<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
FINANCIAL SUPPLEMENT AND FORM 10-Q
CONTENTS
- - ---------------------------------------------------------------
FIVE-QUARTER SUMMARY OF SELECTED FINANCIAL INFORMATION 1
BUSINESS SEGMENTS 2
EARNINGS ANALYSIS
Summary 5
Net Interest Income 6
Provision for Credit Losses 7
Noninterest Income 8
Noninterest Expense 10
Applicable Income Taxes 10
Venture Capital Activities 11
BALANCE SHEET ANALYSIS
Assets 12
Liabilities 12
Capital 13
CREDIT RISK ANALYSIS
Summary 14
Allowance for Credit Losses 15
Nonperforming Assets 16
Consumer Risk Management 17
Commercial Risk Management 18
Commercial Real Estate 18
Highly Leveraged Transactions 19
FINANCIAL SECTION
Consolidated Balance Sheet 20
Consolidated Income Statement 21
Consolidated Statement of Changes in Stockholders' Equity 22
Consolidated Statement of Cash Flows 23
Notes to Consolidated Financial Statements 24
SELECTED STATISTICAL INFORMATION
Investment Securities 27
Impact of Credit Card Securitization 28
Analysis of Allowance for Credit Losses 29
Average Balances/Net Interest Margin/Rates 30
Five-Quarter Consolidated Income Statement 32
Selected Statistical Information 33
Financial Ratios 33
Common Stock Data 33
FORM 10-Q
Form 10-Q Cross-Reference Index 35
Signatures 37
<PAGE>
<TABLE>
<CAPTION>
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F I V E - Q U A R T E R S U M M A R Y O F S E L E C T E D F I N A N C I A L I N F O R M A T I O N
First Chicago Corporation and Subsidiaries
- - ----------------------------------------------------------------------------------------------------------------------
March December September June March
(Dollars in millions, except per share data) 1994 1993 1993 1993 1993
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA FOR THE QUARTER
Net interest income.............................................. $ 330.6 $ 300.7 $ 323.1 $ 303.2 $ 298.8
Tax-equivalent adjustment........................................ 4.9 6.2 17.5 8.3 6.2
------- ------- ------- ------- -------
Net interest income--tax-equivalent basis........................ 335.5 306.9 340.6 311.5 305.0
Combined credit provisions....................................... 50.2 71.2 66.5 71.0 65.5
Noninterest income............................................... 501.9 523.0 685.4 503.5 490.5
Noninterest expense (1).......................................... 484.3 480.7 474.0 465.6 433.6
Net income....................................................... 193.8 172.8 284.1 168.5 179.1
- - ----------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Net income - Primary............................................. $ 2.05 $ 1.81 $ 3.14 $ 1.81 $ 1.97
Net income - Fully diluted....................................... 2.00 1.77 2.97 1.72 1.91
- - ----------------------------------------------------------------------------------------------------------------------
AT QUARTER-END
Assets........................................................... $59,843 $52,560 $53,154 $49,936 $48,482
Deposits......................................................... 28,833 28,186 29,379 27,794 27,687
Loans............................................................ 23,782 23,103 21,969 21,621 21,666
Long-term debt................................................... 2,265 2,065 2,091 2,366 1,905
Common stockholders' equity...................................... 3,647 3,503 3,378 3,018 2,888
Stockholders' equity............................................. 4,408 4,264 4,139 3,887 3,757
- - ----------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Assets........................................................... $61,475 $57,708 $56,932 $56,951 $55,826
Earning assets................................................... 49,488 48,977 48,403 48,749 47,939
Loans............................................................ 22,460 22,263 21,588 21,974 22,162
Deposits......................................................... 29,366 29,075 29,343 30,062 30,229
Common stockholders' equity...................................... 3,620 3,451 3,177 2,937 2,803
Stockholders' equity............................................. 4,381 4,212 4,004 3,806 3,521
- - ----------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Return on stockholders' equity................................... 17.9% 16.3% 28.2% 17.8% 20.6%
Return on common stockholders' equity............................ 20.2 18.3 33.8 20.9 23.9
Return on assets................................................. 1.28 1.19 1.98 1.19 1.30
- - ----------------------------------------------------------------------------------------------------------------------
CAPITAL DATA (2)
Common-equity-to-assets.......................................... 6.6% 7.2% 7.0% 6.5% 6.4%
Regulatory leverage ratio........................................ 7.8 8.0 8.0 7.4 7.3
Risk-based capital
Tier 1 ratio................................................... 9.1 8.8 8.7 8.0 7.8
Total capital ratio............................................ 14.2 13.6 13.5 13.0 12.4
Tier 1 capital................................................. $ 4,182 $ 4,098 $ 3,969 $ 3,715 $ 3,571
Total capital.................................................. 6,509 6,292 6,179 6,001 5,700
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COMMON SHARE AND STOCKHOLDER DATA FOR THE QUARTER ENDED
Market price (at quarter-end).................................... $48 1/8 $43 1/4 $48 3/4 $41 1/8 $41 5/8
Book value (at quarter-end)...................................... 42.19 40.55 39.03 36.27 34.78
Dividends declared per common share.............................. 0.40 0.40 0.30 0.30 0.30
Common dividends................................................. 34 35 26 25 24
Preferred dividends.............................................. 14 14 13 16 14
Dividend payout ratio............................................ 19.5% 22.1% 9.6% 16.6% 15.2%
Average number of common and common-equivalent
shares (in millions)........................................... 87.7 87.7 86.1 84.5 84.1
Average number of shares, assuming full dilution (in millions)... 91.6 91.5 91.9 91.4 88.0
- - ----------------------------------------------------------------------------------------------------------------------
(1) Excludes provisions for other real estate.
(2) Net of investment in First Chicago Capital Markets, Inc.
</TABLE>
1
<PAGE>
BUSINESS SEGMENTS
The Corporation's financial results have been prepared in alignment with its
three major business segments: Corporate and Institutional, Consumer, and
Middle Market Banking. Results from other corporate activities, including
venture capital, the accelerated asset disposition portfolio and other corporate
items, are segregated and reported separately.
Segment financial results are derived from the Corporation's internal
profitability reporting system and reflect full allocation of all items,
including institutional assets and overhead items. The Corporation maintains a
detailed funds transfer pricing system that charges or credits assets and
liabilities based on known or assumed repricing characteristics. In cases where
liquidity characteristics differ significantly from repricing characteristics, a
liquidity charge or credit is assigned. Common equity is allocated to each
segment based on the measured risk of that segment using historical loss and
volatility data.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31
Corporate and Consumer Middle Market Other Corporate
(Dollars in millions, Institutional Banking Banking Banking Activities (1)
except where noted) 1994 1993 1994 1993 1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income-
tax-equivalent
basis..................... $ 96 $ 93 $ 189 $151 $57 $56 $ (7) $ 5
Combined credit
provisions................ - 12 43 42 7 12 - -
Noninterest income......... 93 175 226 190 20 21 163 104
Noninterest expense (2).... 173 180 225 202 47 46 39 6
Net income................. 9 47 89 58 15 12 81 62
Return on equity (3)....... -% 12% 44% 34% 19% 14% N/M N/M
Efficiency ratio (4)....... 92% 67% 54% 59% 61% 60% N/M N/M
Average assets
(in billions)............. $44.2 $39.5 $10.2 $8.6 $5.6 $5.5 $1.5 $2.2
- - -----------------------------------------------------------------------------------------------------------------------------------
(1) Includes results from the accelerated asset disposition portfolio, the venture capital group and other special
corporate items.
(2) Excludes provision for other real estate.
(3) The capital allocation method was changed in 1993. Prior results have been restated to reflect this change, which
did not have a material impact on results.
(4) Noninterest expense as a percentage of total revenue.
N/M - Not meaningful.
</TABLE>
CORPORATE AND INSTITUTIONAL BANKING
Corporate and Institutional Banking net income was $9 million for the first
quarter, down significantly from previous quarters. First quarter performance
reflected the following factors:
- Lower trading revenues, driven by losses in the Emerging Markets unit.
- Increased servicing revenues, reflecting growth in both cash management and
securities services.
- Excellent credit quality.
- Constrained noninterest expenses, in part due to lower incentive
compensation accruals.
2
<PAGE>
Revenue performance by activity, which includes both net interest income and fee
revenue, is summarized in the following table.
<TABLE>
<CAPTION>
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Three Months Ended
March 31
(In millions) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Lending......................................... $ 42 $ 46
Servicing....................................... 94 83
Financing....................................... 36 41
Trading......................................... 2 79
Other........................................... 15 19
---- ----
Total....................................... $189 $268
==== ====
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</TABLE>
Lending revenue was down primarily because of continued efforts to manage loan
usage in the context of overall customer relationship returns. Corporate and
Institutional Banking average loan volume for the first quarter was $1.3 billion
lower than a year earlier.
Servicing revenue was up 13 percent, reflecting growth in both cash management
and securities processing services--particularly mortgage custody and
shareholder services.
Slightly lower revenue from financing activities was generally associated with
the timing of transactions and lower leasing gains.
The composition of the quarter's trading revenue, which includes both net
interest income and trading account profits and losses, is presented in the
following table.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
Three Months Ended
March 31
(In millions) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Foreign exchange and derivatives................ $ 4 $11
Fixed income and derivatives.................... 14 24
Emerging markets................................ (49) 10
Funding and arbitrage........................... 12 18
Other trading................................... 21 16
---- ---
Total....................................... $ 2 $79
==== ===
- - -------------------------------------------------------------------------
</TABLE>
Foreign exchange and derivatives results reflected difficult market conditions,
particularly for overseas trading. The decline in fixed income and derivatives
trading revenue was driven by lower profits from government bonds and asset-
backed securities trading. Emerging markets losses reflected extreme volatility
and reduced liquidity in these markets during the first quarter.
CONSUMER BANKING
Combined net income from the credit card business and local retail banking was
$89 million, an increase of more than 53 percent over last year's first quarter.
The return on equity from these activities continued to be very strong at 44
percent for the quarter.
3
<PAGE>
Growth in credit card receivables and related revenues was mainly responsible
for this performance, and the Corporation continues to invest aggressively in
the solicitation of new accounts. The operating efficiency in this business
continued to be excellent. Charge-off rates remained steady, around the 3.5
percent level, in the first quarter.
Revenues and expenses in local retail banking were essentially unchanged from a
year ago, while the provision for credit losses declined modestly.
MIDDLE MARKET BANKING
Middle Market Banking (American National Corporation) earned $15 million in the
first quarter, up 25 percent from the year-earlier quarter. Return on equity
was 19 percent. The provision for credit losses was $7 million, compared with
$12 million a year ago, and noninterest expense was up less than 2 percent.
