<PAGE> 1
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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: SEPTEMBER 30, 1995
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
178,956,076 at September 30, 1995.
Exhibit Index Located on Page 41
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<PAGE> 2
The Chase Manhattan Corporation
September 30, 1995 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.................................................... 26
Stockholder Data.................................................... 27
The Chase Manhattan Bank, N.A. and Subsidiaries Consolidated
Statement of Condition........................................... 28
Average Balances, Interest and Average Rates - Taxable Equivalent... 29
Investment Securities............................................... 33
Average Loan Balances............................................... 35
Analysis of Credit Loss Experience.................................. 35
Intermediate- and Long-Term Debt.................................... 36
Consolidated Statement of Income (Five Quarters).................... 37
PART II. - OTHER INFORMATION................................................... 38
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 38
SIGNATURE............................................................................ 40
EXHIBIT INDEX ....................................................................... 41
</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 September 30, 1995,
December 31, 1994 and September 30, 1994, the Consolidated Statement of Income
for the quarters and nine months ended September 30, 1995 and 1994, the
Consolidated Statement of Changes in Stockholders' Equity for the nine months
ended September 30, 1995 and 1994 and the Consolidated Statement of Cash Flows
for the nine months ended September 30, 1995 and 1994 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, 1994 (the 1994 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, Chase Maryland, The
Chase Manhattan Bank of New Jersey, N.A. and The Chase Manhattan Private Bank
(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, mortgage banking, commercial and
consumer financing and other financial services.
3
<PAGE> 4
Consolidated Statement of Condition
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
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<S> <C> <C> <C>
Assets
Cash and Due from Banks .......................................................... $ 5,141 $ 4,713 $ 5,559
Interest-Bearing Deposits Placed with Banks ...................................... 5,798 6,791 7,055
Federal Funds Sold and Securities Purchased Under Resale Agreements .............. 10,959 7,280 7,712
Trading Account Assets ........................................................... 14,827 15,109 19,302
Investment Securities:
Held to Maturity (Market Value of $1,912, $2,054 and $2,005, Respectively) ..... 1,900 2,084 2,018
Available for Sale Carried at Fair Value ....................................... 5,807 5,135 5,813
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Total Investment Securities ...................................................... 7,707 7,219 7,831
Loans ............................................................................ 64,821 63,038 61,405
Reserve for Possible Credit Losses ............................................... (1,404) (1,414) (1,416)
Customers' Liability on Acceptances .............................................. 862 520 599
Accrued Interest Receivable ...................................................... 1,201 1,276 1,033
Premises and Equipment ........................................................... 1,866 1,895 1,871
Other Assets ..................................................................... 8,314 7,611 6,114
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Total Assets $ 120,092 $ 114,038 $ 117,065
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Liabilities and Stockholders' Equity
Deposits:
Domestic Offices:
Noninterest-Bearing .......................................................... $ 12,196 $ 11,990 $ 11,131
Interest-Bearing ............................................................. 19,917 21,264 22,389
Overseas Offices:
Noninterest-Bearing .......................................................... 3,258 2,320 2,533
Interest-Bearing ............................................................. 34,062 34,382 32,869
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Total Deposits ................................................................... 69,433 69,956 68,922
Federal Funds Purchased and Securities Sold Under Repurchase ..................... 12,539 9,312 11,959
Agreements
Commercial Paper ................................................................. 1,564 1,766 1,459
Other Short-Term Borrowings ...................................................... 3,192 2,884 3,508
Trading Account Liabilities ...................................................... 10,959 9,664 11,841
Acceptances Outstanding .......................................................... 871 525 603
Accrued Interest Payable ......................................................... 734 651 568
Accounts Payable, Accrued Expenses and Other Liabilities ......................... 6,304 5,851 4,734
Intermediate- and Long-Term Debt ................................................. 5,518 5,070 5,031
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Total Liabilities 111,114 105,679 108,625
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Stockholders' Equity:
Nonredeemable Preferred Stock (Without Par Value, 56,000,000
Shares Outstanding) .......................................................... 1,400 1,400 1,400
Common Stock ($2.00 Par Value):
9/30/95 12/31/94 9/30/94
------------ ----------- -----------
Number of Shares:
Authorized 500,000,000 500,000,000 500,000,000
Issued 194,449,931 185,674,178 185,289,886
Outstanding 178,956,076 177,174,178 181,289,886 ........... 389 371 371
Surplus ........................................................................ 4,357 3,949 3,939
Net Unrealized Gains (Losses) on Investment Securities-Available for Sale....... 5 (35) 23
Retained Earnings .............................................................. 3,484 2,980 2,853
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Total 9,635 8,665 8,586
Less: Treasury Stock at Cost (15,493,855, 8,500,000 and 4,000,000 Shares,
Respectively) 657 306 146
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Total Stockholders' Equity 8,978 8,359 8,440
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Total Liabilities and Stockholders' Equity $ 120,092 $ 114,038 $ 117,065
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<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 Nine Months Ended
September 30, September 30,
-----------------------------------
($ in millions, except per common share data) 1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Interest Revenue
Interest and Fees on Loans ................................................................ $1,440 $1,252 $4,323 $3,929
Interest on Deposits Placed with Banks .................................................... 133 108 426 365
Interest and Dividends on Investment Securities:
Held to Maturity ........................................................................ 32 29 96 112
Available for Sale ...................................................................... 82 90 262 433
Interest on Federal Funds Sold and Securities Purchased Under Resale ...................... 268 233 786 1,048
Agreements
Interest on Trading Account Assets ........................................................ 119 89 332 300
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Total Interest Revenue 2,074 1,801 6,225 6,187
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Interest Expense
Deposits .................................................................................. 651 538 1,964 1,717
Federal Funds Purchased and Securities Sold Under Repurchase Agreements ................... 302 203 902 503
Commercial Paper .......................................................................... 24 16 79 45
Other Short-Term Borrowings ............................................................... 105 52 326 908
Intermediate- and Long-Term Debt .......................................................... 105 76 299 229
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Total Interest Expense 1,187 885 3,570 3,402
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Net Interest Revenue ...................................................................... 887 916 2,655 2,785
Provision for Possible Credit Losses ...................................................... 70 100 210 410
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Net Interest Revenue After Provisions for Possible Credit Losses 817 816 2,445 2,375
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Other Operating Revenue
Fees and Commissions ...................................................................... 494 458 1,447 1,384
Foreign Exchange Trading Revenue .......................................................... 45 50 196 213
Trading Account Revenue ................................................................... 92 138 119 306
Investment Securities Gains ............................................................... 6 15 32 95
Other Revenue ............................................................................. 80 66 345 383
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Total Other Operating Revenue 717 727 2,139 2,381
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Other Operating Expenses
Salaries and Employee Benefits:
Salaries ................................................................................ 458 464 1,362 1,298
Employee Benefits ....................................................................... 127 122 418 369
- -------------------------------------------------------------------------------------------------------------------------------
585 586 1,780 1,667
Net Occupancy ............................................................................. 95 98 278 296
Equipment Rentals, Depreciation and Maintenance ........................................... 82 77 249 222
Other Expenses ............................................................................ 317 306 954 1,012
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Total Other Operating Expenses 1,079 1,067 3,261 3,197
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Income Before Taxes ....................................................................... 455 476 1,323 1,559
Applicable Income Taxes ................................................................... 172 171 498 583
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Net Income $ 283 $ 305 $ 825 $ 976
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Net Income Applicable to Common Stock $ 253 $ 274 $ 733 $ 880
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Average Common and Common Equivalent Shares Outstanding (in millions) ..................... 181.1 184.4 180.0 185.0
Primary Earnings Per Common Share Based on Average Shares Outstanding ..................... $ 1.40 $ 1.49 $ 4.07 $ 4.76
- -------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Declared Per Common Share .................................................. $ 0.45 $ 0.40 $ 1.30 $ 1.06
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<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>
Nine Months Ended
September 30,
-------------------
($ in millions) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonredeemable Preferred Stock
Balance at Beginning of Year (56,000,000 and 51,439,738 Shares, Respectively) .............................. $1,400 $1,399
Issuance of Preferred Stock Series N (9,100,000 Shares) .................................................. -- 228
Redemption of Preferred Stock Series F (4,539,738 Shares) ................................................ -- (227)
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Balance at End of Period (56,000,000 and 56,000,000 Shares, Respectively) 1,400 1,400
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Common Stock
Balance at Beginning of Year (185,674,178 and 184,290,491 Shares, Respectively) ............................ 371 369
Shares Issued Pursuant to Acquisition of U.S. Trust (6,619,390 Shares) ................................... 13 --
Shares Issued Pursuant to Dividend Reinvestment and Stock Purchase Plan
(254,277 and 420,209 Shares, Respectively) ............................................................. 1 1
Shares Issued Pursuant to Stock Option and Incentive Plans (1,880,244 and 577,247 Shares, Respectively)... 4 1
Shares Issued Pursuant to Stock Warrants (21,842 Shares and 1,939 Shares, Respectively) .................. -- --
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Balance at End of Period (194,449,931 and 185,289,886 Shares, Respectively) 389 371
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Surplus
Balance at Beginning of Year ............................................................................... 3,949 3,922
Shares Issued Pursuant to Acquisition of U.S. Trust ...................................................... 350 --
Shares Issued Pursuant to Dividend Reinvestment and Stock Purchase Plan .................................. 9 13
Shares Issued Pursuant to Stock Option and Incentive Plans ............................................... 48 12
Other .................................................................................................... 1 (8)
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Balance at End of Period 4,357 3,939
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Net Unrealized Gains on Investment Securities--Available for Sale
Balance at Beginning of Year ............................................................................... (35) 264
Net Change in Unrealized Gains (Losses) on Investment Securities--Available for Sale (Net of Deferred Tax
(Benefits) of $19 and $(167), Respectively) ............................................................ 40 (241)
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Balance at End of Period 5 23
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Retained Earnings
Balance at Beginning of Year ............................................................................... 2,980 2,168
Net Income ............................................................................................... 825 976
Cash Dividends:
Nonredeemable Preferred Stock .......................................................................... (92) (96)
Common Stock ........................................................................................... (229) (196)
Aggregate Foreign Exchange Translation Gain .............................................................. -- 1
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Balance at End of Period (Includes Exchange Translation Adjustments of $12 and $12, Respectively) 3,484 2,853
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Treasury Stock:
Balance at Beginning of Year (8,500,000 Shares and No Shares, Respectively) ................................ (306) --
Purchases (6,993,855 Shares and 4,000,000 Shares, Respectively) .......................................... (351) (146)
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Balance at End of Period (15,493,855 Shares and 4,000,000 Shares, Respectively) (657) (146)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $8,978 $8,440
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<FN>
The accompanying notes on page 8 are an integral part of the financial
statements
</TABLE>
6
<PAGE> 7
Consolidated Statement of Cash Flows
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
($ in millions) 1995 1994
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<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ............................................................................................... $ 825 $ 976
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Possible Credit Losses ................................................................... 210 410
Depreciation and Amortization of Premises and Equipment ................................................ 220 204
Accretion and Amortization ............................................................................. 139 95
Other Real Estate Valuation Losses ..................................................................... -- 104
Deferred Income Taxes (Benefits) ....................................................................... (110) 223
Net Gain on Sales of Assets ............................................................................ (353) (478)
Net (Increase) Decrease in Operating Assets:
Trading Account Assets ................................................................................. 736 (1,650)
Accrued Interest Receivable ............................................................................ 74 (162)
Other Assets ........................................................................................... 695 238
Net Increase (Decrease) in Operating Liabilities:
Trading Account Liabilities ............................................................................ 742 789
Accrued Interest Payable ............................................................................... 83 152
Accounts Payable, Accrued Expenses and Other Liabilities ............................................... (485) (121)
Other--Net ............................................................................................... 342 878
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Net Cash Provided by Operating Activities 3,118 1,658
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Cash Flows from Investing Activities:
Net (Increase) Decrease in Interest-Bearing Deposits Placed with Banks ................................... 1,138 (1,531)
Net Increase in Federal Funds Sold and Securities Purchased Under Resale Agreements ...................... (3,695) (1,127)
Investment Securities--Held to Maturity:
Payments for Purchases ................................................................................. (322) (1,169)
Proceeds from Maturities, Calls and Prepayments ........................................................ 521 553
Investment Securities--Available for Sale:
Payments for Purchases ................................................................................. (3,532) (4,331)
Proceeds from Sales .................................................................................... 2,088 4,512
Proceeds from Maturities, Calls and Prepayments ........................................................ 1,004 1,110
Loans:
Net Increase in Loans Made to Customers ................................................................ (13,641) (8,792)
Payments for Purchases ................................................................................. (2,285) (3,690)
Proceeds from Sales and Securitizations ................................................................ 13,987 11,777
Proceeds from Sales and Repayments of Assets Held for Accelerated Disposition ............................ -- 279
Net Purchases of Premises and Equipment .................................................................. (191) (270)
Acquisition of Mortgage Subsidiaries and Trust and Fiduciary Business .................................... (10) (348)
Proceeds from the Sale of Other Assets and Premises ...................................................... -- 102
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Net Cash Used by Investing Activities (4,938) (2,925)
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Cash Flows from Financing Activities:
Net Decrease in Deposits ................................................................................. (895) (3,484)
Net Increase in Federal Funds Purchased and Securities Sold Under Repurchase ............................. 3,159 4,059
Agreements
Net Decrease in Commercial Paper ......................................................................... (202) (6)
Net Increase in Other Short-Term Borrowings .............................................................. 315 1,201
Intermediate- and Long-Term Debt:
Proceeds from Issuance ................................................................................. 715 545
Repayments ............................................................................................. (235) (1,171)
Stockholders' Equity:
Cash Dividends ......................................................................................... (321) (292)
Proceeds from Issuance of Nonredeemable Preferred Stock ................................................ -- 221
Redemption of Nonredeemable Preferred Stock ............................................................ -- (227)
Proceeds from Issuance of Common Stock ................................................................. 61 27
Purchase of Treasury Stock ............................................................................. (351) (146)
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Net Cash Provided by Financing Activities 2,246 727
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Effect of Exchange Rate Changes on Cash 2 31
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Net Increase (Decrease) in Cash and Due from Banks ................................................. 428 (509)
Cash and Due from Banks at Beginning of Year ............................................................. 4,713 6,068
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Cash and Due from Banks at End of Period $ 5,141 $ 5,559
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Cash Paid for:
Interest ............................................................................................... $ 3,486 $ 3,251
Income Taxes ........................................................................................... 214 94
Noncash Investing and Financing Activities:
Net Loan Transfers to Other Real Estate ................................................................ 36 190
Acquistion of Trust and Fiduciary Business ............................................................. $ 363 $ --
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<FN>
The accompanying notes on page 8 are an integral part of the financial
statements
</TABLE>
7
<PAGE> 8
NOTE 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 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 October 16, 1995, the Board of Directors of the Company
declared a quarterly dividend of $.45 per common share, payable on November 15,
1995.
As explained on page 77 of the 1994 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 undivided profits. 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 income for that
year, combined with its retained net income for the preceding two calendar
years, less any required transfers to surplus.
At September 30, 1995, under the more restrictive of these limitations, the
Bank could declare dividends during the remainder of 1995 of approximately $1.3
billion, combined with an additional amount equal to its net income from
September 30, 1995 up to the date of any dividend declaration. Under applicable
state laws, Chase USA could declare dividends during the remainder of 1995 of
approximately $1.3 billion, combined with an additional amount equal to its
respective retained net profits from September 30, 1995 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.
At September 30, 1995, 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
a the Federal Deposit Insurance Corporation Improvement Act of 1991.
NOTE 2. AGREEMENT TO MERGE WITH CHEMICAL BANKING CORPORATION
On August 28, 1995, the Company and Chemical Banking Corporation announced a
definitive agreement to merge in a stock-for-stock transaction, which is
expected to be completed in the first quarter of 1996. The new institution,
which will adopt the Chase name, will have nearly $300 billion in assets and $20
billion in shareholders' equity. The merger agreement provides for an all-stock
pooling of interests in which each share of Chase common stock would be
exchanged for 1.04 shares of Chemical stock on a tax-free basis. All of Chase's
series of preferred stock will be exchanged for similar Chemical preferred
stock. Chemical and Chase filed a Joint Proxy Statement/Prospectus with the
Securities and Exchange Commission on October 31, 1995, which included Pro Forma
Combined Financial Data as of June 30, 1995 for Chemical and Chase giving effect
to the merger. Pro forma Combined Financial Data as of September 30, 1995 is
contained in Exhibit 99 to this document.
NOTE 3. ACQUISITION OF SECURITIES PROCESSING BUSINESSES OF U.S. TRUST
On September 2, 1995, Chase acquired the securities processing businesses of
U.S. Trust Corporation (U.S. Trust) for $363 million, through the issuance of
approximately 6.6 million shares of Chase common stock. These businesses of
U.S. Trust have been merged into Chase and accounted for under the purchase
method. When compared with Chase's historical financial statements, the
securities processing businesses of U.S. Trust do not qualify as a "significant
subsidiary."
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
Business Operations....................................................................................... 10
Net Interest Revenue--Taxable Equivalent Basis............................................................ 13
Provision for Possible Credit Losses...................................................................... 13
Other Operating Revenue................................................................................... 13
Other Operating Expenses.................................................................................. 14
Provision for Income Taxes................................................................................ 14
Asset/Liability Management
Investment Securities..................................................................................... 15
Liquidity Risk Management................................................................................. 15
Interest Rate Risk Management............................................................................. 16
Trading Activities............................................................................................ 19
Fair Value Disclosures........................................................................................ 21
Capital Management............................................................................................ 21
Credit Risk Management
Loan Composition.......................................................................................... 22
Consumer Loans............................................................................................ 23
Wholesale Loans........................................................................................... 24
Reserve for Possible Credit Losses........................................................................ 24
Net Loan Charge-offs and Annualized Credit Loss Experience Ratios......................................... 25
Nonaccrual, Restructured and Past Due Outstandings and Domestic Other Real Estate (ORE) Acquired ......... 25
</TABLE>
EARNINGS ANALYSIS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EARNINGS SUMMARY AND SELECTED FINANCIAL RATIOS
- -----------------------------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
---------------------------------------
($ in millions, except per share data) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Interest Revenue ................................................................... $ 887 $ 916 $2,655 $2,785
Provision for Possible Credit Losses ................................................... 70 100 210 410
Other Operating Revenue:
Fees and Commissions ................................................................. 494 458 1,447 1,384
Other Revenue ........................................................................ 223 269 692 997
Other Operating Expenses ............................................................... 1,079 1,067 3,261 3,197
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes .................................................................... 455 476 1,323 1,559
Applicable Income Taxes ................................................................ 172 171 498 583
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 283 $ 305 $ 825 $ 976
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios
Net Income Per Common Share .......................................................... $ 1.40 $ 1.49 $ 4.07 $ 4.76
Return on Average Common Stockholders' Equity ........................................ 13.9% 15.8% 13.8% 17.3%
Return on Average Total Assets ....................................................... .89% .98% .88% 1.09%
Book Value (Period End)
Common Stockholders' Equity per Common Share ......................................... $42.35 $38.83
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
OVERVIEW
The Corporation reported third quarter 1995 net income of $283 million ($1.40
per share), down 7% from the $305 million ($1.49 per share) reported for the
third quarter of 1994. The decline was due to gains in the third quarter of 1994
from the disposition of real estate assets and LDC investment securities. Net
income improved in the third quarter of 1995 in both our core businesses (Global
Financial Services and Retail Businesses) as compared to the third quarter
of 1994.
Third quarter 1995 business highlights:
- - Investment banking fees were up 35% over third quarter 1994.
- - Managed credit card receivables increased approximately $2 billion over
third quarter 1994; however, net interest revenue continued to be
impacted by narrower loan spreads.
- - Combined trading and related net interest revenue was $210 million and
was comparable with third quarter 1994.
- - Asset quality continues to be strong. The credit loss provision declined
to $70 million from $100 million in the same period last year,
benefiting from net recoveries on commercial loans and the impact of
credit card securitizations completed earlier this year.
- - The acquisition of the U.S. Trust securities processing businesses was
completed on September 2, 1995, increasing total trust and custody assets
to approximately $2 trillion.
- - On a comparable basis, operating expenses were essentially level with
third quarter 1994.
For the first nine months of 1995, Chase reported net income of $825
million ($4.07 per share), compared with $976 million ($4.76 per share) for
the same period in 1994.
BUSINESS OPERATIONS
As discussed on pages 27 to 31 of the 1994 Annual Report, Chase is a global
financial services company with a strong and diversified domestic base. Chase
serves customers through two core franchises: global financial services and U.S.
retail financial services. Global Financial Services serves the financial needs
of wholesale issuer and investor clients through integrated delivery of global
products and services. Retail businesses provide individuals nationwide with
consumer credit products and other financial services. In New York, New Jersey
and Connecticut, Chase also serves the broad banking requirements of individuals
and small-to-medium-sized businesses. Unallocated Corporate Items includes Real
Estate Finance, which manages Chase's discontinued commercial real estate
activities, LDC Portfolio Management, which oversees Chase's remaining portfolio
of previously refinanced LDC assets, and other corporate items not allocated to
specific business units.
A summary of financial results of business operations follows. Additional
information on each of the core businesses is provided on the following pages.
<TABLE>
<CAPTION>
=================================================================================================================================
Net Income Return on Allocated Equity
------------------------------------------------------------------
Third Quarter Nine Months Third Quarter Nine Months
------------------------------------------------------------------
($ in millions) 1995 1994 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global Financial Services .................................... $170 $153 $461 $530 15.0% 16.6% 13.4% 19.7%
Retail Businesses ............................................ 113 104 343 429 14.6 16.7 15.5 23.9
Unallocated Corporate Items .................................. -- 48 21 17 N/M N/M N/M N/M
- ---------------------------------------------------------------------------------------------------------------------------------
Total $283 $305 $825 $976 13.9% 15.8% 13.8% 17.3%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
N/M - Not meaningful
</TABLE>
For the third quarter of 1995, Global Financial Services (GFS) reported net
income of $170 million, up 11% from $153 million for third quarter 1994. The
favorable change was due to higher revenue from corporate finance activities
and credit recoveries. For the first nine months of 1995, GFS reported net
income of $461 million, down 13% from $530 million for the same period last
year. This decline was due to substantially lower trading revenue, principally
related to emerging markets trading, and higher expenses associated with
business investments made largely during the latter part of 1994.
For the third quarter of 1995, net income for the Retail businesses was $113
million, up 9% from $104 million for third quarter 1994. An improvement in
mortgage banking revenue in the third quarter of 1995 in comparison with the
same period of 1994 and a one time gain from the sale of Upstate New York
branches in the third quarter of 1995 were partially offset by a net loss on
the sale of Chase Maryland deposits and reduced revenue due to competitive
pressures in the credit card business.
For the first nine months of 1995, Retail businesses reported net income of
$343 million, down 20% from $429 million reported for the same period last year.
This change was primarily due to lower revenue in the credit card business and
the one time gain on sale of Chase Arizona in the second quarter of 1994.
Unallocated Corporate Items for third quarter 1994 included gains from the
disposition of real estate assets and LDC investment securities; for the third
quarter of 1995, modest operating results from these activities were fully
offset by other unallocated items.
10
<PAGE> 11
GLOBAL FINANCIAL SERVICES
<TABLE>
<CAPTION>
===================================================================================================================
Third Quarter Nine Months
------------------------------------------------------
($ in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Revenue..................................... $821 $806 $2,416 $2,490
Allocated Credit Loss Provision................... (6) 8 (27) 46
Total Expenses.................................... 568 553 1,728 1,597
Net Income ....................................... 170 153 461 530
- -------------------------------------------------------------------------------------------------------------------
Return on Average Assets.......................... .85% .77% .77% .95%
Return on Allocated Equity........................ 15.0% 16.6% 13.4% 19.7%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPH 1]
For the third quarter of 1995, total revenue for GFS of $821 million was up
$15 million, or 2%, from the comparable 1994 period.
