ (665)
Less: Cumulative Effect of Change in
Accounting Principle*. . . . . . . . . -- 500 500 -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net Income (Loss) Before Cumulative Effect
of Change in Accounting Principle . . . . 671 (114) 466 639 520 (334) (665)
Less: Equity in Undistributed Income (Loss)
of Unconsolidated Subsidiaries and
Associated Companies . . . . . . . . . 5 7 36 11 (32) (40) (20)
Income Taxes (Benefits) . . . . . . . . . . . 412 (40) 265 186 124 203 196
Fixed Charges Excluding Interest On Deposits. 1,374 1,282 2,670 2,277 1,988 3,190 3,938
------ ------ ------ ------ ------ ------ ------
Total Earnings, Excluding Interest On
Deposits, As Adjusted . . . . . . . . . . 2,452 1,121 3,365 3,091 2,664 3,099 3,489
Interest On Deposits . . . . . . . . . . . . 1,178 1,032 2,014 2,935 4,374 5,273 5,080
------ ------ ------ ------ ------ ------ ------
Total Earnings, Including Interest On
Deposits, As Adjusted . . . . . . . . . . $3,630 $2,153 $5,379 $6,026 $7,038 $8,372 $8,569
------ ------ ------ ------ ------ ------ ------
Fixed Charges:
Interest Expense and Amortization of Debt
Discount and Issuance Costs,
Excluding Interest On Deposits . . . . . . $1,339 $1,245 $2,591 $2,205 $1,920 $3,115 $3,860
One-Third of Net Rental Expenses . . . . . . 35 37 79 72 68 75 78
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges For Ratio, Excluding
Interest On Deposits . . . . . . . . . . . 1,374 1,282 2,670 2,277 1,988 3,190 3,938
Interest On Deposits . . . . . . . . . . . . 1,178 1,032 2,014 2,935 4,374 5,273 5,080
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges For Ratio, Including
Interest On Deposits $2,552 $2,314 $4,684 $5,212 $6,362 $8,463 $9,018
------ ------ ------ ------ ------ ------ ------
Ratio Of Earnings To Fixed Charges:
Excluding Interest On Deposits . . . . . . . 1.8x ** 1.3x 1.4x 1.3x ** **
Including Interest On Deposits . . . . . . . 1.4x ** 1.1x 1.2x 1.1x ** **
------ ------ ------ ------ ------ ------ ------
<FN>
* Represents the cumulative effect of change in accounting principle relating
to the adoption of SFAS 109 in the first quarter of 1993.
** For the six months ended June 30, 1993 and the years ended December 31,
1990 and 1989, earnings did not cover fixed charges by $161 million, $91
million and $449 million, respectively, primarily as a result of large
additions to the Reserve for Possible Credit Losses and special charges.
</TABLE>
For purposes of computing the consolidated ratios, earnings represent net
income (loss) plus applicable income taxes and fixed charges, less cumulative
effect of change in accounting principle (for the first six months of 1993 and
the year ended December 31, 1993) and equity in undistributed earnings (losses)
of unconsolidated subsidiaries and associated companies. Fixed charges
represent interest expense (exclusive of interest on deposits in one case and
inclusive of such interest in the other), amortization of debt discount and
issuance costs and one-third (the amount deemed to represent an interest
factor) of net rental expense under all lease commitments.
78