OTHER CORPORATE ACTIVITIES
The combination of the venture capital business, the asset disposition portfolio
and other special corporate items added $81 million to the quarter's earnings.
Venture capital net income was the most significant piece--$69 million--largely
the result of gains related to the Corporation's investment in NEXTEL
Communications, Inc.
In addition, the Corporation's $35 million gain on the sale of its remaining
interest in Brinson Holdings, Inc., an institutional investment management
business, was recorded in other corporate activities. Also included in this
category were special expenses totaling $42 million related to a reduction in
the estimated useful life of personal computer equipment, litigation, and other
corporate items.
STAFFING LEVELS
Staff levels for each of the three business segments as well as corporate
support functions were as follows.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Average Full-Time-Equivalent 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Staff 1994 1993 1993 1993 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Corporate and Institutional... 6,315 6,280 6,349 6,241 6,251
Consumer...................... 7,390 7,304 7,392 7,256 7,198
Middle Market................. 2,062 2,032 2,037 2,011 2,037
Corporate Support............. 1,514 1,502 1,538 1,483 1,481
------ ------ ------ ------ ------
First Chicago Corporation... 17,281 17,118 17,316 16,991 16,967
====== ====== ====== ====== ======
- - -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
EARNINGS ANALYSIS
SUMMARY
The Corporation reported net income of $193.8 million for the first quarter of
1994, compared with $179.1 million for the first quarter of 1993.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
(Dollars in millions, March 31
except per share data) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Net interest income--tax-equivalent basis.................... $335.5 $305.0
Combined credit provisions................................... 50.2 65.5
Noninterest income........................................... 501.9 490.5
Noninterest expense (1)...................................... 484.3 433.6
Net income................................................... 193.8 179.1
Common Share Data
PRIMARY
Net income................................................. 2.05 1.97
Average common and common-equivalent shares
(in millions)............................................. 87.7 84.1
FULLY DILUTED
Net income................................................. 2.00 1.91
Average shares, assuming full dilution
(in millions)............................................ 91.6 88.0
Return on assets............................................. 1.28% 1.30%
Return on common stockholders' equity........................ 20.2 23.9
- - -------------------------------------------------------------------------------
</TABLE>
(1) Excludes provision for other real estate.
The credit card business was a major contributor to earnings, as managed
receivables grew to $10.4 billion at March 31, 1994, up 23 percent from a year
ago.
Net interest income grew 10 percent from the year-earlier quarter, mainly due to
growth in the credit card business, along with increased loans to middle market
customers.
Combined trading losses were $25 million in the first quarter of 1994, compared
with profits of $55 million in the first quarter of 1993. The 1994 results were
principally driven by a loss of $54 million in emerging markets securities
trading.
Net income from the venture capital business -- including revenues, the
portfolio's cost-to-carry and other expenses -- was $69 million in the quarter,
or 73 cents per share. Total equity securities gains were $134 million, of
which $119 million was generated from the venture capital group. During the
first quarter of 1994, the Corporation issued 7.5 million notes in the form of
Debt Exchangeable for Common Stock ("DECS") related to its venture capital
investment in NEXTEL Communications, Inc. The impact of this transaction, along
with subsequent appreciation and sales of NEXTEL common stock, accounted for
over 80 percent of the venture capital gains.
Strong credit quality resulted in a provision for credit losses of $50 million
for the quarter, a significant improvement from one year ago.
5
<PAGE>
Other revenue for the first quarter of 1994 included a $35 million gain on the
sale of the Corporation's remaining investment in Brinson Holdings, Inc. to
Brinson's management.
The Corporation incurred special expenses of $42 million in the first quarter of
1994, $24 million of which related to a reduction in the estimated useful life
of personal computer equipment and $18 million related to litigation and other
corporate items. Excluding special items, noninterest expense was up 3 percent
from a year ago.
The Corporation's regulatory capital ratios continued to increase and are
considerably above "well-capitalized" regulatory guidelines. At March 31, 1994,
the Corporation's risk-based capital ratio was 14.2 percent, compared to 13.6
percent at year-end 1993 and 12.4 percent a year ago. The regulatory leverage
ratio remained strong at 7.8 percent, compared with 7.3 percent a year ago.
Regulatory capital ratios for the Corporation's principal banking subsidiaries
exceeded the minimum levels for well-capitalized institutions.
The Corporation has improved its capital position through effective balance
sheet management and continued access to the capital markets. These topics are
addressed in more detail in the Balance Sheet Analysis section, beginning on
page 12.
NET INTEREST INCOME
Net interest income includes fundamental spreads on earning assets as well as
such items as loan fees, cash interest collections on problem loans, dividend
income, interest reversals, and income or expense on interest rate derivatives
used to manage interest rate risk. Net interest income is a function of average
earning assets and the net interest margin, which are presented in the following
table.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Net interest income--tax-equivalent basis................ $ 335.5 $ 305.0
Average earning assets................................... $49,488 $47,939
Net interest margin...................................... 2.75% 2.58%
- - -------------------------------------------------------------------------------
</TABLE>
In order to analyze fundamental trends in the Corporation's net interest margin,
it is useful to adjust for: 1) securitization of credit card receivables, and
2) the activities of First Chicago Capital Markets, Inc. (FCCM).
When credit card receivables are sold in securitization transactions, the
Corporation's earnings are unchanged; however, the net interest income related
to these high-yield assets is displaced by increased servicing fees, net of
portfolio credit losses. The average level of securitized assets was $4.8
billion in the first quarter of 1994, compared with $4.5 billion in the first
quarter of 1993. The effect of credit card securitization transactions on the
Corporation's financial statements is summarized on page 28. The impact is also
discussed within specific categories of the Earnings Analysis.
FCCM is the Corporation's wholly owned subsidiary engaged in permissible
investment banking activities. Because capital requirements for FCCM are risk-
exposure driven rather than based on asset levels, FCCM can generate substantial
volumes of relatively riskless, thin-spread earning assets that require little
additional capital. Net interest margin trends can be better analyzed if these
earning assets and related margins are excluded.
6
<PAGE>
The following table reflects the elements of net interest margin adjusted for
credit card securitizations and the activities of FCCM.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Adjusted net interest income-- tax-equivalent basis....... $ 455.2 $ 406.3
Adjusted average earning assets........................... $47,004 $45,652
Adjusted net interest margin.............................. 3.93% 3.61%
- - -------------------------------------------------------------------------------
</TABLE>
On an adjusted basis, net interest margin for the quarter increased 32 basis
points to 3.93 percent. Adjusted net interest income rose to $455.2 million.
Improved margins were primarily the result of strong growth in total credit card
receivables, which produced a more favorable earning asset mix, and conservative
interest spread management. Average managed credit card receivables grew
23 percent to $10.3 billion in the first quarter of 1994, compared with $8.4
billion a year ago. A breakdown of average loans adjusted for credit card
securitizations is presented in the following table.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Average Loans
For the Quarter Ended March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial................................. $14,549 53% $16,273 60%
Managed credit card receivables............ 10,321 38 8,370 31
Other consumer............................. 2,466 9 2,542 9
------- --- ------- ---
Total average loans..................... $27,336 100% $27,185 100%
======= === ======= ===
- - -------------------------------------------------------------------------------
</TABLE>
Average nonperforming assets totaled $278 million for the first quarter of 1994,
a 27 percent reduction from the year-ago level of $381 million.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $50 million for the quarter. The commercial
provision was $7 million, compared with $27 million in the first quarter of
1993. The provision for consumer loans, primarily for credit cards, was $43
million for the quarter, compared with $38 million a year-ago.
The change in the allowance for credit losses is presented in the following
table.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Allowance for credit losses
--beginning of period.................................. $683 $624
Provision for credit losses.............................. 50 65
Net charge-offs.......................................... (33) (74)
Other, transfers related to securitized receivables...... 10 (5)
----- -----
Net change in allowance for credit losses................ 27 (14)
----- -----
Allowance for credit losses
--end of period........................................ $710 $610
===== =====
--as a percentage of loans outstanding................. 3.0% 2.8%
--as a percentage of nonperforming loans............... 300% 174%
- - -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Details of the Corporation's credit risk management and performance during the
first three months of 1994 are presented in the Credit Risk Analysis section,
beginning on page 14.
NONINTEREST INCOME
Noninterest income for the first quarter of 1994 increased slightly to $501.9
million from the year-earlier level of $490.5 million.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
March 31
(In millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Combined trading account profits (losses)............... $(24.7) $ 54.5
Equity securities gains................................. 134.2 133.2
Investment securities gains............................. 0.5 -
------ ------
Market-driven revenues................................ 110.0 187.7
Credit card fee revenue................................. 182.3 146.7
Service charges and commissions......................... 101.3 98.2
Fiduciary and investment management fees................ 52.4 48.5
Other................................................... 55.9 9.4
------ ------
Total................................................. $501.9 $490.5
====== ======
- - -------------------------------------------------------------------------------
</TABLE>
Market-driven revenues include trading account profits, foreign exchange trading
profits, and both equity and investment securities gains. Market-driven
revenues for the first three months of 1994 decreased substantially to $110.0
million, compared with $187.7 million for the same period in 1993.
Combined trading activities resulted in a loss of $24.7 million for the first
quarter of 1994. The recent turbulence in global markets caused sharp price
declines and reduced liquidity, particularly in emerging markets securities.
These factors produced significant valuation losses. The total loss in emerging
markets securities trading was $53.6 million in the 1994 first quarter. See the
discussion of line-of-business results beginning on page 2 for further details.
8
<PAGE>
Equity securities gains were $134.2 million, compared with $133.2 million in the
first quarter of 1993. The venture capital portfolio accounted for $118.6
million of these gains, of which over 80 percent related to the Corporation's
investment in NEXTEL Communications, Inc., a telecommunication services company.
Equity securities gains arise principally from the Corporation's venture capital
and corporate finance activities, as well as from the sale of securities
received in troubled-debt restructurings. The following table presents a
breakdown of securities gains from these activities.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months
Ended
March 31
(In millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Venture capital........................................... $118.6 $110.4
Corporate finance......................................... 15.1 7.7
Debt restructuring........................................ 0.5 15.1
------ ------
Total equity securities gains........................... $134.2 $133.2
====== ======
- - -------------------------------------------------------------------------------
</TABLE>
The Debt Exchangeable for Common Stock ("DECS") transaction, completed in the
first quarter of 1994, allows the Corporation to moderate the earnings
volatility related to approximately 7.5 million of the NEXTEL shares held in the
venture capital portfolio. The DECS structure offers downside protection while
allowing the Corporation to share in the potential market appreciation of the
shares.