- - In the transaction and information services businesses, revenue
increased 7% from the third quarter of 1994 reflecting business growth
and one month of revenue from the business acquired from U.S. Trust.
- - Trading and related net interest revenue for the third quarter of 1995
was lower than the comparable 1994 period, reflecting lower revenue
from securities trading and underwriting, partially offset by increases
in foreign exchange and derivatives trading.
- - Investment banking revenue increased 10% from the prior year quarter,
to $96 million. Results included investment banking fees of $62 million,
which reflect increased syndication and capital raising activity,
primarily for clients in specialized industries around the world. Also
included are equity gains of $28 million, in line with third quarter
1994.
- - Total revenue from the loan portfolio decreased from the comparable 1994
period.
For the first nine months of 1995, total revenue for GFS of $2,416 million was
down $74 million, or 3%, from the comparable 1994 period. This change was
largely due to the adverse conditions in the emerging markets during first half
of 1995 and the impact on trading revenue and lower trust and fiduciary revenue.
Asset quality measures within GFS businesses continue to be strong. The third
quarter and first nine months of 1995 results reflect negative allocated credit
loss provisions of $(6) million and $(27) million, respectively, resulting from
net recoveries in these periods, versus allocated credit loss provisions of $8
million and $46 million in the comparable prior year periods.
GFS total expenses of $568 million were up $15 million, or 3%, from third
quarter 1994 levels. GFS expenses in the first nine months of 1995 reflect
business investments made largely during the second half of 1994, notably in the
transaction and information services businesses and in Global Markets.
Productivity initiatives announced at year-end 1994 continued to benefit results
in the third quarter of 1995, with reductions in headcount of 960 from year-end
1994, excluding the acquisition of 1,090 U.S. Trust employees. GFS total
expenses of $1,728 million for the first nine months of 1995 were up $131
million, or 8%, from the first nine months of 1994 levels, reflecting the
business investments mentioned above.
11
<PAGE> 12
RETAIL BUSINESSES
<TABLE>
<CAPTION>
===================================================================================================================
Third Quarter Nine Months
------------------------------------------------------
($ in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Revenue................................... $784 $758 $2,339 $2,427
Allocated Credit Loss Provision................. 89 94 281 290
Total Expenses.................................. 480 496 1,458 1,443
Net Income ..................................... 113 104 343 429
- -------------------------------------------------------------------------------------------------------------------
Return on Average Assets........................ 1.01% 1.02% 1.05% 1.43%
Return on Allocated Equity...................... 14.6% 16.7% 15.5% 23.9%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPH 2]
For the third quarter of 1995, total revenue for the Retail businesses of $784
million was $26 million, or 3%, higher than third quarter 1994.
- - The credit card product revenue was $292 million in the third quarter of
1995, down $45 million from the comparable 1994 period. Competitive
repricing of credit cards reduced net interest revenue; however, managed
receivables grew $2 billion year-over-year due to new products and
aggressive promotions.
- - Business services revenue, including services provided to middle market
and small business customers, rose $8 million or 7%, for the third
quarter of 1995 from the comparable 1994 period, due to improved net
interest margin and other revenue.
- - Revenue from mortgage banking increased $15 million, or 21%, over the
third quarter 1994 primarily due to the impact from the 1995 adoption
of Statement of Financial Accounting Standards (SFAS) No. 122,
"Accounting for Mortgage Servicing Rights."
- - Other Retail Products increased $46 million from the prior year quarter
primarily due to one time gains on sale of Upstate New York branches and
sale of consumer loans, as well as the higher revenue reported in the
Auto Finance and Asia Consumer businesses.
Total revenue of $2,339 million for the first nine months of 1995 was $88
million lower than the prior year period due to the lower revenue in the credit
card business in 1995, and the one time gain on sale of Chase Arizona in 1994.
Credit card securitizations resulted in lower net interest revenue, offset by a
lower provision for credit losses and higher fee revenue, compared with third
quarter 1994.
For the third quarter of 1995, total expenses for the Retail businesses were
$480 million, or 3% lower than the same period last year. The lower expenses
were achieved by productivity initiatives implemented by all Retail businesses,
with reductions in headcount of 2,730 from year-end 1994. Total expenses of
$1,458 million were up $15 million, or 1%, from the first nine months of 1994
levels, principally due to the acquisition of American Residential Holding
Corporation (AmRes) in September 1994.
12
<PAGE> 13
NET INTEREST REVENUE -- TAXABLE EQUIVALENT BASIS
Net interest revenue, on a taxable equivalent basis, was $892 million for the
third quarter of 1995, compared with $922 million for the third quarter of 1994.
Net interest margin was 3.46%, compared with 3.74% reported for the third
quarter of 1994. Average interest-earning assets increased to $102.2 billion
from the $97.9 billion level reported for the third quarter of last year.
Average loans were $64.2 billion for the current quarter, compared with $60.0
billion for the third quarter of 1994.
Net interest revenue reflected the impact of prior period credit card
securitizations. These securitizations resulted in lower net interest revenue
offset by a lower provision for credit losses and higher fee revenue, compared
with third quarter 1994.
Net interest revenue in the current quarter benefited from continued growth in
consumer loans and from net interest revenue associated with trading and
transaction processing business.
For the first nine months of 1995, net interest revenue, on a taxable
equivalent basis, was $2,671 million, compared with $2,803 million for the same
period last year. For the first nine months of 1995, average loans were $63.7
billion, compared with $60.6 billion reported for 1994. For the first nine
months of 1995, average interest-earning assets were $101.9 billion, compared
with $96.3 billion for 1994.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE AND INTEREST RATE SPREADS--TAXABLE EQUIVALENT BASIS*
- ---------------------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
----------------------------------------------------------------------------------------
1995 1994 1995 1994
----------------------------------------------------------------------------------------
($ in millions) Amount Rate Amount Rate Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earned ................. $2,079 8.07% $1,807 7.32% $6,241 8.19% $6,205 8.62%
Interest Paid ................... 1,187 5.57 885 4.32 3,570 5.58 3,402 5.69
Net Interest Revenue $ 892 2.50% $922 3.00% $2,671 2.61% $2,803 2.93%
- --as a % of Average Gross
Interest-Earning Assets** 3.46% 3.74% 3.50% 3.89%
- ---------------------------------------------------------------------------------------------------------------------------
<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 $5 million and $6 million for the third
quarter of 1995 and 1994, respectively, and $16 million and $18 million
for the first nine months of 1995 and 1994, 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 29 and 31 for components of Average Gross Interest-Earning
Assets.
</TABLE>
PROVISION FOR POSSIBLE CREDIT LOSSES
The provision for possible credit losses was $70 million, or $30 million lower
than the third quarter of last year.
The provision for possible credit losses for the first nine months of 1995 was
$210 million, compared with $410 million for the same period last year. See
Credit Risk Management section starting on page 22 for a discussion of the
Reserve for Possible Credit Losses and asset quality.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
OTHER OPERATING REVENUE
- -----------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------------------------------------
($ in millions) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fees and Commissions:
Consumer Banking ....................................... $ 180 $ 162 $ 505 $ 470
Trust and Fiduciary .................................... 147 141 409 423
Investment Banking ..................................... 62 46 207 162
Other .................................................. 105 109 326 329
- -----------------------------------------------------------------------------------------------------------------
Total Fees and Commissions 494 458 1,447 1,384
- -----------------------------------------------------------------------------------------------------------------
All Other Operating Revenue:
Foreign Exchange Trading ............................... 45 50 196 213
Trading Account ........................................ 92 138 119 306
Investment Securities Gains ............................ 6 15 32 95
Equity Gains ........................................... 28 26 185 165
Accelerated Disposition Portfolio Gains ................ -- 15 -- 83
Other .................................................. 52 25 160 135
- -----------------------------------------------------------------------------------------------------------------
Total Other Operating Revenue $ 717 $ 727 $2,139 $2,381
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Total other operating revenue for the third quarter of 1995 was $717 million, or
1% lower than the same period of 1994, due to a lower level of trading and the
absence of gains from accelerated disposition of real estate partially offset by
an increase in fees and commissions.
Fees and commissions of $494 million increased from the prior year quarter.
Investment banking fees of $62 million were up significantly compared with third
quarter 1994, reflecting increased syndications and capital raising activity for
clients around the world. Trust and
13
<PAGE> 14
fiduciary fee revenue increased from the third quarter of 1994, reflecting
business growth and one month of revenue from the business acquired from U.S.
Trust. The increase in consumer banking fees over prior quarters reflected the
favorable impact of credit card securitizations.
For the first nine months of 1995, fees and commissions were $1,447 million up
from the same period of 1994, primarily due to higher fees from investment
banking and consumer banking activities.
Total trading revenue was $137 million for third quarter 1995, compared with
$188 million for the third quarter of 1994. For the first nine months of 1995,
total trading revenue was $315 million compared with $519 million for the first
nine months of 1994. For a detailed discussion, refer to Trading Activities
section starting on page 19.
For the third quarter of 1995, total other revenue was $86 million, compared
with $81 million for the same period last year. Equity gains for third quarter
1995 were in line with third quarter 1994. The improvement in other revenue over
the third quarter of 1994 was due to an increase from Chase's mortgage banking
activities and Upstate New York branch sales.
Total other revenue for the first nine months of 1995 was $377 million, down
from $478 million for the same period in 1994. The 1994 period included
significant gains from the liquidation of real estate assets held for
accelerated disposition and investment securities gains resulting from Chase's
program of reducing its cross-border Brady exposures in its available for sale
investment portfolio.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
OTHER OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
---------------------------------------
($ in millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Employee Benefits ............................................ $ 585 $ 586 $1,780 $1,667
Net Occupancy ............................................................. 95 98 278 296
Equipment Rentals, Depreciation and Maintenance ........................... 82 77 249 222
Other Expenses ............................................................ 317 306 954 1,012
Total Other Operating Expenses $1,079 $1,067 $3,261 $3,197
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Total operating expenses were $1,079 million for the third quarter of 1995,
compared with $1,067 million for the same period of last year. Excluding the
favorable impact of net ORE revenue in the third quarter of 1994, operating
expenses were down from the prior period. In addition, excluding a $19 million
FDIC deposit insurance refund and $12 million of operating expenses related to
the securities processing businesses acquired from U.S. Trust, operating
expenses for third quarter 1995 were essentially level with third quarter 1994.
Total headcount was 33,670 at September 30, 1995, which included approximately
1,090 from U.S. Trust. Excluding U.S. Trust personnel, productivity initiatives
continue to result in reductions, with total headcount down approximately 955
during the quarter.
For the first nine months of 1995, other operating expenses were $3,261
million, compared with $3,197 million for 1994. Operating expenses for the first
nine months of 1995 included the second quarter 1995 charge, primarily related
to the disposition of Chase's Futures brokerage business, as well as the third
quarter 1995 U.S. Trust related expenses and FDIC refund.
PROVISION FOR INCOME TAXES
For the third quarter of 1995, the provision for income taxes was $172 million,
compared with $171 million for the same period last year. The effective tax rate
was 38% for the third quarter of 1995 and 36% for third quarter 1994.
For the first nine months of 1995, the provision for income taxes was $498
million, compared with $583 million for the same period last year.
14
<PAGE> 15
ASSET/LIABILITY MANAGEMENT
Asset/ liability management (ALM) is an important ongoing process, which
requires the management of both liquidity risk and interest rate risk. The
policies and guidelines for management of Chase's liquidity and interest rate
risks are discussed further on pages 34 and 38 of the 1994 Annual Report.
INVESTMENT SECURITIES
Information regarding Chase's investment securities portfolio and related
accounting policies is contained on pages 34, 56, 57, and 63 to 65 of the 1994
Annual Report. At September 30, 1995, net unrealized gains in the investment
securities held to maturity portfolio were $12 million, compared with net
unrealized losses of $30 million and $13 million at December 31, 1994 and
September 30, 1994, respectively. With respect to those investment securities
that are available for sale and carried at fair value, the net gains reflected
in stockholders' equity, net of taxes, were $5 million at September 30, 1995
compared with net unrealized losses of $35 million at December 31, 1994 and net
unrealized gains of $23 million at September 30, 1994.
For further information on the investment securities portfolios, see pages 33
and 34.
LIQUIDITY RISK MANAGEMENT
As discussed on pages 34 and 35 of the 1994 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 September 30,
1995, these assets totaled $42.5 billion, compared with $39.0 billion at
December 31,1994. In addition to maintaining this portfolio of liquid assets,
Chase also has core consumer assets, such as loans secured by 1-4 family
residential properties, credit card receivables and automobile loans, that can
be sold or securitized. During the third quarter of 1995, Chase securitized
residential mortgage loans, auto loans and home equity loans. See Credit Risk
Management on page 22.
On October 27, 1995, the Company entered into a new $750 million revolving
credit agreement that expires October 25, 1996. This agreement replaced a
previous $750 million facility. No borrowings have ever been made under any of
these credit facilities.
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.
15
<PAGE> 16
INTEREST RATE RISK MANAGEMENT
ALM RISK MANAGEMENT
As discussed on pages 35 to 38 of the 1994 Annual Report, fluctuations in market
interest rates may impact Chase's net interest revenue due to 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 effect of interest rate changes on 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 and common
stockholders' equity. During the first nine months of 1995, the quarterly
exposures in the tactical (18-month) time horizon averaged 1.5% of quarterly
core net income. The objective in managing interest rate risk is to support the
achievement of business strategies, while protecting earnings and liquidity.
At September 30, 1995, as shown in the following chart, 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 contracts, including interest rate swaps, futures, forwards and
option-related contracts. Derivative contracts 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
contracts and the linked balance sheet positions are also performed. In
implementing its strategy, Chase does not use derivative contracts with leverage
features.
The following chart provides a quantification of Chase's interest rate
sensitivity gap as of September 30, 1995, 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 contracts 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 3]
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 October 1 and maturing on November 28
would have a gap impact of $64 million ($100 million x 59 days/92 days) in the
fourth quarter 1995 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 reported based on a declining schedule over a five-year
period, while stockholders' equity is assigned a 5-year maturity.
(4) Trading Account Assets and Liabilities are considered overnight maturities.
(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.
16
<PAGE> 17
At September 30, 1995, Chase had approximately $23 billion and $8 billion,
respectively, of notional swap principal and other ALM contracts outstanding
related to such interest rate risk management activities, compared with $50
billion and $17 billion, respectively, at December 31, 1994. The following table
summarizes certain of Chase's assets and liabilities at September 30, 1995, the
corresponding interest revenue earned on such assets or interest expense
incurred on such liabilities for the nine months ended September 30, 1995, as
well as the notional or contract amounts of related derivative contracts used
for ALM purposes at September 30, 1995. Also disclosed is the favorable or
unfavorable percentage impact these derivative contracts had on the related
interest amounts reflected in Chase's Consolidated Statement of Income. As
shown, Chase's use of derivative contracts reduced interest expense on deposits,
intermediate- and long-term debt, and interest revenue on interest-bearing
deposits placed with banks by the percentages indicated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DERIVATIVE PRODUCTS AND RELATED BALANCE SHEET POSITIONS AND INTEREST REVENUE (EXPENSE)
- -------------------------------------------------------------------------------------------------------------------
Nine Months Ended
Contract/ September 30, 1995
Notional Amount Income Statement
--------------------------- ----------------------------
Published Published Favorable
Balance Interest Other Interest (Unfavorable)
Sheet Rate ALM Revenue Percentage
($ in millions) Amount Swaps Contracts* (Expense) Impact**
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1995
Interest-Bearing Deposits
Placed with Banks ..................... $ 5,798 $ 200 $ 400 $ 426 (1)%
Investment Securities ................... 7,707 900 800 358 --
Loans ................................... 64,821 2,200 1,000 4,323 --
Deposits ................................ 69,433 17,100 5,200 (1,964) 5
Intermediate- and Long-Term Debt ........ 5,518 2,700 600 (299) 6
-------------------------------------
$ 23,100 $ 8,000
- -------------------------------------------------------------------------------------------------------------------
<FN>
* Includes currency exchange agreements, forward, futures and purchased option
and option-related contracts.
** Represents the favorable (unfavorable) percentage impact of ALM derivative
contracts on the related interest revenue or interest expense amount prior
to the impact of derivative contracts.
</TABLE>
The following table summarizes the outstanding ALM contract/notional amounts of
interest rate swaps and other ALM contracts at September 30, 1995, by yearly
intervals. The decrease in notional amounts from one period to the next period
represents maturities of the underlying contracts. 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 September
30, 1995. 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) on closed
derivative contracts and premiums paid on open ALM option contracts purchased,
as reflected in the tables on page 18.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING ALM CONTRACT/NOTIONAL AMOUNTS BY YEARLY INTERVALS
- ---------------------------------------------------------------------------------------------------------------------------------
For The Twelve Months Beginning October 1,
------------------------------------------------------------------
($ in millions) 1995 1996 1997 1998 1999 Thereafter
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps:
Contract/Notional Amount .................................... $16,900 $11,700 $ 9,400 $ 7,600 $ 6,600 $ 6,200
Weighted Average:
Receive Rate .............................................. 6.54% 6.62% 6.83% 6.91% 6.87% 6.75%
Pay Rate .................................................. 5.90 6.05 6.23 6.61 6.66 6.90
Pay Fixed Swaps:
Contract/Notional Amount .................................... $ 6,200 $ 4,600 $ 2,100 $ 1,500 $ 1,200 $ 1,000
Weighted Average:
Receive Rate .............................................. 5.88% 6.03% 6.21% 6.62% 6.65% 6.83%
Pay Rate .................................................. 7.90 8.33 8.28 8.28 8.26 8.01
Other ALM Contracts ........................................... $ 8,000 $ 6,500 $ 6,300 $ 6,200 $ 4,300 $ 4,300
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As discussed on page 36 of the 1994 Annual Report, Chase uses derivative
contracts 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,
certain fixed-rate liabilities are hedged using
17
<PAGE> 18
derivative contracts. Significant changes in value to Chase's ALM derivative
contracts and related linked balance sheet positions for the first nine
months of 1995 are presented below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CHANGE IN VALUE OF CERTAIN ALM DERIVATIVE CONTRACTS AND LINKED BALANCE SHEET POSITIONS
- ------------------------------------------------------------------------------------------------------------------
For Nine Months Ended September 30, 1995
-------------------------------------------------------
Change in Value of Linked Change in Value of
($ in millions) Balance Sheet Positions Related ALM Derivatives
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance Sheet Assets/Liabilities:
Deposits*............................................... $(1,072) $432
Company's Intermediate- and Long-Term Debt.............. (300) 227
- ------------------------------------------------------------------------------------------------------------------
<FN>
* Deposits are valued by a model that forecasts future deposit costs versus
alternative funding sources using simulation techniques. Key assumptions
include alternative funding costs of 3-month LIBOR, deposit operating costs,
reserve requirement of 10%, and Chase's long-run interest elasticity of
demand for balances. This valuation is performed on a "going concern" basis,
which assumes new business replaces any runoff.
</TABLE>
The change in value of Chase's ALM derivative contracts from December 31, 1994
to September 30, 1995 is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CHANGE IN VALUE OF ALM DERIVATIVE CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
September 30, December 31, Change in
($ in millions) 1995 1994 Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALM Derivative Contracts:
Net Deferred Gains/(Losses)............................. $ 12 $ (97) $109
Net Unrealized Gains/(Losses)........................... (29) (597) 568
- -------------------------------------------------------------------------------------------------------------------
Net ALM Derivative Contract Gains/(Losses) $(17) $(694) $677
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The net deferred gains at September 30, 1995 are expected to be amortized over
the periods reflected in the following table. The amortization of deferred gains
and losses are recognized as yield adjustments to the interest revenue or
interest expense associated with the linked assets or liabilities.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AMORTIZATION OF NET DEFERRED GAINS/(LOSSES) RELATED TO CLOSED ALM DERIVATIVE CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1996 1997 1998 1999 2000 Thereafter Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Gains/(Losses)
Amortization $21 $58 $10 $(30) $(43) $(54) $50 $12
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, Chase's Consolidated Statement of Condition included unamortized
premiums on open ALM option contracts purchased amounting to $121 million and
$140 million at September 30, 1995 and December 31, 1994, respectively. The
premiums at September 30, 1995 will be amortized over the periods indicated in
the following table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
AMORTIZATION OF PREMIUMS ON OPEN ALM OPTION CONTRACTS PURCHASED
- -------------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1996 1997 1998 1999 2000 Thereafter Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premium Amortization $5 $17 $16 $16 $14 $13 $40 $121
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER RISK MANAGEMENT ACTIVITIES
As discussed on page 38 of the 1994 Annual Report, Chase also uses derivative
contracts to reduce interest rate, foreign currency and other market risks
associated with certain assets and liabilities. At September 30, 1995 and
December 31, 1994, outstanding notional amounts of interest rate contracts
related to mortgage servicing assets were approximately $2 billion and $6
billion, respectively, and those related to mortgage loan sales were
approximately $2 billion and $1 billion, respectively. In addition,
approximately $1 billion of notional amounts of foreign currency contracts,
primarily forward contracts related to Chase's net investments in overseas
entities, were outstanding at both September 30, 1995 and December 31, 1994. The
effect of these activities are not material to Chase's consolidated financial
position or results of operations.
18
<PAGE> 19
TRADING ACTIVITIES
As discussed on pages 38 to 42 of the 1994 Annual Report, Chase conducts its
trading activities in the Global Markets business sector, functioning as an
intermediary between customers (both issuers and investors) and the global
foreign exchange and capital markets. Global Markets designs, trades and markets
a broad range of derivative risk management products.
The net market risk exposures created as a result of providing these services
to customers are managed on a consolidated basis by Global Markets as part of
Chase's trading activities. As a secondary business objective, Global Markets
may create proprietary positions to take advantage of market opportunities that
are not directly associated with customer activities.
Combined trading and trading-related revenue (including revenue classified as
net interest revenue for financial statement purposes) for Global Markets are
set forth below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COMBINED TRADING AND TRADING-RELATED REVENUE*
- -------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------
($ in millions) 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business Diversification:
Foreign Exchange** ......................................... $ 71 $ 58 $235 $216
Interest Rate and Commodity Derivatives*** ................. 65 33 183 130
Securities Trading and Underwriting**** .................... 74 128 95 278
- -------------------------------------------------------------------------------------------------------------------
Total $210 $219 $513 $624
- -------------------------------------------------------------------------------------------------------------------
Income Statement Classification:
Foreign Exchange Trading Revenue ........................... $ 45 $ 50 $196 $213
Trading Account Revenue .................................... 92 138 119 306
Net Interest Revenue***** .................................. 73 31 198 105
- -------------------------------------------------------------------------------------------------------------------
Total $210 $219 $513 $624
- -------------------------------------------------------------------------------------------------------------------
<FN>
* Prior period amounts have been reclassified to conform with current
presentation.
** Includes gains and losses from foreign exchange spot, forward, futures
and options contracts.
*** Includes gains and losses from interest rate swaps, currency exchange
agreements, future rate agreements, interest rate futures, options,
caps and floors; precious metals spot, forward, futures and options
contracts; and commodity and equity index linked derivative contracts.
**** Includes gains and losses from U.S. and foreign government, government
agency, and corporate debt securities, emerging markets securities and
loans, and related derivative contracts.
***** 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>
The combined trading and trading-related revenue of $210 million for third
quarter 1995 was consistent with prior quarters. Foreign exchange revenue of $71
million and interest rate and commodity derivatives revenue of $65 million were
both essentially level with the second quarter of 1995, and showed significant
improvement over the same period last year due to improved customer demand.
Securities trading and underwriting revenue of $74 million reflected continued
strength, particularly in the emerging markets, while third quarter 1994
included significant gains in the emerging markets resulting from improved
market confidence.
