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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 17, 1994
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First Chicago Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-6052 36-2669970
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First National Plaza, Chicago, IL 60670
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312-732-4000
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Item 5. Other Events
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The Registrant hereby incorporates by reference the information contained in
Attachment A hereto in response to this Item 5.
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 hereunto duly authorized.
First Chicago Corporation
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(Registrant)
Date: January 17, 1994 By: /s/ David P. Bolger
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Title: Senior Vice President and
Treasurer
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ATTACHMENT A
CHICAGO, Jan. 17, 1994 -- First Chicago Corporation today reported record
profits for 1993. Net income for the year was $804.5 million, or $8.78 per
share. Return on common stockholders' equity was 24.2 percent. Earnings from the
venture capital business were $204 million, or $2.29 per share, for 1993.
For the fourth quarter, the Corporation earned net income of $172.8 million,
or $1.81 per common share. Return on common stockholders' equity was 18.3
percent. Earnings from the venture capital business were $7 million, or five
cents per share, for the fourth quarter. Excluding the venture capital
contribution, quarterly earnings were up 83 percent from a year earlier.
In the fourth quarter of 1992, net income was $137 million, or $1.53 per
share. Net income for the full year 1992 was $94 million, or 64 cents per share,
reflecting the $625 million special provision for combined credit losses related
to the accelerated asset disposition program.
FULL YEAR HIGHLIGHTS
. The Corporation's earnings from core businesses were consistently strong
each quarter throughout the year.
. Equity securities gains of $381 million were recognized in the venture
capital portfolio in 1993. Net income from the venture capital business --
revenues less the portfolio's cost-to-carry and other expenses -- was $204
million, or $2.29 per share, for the year. In 1992, venture capital earnings
were $80 million, or 95 cents per share.
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. Earnings from the credit card business grew substantially in 1993. Total
managed receivables ended the year at $10.7 billion, up from $8.6 billion at
year-end 1992. Average credit card outstandings for the year increased 21
percent over 1992 levels.
. Combined trading profits reached a record $285 million for the year,
compared with $177 million in 1992. Foreign exchange trading, interest rate
swap and option transactions, and emerging markets trading were the key
activities driving this performance.
. Credit quality at December 31, 1993, was excellent. Nonperforming assets
were $277 million, or 1.2 percent of loans and other real estate. The ratio
of the allowance for credit losses to nonperforming loans at year-end was
292 percent. Total commercial provision expense for the year was $78
million, or 54 basis points of related loans -- a significant improvement
from 165 basis points in 1992.
. As of December 31, 1993, approximately 89 percent of the net value of the
accelerated asset disposition portfolio had been liquidated, well ahead of
the Corporation's "price and pace" objectives. The carrying value of the
portfolio was $126 million at year-end, down from $1.0 billion at December
31, 1992. This value represented 26 percent of original contractual
exposure, compared with 46 percent a year earlier. Net gains of $60 million
from portfolio activity were recognized in noninterest income in 1993.
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. The Corporation's regulatory capital ratios, and those of all its banking
subsidiaries, remain significantly above the guidelines for
"well-capitalized" status. At December 31, 1993, the estimated Tier 1 ratio
was 8.8 percent, and the total risk-adjusted ratio was approximately 13.5
percent. Year-ago ratios were 6.7 percent and 10.8 percent, respectively.
. First Chicago's book value increased to $40.55 per common share at the end
of 1993 from $33.19 at year-end 1992.
FOURTH QUARTER HIGHLIGHTS
. The credit card business continued to contribute significantly to earnings.
Total managed credit card receivables grew 11 percent in the quarter to
$10.7 billion from $9.6 billion at September 30, 1993.
. The carrying value of the accelerated asset disposition portfolio declined
$118 million during the quarter to $126 million at December 31, 1993, or 26
percent of original contractual exposure. A net gain of $30 million from
portfolio activity was recognized in noninterest income in the fourth
quarter.
. The Corporation reclassified its $196 million reserve for securitized credit
card receivables from the "allowance for credit losses" to "other assets."
This reclassification was made to be consistent with industry practice and
had no impact on reserves available for losses or on reported earnings.
. The provision for commercial credits was $8 million for the fourth quarter,
representing 22 basis points of related loans.
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. Total equity securities gains were $40 million, of which $20 million were
generated from the venture capital portfolio. Net income from the venture
capital business was $7 million, or five cents per share, in the fourth
quarter. In 1992's fourth quarter, venture capital earnings were $48
million, or 57 cents per share.
NET INTEREST INCOME
Net interest income on a tax-equivalent basis was $307 million for the fourth
quarter. Net interest margin was 2.49 percent, and average earning assets were
$49.0 billion.
Adjusted for the effects of credit card securitization and the activities of
the Corporation's capital markets subsidiary, net interest margin was 3.62
percent. Adjusted net interest margin was 3.78 percent in the fourth quarter of
1992 and 3.98 percent in the third quarter of 1993.