Credit card fee revenue for the first quarter of 1994 grew to $182.3 million, up
24 percent from a year ago. Adjusting for the effects of credit card
securitization, credit card fee growth was 19 percent for the quarter. This
growth resulted from increased transaction volume due in part to a growing
cardholder base.
Service charges and commissions for the 1994 first quarter increased 3 percent
from the year-earlier period to $101.3 million, primarily reflecting growth in
product revenues.
Fiduciary and investment management fees increased $3.9 million from one year
ago, to $52.4 million. First Chicago Trust Company of New York, a leading
provider of corporate shareholder services, generated $22.0 million of these
revenues, an increase of 15 percent over the first quarter of 1993. Fee revenue
from specialized transaction activity and a growing customer base contributed to
this revenue growth.
Other revenue included a $34.5 million gain related to the sale of the
Corporation's remaining interest in Brinson Holdings, Inc. to Brinson's
management.
9
<PAGE>
NONINTEREST EXPENSE
Operating expenses included $42 million of special corporate expense items in
the first quarter of 1994, compared with $3 million of similar expenses a year
ago. Excluding these items, operating expense increased 3 percent from the
year-earlier period.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------
Three Months
Ended
March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Salaries and benefits............................ $ 207.4 $ 198.8
Occupancy expense of premises, net............... 34.8 39.0
Equipment rentals, depreciation and maintenance.. 53.3 27.0
Amortization of intangible assets................ 18.2 18.8
Deposit insurance expense........................ 10.7 14.2
Other............................................ 159.9 135.8
------- -------
Operating expense.......................... 484.3 433.6
Provision for other real estate.................. 0.2 0.5
------- -------
Total...................................... $ 484.5 $ 434.1
======= =======
Average full-time-equivalent staff............... 17,281 16,967
======= =======
- - -------------------------------------------------------------------
</TABLE>
Salaries and benefits increased $8.6 million, or 4 percent, in the first quarter
of 1994 from the first quarter of 1993. Increased 401(k) contributions, reduced
pension credits and the impact of higher staff levels were only partially offset
by reduced performance-related expense accruals.
Equipment rentals, depreciation and maintenance included a special charge of
$24.5 million related to a reduction in the estimated useful life of personal
computer equipment. Previously, purchases of personal computers were
capitalized and depreciated. In the future, most purchases of such equipment
will be expensed.
Other operating expense included special charges of $17.7 million related to a
litigation matter and other corporate activities, compared with $3.0 million of
similar charges a year ago. Excluding these charges, other operating expense
rose 7 percent, mainly due to higher bankcard marketing and solicitation costs.
<TABLE>
<CAPTION>
APPLICABLE INCOME TAXES
- - -------------------------------------------------------------------
Three Months
Ended
March 31
(Dollars in millions) 1994 1993
- - -------------------------------------------------------------------
<S> <C> <C>
Income before income taxes....................... $298.0 $290.2
Applicable income taxes.......................... 104.2 111.1
Effective tax rate............................... 35.0% 38.3%
- - -------------------------------------------------------------------
</TABLE>
The decrease in the effective tax rate from a year ago is primarily due to a
one-time benefit from implementing the final I.R.S. bad debt recapture
regulations.
10
<PAGE>
VENTURE CAPITAL ACTIVITIES
The Corporation's portfolio of venture capital investments is composed of
publicly traded equity securities held directly, publicly traded equity
securities held indirectly, and investments in private companies.
<TABLE>
<CAPTION>
Venture Capital Portfolio
- - ---------------------------------------------------------------------
March 31, 1994 Investments Investments
(In millions) Held Directly Held Indirectly Total
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
Publicly traded equity
investments
Gross value............. $412 $ 559 $ 971
Discount................ (21) (133) (154)
---- ----- ------
Fair value........... $391 $ 426 817
==== =====
Investments in private
companies................. 643
------
Total...................... $1,460
======
- - ---------------------------------------------------------------------
</TABLE>
Fair value accounting is used for this portfolio, which has significantly
increased the volatility of the Corporation's reported earnings. The
Corporation has instituted a program intended to reduce that volatility, which
includes hedging using equity derivatives and the sale of investments. In
addition, during the first quarter of 1994, the Corporation issued Debt
Exchangeable for Common Stock ("DECS") related to 7.475 million shares of its
holdings in NEXTEL Communications, Inc. The DECS transaction limits the
Corporation's downside risk on this investment to the $271 million DECS proceeds
and, at the same time, allows the Corporation to share in potential market
appreciation. As of March 31, 1994, 60 percent of the $817 million in publicly
traded investments was hedged using equity derivatives and DECS. Management
intends to continue to use these and other techniques to more fully hedge the
price risk inherent in this portfolio.
The following table provides fair value and sale information for the portfolio
for the first quarter of 1994.
<TABLE>
<CAPTION>
Venture Capital Portfolio Activity
- - -------------------------------------------------------------------------
Publicly
Traded Private
(In millions) Companies Companies Total
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value--December 31, 1993............ $ 774 $691 $1,465
Additional investments................... - 19 19
Appreciation (depreciation) recorded as
equity securities gains (losses)(1)..... 159 (9) 150
Sales proceeds (1)....................... (117) (21) (138)
Other (2)................................ 1 (37) (36)
----- ---- ------
Fair value--March 31, 1994............... $ 817 $643 $1,460
===== ==== ======
Unrealized appreciation (depreciation)
at March 31, 1994....................... $ 592 $(32) $ 560
===== ==== ======
- - -------------------------------------------------------------------------
</TABLE>
(1) Net of transaction costs.
(2) Includes principal repayments, fund distributions and sales, and certain
reclassifications.
In addition to the $1.5 billion of investments in the venture capital portfolio
at March 31, 1994, unfunded commitments totaled $258 million.
11
<PAGE>
BALANCE SHEET ANALYSIS
ASSETS
The Corporation's assets totaled $59.8 billion at March 31, 1994, up from $52.6
billion at year-end 1993 and $48.5 billion at March 31, 1993.
In 1994, the Corporation prospectively adopted FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts. For information regarding
the impact on the Corporation's assets and liabilities, see Note 6 on page 25.
The Corporation believes that asset liquidity is the most effective way to
manage overall liquidity. One measure of the Corporation's liquidity is the
ratio of liquid assets to total assets for The First National Bank of Chicago
and FCC National Bank. The short-term assets defined as liquid are deposit
placements (due from banks--interest-bearing) and federal funds sold. During
the first three months of 1994, the Corporation maintained an average liquid
asset ratio of 19 percent. This ratio was well in excess of the 10 percent to
15 percent minimum targeted by the Corporation.
The Corporation continues to use credit card securitization as an effective tool
for increasing liquidity and reducing funding needs. The total securitized
credit card portfolio was $4.7 billion at March 31, 1994, compared with $5.0
billion at year-end 1993 and $4.4 billion at March 31, 1993.
Loans increased $679 million from year-end 1993 and $2.1 billion from March 31,
1993. The increase from year-end 1993 was primarily due to an increase in
short-term commercial loans. The continued growth in credit card receivables
significantly contributed to the year-to-year growth in loans.
LIABILITIES
The Corporation's total liabilities were $55.4 billion at March 31, 1994, up
from $48.3 billion at year-end 1993 and $44.7 billion at March 31, 1993.
The continued diversification of liabilities among instruments, maturities and
depositors is intended to balance the total expense of gathering funds with the
maintenance of flexibility in funding options.
The Corporation is able to adjust its funding based on its needs through an
established distribution network in both domestic and international markets.
The Corporation has strengthened its retail deposit base in recent years through
its expanded presence in the Chicago area.
The Corporation increased the use of short-term bank notes issued through its
banking subsidiaries in order to better match asset repricing and maturity
characteristics. At the same time, the level of negotiable certificates of
deposit issued by its banking subsidiaries declined by $144 million from year-
end 1993 and $532 million from a year ago.
Long-term debt increased $200 million from year-end 1993 as a result of the
issuance of $200 million of subordinated debt in January 1994. Long-term debt
increased $360 million from a year ago. In addition to the January 1994
issuance of subordinated debt, long-term debt increased, from a year ago, by
$349 million, due to the issuance of subordinated debt in the second and third
quarters of 1993, and by $267 million due to the sale and leaseback of certain
bank properties. These increases were partially offset by the early redemption
of $428 million of subordinated debt.
The Corporation's Statement of Cash Flows is presented on page 23.
12
<PAGE>
CAPITAL
Stockholders' equity totaled $4.408 billion at March 31, 1994, up from $4.264
billion at December 31, 1993, and $3.757 billion at March 31, 1993.
The Corporation's principal capital objective is to maintain and enhance its
strong capital ratios relative both to its peer group and to the regulatory
capital guidelines. Management believes that a strong capital position is
instrumental in achieving enhanced stockholder returns over the long term.
The Corporation increased regulatory capital in the first quarter of 1994 by
issuing $200 million of subordinated debt.
The Corporation's ratio of common equity to assets, net of its investment in
FCCM, was 6.6 percent at March 31, 1994, 7.2 percent at year-end 1993 and 6.4
percent a year ago.
The following table shows the components of regulatory capital as defined by the
banking regulators for risk-based capital and leverage ratio guidelines.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
Regulatory Capital March 31 December 31 March 31
(In millions) 1994 1993 1993
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital
Common stockholders' equity............. $3,647 $3,503 $2,888
Preferred stock......................... 761 761 869
Less: 50 percent of investment in FCCM.. (129) (69) (69)
Less: Disallowed intangibles (1)........ (97) (97) (117)
------ ------ ------
Tier 1 capital........................ 4,182 4,098 3,571
------ ------ ------
Tier 2 capital
Allowance for credit losses (2)......... 576 581 574
Qualifying long-term debt............... 1,880 1,682 1,624
Less: 50 percent of investment in FCCM.. (129) (69) (69)
------ ------ ------
Tier 2 capital........................ 2,327 2,194 2,129
------ ------ ------
Total capital................. $6,509 $6,292 $5,700
====== ====== ======
- - ---------------------------------------------------------------------------
</TABLE>
(1) Primarily goodwill.
(2) Limited to 1.25 percent of risk-weighted assets.
The risk-based capital guidelines consider both balance-sheet and off-balance-
sheet credit risk, while the capital leverage ratio is an ongoing tool to
monitor capital in relation to total average assets.