For the first nine months of 1995, combined trading revenue was $513 million,
lower than $624 million for the same period of 1994. Foreign exchange and
derivative revenue showed increases over last year due to improved market
conditions and customer demand. This improvement was offset by the Mexican peso
devaluation in December 1994 and its impact on securities trading and
underwriting revenue in first quarter 1995.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TRADING ACCOUNT ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
September 30, December 31,
($ in millions) 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Securities and Loans ............................................................... $ 6,826 $ 6,833
Other, Principally Derivative Contracts* ........................................... 8,001 8,276
- --------------------------------------------------------------------------------------------------------------------
Total $14,827 $15,109
- --------------------------------------------------------------------------------------------------------------------
Liabilities:
Securities Sold But Not Yet Purchased .............................................. $ 2,391 $ 1,692
Derivative Contracts* .............................................................. 8,568 7,972
- --------------------------------------------------------------------------------------------------------------------
Total $10,959 $ 9,664
- --------------------------------------------------------------------------------------------------------------------
<FN>
* The average fair values of trading derivative contract assets for the first
nine months of 1995 and for the year 1994 were $9.9 billion and $10.2
billion, respectively; and those of trading derivative contract liabilities
were $10.0 billion and $9.7 billion, respectively.
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TRADING ACCOUNT SECURITIES AND LOANS
- ---------------------------------------------------------------------------------------------------------------------
September 30, December 31,
-------------------------------
($ in millions) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government and Agency and Municipal Securities .................................. $1,245 $1,126
Foreign Securities ................................................................... 3,663 3,437
Loans ................................................................................ 258 887
Corporate Debt Securities ............................................................ 917 763
Other ................................................................................ 743 620
- ---------------------------------------------------------------------------------------------------------------------
Total $6,826 $6,833
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TRADING DERIVATIVE CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
September 30, 1995 December 31, 1994
--------------------------------------------------------------------------
Notional Credit Risk Notional Credit Risk
($ in millions) Amount* Amount Amount Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate Contracts:
Interest Rate Swaps.......................... $329,900 $ 5,700 $250,100 $4,800
Currency Exchange Agreements................. 24,900 1,400 18,900 1,100
Forwards and Futures......................... 197,800 300 252,300 200
Options, Caps and Floors Purchased........... 96,200 600 57,900 700
Options, Caps and Floors Written**........... 100,100 -- 72,200 --
- ---------------------------------------------------------------------------------------------------------------------
Less: Master Netting Agreements............ 4,600 3,000
Net Interest Rate Contracts 3,400 3,800
- ---------------------------------------------------------------------------------------------------------------------
Foreign Exchange Contracts:
Spot, Forwards and Futures................... 613,500 10,300 541,900 6,600
Options Purchased............................ 58,000 1,400 36,800 700
Options Written**............................ 47,700 -- 49,000 --
- ---------------------------------------------------------------------------------------------------------------------
Less: Master Netting Agreements............ 7,400 3,100
Net Foreign Exchange Contracts 4,300 4,200
- ---------------------------------------------------------------------------------------------------------------------
Commodity Contracts**.......................... 17,800 500 13,400 400
- ---------------------------------------------------------------------------------------------------------------------
Total Before Cross Product Netting Agreements.. 8,200 8,400
- ---------------------------------------------------------------------------------------------------------------------
Less: Cross Product Netting Agreements..... 200 100
- ---------------------------------------------------------------------------------------------------------------------
Total Trading Derivative Assets $ 8,000 $8,300
- ---------------------------------------------------------------------------------------------------------------------
<FN>
* The notional amounts of exchange traded interest rate contracts, foreign
exchange contracts, and commodity contracts were $51.8 billion, $12.1
billion and $1.9 billion, respectively. The credit risk amounts of these
contracts were minimal since exchange-traded contracts principally settle
daily in cash.
** Options, caps and floors written have no credit risk. Commodity contract
notional amounts include options written of $3.6 billion and $2.8 billion at
September 30, 1995 and December 31, 1994, respectively.
</TABLE>
The change in the credit risk amounts of foreign exchange contracts reflects the
volatility in the value of the U.S. dollar against most major currencies.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
MATURITY OF TRADING ACCOUNT DERIVATIVE CONTRACTS*
- -----------------------------------------------------------------------------------------------------------------
Interest Foreign
Rate Exchange
At September 30, 1995 Contracts Contracts
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than 3 months ................................................................... 21% 63%
3 to 6 months ........................................................................ 13 21
6 to 12 months ....................................................................... 16 14
1 to 3 years ......................................................................... 28 2
3 to 5 years ......................................................................... 14 -
Over 5 years ......................................................................... 8 -
- -----------------------------------------------------------------------------------------------------------------
Total ................................................................................ 100% 100%
- -----------------------------------------------------------------------------------------------------------------
<FN>
* Approximate percentages based upon remaining life of notional amounts.
</TABLE>
20
<PAGE> 21
MARKET RISK
Chase's base level of daily risk dollars for its trading activities (before
Management's judgment overlays or stress testing) are estimated to be
approximately $9 million in aggregate at September 30, 1995, having averaged
approximately $12 million during the first nine months of 1995. The decline in
quarter-end risk dollars from the average is primarily attributed to reduced
volatility and positions in international securities.
Chase continuously validates the accuracy and applicability of risk dollars by
comparing actual portfolio changes in value against predicted changes in value,
or risk dollars. During the first nine months of 1995, actual declines in value
were within predicted declines in value at a frequency consistent with Chase's
defined confidence level of 97.5%.
CREDIT RISK
Chase's predominant credit risk exposures (net replacement values) in its
trading businesses relate to derivative contracts. Interest rate derivative
credit risk exposures are primarily of a medium-term nature, while credit risk
exposures in most other trading products are of a short-term nature. In terms of
industry exposure, depository institutions, substantially all in OECD countries,
represent 64% of net replacement value, with no other major industry greater
than 4% of the total net exposure. For other than depository institutions, the
largest single counterparty credit risk exposure is $107 million. The net
replacement value of contracts identified as being potential problem contracts
was not material at September 30, 1995. Presented in the following table are the
percentages of total net replacement value by counterparty type and by major
country exposures.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DERIVATIVE-RELATED CREDIT RISK EXPOSURE*
- -------------------------------------------------------------------------------------------------------------------
Percentage of Total Net
At September 30, 1995 Replacement Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Counterparty Type:
Depository Institutions ........................................................................ 64%
Other .......................................................................................... 36
- -------------------------------------------------------------------------------------------------------------------
Total 100%
- -------------------------------------------------------------------------------------------------------------------
Country of Risk:
United States .................................................................................. 22%
Japan .......................................................................................... 22
United Kingdom ................................................................................. 10
Italy .......................................................................................... 6
France ......................................................................................... 5
Other .......................................................................................... 35
- -------------------------------------------------------------------------------------------------------------------
Total 100%
- -------------------------------------------------------------------------------------------------------------------
<FN>
* Includes foreign exchange, interest rate and commodity contracts
</TABLE>
Chase's credit losses arising from derivative contracts have not been material
during the first nine months of 1995 and throughout 1994.
Leveraged derivatives are contracts that contain features that may increase
the contract's volatility by a factor significantly disproportionate to its
stated notional amount. Chase does not engage in these types of derivatives to
any material extent and, at September 30, 1995, the amount of such contracts was
minimal.
FAIR VALUE DISCLOSURES
Chase monitors the estimated fair value of its on- and off- balance-sheet
financial instruments as discussed on pages 58 to 60 of the 1994 Annual Report.
Based upon market and other conditions existing at September 30, 1995, the
estimated net fair value of Chase's on- and off-balance-sheet financial
instruments was not materially adversely impacted during the third quarter of
1995.
CAPITAL MANAGEMENT
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 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 September 30, 1995, 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 September 30, 1995 was $8,978 million or
7.48% of total assets, compared with $8,359 million, or 7.33%, and $8,440
million, or 7.21%, at December 31, 1994 and September 30, 1994, respectively.
In the third quarter of 1995, Chase repurchased approximately 3.0 million
shares of its common stock. These repurchases were primarily made pursuant to a
repurchase program intended to offset the shares of common stock issued in the
acquisition of U.S. Trust securities
21
<PAGE> 22
processing businesses as discussed in Note 3, Acquisition of Securities
Processing Businesses of U.S. Trust, in Notes to Consolidated Financial
Statements on page 8. On September 2, 1995, Chase completed the acquisition of
the U.S. Trust securities processing businesses which included the issuance of
approximately 6.6 million shares of its common stock. A discussion regarding
Chase's recent capital position is set forth below and on pages 42 and 43 of
the 1994 Annual Report.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
TIER 1 AND TIER 2 CAPITAL
- ---------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital ................................................... $ 8,050 $ 7,759 $ 7,738
Tier 2 Capital ................................................... 4,664 4,194 4,278
- ---------------------------------------------------------------------------------------------------------------
Total Capital $12,714 $11,953 $12,016
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Chase's Tier 1 risk-based capital ratio was 8.24% at September 30, 1995,
compared with 8.30% at December 31, 1994 and 8.51% at September 30, 1994. The
decrease in the Tier 1 capital ratio since December 31, 1994 was due to higher
net risk-weighted assets of $97.7 billion at September 30, 1995, compared with
$93.5 billion at December 31, 1994, the repurchase of common stock as previously
mentioned and the goodwill associated with the acquisition of U.S. Trust
securities processing businesses, partially offset by a net increase in shares
of common stock issued in the acquisition of U.S. Trust securities processing
businesses and higher retained earnings. During the first nine months of 1995,
Tier 2 capital increased due to the issuance of $678 million of subordinated
notes, partially offset by the discount applicable to subordinated debt with
remaining maturities of five years or less. The net proceeds from these
issuances were 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.
On September 20, 1995, Chase announced the repurchase of up to 9 million share
of its common stock. The repurchase of these shares will help to neutralize the
impact from the expected exercise of Chase Vision Shares and other stock
options.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS*
- -------------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30, Regulatory
1995 1994 1994 Guidelines
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Leverage Ratio (a)................................. 7.47% 7.37% 7.31% 3.00-5.00%
Risk-Based Capital Ratios: (b)
Tier 1................................................ 8.24 8.30 8.51 4.00
Total Capital......................................... 13.01 12.78 13.22 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 1 and Tier 2
Capital.
(a) Tier 1 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 1 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>
CREDIT RISK MANAGEMENT
As further discussed on pages 43 and 44 of the 1994 Annual Report, Chase has
established and implemented policies and procedures to actively manage credit
risk, both on- and off-balance sheet. In comparison with September 30, 1994, the
loan portfolio balances at September 30, 1995 reflected a 8% growth in domestic
consumer loans, which consists of loans secured by 1-4 family residential
properties, home equity loans, credit card receivables, auto loans and other
forms of installment loans. During the same period, domestic commercial real
estate loans within the wholesale portfolio declined 18% to $1.8 billion, while
total loans in overseas offices increased 9% to $18.0 billion.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LOAN COMPOSITION
- ------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Wholesale ................................... $13,031 $13,350 $13,714
Consumer .................................... 34,024 33,432 31,378
Less: Unearned Discount and Fee Revenue 260 177 167
- ------------------------------------------------------------------------------------------------------------
Total Domestic Offices 46,795 46,605 44,925
- ------------------------------------------------------------------------------------------------------------
Overseas Offices:
Wholesale ................................... 15,192 13,985 13,903
Consumer .................................... 2,890 2,500 2,627
Less: Unearned Discount and Fee Revenue 56 52 50
- ------------------------------------------------------------------------------------------------------------
Total Overseas Offices 18,026 16,433 16,480
- ------------------------------------------------------------------------------------------------------------
Total Loans $64,821 $63,038 $61,405
- ------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 23
Key data on the worldwide consumer loan portfolio are summarized below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CONSUMER LOANS
- ------------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Secured by 1-4 Family Residential Properties........... $15,442 $15,092 $14,839
Credit Card............................................ 7,281 7,733 6,666
Auto Loans............................................. 6,136 6,227 5,802
Lease Financings....................................... 1,817 969 800
Other Consumer......................................... 3,348 3,411 3,271
- ------------------------------------------------------------------------------------------------------------------
Total Domestic Offices................................... 34,024 33,432 31,378
Overseas Offices......................................... 2,890 2,500 2,627
- ------------------------------------------------------------------------------------------------------------------
Total Consumer Loans $36,914 $35,932 $34,005
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The increase in domestic consumer loans from September 30, 1994 to September 30,
1995 was due to increased demand for loans secured by 1-4 family residential
properties, credit card loans, auto loans and lease financings throughout the
period, offset by sales and securitizations. During the first nine months of
1995, Chase securitized or sold $3.0 billion of residential mortgage loans, and
sold an additional $4.3 billion of such loans, primarily through traditional
secondary market outlets. Additionally, Chase securitized credit card
receivables of $1.0 billion on March 15, 1995 and $1.5 billion on June 15, 1995,
auto loans of $1.5 billion on September 13, 1995 and home equity loans of $.4
billion on September 28, 1995. There were no securitizations of credit card
receivables, auto loans and home equity loans in 1994. At September 30, 1995,
the aggregate amount of securitized credit card receivables outstanding was $4.6
billion, compared with $2.7 billion and $3.0 billion at December 31, 1994 and
September 30, 1994, respectively.
Credit card securitization transactions are structured with a revolving period
and a subsequent amortization period. During the first nine months of 1995, $564
million of previously securitized credit card receivables were amortized and
$188 million are scheduled to amortize during the remainder of 1995.
Credit card securitization transactions do not materially impact earnings
since Chase continues to service the credit card accounts after the receivables
are securitized. This income is recorded in Fees and Commissions and Other
Revenue, as opposed to Net Interest Revenue offset by the Provision for Possible
Credit Losses.
For analytical purposes only, the following table summarizes the net impact of
securitization of credit card receivables as an increase (decrease) in Chase's
consolidated statement of income line items.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------------------------------------
($ in millions) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Interest Revenue ........................... $(92) $ (65) $(226) $(207)
Decrease in Provision for Possible Credit Losses 43 38 108 128
Fees and Commissions ........................... 45 27 112 79
Other Revenue .................................. -- -- 17 --
- -----------------------------------------------------------------------------------------------------------------
Income Before Taxes $ (4) $ -- $ 11 $ --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Average domestic credit card receivables, net loan charge-offs and average loss
ratio amounts are presented below both had the securitization transactions not
taken place and per actual financial statement presentation.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
------------------------------------------------------
1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Receivables ($ in billions)
Prior to Securitization ................................ $11.4 $9.6 $10.8 $9.8
Net of Securitization .................................. 6.7 6.5 7.1 6.4
Net Loan Charge-offs ($ in millions)
Prior to Securitization ................................ $106 $101 $306 $316
Net of Securitization .................................. 63 63 198 188
Average Loss Ratio
Prior to Securitization ................................ 3.70% 4.19% 3.80% 4.31%
Net of Securitization .................................. 3.71 3.85 3.72 3.91
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
Key data on the worldwide wholesale loan portfolio are summarized below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
WHOLESALE LOANS
- ------------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Offices:
Commercial Real Estate.................................. $ 1,801 $ 2,055 $ 2,194
Commercial and Industrial............................... 8,095 8,291 8,670
Other Wholesale......................................... 3,135 3,004 2,850
- ------------------------------------------------------------------------------------------------------------------
Total Domestic Offices.................................... 13,031 13,350 13,714
- ------------------------------------------------------------------------------------------------------------------
Overseas Offices:
Commercial and Industrial............................... 9,691 9,020 9,250
Other Wholesale......................................... 5,501 4,965 4,653
- ------------------------------------------------------------------------------------------------------------------
Total Overseas Offices.................................... 15,192 13,985 13,903
- ------------------------------------------------------------------------------------------------------------------
Total Wholesale Loans $28,223 $27,335 $27,617
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Wholesale loans in overseas offices increased from $13.9 billion at September
30, 1994 to $15.2 billion at September 30, 1995 from higher levels of global
loan underwriting and syndication activity, partially offset by repayments.
RESERVE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATION OF RESERVE FOR POSSIBLE CREDIT LOSSES
- -----------------------------------------------------------------------------------------------------------------
Third Quarter
------------------------------------
($ in millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at Beginning of Period ............................................. $ 1,416* $ 1,435
Additions:
Provision for Possible Credit Losses Charged to Expense .................. 70 100
Deductions:
Charge-Offs .............................................................. 110 155
Recoveries ............................................................... (32) (36)
- -----------------------------------------------------------------------------------------------------------------
Net Loan Charge-Offs ..................................................... 78 119
Reserves of Disposed Subsidiaries and Other Adjustments .................... (4) --
- -----------------------------------------------------------------------------------------------------------------
Balance at End of Period $ 1,404* $ 1,416
- -----------------------------------------------------------------------------------------------------------------
<FN>
* Includes $15 million and $17 million of related SFAS 114 valuation
allowance at September 30, 1995 and June 30, 1995, respectively.
</TABLE>
Chase adopted SFAS 114 and SFAS 118 effective January 1, 1995. This did not have
any impact on Chase's results of operations nor on its financial position,
including the level of the reserve for possible credit losses. Instead, it
resulted only in a reallocation of the existing reserve for possible credit
losses.
At September 30, 1995, the recorded investment in loans that are considered
impaired under SFAS 114 was $466 million. No SFAS 114 reserve is required for
$417 million of recorded investment in impaired loans, since previously taken
charge-offs and interest applied to principal have reduced the recorded
investment values to amounts that are less than the SFAS 114 calculated values.
The remaining $49 million of impaired loans required a SFAS 114 reserve for
possible credit losses of $15 million. The average recorded investment in
impaired loans during the three months and nine months ended September 30, 1995
was approximately $498 million and $513 million, respectively. For the three
months and nine months ended September 30, 1995, Chase recognized interest
revenue on these impaired loans of $1 million and $8 million, respectively.
24
<PAGE> 25
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NET LOAN CHARGE-OFFS AND ANNUALIZED CREDIT LOSS EXPERIENCE RATIOS
- ----------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
---------------------------------------------------------
($ in millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Loan Charge-offs:
Domestic:
Consumer ......................................... $ 87 $ 90 $ 269 $ 274
Commercial Real Estate ........................... (4) 21 (18) 123
Commercial and Other ............................. (2) 6 (17) 22
- ----------------------------------------------------------------------------------------------------------------
Total Domestic 81 117 234 419
- ----------------------------------------------------------------------------------------------------------------
Total International (3) 2 (17) 3
- ----------------------------------------------------------------------------------------------------------------
Total $ 78 $ 119 $ 217 $ 422
- ----------------------------------------------------------------------------------------------------------------
Net Loan Charge-offs as a Percentage of Average Loans:
Domestic:
Consumer ......................................... 1.03% 1.19% 1.07% 1.24%
Commercial Real Estate ........................... (.89) 3.76 (1.30) 6.01
Commercial and Other ............................. (.07) .21 (.20) .25
- ----------------------------------------------------------------------------------------------------------------
Total Domestic Credit Loss Ratio .69 1.08 .67 1.30
- ----------------------------------------------------------------------------------------------------------------
Total International Credit Loss Ratio (.07) .06 (.13) .02
- ----------------------------------------------------------------------------------------------------------------
Total Credit Loss Ratio .48% .79% .46% .93%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Net loan charge-offs for the third quarter of 1995 were $78 million, down $41
million from the third quarter of 1994. Domestic commercial real estate net loan
charge-offs declined $25 million from the third quarter of 1994. Net loan
charge-offs for the first nine months of 1995 were $217 million, down $205
million from the first nine months of 1994 due to improved credit quality and
recoveries in the commercial real estate and commercial and other portfolios in
1995. For further details on the reserve for possible credit losses and net loan
charge-offs, see Analysis of Credit Loss Experience on page 35.
NONACCRUAL, RESTRUCTURED AND PAST DUE OUTSTANDINGS AND DOMESTIC ORE ACQUIRED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NONACCRUAL AND RESTRUCTURED OUTSTANDINGS AND DOMESTIC ORE
- ------------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Outstandings:
Commercial Real Estate.................................. $169 $266 $271
Commercial and Industrial............................... 158 109 147
Other................................................... 145 135 134
- ------------------------------------------------------------------------------------------------------------------
Domestic Outstandings 472 510 552
- ------------------------------------------------------------------------------------------------------------------
Overseas Outstandings:
Refinancing Countries................................... 48 54 55
Commercial Real Estate.................................. 5 8 9
Commercial and Industrial............................... 50 47 42
Other................................................... 29 41 43
- ------------------------------------------------------------------------------------------------------------------
Overseas Outstandings 132 150 149
- ------------------------------------------------------------------------------------------------------------------
Total Nonaccrual and Restructured Outstandings $604* $660 $701
- ------------------------------------------------------------------------------------------------------------------
Domestic ORE $158 $251 $502
- ------------------------------------------------------------------------------------------------------------------
As a % of Total Gross Assets:
Nonaccrual and Restructured Outstandings .50% .57% .59%
Nonaccrual and Restructured Outstandings and
Domestic ORE .63 .79 1.02
- ------------------------------------------------------------------------------------------------------------------
<FN>
* Considered impaired loans as defined by SFAS 114, with the exception of $138
million, principally consumer loans.
</TABLE>
The substantial decrease in nonaccrual and restructured outstandings and
domestic ORE at September 30, 1995, as compared with September 30, 1994 was due
to repayments of commercial real estate loans and sales, respectively.
Nonaccrual loans that have been restructured but remain in nonaccrual status
amounted to $50 million, $44 million and $49 million at September 30, 1995,
December 31, 1994 and September 30, 1994, respectively, and continue to be
included in the preceding table.
25
<PAGE> 26
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NEGATIVE IMPACT OF NONACCRUAL AND RESTRUCTURED OUTSTANDINGS
- ----------------------------------------------------------------------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
($ in millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Revenue That Would Have Been
Recorded Under Original Terms .......................... $11 $15 $40 $39
Interest Revenue Actually Realized ....................... 1 2 8 6
- ----------------------------------------------------------------------------------------------------------------
Negative Impact on Interest Revenue $10 $13 $32 $33
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
- ------------------------------------------------------------------------------------------------------------------
September 30, December 31, September 30,
($ in millions) 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic Loans:
Consumer*............................................... $177 $192 $175
Commercial Real Estate.................................. 30 8 5
Commercial and Other.................................... 21 19 24
- ------------------------------------------------------------------------------------------------------------------
Total Domestic Loans...................................... 228 219 204
- ------------------------------------------------------------------------------------------------------------------
Overseas Loans............................................ 7 181 13
- ------------------------------------------------------------------------------------------------------------------
Total Accruing Loans Past Due 90 Days or More $235 $400 $217
- ------------------------------------------------------------------------------------------------------------------
<FN>
* Includes loans secured by 1-4 family residential properties.
</TABLE>
Accruing loans that are contractually past due 90 days or more are generally
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 loans secured by 1-4 family residential properties, are generally
charged off according to internally established delinquency schedules, which do
not permit delinquencies to exceed 180 days. Such loans secured by 1-4 family
residential properties 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.