For the full year, adjusted net interest margin was 3.70 perent, compared with
3.45 percent in 1992. Gains on Brazilian bonds and a required revaluation of
leveraged leases in conjunction with the change in tax rates added 9 basis
points to adjusted net interest margin in 1993.
NONINTEREST INCOME
Total noninterest income was $523 million for the fourth quarter. Combined
trading activities generated revenues of $61 million.
Equity securities gains were $40 million, including $20 million from the
venture capital portfolio. The remaining gains of $20 million were realized from
equity securities held in conjunction with corporate financing activities and
the sale of Chilean equity positions previously received in exchange for debt.
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Net gains of $30 million from accelerated disposition activities were
recorded in other revenue.
For the year, noninterest income totaled $2.202 billion and included $480
million in equity securities gains.
NONINTEREST EXPENSE
Operating noninterest expense was $481 million for the quarter. Higher
incentive compensation costs versus prior periods and increased expenses for
the credit card business are reflected in this total. The provision for other
real estate was $1 million.
Operating noninterest expense for 1993 was $1.854 billion, compared with
$1.764 billion a year earlier. In 1992 these expenses included charges of $86
million principally for reserves related to occupancy, asset disposition and
litigation matters.
CREDIT QUALITY
The provision for credit losses was $70 million for the fourth quarter. This
included $62 million for the consumer portfolios and $8 million for commercial
credits.
For the year, the provision for credit losses was $270 million, down
substantially from $425 million in 1992 before the special provision.
The Corporation's allowance for credit losses was $683 million at year-end. Of
this total, $488 million was related to the commercial exposure segment and $195
million to the consumer portfolios.
The reclassification of reserves related to securitized credit card
receivables reduced the ratio of total allowance to nonperforming loans.
However, it had no impact on the ratio of commercial reserves to commercial
nonperfoming loans, which was 209 percent at the end of 1993.
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Net charge-offs were $39 million for the fourth quarter. Commercial net
charge-offs were $10 million. Consumer net charge-offs, mainly in the credit
card portfolio, were $29 million. The net charge-off rate for credit card
receivables was 3.5 percent.
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First Chicago Corporation and Subsidiaries
Comparative Summary
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<CAPTION>
Three Months Ended December 31
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(In millions, except per share data) 1993 1992 Change
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<S> <C> <C> <C>
Net interest income--tax-equivalent basis........................... $ 306.9 $ 326.2 - 6%
Provisions for credit and real estate losses (including provisions
for assets held for accelerated disposition)...................... 71.2 81.5 - 13%
Noninterest income.................................................. 523.0 436.0 + 20%
Noninterest expense (excluding provisions for other real estate).... 480.7 461.2 + 4%
Net income.......................................................... 172.8 136.6 + 27%
Earnings per share
Primary........................................................... 1.81 1.53 + 18%
Average common and common equivalent shares (in millions)....... 87.7 81.7 + 7%
Fully diluted..................................................... 1.77 1.49 + 19%
Average shares, assuming full dilution (in millions)............ 91.5 85.1 + 7%
Average balances
Loans............................................................. 22,263 22,761 - 2%
Earning assets.................................................... 48,977 47,654 + 3%
Total assets...................................................... 57,708 56,167 + 3%
Common equity..................................................... 3,451 2,616 + 32%
Stockholders' equity.............................................. 4,212 3,235 + 30%
Net interest margin................................................. 2.49% 2.72% - 8%
Return on assets.................................................... 1.19% 0.97% + 23%
Return on common stockholders' equity............................... 18.3% 19.0% - 4%
For the Year
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1993 1992 Change
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Net interest income--tax-equivalent basis........................... $1,264.0 $1,217.0 + 4%
Provisions for credit and real estate losses (including provisions
for assets held for accelerated disposition)...................... 274.2 1,106.9 -
Noninterest income.................................................. 2,202.4 1,488.2 + 48%
Noninterest expense (excluding provisions for other real estate).... 1,853.9 1,764.4 + 5%
Income (loss) before cumulative effect of changes in
accounting principles............................................. 804.5 (114.5) -
Cumulative effect of changes in accounting principles--
Valuation of venture capital investment securities................ - 220.7 -
Recognition of credit card solicitation costs..................... - (12.7) -
Net income.......................................................... 804.5 93.5 -
Earnings per share
Primary
Income (loss) before cumulative effect of changes in
accounting principles........................................... 8.78 (2.08) -
Cumulative effect of changes in accounting principles............. - 2.72 -
Net income........................................................ 8.78 0.64 -
Average common and common equivalent shares (in millions)....... 85.2 76.5 + 11%
Fully Diluted
Income (loss) before cumulative effect of changes in
accounting principles........................................... 8.43 (2.08) -
Cumulative effect of changes in accounting principles............. - 2.72 -