The Corporation's Tier 1 and total risk-based capital ratios, as well as its
capital leverage ratio, exceed the current regulatory minimum guidelines by a
considerable margin. The Corporation intends to continue to build its capital
resources in the current year primarily through internal capital generation and
effective balance sheet management.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
Regulatory Capital Ratios
Minimum
March 31 Dec. 31 March 31 Regulatory
1994 1993 1993 Requirements
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital........... 9.1% 8.8% 7.8% 4.0%
Total capital............ 14.2 13.6 12.4 8.0
Leverage Ratio............. 7.8 8.0 7.3 3.0
- - -------------------------------------------------------------------------
</TABLE>
As of March 31, 1994, the regulatory capital ratios for all of the Corporation's
banking subsidiaries exceeded the minimum levels for well-capitalized
institutions. To achieve well-capitalized status, a bank's Tier 1 and total
capital ratios must be at least 6 percent and 10 percent, respectively. In
addition, its leverage ratio must be at least 5 percent.
13
<PAGE>
The Corporation's leverage ratio decreased from December 31, 1993, due to an
increase in assets that resulted primarily from the implementation of FASB
Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts. See
Note 6 on page 25 for more information.
CREDIT RISK ANALYSIS
Summary
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------
Selected Statistical Information
March 31 Dec. 31 Sept. 30 June 30 March 31
(Dollars in millions) 1994 1993 1993 1993 1993
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At period-end:
Loans outstanding................. $23,782 $23,103 $21,969 $21,621 $21,666
Nonperforming loans............... 237 234 307 370 351
Other real estate, net............ 43 43 44 45 26
Nonperforming assets.............. 280 277 351 415 377
Allowance for credit losses....... 710 683 637 627 610
Nonperforming loans/
loans outstanding................ 1.0% 1.0% 1.4% 1.7% 1.6%
Nonperforming assets/loans
outstanding and other
real estate, net................. 1.2 1.2 1.6 1.9 1.7
Allowance for credit losses/
loans outstanding................ 3.0 3.0 2.9 2.9 2.8
Allowance for credit losses/
nonperforming loans.............. 300 292 208 170 174
For the quarter ended:
Average loans outstanding......... $22,460 $22,263 $21,588 $21,974 $22,162
Net charge-offs................... 33 39 37 32 74
Net charge-offs/average loans(1).. 0.6% 0.7% 0.7% 0.6% 1.4%
- - ----------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
For analytical purposes, the Corporation's portfolio is divided into commercial
(domestic and foreign office) and consumer (credit card and other nonbusiness
credit to individuals) segments.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
Loan Composition March 31 Dec. 31 Sept. 30 June 30 March 31
(In millions) 1994 1993 1993 1993 1993
- - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial Risk
Domestic office
Commercial.............. $ 6,438 $ 6,007 $ 5,807 $ 6,536 $ 6,569
Commercial real estate
Construction.......... 302 315 384 386 411
Other................. 2,050 2,094 2,106 2,054 2,161
Financial institutions.. 1,241 1,292 1,295 1,288 1,311
Other................... 2,631 2,746 3,258 2,510 2,477
------- ------- ------- ------- -------
Total domestic........ 12,662 12,454 12,850 12,774 12,929
Foreign office............ 2,578 1,975 2,030 2,225 2,024
------- ------- ------- ------- -------
Total commercial.. 15,240 14,429 14,880 14,999 14,953
------- ------- ------- ------- -------
Consumer Risk
Credit cards.............. 5,736 5,778 4,302 4,000 4,131
Secured by real estate
Mortgage................ 1,370 1,469 1,370 1,222 1,179
Home equity............. 767 780 813 824 825
Other..................... 669 647 604 576 578
------- ------- ------- ------- -------
Total consumer.... 8,542 8,674 7,089 6,622 6,713
------- ------- ------- ------- -------
Total............. $23,782 $23,103 $21,969 $21,621 $21,666
======= ======= ======= ======= =======
- - ----------------------------------------------------------------------------
</TABLE>
14
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at a level considered adequate to
provide for the credit losses inherent in the loan portfolio. The credit risk
associated with certain off-balance-sheet exposures for credit-related and
derivative financial instruments is also included in the assessment of the
adequacy of the allowance.
While the allowance for credit losses is available to absorb potential losses in
the entire credit portfolio, its composition reflects an internal allocation to
the commercial and consumer segments.
Potential losses associated with the commercial and consumer categories are
estimated quarterly and reflected in the allowance for credit losses. The
underlying credit risk for both these categories of credit exposure is actively
managed.
Using this framework, the following table presents the allowance for credit
losses for both categories.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
Allowance for Credit Losses
Three Months Ended
March 31, 1994
-----------------------------
(Dollars in millions) Commercial Consumer Total
- - -------------------------------------------------------------
<S> <C> <C> <C>
Balance--beginning of period.. $488 $195 $683
Provision for credit losses... 7 43 50
Net (charge-offs)/recoveries.. 12 (45) (33)
Other, transfers related to
securitized receivables...... - 10 10
---- ---- ----
Balance--end of period........ $507 $203 $710
==== ==== ====
Allowance as a percentage
of loans outstanding....... 3.3% 2.4% 3.0%
Allowance as a percentage
of nonperforming loans..... 214 - 300
- - -------------------------------------------------------------
</TABLE>
15
<PAGE>
NONPERFORMING ASSETS
The following table shows the trend in nonperforming assets, as well as the
level of nonperforming loans by portfolio segment.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
Nonperforming Assets
March 31 Dec. 31 Sept. 30 June 30 March 31
(Dollars in millions) 1994 1993 1993 1993 1993
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans...................... $ 233 $ 230 $ 303 $ 366 $ 346
Accrual renegotiated loans............ 4 4 4 4 5
----- ----- ----- ----- -----
Total nonperforming loans........ $ 237 $ 234 $ 307 $ 370 $ 351
===== ===== ===== ===== =====
Nonperforming Loans
Commercial real estate.............. $ 101 $ 108 $ 151 $ 190 $ 143
Troubled-country debtor............. 50 50 57 57 57
Other............................... 86 76 99 123 151
----- ----- ----- ----- -----
Total nonperforming loans........ 237 234 307 370 351
----- ----- ----- ----- -----
Other real estate, net
Owned assets........................ 26 29 14 11 7
In-substance foreclosed assets...... 17 14 30 34 19
----- ----- ----- ----- -----
Total other real estate, net..... 43 43 44 45 26
----- ----- ----- ----- -----
Total nonperforming assets....... $ 280 $ 277 $ 351 $ 415 $ 377
===== ===== ===== ===== =====
Nonperforming loans as a percentage
of total loans...................... 1.0% 1.0% 1.4% 1.7% 1.6%
Nonperforming assets as a percentage
of loans outstanding and other
real estate, net.................... 1.2 1.2 1.6 1.9 1.7
- - ------------------------------------------------------------------------------------------
</TABLE>
Loans 90 days or more past due and still accruing interest amounted to $74
million at March 31, 1994, compared with $63 million at December 31, 1993, and
$188 million at March 31, 1993.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
Three Months Ended March 31, 1994
---------------------------------
Reconciliation of Changes in Nonperforming Loans Commercial
(In millions) Real Estate Other Total
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonperforming loans--beginning of period.......... $108 $126 $234
Loans placed on nonperforming status.............. 9 33 42
Charge-offs....................................... (2) (10) (12)
Transfers to other real estate.................... (7) - (7)
Transfers to accrual status....................... (1) (2) (3)
Other, principally payments....................... (6) (11) (17)
---- ---- ----
Nonperforming loans--end of period................ $101 $136 $237
==== ==== ====
- - ------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
CONSUMER RISK MANAGEMENT
Consumer loans consist of credit card receivables as well as home mortgage
loans, home equity loans and other forms of installment credit. At March 31,
1994, consumer loans totaled $8.5 billion.
Total managed credit card receivables (i.e. those held in the portfolio and
those sold to investors through securitization) were $10.4 billion at March 31,
1994, up 23 percent from a year earlier.
At March 31, 1994, the allowance for credit losses related to the consumer
portfolio was $203 million, or 2.4 percent of loans. Comparable figures for
December 31, 1993, were $195 million and 2.2 percent. Net charge-offs in the
first quarter were $45 million, compared with $28 million in the first quarter
of 1993.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
Consumer Loans
March 31 Dec. 31 Sept. 30 June 30 March 31
(In millions) 1994 1993 1993 1993 1993
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card.......................... $ 5,736 $ 5,778 $ 4,302 $ 4,000 $ 4,131
Other consumer loans................. 2,806 2,896 2,787 2,622 2,582
Securitized credit card receivables.. 4,700 4,958 5,333 5,008 4,383
------- ------- ------- ------- -------
Total........................... $13,242 $13,632 $12,422 $11,630 $11,096
======= ======= ======= ======= =======
- - -------------------------------------------------------------------------------------
</TABLE>
Average credit card receivables for the first quarter of 1994 grew 23 percent
from the year-earlier quarter and 5 percent from the fourth quarter of 1993.
The net charge-off rate for the total average managed credit card portfolio was
3.6 percent in the first quarter of 1994. Charge-off rates for the remainder of
the year are expected to be similar to first quarter results.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
Average Credit Card Receivables
For the Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
(Dollars in millions) 1994 1993 1993 1993 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans outstanding........ $ 5,473 $4,661 $4,014 $4,116 $3,888
Securitized credit card receivables.. 4,848 5,203 5,170 4,503 4,482
------- ------ ------ ------ ------
Total credit card receivables... $10,321 $9,864 $9,184 $8,619 $8,370
======= ====== ====== ====== ======
Total net charge-offs
(including securitizations)........ $ 91 $ 88 $ 81 $ 84 $ 79
======= ====== ====== ====== ======
Net charge-offs/average total
receivables (1).................... 3.6% 3.5% 3.5% 3.9% 3.8%
======= ====== ====== ====== ======
- - -----------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
17
<PAGE>
COMMERCIAL RISK MANAGEMENT
Commercial loans totaled $15.2 billion at March 31, 1994, up 5.6 percent from
December 31, 1993, and 1.9 percent from March 31, 1993.
During the first quarter, net recoveries in the commercial portfolio totaled $12
million. The provision for credit losses related to the commercial portfolio
was $7 million, or 19 basis points of related assets, and the quarter-end
reserve of $507 million represented 3.3 percent of total commercial loans and
214 percent of nonperforming loans.
COMMERCIAL REAL ESTATE
Commercial real estate consists primarily of loans secured by real estate. In
addition, this category includes certain loans that are not secured by real
estate when 80 percent or more of the borrower's revenues are derived from real
estate activities and the loans are not collateralized by cash or marketable
securities.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
Commercial Real Estate Assets
March 31 Dec. 31 Sept. 30 June 30 March 31
(Dollars in millions) 1994 1993 1993 1993 1993
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial real estate loans (1)................ $2,416 $2,474 $2,563 $2,526 $2,656
Nonperforming loans............................. 101 108 151 190 143
Other real estate, net.......................... 43 43 44 45 26
Nonperforming assets............................ 144 151 195 235 169
Net charge-offs for the quarter................. - 9 21 5 16
Nonperforming assets/loans outstanding
and other real estate, net.................... 5.9% 6.0% 7.5% 9.1% 6.3%
- - ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes loans booked in foreign offices.