FINANCIAL RATIOS
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
1995 1994 September 30,
---------------------------------------------------------
3rd Qtr. 2nd Qtr. 3rd Qtr. 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings Ratios
Net Income as a Percentage of Average:
Total Assets ....................................... .89% .88% .98% .88% 1.09%
Common Stockholders' Equity* ....................... 13.85 14.22 15.83 13.84 17.34
Total Stockholders' Equity ......................... 13.00 13.33 14.57 13.01 15.83
- ----------------------------------------------------------------------------------------------------------------
Leverage Ratios--Averages
Common Stockholders' Equity as a % of Total Assets ... 5.77% 5.52% 5.59% 5.62% 5.67%
Total Stockholders' Equity as a % of Total Assets .... 6.88 6.61 6.76 6.74 6.89
- ----------------------------------------------------------------------------------------------------------------
Common Stockholders' Equity Per Common Share ......... $42.35 $41.09 $38.83
- ----------------------------------------------------------------------------------------------------------------
Capital Ratios at Quarter End**
Common Stockholders' Equity as a % of Total Assets ... 6.31% 6.04% 6.01%
Total Stockholders' Equity as a % of Total Assets .... 7.48 7.22 7.21
Tier I Leverage ...................................... 7.47 7.19 7.31
Tier I Capital as a % of Net Risk-Weighted Assets .... 8.24 8.22 8.51
Total Capital as a % of Net Risk-Weighted Assets ..... 13.01 12.99 13.22
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Based on Net Income, adjusted as applicable
** Based on Federal Reserve Board definitions. Risk-based capital and
leverage ratios exclude the equity, assets and off-balance sheet
positions of Chase Securities Inc., the Corporation's U.S. underwriting
and dealing subsidiary.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Chase Manhattan Bank, N.A. and Subsidiaries
Capital Ratios at Quarter End*
Tier I Leverage .................................... 7.47% 7.01% 6.90%
Tier I Capital as a % of Net Risk-Weighted Assets .. 8.42 8.24 8.25
Total Capital as a % of Net Risk-Weighted Assets ... 11.81 11.62 12.06
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Based on Office of the Comptroller of the Currency definition.
</TABLE>
26
<PAGE> 27
Stockholder Data
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Nine Months Ended
1995 1994 September 30,
---------------------------------------------------------
($ in millions, except per share data) 3rd Qtr. 2nd Qtr 3rd Qtr. 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarterly Cash Dividends:
Common Stock:
Per Share .......................................... $ .45 $ .45 $ .40 $ 1.30 $ 1.06
Aggregate .......................................... $78.3 $79.8 $73.8 $229.0 $195.7
Preferred Stock:
Floating Rate Series F ............................. -- -- -- -- 8.6
10 1/2% Series G ................................... 3.7 3.7 3.7 11.1 11.1
9.76% Series H ..................................... 2.5 2.5 2.5 7.5 7.5
10.84% Series I .................................... 5.4 5.4 5.4 16.2 16.2
9.08% Series J ..................................... 3.4 3.4 3.4 10.2 10.2
8-1/2% Series K .................................... 3.6 3.6 3.6 10.8 10.8
8.32% Series L ..................................... 5.0 5.0 5.0 15.0 15.0
8.40% Series M ..................................... 3.6 3.6 3.6 10.8 10.8
Floating Rate Series N ............................. 3.2 3.6 3.5 10.6 5.5
- ----------------------------------------------------------------------------------------------------------------
Total Preferred Stock 30.4 30.8 30.7 92.2 95.7
- ----------------------------------------------------------------------------------------------------------------
Total Cash Dividends $108.7 $110.6 $104.5 $321.2 $291.4
- ----------------------------------------------------------------------------------------------------------------
Cash Dividends Paid on Common Stock as
Percentage of Net Income Applicable
to Common Stock 31.0% 31.9% 26.9% 31.2% 22.2%
Total Cash Dividends Paid as a Percentage of
Net Income 38.4 39.3 34.2 38.9 29.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
Consolidated Statement of Condition
The Chase Manhattan Bank, N.A. and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
September December September
30, 31, 30,
($ in millions) 1995 1994 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and Due from Banks ......................................................... $ 5,014 $ 4,518 $ 5,330
Interest-Bearing Deposits Placed with Banks ..................................... 5,957 7,002 7,247
Federal Funds Sold and Securities Purchased Under Resale Agreements ............. 2,276 3,824 3,392
Trading Account Assets .......................................................... 12,526 13,088 15,617
Investment Securities:
Held to Maturity (Market Value of $1,874, $1,739 and $1,480, Respectively) .... 1,863 1,760 1,482
Available for Sale Carried at Fair Value ...................................... 5,117 4,502 5,123
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Securities ................................................. 6,980 6,262 6,605
Loans ........................................................................... 55,096 50,607 49,486
Reserve for Possible Credit Losses .............................................. (1,131) (1,092) (1,089)
Customers' Liability on Acceptances ............................................. 862 520 599
Accrued Interest Receivable ..................................................... 901 966 707
Premises and Equipment .......................................................... 1,755 1,759 1,729
Other Assets .................................................................... 7,268 6,525 4,890
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $ 97,504 $ 93,979 $ 94,513
- ---------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity
Deposits:
Domestic Offices:
Noninterest-Bearing ......................................................... $ 12,131 $ 11,648 $ 10,788
Interest-Bearing ............................................................ 18,841 17,888 18,096
Overseas Offices:
Noninterest-Bearing ......................................................... 3,258 2,320 2,533
Interest-Bearing ............................................................ 32,702 33,645 32,140
- ---------------------------------------------------------------------------------------------------------------------
Total Deposits ............................................................ 66,932 65,501 63,557
Federal Funds Purchased and Securities Sold Under Repurchase Agreements.......... 2,331 2,580 3,003
Other Short-Term Borrowings ..................................................... 2,265 2,308 2,904
Trading Account Liabilities ..................................................... 9,105 8,066 10,707
Acceptances Outstanding ......................................................... 871 525 603
Accrued Interest Payable ........................................................ 627 574 490
Accounts Payable, Accrued Expenses and Other Liabilities ........................ 5,138 4,620 3,627
Intermediate- and Long-Term Debt ................................................ 2,370 2,803 2,627
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 89,639 86,977 87,518
- ---------------------------------------------------------------------------------------------------------------------
Stockholder's Equity:
Capital Stock ( $15 Par Value):
9/30/95 12/31/94 9/30/94
------- -------- -------
Number of Shares:
Authorized 81,744,445 81,744,445 81,744,445
Outstanding 61,425,980 61,038,415 60,955,569................ 921 916 914
Surplus ....................................................................... 5,244 4,656 4,625
Net Unrealized Losses on Investment Securities - Available for Sale ........... (43) (65) (8)
Undivided Profits ............................................................. 1,743 1,495 1,464
- ---------------------------------------------------------------------------------------------------------------------
Total Stockholder's Equity 7,865 7,002 6,995
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $ 97,504 $ 93,979 $ 94,513
- ---------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes on page 8 are an integral part of the financial
statements.
Member Federal Deposit Insurance Corporation
</TABLE>
28
<PAGE> 29
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Third Quarter
-------------------------------------------------------
1995 1994
-------------------------------------------------------
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 ............ $ 6,803 $ 133 7.74% $ 7,783 $ 108 5.51%
Federal Funds Sold and Securities Purchased
Under Resale Agreements............................... 15,523 268 6.84 14,778 233 6.25
Trading Account Assets-Interest-Earning* ............... 8,432 119 5.61 8,035 89 4.38
Investment Securities:
Held to Maturity
Taxable ............................................ 1,651 28 6.80 1,480 23 6.15
Tax-Exempt ......................................... 269 7 10.07 359 10 10.91
- ----------------------------------------------------------------------------------------------------------------
Total Held to Maturity ............................... 1,920 35 7.26 1,839 33 7.08
Available for Sale
Taxable ............................................ 5,235 81 6.16 5,365 90 6.64
Tax-Exempt ......................................... 43 1 6.12 44 - -
- ----------------------------------------------------------------------------------------------------------------
Total Available For Sale ............................. 5,278 82 6.16 5,409 90 6.64**
- ----------------------------------------------------------------------------------------------------------------
Total Investment Securities ............................ 7,198 117 6.45 7,248 123 6.75
Loans:
Domestic Offices ..................................... 46,731 1,073 9.11 43,492 945 8.62
Overseas Offices ..................................... 17,490 369 8.38 16,519 307 7.37
- ----------------------------------------------------------------------------------------------------------------
Total Loans ............................................ 64,221 1,442 8.91 60,011 1,252 8.28
Reserve for Possible Credit Losses*** .................. (1,397) -- -- (1,426) -- --
Accelerated Disposition Portfolio-Interest-Earning ..... -- -- -- 25 2 27.58
- ----------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets***, Net 100,780 2,079 8.07 96,454 1,807 7.32
- ----------------------------------------------------------------------------------------------------------------
Summary--Gross Interest-Earning Assets:
Domestic Offices ....................................... 71,690 1,425 7.89 67,223 1,225 7.23
Overseas Offices ....................................... 30,487 654 8.50 30,657 582 7.53
- ----------------------------------------------------------------------------------------------------------------
Total Gross Interest-Earning Assets $102,177 $2,079 8.07% 97,880 $1,807 7.32%
- ----------------------------------------------------------------------------------------------------------------
Noninterest-Earning Assets:
Cash and Due from Banks ................................ 6,302 6,229
Trading Account Assets-Noninterest-Earning**** ......... 8,676 12,263
Customers' Liability on Acceptances .................... 857 652
Premises and Equipment ................................. 1,896 1,822
Accrued Interest Receivable ............................ 1,075 835
Other Assets ........................................... 5,966 4,791
- ----------------------------------------------------------------------------------------------------------------
Total Noninterest-Earning Assets 24,772 26,592
- ----------------------------------------------------------------------------------------------------------------
Total Assets 125,552 $123,046
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Includes only trading securities.
** Average rate based on average amortized cost.
*** Reserve for Possible Credit Losses excluded from calculations of average
balances and average rates, as appropriate.
**** Includes foreign exchange, interest rate, and commodity derivative contracts.
Note: Loan and other asset amounts include nonaccrual and restructured loans
and ORE, as applicable.
</TABLE>
29
<PAGE> 30
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Third Quarter
----------------------------------------------------
1995 1994
----------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Domestic Offices:
Savings and Negotiable Order of Withdrawal Deposits . 4,736 28 2.34% $ 5,491 $ 26 1.87%
Money Market Deposits ............................... 9,392 84 3.56 10,394 63 2.39
Negotiable Certificates of Deposit .................. 784 17 8.41 1,203 24 7.83
Other Time Deposits ................................. 5,213 80 6.12 6,279 74 4.65
- ----------------------------------------------------------------------------------------------------------------
Total Domestic Offices 20,125 209 4.12 23,367 187 3.18
Overseas Offices 34,724 442 5.04 32,575 351 4.28
- ----------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits ......................... 54,849 651 4.71 55,942 538 3.82
Federal Funds Purchased and Securities Sold Under ....... 19,902 302 6.02 16,174 203 4.98
Repurchase Agreements
Other Short-Term Borrowings:
Domestic Offices ...................................... 3,188 90 11.16 3,083 58 7.37
Overseas Offices ...................................... 1,072 39 14.51 1,058 10 3.93
- ----------------------------------------------------------------------------------------------------------------
Total Other Short-Term Borrowings ....................... 4,260 129 12.01 4,141 68 6.49
Intermediate- and Long-Term Debt ........................ 5,571 105 7.50 4,906 76 6.14
- ----------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 84,582 1,187 5.57 81,163 885 4.32
- ----------------------------------------------------------------------------------------------------------------
Summary--Interest-Bearing Liabilities:
Domestic Offices ........................................ 53,787 770 5.68 52,933 577 4.32
Overseas Offices ........................................ 30,795 417 5.37 28,230 308 4.33
- ----------------------------------------------------------------------------------------------------------------
Noninterest-Bearing Liabilities:
Deposits in Domestic Offices ............................ 12,536 13,093
Deposits in Overseas Offices ............................ 3,039 2,335
Trading Account Liabilities* ............................ 11,323 13,823
Acceptances Outstanding ................................. 865 657
Accounts Payable, Accrued Expenses and Other Liabilities 4,565 3,663
- ----------------------------------------------------------------------------------------------------------------
Total Noninterest-Bearing Liabilities 32,328 33,571
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 116,910 114,734
- ----------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Nonredeemable Preferred Stock ........................... 1,400 1,432
Common Stockholders' Equity ............................. 7,242 6,880
- ----------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 8,642 8,312
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $125,552 $123,046
- ----------------------------------------------------------------------------------------------------------------
Taxable Equivalent Net Interest
Revenue and Average Interest Rate Spread $892 2.50% $922 3.00%
- ----------------------------------------------------------------------------------------------------------------
Net Interest Revenue as a Percentage of Gross
Interest-Earning Assets 3.46% 3.74%
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Includes short sales, and foreign exchange, interest rate, and commodity
derivative contracts.
</TABLE>
30
<PAGE> 31
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------------------------------
September 30, 1995 September 30, 1994
-----------------------------------------------------------------
Average Average Average Average
($ 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 ........... $ 7,558 $ 426 7.54% $ 6,980 $ 365 7.00%
Federal Funds Sold and Securities Purchased Under ..... 15,234 786 6.90 13,068 1,048 10.72
Resale Agreements
Trading Account Assets-Interest-Earning* .............. 8,147 332 5.44 7,797 300 5.13
Investment Securities:
Held to Maturity
Taxable ........................................... 1,687 81 6.42 1,188 92 10.34
Tax-Exempt ........................................ 297 24 10.59 375 32 11.38
- --------------------------------------------------------------------------------------------------------------------------
Total Held to Maturity 1,984 105 7.05 1,563 124 10.59
Available for Sale
Taxable ........................................... 5,193 259 6.69 6,150 432 9.40
Tax-Exempt ........................................ 64 3 6.42 19 1 5.29
- --------------------------------------------------------------------------------------------------------------------------
Total Available for Sale ............................ 5,257 262 6.68 6,169 433 9.39**
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Securities ........................... 7,241 367 6.78 7,732 557 9.63
Loans:
Domestic Offices .................................... 46,612 3,259 9.35 43,698 2,752 8.42
Overseas Offices .................................... 17,112 1,071 8.37 16,919 1,177 9.30
- --------------------------------------------------------------------------------------------------------------------------
Total Loans ........................................... 63,724 4,330 9.08 60,617 3,929 8.67
Reserve for Possible Credit Losses*** ................. (1,402) -- -- (1,437) -- --
Accelerated Disposition Portfolio-Interest-Earning .... -- -- -- 56 6 16.09
- --------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets***, Net 100,502 6,241 8.19 94,813 6,205 8.62
- --------------------------------------------------------------------------------------------------------------------------
Summary--Gross Interest-Earning Assets:
Domestic Offices ...................................... 71,166 4,336 8.15 65,602 3,450 7.03
Overseas Offices ...................................... 30,738 1,905 8.28 30,648 2,755 12.02
- --------------------------------------------------------------------------------------------------------------------------
Total Gross Interest-Earning Assets 101,904 $6,241 8.19% 96,250 $6,205 8.62%
- --------------------------------------------------------------------------------------------------------------------------
Noninterest-Earning Assets:
Cash and Due from Banks ............................... 5,968 6,083
Trading Account Assets-Noninterest-Earning**** ........ 9,842 10,348
Customers' Liability on Acceptances ................... 843 684
Premises and Equipment ................................ 1,915 1,803
Accrued Interest Receivable ........................... 1,096 854
Other Assets .......................................... 5,685 5,146
- --------------------------------------------------------------------------------------------------------------------------
Total Noninterest-Earning Assets 25,349 24,918
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $ 125,851 $119,731
- --------------------------------------------------------------------------------------------------------------------------
<FN>
* Includes only trading securities.
** Average rate based on average amortized cost.
*** Reserve for Possible Credit Losses excluded from calculations of
average balances and average rates, as appropriate.
**** Includes foreign exchange, interest rate, and commodity derivative
contracts.
Note: Loan and other asset amounts include nonaccrual and restructured
loans and ORE, as applicable.
Note: Average rates for overseas offices in the above table reflect
significantly lower Brazilian rates due to the significant decrease
in Brazilian inflation beginning in the third quarter of 1994.
</TABLE>
31
<PAGE> 32
Average Balances, Interest and Average Rates - Taxable Equivalent
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------------------------------------
September 30, 1995 September 30, 1994
-----------------------------------------------------------------------
Average Average Average Average
($ in millions, based on daily averages) Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Domestic Offices:
Savings and Negotiable Order of Withdrawal Deposits ... $ 4,979 $ 86 2.33% $ 5,566 $ 78 1.87%
Money Market Deposits ................................. 9,394 259 3.68 10,938 143 1.75
Negotiable Certificates of Deposit .................... 876 54 8.20 1,359 76 7.44
Other Time Deposits ................................... 5,556 191 4.59 6,744 213 4.22
- -----------------------------------------------------------------------------------------------------------------------------------
Total Domestic Offices 20,805 590 3.79 24,607 510 2.77
Overseas Offices 35,574 1,374 5.16 31,461 1,207 5.13
- -----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits ........................... 56,379 1,964 4.66 56,068 1,717 4.09
- -----------------------------------------------------------------------------------------------------------------------------------
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements......................... 19,288 902 6.25 14,431 503 4.66
Other Short-Term Borrowings:
Domestic Offices......................................... 3,495 299 11.42 2,976 148 6.66
Overseas Offices......................................... 877 106 16.18 1,178 805 91.40
- -----------------------------------------------------------------------------------------------------------------------------------
Total Other Short-Term Borrowings ......................... 4,372 405 12.37 4,154 953 30.69
Intermediate- and Long-Term Debt .......................... 5,417 299 7.39 5,274 229 5.81
- -----------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities ........................ 85,456 3,570 5.58 79,927 3,402 5.69
- -----------------------------------------------------------------------------------------------------------------------------------
Summary--Interest-Bearing Liabilities:
Domestic Offices .......................................... 56,405 2,401 5.69 51,310 1,433 3.74
Overseas Offices .......................................... 29,051 1,169 5.38 28,617 1,969 9.20
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest-Bearing Liabilities:
Deposits in Domestic Offices .............................. 12,396 13,479
Deposits in Overseas Offices .............................. 2,682 2,461
Trading Account Liabilities* .............................. 11,730 11,575
Acceptances Outstanding ................................... 848 692
Accounts Payable, Accrued Expenses and Other Liabilities .. 4,260 3,350
- -----------------------------------------------------------------------------------------------------------------------------------
Total Noninterest-Bearing Liabilities 31,916 31,557
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 117,372 111,484
- -----------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Nonredeemable Preferred Stock ............................. 1,400 1,455
Common Stockholders' Equity ............................... 7,079 6,792
- -----------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 8,479 8,247
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $125,851 $119,731
- -----------------------------------------------------------------------------------------------------------------------------------
Taxable Equivalent Net Interest Revenue and
Average Interest Rate Spread $2,671 2.61% $2,803 2.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue as a Percentage of
Gross Interest-Earning Assets 3.50% 3.89%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Includes short sales, and foreign exchange, interest rate, and commodity derivative contracts.
Note: Average rates for overseas offices in the above table reflect significantly lower Brazilian rates due to
the significant decrease in Brazilian inflation beginning in the third quarter of 1994.
</TABLE>
32
<PAGE> 33
INVESTMENT SECURITIES
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SECURITIES--HELD TO MATURITY
- -----------------------------------------------------------------------------------------------------------------------------------
September 30, 1995 December 31, 1994 September 30, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair Amortized Fair
($ in millions) Cost Gains Losses Value* Cost Value* Cost Value*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities.......... $ 113 $-- $-- $ 113 $ 115 $ 115 $ 120 $ 120
Federal Agency Securities**....... 381 -- 1 380 452 431 481 467
State and Political
Subdivision
Securities...................... 267 5 1 271 335 334 352 359
Other Bonds, Notes and
Debentures:
Securities Issued by OECD
Central Governments
and their Agencies***..... 794 9 1 802 724 716 544 537
Securities Issued by Other
Foreign Central
Governments and
their Agencies........... 7 -- -- 7 10 10 74 74
Privately-Issued Mortgage-
Backed Securities........... 32 1 -- 33 33 33 29 30
Corporate and Other Debt
Securities.................. 115 -- -- 115 229 229 233 233
- -----------------------------------------------------------------------------------------------------------------------------------
Total Other Bonds, Notes
and Debentures.................. 948 10 1 957 996 988 880 874
- -----------------------------------------------------------------------------------------------------------------------------------
Federal Reserve Bank and
Other Stock Investments......... 191 -- -- 191 186 186 185 185
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,900 $15 $ 3 $1,912 $2,084 $2,054 $2,018 $2,005
- -----------------------------------------------------------------------------------------------------------------------------------
<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 at historical cost in
terms of taxable interest income, nontaxable interest income, and
dividends for the third quarter and the first nine months of 1995 were:
$25 million, $4 million and $3 million; and $72 million, $15 million
and $9 million, respectively; and for the third quarter and first nine
months of 1994, such amounts were: $20 million, $6 million and $3
million; and $84 million, $20 million and $8 million, respectively.
</TABLE>
33
<PAGE> 34
INVESTMENT SECURITIES
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SECURITIES--AVAILABLE FOR SALE
- -----------------------------------------------------------------------------------------------------------------------------------
September 30, 1995 December 31, 1994 September 30, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair Amortized Fair
($ in millions) Cost Gains Losses Value* Cost Value* Cost Value*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities......... $2,436 $ 3 $ 25 $2,414 $2,445 $2,418 $2,881 $2,866
Federal Agency Securities**...... 515 -- 10 505 646 621 656 634
State and Political
Subdivision Securities........... 64 1 -- 65 89 88 63 63
Other Bonds, Notes and
Debentures:
Securities Issued by OECD
Central Governments
and their Agencies*** ... 1,024 4 20 1,008 537 522 687 671
Securities Issued by Other
Foreign Central
Governments and
their Agencies.......... 1,020 -- 97 923 811 714 916 868
Privately-Issued Mortgage-
Backed Securities.......... 71 -- -- 71 77 76 78 78
Corporate and Other Debt
Securities................. 200 10 5 205 173 188 119 134
- -----------------------------------------------------------------------------------------------------------------------------------
Total Other Bonds, Notes
and Debentures 2,315 14 122 2,207 1,598 1,500 1,800 1,751
- -----------------------------------------------------------------------------------------------------------------------------------
Federal Reserve Bank and
Other Stock Investments........ 483 133 -- 616 422 508 383 499
- -----------------------------------------------------------------------------------------------------------------------------------
Total $5,813 $151 $157 $5,807 $5,200 $5,135 $5,783 $5,813
- -----------------------------------------------------------------------------------------------------------------------------------
<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 available for sale in
terms of taxable interest income, nontaxable interest income and
dividends for the third quarter and first nine months of 1995 were:
$81 million, none and $1 million; and $256 million, $2 million and $4
million, respectively; and for the third quarter and first nine months
of 1994 were: $88 million, none and $2 million; and $428 million, none
and $5 million, respectively.