Net income........................................................ 8.43 0.64 -
Average shares, assuming full dilution (in millions)............ 90.3 79.7 + 13%
Average balances
Loans............................................................. 21,997 24,347 - 10%
Earning assets.................................................... 48,517 46,706 + 4%
Total assets...................................................... 56,854 54,768 + 4%
Common equity..................................................... 3,092 2,733 + 13%
Stockholders' equity.............................................. 3,886 3,314 + 17%
Net interest margin................................................. 2.61% 2.61% -
Return on assets.................................................... 1.42% 0.17% -
Return on common stockholders' equity............................... 24.2% 1.8% -
At December 31
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1993 1992 Change
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Total assets........................................................ $52,560 $49,281 + 7%
Total deposits...................................................... 28,186 29,740 - 5%
Loans............................................................... 23,103 22,692 + 2%
Common stockholders' equity......................................... 3,503 2,732 + 28%
Stockholders' equity................................................ 4,264 3,401 + 25%
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<TABLE>
<CAPTION>
First Chicago Corporation
Credit Data--Accelerated Disposition Portfolio
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(In millions)
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Accelerated Disposition Portfolio--Exposure:
12/31/93 9/30/93 6/30/93 3/31/93 12/31/92
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<S> <C> <C> <C> <C> <C>
Loans
Performing...................... $ 20 $111 $163 $244 $ 504
Nonperforming................... 16 21 27 70 115
Other Real Estate Assets........ 71 79 165 207 257
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Subtotal.................... 107 211 355 521 876
Off-Balance Sheet Exposure...... 19 33 47 74 161
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Total Portfolio............. $126 $244 $402 $595 $1,037
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Disposition Value as a Percentage
of Original Contractual Exposure. 26% 33% 38% 41% 46%
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CAPITAL DATA
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12/31/93 9/30/93 6/30/93 3/31/93 12/31/92
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Common Equity/Assets*............ 7.2% 7.0% 6.5% 6.4% 5.9%
Risk-Based Capital Ratios:**
Tier 1......................... 8.8% 8.7% 8.0% 7.8% 6.7%
Total.......................... 13.5% 13.5% 13.0% 12.4% 10.8%
Leverage Ratio................... 8.0% 8.0% 7.4% 7.3% 6.6%
Book Value of Common Equity...... $40.55 $39.03 $36.27 $34.78 $33.19
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*Net of investment in First Chicago Capital Markets, Inc.
**Based on 1992 guidelines. 12/31/93 ratios are estimated.
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FIRST CHICAGO CORPORATION
CREDIT DATA -- Excluding Accelerated Disposition Portfolio
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<CAPTION>
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For the Quarter Ending
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(Dollars in millions) 12/31/93 9/30/93 6/30/93 3/31/93 12/31/92
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<S> <C> <C> <C> <C> <C>
Provision for Credit Losses:
Commercial.......................................... $ 8 $ 19 $ 24 $ 27 $ 31
Consumer............................................ 62 46 46 38 49
Total............................................... 70 65 70 65 80
Total Charge-offs................................... 66 59 54 100 69
Total Recoveries.................................... 27 22 22 26 35
Net Charge-offs:
Commercial:
Commercial Real Estate......................... 9 21 5 16 10
Other Commercial............................... 1 (5) 1 30 (1)
Total Commercial............................... 10 16 6 46 9
Consumer.......................................... 29 21 26 28 25
Total............................................... 39 37 32 74 34
Nonperforming Assets:
Commercial Real Estate.............................. 108 151 190 143 93
Troubled-County Debtor.............................. 50 57 57 57 76
Other............................................... 76 99 123 151 222
Nonperforming Loans............................... 234 307 370 351 391
Other Real Estate, net.............................. 43 44 45 26 23
Total Nonperforming Assets (NPA).................. 277 351 415 377 414
NPA as Percentage of Loans and Other Real Estate.... 1.2% 1.6% 1.9% 1.7% 1.8%
Total Reserve as a Percentage of Loans*............. 3.0% 2.9% 2.9% 2.8% 2.8%
Total Reserve as a Percentage of Nonperforming Loans* 292% 208% 170% 174% 160%
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* The Corporation reclassified its reserve for securitized credit card
receivables from the allowance for credit losses to other assets. These
percentages have been adjusted to give effect to this change. The following
table shows the allowance for credit losses prior to the change, the impact
of the reclassification, and the allowance for credit losses as adjusted for
the periods indicated (in millions):
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<CAPTION>
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As of December 31
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1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
Allowance for credit
Losses prior to change................... $ 879 $ 791 $ 884 $ 994 $1,278
Reclassification to
other assets............................. (196) (167) (125) (97) (46)
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Allowance for credit
losses as adjusted....................... $ 683 $ 624 $ 759 $ 897 $1,232
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