The following table presents loans secured by real estate identified by both
geographic region and collateral type. Since real estate-related loans are not
in all cases geographic- or property-specific, such loans are not included in
the table below.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Commercial Real Estate Assets
March 31, 1994 (Dollars in millions)
- - ------------------------------------------------------------------------------------------------------
Industrial/
Office Shopping Land Service
Geographic Region Buildings Hotels Centers Loans Centers Other Total Percent
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chicago...................... $234 $ 29 $151 $49 $605 $628 $1,696 76%
Southeast.................... 46 22 43 5 13 5 134 6
Los Angeles.................. 31 11 16 - 12 23 93 4
Other California............. 11 31 19 - 6 20 87 4
Other Midwest................ 33 5 10 2 8 4 62 3
Arizona/Colorado/Texas....... 3 15 6 27 1 - 52 2
Other........................ 23 64 9 - 2 8 106 5
---- ---- ---- --- ---- ---- ------ ---
Total loans secured by
real estate.............. $381 $177 $254 $83 $647 $688 $2,230 100%
==== ==== ==== === ==== ==== ====== ===
- - ------------------------------------------------------------------------------------------------------
Nonperforming loans secured
by real estate............. $ 26 $ - $ 2 $27 $ 20 $ 23 $ 98
Other real estate............ - 1 13 2 13 14 43
- - ------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
HIGHLY LEVERAGED TRANSACTIONS
The Corporation originates and syndicates highly leveraged transactions (HLTs).
Policies and procedures are maintained for the management and reporting of HLT
exposure. The Corporation continues to disclose this exposure using the HLT
definition previously established by federal banking regulatory agencies.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------
HLT Credit Exposure
March 31 Dec. 31 Sept. 30 June 30 March 31
(In millions) 1994 1993 1993 1993 1993
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans...................... $ 650 $ 711 $ 871 $ 834 $1,170
Other credit exposure...... 309 303 344 442 360
----- ------ ------ ------ ------
Total HLT credit exposure.. $ 959 $1,014 $1,215 $1,276 $1,530
===== ====== ====== ====== ======
- - ---------------------------------------------------------------------------
</TABLE>
Credit exposure to communications-related industries represented the only
significant HLT concentration. This concentration reflected approximately 27
percent of HLT credit exposure at March 31, 1994.
During the first quarter of 1994, net charge-offs for HLT loans were $4 million.
HLT net charge-offs were under $1 million in the first quarter of 1993.
Nonperforming HLT loans totaled $1 million at March 31, 1994. At December 31,
1993, and March 31, 1993, nonperforming HLT loans were $1 million and $40
million, respectively.
The Corporation's venture capital subsidiaries have invested in companies that
have substantially higher leverage than would normally exist in their
industries. At March 31, 1994, this portfolio consisted of 41 HLT investments,
with a carrying value of $384 million. At March 31, 1994, gross unrealized
gains related to HLT investments totaled $75 million while gross unrealized
losses were $90 million. The same portfolio at December 31, 1993, and March 31,
1993, totaled $397 million and $437 million, respectively. At March 31, 1994,
$2 million of unfunded commitments were related to the HLT segment of the
venture capital portfolio.
At March 31, 1994, $5 million of the venture capital HLT investments were
classified as nonperforming assets, compared with $5 million at December 31,
1993, and $6 million at March 31, 1993.
19
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
March 31 December 31 March 31
- - ------------------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1993
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks--noninterest-bearing.......................................... $ 3,621 $ 3,916 $ 3,398
Due from banks--interest-bearing...................................................... 7,926 6,037 6,193
Federal funds sold and securities under resale agreements............................. 10,475 8,783 7,292
Trading account assets................................................................ 4,748 4,536 3,276
Investment securities (fair values--$2,255, $2,264 and $2,285, respectively).......... 2,253 2,256 2,272
Loans (net of unearned income--$297, $282, and $319, respectively).................... 23,782 23,103 21,666
Less allowance for credit losses.................................................... 710 683 610
------- ------- -------
Loans, net.......................................................................... 23,072 22,420 21,056
Premises and equipment................................................................ 612 635 593
Accrued income receivable............................................................. 377 407 347
Customers' acceptance liability....................................................... 502 517 546
Derivative product assets............................................................. 5,047 - -
Other assets.......................................................................... 1,210 3,053 3,509
------- ------- -------
Total assets................................................................ $59,843 $52,560 $48,482
======= ======= =======
- - ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits
Demand.............................................................................. $ 7,114 $ 8,184 $ 6,305
Savings............................................................................. 7,633 7,541 7,613
Time................................................................................ 4,445 4,925 5,784
Foreign offices..................................................................... 9,641 7,536 7,985
------- ------- -------
Total deposits.............................................................. 28,833 28,186 27,687
Federal funds purchased and securities under repurchase agreements.................... 9,266 8,255 6,195
Other funds borrowed.................................................................. 8,284 6,007 5,293
Long-term debt........................................................................ 2,265 2,065 1,905
Acceptances outstanding............................................................... 502 517 546
Derivative product liabilities........................................................ 4,574 - -
Other liabilities..................................................................... 1,711 3,266 3,099
------- ------- -------
Total liabilities........................................................... 55,435 48,296 44,725
- - ------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock....................................................................... 761 761 869
Common stock--$5 par value............................................................ 434 434 416
Number of shares authorized--150,000,000
Number of shares issued--86,788,368, 86,715,812, and 83,144,528, respectively
Number of shares outstanding--86,440,453, 86,398,605, and 83,046,898, respectively
Surplus............................................................................... 1,725 1,724 1,612
Retained earnings..................................................................... 1,504 1,358 861
Other adjustments..................................................................... (1) - 2
------- ------- -------
Total....................................................................... 4,423 4,277 3,760
Less treasury stock at cost, 347,915, 317,207, and 97,630 shares, respectively........ 15 13 3
------- ------- -------
Stockholders' equity........................................................ 4,408 4,264 3,757
------- ------- -------
Total liabilities and stockholders' equity.................................. $59,843 $52,560 $48,482
======= ======= =======
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
March 31 March 31 December 31
Three Months Ended (In millions, except per share amounts) 1994 1993 1993
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................................. $437.6 $422.8 $415.3
Interest on bank balances.............................................. 75.0 78.8 70.0
Interest on federal funds sold and securities under resale agreements.. 91.0 84.6 89.6
Interest on trading account assets..................................... 59.1 50.7 56.3
Interest on investment securities (including dividends)................ 15.9 22.3 16.5
------ ------ ------
Total........................................................ 678.6 659.2 647.7
- - ---------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits................................................... 153.9 171.0 156.7
Interest on federal funds purchased and securities under repurchase
agreements........................................................... 81.8 81.2 81.1
Interest on other funds borrowed....................................... 71.4 75.3 70.2
Interest on long-term debt............................................. 40.9 32.9 39.0
------ ------ ------
Total........................................................ 348.0 360.4 347.0
- - ---------------------------------------------------------------------------------------------------------
NET INTEREST INCOME.................................................... 330.6 298.8 300.7
Provision for credit losses............................................ 50.0 65.0 70.0
------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.................. 280.6 233.8 230.7
- - ---------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits (losses)...................................... (24.7) 54.5 61.2
Equity securities gains................................................ 134.2 133.2 40.1
Investment securities gains............................................ 0.5 - 0.9
------ ------ ------
Market-driven revenue............................................. 110.0 187.7 102.2
Credit card fee revenue................................................ 182.3 146.7 196.6
Service charges and commissions........................................ 101.3 98.2 122.4
Fiduciary and investment management fees............................... 52.4 48.5 50.7
Other income........................................................... 55.9 9.4 51.1
------ ------ ------
Total........................................................ 501.9 490.5 523.0
- - ---------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits......................................... 207.4 198.8 226.5
Occupancy expense of premises, net..................................... 34.8 39.0 35.7
Equipment rentals, depreciation and maintenance........................ 53.3 27.0 30.3
Other expense.......................................................... 188.8 168.8 188.2
------ ------ ------
Subtotal..................................................... 484.3 433.6 480.7
Provision for other real estate........................................ 0.2 0.5 1.2
------ ------ ------
Total........................................................ 484.5 434.1 481.9
- - ---------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............................................. 298.0 290.2 271.8
Applicable income taxes................................................ 104.2 111.1 99.0
------ ------ ------
NET INCOME............................................................. $193.8 $179.1 $172.8
====== ====== ======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY................. $180.0 $165.5 $159.0
====== ====== ======
- - ---------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Net income - Primary................................................. $ 2.05 $ 1.97 $ 1.81
Net income - Fully diluted........................................... $ 2.00 $ 1.91 $ 1.77
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES TO STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
Three Months Ended March 31 (In millions) 1994 1993
- - -----------------------------------------------------------------
Stockholders' Equity
<S> <C> <C>
Balance, beginning of period.................... $4,264 $3,401
Net income..................................... 194 179
Issuance of common stock....................... 3 21
Issuance of preferred stock.................... - 196
Issuance of treasury stock..................... 5 (2)
Treasury stock purchases....................... (9) -
Other.......................................... (1) -
------ ------
4,456 3,795
Cash dividends declared on preferred stock..... (14) (14)
Cash dividends declared on common stock........ (34) (24)
------ ------
1994 1993
- - ------------------------------------------------
Rate per common share for period $0.40 $0.30
- - ------------------------------------------------
Balance, end of period.......................... $4,408 $3,757
====== ======
- - -----------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- - --------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31 (In millions) 1994 1993
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................................................... $ 194 $ 179
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization................................................................ 45 43
Provision for credit losses.................................................................. 50 65
Equity securities gains...................................................................... (134) (133)
Net increase in net derivative product balances.............................................. (254) -
Net (increase) decrease in trading account assets............................................ (212) 36
Net decrease in accrued income receivable.................................................... 30 9
Net decrease in other assets................................................................. 114 318
Other noncash adjustments.................................................................... 162 170
-------- --------
Total adjustments............................................................................ (199) 508
-------- --------
Net cash provided by (used in) operating activities............................................ (5) 687
- - --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in federal funds sold and securities under resale agreements...................... (1,692) (400)
Purchases of investment securities............................................................. - (310)
Purchase of investment securities--available for sale.......................................... (449) -
Purchase of debt investment securities--held to maturity....................................... (53) -
Purchase of equity securities--venture capital................................................. (23) -
Proceeds from maturities of debt securities.................................................... - 216
Proceeds from maturities of debt securities--available for sale................................ 474 -
Proceeds from maturities of debt securities--held to maturity.................................. 19 -
Proceeds from sales of debt securities......................................................... - 1
Proceeds from sales of equity securities....................................................... - 356
Proceeds from sales of equity securities--available for sale................................... 1 -
Proceeds from sales of equity securities--venture capital...................................... 176 -
Net increase in credit card receivables........................................................ (8) (34)
Net (increase) decrease in loans of bank subsidiaries.......................................... (734) 981
Loans made to customers and purchased from others by nonbank subsidiaries...................... (26) (102)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries................. 25 78
Loan recoveries................................................................................ 31 26
Purchases of premises and equipment............................................................ (53) (40)
Proceeds from sales of premises and equipment.................................................. 25 16
-------- --------
Net cash provided by (used in) investing activities............................................ (2,287) 788
- - --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand and savings deposits.................................................... (978) (1,275)
Net decrease in time deposits.................................................................. (480) (478)
Net increase (decrease) in deposits in foreign offices......................................... 2,125 (345)
Net increase (decrease) in federal funds purchased and securities under repurchase agreements.. 1,011 (767)
Proceeds from other funds borrowed............................................................. 18,720 19,377
Repayment of other funds borrowed.............................................................. (16,443) (18,253)
Proceeds from issuance of long-term debt....................................................... 199 201
Repayment of long-term debt.................................................................... (2) (2)
Net increase (decrease) in other liabilities................................................... (192) 87
Dividends paid................................................................................. (49) (38)
Proceeds from issuance of common stock......................................................... 3 22
Proceeds from issuance of preferred stock...................................................... - 196
Payment for purchase of treasury stock......................................................... (9) -
Proceeds from reissuance of treasury stock..................................................... 5 -
-------- --------
Net cash provided by (used in) financing activities............................................ 3,910 (1,275)
- - --------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................................... (24) 53
- - --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................................................... 1,594 253
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................................... 9,953 9,338
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................................................... $ 11,547 $ 9,591
======== ========
- - --------------------------------------------------------------------------------------------------------------------
See Note 7 on page 26.