</TABLE>
34
<PAGE> 35
Average Loan Balances
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
1995 1994 September 30,
-------------------------------------------------------------------
($ in millions, based on daily averages) 3rd Quarter 2nd Quarter 3rd Quarter 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic Offices:
Wholesale:
Commercial Real Estate ............... $ 1,776 $ 1,917 $ 2,214 $ 1,836 $ 2,744
Commercial and Industrial............. 8,989 8,877 8,372 8,888 8,401
Financial Institutions................ 791 719 1,053 732 1,101
Lease Financings ..................... 790 825 753 820 790
Other Wholesale....................... 1,077 1,007 1,208 1,033 1,372
Consumer:
Secured by 1-4 Family Residential
Properties.......................... 14,977 15,436 14,006 15,099 13,945
Credit Card........................... 6,729 7,135 6,503 7,154 6,345
Lease Financings ..................... 1,588 1,249 765 1,296 710
Auto Loans............................ 7,051 6,716 5,519 6,682 4,971
Other Consumer........................ 3,173 3,176 3,260 3,266 3,491
- ---------------------------------------------------------------------------------------------------------------
Total Domestic Offices, Gross............. 46,941 47,057 43,653 46,806 43,870
Less: Unearned Discount and Fee Revenue... 210 191 161 194 172
- ---------------------------------------------------------------------------------------------------------------
Total Domestic Offices 46,731 46,866 43,492 46,612 43,698
- ---------------------------------------------------------------------------------------------------------------
Overseas Offices, Gross................... 17,547 17,511 16,568 17,167 16,966
Less: Unearned Discount and Fee Revenue... 57 55 49 55 47
- ---------------------------------------------------------------------------------------------------------------
Total Overseas Offices 17,490 17,456 16,519 17,112 16,919
- ---------------------------------------------------------------------------------------------------------------
Total Average Loans $64,221 $64,322 $60,011 $63,724 $60,617
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Analysis of Credit Loss Experience
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
1995 1994 September 30,
------------------------------------------------------------------
($ in millions) 3rd Quarter 2nd Quarter 3rd Quarter 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for Possible Credit Losses at
Beginning of Period ...................... $ 1,416 $ 1,419 $ 1,435 $ 1,414 $ 1,425
Net Loan Charge-Offs:
Domestic Loans:
Commercial Real Estate ................. (4) (12) 21 (18) 123
Commercial and Industrial .............. (2) 6 2 (10) 3
Financial Institutions ................. -- -- -- -- 11
Lease Financings ....................... -- (1) 4 (2) 8
Consumer ............................... 87 92 90 269 274
Other .................................. -- -- -- (5) --
- ---------------------------------------------------------------------------------------------------------------
Total Domestic Net Loan Charge-Offs 81 85 117 234 419
- ---------------------------------------------------------------------------------------------------------------
International Loans:
Commercial and Industrial .............. (4) (2) (3) (13) 8
Financial Institutions ................. (1) -- 6 (1) 5
Consumer ............................... 2 1 (1) 4 --
Foreign Governments and
Official Institutions................. -- -- -- -- (10)
Other .................................. -- (7) -- (7) --
- ---------------------------------------------------------------------------------------------------------------
Total International Net
Loan Charge-Offs (3) (8) 2 (17) 3
- ---------------------------------------------------------------------------------------------------------------
Total Net Loan Charge-Offs 78 77 119 217 422
- ---------------------------------------------------------------------------------------------------------------
Provision for Credit Losses Charged
to Expenses .............................. 70 75 100 210 410
Reserves of Disposed Subsidiaries and Other
Adjustments .............................. (5) -- (1) (5) (1)
Foreign Exchange Translation Adjustments ... 1 (1) 1 2 4
- ---------------------------------------------------------------------------------------------------------------
Reserve For Possible Credit Losses
at End of Period $ 1,404 $ 1,416 $ 1,416 $ 1,404 $ 1,416
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 36
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
September 30, 1995 and December 31, 1994 and certain applicable terms is
presented below.
<TABLE>
<CAPTION>
==================================================================================================================================
Modified Amount Outstanding
Maturity Interest September 30, December 31, Other
($ in millions) Date Rate* 1995 1994 Data**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Company:
Medium-Term Notes ..................................... 1995--1997 7.59--9.61% $264 $ 321
Floating Rate Medium-Term Notes ....................... 1995 6.29 -- 58
Notes ................................................. 1996 8.50 250 250 T
Notes ................................................. 1997 7.88 227 227 T
Floating Rate Subordinated Notes ...................... 1997 6.13 175 175 S,T
Subordinated Notes .................................... 1997 7.50 200 200 S,T
Non-U.S. Currency Borrowings .......................... 1998 5.30 51 52
Floating Rate Notes ................................... 1999 6.70 10 10 R
Subordinated Medium-Term Notes ........................ 1999 7.58--7.89 175 175 S,T
Subordinated Notes (Three Issues) ..................... 1999 6.79--10.00 675 675 S,T
Floating Rate Subordinated Notes ...................... 2000 6.00 250 250 S,R,T
Subordinated Notes .................................... 2000 8.80 150 -- S,R,T
Subordinated Notes (Two Issues) ....................... 2001 8.01--9.38 350 350 S,T
Subordinated Medium-Term Notes ........................ 2001--2010 5.96--7.05 139 9 S,R,T
Subordinated Notes (Two Issues) ....................... 2002 8.00--9.05 250 -- S,R,T
Subordinated Notes .................................... 2003 6.61 200 200 S,T
Floating Rate Subordinated Notes (Three Issues) ....... 2003 5.76--5.94 333 333 S,T
Subordinated Notes (Two Issues) ....................... 2004 5.90--8.00 297 297 S,R,T
Subordinated Notes .................................... 2005 8.00 150 -- S,R,T
Subordinated Notes .................................... 2005 6.50 198 198 S,T
Subordinated Notes (Two Issues) ....................... 2008 6.22--6.63 298 298 S,T
Subordinated Notes .................................... 2009 5.91 149 149 S,T
Floating Rate Subordinated Notes ...................... 2009 6.00 274 311 S,R,T
Other Borrowings ...................................... 1995--1996 *** 43 5
- ----------------------------------------------------------------------------------------------------------------------------------
Total 5,108 4,543
- ----------------------------------------------------------------------------------------------------------------------------------
Bank:
Floating Rate Subordinated Note ....................... 1996 8.50 -- 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 ...................................... 1995--2013 *** 410 443
- ----------------------------------------------------------------------------------------------------------------------------------
Total 2,370 2,803
- ----------------------------------------------------------------------------------------------------------------------------------
Other Subsidiaries:
Subordinated Notes (Three Issues) ..................... 1997--1998 5.63--7.25 270 235 S,C
Subordinated Note ..................................... 2012 9.00 250 250 S,C
Other Borrowings ...................................... 1995--2014 *** -- 84
- ----------------------------------------------------------------------------------------------------------------------------------
Total 520 569
- ----------------------------------------------------------------------------------------------------------------------------------
Less: Investment by the Company in a Subordinated
Note Issued with Equity Contract of the Bank and
other Subordinated Notes........................... 2,480 2,845 S,C
- ----------------------------------------------------------------------------------------------------------------------------------
Total Intermediate-and Long-Term Debt $5,518 $5,070
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* The interest rates shown have been adjusted to reflect the effect of ALM
derivative contracts, primarily interest rate swaps, used to convert a
majority of the Company's fixed rate debt to floating rates. The interest
rates shown for floating rate issues, including the aforementioned converted
issues, are those in effect at September 30, 1995 or in the case of those
issues redeemed in 1995 at the date of redemption. Such floating interest
rates are determined by formulas, subject to certain minimum rates.
** Issues indicated by:
"S"--Subordinated in right of payment to claims of depositors and certain
other creditors, as applicable.
"C"--Held by the Company.
"R"--Redeemable in whole, or in part, at the option of Chase, prior to
maturity.
"T"--Qualifies as Tier 2 capital under the Risk-based Capital guidelines.
*** Consists of numerous borrowings that bear interest at rates generally
reflecting market conditions in the applicable countries at the time of
issuance or repricing.
</TABLE>
36
<PAGE> 37
Consolidated Statement of Income (Five Quarters)
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data) 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Revenue
Interest and Fees On Loans ...................... $1,440 $1,474 $ 1,409 $ 1,341 $1,252
Interest On Deposits Placed With Banks .......... 133 151 143 133 108
Interest and Dividends on Investment Securities:
Held to Maturity .............................. 32 31 32 32 29
Available for Sale ............................ 82 85 94 92 90
Interest On Federal Funds Sold and Securities
Purchased Under Resale Agreements ............. 268 269 250 228 233
Interest On Trading Account Assets .............. 119 98 114 121 89
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Revenue 2,074 2,108 2,042 1,947 1,801
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Expense
Deposits ........................................ 651 664 650 609 538
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements .............. 302 306 294 256 203
Commercial Paper ................................ 24 28 26 23 16
Other Short-Term Borrowings ..................... 105 128 93 72 52
Intermediate- and Long-Term Debt ................ 105 100 94 83 76
- ----------------------------------------------------------------------------------------------------------------------------------
Total Interest Expense 1,187 1,226 1,157 1,043 885
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue .............................. 887 882 885 904 916
Provision for Possible Credit Losses .............. 70 75 65 90 100
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Revenue After Provision for
Possible Credit Losses 817 807 820 814 816
- ----------------------------------------------------------------------------------------------------------------------------------
Other Operating Revenue
Fees and Commissions ............................ 494 483 469 492 458
Foreign Exchange Trading Revenue ................ 45 60 92 67 50
Trading Account Revenue (Losses) ................ 92 75 (48) (35) 138
Investment Securities Gains ..................... 6 2 24 11 15
Other Revenue ................................... 80 130 135 137 66
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Operating Revenue 717 750 672 672 727
- ----------------------------------------------------------------------------------------------------------------------------------
Other Operating Expenses
Salaries and Employee Benefits:
Salaries ...................................... 458 453 451 475 464
Employee Benefits ............................. 127 146 145 281 122
- ----------------------------------------------------------------------------------------------------------------------------------
585 599 596 756 586
Net Occupancy ................................... 95 89 93 98 98
Equipment Rentals, Depreciation and Maintenance . 82 85 83 85 77
Other Expenses .................................. 317 331 306 336 306
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Operating Expenses 1,079 1,104 1,078 1,275 1,067
- ----------------------------------------------------------------------------------------------------------------------------------
Income Before Taxes ............................... 455 453 414 211 476
Applicable Income Taxes (Benefits) ................ 172 172 154 (18) 171
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 283 $ 281 $ 260 $ 229 $ 305
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $ 253 $ 250 $ 229 $ 198 $ 274
- ----------------------------------------------------------------------------------------------------------------------------------
Average Common and Common Equivalent Shares
Outstanding (in millions) 181.1 180.7 178.1 179.8 184.4
- ----------------------------------------------------------------------------------------------------------------------------------
Primary Earnings Per Common Share $ 1.40 $ 1.38 $ 1.29 $ 1.10 $ 1.49
Cash Dividends Declared Per Common Share $ .45 $ .45 $ .40 $ .40 $ .40
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 38
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2
Agreement and Plan of Merger
Exhibit 4
Amendment to Rights Agreement
Exhibit 10Q
Form of amendment to forms of termination agreements entered into
between the Company and certain of its officers
Exhibit 10R
Amendment to the Special Severance Plan of the Company
Exhibit 10S
Amendment to The Chase Manhattan 1994 Long-Term Incentive Plan
Exhibit 10T
Amendment to The Chase Manhattan 1987/82 Long-Term Incentive Plan
Exhibit 10U
Amendment to The Chase Manhattan Management Incentive Plan
Exhibit 10V
Amendment to The Chase Manhattan Corporation Annual Incentive
Compensation Program
Exhibit 10W
The Chase Manhattan Annual Incentive Arrangement for Certain
Executive Officers
Exhibit 10X
Three-Year Incentive Arrangement for Certain Executive Officers
of The Chase Manhattan Corporation
Exhibit 10Y
Amendment to Three Year Incentive Arrangement for Certain
Executive Officers
Exhibit 10Z
Amendment to the Supplemental Retirement Plan of the Bank, as
amended
Exhibit 10AA
Amendment to Supplemental Benefit Plan of the Bank, as amended
Exhibit 10BB
Amendment to TRA 86 Supplemental Benefit Plan of the Bank, as amended
Exhibit 10CC
Amendment to Non-Qualified Retirement Plans for Non-Officer
Directors of the Company
Exhibit 10DD
Amendment to the Terms and Provisions Governing the Deferral of
Chase Directors' Retainer and Fees, as amended
Exhibit 10EE
Stock Option Agreement, dated as of August 27, 1995, between Chemical
and the Company (incorporated by reference to Exhibit 10(a) to the
Company's Current Report on Form 8-K dated August 28, 1995, File No.
1-5945)
38
<PAGE> 39
Exhibit 10FF
Stock Option Agreement, dated as of August 27, 1995, between the
Company and Chemical (incorporated by reference to Exhibit 10(b) to
the Company's Current Report on Form 8-K dated August 28, 1995, File
No. 1-5945)
Exhibit 10GG
Employee Benefits Agreement, dated as of August 27, 1995, between the
Company and Chemical (incorporated by reference to Exhibit 10(c) to
the Company's Current Report on Form 8-K dated August 28, 1995, File
No. 1-5945)
Exhibit 11
Statement re: Computation of Earnings Per Common Share
Exhibit 12
Statement re: Computation of Ratios of Earnings to Fixed Charges
Exhibit 27
Statement re: Financial Data Schedule for the nine months ended
September 30, 1995.
Exhibit 99
Supplemental Pro Forma Financial Statements
(b) Report on Form 8-K
The registrant filed the following reports on Form 8-K during the
quarter ended September 30, 1995:
Date of
Report Items Reported
------ --------------
7/17/95 -- 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) Consolidated Statement of Condition of The Chase
Manhattan Corporation and Subsidiaries at June 30,
1995 and 1994.
(ii) Consolidated Statement of Income of The Chase
Manhattan Corporation and Subsidiaries for the
quarters and six months ended June 30, 1995 and
1994.
(iii) Summary of Changes in Stockholders' Equity of
The Chase Manhattan Corporation and Subsidiaries
for the six months ended June 30, 1995 and 1994.
(iv) Consolidated Statement of Condition of The Chase
Manhattan Bank, N.A. and Subsidiaries at June
30, 1995 and 1994.
8/28/95 -- 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 entry into
an Agreement and Plan of Merger with the Chemical
Banking Corporation.
39
<PAGE> 40
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: November 14, 1995 By: /s/ LESTER J. STEPHENS, JR.
Lester J. Stephens, Jr.
(Senior Vice President and Controller)
40
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT PAGE
- ----------- ------------------------------------------------------------------------------------------------- ------
<S> <C> <C>
2 Agreement and Plan of Merger, dated as of August 27, 1995 between the Company and Chemical
Banking Corporation ("Chemical") (incorporated herein by reference to Exhibit 2 to the
Company's Current Report on Form 8-K, dated August 28, 1995, File No. 1-5945)..................
4 Amendment to Rights Agreement (incorporated herein by reference to Exhibit 4(b) to the
Company's Current Report on Form 8-K, dated August 28, 1995, File No. 1-5945)...................
10Q Form of amendment to forms of termination agreements entered into between the Company and
certain of its officers......................................................................... 42
10R Amendment to the Special Severance Plan of the Company.......................................... 46
10S Amendment of The Chase Manhattan 1994 Long-Term Incentive Plan.................................. 51
10T Amendment to The Chase Manhattan 1987/82 Long-Term Incentive Plan............................... 54
10U Amendment to The Chase Manhattan Management Incentive Plan...................................... 56
10V Amendment to The Chase Manhattan Corporation Annual Incentive Compensation Program.............. 57
10W The Chase Manhattan Annual Incentive Arrangement for Certain Executive Officers................. 59
10X Three-Year Incentive Arrangement for Certain Executive Officers of The Chase Manhatan
Corporation..................................................................................... 62
10Y Amendment to Three Year Incentive Arrangement for Certain Executive Officers.................... 66
10Z Amendment to the Supplemental Retirement Plan of the Bank, as amended........................... 67
10AA Amendment to Supplemental Benefit Plan of the Bank, as amended.................................. 69
10BB Amendment to TRA 86 Supplemental Benefit Plan of the Bank, as amended........................... 72
10CC Amendment to Non-Qualified Retirement Plans for Non-Officer Directors of the Company............ 75
10DD Amendment to the Terms and Provisions Governing the Deferral of Chase Directors' Retainer and
Fees, as amended................................................................................ 77
10EE Stock Option Agreement, dated as of August 27, 1995, between Chemical and the Company
(incorporated by reference to Exhibit 10(a) to the Company's Current Report on Form 8-K
dated August 28, 1995, File No. 1-5945).........................................................
10FF Stock Option Agreement, dated as of August 27, 1995, between the Company and Chemical
(incorporated by reference to Exhibit 10(b) to the Company's Current Report on Form 8-K dated
August 28, 1995, File No. 1-5945)...............................................................
10GG Employee Benefits Agreement, dated as of August 27, 1995, between the Company and Chemical
(incorporated by reference to Exhibit 10(c) to the Company's Current Report on Form 8-K dated
August 28, 1995, File No. 1-5945)...............................................................
11 Statement re: Computation of Earnings Per Common Share for the quarters and nine months ended
September 30, 1995 and 1994..................................................................... 79
12 Statement re: Computation of Ratios of Earnings to Fixed Charges for the
nine months ended September 30, 1995 and 1994 and for each of the five years in
the period ended December 31, 1994.............................................................. 80
27 Financial Data Schedule for the nine months ended September 30, 1995............................ 81
99 Supplemental Pro Forma Financial Statements..................................................... 84
</TABLE>
41
<PAGE> 42
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.
Graphic Number Page Description
<TABLE>
<S> <C> <C>
1. 11 Bar graph entitled, "Global
Financial Services - Revenue by
Product ($ in millions)",
showing the following revenue
amounts in separate bars by
product for the third quarter
1995 and 1994 respectively:
Transaction & Information
Services - 318 and 297; Trading
- 210 and 219; Loan Portfolio -
159 and 168; Investment Banking
- 96 and 87; Individual
Investment Services - 88 and
89; Product Revenue Overlap &
Other - (50) and (54). Graph
also shows the following
revenue amounts in separate
bars by product for nine months
1995 and 1994 respectively:
Transaction & Information
Services - 889 and 874; Trading
- 513 and 624; Loan Portfolio -
471 and 486; Investment Banking
- 405 and 360; Individual
Investment Services - 274 and
266; Product Revenue Overlap
& Other - (136) and (120).
2. 12 Bar graph entitled, "Retail
Businesses - Revenue by Product
($ in millions)", showing the
following revenue amounts in
separate bars by product for
the third quarter 1995 and 1994
respectively:
Credit Card - 292 and 337;
Consumer Deposit - 155 and 153;
Business Services - 129 and
121; Mortgage - 85 and 70;
Other Retail Product - 123 and
77. Graph also shows the
following revenue amounts in
separate bars by product for
nine months 1995 and 1994
respectively: Credit Card - 923
and 1,030; Consumer Deposit -
472 and 464; Business Services
- 374 and 355; Mortgage - 278
and 250; Other Retail Products
- 292 and 328.
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C>
3. 16 Bar graph entitled "Cumulative
Interest Rate Gaps September
30, 1995 ($ in billions)" showing
the net assets or net
liabilities, in separate bars
titled including derivatives
and excluding derivatives,
respectively, for the following
periods: net assets of 6.8 and
3.7, for 4th Quarter 1995; net
assets of 3.8 and net
liabilities of 2.8, for 1996;
net liabilities of 0.2 and 8.5,
for 1997; net liabilities of
4.1 and 11.6, for 1998; net
liabilities of 7.3 and 14.2,
for 1999; net liabilities of
7.2 and 13.9, for 2000; and net
liabilities of 3.6 and 10.2,
for 2001.
</TABLE>
<PAGE> 1
EX-10Q
GENERAL FORM
AMENDMENT dated as of August ,
1995 to the AGREEMENT dated as
of , 199 , (the
"Agreement") between THE CHASE
MANHATTAN CORPORATION, a Delaware
corporation (the "Company") and
(the
---------------------
"Executive").
The Company and the Executive desire to amend the Agreement as follows:
1. Approved Change in Control. As used herein, the term "Approved Change in
Control" means any Change in Control occurring by reason of or upon the
occurrence of the transactions and events contemplated by the Merger Agreement.
"Merger Agreement" means any agreement or plan of merger or consolidation
between the Company and Chemical Banking Corporation that is approved by the
Boards of Directors of the Company and Chemical Banking Corporation on or before
September 30, 1995, as modified from time to time.
2. Good Reason. The parties hereto agree that, in the event of any Approved
Change in Control, the definition of "Good Reason" in Section 15(N) of the
Agreement, for purposes only of any such Approved Change in Control (and any
related Potential Change in Control), shall be as follows:
"Good Reason" for termination by the Executive of
the Executive's employment shall mean the
occurrence (without the Executive's express written
consent) of any one of the following acts, or
failure to act, unless, in the case of any act or
failure to act described in clause (I), (IV), (V),
(VI) or (VII) below, 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) a substantial diminution in the overall
importance of the Executive's role, as determined
by balancing (i) any increase or decrease in the
scope of the Executive's management
responsibilities against (ii) any increase or
decrease in the relative sizes of the businesses,
activities or functions (or portions thereof) for
which the Executive has responsibility; provided,
however, that none of (a) a change in the
<PAGE> 2
Executive's title or employer, (b) a change in
the Executive's position in the reporting hierarchy
and (c) a change in the Executive's
responsibilities from line to staff or vice versa,
shall, by itself, be considered Good Reason;
(II) a reduction in the Executive's Annual
Base Salary as in effect on the date hereof or as
the same may be increased from time to time;
(III) the relocation of the principal place of
the Executive's employment to a location that is
more than 50 miles from such principal place of
employment immediately prior to the Change in
Control (unless such relocation is to the New York
Metropolitan Area or from one location outside of
the United States to another location outside of
the United States);
(IV) the failure by the Company or a
subsidiary to pay to the Executive any portion of
the Executive's current compensation, or to pay to
the Executive any portion of an installment of
deferred compensation under any deferred
compensation program of the Company or a subsidiary
within seven (7) days of the date such compensation
is due;
(V) the failure by the Company or a subsidiary
to pay the Executive by February 15 following any
calendar year an annual cash bonus for such
calendar year that, in the reasonable, good faith
judgment of the Compensation Committee of the Board
of Directors of the Company or the Chairman of the
Company, fairly reflects the performance of the
Executive, any unit or units (or portions thereof)
for which the Executive was responsible and the
Company as a whole during such calendar year;
provided, however, that the Executive may not claim
that a bonus equal to or greater than the highest
annual bonus paid to the Executive for any of the
three calendar years immediately preceding the
Change in Control does not fairly and in good faith
reflect such performance;
(VI) the failure by the Company or a
subsidiary to include the Executive in any other
employee benefit or compensation plan or
arrangement on a basis reasonably comparable to
that of other executives of the Company having
responsibilities of equal importance to those of
the Executive; provided, however, that failure to
2
<PAGE> 3
include the Executive in a plan or arrangement
designed for a general category of positions that
does not include the Executive's position, as
determined in good faith by the Compensation
Committee of the Board of Directors of the Company
or the Chairman of the Company, shall not be
considered Good Reason; or
(VII) any purported termination of the
Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the
requirements of Section 7.01; for purposes of this
Agreement, no such purported termination shall be
effective.
The Executive's right to terminate the
Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to
physical or mental illness. The Executive'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.
3. Extension of Term with Respect to Payment of Bonuses. In the event there
shall have occurred any Approved Change in Control, the parties hereto agree
that, with respect to any calendar year more than six months of which fall
within the 24 month term of the Agreement commencing on the date of the last
such Approved Change in Control, the term of the Agreement shall be further
extended to March 1 of the next calendar year solely with respect to any Notice
of Termination given by the Executive regarding any bonus the payment or
non-payment of which constitutes Good Reason under clause (V) of the definition
of "Good Reason" set forth in Section 2 of this Amendment.
4. Waiver of Notice Not to Extend. Each party hereto waives its right under
Section 2 of the Agreement to serve notice not to extend the Agreement with
respect to the calendar year commencing January 1, 1996. The parties hereto
acknowledge and agree that the Agreement, as amended by this Amendment, shall
automatically renew for an additional one year term commencing January 1, 1996.
5. Limited Effect of Amendment. The parties hereto agree that the definition of
"Good Reason" set forth in Section 2 of this Amendment shall apply only in the
event of and with respect to an Approved Change in Control (and any related
Potential Change in Control) and that such definition of "Good Reason" shall not
apply to any other Change in Control, whether such other Change in Control
occurs before or after the Approved Change in Control. In the event such other
Change in Control shall occur,
3
<PAGE> 4
the provisions of Sections 2 and 3 of this Amendment shall have no effect.
6. Miscellaneous. Capitalized terms used and not defined in this Amendment have
the meanings assigned to them in the Agreement. This Amendment shall be
effective as of the date hereof, may be executed in counterparts, and shall be
governed by and construed in accordance with the laws of the State of New York.
The parties hereto have executed this Amendment as of the date first
above written.