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
- - ------
Although the interim amounts are unaudited, they do reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of the
results of operations for the interim periods. All such adjustments are of a
normal, recurring nature. Because the results from commercial banking
operations are so closely related and responsive to changes in economic
conditions, fiscal policy and monetary policy and because the results for the
venture capital and trading portfolios are largely market-driven, the results
for any interim period are not necessarily indicative of the results that can be
expected for the entire year.
Note 2
- - ------
The Corporation presents earnings per share on both a primary and a fully
diluted basis. Earnings per common and common-equivalent share amounts were
computed by dividing net income, after deducting dividends on preferred stock,
by the average number of common and common-equivalent shares outstanding during
the period.
Common-equivalent shares consist of shares issuable under the Employee Stock
Purchase and Savings Plan and outstanding stock options. Fully diluted shares
also include the common shares that would result from the conversion of
convertible preferred stock.
Net income was reduced by preferred stock dividend requirements to compute
primary earnings per share. To compute fully diluted earnings per share, net
income was reduced by preferred stock dividend requirements, except those
related to convertible stock.
The net income, preferred stock dividends and shares used to compute primary and
fully diluted earnings per share are presented in the table below.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three Months Ended
(In millions) March 31
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY
Net income.............................................. $193.8 $179.1
Preferred stock dividends............................... 13.8 13.6
------ ------
Net income attributable to common stockholders' equity.. $180.0 $165.5
====== ======
Average number of common and common-equivalent shares... 87.7 84.1
====== ======
FULLY DILUTED
Net income.............................................. $193.8 $179.1
Preferred stock dividends, excluding convertible
Series A and B........................................ 10.9 10.9
------ ------
Fully diluted net income................................ $182.9 $168.2
====== ======
Average number of shares, assuming full dilution........ 91.6 88.0
====== ======
- - -------------------------------------------------------------------------------
</TABLE>
Note 3
- - ------
At March 31, 1994, credit card receivables aggregated $5.7 billion. These
receivables are available for sale at face value through credit card
securitization programs.
Note 4
- - ------
Included in other assets on the Corporation's consolidated balance sheet is a
reserve for credit losses related to securitized credit card receivables, which
offsets the receivables due from the securitization trust. This reserve totaled
$185 million at March 31, 1994, compared with $196 million at year-end 1993 and
$172 million a year ago.
24
<PAGE>
Note 5
- - ------
Included in other assets on the Corporation's consolidated balance sheet are
accelerated disposition portfolio assets of $84 million at March 31, 1994,
compared with $107 million at year-end 1993 and $521 million a year ago. These
assets are carried at the lower of the initially established carrying value or
their estimated disposition value.
Of these assets, $67 million were nonperforming at March 31, 1994, compared with
$87 million at year-end 1993 and $277 million a year ago.
Note 6
- - ------
Offsetting of Amounts Related to Certain Contracts
- - --------------------------------------------------
In 1994, the Corporation prospectively adopted FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts. This interpretation is
applicable to the balance sheet presentation of derivative financial
instruments. These derivatives include interest rate, currency, commodity and
equity swaps, forwards, options, caps, floors, collars, forward rate agreements,
and other conditional or exchange contracts, and includes both exchange-traded
and over-the-counter contracts.
In general, purchased option, cap and floor contracts are reported in derivative
product assets and written option, cap and floor contracts are reported in
derivative product liabilities. For other derivative financial instruments, an
unrealized gain is reported in derivative product assets and an unrealized loss
is reported in derivative product liabilities. Previously, the Corporation
reported certain unrealized gains and unrealized losses on a net basis.
Derivative financial instruments executed with the same counterparty under a
legally enforceable master netting arrangement are reported on a net basis as
derivative product assets or liabilities depending on whether they are a net
asset or liability.
At December 31, 1993, the fair value of currency options purchased totaled $536
million, while the fair value of currency options written totaled $501 million.
At March 31, 1993, the fair value of currency options purchased totaled $549
million, while the fair value of currency options written totaled $522 million.
These amounts are recorded in other assets and other liabilities, respectively.
The adoption of this interpretation for balance sheet presentation purposes does
not affect the net income or capital of the Corporation. It also does not
affect its risk-based capital ratios, which historically have incorporated the
gross unrealized gains on derivative financial instruments. However, based on
current regulatory agency guidelines, the Corporation's regulatory leverage
ratio was adversely affected by this change. The balance sheet impact of this
interpretation at future dates will fluctuate as the unrealized gains and losses
on derivative financial instruments increase or decrease with changes in
remaining maturity and market rates, as well as the ability to net amounts under
master netting arrangements.
25
<PAGE>
Accounting for Loan Impairment
- - ------------------------------
In May 1993, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 114, Accounting by Creditors for Impairment of a Loan. This statement is
effective for financial statements issued for periods beginning after December
15, 1994. SFAS No. 114 addresses the accounting for loans when it is probable
that all principal and interest amounts that are due on a loan will not be
collected in accordance with its contractual terms (i.e. "impaired loans").
Pursuant to SFAS No. 114, to the extent the recorded investment of an impaired
loan exceeds the present value of the loan's expected future cash flows or other
measures of value, a valuation allowance is established for the difference with
a corresponding charge to the provision for credit losses. The Corporation does
not expect the adoption of SFAS No. 114 to have a material impact on the results
of its operations and financial position. However, the future impact at the
adoption date is not currently determinable since it would be based on the
existing impaired loans as of that date.
SFAS No. 114 also changes the definition of In-Substance Foreclosures (ISFs),
with the result that a larger portion of currently reported ISFs would be
reclassified as nonaccrual loans. The Corporation intends to adopt this new ISF
definition concurrent with the adoption of the other provisions of SFAS No. 114.
Note 7
- - ------
For purposes of the Statement of Cash Flows, cash and cash equivalents consist
of cash and due from banks.
Cash flows from derivative financial instruments are reported net as operating
activities. Upon adopting FASB Interpretation No. 39 on January 1, 1994, a
noncash transfer of balances attributable to derivative financial instruments on
December 31, 1993 was made from other assets ($573 million), accrued income
receivable ($941 million) and other liabilities ($1.3 billion) to net derivative
product balances for purposes of reporting the Consolidated Statement of Cash
Flows.
Loans of $7 million and $8 million were transferred to other real estate in the
first quarter of 1994 and 1993, respectively.
Note 8
- - ------
The ratio of income to fixed charges for the three months ended March 31, 1994,
excluding interest on deposits was 2.5x, and including interest on deposits was
1.8x. The ratio has been computed on the basis of the total enterprise (as
defined by the Securities and Exchange Commission) by dividing income before
fixed charges and income taxes by fixed charges. Fixed charges consist of
interest expense on all long- and short-term borrowings, excluding or including
interest on deposits.
Note 9
- - ------
The Corporation and certain of its subsidiaries are defendants in various
lawsuits, including certain class actions, arising out of normal corporate
activities, and the Corporation has received certain tax deficiency assessments.
Since the Corporation and certain of its subsidiaries, which are regulated by
one or more federal and state regulatory authorities, also are the subject of
numerous examinations and reviews by such authorities, the Corporation is and
will be, from time to time, normally engaged in various disagreements with
regulators, primarily related to banking matters. In the opinion of management
and the Corporation's general counsel, the ultimate resolution of the matters
referred to in this note will not have a material effect on the Corporation's
consolidated financial statements.
26
<PAGE>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- - -------------------------------------------------------------------------------
INVESTMENT SECURITIES
Investment securities included in the consolidated balance sheet as of March 31,
1994, were as follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
Book Cost Unrealized Unrealized Fair
(In millions) Value Basis Gains Losses Value
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government and federal agency
Held to maturity....................... $ 271 $ 271 $ 1 $ 3 $ 269
Available for sale..................... 232 232 - - 232
------ ------ ---- ---- ------
Total.................................... 503 503 1 3 501
States and political subdivisions
Held to maturity....................... 144 144 4 - 148
Available for sale..................... - - - - -
------ ------ ---- ---- ------
Total.................................... 144 144 4 - 148
Other securities
Bonds, notes and debentures
Held to maturity....................... 4 4 - - 4
Available for sale..................... 15 15 - - 15
------ ------ ---- ---- ------
Total.................................... 19 19 - - 19
Equity securities (1)
Venture capital........................ 1,460 900 687 127 1,460
Available for sale (2)................. 127 127 - - 127
------ ------ ---- ---- ------
Total.................................... 1,587 1,027 687 127 1,587
Total investment securities............... $2,253 $1,693 $692 $130 $2,255
====== ====== ==== ==== ======
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fair values for certain securities for which market quotations are not
available have been estimated. In addition, the values reflect liquidity
and other market-related factors.
(2) Includes Federal Reserve stock.
27
<PAGE>
IMPACT OF CREDIT CARD SECURITIZATION
For analytical purposes only, the following table shows income statement line
items for the Corporation adjusted for the net impact of securitization of
credit card receivables.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1994 Three Months Ended March 31, 1993
------------------------------------ --------------------------------------------
Credit Card Credit Card
(In millions) Reported Securitizations Adjusted Reported Securitizations Adjusted
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--
tax-equivalent basis.. $ 336 $ 123 $ 459 $ 305 $ 103 $ 408
Provision for credit
losses................ 50 56 106 65 53 118
Noninterest income...... 502 (67) 435 491 (50) 441
Noninterest expense..... 484 - 484 434 - 434
Net income.............. 194 - 194 179 - 179
Assets--quarter-end..... $59,843 $4,700 $64,543 $48,482 $4,383 $52,865
--average.......... 61,475 4,848 66,323 55,826 4,482 60,308
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
- - -------------------------------------------------------------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------------------
(In millions) March 31 December 31 September 30 June 30 March 31
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter
Commercial................................. $ 488 $490 $487 $469 $488
Consumer................................... 195 147 140 141 136
----- ---- ---- ---- ----
Total balance, beginning of quarter....... 683 637 627 610 624
- - -------------------------------------------------------------------------------------------------------
Provision for credit losses
Commercial................................. 7 8 19 24 27
Consumer................................... 43 62 46 46 38
----- ---- ---- ---- ----
Total provision for credit losses......... 50 70 65 70 65
- - -------------------------------------------------------------------------------------------------------
Charge-offs
Commercial
Domestic
Commercial............................... 6 5 3 8 15
Real estate.............................. 2 10 21 6 16
Other.................................... 1 1 1 - 4
Foreign, including TCD.................... 3 8 - - 25
Consumer
Credit card............................... 50 39 33 39 38
Other..................................... 2 3 1 1 2
----- ---- ---- ---- ----
Total charge-offs........................ 64 66 59 54 100
- - -------------------------------------------------------------------------------------------------------
Recoveries
Commercial
Domestic
Commercial............................... 3 3 2 5 11
Real estate.............................. 2 1 - 1 -
Other.................................... 5 3 2 1 -
Foreign, including TCD.................... 14 7 5 1 3
Consumer
Credit card............................... 7 13 13 13 12
Other..................................... - - - 1 -
----- ---- ---- ---- ----
Total recoveries......................... 31 27 22 22 26
- - -------------------------------------------------------------------------------------------------------
Net charge-offs/(recoveries)
Commercial................................. (12) 10 16 6 46
Consumer................................... 45 29 21 26 28
----- ---- ---- ---- ----
Total net charge-offs/(recoveries).......... 33 39 37 32 74
- - -------------------------------------------------------------------------------------------------------
Other
Commercial................................ - - - - -
Consumer.................................. 10 15 (18) (21) (5)
----- ---- ---- ---- ----
Total.................................... 10 15 (18) (21) (5)
- - -------------------------------------------------------------------------------------------------------
Balance, end of quarter
Commercial................................. 507 488 490 487 469
Consumer................................... 203 195 147 140 141
----- ---- ---- ---- ----
Total balance, end of quarter............ $ 710 $683 $637 $627 $610
===== ==== ==== ==== ====
- - -------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- - -----------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
(Three Months Ended) March 31, 1994 December 31, 1993
- - ------------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis) Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
- - ------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C> <C>
Due from banks--interest-bearing (A)....................... $ 7,974 $ 75.0 3.81% $ 7,219 $ 70.0 3.85%
Federal funds sold and securities under resale agreements.. 11,744 91.0 3.14 12,171 89.6 2.92
Trading account assets..................................... 4,672 59.5 5.16 4,595 56.8 4.90
Investment securities
U.S. government and federal agency....................... 793 7.4 3.78 810 6.8 3.33
States and political subdivisions........................ 150 3.3 8.92 180 4.0 8.82
Other.................................................... 1,667 6.8 1.65 1,622 7.9 1.93
------------------------------------------------------------------------------------------------------------------------
Total investment securities.............................. 2,610 17.5 2.72 2,612 18.7 2.84
Loans (B)(C)
Domestic offices......................................... 20,639 414.3 8.43 20,426 392.3 7.89
Foreign offices.......................................... 1,849 26.2 5.75 1,954 26.5 5.38
- - ------------------------------------------------------------------------------------------------------------------------
Total loans................................................ 22,488 440.5 8.20 22,380 418.8 7.67
- - ------------------------------------------------------------------------------------------------------------------------
Total earning assets (D)............................... 49,488 683.5 5.60 48,977 653.9 5.30
Cash and due from banks--noninterest-bearing............... 4,257 4,128
Allowance for credit losses................................ (693) (654)
Other assets............................................... 8,423 5,257
- - ------------------------------------------------------------------------------------------------------------------------
Total assets............................................... $61,475 $57,708
======= =======
- - ------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings.................................................. $ 8,100 $ 41.3 2.07% $ 7,952 $ 40.6 2.03%
Time..................................................... 4,748 29.6 2.53 5,004 37.4 2.97
Foreign offices (E)...................................... 9,343 83.0 3.60 8,714 78.7 3.58
- - ------------------------------------------------------------------------------------------------------------------------
Total deposits--interest-bearing....................... 22,191 153.9 2.81 21,670 156.7 2.87
Federal funds purchased and securities under repurchase
agreements............................................... 10,683 81.8 3.11 10,798 81.1 2.98
Other funds borrowed....................................... 7,273 71.4 3.98 7,020 70.2 3.97
Long-term debt............................................. 2,211 40.9 7.50 2,088 39.0 7.41
- - ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities....................... 42,358 348.0 3.33 41,576 347.0 3.31
Demand deposits............................................ 7,175 7,405
Other liabilities.......................................... 7,561 4,515
Preferred stock............................................ 761 761
Common stockholders' equity................................ 3,620 3,451
- - ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity............. $61,475 $57,708
======= =======
Interest income/earning assets............................. $683.5 5.60% $653.9 5.30%
Interest expense/earning assets............................ 348.0 2.85 347.0 2.81
- - ------------------------------------------------------------------------------------------------------------------------
Net interest margin........................................ $335.5 2.75% $306.9 2.49%
====== ==== ====== ====
</TABLE>
(A) Principally balances in overseas offices.
(B) Rates are calculated on average lease-financing receivables balances
reduced by deferred liability for taxes.
(C) Nonperforming loans are included in average balances used to determine
rates.
(D) Includes a tax-equivalent adjustment based on the current federal income
tax rate. The tax-equivalent adjustment for the third quarter of 1993
reflects the year-to-date impact of the increase in the federal tax rate to
35%, including the required revaluation of the leveraged lease portfolio.
The tax-equivalent adjustment for the three months ended March 31, 1994,
was $4.9 million, compared with $6.2 million, $17.5 million, $8.3 million
and $6.2 million for the three months ended December 31, 1993, September
30, 1993, June 30, 1993, and March 31, 1993.
(E) Includes International Banking Facilities deposit balances in domestic
offices and balances of Edge Act and overseas
offices.
30
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------
September 30, 1993 June 30, 1993 March 31, 1993
- - -------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,582 $ 73.3 3.84% $ 7,582 $ 75.9 4.02% $ 7,381 $ 78.8 4.33%
11,610 88.6 3.03 11,324 82.0 2.90 11,250 84.6 3.05
5,152 59.7 4.60 4,999 56.2 4.51 4,171 51.0 4.96
618 6.8 4.37 947 9.6 4.07 522 6.5 5.05
211 4.9 9.21 234 5.3 9.08 241 5.5 9.26
1,458 5.3 1.44 1,397 7.9 2.27 1,671 12.7 3.08
- - -------------------------------------------------------------------------------------------
2,287 17.0 2.95 2,578 22.8 3.55 2,434 24.7 4.12
19,735 394.2 8.16 20,172 386.9 7.89 20,538 393.9 7.97
2,037 53.4 10.40 2,094 33.0 6.32 2,165 32.4 6.07
- - -------------------------------------------------------------------------------------------
21,772 447.6 8.38 22,266 419.9 7.74 22,703 426.3 7.79
- - -------------------------------------------------------------------------------------------
48,403 686.2 5.62 48,749 656.8 5.40 47,939 665.4 5.63
3,885 3,745 3,493
(619) (611) (626)
5,263 5,068 5,020
- - -------------------------------------------------------------------------------------------
$56,932 $56,951 $55,826
======= ======= =======
- - -------------------------------------------------------------------------------------------
$ 8,296 $ 40.7 1.95% $ 8,569 $ 40.7 1.91% $ 7,554 $ 40.8 2.19%
4,988 32.3 2.57 5,343 35.0 2.63 6,269 39.2 2.54
9,113 82.8 3.60 9,303 84.9 3.66 9,684 91.0 3.81
- - -------------------------------------------------------------------------------------------
22,397 155.8 2.76 23,215 160.6 2.77 23,507 171.0 2.95
9,800 74.2 3.00 9,371 71.6 3.06 10,479 81.2 3.14
7,238 73.4 4.02 7,780 76.9 3.96 6,133 75.3 4.98
2,255 42.2 7.42 2,026 36.2 7.17 1,860 32.9 7.17
-------------------------------------------------------------------------------------------
41,690 345.6 3.29 42,392 345.3 3.27 41,979 360.4 3.48
6,946 6,847 6,722
4,292 3,906 3,604
827 869 718
3,177 2,937 2,803
- - -------------------------------------------------------------------------------------------
$56,932 $56,951 $55,826
======= ======= =======
$686.2 5.62% $656.8 5.40% $665.4 5.63%
345.6 2.83 345.3 2.84 360.4 3.05
- - -------------------------------------------------------------------------------------------
$340.6 2.79% $311.5 2.56% $305.0 2.58%
====== ==== ====== ==== ====== ====
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
FIVE-QUARTER CONSOLIDATED INCOME STATEMENT
- - --------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
(Dollars in millions, except per share data) 1994 1993 1993 1993 1993
- - --------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
<S> <C> <C> <C> <C> <C>
Interest and fees on loans............................................. $ 437.6 $ 415.3 $ 433.0 $ 416.3 $ 422.8
Interest on bank balances.............................................. 75.0 70.0 73.3 75.9 78.8
Interest on federal funds sold and securities under resale agreements.. 91.0 89.6 88.6 82.0 84.6
Interest on trading account assets..................................... 59.1 56.3 59.2 55.7 50.7
Interest on investment securities (including dividends)................ 15.9 16.5 14.6 18.6 22.3
------- ------- ------- ------- -------