THE CHASE MANHATTAN CORPORATION
By:
----------------------------
John J. Farrell
Executive Vice President
------------------------------
4
<PAGE> 1
EX-10R
THE CHASE MANHATTAN CORPORATION
SPECIAL SEVERANCE PLAN
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation has reserved the right to
amend The Chase Manhattan Corporation Special Severance Plan (the "Plan") and
desires to amend the Plan as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Approved Change in Control. Section 2 of the Plan is amended by adding the
following new definitions thereto:
(s) "Approved Change in Control" means any Change in
Control occurring by reason of or upon the occurrence of the
transactions and events contemplated by the Merger Agreement.
(t) "Merger Agreement" means any agreement or plan of
merger or consolidation between CMC and Chemical Banking Corporation
that is approved by the Board of Directors of CMC and Chemical Banking
Corporation on or before September 30, 1995, as modified from time to
time.
2. Good Reason. In the event of any Approved Change in Control, the definition
of "Good Reason" in Section 2(k) of the Plan, for purposes only of such Approved
Change in Control (and any related Potential Change in Control), shall be as
follows:
(k) "Good Reason" for termination by the Participant
of the Participant's employment shall mean the occurrence (without the
Participant's express written consent) of any one of the following
acts, or failure to act, unless, in the case of any act or failure to
act described in clause (2), (3), (4) or (5) below, such act or failure
to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(1) a reduction in the Participant's Annual Base
Salary as in effect on the date the Participant first became a
Participant in the Plan or as the same may be increased from time to
time;
(2) the failure by the Participant's primary employer
to pay to the Participant any portion of the Participant's current
compensation, or the failure by CMC or any Subsidiary to pay to the
Participant any portion of an installment of deferred compensation
under any deferred
<PAGE> 2
2
compensation program within seven days of the date such compensation
is due;
(3) the failure by CMC or a Subsidiary to pay to the
Participant by February 15 following any calendar year an annual cash
bonus for such calendar year that, in the reasonable, good faith
judgment of the Compensation Committee of the Board of Directors of CMC
or the Corporate Human Resources Executive of CMC, fairly reflects the
performance of the Participant, any unit or units (or portions thereof)
for which the Participant was responsible and CMC as a whole during
such calendar year; provided, however, that the Participant may not
claim that a bonus equal to or greater than the highest annual bonus
paid to the Participant for any of the three calendar years immediately
preceding the Change in Control does not fairly and in good faith
reflect such performance;
(4) the failure by CMC or a Subsidiary to include the
Participant in any other employee benefit or compensation plan or
arrangement on a basis reasonably comparable to that of other
participants in the Plan having responsibilities of equal importance to
those of the Participant; provided, however, that failure to include
the Participant in a plan or arrangement designed for a general
category of positions that does not include the Participant's position,
as determined in good faith by the Compensation Committee of the Board
of Directors of CMC or the Corporate Human Resources Executive of CMC,
shall not be considered Good Reason; or
(5) any purported termination of the Participant's
employment which is not effected pursuant to a Notice of Termination
and, for purposes of the Plan, no such purported termination shall be
effective.
A Participant's right to terminate employment for Good Reason shall not
be affected by the Participant's incapacity due to physical or mental
illness. The Participant'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.
3. Severance Payments after an Approved Change in Control. In the event of an
Approved Change in Control, Section 5 of the Plan shall be amended as follows
only for purposes of any such Approved Change in Control (and any related
Potential Change in Control):
(a) The first sentence of Section 5(b) shall be amended by inserting
the following phrase after the word "occurred" in the first sentence thereof:
<PAGE> 3
3
(or at any time within the period commencing on the date of
the Merger Agreement and ending 24 months after the month in
which the closing of the transactions contemplated by the
Merger Agreement occur),
(b) The third sentence of Section 5(b) shall be deleted and replaced
with a new third sentence to read as follows:
A Participant's employment shall not be deemed terminated
without Cause solely because of a redesignation of the
Participant's employer among CMC and its subsidiaries.
(c) Section 5(c)(1) shall be amended by deleting the words "but in no
event shall the amount of such Lump Sum Severance Payment exceed an amount which
is equal to a Week of Annual Base Salary multiplied by the number of week's
(including fractions) between the Participant's Date of Termination and the
Participant's sixty-fifth birthday." therefrom.
(d) For purposes only of any such Approved Change in Control (and any
related Potential Change in Control), Section 5(c)(1) of the Plan shall be
deleted and replaced by the Section 5(c)(1) attached as Exhibit A to, and made a
part of, this Instrument of Amendment.
4. Extension of Term with Respect to Payment of Bonuses. In the event there
shall have occurred an Approved Change in Control, the Plan is amended to
provide that, with respect to any calendar year more than six months of which
fall within the 24 month term of the Plan commencing on the date of the last
such Approved Change in Control, the term of the Plan shall be further extended
to March 1 of the following calendar year solely with respect to any Notice of
Termination given by a Participant regarding any bonus the payment or
non-payment of which constitutes "Good Reason" under clause (3) of the
definition of "Good Reason" set forth in Section 2 of this Amendment.
5. Limited Effect of Amendment. The definition of "Good Reason" set forth in
Section 2 of this Instrument of Amendment shall apply only in the event of and
with respect to an Approved Change in Control (and any related Potential Change
in Control) and such definition of "Good Reason" shall not apply to any other
Change in Control, whether such other Change in Control occurs before or after
any Approved Change in Control. In the event any such other Change in Control
shall occur, the provisions of Sections 2, 3, and 4 of this Instrument of
Amendment shall have no effect.
<PAGE> 4
4
6. Waiver of Notice Not to Extend. The Chase Manhattan Corporation hereby waives
its right under Section 3 of the Plan to serve notice not to extend the Plan
with respect to the calendar year commencing January 1, 1996 and agrees that the
Plan, as amended by this Instrument of Amendment, shall automatically renew for
an additional one year term commencing January 1, 1996.
7. Miscellaneous. Capitalized terms used but not defined in this Instrument of
Amendment have the meanings assigned to them in the Plan. This Instrument of
Amendment shall be effective as of August 25, 1995.
The Chase Manhattan Corporation has executed and adopted this
Instrument of Amendment as of the date set forth above.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
<PAGE> 5
EXHIBIT A
The Chase Manhattan Corporation
Special Severance Plan
(c) Amount of Severance Benefits.
(1) Lump Sum Severance Payment. A Participant's Lump Sum
Severance Payment shall be an amount equal to the sum of (i) the
Participant's Annual Base Salary, and (ii) the number of Weeks of
Annual Base Salary determined by reference to the schedule set forth
below based on the Participant's length of full-time service with The
Chase Manhattan Corporation and its subsidiaries:
Lump Sum Severance Payment Schedule
Weeks of
Length of Service Annual Base Salary
2 years or less Eight
More than 2 years 3 weeks for each complete
year of service
Notwithstanding the foregoing, the Lump-Sum Severance Payment
determined under this subsection (1) may not exceed 104 Weeks of Annual
Base Salary.
* * *
<PAGE> 1
EX-10S
THE CHASE MANHATTAN CORPORATION
1994 LONG-TERM INCENTIVE PLAN
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation has reserved the right to
amend The Chase Manhattan 1994 Long-Term Incentive Plan (the "Plan");
WHEREAS, the Compensation Committee of the Board of Directors of The
Chase Manhattan Corporation has the authority to amend the Plan and desires to
amend the Plan as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 6(a) of the Plan is amended as follows:
(a) The phrase "Except as provided in clause (3) below," shall be added
to the beginning of each of clauses (1) and (2) of Section 6(a).
(b) The following new clause (3) shall be added to the end of Section
6(a):
(3) If an optionee's employment is terminated after the
occurrence of an Approved Change in Control (as defined in Section
6(e)(iii) below), unless such termination is (i) for "Cause" (as
defined in Section 6(e) below), or (ii) by the optionee without Good
Reason (as defined in Section 6(e) below but excluding for this purpose
subsection (i) thereof), the optionee's outstanding Options and Stock
Appreciation Rights shall become immediately exercisable and the
optionee shall have the right, subject to the provisions of Section
4(d)(5) above, to exercise such Options and Stock Appreciation Rights,
at any time within the twenty-four month period after such termination
of employment. After the occurrence of an Approved 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) below) from CMC to the employee or from the
employee to CMC, as the case may be.
2. Section 6(b) of the Plan is amended as follows:
(a) The following phrase shall be inserted immediately after the first
use of the phrase "Change in Control" in Section (b):
<PAGE> 2
2
or a termination of employment under circumstances described in Section
6(a)(3) above that would entitle such employee to exercise immediately
any outstanding Options awarded to such employee
(b) The phrase "or such termination" shall be inserted immediately
after the second, third and fourth uses of the phrase "Change in Control" in
Section 6(b).
3. Section 6(c) is amended by adding the following new sentences at the end
thereof:
For purposes of this Section 6(c), the definition of "Change in
Control" shall be that set forth in Section 6(e) below except that the
third sentence of Section 6(e)(3) shall be ignored. The definition of
"Good Reason" applicable to any Potential Change in Control relating to
any Approved Change in Control shall, for purposes of this Section
6(c), exclude subsection (i) of the definition of "Good Reason" set
forth in Section 6(e)(7) hereof.
4. Section 6(d) is amended by adding the following new sentence the end thereof:
For purposes of this Section 6(d), the definition of "Change in
Control" shall be that set forth in Section 6(e) below except that the
third sentence of Section 6(e)(3) shall be ignored.
5. Section 6(e)(3) of the Plan is amended by inserting at the end thereof the
following:
For purposes of this Plan, any Approved Change in Control shall not
constitute a Change in Control. As used herein, the term "Approved
Change in Control" means any Change in Control occurring by reason of
or upon the occurrence of the transactions and events contemplated by
the Merger Agreement. "Merger Agreement" means any agreement or plan of
merger or consolidation between CMC and Chemical Banking Corporation
that is approved by the Boards of Directors of CMC and Chemical Banking
Corporation on or before September 30, 1995, as modified from time to
time.
<PAGE> 3
3
6. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Corporation has executed this
Instrument of Amendment as of August 25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10T
THE CHASE MANHATTAN CORPORATION
1987/82 LONG-TERM INCENTIVE PLAN
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation has reserved the right to
amend The Chase Manhattan 1987/82 Long-Term Incentive Plan (the "Plan") and
desires to amend the Plan as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 6A(a) of the Plan is amended as follows:
(a) The phrase "Except as provided in clause (3) below," shall be added
to the beginning of each of clauses (1) and (2) of Section 6A(a).
(b) The following new clause (3) shall be added to the end of Section
6A(a):
(3) If an optionee's employment is terminated after the
occurrence of an Approved Change in Control (as defined in Section
6A(f)(iii) below), unless such termination is (i) for "Cause" (as
defined in Section 6A(f) below), or (ii) by the optionee without Good
Reason (as defined in Section 6A(e) below but excluding for this
purpose subsection (i) thereof), the optionee's outstanding Options and
Stock Appreciation Rights shall become immediately exercisable and the
optionee shall have the right, subject to the provisions of Section
4(d)(5) above, to exercise such Options and Stock Appreciation Rights,
at any time within the twenty-four month period after such termination
of employment. After the occurrence of an Approved 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 6A(f) below) from CMC to the employee or from the
employee to CMC, as the case may be.
2. Section 6A(b) of the Plan is amended as follows:
(a) The following phrase shall be inserted immediately after the first
use of the phrase "Change in Control" in Section 6A(b):
or a termination of employment under circumstances described in Section
6A(a)(3) above that would entitle such employee to exercise immediately
any options awarded to such employee
<PAGE> 2
2
(b) The phrase "or such termination" shall be inserted immediately
after the second, third and fourth uses of the phrase "Change in Control" in
Section 6A(b).
3. Section 6A(d) is amended by adding the following new sentence to the end
thereof:
For purposes of this Section 6A(d), the definition of "Change in
Control" shall be that set forth in Section 6A(f) below except that the
third sentence of Section 6A(f)(3) shall be ignored. The definition of
"Good Reason" applicable to any Potential Change in Control related to
any Approved Change in Control shall, for purposes of this Section
6A(d), exclude subsection (i) of the definition of "Good Reason" set
forth in Section 6(f)(7) hereof.
4. Section 6A(e) is amended by adding the following new sentence to the end
thereof:
For purposes of this Section 6A(e), the definition of "Change in
Control" shall be that set forth in Section 6A(f) below except that the
third sentence of Section 6A(f)(3) shall be ignored.
5. Section 6A(f)(3) of the Plan is amended by inserting at the end thereof the
following:
For purposes of the Plan, any Approved Change in Control shall not
constitute a Change in Control. As used herein, the term "Approved
Change in Control" means any Change in Control occurring by reason of
or upon the occurrence of the transactions and events contemplated by
the Merger Agreement. "Merger Agreement" means any agreement or plan of
merger or consolidation between CMC and Chemical Banking Corporation
that is approved by the Boards of Directors of CMC and Chemical Banking
Corporation on or before September 30, 1995, as modified from time to
time.
6. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Corporation has executed this
Instrument of Amendment as of August 25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10U
THE CHASE MANHATTAN BANK, N.A.
MANAGEMENT INCENTIVE PLAN
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Bank, N.A. maintains The Chase Manhattan
Management Incentive Plan (the "Program"), pursuant to resolutions of the Board
of Directors of The Chase Manhattan Bank, N.A.;
WHEREAS, the Board of Directors of the The Chase Manhattan Bank, N.A.
resolved on August 25, 1995, that the Program be amended as set forth in this
Instrument of Amendment;
NOW, THEREFORE, the Program is hereby amended as follows:
1. Section 2(b) of the resolutions dated August 17, 1990 to the Program is
amended by inserting at the end thereof the following:
For purposes of this Change in Control Provision, an Approved Change in
Control shall not constitute a Change in Control. As used herein, the
term "Approved Change in Control" means any Change in Control occurring
by reason of or upon the occurrence of the transactions and events
contemplated by the Merger Agreement. "Merger Agreement" means any
agreement or plan of merger or consolidation between CMC and Chemical
Banking Corporation that is approved by the Boards of Directors of CMC
and Chemical Banking Corporation on or before September 30, 1995, as
modified from time to time.
2. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Bank, N.A. has executed this
Instrument of Amendment as of August 25, 1995.
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10V
THE CHASE MANHATTAN CORPORATION
ANNUAL INCENTIVE COMPENSATION PROGRAM
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation has reserved the right to
amend The Chase Manhattan Corporation Annual Incentive Compensation Program (the
"Program"), which sets forth the principles and primary terms and provisions for
annual incentive compensation plans and programs maintained for employees of The
Chase Manhattan Corporation and its subsidiaries;
WHEREAS, The Chase Manhattan Bank, N.A. and certain other subsidiaries
of The Chase Manhattan Corporation have implemented plans for incentive awards
which provide for annual cash bonuses to be paid to selected employees, and such
plans operate in accordance with the Program under the supervision of the
Compensation Committee of the Board of Directors of The Chase Manhattan
Corporation;
WHEREAS, the Compensation Committee of the Board of Directors of The
Chase Manhattan Corporation has the authority to amend the Program and now
desires to amend the Program as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Program is hereby amended as follows:
1. Clause (b) of Section 6 of the Program is hereby amended by adding to end
thereof the following:
; provided, however, that any Approved Change in Control shall not
constitute a "change in control" for purposes of any Plan. As used
herein, the term "Approved Change in Control" means any "change in
control" occurring by reason of or upon the occurrence of the
transactions and events contemplated by the Merger Agreement. "Merger
Agreement" means any agreement or plan of merger or consolidation
between The Chase Manhattan Corporation and Chemical Banking
Corporation that is approved by the Boards of Directors of The Chase
Manhattan Corporation and Chemical Banking Corporation on or before
September 30, 1995, as modified from time to time.
<PAGE> 2
2
2. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, the Compensation Committee of The Chase Manhattan
Corporation has caused this Instrument of Amendment to be executed as of August
25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EXHIBIT 10W
THE CHASE MANHATTAN ANNUAL
INCENTIVE ARRANGEMENT FOR CERTAIN EXECUTIVE OFFICERS
1. PURPOSE OF THE ARRANGEMENT
The purpose of The Chase Manhattan Annual Incentive Arrangement for Certain
Executive Officers (the "Arrangement") is to provide a means of rewarding
certain executive officers of The Chase Manhattan Corporation (the
"Corporation") who have contributed to the profitability of the Corporation in a
manner which permits such compensation to be deductible by the Corporation or
any of its subsidiaries for federal income tax purposes.
2. ADMINISTRATION OF THE ARRANGEMENT
The administration of this Arrangement shall be vested in the Compensation
Committee of the Board of Directors of the Corporation, 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") which shall make all determinations necessary under this
Arrangement. All members of the Committee shall qualify as "outside directors"
(as that term is defined in Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder as currently proposed or
as may from time to time be in effect (the "Regulations")). No member of the
Committee shall be entitled to participate in this Arrangement.
3. PARTICIPATION IN THE ARRANGEMENT
All executive officers of the Corporation at or above the Executive Vice
President level shall be eligible to participate in the Arrangement. Within the
period specified in the Regulations within which performance goals are required
to be established to qualify as a pre-established performance goal (the
"Designation Period"), the Committee shall designate the executive officers of
the Corporation (each, a "Participant") who shall participate in the Arrangement
for the Performance Period (as that term is defined in Section 6 below). All
executive officers of the Corporation who are not designated by the Committee as
Participants for the applicable Performance Period and any person who becomes an
executive officer of the Corporation during the Performance Period shall be
eligible to participate in The Chase Manhattan Management Incentive Plan.
4. BONUS POOL
Prior to the end of the Designation Period for the Performance Period, the
Committee shall designate in writing a percentage of the consolidated after-tax
net income of the Corporation and its subsidiaries for such Performance Period
that will be included in the bonus pool from which awards may be made for the
Performance Period (the "Bonus Pool"). There shall also be available for
inclusion in the Bonus Pool for any Performance Period the aggregate amount of
the Bonus Pools from all prior Performance Periods as to which bonus awards were
not made (the "Carryforward Amount"); provided, however, that no more than $3
million of the Carryforward Amount may be included in the Bonus Pool for any
Performance Period. The Committee shall certify in writing the Carryforward
Amount for the Performance Period prior to the end of the Designation Period.
The total amount of the Bonus Pool need not be paid as bonus awards under this
Arrangement.
5. ALLOCATION OF THE BONUS POOL
Prior to the end of the Designation Period for the Performance Period, the
Committee shall allocate in writing, on behalf of each Participant, a portion of
the Bonus Pool to be paid for such Performance Period. Such allocation shall
consist of separate allocations of a portion of the Corporation's after-tax net
income which is included in the Bonus Pool and of the Carryforward Amount. The
total amount of the Bonus Pool allocated to all Participants (and of each
component thereof) shall not exceed 100% thereof (except to the extent permitted
by Section 162(m) of the Code and the Regulations). The annual maximum award
payable to any Participant shall equal the sum of (a) .40% of the consolidated
after-tax net income of the Corporation and its subsidiaries for such
Performance Period plus (b) 40% of the Carryforward Amount.
<PAGE> 2
6. PERFORMANCE PERIOD
The Performance Period as to which awards may be made under this
Arrangement shall be the twelve-month period commencing January 1 of a calendar
year and ending on December 31 of such calendar year.
7. PAYMENT OF BONUS AWARDS UNDER THE ARRANGEMENT
(a) No bonus awards may be made pursuant to this Arrangement for any
Performance Period unless the Committee is able to certify pursuant to Section
7(b) of this Arrangement that there was consolidated after-tax net income of the
Corporation and its subsidiaries for such Performance Period.
(b) Following the completion of each Performance Period, the Committee
shall certify in writing (i) the amount, if any, of consolidated after-tax net
income of the Corporation and its subsidiaries for such Performance Period (ii)
the amount of the Bonus Pool and (iii) the bonus awards payable to the
Participants. The total of all individual bonus awards shall not exceed the
amount of the Bonus Pool. The Committee shall have the authority, in its sole
and absolute discretion, to reduce the amount of any bonus award below the
amount which would be payable based on the terms of this Arrangement or to not
grant bonus awards if, in its judgment, such action is warranted. Subject to the
limitations in the last sentence of Section 5 of this Arrangement, each bonus
award shall be paid first from the portion of the percentage of the consolidated
after-tax net income of the Corporation and its subsidiaries included in the
Bonus Pool and shall be paid from the Carryforward Amount only to the extent
necessary.
(c) In the event the Committee determines, upon the advice of counsel to
the Corporation, that payment of an award may be made under this Arrangement
before the expiration of the Performance Period without materially adversely
affecting the ability of the Corporation or any of its subsidiaries to deduct
for federal income tax purposes the amounts payable under this Arrangement,
including, without limitation, by making a partial payment of an award based
upon the consolidated after-tax net income of the Corporation and its
subsidiaries for the first nine months or any other portion of the Performance
Period (which payment may be contingent upon the repayment to the Corporation of
any amount of any award in excess of the amount payable on account of the
consolidated after-tax net income of the Corporation and its subsidiaries for
the entire Performance Period), the Committee may elect during December of any
Performance Period to pay awards under this Arrangement prior to the expiration
of the Performance Period. In the event of any such election by the Committee,
the Committee shall certify in writing the portion of the Performance Period for
which awards are to be paid, and shall make the certifications in writing
required by Section 7(b) of this Arrangement with respect to such portion of the
Performance Period as if such portion of the Performance Period were the
Performance Period.
(d) Except as provided in Section 7(e) or Section 8 of this Arrangement,
each Participant shall receive payment, subject to all required tax
withholdings, of his or her bonus award as soon as practicable following the
determination of the amount of such award.
(e) Awards may be paid in cash, stock (which may have such restrictions as
to transferability or vesting as the Committee shall determine), any other form
of consideration determined by the Committee or any combination thereof. Any
stock so granted may be awarded as restricted stock units pursuant to The Chase
Manhattan 1994 Long-Term Incentive Plan, as it may be amended from time to time,
if the Committee so determines. The value of any share of stock so granted shall
be the mean between the highest and lowest quoted selling prices for such shares
as reported on the composite tape on the date of grant (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. The value of any other non-cash
consideration shall be determined by the Committee at the time it is granted.
8. DEFERRAL OF PAYMENT OF AWARDS
At the discretion of the Committee, any Participant, subject to such terms
and conditions as the Committee may determine, may elect to defer payment of all
or part of any award which such Participant might earn with respect to a
Performance Period (together with a return thereon from the date as of which the
<PAGE> 3
award would have been paid but for such Participant's election to defer payment
at the rate, if any, fixed by the Committee) by complying with such procedures
as the Committee may from time to time prescribe.
9. SEPARATION FROM THE CORPORATION AND ITS SUBSIDIARIES
(a) Participants who cease to be employed by the Corporation or its
subsidiaries prior to the end of the Performance Period, other than due to
retirement under any retirement plan maintained by the Corporation or any of its
subsidiaries under which such Participant is covered, death or disability (as
defined in any disability plan of the Corporation or any of its subsidiaries
applicable to the Participant), shall not be eligible to receive a bonus award
for the Performance Period in which such termination of employment occurs;
provided, however, that the Committee may, in its sole discretion, when it finds
that a waiver may be in the best interest of the Corporation, waive in whole or
in part any or all of the provisions of this Section 9(a).
(b) Any Participant may designate in writing the beneficiary of the unpaid
amount of a bonus award (including the amount of any bonus award which was
previously deferred) in case of death and if no designation has been made, or if
any such designation shall become ineffective, any such unpaid amount will be
paid to the Participant's estate. Such designation shall be effective upon
receipt thereof by the Corporation. Any such designation may be revoked in
writing by a Participant at any time without the consent of any such
beneficiary.
10. AMENDMENTS
The Committee may amend this Arrangement at any time, provided, that such
changes may be made consistent with the provisions of Section 162(m) of the Code
and the Regulations without adversely affecting the ability of the Corporation
or any of its subsidiaries to deduct the compensation which may be paid pursuant
to this Arrangement for federal income tax purposes and, provided, further, that
no amendment that requires stockholder approval under Section 162(m) of the Code
or the Regulations may be made without such approval.
11. TERMINATION
The Board of Directors of the Corporation may terminate this Arrangement at
any time. No termination of this Arrangement shall adversely affect the right of
any person to receive any award paid pursuant to Section 7 of this Arrangement
regardless of the vesting date of such award, or amounts previously awarded to
such person but deferred in accordance with Section 8 of this Arrangement plus
any earnings thereon.
12. MISCELLANEOUS
(a) Nothing contained in this Arrangement shall be construed as giving any
executive officer of the Corporation the right to continued employment or any
interest in any asset of the Corporation or any of its subsidiaries, nor to
prevent the Corporation or any of its subsidiaries or affiliates from taking any
action which it deems to be appropriate or in its best interests, whether or not
such action would have an adverse effect on this Arrangement or the amounts
payable hereunder.
(b) This Arrangement shall be unfunded and the Corporation shall not be
required to establish any segregation of assets to assure payment of any awards
made hereunder.
(c) A Participant may not sell, transfer or assign any right or interest in
the Arrangement except as provided in Section 9(b) hereof and any attempted
sale, transfer or assignment shall be null and void.
(d) This Arrangement shall be governed by and construed in accordance with
the laws of the State of New York and the applicable provisions of the Code and
the Regulations.
13. EFFECTIVE DATE
This Arrangement shall be effective as of January 1, 1995, subject to the
subsequent approval hereof by the Corporation's stockholders at the 1995 Annual
Meeting and, if so approved, shall remain in effect until terminated in
accordance with Section 11 hereof.
<PAGE> 1
EXHIBIT 10 - X
THREE-YEAR INCENTIVE ARRANGEMENT
FOR CERTAIN EXECUTIVE OFFICERS
PURPOSE
This Three-Year Incentive Arrangement for certain Executive Officers of The
Chase Manhattan Corporation is intended to provide competitive compensation
opportunities for sustained improved corporate performance in a manner which
permits such compensation to be deductible for federal income tax purposes.
ADMINISTRATION
The administration of this arrangement shall be vested in the Compensation
Committee of the Board of Directors of The Chase Manhattan Corporation (the
"Corporation"), 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") which shall make all determinations
necessary under this arrangement. All members of the Committee shall qualify as
"outside directors" (as that term is defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), and the
regulations thereunder as currently proposed or as may from time to time be in
effect (the "Regulations")), and no member of the Committee shall be entitled to
participate in this arrangement.
ELIGIBILITY
Any Executive Officer of the Corporation at the Executive Vice President
level or above on December 31, 1996 or such later date as a performance target
is achieved may be eligible to receive an award. Awards may be paid under this
arrangement only to the Executive Officers who are "covered employees" (as that
term is defined in Section 162(m) of the Code or the Regulations. Awards under
other compensation arrangements to all Executive Officers who are not "covered
employees" shall be subject to the provisions below under "Limitations on Other
Awards".
PERFORMANCE TARGETS
Performance targets relate to the price of Common Stock as defined below.
The "Sixty Dollar Target" 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. Each of
such 10 days must fall within the period commencing on January 1, 1994, and
ending on March 31, 1997. The "Fifty Two Dollar Target" 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 $52. Each of such 10 days must fall within the period
commencing on January 1, 1994, and ending on March 31, 1997. A trading day is
any day on which the New York Stock Exchange, Inc. is open for trading of shares
of Common Stock.
As used herein, "Common Stock" means the common stock, par value $2.00 per
share, of the Corporation. In the event of a change in the designation thereof
to "Capital Stock" or other similar designation, or a change in the par value
thereof, or from par value to no par value, without increase or decrease in the
number of shares outstanding, the shares resulting from any such change shall be
deemed to be Common Stock within the meaning of this arrangement.
The Sixty Dollar Target and the Fifty Two Dollar Target shall 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 the Corporation or any of its subsidiaries or affiliates.
<PAGE> 2
AGGREGATE AWARDS
The maximum amount payable under this arrangement, subject to adjustment as
described below, if the Sixty Dollar Target is reached is $9 million. The
maximum amount payable under this arrangement, subject to adjustment as
described below, if the Fifty Two Dollar Target is reached is $4.5 million. If
either Target has been reached by December 31, 1996 then the maximum amount
payable will be adjusted by multiplying such amount by a fraction (X) the
numerator of which is the average over the 10 consecutive trading days ending on
December 31, 1996 of the mean between the highest and lowest quoted selling
price for shares of Common Stock on the New York Stock Exchange, Inc. and (Y)
the denominator of which is the Target reached. The maximum amount payable under
this arrangement if the Sixty Dollar Target is reached shall be reduced by any
amounts paid under this arrangement upon having reached the Fifty Two Dollar
Target.
ALLOCATION OF AGGREGATE AWARDS
<TABLE>
<CAPTION>
MAXIMUM AMOUNT EXPRESSED
POSITION HELD BY AS A PERCENTAGE OF THE
PARTICIPATING EXECUTIVE AGGREGATE AWARD
-------------------------------------------------------------- ------------------------
<S> <C>
Chairman...................................................... 33 1/3%
President..................................................... 33 1/3%
Vice Chairman and other Covered Employees (each).............. 11 1/9%
</TABLE>
LIMITATION ON OTHER AWARDS
Because participation in this arrangement is designed to enable the
Corporation and its subsidiaries to receive federal income tax deductions for
awards paid to participants, awards are payable under this arrangement only to
those Executive Officers who are "covered employees". Eligible Executive
Officers who are not within the group of such "covered employees" may receive
awards under other compensation arrangements, but not in an amount in excess of
the amount that could be paid to such Executive Officers under this arrangement
if they were "covered employees", if such awards were paid on the basis of
similar performance criteria.
In the event awards are paid under this arrangement on the basis of
achieving a performance Target in 1997 and awards are paid under other
compensation arrangements on the basis of similar performance criteria, so long
as the limitations in the preceding paragraph are complied with, any such awards
to the Executive Officers who are "covered employees" with respect to 1997 shall
be paid under this arrangement and such awards to all other Executive Officers
shall be paid under such other compensation arrangements.
PAYMENT OF AWARDS
Awards under this arrangement may be paid in cash, Common Stock (which may
have such restrictions as to transferability or vesting as the Committee shall
determine), any other form of consideration determined by the Committee or any
combination thereof. Any Common Stock so granted may be awarded as restricted
stock units pursuant to The Chase Manhattan 1994 Long-Term Incentive Plan, as it
may be amended from time to time, if the Committee so determines. The value of
any share of Common Stock so granted shall be the mean between the highest and
lowest quoted selling prices for such shares as reported on the composite tape
on the date of grant (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 the value as shall be determined by
such method as the Committee shall deem to reflect the fair market value as of
such date. The value of any other non-cash consideration shall be determined by
the Committee at time it is granted.
The awards may be payable immediately or on a deferred basis at the
discretion of the Committee. The Committee will determine the amount and form of
payment to a participant. The Committee shall have the authority to reduce or
eliminate any award which would be payable under this arrangement. The Committee
may not, however, increase the amount of any such award above the maximum amount
provided under this arrangement.
<PAGE> 3
Unless deferred by the Committee, payments based on achieving performance
Targets on or before December 31, 1996 will be paid on or as soon as possible
after December 31, 1996. Unless deferred by the Committee, payments based on
achieving performance Targets after December 31, 1996 but on or before March 31,
1997 will be paid on or as soon as possible after the date the performance
Targets are met. All payments may be subject to the satisfaction of all required
tax withholding obligations.
No payments may be made under this arrangement unless the material terms of
this arrangement are approved by the stockholders of the Corporation in
accordance with the requirements of Section 162(m) and the Regulations.
DEFERRAL OF PAYMENT OF AWARDS
At the discretion of the Committee, any "covered employee", subject to such
terms and conditions as the Committee may determine, may elect to defer payment
of all or part of any award under this arrangement (together with a return
thereon from the date as of which the award would have been paid but for such
"covered employee's" election to defer payment at the rate, if any, fixed by the
Committee) by complying with such procedures as the Committee may from time to
time prescribe.
Any "covered employee" may designate in writing the beneficiary of the
unpaid amount of any award which was deferred in case of death and if no
designation has been made, or if such designation shall become ineffective, any
such unpaid amount will be paid to such "covered employee's" estate. Such
designation shall be effective upon receipt thereof by the Corporation. Any such
designation may be revoked in writing by a "covered employee" at any time
without the consent of any such beneficiary.
CHANGE IN CONTROL
Notwithstanding the provisions under "Payment of Awards", in the event of a
Change in Control (as that term is defined in The Chase Manhattan Stock Option
Program for Employees) the Executive Officers who are "covered employees" shall
be paid the maximum amount payable under this arrangement for each performance
Target which is reached upon the latter of the Change in Control or the
achievement of a performance Target. This payment obligation shall be binding
upon the Corporation and its successors and assigns.
In the event a Change in Control occurs after one or both performance
Targets are reached but before December 31, 1996, the maximum aggregate amount
payable upon achievement of such higher performance Target shall be adjusted in
the manner provided in the last sentence under "Aggregate Awards" as if the date
on which such Change in Control occurred was December 31, 1996.
AMENDMENTS
The Committee may amend this arrangement at any time, provided, that such
changes may be made consistent with the provisions of Section 162(m) of the Code
and the Regulations without adversely affecting the ability of the Corporation
or any of its subsidiaries to deduct the compensation which may be paid pursuant
to this arrangement for federal income tax purposes and, provided, further, that
no amendment that requires stockholder approval under Section 162(m) of the Code
or the Regulations may be made without such approval.
TERMINATION
The Board of Directors of the Corporation may terminate this arrangement at
any time. No termination of this arrangement shall adversely affect the right of
any person to receive any award paid under this arrangement regardless of the
vesting date of such award, or amounts previously awarded to such person but
deferred in accordance with the terms of this arrangement plus any earnings
thereon.
MISCELLANEOUS
Nothing contained in this arrangement shall be construed as giving any
Executive Officer the right to continued employment or any interest in any
asset, nor to prevent the Corporation or any of its subsidiaries or
<PAGE> 4
affiliates from taking any action which it deems to be appropriate or in its
best interests, whether or not such action would have an adverse effect on this
arrangement.
This arrangement shall be unfunded and the Corporation shall not be
required to establish any segregation of assets to assure payment of any awards
made hereunder.
An Executive Officer may not sell, transfer or assign any right or interest
in this arrangement except as provided under "Deferral of Payment of Awards" and
any attempted sale, transfer or assignment shall be null and void.
This arrangement shall be governed by and construed in accordance with the
laws of the State of New York and the applicable provisions of the Code and the
Regulations.
<PAGE> 1
EX-10Y
THE CHASE MANHATTAN CORPORATION
THREE-YEAR INCENTIVE ARRANGEMENT
FOR
CERTAIN EXECUTIVE OFFICERS
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation has reserved right to amend
the Three-Year Incentive Arrangement For Certain Executive Officers (the
"Arrangement");
WHEREAS, the Compensation Committee of the Board of Directors of The
Chase Manhattan Corporation has the authority to amend the Arrangement and now
desires to amend the Arrangement as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Arrangement is hereby amended as follows:
1. The Arrangement is amended by adding the following new third paragraph
under the heading "Change in Control":
Notwithstanding the foregoing, in the event an Approved Change
in Control shall occur, the Committee shall have the authority to
reduce the amount of any award that would be payable under the
arrangement (and/or to impose additional conditions upon the payment of
such award). As used herein, the term "Approved Change in Control"
means any Change in Control occurring by reason of or upon the
occurrence of the transactions and events contemplated by the Merger
Agreement. "Merger Agreement" means any agreement or plan of merger or
consolidation between the Corporation and Chemical Banking Corporation
that is approved by the Boards of Directors of the Corporation and
Chemical Banking Corporation on or before September 30, 1995, as
modified from time to time.
2. The amendment set forth above shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, the Compensation Committee of The Chase Manhattan
Corporation has caused this Instrument of Amendment to be executed as of August
25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
--------------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10Z
SUPPLEMENT RETIREMENT PLAN
OF
THE CHASE MANHATTAN BANK, N.A.
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Bank, N.A. has reserved the right to amend
its Supplemental Retirement Plan (the "Plan") and now desires to amend the Plan
as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section III-A(4)(c) of the Plan is amended by inserting at the end
thereof the following:
Any Approved Change in Control shall not be a
Change in Control hereunder. As used herein,
the term "Approved Change in Control" means any
Change in Control occurring by reason of or
upon the occurrence of the transactions and
events contemplated by the Merger Agreement.
"Merger Agreement" means any agreement or plan
of merger or consolidation between CMC and
Chemical Banking Corporation that is approved
by the Boards of Directors of CMC and Chemical
Banking Corporation on or before September 30,
1995, as modified from time to time.
2. Section III-A is amended by adding the following as a
new subsection 5.
5. Special Change in Control Benefits. If,
after an Approved Change in Control, the
employment of an employee not otherwise
eligible to receive a benefit under the Plan is
terminated for any reason (other than for Cause
or by such employee without Good Reason) (a
"Protected Employee"), the benefits of such
Protected Employee under the Plan shall be
immediately 100% vested and non-forfeitable on
the date of any such termination of employment.
<PAGE> 2
3. Clause (i) of the definition of "Good Reason" in Section
III-A(4)(g) of the Plan is amended by adding the
following additional proviso to end thereof:
; provided further, however, that no event
described in this clause (i) shall constitute
Good Reason for purposes of Section III-A(5)
hereof;
4. Section III-A(3) shall be modified by adding the
following as the final subparagraph:
(iv) For purposes of this Section III-A(3), the
definition of "Change in Control" shall be that
set forth in Section III-A(4)(c) below, except
that the third sentence of Section III-A(4)(c)
shall be ignored.
5. Section III-A(2) shall be modified by adding the
following new sentences to the end thereof:
For purposes of this Section III-A(2), the
definition of "Change in Control" shall be that
set forth in Section III-A(4)(c) except that
the third sentence of Section III-A(4)(c) shall
be ignored. The definition of "Good Reason"
applicable to any Potential Change in Control
related to Approved Change in Control shall,
for purposes of this Section III-A(2), exclude
subsection (i) of the definition of "Good
Reason" set forth in Section III-A(4)(g)
hereof.
6. The amendments set forth above shall be effective as of
August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Bank, N.A. has caused this
Instrument of Amendment to be executed this 27th day of August, 1995.
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10AA
SUPPLEMENTAL BENEFIT PLAN
OF
THE CHASE MANHATTAN BANK, N.A.
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Bank, N.A. has reserved the right to amend
its Supplemental Benefit Plan (the "Plan") and now desires to amend the Plan as
set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section II-A(4)(c) of the Plan is amended by inserting at the end
thereof the following:
Any Approved Change in Control shall not be a
Change in Control hereunder. As used herein,
the term "Approved Change in Control" means any
Change in Control occurring by reason of or
upon the occurrence of the transactions and
events contemplated by the Merger Agreement.
"Merger Agreement" means any agreement or plan
of merger or consolidation between CMC and
Chemical Banking Corporation that is approved
by the Boards of Directors of CMC and Chemical
Banking Corporation on or before September 30,
1995, as modified from time to time.
2. Section II-A is amended by adding the following as a new subsection 5.
Special Change in Control Benefits. If,
after an Approved Change in Control, the
employment of an employee not otherwise
<PAGE> 2
2
eligible to receive a benefit under this Plan
is terminated for any reason (other than for
Cause or by such employee without Good Reason)
(a "Protected Employee"), the benefits of such
Protected Employee under the Plan shall be
immediately 100% vested and non-forfeitable on
the date of any such termination of employment.
3. Clause (i) of the definition of "Good Reason" in Section II-A(4)(h) of
the Plan is amended by adding the following additional proviso to the
end thereof:
; provided further, however, that no event
described in this clause (i) shall constitute
Good Reason for purposes of Section II-A(5)
hereof;
4. Section II-A(3) is amended by adding the following new sentences at the
end thereof:
For purposes of this Section II-A(3), the
definition of "Change in Control" shall be that
set forth in Section II-A(4)(c), except that
the third sentence of Section II-A(4)(c) shall
be ignored. The definition of "Good Reason"
applicable to any Potential Change in Control
related to any Approved Change in Control
shall, for purposes of this Section II-A(3),
exclude subsection (i) of the definition of
"Good Reason" set forth in Section II-A(4)(g)
hereof.
5. Article III is amended by adding the following proviso:
; provided, however, that no such action shall
adversely affect an individual's rights under
the Plan without the written consent of such
individual if such action is taken within 24
months after a Change in Control or within 12
months after a Potential Change in Control
(excluding for this purpose the third sentence
of Section II-A(4)(c) above).
<PAGE> 3
3
6. The amendments set forth above shall be effective as of
August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Bank, N.A. has caused this
Instrument of Amendment to be executed this 27th day of August, 1995.
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10BB
TRA 86 SUPPLEMENTAL BENEFIT PLAN
OF
THE CHASE MANHATTAN BANK, N.A.
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Bank, N.A. has reserved the right to amend
its TRA 86 Supplemental Benefit Plan (the "Plan") and now desires to amend the
Plan as set forth in this Instrument of Amendment;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section II-A(4)(c) of the Plan is amended by inserting at the end
thereof the following:
Any Approved Change in Control shall not be a
Change in Control hereunder. As used herein,
the term "Approved Change in Control" means any
Change in Control occurring by reason of or
upon the occurrence of the transactions and
events contemplated by the Merger Agreement.
"Merger Agreement" means any agreement or plan
of merger or consolidation between CMC and
Chemical Banking Corporation that is approved
by the Boards of Directors of CMC and Chemical
Banking Corporation on or before September 30,
1995, as modified from time to time.
2. Section II-A is amended by adding the following as a new
subsection 5.
5. Special Change in Control Benefits. If,
after an Approved Change in Control, the
employment of an employee eligible to receive a
benefit under this Plan is terminated for any
reason (other than for Cause or by such
employee without Good Reason) (a "Protected
<PAGE> 2
2
Employee"), the benefits of such Protected
Employee under the Plan shall be immediately
100% vested and non-forfeitable on the date of
any such termination of employment.
3. Clause (i) of the definition of "Good Reason" in Section II-A(4)(h) of
the Plan is amended by adding the following additional proviso to the
end thereof:
; provided further, however, that no event
described in this clause (i) shall constitute
Good Reason for purposes of Section II-A(5)
hereof;
4. Section II-A(3) is amended by adding the following new sentences to the
end thereof:
For purposes of this Section II-A(3), the
definition of "Change in Control" shall be that
set forth in Section II-A(4)(c) except that the
third sentence of Section II-A(4)(c) shall be
ignored. The definition of "Good Reason"
applicable to any Potential Change in Control
related to any Approved Change in Control
shall, for purposes of this Section II-A(3),
exclude subsection (I) of the definition of
"Good Reason" set forth in section II-A(4)(g)
hereof.
5. Article III is amended by adding the following proviso:
; provided, however, that no such action shall
adversely affect an individual's rights under
the Plan without the written consent of such
individual if such action is taken within 24
months after a Change in Control or within 12
months after a Potential Change in Control
(excluding for this purpose the third sentence
of Section II-A(4)(c) above).
<PAGE> 3
3
6. The amendments made by paragraphs 1-5 above shall be effective as of
August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Bank, N.A. has caused this
Instrument of Amendment to be executed as of the 25th day of August, 1995.
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10CC
THE CHASE MANHATTAN CORPORATION
THE CHASE MANHATTAN BANK, N.A.
* * *
NON-QUALIFIED RETIREMENT PLANS
FOR
NON-OFFICER DIRECTORS
* * *
INSTRUMENT OF AMENDMENT
WHEREAS, The Chase Manhattan Corporation and The Chase Manhattan Bank,
N.A. have each established a retirement plan for their respective non-officer
Directors, pursuant to resolutions adopted from time to time by the respective
Boards of Directors of The Chase Manhattan Corporation and The Chase Manhattan
Bank, N.A. setting forth the terms and provisions of such plans (the "Terms and
Provisions");
WHEREAS, the Board of Directors of The Chase Manhattan Corporation and
the Board of Directors of The Chase Manhattan Bank, N.A. each resolved on August
25, 1995, that the Terms and Provisions be amended as set forth in this
Instrument of Amendment;
NOW, THEREFORE, the Terms and Provisions are hereby amended as follows:
1. To provide that an Approved Change in Control shall not constitute a
"change in control" for purposes of the plans. As used herein, the term
"Approved Change in Control" means any "change in control" occurring by reason
of or upon the occurrence of the transactions and events contemplated by the
Merger Agreement. "Merger Agreement" means any agreement or plan of merger or
consolidation between The Chase Manhattan Corporation and Chemical Banking
Corporation that is approved by the Boards of Directors of The Chase Manhattan
Corporation and Chemical Banking Corporation on or before September 30, 1995, as
modified from time to time.
<PAGE> 2
2
2. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, The Chase Manhattan Corporation and The Chase
Manhattan Bank, N.A. have each executed this Instrument of Amendment as of
August 25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
----------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
EX-10DD
THE CHASE MANHATTAN CORPORATION
THE CHASE MANHATTAN BANK, N.A.
* * *
TERMS AND PROVISIONS
GOVERNING THE
CHASE DIRECTORS' RETAINER AND FEE DEFERRALS
* * *
INSTRUMENT OF AMENDMENT
WHEREAS, each Director of The Chase Manhattan Corporation and each
Director of The Chase Manhattan Bank, N.A. is entitled to defer receipt of all
or a portion of such Director's retainer and other fees, pursuant to resolutions
adopted from time to time by the respective Boards of Directors of The Chase
Manhattan Corporation and The Chase Manhattan Bank, N.A. setting forth the terms
and provisions of such deferrals (the "Terms and Provisions");
WHEREAS, the Board of Directors of The Chase Manhattan Corporation and
the Board of Directors of The Chase Manhattan Bank, N.A. each resolved on August
25, 1995, that the Terms and Provisions be amended as set forth in this
Instrument of Amendment;
NOW, THEREFORE, the Terms and Provisions are hereby amended as follows:
1. Section 6-A(b)(ii) of the Terms and Provisions is amended by inserting at the
end thereof the following:
Any Approved Change in Control shall not constitute a Change in Control
for purposes of this document. As used herein, the term "Approved
Change in Control" means any Change in Control occurring by reason of
or upon the occurrence of the transactions and events contemplated by
the Merger Agreement. "Merger Agreement" means any agreement or plan of
merger or consolidation between CMC and Chemical Banking Corporation
that is approved by the Boards of Directors of CMC and Chemical Banking
Corporation on or before September 30, 1995, as modified from time to
time.
<PAGE> 2
2. This Instrument of Amendment shall be effective as of August 25, 1995.
IN WITNESS WHEREOF, each of The Chase Manhattan Corporation and The
Chase Manhattan Bank, N.A. has executed this Instrument of Amendment as of
August 25, 1995.