Total........................................................ 678.6 647.7 668.7 648.5 659.2
- - --------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits................................................... 153.9 156.7 155.8 160.6 171.0
Interest on federal funds purchased and securities under repurchase
agreements............................................................ 81.8 81.1 74.2 71.6 81.2
Interest on other funds borrowed....................................... 71.4 70.2 73.4 76.9 75.3
Interest on long-term debt............................................. 40.9 39.0 42.2 36.2 32.9
------- ------- ------- ------- -------
Total........................................................ 348.0 347.0 345.6 345.3 360.4
- - --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME.................................................... 330.6 300.7 323.1 303.2 298.8
Provision for credit losses............................................ 50.0 70.0 65.0 70.0 65.0
------- ------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES.................. 280.6 230.7 258.1 233.2 233.8
- - --------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Combined trading profits (losses)...................................... (24.7) 61.2 77.3 91.6 54.5
Equity securities gains................................................ 134.2 40.1 228.2 78.7 133.2
Investment securities gains (losses)................................... 0.5 0.9 (0.8) 0.2 -
------- ------- ------- ------- -------
Market-driven revenue............................................. 110.0 102.2 304.7 170.5 187.7
Credit card fee revenue................................................ 182.3 196.6 186.7 164.2 146.7
Service charges and commissions........................................ 101.3 122.4 108.0 103.9 98.2
Fiduciary and investment management fees............................... 52.4 50.7 47.9 53.6 48.5
Other income........................................................... 55.9 51.1 38.1 11.3 9.4
------- ------- ------- ------- -------
Total........................................................ 501.9 523.0 685.4 503.5 490.5
- - --------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits......................................... 207.4 226.5 217.7 210.9 198.8
Occupancy expense of premises, net..................................... 34.8 35.7 37.0 36.0 39.0
Equipment rentals, depreciation and maintenance........................ 53.3 30.3 26.5 26.5 27.0
Other expense.......................................................... 188.8 188.2 192.8 192.2 168.8
------- ------- ------- ------- -------
Subtotal..................................................... 484.3 480.7 474.0 465.6 433.6
Provision for other real estate........................................ 0.2 1.2 1.5 1.0 0.5
------- ------- ------- ------- -------
Total........................................................ 484.5 481.9 475.5 466.6 434.1
- - --------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES............................................. 298.0 271.8 468.0 270.1 290.2
Applicable income taxes.............................................. 104.2 99.0 183.9 101.6 111.1
------- ------- ------- ------- -------
NET INCOME............................................................. $ 193.8 $ 172.8 $ 284.1 $ 168.5 $ 179.1
======= ======= ======= ======= =======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY................. $ 180.0 $ 159.0 $ 270.3 $ 152.7 $ 165.5
======= ======= ======= ======= =======
- - --------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Net Income - Primary................................................. $ 2.05 $ 1.81 $ 3.14 $ 1.81 $ 1.97
Net Income - Fully diluted........................................... $ 2.00 $ 1.77 $ 2.97 $ 1.72 $ 1.91
- - --------------------------------------------------------------------------------------------------------------------------
Average number of common and common-equivalent shares (in millions).... 87.7 87.7 86.1 84.5 84.1
Average number of shares, assuming full dilution (in millions)......... 91.6 91.5 91.9 91.4 88.0
Average full-time-equivalent staff..................................... 17,281 17,118 17,316 16,991 16,967
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
FIRST CHICAGO CORPORATION AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
- - -----------------------------------------------------------------------------------------------------------------------------------
1994 1993
- - -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) March 31 December 31 September 30 June 30 March 31
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME DATA
Actual
<S> <C> <C> <C> <C> <C>
Net interest income--tax-equivalent basis...... $ 335.5 $ 306.9 $ 340.6 $ 311.5 $ 305.0
Average earning assets......................... 49,488 48,977 48,403 48,749 47,939
Net interest margin............................ 2.75% 2.49% 2.79% 2.56% 2.58%
Adjusted (1)
Net interest income--tax-equivalent basis...... $ 455.2 $ 436.6 $ 465.1 $ 416.4 $ 406.3
Average earning assets......................... 47,004 47,810 46,325 46,653 45,652
Net interest margin............................ 3.93% 3.62% 3.98% 3.58% 3.61%
- - -----------------------------------------------------------------------------------------------------------------------------------
AT QUARTER-END
BALANCE SHEET DATA
Assets........................................... $59,843 $52,560 $53,154 $49,936 $48,482
Deposits......................................... 28,833 28,186 29,379 27,794 27,687
Loans............................................ 23,782 23,103 21,969 21,621 21,666
Long-term debt................................... 2,265 2,065 2,091 2,366 1,905
Common stockholders' equity...................... 3,647 3,503 3,378 3,018 2,888
Stockholders' equity............................. 4,408 4,264 4,139 3,887 3,757
- - -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS (2)
Common equity/assets............................. 6.6% 7.2% 7.0% 6.5% 6.4%
Regulatory leverage ratio........................ 7.8 8.0 8.0 7.4 7.3
Risk-based capital
Tier 1 capital ratio........................... 9.1 8.8 8.7 8.0 7.8
Total capital ratio............................ 14.2 13.6 13.5 13.0 12.4
Tier 1 capital................................. $ 4,182 $ 4,098 $ 3,969 $ 3,715 $ 3,571
Total capital.................................. 6,509 6,292 6,179 6,001 5,700
- - -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
FOR THE QUARTER ENDED
Net income as a percentage of:
Average stockholders' equity................... 17.9% 16.3% 28.2% 17.8% 20.6%
Average common stockholders' equity............ 20.2 18.3 33.8 20.9 23.9
Average total assets........................... 1.28 1.19 1.98 1.19 1.30
Average earning assets......................... 1.59 1.40 2.33 1.39 1.52
Stockholders' equity as a percentage of:
Total assets................................... 7.4 8.1 7.8 7.8 7.7
Total loans.................................... 18.5 18.5 18.8 18.0 17.3
Total deposits................................. 15.3 15.1 14.1 14.0 13.6
Average stockholders' equity as a percentage of:
Average assets................................. 7.1 7.3 7.0 6.7 6.3
Average loans.................................. 19.5 18.9 18.5 17.3 15.9
Average deposits............................... 14.9 14.5 13.6 12.7 11.6
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
FOR THE QUARTER ENDED
Market price
High........................................... $52 3/8 $50 5/8 $49 1/4 $45 3/8 $44 3/4
Low............................................ 41 1/8 40 7/8 40 7/8 35 1/2 36
At quarter-end................................. 48 1/8 43 1/4 48 3/4 41 1/8 41 5/8
Price earnings ratio............................. 5.5 4.9 5.8 N/M N/M
Book value....................................... $ 42.19 $ 40.55 $ 39.03 $ 36.27 $ 34.78
Market price/book value.......................... 114% 107% 125% 113% 120%
Dividends declared on common stock............... $ 0.40 $ 0.40 $ 0.30 $ 0.30 $ 0.30
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Adjusted to exclude impact of securitization of credit card receivables
and the activity of FCCM, the Corporation's capital markets subsidiary.
(2) Net of investment in FCCM.
N/M - Not meaningful.
33
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
-------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 1-6052
---------------------------------------
FIRST CHICAGO CORPORATION
--------------------------------------------------------------
(exact name of registrant as specified in its charter)
DELAWARE 36-2669970
--------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60670
--------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
312-732-4000
-------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGE
--------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1994.
Class Number of Shares Outstanding
- - ------------------------- ----------------------------
Common Stock $5 par value 86,515,138
34
<PAGE>
FORM 10-Q CROSS-REFERENCE INDEX
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
- - ----------------------------
Page
----
<S> <C>
Consolidated Balance Sheet --
March 31, 1994 and 1993 and December 31, 1993 20
Consolidated Income Statement --
Three Months Ended March 31, 1994 and 1993 and
December 31, 1993 21
Consolidated Statement of Changes in Stockholders' Equity --
Three Months Ended March 31, 1994 and 1993 22
Consolidated Statement of Cash Flows --
Three Months Ended March 31, 1994 and 1993 23
Notes to Consolidated Financial Statements 24-26
Selected Statistical Information 1,
14-16,
27-33
ITEM 2. Management's Discussion and Analysis of Financial
- - ---------------------------------------------------------
Condition and Results of Operations 1-19
-----------------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings 36
- - -------------------------
ITEM 2. Changes in Securities 36
- - -----------------------------
ITEM 3. Defaults Upon Senior Securities 36
- - ---------------------------------------
ITEM 4. Submission of Matters to a Vote of Security Holders 36
- - -----------------------------------------------------------
ITEM 5. Other Information 36
- - -------------------------
ITEM 6. Exhibits and Reports on Form 8-K 36
- - -----------------------------------------
Signatures 37
</TABLE>
35
<PAGE>
PART II. - OTHER INFORMATION
----------------------------
ITEM 1. Legal Proceedings
- - -------------------------
None
ITEM 2. Changes in Securities
- - -----------------------------
None
ITEM 3. Defaults Upon Senior Securities
- - ---------------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
- - -----------------------------------------------------------
None
ITEM 5. Other Information
- - -------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
- - ----------------------------------------
(a) Exhibit 12 Statements re computation of ratios.
(b) The Registrant filed the following Current Reports on Form 8-K during the
quarter ended March 31, 1994.
Date Item Reported
------- -------------
1/17/94 The Registrant's earnings for the quarter ended
December 31, 1993
2/9/94 Registrant's announcement of the issuance of notes in
the form of Debt Exchangeable for Common Stock ("DECS")
relating to its investment in NEXTEL Communications,
Inc.
2/11/94 Filing of certain exhibits to Registrant's Form S-3
Registration Statement relating to the issuance of
DECS.
36
<PAGE>
SIGNATURES
----------
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.
FIRST CHICAGO CORPORATION
-------------------------------
(Registrant)
Date May 12, 1994 Richard L. Thomas
--------------------- -------------------------------
Richard L. Thomas
Chairman of the Board
Date May 12, 1994 William J. Roberts
--------------------- -------------------------------
William J. Roberts
Principal Accounting Officer
37
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Number Description of Exhibit Page
- - -------------- ---------------------- ----
<C> <S> <C>
12 - Statement re computation of ratios. 39
</TABLE>
38
<PAGE>
Exhibit 12
COMPUTATION OF RATIOS OF INCOME TO FIXED CHARGES
The computation of the ratios of income to fixed charges is set forth
in Note 8 of Notes to Consolidated Financial Statements on page 26 of the
Form 10-Q.
39