THE CHASE MANHATTAN CORPORATION
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ JOHN J. FARRELL
---------------------------
John J. Farrell
Executive Vice President
<PAGE> 1
Computation of Earnings Per Common Share Exhibit 11
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
- ----------------------------------------------------------------------------------------------------------------
($ in millions, except per share amounts) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary:
Net Income................................................ $283 $305 $825 $976
Less: Preferred Stock Dividend Requirements.............. 30 31 92 96
- ----------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $253 $274 $733 $880
- ----------------------------------------------------------------------------------------------------------------
Average Common and Common Equivalent Shares Outstanding... 181,074,984 184,417,030 179,990,602 185,038,631
- ----------------------------------------------------------------------------------------------------------------
Primary Earnings Per Common Share......................... $1.40 $1.49 $4.07 $4.76
- ----------------------------------------------------------------------------------------------------------------
Assuming Full Dilution:
Net Income Applicable to Common Stock $253 $274 $733 $880
- ----------------------------------------------------------------------------------------------------------------
Average Common and Common Equivalent Shares Outstanding... 181,074,984 184,417,030 179,990,602 185,038,631
Add: Shares Issuable Upon Exercise of Stock Options,
Warrants and Conversion of Restricted Stock Units....... 1,939,046 740,520 1,447,461 1,037,686
- ----------------------------------------------------------------------------------------------------------------
Shares of Common and Common Equivalent Stock Outstanding -
As Adjusted 183,014,030 185,157,550 181,438,063 186,076,317
- ----------------------------------------------------------------------------------------------------------------
Earnings Per Common Share Assuming Full Dilution $1.38 $1.48 $4.04 $4.73
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 1
Computation of Ratios of Earnings to Fixed Charges Exhibit 12
The Chase Manhattan Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1994 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net Income (Loss) ..................... $ 825 $ 976 $1,205 $ 966 $ 639 $ 520 $ (334)
Less: Cumulative Effect of Change in
Accounting Principle* ............ -- -- -- 500 -- -- --
- --------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Before Cumulative
Effect of Change in Accounting
Principle ........................... 825 976 1,205 466 639 520 (334)
Less: Equity in Undistributed
Income (Loss) of Unconsolidated
Subsidiaries and Associated
Companies ........................... 2 7 7 36 11 (32) (40)
Income Taxes .......................... 498 583 565 265 186 124 203
Fixed Charges Excluding Interest
On Deposits ......................... 1,660 1,736 2,187 2,670 2,277 1,988 3,190
- --------------------------------------------------------------------------------------------------------------------
Total Earnings, Excluding Interest On
Deposits, As Adjusted ............... 2,981 3,288 3,950 3,365 3,091 2,664 3,099
Interest On Deposits .................. 1,964 1,717 2,326 2,014 2,935 4,374 5,273
- --------------------------------------------------------------------------------------------------------------------
Total Earnings, Including Interest On
Deposits, As Adjusted ............... $4,945 $5,005 $6,276 $5,379 $6,026 $ 7,038 $ 8,372
- --------------------------------------------------------------------------------------------------------------------
Fixed Charges:
Interest Expense and Amortization
of Debt Discount and Issuance Costs,
Excluding Interest On Deposits ... $1,605 $1,685 $2,119 $2,591 $2,205 $ 1,920 $ 3,115
One-Third of Net Rental Expenses ...... 55 51 68 79 72 68 75
- --------------------------------------------------------------------------------------------------------------------
Total Fixed Charges For Ratio,
Excluding Interest On Deposits ...... 1,660 1,736 2,187 2,670 2,277 1,988 3,190
Interest On Deposits .................. 1,964 1,717 2,326 2,014 2,935 4,374 5,273
- --------------------------------------------------------------------------------------------------------------------
Total Fixed Charges For Ratio,
Including Interest On Deposits ..... $3,624 $3,453 $4,513 $4,684 $5,212 $ 6,362 $ 8,463
- --------------------------------------------------------------------------------------------------------------------
Ratio Of Earnings To Fixed Charges:
Excluding Interest On Deposits ........ 1.8x 1.9x 1.8x 1.3x 1.4x 1.3x **
Including Interest On Deposits ........ 1.4x 1.4x 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 ("Accounting for Income Taxes") in
the first quarter of 1993.
** For the year ended December 31, 1990, earnings did not cover fixed charges
by $91 million 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 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.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CHASE
MANHATTAN CORPORATION AND ITS SUBSIDIARIES (CHASE) CONSOLIDATED STATEMENT OF
CONDITION AT SEPTEMBER 30, 1995; THE CONSOLIDATED STATEMENTS OF INCOME, CHANGES
IN STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 AND THE FORM 10-Q OF THE CHASE MANHATTAN CORPORATION FOR THE QUARTER ENDED
SEPTEMBER 30, 1995. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS AND THE FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,141
<INT-BEARING-DEPOSITS> 5,798
<FED-FUNDS-SOLD> 10,959
<TRADING-ASSETS> 14,827
<INVESTMENTS-HELD-FOR-SALE> 5,807
<INVESTMENTS-CARRYING> 1,900
<INVESTMENTS-MARKET> 1,912
<LOANS> 64,821
<ALLOWANCE> 1,404
<TOTAL-ASSETS> 120,092
<DEPOSITS> 69,433
<SHORT-TERM> 17,295<F1>
<LIABILITIES-OTHER> 18,868<F2>
<LONG-TERM> 5,518
<COMMON> 389
0
1,400
<OTHER-SE> 7,189
<TOTAL-LIABILITIES-AND-EQUITY> 120,092
<INTEREST-LOAN> 4,323
<INTEREST-INVEST> 358
<INTEREST-OTHER> 1,544<F3>
<INTEREST-TOTAL> 6,225
<INTEREST-DEPOSIT> 1,964
<INTEREST-EXPENSE> 3,570
<INTEREST-INCOME-NET> 2,655
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 32
<EXPENSE-OTHER> 3,261
<INCOME-PRETAX> 1,323
<INCOME-PRE-EXTRAORDINARY> 825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 825
<EPS-PRIMARY> 4.07
<EPS-DILUTED> 4.04
<YIELD-ACTUAL> 3.50
<LOANS-NON> 604
<LOANS-PAST> 234
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,414
<CHARGE-OFFS> 332
<RECOVERIES> 115
<ALLOWANCE-CLOSE> 1,404
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Short term borrowings include the following:
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 12,539
Commercial Paper 1,564
Other Short-Term Borrowings 3,192
Total 17,295
<F2>Other liabilities include the following:
Trading Account Liabilities 10,959
Acceptances Outstandings 871
Accrued Interest Payable 734
Accounts Payable, Accrued Expenses
and Other Liabilities 6,304
Total 18,868
<F3>Other interest income includes the following:
Interest on Deposits Placed with Banks 426
Interest on Federal Funds Sold and
Securities Purchased Under Resale
Agreements 786
Interest on Trading Account Assets 332
Total 1,544
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS)
The following unaudited pro forma combined balance sheet combines the
historical consolidated balance sheets of Chemical Banking Corporation
("Chemical") and The Chase Manhattan Corporation ("Chase") giving effect to
the merger of Chemical and Chase (the "Merger"), which will be accounted
for as a pooling of interests, as if the Merger had been effective on September
30, 1995. The information set forth below should be read in conjunction with the
notes to the pro forma combined financial statements which describe the pro
forma adjustments. The effect of the estimated $1.5 billion restructuring charge
($925 million net of tax) expected to be taken in connection with the Merger has
been reflected in the pro forma combined balance sheet; however, since the
proposed restructuring charge is nonrecurring, it has not been reflected in the
pro forma combined statement of income. The pro forma financial data do not give
effect to the anticipated cost savings in connection with the Merger. The pro
forma financial data are not necessarily indicative of the actual financial
position that would have occurred had the Merger been consummated on September
30, 1995 or that may be obtained in the future.
<PAGE> 2
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
----------------------------------------------------------
CHEMICAL CHASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS (a,i,j,n)
Cash and Due from Banks $ 7,118 $ 5,141 $ - $ 12,259
Deposits with Banks 3,690 5,798 - 9,488
Federal Funds Sold and Securities
Purchased Under Resale Agreements 13,348 10,959 - 24,307
Trading Assets:
Debt and Equity Instruments 14,080 6,826 - 20,906
Risk Management Instruments 19,750 8,001 - 27,751
Securities: (b)
Held-to-Maturity 8,074 1,900 - 9,974
Available-for-Sale 26,017 5,807 (424) (c) 31,400
Loans 85,623 64,821 424 (c) 151,031
163 (d)
Allowance for Credit Losses (2,405) (1,404) - (3,809)
Premises and Equipment 2,134 1,866 (102) (o) 3,898
Due from Customers on Acceptances 1,200 862 - 2,062
Accrued Interest Receivable 1,301 1,201 - 2,502
Assets Acquired as Loan Satisfactions 56 - 72 (d) 128
Assets Held for Accelerated Disposition 202 - - 202
Other Assets 7,665 8,314 (235) (d) 15,744
--------- --------- ------- --------
TOTAL ASSETS $ 187,853 $ 120,092 $ (102) $307,843
========= ========= ======= ========
LIABILITIES
Deposits:
Domestic Noninterest-Bearing $ 18,482 $ 12,196 $ - $ 30,678
Domestic Interest-Bearing 45,826 19,917 - 65,743
Foreign 32,480 37,320 - 69,800
-------- --------- ------- --------
Total Deposits 96,788 69,433 - 166,221
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 30,911 12,539 - 43,450
Other Borrowed Funds 14,690 4,756 (4,946) (e) 14,500
Acceptances Outstanding 1,203 871 - 2,074
Trading Liabilities 20,664 10,959 4,946 (e) 36,569
Accounts Payable, Accrued Expenses and Other 4,229 7,038 144 (f) 12,297
Liabilities 925 (g)
(39) (o)
Long-Term Debt 7,537 5,518 - 13,055
------- ------- ----- -------
TOTAL LIABILITIES 176,022 111,114 1,030 288,166
STOCKHOLDERS' EQUITY
Preferred Stock 1,250 1,400 - 2,650
Common Stock 255 389 (203) (h) 441
Capital Surplus 6,444 4,357 (205) (h) 10,596
Retained Earnings 4,153 3,484 (144) (f) 6,256
(925) (g)
(249) (h)
(63) (o)
Net Unrealized Gain (Loss) on Securities
Available-for-Sale, Net of Taxes (135) 5 - (130)
Treasury Stock, at Cost (136) (657) 657 (h) (136)
--------- --------- ------- --------
TOTAL STOCKHOLDERS' EQUITY 11,831 8,978 (1,132) 19,677
--------- --------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 187,853 $ 120,092 $ (102) $307,843
========= ========= ======= ========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
<PAGE> 3
EXHIBIT 99
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following unaudited pro forma combined statements of income, for the
nine month periods ended September 30, 1995 and 1994, combine the historical
consolidated statements of income of Chemical and Chase giving effect to
the Merger, which will be accounted for as a pooling of interests, as if the
Merger had been effective as of the beginning of the periods indicated after
giving effect to the pro forma adjustments described in the notes to the pro
forma combined financial statements. The effect of the estimated $1.5 billion
restructuring charge ($925 million net of tax) expected to be taken in
connection with the Merger has been reflected in the pro forma combined balance
sheet; however, since the proposed restructuring charge is nonrecurring, it has
not been reflected in the pro forma combined statement of income. The pro forma
financial data do not give effect to the anticipated cost savings in connection
with the Merger. The pro forma financial data are not necessarily indicative of
the results that actually would have occurred had the Merger been consummated on
the dates indicated or that may be obtained in the future.
THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME FOR EACH OF THE
THREE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 ARE INCLUDED IN CHEMICAL'S
CURRENT REPORT ON FORM 8-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON OCTOBER 26, 1995.
<PAGE> 4
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
-------------------------------------------------------
CHEMICAL CHASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
(a,j,n)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 5,275 $ 4,323 $ 38 (e) $ 9,636
Securities 1,553 358 (38)(e) 1,873
Trading Assets 615 332 - 947
Federal Funds Sold and Securities Purchased Under Resale Agreements 612 786 - 1,398
Deposits with Banks 211 426 - 637
------- ------- ----- -------
Total Interest Income 8,266 6,225 - 14,491
------- ------- ----- -------
INTEREST EXPENSE
Deposits 2,725 1,964 - 4,689
Short-Term and Other Borrowings 1,614 1,307 - 2,921
Long-Term Debt 412 299 - 711
------- ------- ----- -------
Total Interest Expense 4,751 3,570 - 8,321
------- ------- ----- -------
NET INTEREST INCOME 3,515 2,655 - 6,170
Provision for Credit Losses 362 210 - 572
------- ------- ----- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 3,153 2,445 - 5,598
NONINTEREST REVENUE
Trust and Investment Management Fees 284 409 - 693
Corporate Finance and Syndication Fees 405 207 - 612
Service Charges on Deposit Accounts 225 - 91 (k) 316
Fees for Other Financial Services 891 831 (91)(k) 1,631
Trading Revenue 440 315 - 755
Securities Gains 98 32 (23)(c) 107
Other Revenue 465 345 23 (c) 833
------- ------- ----- -------
Total Noninterest Revenue 2,808 2,139 - 4,947
------- ------- ----- -------
NONINTEREST EXPENSE
Salaries 1,719 1,362 (3)(l) 3,078
Employee Benefits 328 418 (10)(f) 736
Occupancy Expense 395 278 - 673
Equipment Expense 295 249 24 (o) 568
Foreclosed Property Expense (21) - (39)(m) (60)
Restructuring Charge - - 15 (l) 15
Other Expense 1,035 954 (12)(l) 2,016
- - 39 (m) -
------- ------- ----- -------
Total Noninterest Expense 3,751 3,261 14 7,026
------- ------- ----- -------
Income Before Income Tax Expense and Effect of Accounting Change 2,210 1,323 (14) 3,519
Income Tax Expense 884 498 (6) 1,376
------- ------- ----- -------
INCOME BEFORE EFFECT OF ACCOUNTING CHANGE $ 1,326 $ 825 $ (8) $ 2,143
------- ------- ----- -------
Income Applicable to Common Stock $ 1,245 $ 733 $ (8) $ 1,970
------- ------- ----- -------
Income Per Share (Before Accounting Change):
Primary $ 4.95 $ 4.07 $ 4.49
Assuming Full Dilution $ 4.66 $ 4.04 $ 4.32
Average Common Share Outstanding:
Primary 251.3 180.0 438.5 (h)
Assuming Full Dilution 268.8 181.4 457.5 (h)
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
<PAGE> 5
CHEMICAL BANKING CORPORATION
AND THE CHASE MANHATTAN CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
-------------------------------------------------------
CHEMICAL CHASE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
(a,j,n)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 4,155 $ 3,929 $ 44 (c) $ 8,128
Securities 1,270 545 (44)(c) 1,771
Trading Assets 545 300 - 845
Federal Funds Sold and Securities Purchased Under Resale Agreements 372 1,048 - 1,420
Deposits with Banks 280 365 - 645
------- ------- ----- -------
Total Interest Income 6,622 6,187 - 12,809
------- ------- ----- -------
INTEREST EXPENSE
Deposits 1,660 1,717 - 3,377
Short-Term and Other Borrowings 1,056 1,456 - 2,512
Long-Term Debt 401 229 - 630
------- ------- ----- -------
Total Interest Expense 3,117 3,402 - 6,519
------- ------- ----- -------
NET INTEREST INCOME 3,505 2,785 - 6,290
Provision for Credit Losses 465 410 - 875
------- ------- ----- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 3,040 2,375 - 5,415
NONINTEREST REVENUE
Trust and Investment Management Fees 322 423 - 745
Corporate Finance and Syndication Fees 272 162 - 434
Service Charges on Deposit Accounts 222 - 80 (k) 302
Fees for Other Financial Services 854 799 (80)(k) 1,573
Trading Revenue 600 519 - 1,119
Securities Gains 65 95 (93)(c) 67
Other Revenue 447 383 93 (c) 923
------- ------- ----- -------
Total Noninterest Revenue 2,782 2,381 - 5,163
------- ------- ----- -------
NONINTEREST EXPENSE
Salaries 1,634 1,298 - 2,932
Employee Benefits 329 369 (10)(f) 688
Occupancy Expense 431 296 - 727
Equipment Expense 275 222 24 (o) 521
Foreclosed Property Expense 39 - 36 (m) 75
Restructuring Charge 48 - - 48
Other Expense 1,160 1,012 (36)(m) 2,136
------- ------- ----- -------
Total Noninterest Expense 3,916 3,197 14 7,127
------- ------- ----- -------
Income Before Income Tax Expense 1,906 1,559 (14) 3,451
Income Tax Expense 791 583 (6) 1,368
------- ------- ----- -------
NET INCOME $ 1,115 $ 976 $ (8) $2,083
------- ------- ----- -------
Income Applicable to Common Stock $ 1,007 $ 880 $ (8) $ 1,879
------- ------- ----- -------
Income Per Share:
Primary $ 3.98 $ 4.76 $ 4.22
Assuming Full Dilution $ 3.92 $ 4.73 $ 4.17
Average Common Shares Outstanding:
Primary 253.0 185.0 445.4 (h)
Assuming Full Dilution 260.6 186.1 454.1 (h)
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
<PAGE> 6
EXHIBIT 99
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Chemical and Chase are in the process of reviewing their accounting
policies and as a result of this review, it may be necessary to restate
either Chemical's or Chase's financial statements to conform to
those accounting policies that are determined to be most appropriate by
the combined company. While some restatements of prior periods have been
included in the pro forma combined financial statements included in this
Exhibit, further restatements may be necessary upon the completion of this
review process.
(b) Chemical and Chase intend to review their combined securities
portfolio to determine the classification of such securities as either
available-for-sale or held-to-maturity in connection with the combined
company's anticipated interest rate risk position. As a result of this
review, certain reclassifications of the combined company's securities
might take place. No such adjustments have been made to existing
securities classifications in the pro forma condensed combined balance
sheet. Any such reclassifications will be accounted for in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
(c) Chase's historical financial data includes within available-for-sale
securities certain securities issued by foreign governments (such as
Mexico) to financial institutions as part of a debt renegotiation (i.e.,
"Brady Bonds"). To conform to Chemical's classification, Chase's
historical financial data have been reclassified on a pro forma basis to
reflect such securities as a component of loans. Both Chemical and
Chase have accounted for Brady Bonds in accordance with the provisions of
SFAS 115.
Chase's historical financial data reflect sales of Brady Bonds as a
component of securities gains and interest income from Brady Bonds as a
component of interest income from securities. To conform to
Chemical's classification, Chase's historical financial data have been
reclassified on a pro forma basis to reflect sales of Brady Bonds as a
component of other revenue and interest income from Brady Bonds as a
component of interest income from loans.
(d) Chase's historical financial data reflect assets acquired as loan
satisfactions as a component of other assets. Effective January 1, 1995,
Chase adopted SFAS 114, "Accounting by Creditors for Impairment of a
Loan," and prospectively classified in substance foreclosures (ISFs) as
nonperforming loans (the ISF balance as of the January 1, 1995 adoption
remained in other assets). To conform to Chemical's classification,
Chase's September 30, 1995 historical financial data have been
reclassified on a pro forma basis to reflect the remaining $163 million
balance of ISFs as nonperforming loans. To conform to Chemical's
classification, Chase's historical financial data have been reclassified
on a pro forma basis to reflect assets acquired as loan satisfactions
(excluding ISFs) as a separate balance sheet caption.
(e) Chemical's historical financial data reflect securities sold but
not yet purchased as a component of other borrowed funds. To conform to
Chase's classification, Chemical's historical financial data have
been reclassified on a pro forma basis to reflect its securities sold but
not yet purchased as a component of trading liabilities.
(f) Chase elected at the time of its adoption of SFAS No. 106 (effective
January 1, 1993) to amortize the transition liability for accumulated
postretirement benefits over 20 years, while Chemical upon its
adoption of SFAS No. 106 (effective January 1, 1993) elected to expense
its entire transition liability. To conform with Chemical's adoption of
SFAS No. 106, Chase's historical financial data have been
<PAGE> 7
adjusted on a pro forma basis to reverse the amortization of Chase's
transition liability reflected as a component of OPEB expense under SFAS
106. Chase's transition liability of approximately $270 million ($167
million after-tax), net of the $38 million ($23 million after-tax)
reversal of amortization expense, has been reflected in retained earnings
on the pro forma consolidated balance sheet. Both the pre-tax and tax
effect are included in the caption "Accounts Payable, Accrued Expenses and
Other Liabilities" on the pro forma balance sheet.
(g) In connection with the Merger, it is expected that a one-time
restructuring charge of approximately $1.5 billion ($925 million
after-tax) will be incurred at the time of the consummation of the Merger.
The restructuring charge is the result of severance expenses to be
incurred in connection with anticipated staff reductions, costs incurred
in connection with planned office eliminations and other merger-related
expenses, including costs to eliminate redundant back office and other
operations of Chemical and Chase. The restructuring charge is
assumed to have the following components for the purpose of the pro forma
financial statements:
(IN MILLIONS)
<TABLE>
<CAPTION>
<S> <C>
Severance . . . . . . . . . . . . . . . $ 550
Real Estate Costs . . . . . . . . . . . 550
Other . . . . . . . . . . . . . . . . . 400
-------
$ 1,500
-------
</TABLE>
The effect of the proposed restructuring charge has been reflected in the
pro forma combined balance sheet; however, since the proposed
restructuring charge is nonrecurring, it has not been reflected in the pro
forma combined statement of income. Both the pre-tax and tax effect are
included in the caption "Accounts Payable, Accrued Expenses and Other
Liabilities" on the pro forma balance sheet.
(h) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis and, accordingly, the related pro forma
adjustments to the common stock, capital surplus and retained earnings
accounts at September 30, 1995 reflect (i) an exchange of 186.1 million
shares of Chemical's Common Stock (using the exchange ratio of
1.04) for the 179.0 million shares of Chase common stock outstanding at
September 30, 1995; (ii) the exchange of each outstanding share of Chase
preferred stock into one share of Chemical's preferred stock; and
(iii) the cancellation and retirement of all remaining shares of Chase
common stock held in Chase's treasury. Reference is made to the Form 8-K,
which Chemical has filed with the Securities and Exchange
Commission on October 26, 1995, for more information regarding the Merger.
For the income per share calculations, the pro forma combined average
common shares outstanding (primary and assuming full dilution) reflects
the exchange of Chemical's Common Stock (using the exchange ratio
of 1.04) for the outstanding shares of Chase common stock.
(i) The pro forma financial information presented does not give effect to the
planned net repurchase of up to a maximum of 9 million shares in the
aggregate of Chemical's Common Stock and of Chase's Common Stock
(after giving effect to the issuance of shares by both Chemical and
Chase under various employee benefit plans) prior to the consummation of
the Merger pursuant to their respective previously announced buyback
programs.
(j) On September 2, 1995, Chase acquired the securities processing businesses
of U.S. Trust Corporation which was merged into Chase and accounted for
under the purchase method. The results of U.S. Trust Corporation are
included in these statements from the date of acquisition.
<PAGE> 8
Chemical's disposition of approximately 60% of Chemical Bank New
Jersey, National Association in the 1995 fourth quarter is not considered
significant to the pro forma combined financial statements and, therefore,
its impact is not included in these statements.
(k) Chase's historical financial data reflect service charges on deposit
accounts as a component of fees for other financial services. To conform
to Chemical's classification, such charges have been reclassified
under a separate caption.
(l) Chase's historical financial statements reflect the components of
restructuring charges within various noninterest expense categories. To
conform to Chemical's classification, all such charges have been
reclassified to restructuring charge.
The following costs have been reclassified:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, 1995
------------------------
(IN MILLIONS)
<S> <C>
Salaries . . . . . . . . . . . . . . . . . . . . . $ 3
Other Expense . . . . . . . . . . . . . . . . . . 12
------
Costs reclassified to Restructuring Charge . . . . $ 15
======
</TABLE>
(m) Chase's historical financial data reflect foreclosed property expense as a
component of other expense. To conform to Chemical's classification,
Chase's historical financial data have been reclassified on a pro forma
basis to reflect foreclosed property expense as a separate income
statement caption.
(n) Transactions between Chemical and Chase are not material in relation to
the pro forma combined financial statements and therefore intercompany
balances have not been eliminated from the pro forma combined amounts.
(o) Chase's historical financial data reflect the capitalization of computer
software costs. To conform to Chemical's accounting policy, Chase's
historical financial data have been adjusted on a pro forma basis to
recognize immediately as expense those computer software costs that are
capitalized.
The pro forma adjustment to the balance sheet reflects the unamortized
capitalized computer software costs of $102 million ($63 million net of
tax) as of September 30, 1995. The pro forma adjustment to the statement
of income for each period reflects the net impact of (i) charging to
expense computer software costs that were capitalized during each
respective period less (ii) the elimination of the previously recorded
amortization of capitalized computer software costs.
